... policymakers gathered to discuss five research papers that address the role of asset markets in the economy and their importance for the conduct and implementation of monetary policy, a particularly pertinent topic, given the ongoing developments in U.S. financial markets. Among other things, asset ...
Asset price bubbles: What are the causes
... turmoil in financial markets and the wider economy. The October 1929 stock market crash is perhaps the most dramatic instance. That said, until recently, the successful performance of the U.S. economy in the post-World War II era, particularly during the “Great Moderation” of 1984–2006, appeared to ...
... turmoil in financial markets and the wider economy. The October 1929 stock market crash is perhaps the most dramatic instance. That said, until recently, the successful performance of the U.S. economy in the post-World War II era, particularly during the “Great Moderation” of 1984–2006, appeared to ...
Alan Greenspan
... along with the world economy, and hindsightassisted evidence suggests that he turned a deaf ear to warnings of the housing and stock market bubbles that exploded after he left the Fed in 2006. In House hearings during the second month of the market meltdown of 2008, Greenspan testified that he had " ...
... along with the world economy, and hindsightassisted evidence suggests that he turned a deaf ear to warnings of the housing and stock market bubbles that exploded after he left the Fed in 2006. In House hearings during the second month of the market meltdown of 2008, Greenspan testified that he had " ...
New Zealand housing market
... - Increases financial system risk by increasing the probability and potential impact of a significant downward price adjustment - Increases inflation risk ...
... - Increases financial system risk by increasing the probability and potential impact of a significant downward price adjustment - Increases inflation risk ...
The U.S`s Financial Crisis of 2007-2009
... The stimulus reduced the risk of a sharper Reduced more sustained global downturn. FRS – interest rate cuts make money cheaper. State and local revenue recovering tax receipts up 5% on the annual basis ...
... The stimulus reduced the risk of a sharper Reduced more sustained global downturn. FRS – interest rate cuts make money cheaper. State and local revenue recovering tax receipts up 5% on the annual basis ...
I was asked to speak to you about the recently announced Budget
... highlight three important lessons. The first is that financial markets are not efficient – by which I mean they are prone to speculative excess and the build-up of asset price bubbles. These bubbles create systemic risks and vulnerabilities for the real economy, because when they burst – as they oft ...
... highlight three important lessons. The first is that financial markets are not efficient – by which I mean they are prone to speculative excess and the build-up of asset price bubbles. These bubbles create systemic risks and vulnerabilities for the real economy, because when they burst – as they oft ...
1. What is an asset price bubble and why do they matter?
... 1. What is an asset price bubble and why do they matter? Asset price bubbles are not a new phenomenon. Defined as an upward price movement over a period of time which is unexplainable based on fundamentals, and which subsequently implodes (Siegel, 2003), asset price bubbles have plagued financial sy ...
... 1. What is an asset price bubble and why do they matter? Asset price bubbles are not a new phenomenon. Defined as an upward price movement over a period of time which is unexplainable based on fundamentals, and which subsequently implodes (Siegel, 2003), asset price bubbles have plagued financial sy ...
Should the Fed React to the Stock Market?
... the asymmetric nature of the costs of policy errors when faced with a suspected bubble:“If the economy is indeed robust and the boom is sustainable, actions ...
... the asymmetric nature of the costs of policy errors when faced with a suspected bubble:“If the economy is indeed robust and the boom is sustainable, actions ...
Boom in Bolivian housing market: bubble or economic fundamentals?
... employed in the literature were applied to test the hypothesis of the document: a cointegration analysis and the method of Levin and Wright (1997a y 1997b), which estimates the importance of the speculative component in the price of housing. Regarding the results, the cointegration analysis indicate ...
... employed in the literature were applied to test the hypothesis of the document: a cointegration analysis and the method of Levin and Wright (1997a y 1997b), which estimates the importance of the speculative component in the price of housing. Regarding the results, the cointegration analysis indicate ...
Credit_Crisis_and_the_Future_ of_ Accounting
... production as the primary engine of growth; studies suggest that ‘intangible’ assets are now contributing over threequarters of U.S. GDP. ...
... production as the primary engine of growth; studies suggest that ‘intangible’ assets are now contributing over threequarters of U.S. GDP. ...
Outlook for the U.S. Economy
... 1968), in 1970, these consist of government backed securities issued on the basis of mortgages purchased from originators. These pass-throughs have been used by the Federal National Mortgage Association (FNMA, of Fannie Mae, est. in 1938), and by the Federal Home Loan Mortgage Corporation (Freddie M ...
... 1968), in 1970, these consist of government backed securities issued on the basis of mortgages purchased from originators. These pass-throughs have been used by the Federal National Mortgage Association (FNMA, of Fannie Mae, est. in 1938), and by the Federal Home Loan Mortgage Corporation (Freddie M ...
PowerPoint - The Center for Economic and Policy Research
... • Limited supply of land – land has always been limited; what happened to Internet removing restrictions of time and space? • Low interest rates – if low interest rates explain the run-up, then house prices will plummet when interest rates return to normal • It is interesting to note that the fundam ...
