Here the crucial point is that the models we use to interpret economic data and to set policy are particularly lacking in the treatment of asset prices. In this respect: •  We probably do not know enough about the effects of asset price misalignments and related imbalances in equity, real estate and currency markets, as well as in bank credit and government debt.
These effects are normally found to be relatively small, and asset price movements to play a relatively limited role in the transmission of monetary policy. Even if “extreme events” materialised in powerful fashion, in econometric estimates they are likely to be dominated over the sample by “normal time” observations and frequently end up being “dummied out”.