Monetary Policy in an Era of Capital Market Inflation

Jan Toporowski
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Jan Toporowski: Reader in Economics, South Bank University

Macroeconomics from University Library of Munich, Germany

Abstract: The 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.

JEL-codes: E (search for similar items in EconPapers)
Pages: 18 pages
Date: 2000-10-06
New Economics Papers: this item is included in nep-mon
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 18; figures: included
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0004026

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