Geldpolitik, vagabundierende Liquidität und platzende Blasen in neuen und Aufstrebenden Märkten

Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets

Gunther Schnabl and Andreas Hoffmann

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Bubbles; Boom-bust cycles; Capital Flows; Emerging Markets; Hayek; Wicksell (search for similar items in EconPapers)
JEL-codes: B53 E32 E44 E52 (search for similar items in EconPapers)
Date: 2007-04-05
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-his, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (2)

Published in Wirtschaftsdienst April 2007 (2007): pp. 220-224

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