scholarly journals The Mises-Hayek business cycle theory

2021 ◽  
pp. 81-133
Author(s):  
Robyn Harte- Bunting
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Banking Sector ◽  
Jel Classification ◽  
Policy Recommendations ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Palabras Clave ◽  
Austrian Business Cycle ◽  
Similarities And Differences

The Paper is an Overview of Austrian Business Cycle Theory (ABCT) phenomena it is intended to explain, economy wide crisis especially concentrated on the banking sector. A short examination of similarities and differences between Mises and Hayek, the main developers of ABCT, is then given. Finally, some policy recommendations are examined in the light of ABCT. Key words: Financial Crisis, Business Cycle, Inflation, Saving. JEL Classification: B53, E42, E44, E61, G01, G21, P10, P20. Resumen: El artículo es una visión general de la Teoría Austriaca del Ciclo Económico (TACE) basada en un primer contacto con la literatura. La TACE se presenta en términos de los fenómenos que intenta explicar: crisis eco-nómicas, concentradas en el sector bancario. Después se expone una breve investigación de las semejanzas y diferencias entre Mises y Hayek, los prin - cipales contribuyentes a la TACE. El trabajo concluye con unas recomenda-ciones de política económica que se analizan a la luz de la TACE. Palabras clave: Crisis Financiera, Ciclo Económico, Inflación, Ahorro. Clasificación JEL: B53, E42, E44, E61, G01, G21, P10, P20.

scholarly journals Minsky’s Financial Instability Hypothesis vs. Austrian Business Cycle Theory

2018 ◽  
pp. 155-186
Author(s):  
Olga Peniaz
Keyword(s):  
Comparative Analysis ◽  
Interest Rate ◽  
Business Cycle ◽  
Empirical Studies ◽  
Jel Classification ◽  
Financial Instability ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Palabras Clave ◽  
Austrian Business Cycle

This article represents a detailed theoretical analysis, focusing on two heterodox theories: the Minsky’s Financial Instability Hypothesis and the Aus- trian Business Cycle Theory, particularly in the light of the 2008 crisis. It provi- des a theoretical comparative analysis of these theories and a review of the empirical studies of two approaches. Keywords: Economic crisis, interest rate, austrian business cycle theory, finan- cial instability hypothesis. JEL Classification: E32, E44, E52, E58. Resumen: Este artículo ofrece un análisis teórico detallado, centrado en dos teorías heterodoxas: la Hipótesis de la Inestabilidad Financiera de Minsky y la Teoría Austríaca del Ciclo Económico, especialmente en vista de la crisis de 2008. Este trabajo proporciona un análisis comparativo teórico de estas teo- rías y una revisión de los estudios empíricos de ambos enfoques. Palabras clave: Crisis económica, tipo de interés, teoría austriaca del ciclo eco- nómico, hipótesis de inestabilidad financiera. Clasificación JEL: E32, E44, E52, E58.

scholarly journals Business Cycle and Stability of China’s Financial and Monetary System

2020 ◽  
pp. 123-171
Author(s):  
William Hongson Wang ◽  
Antonio Vegas García
Keyword(s):  
Business Cycle ◽  
Banking System ◽  
Central Banking ◽  
Jel Classification ◽  
Shipping Industry ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Monetary System ◽  
Austrian Business Cycle ◽  
China’S Economy

The importance of China’s economy and the instability of China’s fi-nancial system are in the spotlight recently. This paper uses Austrian Business Cycle Theory to gauge the potential risks of China’s economy. The approach of this paper is a sector analysis, focusing on China’s monetary and financial system, shipping industry, and real estate industry, especially the state-owned enterprises in those sectors. We conclude that China’s central banking system is hurting China’s economy and we also propose reforms to overhaul the system, according to the perspective of praxeology and Austrian School Econom-ics. Keywords: Austrian Business Cycle Theory, China’s banking system, China’s economy. JEL Classification: B53, D8, E310, E32, E52, H12, N15, N27, N45, N65, O53, P11, R3, R4, Y10. Resumen: La importancia de la economía china junto con la reciente inestabili-dad del sistema financiero de China, preocupan al resto del mundo. Este artí-culo usa la Teoría Austriaca del Ciclo Económico para identificar los riesgos potenciales de la economía de China. En este artículo realizaremos un análisis sectorial, enfocado en el sistema monetario y financiero de China, el sector de la construcción, la industria marítima y, en especial, las empresas estatales de dichos sectores. Concluimos que el actual sistema de banca central en China está dañando a su economía y proponemos soluciones desde la perspectiva de la praxeología y la Escuela Austriaca de Economía. Palabras clave: Teoría austriaca del ciclo económico, sistema bancario chino, economía china.

scholarly journals From Orthodoxy to Heterodoxy: Financial Crisis Literature Compared

