The Review of Austrian Economics

, Volume 27, Issue 3, pp 281–299

The Mises-Hayek business cycle theory, fiat currencies and open economies

Article

Abstract

This paper extends the Mises-Hayek business cycle theory to open economies with fiat currencies. I explore: (1) the problem of domestic versus international monetary policy with fiat currencies in an international setting. (2) How the feedback effects between central banks in the context of an expansionary monetary contributes to extend and transmit a Mises-Hayek business cycle from big economies to small financially integrated economies. I find that a lengthening of the period of production is not the only effect produced on the capital structure, but also a misallocation of capital goods between the production of tradable and non-tradable goods and services and that business cycles can become more severe when there are open economies with fiat currencies.

Keywords

Austrian business cycle theory Fiat currencies Exchange rate International business cycle 

JEL Codes

B53 E32 E58 F44 

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Department of EconomicsSuffolk UniversityBostonUSA

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