European Business Fluctuations in the Austrian Framework
Miia Parnaudeau ()
MPRA Paper from University Library of Munich, Germany
The Austrian theory mainly deals with analyzing the effects of an increased credit offer on productive structures. In this respect, we propose to link long-term growth cycles to various short-term interest rate gaps. Are European Business Cycles affected when a fall in the money market rate disrupts agents’ expectations of inflation? Using the hypothesis that individual speculation is motivated by the difference between short-term real interest rates and their natural levels, we argue that Wicksellian interest rate gaps can account for a high proportion of long-term fluctuations in 4 European countries (Germany, France, Italy and Spain). We present specific dating methods and filters used in order to distinguish between short-term and long-term growth cycles. The Wicksellian incentives we constructed are then significantly linked to long-term business fluctuations. Under the hypothesis of adaptive expectations of inflation, our results are enhanced.
Keywords: European; Growth; Cycles; Inflation; Expectations (search for similar items in EconPapers)
JEL-codes: E43 E32 E31 E51 (search for similar items in EconPapers)
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Published in Quarterly Journal of Austrian Economics 11 (2008): pp. 94-105
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25046
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