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A Kind of Neither Keynesian Nor Neoclassical Model (7): The Cause of the Financial Crisis

DOI: 10.4236/oalib.1105084, PP. 1-16

Keywords: Cobb-Douglas Function, P/E Ratio, Endogenous Earnings, Exogenous Earnings

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Abstract:

There are two reasons for the financial crisis. One is the spontaneous specula-tion in the capital market. The P/E ratio of the speculative object is much high-er than the ratio of capital to output in the factual economic system. The other is the crisis triggered by the bubble environment. In addition, inflation has a strong inhibitory effect on asset bubbles, and high inflation and asset bubbles will not occur at the same time. These can be verified by statistical data and theoretical explanation from the marginal state equation of Cobb-Douglas function.

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