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The Crisis of Financial Markets and the Real Economy
| Content Provider | Semantic Scholar |
|---|---|
| Copyright Year | 2010 |
| Abstract | Historically speaking, the debt finance/equity finance ratio has never been higher than during the last years. Debt finance facilitates economic expansion, but pushes up systemic risks accordingly. It was the explicit philosophy of this period that when the prices of goods do not exceed a specific benchmark (ECB: 2%), this is not considered a jeopardy for economic stability. It went largely unnoticed that simultaneously, asset inflation bubbles were forming. Generally, it may be stated that economies with a high share of debt finance are significantly less shock-resistant than those with a low share: Debts have to be repaid with interest on a specific day, otherwise problems occur; in the case of several debtors, also problems for the bank. In case equity capital quota are high, equity is devalued for some time. This can be compensated after the crisis. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.iceur-vienna.at/pdf/Felderer.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
