Title: Transformative finance

Authors: Christian Fahrbach

Addresses: Leuphana University Lüneburg, Universitätsallee 1, D-21335 Lüneburg, Germany

Abstract: Transformative finance is a new topic in financial economics and provides a new methodology to stabilise financial markets in an economic crisis. The objective is to balance financial markets in an ongoing bear market. In this case, the central bank and the state are required to implement either negative nominal interest rates or negative nominal interest rates after taxes through appropriate monetary and fiscal policies. Accordingly, there are two different economic policies in which the central bank and the state play very different roles and which still lead to the same result. Both have the same effect on investor expectations: investors are guided by negative interest rates (after taxes), adjusting their return expectations downwards, making cheap equity available and thus easing financing conditions for companies. Both strategies are theoretically equivalent: stabilising the financial markets at a lower level of return on assets, thus promoting a lasting economic recovery.

Keywords: bear market; economic crisis; finance; stock market; financial market; stability; negative interest rates; wealth tax; corporate social responsibility; monetary policy; fiscal policy.

DOI: 10.1504/IJPEE.2023.138575

International Journal of Pluralism and Economics Education, 2023 Vol.14 No.3/4, pp.234 - 245

Received: 26 Jul 2023
Accepted: 11 Aug 2023

Published online: 13 May 2024 *

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