Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets - An Overinvestment View

Gunther Schnabl () and Andreas Hoffmann ()

MPRA Paper from University Library of Munich, Germany

Abstract: 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, 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.

Keywords: Bubbles; Boom-Bust Cycles; Hayek; Wicksell; Schumpeter; Emerging Markets; Capital Flows; Overinvestment Theories. (search for similar items in EconPapers)
JEL-codes: E44 E32 B53 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mon and nep-sea
Date: 2007-09-10
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Related works:
Working Paper: Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View (2007)
Journal Article: Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets: An Overinvestment View (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:5201

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