... • Limited supply of land – land has always been limited; what happened to Internet removing restrictions of time and space? • Low interest rates – if low interest rates explain the run-up, then house prices will plummet when interest rates return to normal • It is interesting to note that the fundam ...
I Easy Money and the Decapitalization of America GEORGE WILLIAM H.
... already rising by 2008 (annual rate 3.85%), but this rise was put into reverse when bank lending and consumer spending then fell sharply. However, the huge additional monetary overhang created over the last couple of years (or, to put it more pointedly, the vast recent monetizations of government de ...
... already rising by 2008 (annual rate 3.85%), but this rise was put into reverse when bank lending and consumer spending then fell sharply. However, the huge additional monetary overhang created over the last couple of years (or, to put it more pointedly, the vast recent monetizations of government de ...
PP--Government Efforts to Combat the Economic Crisis
... #3: What did the Glass-Steagall Act do? ...
... #3: What did the Glass-Steagall Act do? ...
Black Holes and Financial Crisis
... Business sector and how it evolves: • First in normal times, with no unexpected macro shocks, but lots of small idiosyncratic shocks at micro level that cancel out on aggregate. • Then, after a macro shock – a synchronised shock, when all Small Businesses might become insolvent ...
... Business sector and how it evolves: • First in normal times, with no unexpected macro shocks, but lots of small idiosyncratic shocks at micro level that cancel out on aggregate. • Then, after a macro shock – a synchronised shock, when all Small Businesses might become insolvent ...
When the Bubbles Burst…
... Ratio of value of S&P 500 to the average earnings of those companies over the previous 10 years, adapted and updated from Shiller. Blue line: ratio of monthly average S&P 500 index (deflated by current CPI) to 10-year average of most recent monthly earnings (each deflated by CPI for that month). Apr ...
... Ratio of value of S&P 500 to the average earnings of those companies over the previous 10 years, adapted and updated from Shiller. Blue line: ratio of monthly average S&P 500 index (deflated by current CPI) to 10-year average of most recent monthly earnings (each deflated by CPI for that month). Apr ...
Slide 1
... which interprets bubbles as asset price inflation. Then, the key to macroeconomic stability would lie on fighting not only goods inflation but also asset price inflation. This is clearly stated on the report: “Characteristics of the new global financial system, combining with macroeconomic imbalance ...
... which interprets bubbles as asset price inflation. Then, the key to macroeconomic stability would lie on fighting not only goods inflation but also asset price inflation. This is clearly stated on the report: “Characteristics of the new global financial system, combining with macroeconomic imbalance ...
The financial crisis - World Economy & Finance Research
... Source: Standard & Poor Case-Shiller, composite index. ...
... Source: Standard & Poor Case-Shiller, composite index. ...
Views of Risk
... • market price incorporates perfect information • Random walks in price around equilibrium value ...
... • market price incorporates perfect information • Random walks in price around equilibrium value ...
FRBSF E L CONOMIC ETTER
... to exhibit “excess volatility,” that is, prices move too much to be explained by changes in the underlying fundamentals, such as dividends or cash flows.Another prominent feature of asset prices is the intermittent occurrence of sustained run-ups above estimates of fundamental value, so-called specu ...
... to exhibit “excess volatility,” that is, prices move too much to be explained by changes in the underlying fundamentals, such as dividends or cash flows.Another prominent feature of asset prices is the intermittent occurrence of sustained run-ups above estimates of fundamental value, so-called specu ...
Slide 1
... that the avoidance of this over-investment is the only possible remedy for the ensuing slump, and that, ..., the boom can be avoided by a high rate of interest.” ...
... that the avoidance of this over-investment is the only possible remedy for the ensuing slump, and that, ..., the boom can be avoided by a high rate of interest.” ...
Document
... well have contributed to the stock price bubble of the latter part of the 1990s. Looking back on those years, it is evident that technology-driven increases in productivity growth imparted significant upward momentum to expectations of earnings growth and, accordingly, to stock prices. At the same t ...
... well have contributed to the stock price bubble of the latter part of the 1990s. Looking back on those years, it is evident that technology-driven increases in productivity growth imparted significant upward momentum to expectations of earnings growth and, accordingly, to stock prices. At the same t ...
Economic bubble
An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is trade in an asset at a price or price range that strongly deviates from the corresponding asset's intrinsic value. It could also be described as a situation in which asset prices appear to be based on implausible or inconsistent views about the future.Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Both the boom and the burst phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.While some economists deny that bubbles occur, the cause of bubbles remains disputed by those who are convinced that asset prices often deviate strongly from intrinsic values. Many explanations have been suggested, and research has recently shown that bubbles may appear even without uncertainty, speculation, or bounded rationality. In such cases, the bubbles may be argued to be rational, where investors at every point fully compensated for the possibility that the bubble might collapse by higher returns. These approaches require that the timing of the bubble collapse can only be forecast probabilistically and the bubble process is often modelled using a Markov switching model. It has also been suggested that bubbles might ultimately be caused by processes of price coordination or emerging social norms.