We thus think that this is one reason to revisit the role of monetary and credit variables in monetary policy strategies going forward. Moreover, disregard for monetary and financial phenomena by policymakers had a more profound implication insofar as found a theoretical underpinning in the risk management approach to asset price trends.
The consensus view in the run-up to the crisis – to which the ECB did not subscribe to – was that the best that central banks could do was to “clean-up” following a bubble burst through a loosening of the monetary policy stance. Subsequent events have shown that these “bubble bursts” can be very costly and that aggressive ex post action may not suffice.