First, increase in the gross domestic saving rate to levels around 30 per cent, coupled with sustained absorption of external savings of about 2 per cent of GDP, would provide the potential for attainment of an accelerated growth trajectory. Second, the micro structural reforms undertaken over the years have enabled continuing productivity gains in the real sector.
The great moderation fed the perception that large fluctuations were a thing of the past, and this has reduced risk premia and increased leverage. This was reinforced by low policy interest rates, which were possible thanks to more credibility in monetary policy and because globalisation contained consumer price inflation.