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What Broke the Bubble?

Author

Listed:
  • William Barnett

    (Department of Economics, The University of Kansas)

Abstract

This paper is the basis for the Guest Columnist article in the Tuesday, November 11, 2008 issue of the Kansas City Star Business Weekly. Because of space limitations, the published newspaper column had to be shortened from the original and unfortunately did not include either of the two supporting figures. This is the unedited source article. The position taken by this opinion editorial is that the declining trend of total reserves during the recent period of financial crisis was counterproductive, and the declining level of the federal funds rate during that period was an inadequate indicator of Federal Reserve policy stance. But the recent startling surge in reserves potentially offsets the problem, although for reasons not motivated by the issues raised by this article. In fact, the reason for the surge is associated with the declining stock of Treasury bonds available to the Federal Reserve for sterilization of the effects of the new lending initiatives on bank reserves.

Suggested Citation

  • William Barnett, 2008. "What Broke the Bubble?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200813, University of Kansas, Department of Economics, revised Nov 2008.
  • Handle: RePEc:kan:wpaper:200813
    as

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    File URL: http://www2.ku.edu/~kuwpaper/2008Papers/200813.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why Did the Bubble Burst?
      by William A. Barnett in inside the economist's mind on 2008-11-13 00:16:00

    More about this item

    Keywords

    bubbles; bailouts; monetary policy; reserves; TAFs; sterilization; financial crisis.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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