Monetary policy-makers should track bubbles – Dallas Fed paper

Economists warn of possible ‘explosive bubbles’ and evaporating wealth

Research team, Dallas Fed
Lauren Spits, Enrique Martínez García and Valerie Grossman

Novel techniques in statistical analysis make bubbles easier to detect in real-time and this analysis should be considered by monetary policy-makers, researchers with the Federal Reserve Bank of Dallas argue.

Though such analysis has typically been the preserve of macro-prudential authorities, Enrique Martínez García, Valerie Grossman and Lauren Spits say bubbles also matter for monetary policy.

In their paper, published on June 1, they expand on a technique for identifying asset price bubbles

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