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New Perspectives on Asset Price Bubbles$
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Douglas D. Evanoff, George G. Kaufman, and A. G. Malliaris

Print publication date: 2012

Print ISBN-13: 9780199844333

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199844333.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 26 July 2021

An Old Perspective on Asset Price Bubbles Policy

An Old Perspective on Asset Price Bubbles Policy

Chapter:
(p.335) Chapter 12 An Old Perspective on Asset Price Bubbles Policy
Source:
New Perspectives on Asset Price Bubbles
Author(s):

William Poole

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780199844333.003.0012

This chapter suggests that the large literature on asset price bubbles has not incorporated the results from control theory from the 1960s and the rational expectations literature from the 1970s, and that it would be a mistake for the government to attempt to influence, through direct market intervention, an asset price suspected of displaying a bubble. It also argues that the problem with a bubble is not the bubble per se but the accumulation of bubble-related assets in leveraged portfolios. Finally, it discusses three key reforms to strengthen the banking system.

Keywords:   asset price bubbles, control theory, rational expectations, leveraged portfolios, banking system

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