Brunnermeier, Markus K, Harold James, and Jean-Pierre Landau.
The Euro and the Battle of Ideas. Princeton, NJ, USA: Princeton University Press, 2016. Web.
Chapter 1: Endorsements by Larry Summers (former US Treasury Secretary), Ben Bernanke (former Chairman of the US Fed), Wolfgang Schäuble (German Finance Minister) and Jean Tirole (Nobel Prize Laureate)
Brunnermeier, Markus K, and Isabel Schnabel. “
Bubbles and Central Banks: Historical Perspectives”.
Central Banks at a Crossroads: What Can We Learn from History? . Cambridge, UK: Cambridge University Press, 2016. Web.
Publisher's VersionAbstractThis paper reviews some of the most prominent asset price bubbles from the past 400 years and documents how central banks (or other institutions) reacted to those bubbles. The historical evidence suggests that the emergence of bubbles is often preceded or accompanied by an expansionary monetary policy, lending booms, capital inflows, and financial innovation or deregulation. We find that the severity of the economic crisis following the bursting of a bubble is less linked to the type of asset than to the financing of the bubble – crises are most severe when they are accompanied by a lending boom, high leverage of market players, and when financial institutions themselves are participating in the buying frenzy. Past experience also suggests that a purely passive “cleaning up the mess” stance towards inflating bubbles in many cases is costly. At the same time, while interest-rate leaning policies and macroprudential tools can and sometimes have helped to deflate bubbles and mitigate the associated economic crises, the correct implementation of such proactive policy approaches remains fraught with difficulties.
Bubbles_CentralBanks_Historical.pdf
Bubbles_CentralBanks slides.pdf