Financial Market Crisis as a Phenomenon of Stock Market Overshooting

A theoretical model sets out to explain how, in an interplay between money, equity and goods markets,
an overly expansionary monetary policy stance (notably in the USA) fuelled stock market speculation
developing a bubble that burst after prices had overshot their long-term equilibrium. The subsequent collapse
of share prices triggered a recession on the goods. This theoretical explanation of the financial
market crisis by means of a three-market-model may also contribute towards a better understanding of
the mortgage boom and the following subprime crisis on the US housing market and how this led to a
global crisis. Abstracting from the more complex origins of the current financial market and economic
crisis, the main focus is set on the influences from the monetary policy side.