speeches explain this positive outcome was done by delong and summers ( 1988 ), in which they show that a stabilizing policy can have a medium - term impact because it is not necessarily symmetrical, and hence its importance. the troughs can be smoothed without “ shaving ” the peak periods in the business cycles. another way of examining the cost of volatility, or alternatively the value of stability, is to examine investment in the economy, which has a large effect on gdp and on consumption. uncertainty affects production decisions, when firms must made decisions in advance regarding the technology that they will use and the means of production they will employ. firms may therefore inefficiently allocate their resources. ramay and ramay ( 1991 ) also found a statistically significant value to the “ consumption insurance premium ". in addition, bar - levy ( 2004 ) found that an increase in investment during peak periods contributes less to growth than the negative impact to growth from a reduction in investment during a recession. therefore, a stabilizing policy is not limited to smoothing consumption volatility, but contributes to the growth rate and to improving per capita consumption. it is important to note that there is “ bad ” uncertainty, regarding which we must guard stability, but there is also “ good ” uncertainty, as shown by a study i conducted with segal and shaliastovich ( 2015 ). we must maintain stability while enabling that good uncertainty that is reflected in innovation and technological improvements, research and development, and competition. until now, the discussion has been regarding volatile business cycles. but what about the significant effect of financial cycles on that volatility? " financial cycle ” is a term that is described and analyzed in the bank of israel ’ s upcoming financial stability report. it is a method of identifying cyclical behavior of financial activity. the financial cycle is defined as “ deviations from the long - term trend of a group of variables that are important to financial stability ". the definition first requires us to choose the relevant variables, and then to choose the method of identifying deviations in the trend. in accordance with the literature, the bank of israel examined a number of estimations for identifying the financial cycle, including private credit, home prices, share prices, and the slope of the real yield curve. it was found that, except for private credit and home prices, the rest of the estimations that were examined vary at a different ( high ) rate, and therefore do not contribute

the proper tools for this both through the required legislative changes – for example, there is a proposed fair credit law that sets out criminal penalties for collecting interest beyond a rate set by the law – and by making resources available. in summation, the gray market in israel is an existing fact. there is place for a credit market beyond the banking system, mainly concerning increased access to credit. the market can also contribute in terms of competition. it is important to establish a regulatory framework to regulate, supervise and enforce the law and regulations for activity of the noninstitutional market. there are currently many processes in various committees relating to some of the problems. there is a committee in the ministry of finance to establish a dedicated regulator, there is a committee to increase competitiveness in the financial services, and the government is leading various efforts to assist small businesses. i am aware of the desire for everything to be here and now. but we need to deal with these issues properly, with the proper regulation, even if it takes time, since the damage of promoting unregulated financial activity will exceed the benefit, and the victim, as always, will be the public. bis central bankers ’ speeches