Moreover, the deficit and surplus countries, rather than exerting policy discipline on each other, in fact accommodated the other in the pursuit of their respective growth models (see Dooley et al. 2003). Market discipline also proved partly unreliable for a number of reasons.
Firstly, markets frequently do not function in line with fundamentals as expected, leading to mispricing and undue volatility in, for example, exchange rates and credit risk premia. This may be explained in part by factors such as herding behaviour, but also the lack of a shared view on the relevant fundamentals. Secondly, market behaviour has also been constrained by structural factors and policy regimes.