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).

18 Forbes and Warnock (2012) present evidence that high capital inflows can end suddenly, with global factors typically more important than the domestic macroeconomy. 19 Cesa-Bianchi et al (2017) find that foreign credit growth is a strong predictor of financial crises, over and above domestic credit growth. The result is driven by a combination of contagion from foreign crises, capital inflows and (global) market sentiment. 20 The first number is the April 2008 Global Financial Stability Report’s estimated subprime-related global bank losses as of March 2008 (IMF (2008), Table 1.6). The second number is the April 2009 Global Financial Stability Report estimated potential total mature economies banking sector write-down for the 2007-2010 period (IMF (2009), Table 1.3). The corresponding April 2010 Global Financial Stability Report estimate revises this number down to 2.3 trillion (IMF (2010), Table 1.2). 21 Bardoscia et al (forthcoming). 22 Cont and Schaanning (2014). 23 This was revealed during the crisis where some investors – typically ‘shadow banks’, which took bank-like risks but without being subject to commensurate regulatory standards – funded their investment in long-term securitised assets with short-term asset-backed commercial paper. When this funding was withdrawn during the crisis, it resulted in a sell-off of these long-term assets, depressing their price (Brunnermeier, 2009). 24 Regulated open-ended funds include mutual funds, exchange-traded funds, and institutional funds. Based on BlackRock, The Investment Company Institute and Bank calculations. 25 In 2015, Bank and FCA staff conducted a joint information-gathering exercise on investment funds with large holdings of corporate bonds.