Targeting Asset Bubbles: Evolution of Policies

Igor M. Tomic, Johns Angelidis
2016 Journal of Finance & Economics  
Before the Great Recession the policy was not to interfere with increases in asset values, and if any resulting asset bubble crashes led to financial instability, then policies would be enacted to help the recovery. The crash that led to the recent financial crisis changed the mind of many researchers as they more thoroughly investigated the present and the past crises concluding that more attention needs to be paid to financial stability. This involved microprudential policies, meaning
more » ... es, meaning policies that would stabilize financial firms, as well as experimentation with macroprudential policies whose purpose is to stabilize a specific sector. By stabilizing a sector, the hope is that no spill over would take place to destabilize the financial system. JEL Classifications: E44, E65, M38
doi:10.12735/jfe.v4n4p24 fatcat:b2tuohkiknhbxi3kwfrdddwpkq