The Evolving Nature of Asset Price Bubbles, Financial Instability and Monetary Policy

Multinational Finance Journal, 2018, volume 22, no. 1/2, pp. 35-62.

26 Pages Posted: 3 Dec 2018 Last revised: 27 Aug 2019

See all articles by A. (Tassos) G. Malliaris

A. (Tassos) G. Malliaris

Loyola University of Chicago - Department of Economics

Date Written: July 30, 2018

Abstract

This paper links the bursting of the housing asset price bubble around 2007 in the U.S. to the instability that arose in financial markets with the bankruptcy of Lehman Brothers in September 2008, and both of these to the Great Recession and the unconventional monetary policy that followed. Similar narratives about the Stock Market Crash of 1929, the Crash of 1987 and the Internet Bubble of 2000 are briefly presented to show their evolving financial nature, describe the financial instabilities produced by them and their costs and, finally examine the responses initiated, primarily, by monetary policy. This analytical synopsis of the four best-known U.S. asset bubble crashes guides us to an articulation of a few basic lessons learned.

Keywords: Asset Price Bubbles, Financial Instability, Monetary Policy, Financial Crises, Great Recession

JEL Classification: E50, E52, E58

Suggested Citation

Malliaris, A. (Tassos) G., The Evolving Nature of Asset Price Bubbles, Financial Instability and Monetary Policy (July 30, 2018). Multinational Finance Journal, 2018, volume 22, no. 1/2, pp. 35-62.. Available at SSRN: https://ssrn.com/abstract=3281219

A. (Tassos) G. Malliaris (Contact Author)

Loyola University of Chicago - Department of Economics ( email )

16 E. Pearson Ave
Quinlan School of Business
Chicago, IL 60611
United States
312-915-6063 (Phone)

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