2016 ◽  
Vol 63 (s1) ◽  
pp. 71-87
Author(s):  
Ignacio Martínez ◽  
Gabriel Mursa
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Financial Markets ◽  
Financial Crises ◽  
Financial Instability ◽  
Business Cycle Theory ◽  
Economic Cycle ◽  
Austrian Business Cycle Theory ◽  
Economic Downturns ◽  
Austrian Business Cycle

Abstract In this paper we’ll attempt to explain the connection between interventionism in financial markets, financial crises and economic downturns, as the main cause of the financial crisis mainstream models; As well as the connection between the theories of Austrian and Minsky’s economic cycle as branches of heterodox economic theory. In order to achieve this target, we’ll begin with a brief introduction of mainstream financial crises models in the orthodox economic literature, then we’ll examine the statements of the Austrian Business Cycle Theory and the Financial Instability Hypothesis, and evaluate whether a connection between the two. We conclude that Financial Instability Hypothesis can be studied as a particular case of the Austrian Business Cycle Theory.

scholarly journals Keynesian Supply Shocks and Hayekian Secondary Deflations

2021 ◽  
Vol 24 (3) ◽  
Author(s):  
Lucas Engelhardt
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Aggregate Demand ◽  
Business Cycle Theory ◽  
Demand Shock ◽  
Austrian Business Cycle Theory ◽  
Employment Dynamics ◽  
Supply Shocks ◽  
Supply Shock ◽  
Austrian Business Cycle

In response to the COVID-19 lockdown policies, Guerrieri et al. (2020) developed a new concept: the Keynesian supply shock. A Keynesian supply shock is an aggregate supply shock that leads to an even larger aggregate demand shock. This paper suggests that Keynesian supply shocks are very similar to the secondary deflations suggested by Hayek (1931), and US data from the 2007–09 financial crisis show that these concepts may help to explain employment dynamics in the midst of a crisis. This fact implies that long-standing policy advice based on Austrian business cycle theory would be useful in responding to Keynesian supply shocks.

A brief note on economic recessions, banking reform and the future of capitalism

2021 ◽  
pp. 289-298
Author(s):  
Jesús Huerta de Soto
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Economic Recession ◽  
Central Banks ◽  
Business Cycle Theory ◽  
English Edition ◽  
Austrian Business Cycle Theory ◽  
Fractional Reserve ◽  
The Future ◽  
Austrian Business Cycle

In my book «Money, Bank Credit, and Economic Cycles» (1st Spanish Edition 1992, 2nd English Edition 2009) I present a detailed analysis of the Austrian Business Cycle Theory. Now I will concentrate on the financial crisis and the current worldwide economic recession as one of the most challenging problems we must now cope with and the way in which the Austrian Business Cycle Theory can help us to understand its causes and the best approach to economic recovery. Having witnessed the intellectual and practical defeat of socialism specially during the last decades of the twentieth century, in my opinion one of the main challenges that still remains for the future of Capitalism is the urgent need to privatize money by dismantling the organ of central monetary planning: the Central Bank. In other words, real Socialism, represented by state money, Central banks and financial administrative regulations, is still in force in the monetary and credit sectors of the so called free market economies. As a result of this fact we experience regularly in the area of money and credit all the negative consequences established by the Theorem of the Impossibility of Socialism discovered by those distinguished members of the Austrian School of Economics Ludwig von Mises and Friedrich Hayek. Specifically, the central planners of state money are unable to know, to follow and to control the changes in both the demand and supply of money. Furthermore, the whole financial system is based on the legal privilege given by the state to private bankers to act with a fractional reserve ratio in relation with the demand deposits they receive from their clients. As a result of this privilege, private bankers are not true financial intermediaries, but are mainly creators of deposits materializing in credit expansions. These credit expansions are artificial and do not correspond to any previous increases in the voluntary savings of the citizens. In this way the current fractional reserve banking system, tends to worsen and amplify the systemic intertemporal distortions and investment misallocations that the macroeconomic planners working for central banks induce in the production structure of the whole real economy. These distortions manifest themselves in the stages of financial bubbles, economic boom, overall malinvestment and afterwards in the stages of financial crisis, deep economic recession and unemployment.

scholarly journals New paths in Austrian Macroeconomics

2021 ◽  
pp. 91-114
Author(s):  
William Barnet II ◽  
Walter E. Block
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Jel Classification ◽  
Financial Assets ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Nominal Interest Rates ◽  
Palabras Clave ◽  
Austrian Business Cycle ◽  
Interest Margins

