The crisis confirmed that the “hands-off” approach in dealing with early warnings of risks was too costly in terms of the eventual instability that ensued and the unprecedented policy measures later undertaken, which now imply future restrictions. Corrective intervention measures should be viewed as a “second best” solution, to be used only to overcome deficiencies in the preventive regulatory approach.
Finally, monetary policy is ill suited for directly abating bubbles. Given that bubbles are relevant to the extent that they may weaken the financial system, it is better to use regulatory and supervisory tools to target the source of problems.