AUSTRIAN BUSINESS CYCLE THEORY - EVIDENCE FROM BRAZILIAN ECONOMY (2004 TO 2009)

Augusto Luiz Heck Barros (), Cristiano Stamm () and Luiz Alberto Cypriano ()
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Augusto Luiz Heck Barros: Universidade Federal da Integração Latino-Americana (UNILA)
Cristiano Stamm: Universidade Estadual do Oeste do Paraná (UNIOESTE)
Luiz Alberto Cypriano: Universidade Estadual do Oeste do Paraná (UNIOESTE)

Revista de Economia Mackenzie (REM), 2021, vol. 18, issue 1, 192-219

Abstract: The aim of this study is to analyze how the Austrian Business Cycle Theory explains the effects of changes in the money supply by the Central Bank on the intertemporal structure of production of the Brazil’s economy between the years 2004 and 2019. The Austrian Business Cycle Theory is the theory of the unsustainable boom. The artificial expansion of money and credit conducted by the central bank distorts interest rates and stimulates the intertemporal misallocation of capital, thereby creating an artificial expansion of the economy. As the monetary authority is forced to restrict monetary policy due to the inflationary pressure caused by the general restriction of resources, the intertemporal misallocation of capital is revealed. Time-series econometric analysis was used to illustrate the impacts of variations in the supply of money and credit on the intertemporal structure of production, specifically the Granger non-causality test suggested by Toda and Yamamoto (1995). The estimated results revealed that the manipulation of the money and credit supply directly affects the production structure of the economy, in addition to aggregate industrial production, gross domestic product and the level of utilization of installed industrial capacity during the analysis period. Therefore, the results found support the Mises-Hayek business cycle theory.

Keywords: Austrian Business Cycle Theory Economic cycle; artificial expansion of the money supply and credit; intertemporal production structure; misallocation of capital. (search for similar items in EconPapers)
JEL-codes: B53 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:aft:journl:v:18:1:2021:jan:jun:p:192-219

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