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Financial Asset Valuations: The Total Demand Approach

Author

Listed:
  • Vytautas Zukauskas

    (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)

  • Guido Hulsmann

    (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)

Abstract

This article provides an explanation of how monetary policy impacts the prices of financial assets relative to the prices of non-financial assets. In the standard view, monetary policy has no such effect. It may influence financial-asset prices in various ways, but it does not all by itself entail any tendency for financial-asset prices to rise faster than the prices of non-financial assets. We argue that the neglected "total demand approach" sheds a different light on this issue. Total-demand theory shows that monetary policy may have such a consequence. It also brings the additional advantage of simplifying the theory of monetary policy, in that it allows to conceptualise unconventional monetary policy and changes in the quality of money within a single theoretical framework.

Suggested Citation

  • Vytautas Zukauskas & Guido Hulsmann, 2019. "Financial Asset Valuations: The Total Demand Approach," Post-Print hal-02558948, HAL.
    • Handle: RePEc:hal:journl:hal-02558948
    DOI: 10.1016/j.qref.2018.11.004
    as

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