But the same line of causation could be less reassuring from another angle. The same studies that have found an important role for policies in the Great Moderation of the last two decades cannot certainly rule out that “good luck” might have exerted a reinforcing influence. More moderate exogenous shocks might have contributed – more or less accidentally – to smoothing economic fluctuations.
Financial complexity is an inevitable consequence of increasingly complex and global economic activity, and we must find ways of working out the necessary checks and balances.