be necessary for central banks to stimulate research on topics and approaches relevant to them. the mars network has been very successful at promoting some of the new approaches and tools that we need, in particular by building an aggregate framework incorporating financial instability. we would now find it desirable that this approach takes root in academic circles, and can permeate the development of a new paradigm, influencing research and teaching. in other words, we invite other researchers, both in academia and in policy institutions outside the escb, to follow up on the progress already made to establish closer links between current policy challenges and economic thinking. i thank you for your attention. bis central bankers ’ speeches

unsold new houses in australia. in fact, the consensus is that there is currently a shortage of dwellings. the australian housing boom ended because prices rose to levels that severely strained the financial capacity of buyers to pay higher prices, not because too many houses were built, as in the us. the overhang of unsold houses in the us has created downward pressure on house prices as builders and developers have been forced to sell. this is absent in australia. rather, the shortage of housing here means that there are buyers waiting for better circumstances – e. g. lower interest rates or rising incomes – to facilitate their entry to the market. this latent underlying demand for housing is a factor that will support the market. a third important difference between australia and the us is in the groups that the lenders targeted, and in the loan terms on offer. in australia, the lending boom was concentrated on existing home owners who traded up to bigger and better houses and bought investment properties. many of these were people in their 40s and 50s who previously had low levels of debt. at the end of the boom, the home ownership rate in australia was no different to that at the start ; in both cases about 70 per cent. while one could argue that no socially productive purpose was served by this increased lending to middle - aged existing home owners, it did mean that the loans largely went to those who had a strong capacity to service and repay them. as a result, whereas most other countries with housing booms have experienced a strong rise in arrears on housing loans once the boom ended, in australia the arrears rate is today no higher than it was at the start of the boom in the mid 1990s. and, of course, it is low by international standards. graph 6 in the us, in contrast, a lot of the lending found its way to more marginal borrowers who previously could not afford a loan, or it took the form of aggressively structured mortgages which allowed people to borrow much more than they previously could. the home ownership rate in the us continued to rise during the first years of the boom. one could argue that this was a good thing, but one consequence was that a significant proportion of this group ended up having trouble servicing their loans ; hence, the sharp rise we have seen in us loan delinquencies. in setting out these differences, i don ’ t want to leave the impression that the australian housing market is without its problems. there is no