with global growth. in recent years, the connection has become even tighter, as the share of exports in gdp is increasing, and there is a high correlation between israeli exports and world trade. accordingly, the forecast for world trade is another factor that we need to take into account when we think about the future of israel ’ s economy. let us now examine which factors are expected to continue and affect productivity and growth in the coming years. the first factor is the development of the global economy, and it is not heartening – in recent years there has been a marked slowdown in growth of advanced economies and some slowdown in emerging markets, and the forecast is for the growth rate to increase slowly in advanced economies, and to continue to decline in emerging markets. there is broad agreement on the assessment that the rate of global growth over the next 5 years will be markedly lower than that of the decade before the crisis. different economists use different terms in order to describe this – summers speaks of “ secular stagnation ” and forecasts a marked moderation for a considerable time, while rogoff is slightly more optimistic and speaks of a “ super debt cycle ”, a process in which high levels of debt are what lead to, at least in the medium term, expected moderate global growth. in any case, the moderate expected global growth will impact on israel ’ s growth as well. moreover, the assessment based on the imf ’ s analysis is that the connection between global growth and world trade has weakened in recent years, and is expected to be weaker than in the past. some countries whose past contribution to growth of world trade was very high are going through a growth reorientation process toward domestic market oriented growth, and therefore for given global growth we will see a more moderate increase in world trade. due to the fact that global growth is translated into demand for israeli output through world trade, this development is expected to be significant for the israeli economy. it should be emphasized that this is a slowdown in the long term component of world trade, beyond the short term cyclical slowdown. we have thus surveyed two global trends that are expected to act adversely on growth in israel – a slowdown in global growth, and a slowdown in world trade for a given level of growth. the estimated combined impact of both these trends is that they will reduce growth in israel by 0. 4 – 0. 8 percentage points, relative to the growth seen in the decade prior to the crisis. bis

, the mispricing of assets and risks was not confined to the u. s. subprime mortgage market. many credit risk spreads across the globe were at historic lows in the period before the crisis, after several decades of mostly mild, infrequent recessions in the industrial economies. the broad incidence of narrow spreads in part reflected the activities of investors and intermediaries who were facing the same perceived incentives in many different markets. and asset prices – especially real estate prices – were unsustainably high in a number of countries. liquidity risk had also been mispriced. investors had paid insufficient attention to the maturity mismatch present in a number of investment vehicles, including abcp conduits and money funds. and both investors and intermediaries had assumed that the exceptionally liquid conditions in many markets of the pre - crisis period were a permanent part of the financial landscape. again, with hindsight, we can see that these vehicles were vulnerable to runs once the crisis hit, and these runs did not stop at national borders. michael gibson of the board's staff contributed to these remarks. the views expressed are my own and not necessarily those of other members of the board of governors. moreover, even countries where assets weren't obviously mispriced felt the effects of the growing dislocations when global banks were forced to deleverage and conserve liquidity. their pullback from lending was broad - based and eventually affected many emerging market economies. and the adverse feedback loop between world financial markets and the real economy was exacerbated by the greater global integration of markets for goods and services. trade and industrial output plunged everywhere as consumers and businesses pulled back from spending. notably, although financial institutions in some countries seemed to be more resilient to the growing turmoil than in other countries, all were affected to a degree, and no particular type of regulatory or supervisory system proved itself clearly superior to other designs – either in the buildup or the crisis - response phase. problems afflicted both the fragmented system of the united states and the unified systems of other countries. they cropped up where the central bank was deeply involved in regulation and where it played only a consultative role. and it occurred both in systems that were principles - based and those that had thick rule books. clearly, the deficiencies in both private behavior and public oversight were widespread, and both needed to be addressed. the response to the crisis was global given the global factors