1993 | OriginalPaper | Buchkapitel
Asset Deflation and Financial Fragility
verfasst von : Paul Davidson
Erschienen in: Money and Banking
Verlag: Palgrave Macmillan UK
Enthalten in: Professional Book Archive
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The purpose of this chapter is quite modest. The theoretical argument starts by accepting Keynes’s fundamental axiom that money is never neutral in an entrepreneurial economy.1 It is then possible to trace the reason why, if all prices are flexible, falling prices and especially an asset price deflation can have a devastating impact on the financial system. The result will be to lower employment and lower real economic growth. (If, on the other hand, money was really neutral, then falling prices would be the process through which the economic system would either maintain or restore full employment prosperity.)