What lessons did we learn from that experience? There were of course a whole host of factors which caused these difficulties. One important factor was the sheer inexperience of many of our bankers: they had been accustomed to a highly protected environment, and were ill-prepared to deal with the demands of a deregulated environment. Nevertheless, I think there were four important lessons.
Initially, with respect to monetary policy, the answer was, not much. The economy was already starting to recover, and the Bank maintained its Bank Rate unchanged at 2 1/2 per cent. 2 As well, the notion that central banks could stabilize macroeconomic activity within their borders is relatively new.