full - fledged recession, at least a close relative, a growth recession – as a result of the developments i just described. a growth recession refers to a period of below - trend growth during which the unemployment rate rises. but that misses the distinctive features of the current slowdown. so i think the story is that we turned from a period in which all the forces operating on the economy were lined up to produce exceptionally favorable performance to a period when the economy must adjust to some of the imbalances that built up in the earlier period. our job as monetary policymakers is to try to ensure that the adjustment is not too jarring. but there has been pain. many investors are understandably unhappy at their loss of wealth. so much of what had been accumulated in a few years has quickly disappeared, almost as mysteriously. in addition, many firms have gone bankrupt and others will, especially some of the riskier ventures in the technology sector. but these patterns seem to have historical precedent in the corrections of both equity values and investment that follow, after a lag, the transition to a period of higher productivity growth. some might expect that new - economy developments would make recessions less likely. that is not an entirely unreasonable presumption. the experience among faster - growing european economies in the earlier postwar period was that these economies tended to have fewer quarters of declining output – the sine qua non of a recession as defined in the united states – than was the case in the slower - growing united states. now that the united states had become a higher - growth economy ( again ), it might be that cyclical episodes would be more likely to be growth recessions and less likely to be outright recessions. however, in the united states in the 1950s and 1960s – when average growth rates were about as high as today – the chance of negative - growth quarters was about equal to the chance in the 1970s and 1980s, when average growth was only half as large. in addition, to the extent that the high - tech revolution increased the ability of firms to recognize and respond to changes in demand and quickly remedy unwanted inventory accumulation, the response of output to demand shocks might be less persistent. on the other hand, it appears that the high - tech revolution didn't help firms or other forecasters anticipate changes in demand. there is no guarantee that a higher - growth economy is less vulnerable to recessions. indeed, i believe that the new - economy developments that have raised sustainable growth

level of an individual country? if only global risks are addressed, vulnerabilities will persist at the local level ; however efforts to address local problems could disadvantage domestic banks relative to those headquartered abroad. third, we need to improve our ability to resolve systemically important institutions without generating spillovers that spread systemic risk across firms or across borders. clearly, each country should have the legal authority to wind down a systemically important institution in an orderly way, taking account of the international dimensions. beyond this, there is not yet a consensus on exactly what to do, but a range of promising proposals have been suggested to facilitate orderly resolutions. one is for supervisors to press firms to strengthen their ability to quickly provide the information on exposures, funding, and counterparties that would be needed for crisis management. another would have supervisors recommend changes to simplify the organizational structures of systemically important firms to make it easier to deal with their failure. a related proposal would require firms to maintain a so - called living will, a written contingency plan that provides for an orderly wind - down should severe financial distress lead to failure. fourth, we need to address home - host issues that arise in the supervision of cross - border firms. for example, some global banks can expose a host country to a withdrawal of risktaking caused by problems outside its own borders. this exposure understandably makes host countries uncomfortable with the traditional division of responsibility that restricts a hostcountry to supervising only the activity of a global bank within its own country. one possible response here would be more information sharing from home to host, to better enable host countries to protect themselves. another response would be restrictions by host countries on cross - border operations of global banks, perhaps going so far as requiring global banks to operate through separately capitalized subsidiaries. however, this requirement, in addition to imposing costs on the banks, might also impede the ability of the global financial system to channel capital to where it is most likely to enhance productivity and growth. conclusion i've touched on only a few of the international aspects of the crisis. we face a difficult set of decisions regarding how best to reform our national regulatory and supervisory frameworks in response to the lessons we have learned. but perhaps chief among the lessons learned from the past two years is that in an integrated global financial system we cannot make those decisions in isolation ; we must collaborate internationally if we are to build a more resilient financial system for the future.