would continue to deteriorate, but this is seen as sustainable. therefore, in both cases, no specific action to correct the imbalances is necessary on the part of advanced countries. finally, a stark corollary of the global assets shortage story is that, as long as the forces underlying excess saving in the periphery persist and the united states retains its undisputed global financial leadership, ( welfare - enhancing ) global imbalances should be the norm. none of these stories, by itself, can account for the build - up of financial fragilities, which were then fully revealed by the outbreak of the crisis. to this end, as i noted earlier, the role of macroeconomic policies appears essential. 4. policy frameworks two central elements of the story i have sketched out are : ( a ) an overly expansionary us monetary policy, which permitted a long expansion of consumer spending financed by growing indebtedness ; ( b ) the choice by china and other emerging countries to follow an export - led growth strategy supported by pegging currency to the us dollar, resulting in the accumulation of large official reserves. both policies were attractive in the short run, but ultimately unsustainable in the long run. this is now clear in retrospect, but even without the benefit of hindsight several signals – the sharp decline in the us household saving rate ; the widening global imbalances and the accumulation of huge official reserves ; the enduringly low levels of long - term interest rates and risk premiums and implied volatility ; the continuous expansion in global credit ; the succession of booms in financial and real asset prices – should have alerted policymakers that those policies were feeding a set of disequilibria that could not be sustained indefinitely, but whose correction was nowhere in sight. the question that should be addressed is not so much why those unsustainable policies were undertaken in the first place – in a world of imperfect knowledge, private agents and policymakers make mistakes all the time – but what allowed them to be maintained for such a long time. to address this question, we need to reconsider the conceptual setups that were used to frame and to assess the results of those two policy choices. in addition, we must look to the international monetary system as a whole, and ask why the incentives incorporated in it did not effectively induce the correction of the imbalances and promote policies conducive to the orderly functioning of the world economy.

the market, the economic system works well. these ideas are very old, dating back at least to joseph schumpeter ’ s ‘ creative destruction ’ and they are now an intrinsic part of empirical analyses from all around the world. indeed, thanks to the efforts of several scholars and research centres, among which i would like to thank the oecd researchers that conducted the seminal firmdyn project, we now have a lot of comparable data on firms ’ entry, growth and exit from the market, over their entire age distribution, in each national system. these country - level indicators are of course deeply affected by business environments and policies. for instance, entry barriers and direct or indirect public subsidies to firms in trouble can alleviate the welfare costs of crises in the short term, but may have long - term negative effects on firm selection and economic growth. to take another example, if the judiciary works badly and private contracts are difficult to enforce, incumbents have a clear advantage over entrants. finally, if the political system works badly, some firms may escape competition thanks to their political connections. finance also plays a role in shaping firm dynamics. new businesses need money, which can ’ t always be provided by banks, because of the riskiness of the venture and the scarcity of collateral. venture capitalists are the right answer, yet their contribution is quite varied across countries. technological improvements, for which the fintech label is a proxy, are now filling these gaps, but the process is uncertain and uneven. for now, at least in some countries, new and young firms have to rely on bank credit and face tight capital constraints. if we leave aside cross - country differences and do some time - series analyses, we notice a decline in business dynamism since the early 2000s all over the world : for most oecd countries, new firms ’ entry rates are now significantly lower than at the beginning of the century. what are the causes of this phenomenon? one may be the possible increased market power of incumbents. another may be the fact that technological change and globalization increase the ability of more productive firms to gain market share. these two possible explanations have markedly different policy implications. the scientific debate is currently ongoing, and during this workshop other possible explanations will be discussed in depth by several presenters. recent research has highlighted how firm dynamics may have a role in explaining not only long - term potential growth but also business cycle fluctuations. the procyclicality of entry rates could be driven by