The doctrine of price level stabilization is one of the most important building blocks in modern macroeconomics. In 1920s and 1930s, Friedrich August von Hayek presented a theory that challenged this monetary-policy regime. Hayek stressed that attempts to stabilize the price level in the...

Friedrich August von Hayek suggested that price level stability might not be consistent with neutrality of money. In the economy with permanently increasing natural output, price level stabilization requires a steadily rising money supply. This permanent injection of liquidity might be the true...

This paper deals with the effects of loan maturity mismatching on the shape of the yield curve and on the real economy. For this purpose, it defines the not yet established concept of the natural yield curve based on the Austrian theory of the natural interest rate. It uses a framework of...

Friedrich August von Hayek in his early papers criticized price-level stabilization as an optimal monetary policy. In the Hayek theory, attempts to stabilize the price level in an economy with increasing natural output may initiate business cycle. The trigger lies in monetary accommodation that...

The trigger of the Austrian (Hayekian) business cycle theory lies in the money-supply shock that deflects the market rate of interest from the natural level. Hayek (1935) developed a simple graphical tool to plot dynamics of the capital structure after this shock. Freezing the money supply is...

This study investigates the behaviour of the interest rate over the business cycle that is predicted by the Austrian theory of economic fluctuations. The first part briefly introduces the Austrian approach and develops some of its basic tools. The second part focuses on the gap between the...

1. Introduction -- 2. The Austrian Theory of Capital -- 3. The Böhm-Bawerkian Theory of Capital and Interest -- 4. The Hayek Triangle -- 5. Impact of the Decrease in Time Preference on the Structure of Production -- 6. Possibility of Eternal Growth and Comparison with the Neoclassical Growth...

Traces of the Austrian capital theory may be detected in the modern growth theory. Yet, it was not generally accepted as it contains many confusions and unsettled points. This paper tries to clarify some of the misunderstandings that are present in this theory. It clarifies the notion of...

The pure time preference theory of Ludwig von Mises and Murray N. Rothbard is a cornerstone of the Austrian theory of interest. In the past, several attempts were made to demonstrate that this theory might be inconsistent. In this paper, the original Böhm-Bawerk theory is illustrated in a...