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Irrational exuberance in the midst of Covid-19

In: Nudged into Lockdown?

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Abstract

The Covid-19 pandemic caused the global economy to sink into recession. Yet the prices of houses and other financial assets boomed. In this chapter, I discuss the concept of an asset bubble where the price of a financial asset deviates from its true underlying value. I show how cognitive biases played a role in such price bubbles. I explain the types of expansionary fiscal and monetary policies that governments adopted in order to fight the recession caused by Covid-19. I then show how those same monetary and fiscal policies exacerbated such price bubbles. I conclude by showing that these price bubbles will cause greater inequality within countries between white-collar and blue-collar workers.

Suggested Citation

  • ., 2022. "Irrational exuberance in the midst of Covid-19," Chapters, in: Nudged into Lockdown?, chapter 6, pages 162-183, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21196_6
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