This paper defends the relevance of Austrian Business Cycle theory (ABCT) within a fiat money regime, by providing an answer to whether a constant rate of credit expansion necessarily leads to a boom-bust cycle. We claim 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 a 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.
CITATION STYLE
Evans, A. J., Cachanosky, N., & Thorpe, R. (2022). The upper turning point in the Austrian business cycle theory. Review of Austrian Economics, 35(1), 89–97. https://doi.org/10.1007/s11138-019-00497-2
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