by Mark Thoma, University of Oregon (Department of Economics)

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How and Why Do Bubbles Form?

Posted on May 16, 2008

What causes bubbles? Here's one set of views: Bernanke's Bubble Laboratory, by Justin Lahart, WSJ [Open Link]: First came the tech-stock bubble. Then there were bubbles in housing and credit. Chinese stocks took off like a rocket. Now, as prices soar on every material from oil to corn, some suggest there's a bubble in commodities. But how and why do bubbles form? Economists traditionally haven't offered much insight. ... Now, the study of financial bubbles is hot. Its hub is Princeton..., home to a band of young scholars hired by ... Ben Bernanke... [T]he Princeton squad argues that t...

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bernanke , china , chinese , commodities , fed , greenspan , housing , india , interest rates , oil , the fed