Role of Central Banks and Moral Hazards Central banks have injected moral hazard into global markets through 'bail-outs' and as lenders of last resort, which skews investor behavior toward risky assets because the downside of risk is being underwritten by the central banks. Thus, bubbles occur, and bubbles are bound to burst.
Role of Central Banks and Moral Hazards Central banks have injected moral hazard into global markets through 'bail-outs' and as lenders of last resort, which skews investor behavior toward risky assets because the downside of risk is being underwritten by the central banks. Thus, bubbles occur, and bubbles are bound to burst.
Chapter1: Making Economics Decisions
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Role of Central Banks and Moral Hazards
Central banks have injected moral hazard into global markets through 'bail-outs' and as lenders of last resort, which skews investor behavior toward risky assets because the downside of risk is being underwritten by the central banks. Thus, bubbles occur, and bubbles are bound to burst.
Critically discuss this statement in 2000-3000 words.
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Step 1: Introducing the role of central banks and moral hazards in global markets
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VIEWStep 3: Examining the Moral Hazard Dilemma
VIEWStep 4: Analyzing Skewed Investor Behavior and Risk Taking
VIEWStep 5: Investigating the Cycle of Market Bubbles and Bursts
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VIEWStep 7: Evaluating the Role of Central Banks
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