Policymakers will not find it easy in real time to identify these elements correctly and to quantify the impact on underlying asset substitutability. What often becomes clear in retrospect (eg incipient rises in bond market volatility related to worries about fiscal deficits, leveraged positions in interest rate markets holding down long-term yields etc) will not be so obvious at the time. Nor is there any reason to suppose that the degree of asset substitutability will be constant across countries. In particular, it is likely to be lower in smaller or less developed financial markets. Hence the central bank.
