At the margin, it might have led to a little more caution among financial institutions, but unless policymakers had been prepared to shock the economy into a period of slow growth it seems unlikely that the financial crisis would have been wholly averted. However, modestly higher Bank Rate might have had the merit of discouraging households and firms from increasing their own debt levels, and therefore left the economy somewhat more resilient in the face of the crisis. Thirdly, action only in the UK might have had limited effect on what has proved to be an internationally widespread crisis whose roots lie to a significant extent in the excess of savings in Asian countries and consequent excess of capital inflows into the US and Europe. The conventional answer to the question about the pre-crisis period therefore has become that policymakers did not have the right tools available. In the UK there was no provision for macroprudential instruments to be used to deal directly with the problems building up within financial institutions, and to a lesser extent in the indebtedness of households and firms. A more targeted approach to these issues seems highly preferable to using the blunt instrument of Bank Rate. But despite these cautions, it is possible that it would have been preferable to have taken a more long-term view of the risks to inflation from economic instability.
Joseph Yam, JP: Hong Kong Foreign Exchange and Money Market Practices Committee Opening remarks by Mr Joseph Yam, JP, Chief Executive of the Hong Kong Monetary Authority, at the inaugural seminar of the reconstructed Hong Kong Foreign Exchange and Money Market Practices Committee, held in Hong Kong on 16 January 2001. *  *  *  Good afternoon Mr Powell, Mr Mathieson, Guests, Ladies and Gentlemen, 1. I am delighted to welcome all of you to today’s seminar. This is the inaugural seminar of the reconstructed Hong Kong Foreign Exchange and Money Market Practices Committee (MPC). The organisation of seminars by the MPC will, I hope, provide bankers, treasurers and other market practitioners with an opportunity to focus on issues of common interest. It will help specifically to fulfil at least two of the objectives of the MPC: to promote understanding and expertise relevant to the markets; and to encourage communication among market participants and professional bodies, both local and overseas. 2. The MPC was first established in 1992, as a non-statutory body, with the mandate to give advice on matters relating to the health and development of Hong Kong’s foreign exchange and money markets. Last year was a year of restructuring and recovery for Hong Kong, and the MPC seems to have been following very much the same path. After a review of its functions, the Committee decided to restructure itself, with a view to playing a fuller role in developing and promoting the forex and money markets in Hong Kong.