Low inflation on goods markets provides no reliable precondition for asset-market stability; it might even promote the emergence of bubbles because interest rates and risk premia appear to be low. A further factor driving asset demand is easy availability of credit, which in turn roots in the...

Liquidity preference theory had a hard time to defeat the loanable funds approach because Keynes himself failed to elucidate the financing of investment in the "General Theory". Liquidity preference is a key element in the credit supply decision of the banking system. Liquidity premium is an...