Financial conditions in advanced economies are now almost as tight as they were in 2009. So far, this has been the result of an economic shock rather than strains within the financial system itself and hence financial conditions are posing less of an independent headwind to growth than during the global financial crisis. However, we are now probably near the point where tight financial conditions begin to exact their own harm on economic activity. Emergency policy measures should help to alleviate these pressures, but the risk is that they prove insufficient to prevent the economic crisis morphing into a financial crisis.
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