Of  course, because output and pricing decisions are taken simultaneously, both the IS and the Phillips curve are equally relevant and should therefore ideally be analysed in a general equilibrium model, such as in Smets and Wouters (2007). 12 See e.g. Fuhrer and Rudebusch (2004), Stracca (2017) and references therein. 13 See also Al-Eyd and Pelin Berkmen (2013) and Blattner and Swarbrick (2017). 14 The real bank rate gap has fallen by around 1.6 percentage point since the second quarter of 2014. The output  gap has fallen by around 2.1 percentage point over the same period. 15 See, e.g., Draghi (2015). 16 In empirical open economy extensions of the New Keynesian model, the exchange rate appears as an  additional variable in the IS curve (see e.g. Ball, 1998, and Svensson, 2000). 17 Fuhrer and Moore (1995) show that the correlation between short-term rates and output reflected the fact that the  statistical properties of the short rate were similar to that of the long rate, which should ultimately matter for aggregate demand. 18 See Praet (2017). 19 This is similar in spirit to the findings of Meltzer (1999) and Goodhart and Hofmann (2005) that changes in the  real monetary base exert separate effects on aggregate demand and that the addition of other asset prices can explain the real interest rate puzzle. 14 / 14  BIS central bankers' speeches
Small and medium-sized enterprises are mainly affected since they are often young firms and have hardly diversified activities and a modest capital base. Enterprises, however, can mitigate this disadvantage to a certain extent by improving information. Bank balance sheets likewise have an influence on the extension of credit. This applies mainly to small and medium-sized enterprises, whose sole source of external funding are frequently bank loans. Bank regulation should seek to prevent provisions from unnecessarily reinforcing the procyclicality of credit extension. In order to help achieve this, the new Basel Capital Accord (Basel II) provides for some flexibility. BIS Review 6/2004  1