Monetary Policy, Panic in Financial Markets and a Spate of Wandering Bubbles (Geldpolitik, Finanzmarkthysterie und eine Welle von Wandernden Blasen)

15 Pages Posted: 22 Mar 2009 Last revised: 25 Mar 2009

See all articles by Andreas Hoffmann

Andreas Hoffmann

Leipzig University

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Date Written: March 19, 2009

Abstract

Building upon the Austrian over investment theory it is argued that credit and asset market booms have emerged during phases of buoyant liquidity supply since the 1980s. We argue that major central banks have tended to lower interest rates too much for too long when bubbles burst and panic spread across financial markets. This caused a wave of bubbles which has recently culminated in the global financial and economic crisis. Therefore, the recent unconventional measures of monetary easing in combination with massive fiscal expansion is likely to contribute either to a new wave of bubbles or to a push in global inflation.

Keywords: Blasen, berinvestition, Finanzkrise, internationaler Kapitalfluss

JEL Classification: B53, E32, E44, E52

Suggested Citation

Hoffmann, Andreas and Schnabl, Gunther, Monetary Policy, Panic in Financial Markets and a Spate of Wandering Bubbles (Geldpolitik, Finanzmarkthysterie und eine Welle von Wandernden Blasen) (March 19, 2009). Available at SSRN: https://ssrn.com/abstract=1365207 or http://dx.doi.org/10.2139/ssrn.1365207

Andreas Hoffmann

Leipzig University ( email )

Institute for Economic Policy
Grimmaische Str. 12
Leipzig, 04109
Germany

HOME PAGE: http://www.a-hoffmann.info

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Stra├če 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

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