Capital markets play a comparatively larger role in our financial system. As a consequence, shocks get  2  BIS Review 9/2005  diffused more broadly, and weakness in traditional intermediation channels can be offset by the strength in other channels. Here in the United States, financial innovation has advanced farther and more rapidly than elsewhere. This reflects a regulatory model that is more supportive of competition, of financial innovation, and of market-driven improvements in risk management. The U.S. financial system has embraced opportunities for risk transfer much more rapidly and extensively than other systems. Finally, we have larger and more developed venture capital, private equity, and hedge fund segments within our financial system. These are important sources of liquidity, they add depth and breadth to capital markets, and they play a valuable arbitrage role in reducing or eliminating mispricing in the financial markets. However, no system is invulnerable to stress and crisis. Recent U.S. financial history is not a history of the uninterrupted achievement of ever higher returns. The stock market crash of ’87, the stress that surrounded the Russian default and the collapse of Long Term Capital Management, and the more recent fall in equity prices that came with the collapse of the technology boom all posed significant potential threats to financial stability. In each case, however, with a swift monetary policy response and other actions the process of recovery and repair was reasonably quick. The relative ease with which we managed through these events has reinforced confidence in the stability of the system.
Therefore, alongside with the baseline forecast, we have worked out an alternative scenario  BIS central bankers’ speeches  3  which we consider to be unlikely to develop and which provides for oil price fall to $ per barrel from early 2015 and during the whole three-year period. In this case Russian economy will require more profound adjustment to the new conditions in 2015–2016. In this scenario, the current account surplus will amount to approximately $ billion in 2015. It will further increase due to the slight rise of non-oil and gas exports and decline of imports. Economic growth rates will depend on the pace of import substitution. Slow development of import-substituting production in 2015–2016 may result in “mild” recession. Nevertheless, output and employment decrease will be considerably less than in 2008–2009. In this scenario we expect economic recovery growth to over 5% in 2017. Under this scenario, in 2015, inflation acceleration may be higher than in the baseline scenario due to the lower ruble appreciation during the year which is also expected due to the compensation of the exchange rate overshoot. During the following two years, due to the deeper output gap inflation will decrease even faster than stipulated in the baseline scenario reaching the target of 4% before late 2017. Meanwhile, the monetary policy will be aimed at stabilisation of inflation expectations, prevention of inflation spiral and its gradual decrease due to the prospects of economic growth.