Asset Bubble Theory and the Recent U.S. Housing Experience

Date of Award

2010

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Khemraj, Tarron

Keywords

Housing Bubble, Asset Bubble, Minsky, Shiller

Area of Concentration

Economics

Abstract

The purpose of this thesis is to provide a narrative evaluation of major determinants of the recent U.S. housing price bubble in the context of established theories on the formation of asset bubbles. Chapter one reviews popular theories on the formation of asset bubbles, and reexamines them in the context of the creation of the housing bubble, where appropriate. I look first at Shiller�s work on the decision-making processes of the individual investor. Next, Minsky�s Financial Instability Hypothesis is outlined. As a final consideration, literature on the role of asset prices in determining monetary policy is discussed. Chapter two outlines three commonly cited causes of the housing bubble: the subprime mortgage market, banking sector deregulation and the rise of the �shadow bank� industry, and monetary policy. The causal linkages supposed to have allowed each determinant to grow the housing bubble are followed. The third chapter provides data in support of these causal linkages. The final section provides a conclusion to the thesis summarizing its contents and providing analysis of its strengths and weaknesses.

Rights

This bibliographic record is available under the Creative Commons CC0 public domain dedication. The New College of Florida, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.

This document is currently not available here.

Share

COinS