The forceful response of fiscal, monetary and prudential authorities has reduced the economic and social costs of this crisis and created a virtuous circle between sovereigns, banks and corporates. The measures introduced have stabilised demand, ensured the flow of credit to firms, avoided a wave of corporate defaults and protected banks’ balance sheets.
I say this because at no time did we employ unconventional monetary policies, nor did we implement capital controls or intervene in the foreign exchange market. We were one of the few emerging market central banks not to have tightened monetary policy during this period. The crisis in Europe shows no signs of abating and the threat of the US fiscal cliff looms large.