Credit Cycle

Abstract

It was with the post-First World War attempts to integrate marginalist value and monetary theory that theorists started pondering the possible (in Hayek’s words) ‘incorporation of cyclical phenomena into the system of economic equilibrium theory’. Hayck’s own ‘intertemporal equilibrium’ approach overturned the traditional view of cycles as temporary deviations from long-period equilibrium conditions. But the publication of Keynes’s General Theory redirected research efforts towards the determination of output at a point in time. Since the late 1960s, with the search for ‘microfoundations for macroeconomics’, this line of thought has been back on the theoretical agenda.