Quarterly Journal of Austrian Economics

The Term Structure of Savings, the Yield Curve, and Maturity Mismatching

The Quarterly Journal of Austrian Economics

Volume 13, No. 3 (Fall 2010)


 Recognizing different types of savings allows for a more fruitful analysis of the business cycle. Sustainable investment activities must be financed by an equivalent amount of savings, both in length of availability and quantity. Upward-sloping yield curves are a feature of the unhampered loanable funds market. Interest rates differ along this curve depending on the investment community’s demand for funds. While free market maturity mismatching can be successful and advance intermediation, the existence of either a central bank or a fractional reserve banking system skew the yield curve, resulting in malinvestment fueled boom-bust cycles. Credit expansion alone fails to explain the full extent of these cycles. Additional causes of the business cycle are found via excessive maturity mismatched borrowing driven by three banking sector interventions: credit expansion, the provision of a lender of last resort, and government bailout guarantees.


Bagus, Philipp, and David Howden. “The Term Structure of Savings, The Yield Curve, and Maturity Mismatching.” The Quarterly Journal of Austrian Economics 13, No. 3 (Fall 2010): 64–85.

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