What we really seem to encourage is rapid liberalization, independent of the state of the banking and financial sector, hoping that financial liberalization will pressure the authorities to move more quickly with improvement in supervision and regulation. The Asian crisis is, I believe, a test of this approach.
Since its adoption, well-anchored inflation expectations have allowed businesses, individuals and families to take a longer view in their planning, which has led to a better allocation of economic and financial resources and a more stable economy overall. Decision making and expectation formation So we know that expectations are crucial, but what do we know about how they are formed?