Monetary Policy in an Era of Capital Market Inflation
AbstractThe theory of capital market inflation argues that the values of long- term securities markets are determined by a disequilibrium inflow of funds into those markets. The resulting over-capitalization of companies leads to increased fragility of banking and undermines monetary policy and stable relationships between short- and long-term interest rates, such as that postulated by Keynes in his theory of the speculative demand for money. Moreover, while the increased fragility of banking is an immediate effect, capital market inflation also creates an unstable Ponzi financing structure in the capital market as a whole.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0004026.
Length: 18 pages
Date of creation: 06 Oct 2000
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Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 18; figures: included
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- E - Macroeconomics and Monetary Economics
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