BIS Review 105/2008  15  Figure 2: US, Risk premia and Macroeconomic Risk (2a) Equity, bond, housing risk premia  (2b) Consumption growth volatility and CPI inflation  Source: ECB, Kim and Wright (2005), Davis et al.
Why expectations were disappointed It is beyond the scope of this speech to give a comprehensive answer. But part of the explanation is the fact that governments did not internalise the new constraints created by monetary union. As a result, few took advantage of the favourable financing conditions in the first decade of EMU to make progress on institutional reforms.