Entrepreneurial ignition of the business cycle: The corporate finance of malinvestment

Entrepreneurial ignition of the business cycle: The corporate finance of malinvestment This paper provides an extension of the Austrian Business Cycle Theory (ABCT) framework by integrating corporate capital structure, the monetary policy transmission channel, and capital budgeting analyses. In this manner, the paper presents the business cycle as being exogenously set up by central bank authorities, but endogenously set off by commercial banks and enterprises making use of central bank-distorted market signals. The cyclical boom is modeled as a gradual process where both latitudinal and longitudinal investment expansions are possible with either internal or external finance. Bank credit creation, although a necessary condition for igniting the boom, is diversely transmitted to the economy because of heterogeneity in entrepreneurial misjudgment, corporate capital structure strategies, and the class of projects available to the enterprises. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

Entrepreneurial ignition of the business cycle: The corporate finance of malinvestment

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Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics; Public Finance & Economics; Political Science; Methodology/History of Economic Thought
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-014-0298-0
Publisher site
See Article on Publisher Site

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