The paucity of data for the latter inhibits our ability to fully test our working hypotheses or models in order to detect changes in economic relationships as quickly and confidently as we would like. Evidence began to accumulate in the early and mid-1990s that prospective rates of return on capital were rising.
Given the central role of government liabilities in the financial system, prolonged concerns over sovereign risk could have profound implications for the functioning of the financial system. In particular, the role of government bonds as the benchmark against which a broad array of financial assets are priced is likely to be eroded.