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Some refinements in austrian trade‐cycle theory
Author(s) -
Wood J. Stuart
Publication year - 1984
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090050304
Subject(s) - order (exchange) , abandonment (legal) , capital good , capital (architecture) , business , business cycle , interest rate , monetary economics , capital equipment , economics , commerce , finance , market economy , goods and services , macroeconomics , archaeology , political science , law , history
Changes in the apparent rate of interest have different effects upon different types of firms, causing the onset of the business cycle to be initiated in specialty suppliers to high‐order capital goods manufacturers. These specialty manufacturers utilize bank loans to finance inventories, so they are sensitive to changes in market rates, while consumer‐goods manufacturers finance capital projects using long‐term sources of funds, which are less sensitive. The abandonment of capital projects by lower‐order manufacturers is also less sensitive to interest rate movements than the manufacturing operations of the high‐order suppliers.