Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View
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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- Ronald McKinnon & Gunther Schnabl, 2006.
"China's Exchange Rate and International Adjustment in Wages, Prices and Interest Rates: Japan Déjà Vu?,"
CESifo Economic Studies,
CESifo, vol. 52(2), pages 276-303, June.
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- Richard Herring & Susan Wachter, "undated". "Bubbles in Real Estate Markets," Zell/Lurie Center Working Papers 402, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Schnabl, Gunther, 2007. "Exchange rate volatility and growth in small open economies at the EMU periphery," Working Paper Series 773, European Central Bank. Full references (including those not matched with items on IDEAS)
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