Date Added: Sep 2010
The Austrian theory mainly deals with analyzing the effects of an increased credit offer on productive structures. In this respect, the authors 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, they 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).