Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

date: 15 December 2018

Abstract and Keywords

The Austrian theory of the business cycle provides a necessary but not sufficient framework for understanding the intertemporal discoordination that caused the housing boom and bust and the financial crisis of 2008. Artificially low interest rates after 2001, caused by central bank expansionary policy, encouraged long-term loans, and housing policy and institutions, especially Fannie Mae and Freddie Mac, channeled those funds into the real estate market. The ensuing boom facilitated the growth of exotic financial instruments premised on rising housing prices, all of which crashed when the intertemporal discoordination became clear. Once in a bust, Austrian economics, supplemented by public-choice theory and other parts of Virginia political economy, rejects expansionary fiscal and monetary policy as appropriate responses. Only market discovery processes in a sound monetary framework can reallocate the malinvestments of the boom.

Keywords: Austrian economics, business cycle, financial crisis, housing, interest rates, monetary policy, public choice

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.