Growth that depends heavily on specific sectors such as capital- and technology-intensive industries can result in weaker economic resilience to external shocks. Household debt that grows more rapidly than household income can limit consumption through increases in borrowers’ debt repayment burdens.
Recent events have illustrated that many large, complex institutions had exposures to subprime mortgages that ran across independent business lines, through off-balance-sheet conduits such as structured investment vehicles, and with respect to numerous counterparties such as monoline financial guarantors. But too few institutions fully recognized their aggregate exposure to risks that turned out to be highly correlated.