based measures, such as loan - to - value ratios, as suggested by stijn and co - authors in this paper. they also highlight capital inflows that – alongside lower collateral requirements – have been one of the distinguishing features of the recent housing boom. with respect to the relative importance of inflows in explaining house price booms across countries, stijn, together with jack favilukis, david kohn and sydney ludvigson in a paper in 2013, empirically document that these played a rather small role in the us. 6 however, they stress that more research is needed on this issue and suggest that capital inflows may have played a more relevant role in the euro area. in fact, capital flowing from productive economies to relatively unproductive economies in combination with a relaxation of lending standards might have contributed to the house price booms in ireland and spain. from a policy perspective, this emphasises the need to take into account country specificities when addressing imbalances in housing markets. credit standards, but also capital inflows, differ significantly across countries, as does, therefore, the optimal policy. let me now turn to systemic risk more generally. stijn, together with bryan kelly and hanno lustig, point to the issue that government guarantees may distort systemic risk indicators. in the american economic review this year, they show that pricing in us option markets implied that the price of insuring against a us financial sector stock market crash was low, relative to prices of insurance against individual banks ’ stock price falls during the 2007 – 2009 financial crisis in the us. 7 thus, a large amount of tail risk was actually missing from the cost of financial sector crash insurance during the crisis. in the presence of an implicit or explicit government guarantee, market crash insurance prices may even fall when the guarantee is more likely to be activated. thus, a fall in crash insurance prices could be mistakenly interpreted as a reduced risk, exactly when systemic risk is rising. as anticipation of future government intervention is embedded in market prices, these do not reflect the true underlying tail risk thus leading to a mismeasurement of systemic risk, particularly for the methods that use market prices to build indicators of systemic risk. stijn van nieuwerburgh has made an important contribution to the widely debated topic of safe assets, following the massive fall in its supply in the aftermath of the crisis. the subsequent emergence of the euro area sovereign debt crisis led

in what concerns the extension of the policy toolkit. on that note, i warmly congratulate you, stijn, on winning the 2016 german bernacer prize for promoting economic research in europe. i am confident that you will make further important contributions in the years to come. 1 reinhart, c. m. and k. s. rogoff, ( 2009 ), “ this time is different, eight centuries of financial folly ”, princeton, new jersey : princeton university press. 2 work at the ecb finds evidence that financial cycles, defined as the joint movement of house prices and credit, are the single best predictors of banking crises ( see schuler, y., p. hiebert and t. peltonen, ( 2016 ), “ coherent financial cycles : why extending credit can be an asset ”, ssrn working paper. this analysis builds on work carried out at the bis ; see drehmann, m., c. borio, and k. tsatsaronis, ( 2012 ), “ characterising the financial cycle : don ’ t lose sight of the medium term! ”, bis working paper no 380. 3 piazzesi, m. and m. schneider, ( 2016 ), “ housing and macroeconomics ”. mimeo. 4 lustig, h. and s. van nieuwerburgh, ( 2005 ), “ housing collateral, consumption insurance, and risk premia : an empirical perspective ”, journal of finance, 60, 1167 – 1219. 5 favilukis, j., s. c. ludvigson and s. van nieuwerburgh, ( forthcoming ), “ the macroeconomic effects of housing wealth, housing finance, and limited risk - sharing in general equilibrium ”, journal of political economy. 6 favilukis, j., d. kohn, s. c. ludvigson and s. van nieuwerburgh, ( 2013 ), “ international capital flows and house prices : theory and evidence, in housing and the financial crisis ”, edited by e. l. glaeser and t. sinai, 235 – 299, chicago : university of chicago press. 7 kelly, b., h. lustig and s. van nieuwerburgh, ( 2016 ), “ too - systemic - to - fail : what option markets imply about sector - wide government guarantees ”, american economic