Pricking Bubbles in the Wind: Could Central Banks Have Done More to Head Off the Financial Crisis?

10 Pages Posted: 8 Dec 2009

See all articles by Howard Davies

Howard Davies

London School of Economics & Political Science (LSE)

Abstract

Regulators, commercial and investment banks, hedge funds and rating agencies have all borne some blame for the current global financial crisis, but could central banks have done more? It is argued in the lecture that in a number of ways central banks should have paid more attention to asset bubbles, which have high output costs. Asset prices, especially housing prices, should be identified as an explicit factor in the consideration of policy. More generally, central banks should adopt policies that ‘lean against the wind’.

Suggested Citation

Davies, Howard, Pricking Bubbles in the Wind: Could Central Banks Have Done More to Head Off the Financial Crisis?. Australian Economic Review, Vol. 42, No. 4, pp. 387-396, December 2009. Available at SSRN: https://ssrn.com/abstract=1518649 or http://dx.doi.org/10.1111/j.1467-8462.2009.00572.x

Howard Davies (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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