Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory
CESifo, Munich, 2016
CESifo Working Paper No. 6179
![](https://cesifo.org/DocImg/cesifo1_wp6179.jpg?c=1689236839)
The paper analyses the evolvement and effects of central bank crisis management since the mid 1980s based on a Hayek-Mises-Wicksell overinvestment framework. It is shown that, given that the traditional transmission mechanism between monetary policy and consumer price inflation has collapsed, asymmetric monetary policy crisis management implies a convergence of interest rates towards zero and a gradual expansion of central bank balance sheets. From a Hayek-Mises-Wicksell perspective asymmetric central bank crisis management has contributed to financial market bubbles, decreasing marginal efficiency of investment, increasing income inequality and declining growth dynamics. The economic policy implication is a slow but decisive exit from ultra-expansionary monetary policies.
Monetary Policy and International Finance
Fiscal Policy, Macroeconomics and Growth