3 Risks to watch encompass significant overheating of the overall economy or crucial sectors, substantial misalignment of asset prices from long-term trends such as in the property market, excessive risk-taking and increasing corporate or household leverage, and extraordinary credit expansion, especially through nontraditional vehicles, including shadow banking. Timely corrective action at the detection of any systemic problem is essential.
Corrective action opens the debate as to what instruments to use to tackle specific complications. In addition to traditional measures such as fiscal, monetary, and bank  1  See, for instance, Scholes, M.S. (2000), “Crisis and Risk Management.” The American Economic Review, 90(2); and Miyajima, K., et al. (2012), “Emerging market local currency bonds: diversification and stability.” BIS Working Papers No 391.