svein gjedrem : globalisation and monetary policy welcome address by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the norges bank conference on monetary policy “ jarle bergo colloquium : globalisation and monetary policy ”, oslo, 7 march 2008. * * * it is a great pleasure to welcome you all to norges bank ’ s conference on monetary policy. the bi - annual conference on evaluation and assessment of monetary policy is a tradition at norges bank. this year the conference is being held in honour of my dear friend and colleague, jarle bergo, who is approaching the end of his twelve - year term as deputy governor of norges bank. he is now resigning office to take the position of alternate executive director of the nordic - baltic constituency at the imf. jarle bergo started his career as an economist in norges bank in the late sixties. over the years he has made crucial contributions both to the work of the bank and to its organisation. i am sure that i speak for all of us who have had the pleasure of working closely with him when i say that he has also made a vital contribution to the atmosphere in the bank through his pleasant manner and good humour. we have titled this conference “ jarle bergo colloquium : globalisation and monetary policy ”. both globalisation and monetary policy are themes wide enough to fill up numerous conferences by themselves, and only a few questions will be addressed here today. during jarle bergo ’ s 40 - year long professional career, views on monetary policy have changed. the general economic environment has also changed dramatically. the global economy has become increasingly integrated. when i speak of the term globalisation, i refer to the growing interdependence of national economies as reflected in greater and freer flows of goods, services, capital and labour across national borders. the number of countries taking part in the global exchange of goods and capital has soared. china, india, russia and many other emerging markets have opened their borders and embraced capitalist reforms. the globalisation process has accelerated over the last two decades through increased trade liberalisation, political changes, technological advances, and a sharp reduction in transaction costs. this new, globalised world economy presents us with new possibilities, but also with challenges. we are very proud to be hosting this conference and we are especially glad that we have been fortunate enough to attract such a distinguished group

moreover, even in a strong economy, unforeseen life events and risks in local real estate markets make highly leveraged borrowers vulnerable. it was ultimately very destructive when, in the early part of this decade, dubious underwriting practices and mortgage products inappropriate for many borrowers became more common. in time, these practices and products contributed to problems in the broader financial services industry and helped spark a foreclosure crisis marked by a tremendous upheaval in housing markets. now, more than 20 percent of borrowers owe more than their home is worth and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further. with housing markets still weak, high levels of mortgage distress may well persist for some time to come. in response to the fallout from the financial crisis, the fed has helped stabilize the mortgage market and improve financial conditions more broadly, thus promoting economic recovery. what may be less well known, however, is what the fed has been doing at the local level. as the foreclosure crisis has intensified, federal reserve staff in our research, community development, and supervision and regulation divisions have actively collaborated to support foreclosure prevention at the local level and promote neighborhood stabilization initiatives. a key initiative developed under the leadership of federal reserve bank of chicago president charles evans has been the mortgage outreach and research effort, known as more. more involves all 12 federal reserve banks and the board of governors in a collaboration that pools resources and combines expertise to inform and engage policymakers, community organizations, financial institutions, and the public at large. the fed is particularly well suited to such an effort. our community development experts are working on the ground to promote fair and equal access to banking services and improve communities. further, federal reserve staff members are conducting empirical research on mortgage - and foreclosure - related topics, and are reaching out to industry experts as well. we are focusing on the hardest - hit cities and regions of the country. a new publication released this week offers details about the more effort. copies are available here today, and it is available online at the website of the federal reserve bank of chicago. 1 the report identifies approaches the fed has taken to mitigate the foreclosure crisis, and i ’ d like to share some highlights of that work. we have helped many of our community development partners organize day - long “ mega events ” that have served thousands of troubled borrowers. moreover, we ’ ve