Jordà, Ò., Schularick, M., and A. Taylor (2013): “When Credit Bites Back”, Journal of Money, Credit and Banking, Supplement to 45(2). Kashyap, A. K., Tsomocos, D. P., and A. P. Vardoulakis (2014): “A programme for improving macroprudential regulation”, published in Macroprudentialism, edited by Dirk Schoenmaker, CEPR Press. http://voxeu.org/sites/default/files/file/macroprudentialism_VoxEU_0.pdf  14  All speeches are available online at www.bankofengland.co.uk/speeches  14  Knight, F. H. (1921): Risk, Uncertainty and Profit, Boston: Houghton Mifflin. Korinek, A., and A. Simsek (2016): “Liquidity Trap and Excessive Leverage”, American Economic Review, 106(3), 699-738. Miles, D., Yang, L., and G. Marcheggiano (2013), “Optimal Bank Capital”, Economic Journal, 123, 1-37. Modigliani, F., and M. Miller (1958): “The Cost of Capital, Corporation Finance, and the Theory of Investment”, American Economic Review, 48(3), 2. Rosengren, E. S. (2011): “Defining Financial Stability, and Some Policy Implications of Applying the Definition”, Keynote Remarks at the Stanford Finance Forum, Graduate School of Business, Stanford University, 3 June. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  1  Recognising this, others have started to take stock on progress on macroprudential frameworks. The most notable contribution to this effort is a recent report to the G20 by the IMF, the FSB and the BIS (IMF-FSB-BIS, 2016). 2 The basis of many of the ideas in this section stems from Kashyap et al (2014). 3 James Carville, strategist for Bill Clinton’s 1992 presidential campaign, coined the phrase ‘The economy, stupid’. 4 See Rosengren (2011).
Retail price inflation (on the Government’s target measure) has averaged 2.7% over this period, and has in fact been marginally below the 2½% target for much of the past two years. Short- -term interest rates – which went up to 12% (and tentatively even to 15%) before we left the ERM in 1992 have been stable at 6% for the best part of a year. Helped by a decline in inflationary expectations, UK 10 year Government bond yields have fallen, to around 4¾% which, apart from a brief period at the beginning of 1999, is the lowest they’ve been for nearly 40 years. They are now just about as low as in any major industrial country with the exception of Japan. And the number of people in work has recently been at an all-time high in the UK as a whole - and close to its high point in Scotland; while the rate of unemployment, on a claimant count basis, is at a 25-year low, both in the UK as a whole and in this country. The question remains – can we keep it up? The answer to that question depends on developments both at home and abroad, but let me comment first on the international situation which is currently the focus of a great deal of attention.