Monetary Expansion and Economic Crises: An Austrian Perspective

• Thesis title in Czech: Peněžní expanze a ekonomické krize: Rakouský pohled
• Thesis title in English: Monetary Expansion and Economic Crises: An Austrian Perspective
• Key words: ABCT, rakouská teorie hospodářského cyklu, hospodářské cykly, mezičasová alokace zdrojů, neudržitelný růst, misalokace investic, peněžní expanze, hospodářské krize
• English key words: ABCT, Austrian business cycle theory, business cycles, intertemporal resource allocation, unsustainable growth, malinvestment, monetary expansion, economic crises
• Academic year of topic announcement: 2011/2012
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: Mgr. Jan Průša, M.Phil., Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 22.06.2012
• Date of assignment: 22.06.2012
• Date and time of defence: 23.09.2014 09:00
• Venue of defence: IES
• Date of electronic submission: 30.07.2014
• Date of proceeded defence: 23.09.2014
• Opponents: prof. PhDr. Tomáš Havránek, Ph.D.

References

Anker, R. (2011). Austrian business cycle theory: evidence from Scandinavia. (Unpublished thesis). Aarhus University, DK. Retrieved from http://pure.au.dk/portal-asb-student/files/39957752/Thesis.pdf
Bismans, F., & Mougeot, C. (2009). Austrian business cycle theory: empirical evidence. Review of Austrian Economics, 22, 241–257. doi:10.1007/s11138-009-0084-6
Carilli, A. M., & Dempster, G. M. (2008). Is the Austrian business cycle theory still relevant? Review of Austrian Economics, 21, 271–281. doi:10.1007/s11138-008-0044-6
Garrison, R. W. (2001). Time and money: the macroeconomics of capital structure. London, GB: Routledge.
Hayek, F. A. (1935). Prices and production (2nd ed.). London, GB: Routledge and Sons.
Huerta de Soto, J. (2009). Money, bank credit, and economic cycles (2nd ed.). Auburn, AL: Ludwig von Mises Institute.
Keeler, J. P. (2001). Empirical evidence on the Austrian business cycle theory. Review of Austrian Economics, 14, 331–351. doi:10.1023/A:1011937230775
Mises, L. von. (2006). The causes of the economic crisis, and other essays before and after the Great Depression (P. L. Greaves Jr., Ed.). Auburn, AL: Ludwig von Mises Institute.
Mulligan, R. F. (2002). A Hayekian analysis of the term structure of production. Quarterly Journal of Austrian Economics, 5(2), 17–33.
Mulligan, R. F. (2006). An empirical examination of Austrian business cycle theory. Quarterly Journal of Austrian Economics, 9(2), 69–93.
Murphy, R. P., Barnet, W., II, & Block, W. (2009). Testing Austrian business cycle theory? A rejoinder to Andrew Young. Journal of Business and Economic Perspectives, 35(2), 73–86.
Wainhouse, C. E. (1984). Empirical evidence for Hayek’s theory of economic fluctuations. In B. N. Siegel (Ed.), Money in crisis: the Federal Reserve, the economy, and monetary reform (Chap. 2, 37–72). San Francisco, CA: Pacific Institute for Public Policy Research.
Young, A. T. (2005). Reallocating labor to initiate changes in capital structures: Hayek revisited. Economics Letters, 89, 275–282. doi:10.1016/j.econlet.2005.05.033

Preliminary scope of work

The Austrian business cycle theory (ABCT) has recently been experiencing a renaissance within economics, which was strengthened by the occurrence of the recent crisis. It is unique in its emphasis of time in the production processes, heterogeneity and structure of capital resources and the influence of manipulation of interest rates and money supply on that structure. The theory asserts that a period of artificially induced low interest rates stimulates borrowing and (mal)investment, especially in the early stages of production, which is unsustainable with the consumption/saving preferences of the consumers and will have to be liquidated. A recession, which is a painful reallocation of resources back to its more efficient uses, comes when either the credit expansion slows down or when it projects into expectations of persistent excessive inflation. The underlying cause of the recession is lack of real resources to cover both the investment and the consumption patterns of the economic actors.
In this thesis I am going to prepare a comprehensive overview of ABCT’s propositions and conclusions, contribute to the series of literature on the empirical testing of whether these are in line with reality and summarise methodological views of the Austrian school and discussion about whether and how econometrics can help in putting the theory to the test.
The empirical testing is going to be performed on appropriately disaggregated macroeconomic data from selected European countries.