Therefore, as policy makers and business leaders, we should be thinking about exploiting the opportunities and preparing ourselves for the challenges of managing a multitrillion dollar (and not a one trillion dollar) economy!
The central bank may have an incentive to keep monetary policy too loose to avoid the adverse effects of tighter money conditions on bank earnings and credit quality12 and provide liquidity to weak banks to avoid triggering losses.13 A supervisor that is also a central bank may be tempted to forbearance during a downturn, delaying the closure of problem banks in the hope that macroeconomic conditions improve and the problems in the financial system disappear on their own.