New Perspectives on Asset Price Bubbles

Paperback | January 25, 2012

EditorDouglas D. Evanoff, George G. Kaufman, A. G. Malliaris

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This volume critically re-examines the profession's understanding of asset bubbles in light of the global financial crisis of 2007-09. It is well known that bubbles have occurred in the past, with the October 1929 crash as the most demonstrative example. However, the remarkably well-behavedperformance of the US economy from 1945 to 2006, and, in particular during the Great Moderation period of 1984 to 2006, assured the economics profession and monetary policymakers that asset bubbles could be effectively managed with little or no real economic impact. The recent financial crisis has now triggered a debate about the emergence of a sequence of repeated bubbles in the Nasdaq market, housing market, credit market and commodity markets. The Greenspan-Bernanke Federal Reserve has followed an asymmetric approach to bubble management. This methodadvocates no monetary policy action during the bubble formation and growth, but a speedy response with a reduction in market rates when a bubble bursts to reduce the potential loss of output and employment. It was supported by academic research and seemed to work well until September 2008 when thefinancial system came close to a complete collapse. The realities of the recent financial crisis have intensified theoretical modeling, empirical methodologies, and debate on policy issues surrounding asset price bubbles and their potentially considerable adverse economic impact if poorly managed. Choosing to take a novel approach, the editors ofthis book have selected five classic papers that represent accepted thinking about asset bubbles prior to the financial crisis. They also include original papers challenging orthodox thinking and presenting new insights. A summary essay by the editors highlights the lessons learned and experiencesgained since the crisis.

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This volume critically re-examines the profession's understanding of asset bubbles in light of the global financial crisis of 2007-09. It is well known that bubbles have occurred in the past, with the October 1929 crash as the most demonstrative example. However, the remarkably well-behavedperformance of the US economy from 1945 to 200...

Douglas D. Evanoff is a vice president and senior research advisor for banking issues at the Federal Reserve Bank of Chicago. His current research interests include asset bubbles, mortgage markets, and financial regulation. His research has been published in various journals and he has also edited a number of books addressing issues ...

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Format:PaperbackDimensions:464 pages, 9.25 × 6.12 × 0.68 inPublished:January 25, 2012Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199844402

ISBN - 13:9780199844401

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Table of Contents

Introduction1. Douglas D. Evanoff, George G. Kaufman and A.G. Malliaris: New Perspectives on Asset Price Bubbles: An OverviewBubbles: Theory and Evidence2. Franklin Allen and Gary Gorton: Churning Bubbles - Seminal research paper: The Review of Economic Studies, Volume 60 (1993)3. Gadi Barlevy: Rethinking Theoretical Models of Bubbles: Reflections Inspired by the Financial Crisis and the Allen and Gorton's Paper on Churning BubblesConsequences of Bubbles Bursting4. Takeo Hoshi and Anil K. Kashyap: The Japanese Banking Crisis: Where Did it Come From and How Will it End? - Seminal research paper: NBER Macroeconomics Annual 1999, vol 14 (2000)5. Andrew Filardo: The Impact of the International Financial Crisis on Asia and the Pacific: Highlighting Monetary Policy Challenges from an Asset Price Bubble PerspectiveBubbles and Monetary Policy6. Ben Bernanke and Mark Gertler: Monetary Policy and Asset Price Volatility - Seminal research paper: Economic Review, Federal Reserve Bank of Kansas City (1999)7. Kenneth N. Kuttner: Monetary Policy and Asset price Volatility: Should We Refill the Bernanke-Gertler Prescription?Bubbles and Macroprudential Regulation8. Claudio Borio: Towards a Macroprudential Framework for Financial Supervision and Regulation? - Seminal research paper: CESifo Economic Studies, Volume 49 (2003)9. Viral V. Acharya and Hassan Naqvi: Bank Liquidity and Bubbles: Why Central Banks Should Lean Against LiquidityBubbles: Behavioral Explanations10. Jose A. Scheinkman and Wei Xiong: Overconfidence and Speculative Bubbles - Seminal research paper: Journal of Political Economy, Volume 111 (2003)11. Werner De Bondt: Asset Bubbles: Insights from Behavioral FinanceBubbles: Keynote Presentations12. William Poole: An Old Perspective on Asset Price Bubbles Policy13. Benjamin M. Friedman: Struggling to Escape From 'Assumption 14'New Ideas on Asset Price Bubbles14. Lawrence J. Christiano, Cosmin Ilut, Roberto Motto, and Massimo Rostagno: Monetary Policy and Stock Market Booms15. John Geanakoplos: Leverage and Bubbles: The Need to Manage the Leverage CycleAsset Bubbles, Central Banks and Investments16. A. G. Malliaris: Asset Price Bubbles and Central Bank Policies: The Crash of the Jackson Hole Consensus17. Robert Chirinko and Huntley Schaller: Do Bubbles Lead to Overinvestment? A Revealed Preference Approach