The phenomenon of financial bubbles : the case study of Lithuania

Abstract

The phenomenon of financial bubbles is not a recent one: the first well-known case of financial bubbles happened in the middle of the 17th century (1639) in Holland and resulted in harsh economic and social consequences. The bulb bubble (broadly known as “tulip mania”) determined the temporary market mania for tulip bulbs: the recently introduced tulips reached extraordinarily high price levels yet after a while their prices suddenly and unexpectedly collapsed. Other infamous bubbles embrace the South Sea Bubble (1720), characterized by speculation in stocks and the resulting stock market crash, Wall Street Crash (1929), which contributed to the Great Depression, numerous real estate (or credit) bubbles that occurred during 1985-2008 in various countries (the USA, Japan, Great Britain, Norway, Sweden, Finland, etc.), including Lithuania, and partly caused the recent global economic crisis. Thus, the analysis of financial bubbles is crucial in order to understand their logics, mechanism and design the instruments of control. [...]