It is difficult to prove “in advance” the rightness of the policy authorities’ judgment about emerging signs of financial imbalances. The difficulty in noticing the signs of financial imbalances with certainty at the same time suggests the difficulty in persuasively arguing for the need for a policy response to such signs.
Even though the financial authorities are able to judge, based on their analysis and experience, that signs of  2  For example, a CCB framework has already been established in Switzerland, and loan-to-income (LTI) and LTV caps for new residential mortgages have been introduced in the United Kingdom and New Zealand, respectively. 3  For details, see Nelson and Tanaka (2014).