Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/186952 
Authors: 
Year of Publication: 
1999
Series/Report no.: 
Working Paper No. 279
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
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 overcapitalization of companies leads to increased fragility of banking and undermines monetary policy and stable relationships between short- and long-term interests 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.
Document Type: 
Working Paper

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