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

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  • Howard Davies

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'." Copyright (c)2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.

Suggested Citation

  • Howard Davies, 2009. "Pricking Bubbles in the Wind: Could Central Banks Have Done More to Head Off the Financial Crisis?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 387-396.
  • Handle: RePEc:bla:ausecr:v:42:y:2009:i:4:p:387-396
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    1. Sushil Wadhwani, 2008. "Should Monetary Policy Respond To Asset Price Bubbles? Revisiting the Debate," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 25-34, October.
    2. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
    3. Sushil Wadhwani, 2008. "Should Monetary Policy respond to Asset Price Bubbles? Revisiting the Debate," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
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