Monetary Policy and Financial Crises Flashcards
2 causes of inflation mainly
loose monetary policy
expectations for future by firms and households
what does it mean to buy on the margin
buying shares on credit
you can get rich quickly but can also find yourself in debt if prices fall
what does irrational exuberance mean
unstable investor enthusiasm eg not questioning the values of shares
3 types of bubbles
boom bust
assest price bublle
credit bubble
example of an asset price bubble
housing market bubble
what is a bubble
dramatic increase in prices far above their fundamental value typically followed bya crash
how might you tell there is a bubble? what are its characteristics
rapidly increasing prices
people are denying its a bubble
people feel envy/regret that they havnt participated
causes of bubble
innovation(new products, people dont understand its underlying value)
overconfidence
irrational behvaoiur
lax monetary policy
example of innvation caused bubble
dot com bubble
tech and internet new
bit coin
4 phases of bubble
stealth
awareness
mania
crash