ECONOMIC developments over the past two decades vividly show that gyrations in financial markets have greatly influenced real activity around the world. Following the largest housing bubble in its modern history, Japan experienced a massive asset market crash in the early 1990s, which marked the start of its “Lost Decade.” After prolonged credit booms, many emerging economies in Asia faced deep financial crises in the second half of the 1990s. The equity market booms of the late 1990s in a number of advanced economies ended with simultaneous busts and recessions.