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Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View

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Author Info
Gunther Schnabl ()
Andreas Hoffmann ()

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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.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2100.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2100

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Related research
Keywords: bubbles; boom-bust cycles; Hayek; Wicksell; Schumpeter; emerging markets; capital flows; overinvestment theories;

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Find related papers by JEL classification:
B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Balázs Égert & Peter Backé & Tina Zumer, 2006. "Credit growth in Central and Eastern Europe - new (over)shooting stars?," Working Paper Series 687, European Central Bank. [Downloadable!]
  2. Gunther Schnabl, 2007. "Exchange Rate Volatility and Growth in Emerging Europe and East Asia," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ronald Ian McKinnon & Gunther Schnabl, 2008. "China’s Exchange Rate Impasse and the Weak U.S. Dollar," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Belke, Ansgar & Orth, Walter & Setzer, Ralph, 2008. "Liquidity and the dynamic pattern of price adjustment: a global view," Discussion Paper Series 1: Economic Studies 2008,25, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Korkut Ertürk, 2009. "What is Driving Global Deflation and How Best to Fight It?," SCEPA Working Papers 2009-8, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
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This page was last updated on 2009-11-3.

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