The Recession of the Early 1980s

Brian P. Simpson

Chapter 5 in Money, Banking, and the Business Cycle, 2014, pp 113-141 from Palgrave Macmillan

Abstract: Abstract This and the next four chapters present historical evidence for the validity of Austrian business cycle theory (ABCT). I start with an analysis of the deep recession of the early 1980s.1 This recession provides the best illustration in recent history of the causes of the business cycle. It does so for three reasons. First, it was a fairly severe recession. This means the factors causing the cycle exerted a strong influence on the economy. Second, the recession of the early 1980s is also a great recession to study because the episode was like an economic experiment. The Federal Reserve chairman at the time, Paul Volcker, made an explicit effort to reduce inflation in the late 1970s, and he actually did end up reducing the money supply growth. He even announced his intentions in advance. So we get to see, given that he did this, what effect it had on the economic system. This is probably as close to an economic experiment as one can get in an economy. This was a situation in which the money supply and prices were rising rapidly and then the increase in the money supply was abruptly reduced. The effects this had, as I will show, were dramatic.

Keywords: Interest Rate; Gross Domestic Product; Business Cycle; Money Supply; Intermediate Good (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-33149-6_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137331496

DOI: 10.1057/9781137331496_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().