Economists have yet to get fully to grips with the complex roles of the financial system, financial frictions, asset prices and credit flows in international macroeconomic dynamics. BIS central bankers’ speeches  9  The research and policy communities are now busy introducing richer financial behaviour in models.
Some promising avenues include study of how financial margin behaviour can propel economic booms, financial incapacity can exacerbate busts, and diffusion of bad news can generate panics. Experimental economics is using lab settings to study human reactions to imperfect information and discontinuous events. But uncovering enduring and reliable inferences about behaviour from discontinuous and perhaps unique real-life observations is daunting.