Risk and business cycles: New and old Austrian perspectives

Abstract

Risk and Business Cycles develops an integrated framework for assessing the roles of both monetary and real shocks in the business cycle. The author uses modern treatments of risk, finance and expectations to develop an innovative and challenging critique of the Austrian school of economics. Drawing upon contemporary methods of empirical and econometric research, the work examines how changes in risk, real interest rates and finance constraints alter the likelihood of intertemporal plan coordination. The author presents a synthesis of the older ‘Austrian’ perspective on business cycles with contemporary theories of financial risk and real business cycles to construct a unified framework. A case is put forward for the revival of an important role for monetary causes in business cycle theory, which challenges the current trend towards favoring purely real theories.