Pros and Cons of Financial Bubbles Regulation by Monetary Methods

Abstract

Author: Elena Vladimirovna Chirkova National Research University The Higher School of Economics evchirkova@gmail.com

The article discusses the negative consequences of financial bubbles and the appropriateness of the monetary regulation thereof. The pros and cons of the monetary authorities’ possible responses to financial bubbles and the options for the regulator’s behavior during the inevitable collapse of the bubble are analyzed based on the availability and effectiveness of the regulatory instruments, possible negative consequences and externalities of different tactics and the ability of the regulator to spot the bubble.