Like the capacity to supply, demand also tends to fluctuate – in response to changes in international conditions, in response to changes in public confidence, in response to changes in government policy, in response to the introduction of new inventions, in response to changes in wealth, in response to a whole host of things – and yes, in response to changes in monetary policy.
Today, I have discussed some problems resulting from changes in the financial system that central banks face and how they should respond. Despite the various efforts I have outlined, the probability of a financial crisis occurring can never be reduced completely to zero. With this in mind, a central bank should enhance its crisis management ability.