Asset Price Bubbles: The Implications for Monetary, Regulatory, and International Policies

✍ Scribed by William Curt Hunter, George G. Kaufman, Michael Pomerleano

Publisher: The MIT Press
Year: 2003
Tongue: English
Leaves: 608
Category: Library

No coin nor oath required. For personal study only.

✦ Synopsis

In both the industrialized and developing worlds, a distinctive feature of the last two decades has been prolonged buildups and sharp collapses in asset markets such as stock, housing, and exchange markets. The volatility has sparked intense debate in academic and policy circles over the appropriate monetary and regulatory response to dramatic market shifts.This book examines asset price bubbles to further our understanding of the causes and implications of financial instability, focusing on the potential of central banks and regulatory agencies to prevent it. The book grew out of a conference jointly sponsored by the Federal Reserve Bank of Chicago and the World Bank Group in April 2002.

✦ Table of Contents

Table of Contents......Page 6
Acknowledgements......Page 10
Preface......Page 12
Overview......Page 14
Part I: Keynote Addresses......Page 28
1 Asset Price Bubbles, Information, and Public Policy......Page 30
2 Asset Price Bubbles and Their Implications for Monetary Policy and Financial Stability......Page 42
3 Rational and Nonrational Bubbles......Page 50
4 Diverse Views on Asset Bubbles......Page 62
5 Asset Prices and Monetary Policy......Page 68
Part II: Recent Experience with Asset Price Bubbles......Page 78
6 U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy......Page 80
7 Japan’s Experience with Asset Price Bubbles: Is It a Case for Inflation Targeting?......Page 108
8 Lending Booms, Real Estate Bubbles, and the Asian Crisis......Page 128
9 Tropical Bubbles: Asset Prices in Latin America, 1980–2001......Page 154
10 Different Countries, Similar Experience......Page 190
11 Comments on Recent Experiences with Asset Price Bubbles......Page 192
Part III: Theory and History of Asset Price Bubbles......Page 200
12 Stocks as Money: Convenience Yield and the Tech-Stock Bubble......Page 202
13 Bubble Psychology......Page 232
14 Bubbles in Real Estate Markets......Page 244
15 Comments on: “Stocks as Money ...” and “Bubble Psychology”......Page 258
16 Comments on Theory and History of Asset Price Bubbles......Page 266
Part IV: Empirical Dimensions of Asset Price Bubbles......Page 272
17 Imbalances or “Bubbles?” Implications for Monetary and Financial Stability......Page 274
18 Testing for Stock Market Overvaluation/Undervaluation......Page 298
19 A Stochastic Index of the Cost of Life: An Application to Recent and Historical Asset Price Fluctuations......Page 304
20 Comments on Empirical Dimensions of Asset Price Bubbles......Page 318
21 Bubbles, Inflation, and the Big One: Comments on “A Stochastic Index of the Cost of Life ...” and “Testing for Stock Market Overvaluation/Undervaluation”......Page 326
Part V: International Transmission of Financial Shocks......Page 334
22 Globalization and Changing Patterns in Crisis Transmission......Page 336
23 Asset Price Bubbles and Stock Market Interlinkages......Page 350
24 Banking Policy and Macroeconomic Stability: An Exploration......Page 364
25 A Global Perspective on Extreme Currency Linkages......Page 388
26 Comments: Shifting the Risk after Shifting the Focus......Page 410
Part VI: Technology, the New Economy, and Asset Price Bubbles......Page 416
27 Valuation and New Economy Firms......Page 418
28 Home Bias, Transactions Costs, and Prospects for the Euro......Page 430
29 Comments on “Valuation and New Economy Firms”......Page 446
Part VII: Implications of Bubbles for Monetary Policy......Page 452
30 Asset Prices in a Flexible Inflation Targeting Framework......Page 454
31 Interest Rate Policy Should Not React Directly to Asset Prices......Page 472
32 Comments on Implications of Bubbles for Monetary Policy......Page 486
Part VIII: Implications of Bubbles for Prudential Regulatory Policy......Page 492
33 The Historical Pattern of Economic Cycles and Their Interaction with Asset Prices and Financial Regulation......Page 494
34 Asset Price Bubbles and Prudential Regulation......Page 508
35 The Morning After: Restructuring in the Aftermath of an Asset Bubble......Page 530
36 Comments on “The Historical Pattern of Economic Cycles and Their Interaction with Asset Prices and Financial Regulation”......Page 544
37 Comments on “Asset Price Bubbles and Prudential Regulation”......Page 550
38 Comments on “The Morning after ... ”......Page 556
Part IX: Looking Forward: Plans for Action to Protect against Bubbles......Page 562
39 Banking Provisions and Asset Price Bubbles......Page 564
40 Looking Forward on Monetary and Supervision Policies to Protect against Bubbles......Page 574
41 Planning to Protect against Asset Bubbles......Page 580
Conference Program......Page 588
B......Page 596
C......Page 597
E......Page 599
F......Page 600
H......Page 601
I......Page 602
L......Page 603
O......Page 604
P......Page 605
R......Page 606
T......Page 607
Y......Page 608

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