8  Shirakawa (2010) points out a mechanism of so-called the “cycle of confidence” behind the bubble and financial crisis. 9  See Varian (2001).
4  BIS Review 72/2010  Central bank in democratic society The third difficult challenge is related to the fact that a success in policy responses poses a new problem as to what responsibility a central bank should bear in democratic society. Confronted with the financial and economic crises, central banks in major countries have all introduced unconventional policy measures.