In contrast, the cross-sectional dimension relates to the interdependence structure of the financial system: the interconnectedness of institutions, parallel behaviour and/or common exposures that lead to the rapid spreading of risks. In the near future, operational macroprudential instruments to counter systemic risk have to be developed. To reduce the cyclical component of systemic risk, time-varying capital and liquidity requirements are at the forefront.
The devastating effects of the crises can be illustrated by a few statistics from some of the affected countries. According to a recent World Bank report, prices of key commodities, such as rice, increased by 25 per cent or more in Indonesia, leading to food riots and major demonstrations against the Government.