Austrian Macroeconomics in Search of Its Uniqueness

Abstract

We consider the essential features of an Austrian macroeconomic model and then ask whether these features are unique. We argue that the temporal aspect of the structure of production is not an essential feature. Malinvestments in any dimension (e.g., time, geography, type, etc.) can generate the predicted boom-bust cycle so long as there are costs to reallocation. However, the view that nominal shocks have long term consequences because costs are incurred to remedy past mistakes is not uniquely Austrian. In particular, we note similarities with the New Keynesian notion of hysteresis.

Keywords: Austrian, Austrian business cycle, Austrian macroeconomics, business cycle, macroeconomics, macroeconomic fluctuation

JEL Classification: B53, E10, E14, E30, E32