This paper makes four points. First, interest rates are not prices; rather they are metrics. Second, there are no markets for «loanable funds» in reality, so attempts to use «the» market for loanable funds either to explain saving-induced growth (or growth induced in other ways) are misleading. Rather, the appropriate concept is markets for financial assets. Third, the primary and most important source of growth is not households’ low or reduced time preferences, but entrepreneurs high or increased profit expectations. Fourth, financial institutions may respond, in part, to a rise in the monetary base by accepting a higher default risk of their assets; i.e., by making riskier loans and buying riskier (financial) assets, in order to maintain nominal interest rates and net interest margins. Key words: Risk, Loanable funds, Financial assets, Austrian business cycle theory. JEL Classification: E32. Resumen: Este artículo desarrolla una versión modificada de la teoría austriaca del ciclo económico en la que el papel protagonista lo juegan las expectativas de beneficio de los empresarios (más que la reducción de la preferencia temporal de los agentes económicos) y la asunción de proyectos empresariales más arriesgado, como principal detonante de las malas inversiones. Palabras clave: Riesgo, Fondos prestables, Activos financieros, Teoría austriaca del ciclo económico. Clasificación JEL: E32.

scholarly journals Preferencia temporal, múltiples tipos de interés y la teoría austriaca del ciclo económico

2021 ◽  
pp. 13-63
Author(s):  
Alejandro J. Zamora
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Term Structure ◽  
Jel Classification ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Preference Theory ◽  
Austrian Business Cycle ◽  
The One

Traditional expositions of the Austrian Business Cycle Theory (ABCT) rest on the reference to only one – equilibrium – interest rate. This paper, on the one hand, explores the theoretical validity of such a reference and, on the other hand, analyses whether it is essential to the ABCT. To address both issues, we depart from a defense of the recently-disputed Pure Time Preference Theory (PTPT), which purports to explain the cause of the phenomenon of interest and serves as a basis for the ABCT. In the light of our study, in the first place, we reject some of the formulations of the PTPT that lead to erroneous interpretations of this theory and we put forward an enunciation that avoids common confu-sions; secondly, we deny the validity of the reference to only one interest rate as well as its essentiality to the ABCT; finally, we point out the necessity of up-dating the exposition of the ABCT in consonance with the previous conclusions. Key words: Austrian Business Cycle Theory, Business Cycles, Pure Time Prefe-rence Theory, Interest Rates, Term Structure of Interest Rates. JEL Classification: E32, E40, E43, E50, B53. Resumen: Las exposiciones tradicionales de la Teoría Austriaca del Ciclo Eco-nómico (TACE) se apoyan en la referencia a un único tipo de interés de equili-brio. Este artículo, por un lado, explora la cuestión de la validez teórica de dicha referencia y, por otro, estudia si ésta es realmente esencial a la TACE. Para analizar dichas cuestiones, partimos de una defensa de la recientemente cuestionada Teoría de la Preferencia Temporal Pura (TPTP), teoría que preten-de explicar la causa del fenómeno del interés y que sirve de fundamento a la TACE. A la luz de nuestro estudio, en primer lugar, rechazamos ciertas formu-laciones de la TPTP que conducen a interpretaciones erróneas de la misma, proponiendo una enunciación de la teoría que evita confusiones comunes; se-gundo, negamos la validez de la referencia a un tipo de interés único y su carácter esencial a la TACE; por último, notamos la necesidad de actualizar la exposición de la TACE conforme a las conclusiones antedichas. Palabras clave: Teoría Austriaca del Ciclo Económico, Ciclos Económicos, Teo-ría de la Preferencia Temporal Pura, Tipos de Interés, Estructura de Tipos de Interés. Clasificación JEL: E32, E40, E43, E50, B53.

scholarly journals Financial Effects of Monetary Expansions

2018 ◽  
pp. 75-94
Author(s):  
Rafael García Iborra
Keyword(s):  
Business Cycles ◽  
Central Banks ◽  
Jel Classification ◽  
Financial Assets ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Palabras Clave ◽  
Austrian Business Cycle ◽  
Productive Structure ◽  
Financial Cycles

The Austrian Business Cycle Theory (ABCT) has traditionally been focused on the distortions created by monetary expansions on the productive structure of the economy. In this paper, I will try to show that, if central banks increase the monetary base and the agents’ preferences do not change, the dis- tortions will not be limited to the productive structure but will also affect the financial structure. This will lead to a series of financial cycles in which both bubbles and crashes, the financial counterparts of booms and crisis, will take place. Keywords: Bubbles, Business Cycles, Financial Assets, Financial Crisis. JEL Classification: E14, E32, E44, G01. Resumen: La Teoría Austriaca del Ciclo Económico (TACE) se ha centrado tra- dicionalmente en las distorsiones generadas por las expansiones monetarias en la estructura productiva de la economía. En este artículo, se intenta mostrar que, si los bancos centrales aumentan la base monetaria y las preferencias de los agentes se mantienen sin cambios, las distorsiones no se limitarán a la estructura productiva sino que también afectarán a la estructura financiera. Esto conducirá a una serie de ciclos financieros en los que burbujas y crashes, los equivalentes financieros de auges y crisis, tendrán lugar. Palabras clave: Burbujas, Ciclos Económicos, Activos Financieros, Crisis Finan- cieras. Clasificación JEL: E14, E32, E44, G01.

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