New Perspectives on Asset Price Bubbles [Paperback]

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-behaved performance 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 realities of the crisis have intensified theoretical modeling, empirical methodologies, and debate on policy issues surrounding asset price bubbles and their potentially adverse economic impact if poorly managed. Taking a novel approach, the editors of this book present 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 highlights the lessons learned and experiences gained since the crisis.

Introduction

1. New Perspectives on Asset Price Bubbles: An Overview
Douglas D. Evanoff, George G. Kaufman and A.G. Malliaris

Bubbles: Theory and Evidence

2. Churning Bubbles
Franklin Allen and Gary Gorton. Seminal research paper: The Review of Economic Studies, Volume 60 (1993).

3. Rethinking Theoretical Models of Bubbles: Reflections Inspired by the Financial Crisis and the Allen and Gorton's Paper on Churning Bubbles
Gadi Barlevy

Consequences of Bubbles Bursting

4. The Japanese Banking Crisis: Where Did it Come From and How Will it End? Takeo Hoshi and Anil K. Kashyap. Seminal research paper: NBER Macroeconomics Annual 1999, l3Ô