The labour potential, that is the number of people who are readily available to the labour market, increased greatly in these economies and they presented plenty of high-yielding investment opportunities. Both led to a significant growth in per capita income. However, the phase before the crisis was also characterised by extremely favourable financing conditions and a high propensity to take risks.
As a result, capital was not always channelled into its most productive use, and in various countries this fostered an unsustainable asset price increase that led to high private-sector debt and excess domestic demand; the housing markets in several advanced economies are a prominent example. These undesirable developments were further encouraged by loopholes and weaknesses in the regulatory framework.