In these kinds of environments, it is valuable to deploy macroprudential tools, such as the countercyclical capital buffer, to mitigate potential increases in financial imbalances. The Path Ahead The COVID shock subjected the financial system to an acute stress that necessitated emergency interventions on a massive scale by financial authorities around the world.
Enterprises’ export expectations also support this claim. It is striking that the appreciation of the euro has had a far less dampening effect than many had expected. It seems that the growth-driven increase in partner countries’ demand for German products has more than offset the exchange rate effects. Exports to the USA, for instance, which had declined last year, have increased again.