The sharp deterioration in market functioning, together with firms' and households' excessively heightened anxiety, shrank global financial and economic activity, creating acute pain for the world economy. Such pain began to wear off from around this spring, and global economic conditions have recently been improving for the following three reasons.
First, the supply of ample liquidity by central banks, together with governments' measures to restore financial system stability, has proved effective, and global financial markets have been regaining stability. Second, inventory adjustments have progressed markedly as a result of a substantial production cutback worldwide. And third, the effects of macroeconomic policies implemented aggressively around the globe have begun to appear.