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The upper turning point in the Austrian business cycle theory

  • Anthony J. EvansEmail author
  • Nicolás Cachanosky
  • Robert Thorpe
Article

Abstract

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.

Keywords

Business cycles Austrian business cycle Turning point 

Jel codes

B53 E32 

Notes

Acknowledgements

We appreciate helpful comments from Jeffrey Rogers Hummel and two anonymous referees from this journal. The usual disclaimer applies.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2020

Authors and Affiliations

  1. 1.Department of Law, Economics, and Humanities, ESCP Business SchoolLondonUK
  2. 2.Department of EconomicsMetropolitan State University of DenverDenverUSA
  3. 3.Independent scholarLimerickIreland

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