• Media type: Report; E-Book
  • Title: Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory
  • Contributor: Schnabl, Gunther [Author]
  • Published: Munich: Center for Economic Studies and ifo Institute (CESifo), 2016
  • Language: English
  • Keywords: monetary overinvestment theory ; secular stagnation ; Hayek ; Wicksell ; asymmetric monetary policy ; F42 ; E52 ; marginal productivity of investment ; E58 ; Goodhart’s Law ; E63 ; financial crisis ; Mises
  • Origination:
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  • Description: The paper analyses the evolvement and effects of central bank crisis management since the mid 1980s based on a Hayek-Mises-Wicksell overinvestment framework. It is shown that, given that the traditional transmission mechanism between monetary policy and consumer price inflation has collapsed, asymmetric monetary policy crisis management implies a convergence of interest rates towards zero and a gradual expansion of central bank balance sheets. From a Hayek-Mises-Wicksell perspective asymmetric central bank crisis management has contributed to financial market bubbles, decreasing marginal efficiency of investment, increasing income inequality and declining growth dynamics. The economic policy implication is a slow but decisive exit from ultra-expansionary monetary policies.
  • Access State: Open Access