Similar policy recommendations follow from another paper 6 prepared by IMF staff, which was presented in Session 2 and sought to identify the features that distinguish “good” credit  2  Neagu, F., Mărgărit, A., Copaciu, M., Racaru, I. Mircea, R., Andrassy, A.: Non-Government Credit in Romania: Perspectives and Implications, National Bank of Romania, Occasional Paper No. 4, June 2006. 3  Ramanauskas, T: Interest Rates, Credit and Macroeconomy – a Small Structural Model for the Lithuanian Case, mimeo, November 2006. 4  World Bank EU8+2 Regular Economic Report, Special Topic: Credit Expansion in Emerging Europe: A Cause for Concern?, January 2007. 5  Bems, R., Schellekens, P.: Finance and Convergence: What's Ahead for Emerging Europe?, IMF Working Paper No. 07/244, November 2007. 6  Barajas, A., Dell’Ariccia, G., Levchenko, A.: Credit Booms: the Good, the Bad, and the Ugly, mimeo, November 2007. 2  BIS Review 137/2007  booms from “bad” ones, i.e. such that probably eventually lead to a banking crisis. The analysis has shown, inter alia, that better banking supervision lowers the probability of a crisis. It has also established that booms that coincide with current account imbalances seem less dangerous (a finding that may seem counter-intuitive at a first glance), that trade openness is another factor that makes a crisis less probable, and that the more prolonged booms as well as those accompanied by high inflation or slow economic growth are the “bad” ones. Another important topic raised during the conference was housing.
And the policy, even if pursued, would risk being self-defeating. So there is both an institutional and a market discipline at work to mitigate this risk, which means that – while this risk does exist and it is encouraging that it is being scrutinised – in practice it is very unlikely to come to pass. And to be clear, there is no signal on policy in what I have just said. There is one further part to the recent context which is relevant to the institutional set-up of central banks with respect to monetary policy. I mentioned earlier that in the last ten to fifteen years, the shocks to which central banks have had to respond – to which we apply stabilisation tools – have got larger. I well remember that in the very early days of the MPC we had some monthly outturns for inflation which were exactly at 2.5% (2.5% was the original target on a different measure of inflation). Now, in most circles this would be a cause of celebration – we’ve hit the target, and again. As I remember, there were some smiles, but – being central bankers you might say – there was a concern that it could unduly raise expectations on the accuracy of the policy process in terms of outcomes. For the record, it didn’t last, as we knew it wouldn’t.