So, I will search for a fundamental connection between financial risk and macroeconomic performance in the developed countries, which will be the focus of my remarks. What is the direction of this link? Does the Great Moderation determine the quantum of risk traded in the markets? Or does the price of risk determined in the financial markets contribute and partly determine those fluctuations?
And what is structural in this link – and thus likely to persist beyond short-term volatilities – and what is transient? BIS Review 105/2008  1  A complete understanding of these relations would bring invaluable insights for policy considerations. For one thing, the centrepiece of dynamic macroeconomics is the equation of savings to investment.