Wednesday, January 14, 2015

More Support for Austrian Business Cycle Theory

After some odd support for Fed money manipulation advocates at Koch-funded operations (SEE: Koch Brothers Satellite Moves Further Down the Road of Federal Reserve Money Printing Advocacy and Cato Institute Economist Calls for Federal Reserve Money Manipulation), top Koch economic field general Tyler Cowen comes full circle and writes:
Austrian business cycle theory continues to make a comeback
Just read the abstract from the latest NBER working paper by Òscar Jordà, Moritz HP. Schularick, and Alan M. Taylor:
Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection methods to demonstrate that loose monetary conditions lead to booms in real estate lending and house prices bubbles; these, in turn, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era.
The piece is called “Betting the House,” and you will find some non-gated copies here.

Will this mean that Selgin and Sumner will now get the Vaclav Klaus treatment?  Extremely unlikely,  especially since Cowen concludes the post with this:
And to my Austrian-oriented readers, please don’t let this evidence push you away from more synthetic accounts of what is going on…
Synthetic accounts?

If you want to see the synthetic accounts and other non_Austrian views destroyed, in favor of the Austrian School read Murray Rothbard: Austrian School Business Cycle Theory.

No comments:

Post a Comment