Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory

Gunther Schnabl

März 2019

Abstract

This chapter analyzes the evolution 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 toward zero and a gradual expansion of central bank balance sheets. From a Wicksell-Hayek-Mises 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.

Keywords: , , , , , , , , .

Erschienen in

The Oxford Handbook of the Economics of Central Banking.

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Via oxfordhandbooks.com

Monetary policy, inequality and political instability

Pablo Duarte; Gunther Schnabl

Februar 2019

Abstract

Voters in the industrialised countries are increasingly expressing dissatisfaction by dissenting from the established political parties and candidates. Based on the concepts of justice by Hayek, Rawls and Buchanan, we argue that the growing dissatisfaction is rooted in the asymmetric pattern of monetary policies since the mid‐1980s for two reasons. First, the structurally declining interest rates and the unconventional monetary policy measures have granted privileges to specific groups. Second, the increasingly expansionary monetary policies have negative growth effects, which have reduced the scope for compensation of the ones excluded from the privileges. As a result, the acceptance of the prevailing economic and political order is undermined and political instability increases.

JEL Codes: , , .

Erschienen in

The World Economy, Wiley Blackwell, vol. 42(2), pages 614-634.

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Via ideas.repec.org

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