Notably, in this episode, the rise in rates created some stress in financial markets but did not lead to serious financial instability, nor did it significantly impair economic activity. However, one would not want to conclude from that one case that sharp rises in rates do not pose risks. 14  See Stein (2013).
15  On the other hand, some risk-taking – such as when an entrepreneur takes out a loan to start a new business or an existing firm expands capacity – is a necessary element of a healthy economic recovery.