The third challenge concerns how financial instability interacts with the macroeconomy. In my article, in chart 2, I have illustrated how drastically major forecasting institutions missed the start of the “Great Recession”, the “free fall” of economic activity in late 2008 and in 2009.
It’s fair to say that a lot has happened over the past two years. It is an understatement to say that the COVID-19 pandemic has created significant challenges inside and outside the banking sector. Bankers significantly adapted operations to continue serving their communities and customers.