7  Frederic S. Mishkin (1997), “The Causes and Propagation of Financial Instability: Lessons for Policymakers”, paper presented at “Maintaining Financial Stability in a Global Economy,” a symposium sponsored by the Federal Reserve Bank of Kansas City, held in Jackson Hole, Wyo., August 28-30, http://www.kc.frb.org/publicat/sympos/1997/sym97prg.htm. BIS Review 98/2007  5  pullback in household and business spending.
That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity. I also believe that the process of adjustment that is under way in financial markets – of investors reassessing the outlook for risk and their tolerance for that risk – will ultimately create a more solid financial footing for the real economy.