Bubbles, crises, and policy

Franklin Allen, Douglas Gale

    Research output: Contribution to journalArticlepeer-review


    In many recent cases financial liberalization has led to a bubble in asset prices. The bursting of the bubble results in a banking crisis and recession. It is suggested such bubbles are caused by an interaction of the risk-shifting problem arising from agency relationships in intermediaries and uncertainty concerning the expansion of credit. Two important policy objectives are identified. The first is the prevention of bubbles in asset prices. The second is minimizing the impact of spillovers on to the real economy during post-bubble banking crises. The different policy approaches taken in Norway and Japan are compared.

    Original languageEnglish (US)
    Pages (from-to)9-18
    Number of pages10
    JournalOxford Review of Economic Policy
    Issue number3
    StatePublished - 1999

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Management, Monitoring, Policy and Law


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