Mr. John McCarthy:

I don't think the Department, Central Bank, and regulator, have a monopoly on failing to see that. I mentioned before there, the IMF. I could tell you every finance Ministry, every central bank ... my own job as the forecaster, I would participate at European Commission meetings, where all 28 member states would be discussing forecasts at an OECD level. Everybody failed to see this.

There was this "Great Moderation" as it's called. Inflation had been tamed. In the past you had ... here's your trend growth rate and GDP, you know, fluctuates around that whereas it was now more like that, so this was the "Great Moderation". I think it was the economist Hyman Minksy who famously said that stability breeds instability. I think that was part of the problem here. We had years and years and years of stability, so people assumed there was this new paradigm, this "Great Moderation", and the models couldn't capture financial disruption. So models themselves failed, although I always think it's the users of the models rather than the models themselves. But what we are doing is trying to develop a model that better incorporates the financial sector into the real economy, how the ... how financial disruption can be brought across into output and employment and so forth. So this is being done in conjunction with the ESRI and I have a PhD economist working on my team, working on that, currently completing a PhD and working with the ESRI on it.