These new instruments should directly target the incentives to extend excessive credit. But there are a number of practical questions to answer before they can be implemented. Charles Bean concludes that it is a mistake to look for a single culprit. Just as in Agatha Christie’s Murder on the Orient Express, those with different motives but similar objectives can all contribute to the same outcome. The economics profession was one of those culprits and there are lessons for the discipline. It could incorporate psychology or behavioural economics into the study of financial markets but this may be unnecessary since much of the story can be explained using standard microeconomics. Economists should take more notice  BIS Review 101/2009  1  of history and not treat crises as pathologies that happen in other times or in other places but as a central feature of free-market economies that models should aspire to explain. Finally, macroeconomists have to learn how to put credit markets into their models in a meaningful way and which enable us to model shocks originating in the financial sector rather than just as an amplification mechanism. The Great Moderation, the Great Panic and the Great Contraction The past twenty-four months have been tumultuous for the global economy, for economic policy makers and, indeed, for the discipline of economics.
In the past few years insolvency laws have been amended, in particular in Spain, Italy and Portugal, to better support early rescue of viable firms, to help the deleveraging process and to free up resources for further investment and thus productivity growth. I believe that these reforms, if the effort to implement them continues, will help us to grow out of the current high private sector debt problem. Of course, there are other possibilities and the list of potential reforms is long. I could elaborate further, but my time here is unfortunately limited so I chose to constrain myself to this crucial area of structural reforms. Conclusions Let me now conclude. As I said at the beginning, the euro area can make a much stronger contribution to global growth than it has done so far. The conditions are very favourable for a strong push for reforms; in particular, our monetary policy stance is supportive. Reforms should now focus on boosting productivity and reducing the burden of the high debt stock. Work in this direction has started and is ongoing, but the euro area governments need to continue on this track with more determination and impetus. BIS central bankers’ speeches  3