The Upper Turning Point in the Austrian Business Cycle Theory

AIER Sound Money Project Working Paper No. 2019-11

The Review of Austrian Economics (Forthcoming)

17 Pages Posted: 21 Mar 2018 Last revised: 30 Dec 2019

See all articles by Anthony J. Evans

Anthony J. Evans

ESCP Business School

Nicolas Cachanosky

The University of Texas at El Paso; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Robert Thorpe

Independent

Date Written: December 27, 2019

Abstract

This paper studies a scenario - one of the six problems with Austrian Business Cycle theory raised by Hummel (1979) - that the ABCT literature has paid little attention. Will a constant rate of credit expansion necessarily lead to a boom-bust cycle? We conclude that this scenario has two potential outcomes, (1) a change in money demand brings the economy back towards equilibrium or (2) the economy will shift to sub-optimal but still sustainable path. We identify capital heterogeneity effects and the Ricardo effect as distinctly Austrian explanations for an upper turning point, even in a fiat money regime.

Keywords: Business Cycles, Austrian Business Cycle, Turning Point

JEL Classification: B53, E32

Suggested Citation

Evans, Anthony J. and Cachanosky, Nicolas and Thorpe, Robert, The Upper Turning Point in the Austrian Business Cycle Theory (December 27, 2019). AIER Sound Money Project Working Paper No. 2019-11, The Review of Austrian Economics (Forthcoming), Available at SSRN: https://ssrn.com/abstract=3145284 or http://dx.doi.org/10.2139/ssrn.3145284

Anthony J. Evans (Contact Author)

ESCP Business School ( email )

537 FINCHLEY ROAD
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Nicolas Cachanosky

The University of Texas at El Paso

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El Paso, TX 79968
United States

HOME PAGE: http://https://www.utep.edu/

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

Robert Thorpe

Independent ( email )

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