expanding. indeed, former federal reserve board chairman alan greenspan pointed to this unusual configuration a year and a half ago. " although capital investment has been advancing at a reasonably good pace, " he said, " it has nonetheless lagged the exceptional rise in profits and internal cash flow. " subsequently, aggregate cash holdings remained elevated through much of last year, even as the economy continued to advance smartly. only in the very recent quarters has this trend seemed to abate somewhat. we are left with an overall picture of a highly liquid corporate sector - perhaps more like that which we would expect of corporate balance sheets in the early stages of an expansion. as policymakers and forecasters, we might ask why corporations have built up such a large stock of liquid assets. is the buildup of cash indicative of a " new equilibrium "? is there something about the current economic or regulatory environment that requires the maintenance of high liquidity levels? and, does the current level of liquidity portend a more robust surge in corporate spending? partial explanations for large holdings of cash almost by definition, the rise and fall in cash holdings can be linked to fluctuations of operating cash flows and capital expenditures. a simple regression of changes in cash, on changes in operating cash flows, and on changes in capital expenditures - using annual data from 1957 to 2001 - accounts reasonably well for historical fluctuations in cash at u. s. nonfinancial corporations, with a regression r - squared of over 50 percent. however, in this framework, the current period appears to be an outlier. 4 that is, even after factoring in the current - cycle dynamics of strong profit growth and relatively modest investment, a good part of the rise in liquid assets remains unaccounted for - as much as one half of the total rise in cash - to - assets - according to federal reserve staff estimates. a number of explanations have been advanced for this unusual rise, and they have a bearing on judging whether this is a temporary shift born of the current environment or a result of a persistent change in behavior. foreign operations the first explanation relates to the growing significance of foreign operations of u. s. multinationals in countries with lower corporate tax rates and the recent accumulation of earnings retained by the foreign subsidiaries. when u. s. multinationals receive dividends from their foreign subsidiaries and the host country levies a lower tax rate than the u. s. corporate tax rate, any repatriated dividends are subject to u. s

##it effect ( the hit to the european economy is a real gdp decrease of around 0. 5 % over the next three years, but this is a very early forecast ). 3. last but not least, political risks have increased, posing a challenge to fiscal and structural reform implementation. rising political uncertainty ( especially in spain, portugal, greece, italy and france ) and increasing support for populist political parties which seem to be less reform - oriented and with eurosceptic credentials contribute to the downside risks to debt sustainability in the euro area. of course, in the aftermath of the british referendum the biggest political risk to the whole of europe is brexit. brexit represents a shock to the institutions and norms that underpin markets. thus, brexit is different from the euro break - up fears of 2012, the global financial crisis of 2008 or the bursting of the high - tech bubble of 2001. it is not financial contagion, as in 1998, or this february. instead, it represents a contagious political development. no matter whether we have a full - blown or a light brexit, the political risk for the rest of the continent is that the referendums will mushroom across europe in a tug - ofwar between populist forces and the political establishment and elites. this risk is particularly heightened for countries with strong anti - european sentiment such as hungary, the netherlands, denmark, even france. there is an old saying in brussels that europe ’ s leaders are known to have a tried - and - tested method for coming up with policy fixes when forced to cope with emergency situations. postbrexit europe has the potential to become an emergency in the not - too - distant future. i only hope that this time is not different. times will tell. bis central bankers ’ speeches