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Pricking Bubbles in the Wind: Could Central Banks Have Done More to Head Off the Financial Crisis?
Author(s) -
Davies Howard
Publication year - 2009
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2009.00572.x
Subject(s) - financial crisis , hedge fund , blame , asset (computer security) , finance , investment (military) , financial system , business , economics , monetary economics , macroeconomics , political science , psychology , computer security , psychiatry , politics , computer science , law
Regulators, commercial and investment banks, hedge funds and rating agencies have all borne some blame for the current global financial crisis, but could central banks have done more? It is argued in the lecture that in a number of ways central banks should have paid more attention to asset bubbles, which have high output costs. Asset prices, especially housing prices, should be identified as an explicit factor in the consideration of policy. More generally, central banks should adopt policies that ‘lean against the wind’.