Monetary policy is also unlikely to offer more stimulus, since policy interest rates remain near zero while major central banks’ balance sheets are already over-stretched. New financial regulations are being implemented, with stronger standards applied to liquidity and capital requirements.
And while all of these developments are certainly conducive to financial stability, they are less conducive to growth – at least in the short run. Without growth, however, financial stability gains will likely prove elusive. EMEs are in contrast doing better than AMEs in many respects, although their economic growths and financial stability have been adversely affected by developments in AMEs.