For instance, the downward pressure that APP exerts on term premia is strengthened by the negative interest rate policy and the rate forward guidance that offers an expected horizon for continuing that policy in the near term. Negative remuneration on banks’ excess reserves induces lenders and other investors holding cash reserves to diversify away from liquidity into longer-dated assets.
There were hiccups, of course, with some of them quite serious, like the collapse of Long-Term Capital Management in September 1998, but these were regarded as failures to employ the theoretical framework rigorously enough. Structural roots of the crisis From the viewpoint of actors during the Great Moderation, the Crisis should never have happened.