The Austrian business cycle theory, rational expectations and historical time

Tomá? Frömmel ()
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Tomá? Frömmel: University of Economics Prague, Department of Economics

No 4507343, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds.This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds.

Keywords: Business cycle; Austrian business cycle theory; rational expectations; historical time (search for similar items in EconPapers)
JEL-codes: D84 E32 E52 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2017-04
New Economics Papers: this item is included in nep-mac
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Published in Proceedings of the Proceedings of the 7th Economics & Finance Conference, Tel Aviv, Apr 2017, pages 9-16

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