3. Counterfactual Scenarios  A primary lesson from this boom-bust cycle that the costs of tolerating the rise of persistently large imbalances are extremely high, especially for high-deficit countries (Lane 2013c). During a global credit boom period, what instruments are available to policymakers in an individual country to mitigate macro-financial risks?
For members of the euro area, the absence of a national currency and national interest rate policy increases the importance of using other policy instruments. Most directly, a credit boom can be addressed through vigorous macro-prudential regulation of the banking system.