European Business Fluctuations In The Austrian Framework
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).