2 In addition, the structure of compensation and incentives in the financial sector created strong motives for excessive risk-taking, especially during boom years. Methods of modern risk management may have intensified the cycle because of their reliance on metrics such as value at risk that are highly sensitive to recent performance, especially volatility.
Nevertheless, the impact of the bubble bursting in the 1990s was well contained, relative to what we saw recently following the Great Financial Crisis. Weak growth, at least in the second decade after the bursting of the bubble, can be explained, to some extent, by adverse demographic trends, or more precisely, a failure to adapt to such trends.