The Evolving Nature of Asset Price Bubbles, Financial Instability and Monetary Policy

Anastasios Malliaris, Loyola University Chicago, USA

This paper links the bursting of the housing asset price bubble around 2007 in the U.S. to the instability that arose in financial markets with the bankruptcy of Lehman Brothers in September 2008, and both of these to the Great Recession and the unconventional monetary policy that followed. Similar narratives about the Stock Market Crash of 1929, the Crash of 1987 and the Internet Bubble of 2000 are briefly presented to show their evolving financial nature, describe the financial instabilities produced by them and their costs and, finally examine the responses initiated, primarily, by monetary policy. This analytical synopsis of the four best-known U.S. asset bubble crashes guides us to an articulation of a few basic lessons learned. 

Keywords: asset price bubbles; financial instability; monetary policy; financial crises; the great recession

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Greek Sovereign Debt: Addressing Economic Distress and Growth in the Euro Area

Panayiotis Alexakis, National and Kapodistrian University of Athens, Greece
Gikas Hardouvelis, University of Piraeus, Greece
Dean Paxson, University of Manchester, UK
Gordon Sick, University of Calgary, Canada
Lenos Trigeorgis, University of Cyprus, Cyprus

This article addresses some key issues of the Greek sovereign debt crisis and its broader economic distress and growth implications for the Euro Area. It also offers a number of remedies, including growth indexed bonds, fiscal balances over the growth cycle, structural reforms, and the use of real option analysis in relevant public policy areas involving either inefficient or growth sectors of the economy.

Keywords: greek sovereign debt; eurozone financial crisis; GDP-linked bonds; structural reforms; real options

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