Jump to ContentJump to Main Navigation
Economic Theory of Bank Credit$
Users without a subscription are not able to see the full content.

L. Albert Hahn

Print publication date: 2015

Print ISBN-13: 9780198723073

Published to Oxford Scholarship Online: November 2015

DOI: 10.1093/acprof:oso/9780198723073.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a monograph in OSO for personal use (for details see www.oxfordscholarship.com/page/privacy-policy).date: 19 March 2019

The Influence of Credit on Goods Production

The Influence of Credit on Goods Production

Chapter:
(p.154) (p.155) [2.*]A. The Influence of Credit on Goods Production
Source:
Economic Theory of Bank Credit
Author(s):

L. Albert Hahn

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198723073.003.0011

Credit expansion (inflationary or non-inflationary) lowers interest rates and makes longer production processes relatively more attractive and more roundabout methods of production are chosen. An elongation of the production process increases the amount of simultaneously available goods but this increase is driven by consumption goods that are diverted into production. Credit expansion widens the flow of goods and could lead to an increase in employment as new ventures become profitable. The effect on prices and wages (and subsequently the business cycle) depends on whether or not the credit is inflationary. Non-inflationary credit does not change the price or wage level because additional savings counteract the effects of credit expansion. Inflationary credit, however, increases prices and nominal wages; this induces higher demand and consequently further credit expansion. This effect reinforces itself until firms no longer expect further price rises and the expansion comes to a halt and the economic downturn begins.

Keywords:   credit expansion, inflationary credit, non-inflationary credit, inflation, price expectation

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .