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Summer 2018

ISSN 0890-913X

Volume 33, Number 2

Categories: Summer 2018 | Business Cycles

The Role of Capital Structure in Austrian Business Cycle Theory

Nicolás Cachanosky, Metropolitan State University of Denver

Peter Lewin, University of Texas at Dallas

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TheJournalofPrivateEnterprise33(2),2018,21–32TheRoleofCapitalStructureinAustrianBusinessCycleTheoryNicolásCachanoskyMetropolitanStateUniversityofDenverPeterLewinUniversityofTexasatDallas______________________________________________________AbstractWearguethattheapplicationoffinancialanalysis,especiallythatofduration,clarifiesandsupportstheapplicationoftheaverageperiodofproductioninAustrianbusinesscycletheory.WealsosuggestthatthefocusintherecentABCTliteratureshouldbemoreontheaverageperiodofproductionandlessonthestagesofproductionasdepictedinHayek’striangleinRogerGarrison’smodel.______________________________________________________JELCodes:B22,B25,E14,E32Keywords:Austrianbusinesscycletheory,ABCT,Cantilloneffect,rationalbehavior,RogerGarrisonI.IntroductionRecentyearshaveseenaninterestingturnintheAustrianbusinesscycletheory(ABCT)literature.Ontheonehand,therehasbeenanincreasedinterestinandendorsementoftheABCTfromnon-Austriansasavalidtheorytoexplaincrisessuchastheonethatoccurredin2007–08(CachanoskyandSalter2016).Ontheotherhand,AustrianshaveraisedquestionsaboutthesoundnessandevennecessityofusingthestructureofproductionconstructintheABCT.Forinstance,SalterandLuther(2016,p.52)suggestthatwhether“thesemalinvestments[inducedbyacreditexpansion]conformtothespecificdistortionsofthetimestructureofproductiondiscussedinthetraditionalABCTisirrelevantinourview.Anyinvestmentininappropriateprojectswilldo”(emphasisadded).Inourview,theABCTnotonlyshedslightontheeventsbuildinguptothe2007–08financialcrisis,butthestructureofproductioncanalsobereframedinawaythat(1)solvestheoreticalproblemsand(2)providesthechangeinrelativepricesthatproducesthespecificdistortionsofthetimestructureofproductiondiscussedinthe

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Title	The Role of Capital Structure in Austrian Business Cycle Theory
Authors/Creators:	Nicolás Cachanosky, Metropolitan State University of Denver Peter Lewin, University of Texas at Dallas
Year:	2018
Volume:	33
Number:	2
Pages:	21 - 32
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Austrian business cycle theory, ABCT, Cantillon effect, rational behavior, Roger Garrison

Citation:
Cachanosky, Nicolás; Lewin, Peter / 2018. "The Role of Capital Structure in Austrian Business Cycle Theory." The Journal of Private Enterprise, 33(2): 21-32.