Financial disruptions and macroeconomic risk Before considering the appropriate policy response to strains in financial markets, it is essential to consider the sources of these strains and the potential consequences for the macroeconomy.
In general, the U.S. financial system is an efficient mechanism for channeling funds to individuals or corporations with worthy investment opportunities, because the financial markets are highly competitive and provide strong incentives for collecting and processing information. 1  I appreciate the comments and assistance of William English, Andrew Levin, Brian Madigan, Roberto Perli, David Reifschneider, and David Wilcox.