I think it is useful to separate the grounds for BIS Review 83/1997  -2-  mistakes into two groups: market participants could be wrong about the economy, or wrong about policymakers’ objectives. Two examples can make this distinction clearer.
For one, we know, after the fact, that most analysts misjudged the full extent to which unusual restraint on credit was exerting a drag on spending from around 1989 to 1993. Essentially, both households and firms recoiled from the explosion of debt in the 1980s.