Abstract
Following its announcement of lower interest rates, the ECB decided to lend 489 million euros to selected European banks at the low rate of 1 % (December 21, 2011). This amounts to an increase in money supply by a significant amount and a further lowering of interest rates, at least for certain European banks and the projects that will be financed. What will be the likely effects of this policy action? According to the analysis of the Austrian school, the effect depends on how the monetary expansion will be distributed among consumption and production and also among the various branches of production and the various branches of consumption.
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Notes
- 1.
See for example F. Hayek, “Capital and industrial fluctuations”, Econometrica, April 1934, p. 161.
- 2.
The data are quarterly (2000–2011) and have been obtained from ELSTAT, the Greek Statistical Authority.
References
Hayek FA (1935/1967) Prices and production, 2nd edn. Augustus M. Kelley, New York
Mises L (1912/1953) The theory of money and credit. Yale University Press, New Haven
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Tsionas, E.G. (2014). The Current Policies of the ECB. In: The Euro and International Financial Stability. Financial and Monetary Policy Studies, vol 37. Springer, Cham. https://doi.org/10.1007/978-3-319-01171-4_16
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DOI: https://doi.org/10.1007/978-3-319-01171-4_16
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