Download This PaperRethinking Capital Based Macroeconomics
The Quarterly Journal of Austrian Economics, Vol. 14, Num. 3, Fall 2011, pp. 347-375
29 Pages Posted: 13 Mar 2013 Last revised: 21 Mar 2013
Date Written: 2011
Abstract
The objective of this article is to present an extension of Garrison’s “capital-based macroeconomics” model. Garrison’s objective was — starting from a full employment equilibrium situation — to build a model that provides insight into the causes of crisis and depression. We offer — starting from an unemployment situation — an explanation of why expansionary monetary policies fail in the longer term to solve the unemployment problems associated with recessions. This extension provides a fresh perspective on the debates between Hayek and Keynes in the 1930s and over “quantitative easing” today.
Keywords: Austrian business cycle theory, monetary policy, capital structure
JEL Classification: B53, E32, E58
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