Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets - An Overinvestment View
32 Pages Posted: 3 Oct 2007
There are 2 versions of this paper
Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets - An Overinvestment View
Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets: An Overinvestment View
Date Written: September 2007
Abstract
Credit booms have globally fuelled hikes in stock, raw material and real estate markets which have culminated in the recent US subprime market crisis. We explain the global asset market booms since the mid 1980s based on the overinvestment theories of Hayek, Wicksell and Schumpeter. We argue that ample liquidity supply originating in the large industrialized countries has contributed to overinvestment cycles in Japan, East Asia, the new markets in the industrial countries and many emerging market economies. Expansionary monetary policies in response to the burst of bubbles are argued to have contributed to vagabonding bubbles around the globe.
Keywords: bubbles, boom-bust cycles, Hayek, Wicksell, Schumpeter, emerging markets, capital flows, overinvestment theories
JEL Classification: B53, E32, E44, E52
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The East Asian Dollar Standard, Fear of Floating, and Original Sin
By Ronald Mckinnon and Gunther Schnabl
-
The East Asian Dollar Standard, Fear of Floating, and Original Sin
By Ronald Mckinnon and Gunther Schnabl
-
Japan's Negative Risk Premium in Interest Rates: The Liquidity Trap and the Fall in Bank Lending
By Rishi Goyal and Ronald Mckinnon
-
The Return to Soft Dollar Pegging in East Asia: Mitigating Conflicted Virtue
By Ronald Mckinnon and Gunther Schnabl
-
Synchronized Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate
By Ronald Mckinnon and Gunther Schnabl
-
Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate
By Ronald Mckinnon and Gunther Schnabl
-
Post-Crisis Exchange Rate Policy in Five Asian Countries Filling in the 'Hollow Middle'?
-
Exchange Rate Policy Options for Post-Crisis Southeast Asia: Is There a Case for Currency Baskets?
-
The Foreign Exchange Origins of Japan's Economic Slump and Low Interest Liquidity Trap
By Ronald Mckinnon and Kenichi Ohno