The Cause of the Asset Price Bubbles and Banking Crises

  • Richard A. Werner


As we saw, asset price bubbles and subsequent busts have been observed in many countries across the world, including Japan in the 1980s and 1990s. Usually, neither the surge in asset prices nor the subsequent fall can be explained by standard economic models. Banking crises have happened in over one hundred countries in the past half century, usually following a period of financial boom. Many of the policies, especially those adopted by the IMF in such post-crisis countries have focused on raising bank stability by tightening up loan procedures, bank supervision and capital adequacy. These policies had a significant negative impact on macroeconomic performance, which was not explained by standard theory.


Real Estate Asset Price Real Estate Market Bank Lending Land Price 
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© Richard A. Werner 2005

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  • Richard A. Werner

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