But it is also true that, unless the Bank moved to pump money into the economy aggressively, any sharp outflow of capital, whether owned by foreigners or owned by New Zealanders, would necessarily result in a sharp increase in interest rates, BIS Review 8/1998  -7-  since those selling New Zealand securities and other assets would be forced to increase the yields offered on those assets in order to encourage others to buy them.
Furthermore, the financial and economic crisis forced many governments to intervene in domestic banking sectors, again placing severe strains on fiscal positions in several cases. Vice versa, fiscal sustainability concerns have rapidly spilled over to the financial sector, thus giving rise to a vicious cycle that is difficult to break.