Schnabl, Gunther and Hoffmann, Andreas (2007): Geldpolitik, vagabundierende Liquidität und platzende Blasen in neuen und Aufstrebenden Märkten. Published in: Wirtschaftsdienst No. April 2007 (April 2007): pp. 220-224.
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Abstract
We show how since the mid 1980s expansionary monetary policies in the large economies and “vagabonding liquidity” have contributed to bubbles in the new and emerging markets. Based on the monetary overinvestment theories of Hayek and Wicksell we describe a wave of bubbles and crises that was initiated in Japan by an expansionary monetary policy in the mid 1980s. After the burst of the Japanese bubble and sharply declining interest rates in Japan, carry trade transmitted the bubbles to East Asia (Asian crisis) and the new markets in the developed economies. After the end of the irrational exuberance in the new markets, new bubbles emerged in the US real estate market and possibly currently in China and Central and Eastern Europe. Because particularly Japan and the US have tended to lower interest rates in response to financial crisis, the low interest rate policies in the large countries and thereby speculative exaggerations may continue. According to Wicksell and Hayek a higher level of interest rates in the large countries would reveal the structural distortions that have come along with the ample liquidity supply.
| Item Type: | MPRA Paper |
|---|---|
| Institution: | University of Leipzig |
| Original Title: | Geldpolitik, vagabundierende Liquidität und platzende Blasen in neuen und Aufstrebenden Märkten |
| English Title: | Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets |
| Language: | German |
| Keywords: | Bubbles; Boom-bust cycles; Capital Flows; Emerging Markets; Hayek; Wicksell |
| Subjects: | E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B53 - Austrian E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles |
| Item ID: | 4019 |
| Depositing User: | Gunther Schnabl |
| Date Deposited: | 12 Jul 2007 |
| Last Modified: | 29 Sep 2019 04:59 |
| References: | Backe, Peter / Égert, Balazs / Zumer, Tina 2006: Credit Growth in Central and Eastern Europe. ECB Working Paper 687. Danne, Christian / Schnabl, Gunther 2007: A Role Model for China? Exchange Rate Flexibility and Monetary Policy Making in Japan. Mimeo. Economist 2007: The Trouble with the Housing Market. 24.3.2007, 11. Hayek, Friedrich 1976: Geldtheorie und Konjunkturtheorie, Salzburg. Kindleberger, Charles 2000: Manias, Panics, and Crashes. New York et al.. McKinnon, Ronald / Schnabl, Gunther 2004: The East Asian Dollar Standard, Fear of Floating, and Original Sin. Review of Development Economics 8, 3, 331-360. Shiller, Robert 2000: Irrational Exuberance, Princeton University Press. Schnabl, Gunther / Starbatty, Joachim 1998: Im Strudel der japanischen Krise: Die Weltkonjunktur ist bedroht / Die Strukturprobleme Japans werden mit einem nachfragepolitischen Kraftakt zementiert. Frankfurter Allgemeine Zeitung, 22.08.1998, 13. Schnabl, Gunther 2000: Leistungsbilanz und Wirtschaftspolitik – das Beispiel Japan, Baden Baden. Schumpeter, Joseph 1997: Theorie der wirtschaftlichen Entwicklung, Berlin. Starbatty, Joachim 1999: Geldpolitische Hygiene statt keynesianischer Hydraulik – Hayeks Konjunkturtheorie wird im Lichte der jüngsten Finanzkrisen wieder aktuell. Handelsblatt 16. März 1999, S. 53. Wicksell, Knut 2005: Geldzins und Güterpreise, FinanzBuch Verlag. Woodward, Bob 2000: Greenspan. Dirigent der Weltwirtschaft, Europa Verlag, Hamburg und Wien. |
| URI: | https://mpra.ub.uni-muenchen.de/id/eprint/4019 |
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