Developments on financial markets have the potential to modify core economic relationships and are therefore of utmost interest for monetary policy. Let me therefore move away somewhat from the recent stress episode to discuss other structural issues related to financial innovations and monetary policy transmission.
The remarkable financial developments of the past decade brought with them a wide range of new financial products, greater competition, a notable increase in securitisation activities, disintermediation, and a consolidation process in the banking sector. This has broadened the range of financial market participants’ activities and possibly also changed their reaction to shocks, e.g. to monetary policy innovations.