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Who Pays the Price When Housing Bubbles Burst? Evidence from the American Community Survey

In: Consequences of Economic Downturn

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  • Cynthia Bansak
  • Martha A. Starr

Abstract

There has been much debate in recent years about whether the Federal Reserve should have taken action against the housing-price bubble as it was forming. As home prices rose, the Fed’s position was that it was difficult to know whether a bubble was developing, and that monetary policy could always be eased if declining prices posed risks to continued expansion.1 As much as it is now widely recognized that this was not a prudent position,2 there remains little consensus as to whether monetary policy should incorporate any systematic concern with asset-price bubbles, above and beyond what is implied by its core concerns with inflation and unemployment. Thus, for example, pro-cyclical adjustments in capital requirements could be used to keep asset values from drifting out of line with their underlying values (Yellen 2009, Evans 2009).

Suggested Citation

  • Cynthia Bansak & Martha A. Starr, 2011. "Who Pays the Price When Housing Bubbles Burst? Evidence from the American Community Survey," Perspectives from Social Economics, in: Martha A. Starr (ed.), Consequences of Economic Downturn, chapter 0, pages 139-165, Palgrave Macmillan.
    • Handle: RePEc:pal:pfschp:978-0-230-11835-5_8
    DOI: 10.1057/9780230118355_8
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    Cited by:

    1. Martha Starr, 2012. "Contributions of Economists to the Housing-Price Bubble," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(1), pages 143-172.

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