An additional challenge in evaluating the role of vulnerabilities for monetary policy is the time frame over which financial vulnerabilities may play out. If they play out only very slowly, which is quite plausible, then it becomes very difficult to properly establish the quantitative link between interest rate decisions and future effects of financial vulnerabilities on the economy.
That is, if the effects of interest rate cuts come many years later, it is more difficult to say whether they caused the vulnerabilities. While the role of financial vulnerabilities is debated, several different pieces of evidence suggest they are most likely relevant. For example, let me discuss evidence based on countries that experienced long periods of above-normal credit growth.