The run-up to the 2008 global nancial crisis was characterised by an environment of low interest rates and a rapid increase in housing market activity across OECD countries. Some scholars argue that expansionary monetary policy has been signi cantly responsible for the low level of interest rates and the subsequent house price boom. Others contend that a scarcity of nancial assets led to capital in ows to developed economies, depressing long rates in government bond markets and stimulating an increase in demand for housing. A third school of thought maintains that excessive mispricing of risk associated with nancial innovation has led to a misallocation of capital to the real.
