Financial Asset Valuations: The Total Demand Approach

TitreFinancial Asset Valuations: The Total Demand Approach
Type de publicationArticle de revue
AuteurZukauskas, Vytautas , Hulsmann, Guido
TypeArticle scientifique dans une revue à comité de lecture
DateMai 2019
Titre de la revueQuarterly Review of Economics and Finance
Mots-clésasset pricing, central banks, fiat money, financial markets, monetary policy, subjective value, value theory
Résumé en anglais

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.

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