In the light of sometimes heated debate surrounding the relevance of the user cost of capital in explaining investment behaviour, other links between monetary policy and investment decisions have gained increasing weight in the last few years. The importance of financial constraints and their main origins are now being debated extensively.
As the SSG report indicates, some firms had a poor understanding of the risks inherent in certain complex products or failed to recognize that certain activities contained latent risks that could be manifest in unexpected concentrations of risk exposures when market turbulence arose.