The Upper Turning Point in the Austrian Business Cycle Theory

16 Pages Posted: 21 Mar 2018 Last revised: 8 Aug 2019

See all articles by Anthony J. Evans

Anthony J. Evans

ESCP Europe; ESCP Europe - Department of Economics

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research

Robert Thorpe

Independent

Date Written: March 20, 2018

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 (March 20, 2018). AIER Sound Money Project Working Paper No. 2019-11. Available at SSRN: https://ssrn.com/abstract=3145284 or http://dx.doi.org/10.2139/ssrn.3145284

Anthony J. Evans (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011
France

HOME PAGE: http://anthonyjevans.com

ESCP Europe - Department of Economics ( email )

United Kingdom

HOME PAGE: http://anthonyjevans.com

Nicolas Cachanosky

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Robert Thorpe

Independent ( email )

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