Irrational exuberance in the midst of Covid-19

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Chapter 6 in Nudged into Lockdown?, 2022, pp 162-183 from Edward Elgar Publishing

Abstract: The Covid-19 pandemic caused the global economy to sink into recession. Yet the prices of houses and other financial assets boomed. In this chapter, I discuss the concept of an asset bubble where the price of a financial asset deviates from its true underlying value. I show how cognitive biases played a role in such price bubbles. I explain the types of expansionary fiscal and monetary policies that governments adopted in order to fight the recession caused by Covid-19. I then show how those same monetary and fiscal policies exacerbated such price bubbles. I conclude by showing that these price bubbles will cause greater inequality within countries between white-collar and blue-collar workers.

Keywords: Economics and Finance; Politics and Public Policy Sociology and Social Policy (search for similar items in EconPapers)
Date: 2022
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