But the self-reinforcing interaction between risk appetite and liquidity came to the surface here. The surge in capital flows weakened incentives to improve transparency and corporate governance; it also fuelled leverage, pushing up asset prices further, to unsustainable levels. Those prices eventually underwent a correction, causing individuals and companies to default on their obligations.
Mr. Hansen could surely have talked about the promotion of exports and strengthening of domestic competition, including increasing the number of small and medium businesses and augmenting their efficiency as essential for the stability of the economy and currency.