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Media type:
E-Article
Title:
Inflation, the Interest Rate, and the Required Return on Equity
Contributor:
Jaffe, Jeffrey F.
Published:
University of Washington Graduate School of Business Administration and the Western Finance Association, 1985
Published in:
The Journal of Financial and Quantitative Analysis, 20 (1985) 1, Seite 29-44
Language:
English
ISSN:
0022-1090;
1756-6916
Origination:
Footnote:
Description:
Miller has analyzed capital structure in the presence of both corporate and personal taxes. The present work investigates the effect of inflation on both interest rates and equity returns when the Miller equilibrium condition is employed in a loanable funds model. Both an interest rate effect and a redistribution effect are derived. The interest rate effect forces the responsiveness of the interest rate to the inflation rate to be below that hypothesized by Darby. However, the redistribution effect may change this responsiveness in either direction.