In this way, the interaction between macroeconomic imbalances and the malfunctioning of the financial system leads to financial crises. This relationship is often described by central banks as the interaction between monetary and financial stability; the macroeconomic stability, i.e. noninflationary sustainable growth and the stability of financial system are interdependent.
Our experiences of recent financial crises underscore the importance of such interaction Volatility of short-term capital flows The second point, which is closely related with the first, is the deepening of crises by sudden changes in short-term capital flows. As I have mentioned already, bank credit to the Asian countries expanded significantly in the years preceding the crisis.