Abstract
If many financial crises have a stylized form, should there be a standard policy response? Assume plethora, speculation, panic; what then? Should the governmental authorities intervene to cope with a crisis and if so at what stage? Should they seek to forestall increases in real estate prices and stock prices as the bubble expands so the subsequent crash will be less severe? Should they prick the bubble once it is evident that asset prices are so high that it is extremely unlikely that increases in rents and in corporate earnings will be sufficiently rapid and large so as to ‘ratify’ these lofty prices? When asset prices begin to fall, should the authorities adopt any measures to dampen the decline and ameliorate the consequences?
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Policy Responses: Letting it Burn Out, and Other Devices
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Kindleberger, C.P., Aliber, R.Z. (2005). Policy Responses: Letting it Burn Out, and Other Devices. In: Manias, Panics and Crashes. Palgrave Macmillan, London. https://doi.org/10.1057/9780230628045_10
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DOI: https://doi.org/10.1057/9780230628045_10
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