This volume critically re-examines the profession's understanding of asset bubbles in light of the global financial crisis of 2007-09. It is well known that bubbles have occurred in the past, with the October 1929 crash as the most demonstrative example. However, the remarkably well-behaved performance of the US economy from 1945 to 2006, and, in particular during the Great Moderation period of 1984 to 2006, assured the economics profession and monetary policymakers that asset bubbles could be effectively managed with little or no real economic impact. The recent financial crisis has now triggered a debate about the emergence of a sequence of repeated bubbles in the Nasdaq market, housing market, credit market, and commodity markets. The realities of the crisis have intensified theoretical modeling, empirical methodologies, and debate on policy issues surrounding asset price bubbles and their potentially adverse economic impact if poorly managed. Taking a novel approach, the editors of this book present five classic papers that represent accepted thinking about asset bubbles prior to the financial crisis. They also include original papers challenging orthodox thinking and presenting new insights. A summary essay highlights the lessons learned and experiences gained since the crisis.

Introduction1. New Perspectives on Asset Price Bubbles: An OverviewDouglas D. Evanoff, George G. Kaufman and A.G. MalliarisBubbles: Theory and Evidence2. Churning BubblesFranklin Allen and Gary Gorton. Seminal research paper: The Review of Economic Studies, Volume 60 (1993).3. Rethinking Theoretical Models of Bubbles: Reflections Inspired by the Financial Crisis and the Allen and Gorton's Paper on Churning BubblesGadi BarlevyConsequences of Bubbles Bursting4. The Japanese Banking Crisis: Where Did it Come From and How Will it End? Takeo Hoshi and Anil K. Kashyap. Seminal research paper: NBER Macroeconomics Annual 1999, vol 14 (2000).5. The Impact of the International Financial Crisis on Asia and the Pacific: Highlighting Monetary Policy Challenges from an Asset Price Bubble PerspectiveAndrew FilardoBubbles and Monetary Policy6. Monetary Policy and Asset Price VolatilityBen Bernanke and Mark Gertler. Seminal research paper: Economic Review, Federal Reserve Bank of Kansas City (1999).7. Monetary Policy and Asset price Volatility: Should We Refill the Bernanke-Gertler Prescription?Kenneth N. KuttnerBubbles and Macroprudential Regulation8. Towards a Macroprudential Framework for Financial Supervision and Regulation? bis.org/publ/work128.pdfClaudio Borio. Seminal research paper: CESifo Economic Studies, Volume 49 (2003).9. Bank Liquidity and Bubbles: Why Central Banks Should Lean Against LiquidityViral V. Acharya and Hassan NaqviBubbles: Behavioral Explanations10. Overconfidence and Speculative BubblesJose A. Scheinkman and Wei Xiong. Seminal research paper: Journal of Political Economy, Volume 111 (2003).11. Asset Bubbles: Insights from Behavioral FinanceWerner De BondtBubbles: Keynote Presentations12. An Old Perspective on Asset Price Bubbles PolicyWilliam Poole13. Struggling to Escape From 'Assumption 14'Benjamin M. FriedmanNew Ideas on Asset Price Bubbles14. Monetary Policy and Stock Market BoomsLawrence J. Christiano, Cosmin Ilut, Roberto Motto, and Massimo Rostagno15. Leverage and Bubbles: The Need to Manage the Leverage CycleJohn GeanakoplosAsset Bubbles, Central Banks and Investments16. Asset Price Bubbles and Central Bank Policies: The Crash of the Jackson Hole ConsensusA. G. Malliaris17. Do Bubbles Lead to Overinvestment? A Revealed Preference ApproachRobert Chirinko and Huntley Schaller