It was with this in mind that the ECB recently made adjustments to negative rates, introducing tiering for excess reserves. On another occasion, a detailed evidence-based analysis showed that concerns that unconventional policies worsen inequality were unfounded,7 and this strengthened the ECB’s resolve to pursue its policy path. This is not to say that experts – the ECB included – have perfect knowledge.
Theories can have blind spots and forecasts can be proven wrong. The crisis revealed that the conviction then prevailing among economists that financial markets could largely self-regulate was misplaced.