Although the upward phase proceeds gradually, the downward phase proceeds in an asymmetrically quick manner, since banks are forced to take immediate action to counter the shortage in funding liquidity. In addition, once confidence is lost, it takes a long time to restore the eroded confidence.
As market participants explain, the credit line can be cut off at once, but the reestablishment of the credit line takes a much longer time. Issues related to monetary policy Mop-up operations Given the understanding on the risk-taking channel I have discussed so far, what consequences will follow from the asymmetric monetary policy responses before and after the burst of a bubble?