A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households. In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly and, in turn, to mutually reinforcing declines in real activity and in the health of the financial sector.
Through these years he was an accomplished research economist who served in several capacities, benefitted from countless experiences, worked on several major economic and financial projects and held many senior responsibilities. He was blessed with an encyclopaedic memory, maintained a filing system for important documents, and engendered the confidence of those with whom he worked.