Lester and Wolff (2013) find little empirical support for the Austrian business cycle theory. According to their analysis, an unexpected monetary shock does not alter the structure of production in a way consistent with the Austrian view. Rather than increasing production in early and late...

Since Hayek’s pioneering work in the 1930s, the Austrian business cycle theory (ABCT) has been presented as a disequilibrium theory populated by less-than-perfectly rational agents. In contrast, we maintain that (1) the Austrian business cycle theory is consistent with rational expectations...