Asset Price Bubble - Causes and Implication: A Malaysian Experience
The purpose of this paper is to investigate the causes of asset price bubbles and its implication to the economy. At the later part of this research, this paper attempts to present how countries such as Malaysia manage its economy to absorb the full impact of the asset price bubble. The design/methodology/approach of this paper is based on a literature review and some philosophical ideas to derive conclusions for the problems studied. Asset price bubble can never be explained by a single factor, but is the result of the interaction of a number of factors. An asset price boom-bust cycle is an episode characterized by a sustained increase in several economic indicators followed by a sharp and rapid contraction. Following the boom phase, asset price collapse and credit crunch arises, where access to financing opportunities are sharply reduced below levels observed during normal times. The unwinding of bust phase brings a considerably large reduction in investment and fall in consumption and an economic is going to be in recession.
Keywordsó Asset Price Bubble, Economics Cycle.