Rethinking Housing Bubbles. The Role of Household and Bank Balance Sheets in Modeling Economic Cycles

摘要

The view that liquidity problems in money markets have been the main cause of the financial-economic crisis 2007/2008, especially in the early stage of the crisis, has been popular among academics and policy makers. This book stresses the role of the housing bubble, fuelled by unusual credit growth, the subsequent collapse of the housing market and the negative consequences for the balance sheets of households and banks as one of its main causes. The book also argues that these problems in the housing markets could have been foreseen well before the crisis. Policy measures have focussed too much on liquidity provision in tight money markets and on fiscal stimulus, rather than addressing insolvencies in these balance sheets. The authors collect empirical evidence from many earlier recessions and crises, particularly the Great Depression and the Great Recession, to strengthen this view. Moreover, the book emphasizes evidence from laboratory experiments how easily speculative bubbles form and subsequent crashes lead to collapse in speculative asset markets for durable goods. After an introductory Chapter summarizing the main arguments, the book builds up this story in nine Chapters 2-10, with a final Chapter 11 summarizing what we have learnt.