THE AUSTRIAN APPROACH TO THE ECONOMIC CYCLE

José Henrique Bassi Souza Sperancini () and Paulo Pio Dantas ()
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José Henrique Bassi Souza Sperancini: Universidade Federal do ABC (UFABC)
Paulo Pio Dantas: Contadoria e Auditoria-Geral do Estado (Cage)

Revista de Economia Mackenzie (REM), 2020, vol. 17, issue 1, 190-217

Abstract: The Austrian economic theory approach, which we will summarize, questions the state’s ability to improve the results of economic activity. The objective is to present as didactic as possible a modeling that offers great applicability to studies of economic crises resulting from strong state interventions in economic activity. The theory identifies in credit market manipulation the source of the distortions that give rise to the economic cycle. The expansion of bank credit without a prior increase in savings leads to an artificial reduction in interest rates. With the additional volume of lower interest credit, entrepreneurs embark on overly ambitious and unsustainable long-term projects. The result is always a crisis or a reduction in the potential economic growth rate.

Keywords: Austrian school; credit; economic cycle; economic theory; modeling. (search for similar items in EconPapers)
JEL-codes: B25 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aft:journl:v:17:2:2020:jan:jun:p:190-217

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