samchain/econo-pairs-v1 huggingface dataset:
Among the EMEs, this period of low global interest rates has seen strong growth of credit in many economies, and while this has supported consumption and domestic demand, it has also led to increased household, corporate, and government indebtedness. The world today is even more indebted then it was before the crisis. I am sure that some of that debt went into productive uses, but it also the case that when something is cheap, it is used wastefully. It should also be obvious after the crisis, that economic growth fuelled by high credit growth is  BIS central bankers’ speeches  3  essentially growth borrowed from the future; higher growth today will be at the cost of lower growth tomorrow. Lastly, risks can also emerge from the current account of the balance of payments. It is important to understand that changes in the current account can be both the source, as well as an outcome, of changes in capital account. The traditional interpretation is that a country has a saving-investment gap that is reflected in its current account deficit, which then drives it to rely on foreign savings to fund that deficit. But, it is equally possible that countries can have large capital inflows resulting in excess domestic liquidity and low interest rates. Add to that an appreciating exchange rate, and you have the key ingredients for domestic consumption and investment booms, leading to higher imports and driving the current account into a deficit or a lower surplus.

One way of answering this question is to look at the macro picture and determine the trend rate of GDP growth that would be commensurate with such a strong increase in corporate earnings. This is also pertinent in the context of the current discussion about a “new economy” that is perceived as being capable of higher productivity growth and thereby an upward shift in potential GDP growth. A simple growth model shows that in order to justify a P/E ratio between 30 and 35, the growth trend for total factor productivity would have to move up almost 3 percentage points.4 That in turn implies 4  The feasibility of a higher future increase in corporate earnings can be analysed with a simple model where GDP growth is determined by the inputs of capital and labour together with the efficiency with which these resources are utilised in production. Using a simple Cobb-Douglas function, the rate of increase in the return to capital can be derived as gR=gA+(1-a)(gL-gK), where gA, gL and gK are the growth rates for total factor productivity, labour and capital, respectively. The relevant factor in the present context is the return to capital (the flow of income to owners of the capital stock in relation to the value of the stock) because this should be linked to the growth of corporate earnings.
As a result, the ECB has a clearer and more credible inflation target, since this 2% target eliminates the possible impression of asymmetry that could stem from the previous target (“below, but close, to 2%”) and seeks to provide a clear anchor for inflation expectations. As I will highlight later on in my talk, this definition also confirms the medium-term orientation of monetary policy that already existed under the previous strategy. This medium-term orientation provides room for inevitable short-term deviations of inflation from the target, as well as for lags and uncertainty in the transmission of monetary policy. Moreover, the flexibility embedded in this medium-term orientation also allows for an appropriate monetary 5  policy response to inflation deviations from the target that takes into account the origin, scale and persistence of the underlying shocks to inflation. Second, the ECB has taken into account the monetary policy implications of the lower bound on interest rates. In particular, the new strategy establishes a requirement for especially forceful or persistent monetary measures when the economy is close to the effective lower bound, in order to prevent negative deviations from the inflation target from becoming entrenched. This may also imply a transitory period of overshooting in which inflation is moderately above target. I will also refer to this key aspect of the new strategy in the third part of my talk today. And third, the ECB has made explicit that the set of policy rates remains its primary monetary policy instrument.

I am well aware that both functional authority and tools lie beyond the Riksbank’s remit, but as household debt and problems on the housing market affect the way the economy works, this development is also a source of unease for the Riksbank. Housing prices have been rising for a long time To begin with, I would like to say a few words on how housing prices have developed in Sweden. Since 2005, they have more than doubled, but the price rise started before then. The fact that housing prices have risen so rapidly for such a long period of time and are now historically high can be explained by factors such as the imbalance between supply and demand for housing, rising real wages and lower taxes, which have increased households’ disposable incomes. 8 Housing prices fell in the autumn of 2017, but have since then recovered slightly. The fall in prices has also affected housing construction, which, after increasing strongly in recent years, slowed down again in 2018 and 2019. Over time, the development of housing prices has contributed towards increasing household indebtedness, even if the slightly weaker development in recent years has contributed towards lending for household mortgages now increasing more slowly than previously. All in all, this has led to household debt as a proportion of disposable income (the debt-to-income ratio) staying relatively unchanged over the last year, but being expected to continue to increase over the coming years. 9 The debt-toincome ratio for the entire household sector is currently over 186 per cent.
It is worth returning to this theory and considering in particular the exceptions. We will consider six such exceptions. The first occurs, as illustrated a few years ago by Paul Samuelson, when emerging economies record an elevated rate of increase in productivity in high value added sectors, forcing advanced economies to re-specialise in low value added production, with a resulting loss in income for the latter. 12 The second exception concerns the adjustment costs which have to be absorbed by advanced economies in order to face the new competition. 13 The faster and more enduring the transition is, the greater are such costs. In particular, if one considers the point from  10  L. Bini Smaghi (2006), "Democratic Representation and Economic Policy Rules in an Ageing Society", Eumoniamaster – Institutional and Political Higher Education, 28 September 2006. 11  A. Orphanides (2003), “The quest for prosperity without inflation”, Journal of Monetary Economics, 50, 3, pp. 633-663. 12  See, for example, P. Samuelson (2004), “Where Ricardo and Mill rebut and confirm arguments of mainstream economists supporting globalization”, Journal of Economic Perspectives, 18, 3, pp. 135-146. 13  See Chapter 5 of the World Economic Outlook of the International Monetary Fund, April 2007. BIS Review 66/2009  5  which emerging economies start, and their size, in terms of population, the adjustment resulting from their current process of growth could take a very long time and could be of considerable magnitude.

Therefore, our macroeconomic forecasting and monetary policy analysis models prescribe an important role to the exchange rate. Furthermore, in financially euroized economies, such as ours, exchange rate movements tend to have financial stability implications. Rapid depreciation increase NPLs, while prolonged periods of appreciation tend to impose financial risks and encourage further euroization. In designing the appropriate monetary policy response, we have to distinguish between trend movements driven by fundamentals, and short term volatility driven by sporadic factors or market imperfections. Inflation targeting central banks should strive to avoid leaning against trend movements in the exchange rate. As long as these movements are in line with fundamentals, these trends represent structural adjustments that do not move the economy away from equilibrium. On the other hand, short term exchange rate volatility is normal in a fully flexible exchange rate regime. The reaction of central banks should depend on their impact on inflation, which in itself depends on the intensity and duration of such volatility. The stronger the duration and the higher the intensity of the shocks, the bigger would be the expected impact on inflation, the greater the risk of rapid shifts in inflation expectations, and the higher the need for a systematic reaction of monetary policy. 3. Exchange rate movements and the Bank of Albania reaction to them  The above mentioned facts have guided our reaction to the recent appreciation of the exchange rate in Albania. The trend appreciation started around the second half of 2015, but it gathered considerable pace in 2018.
When it comes, that is most likely to be through a rise in Bank Rate with asset sales being conducted later in an orderly programme over a period of time, leaving Bank Rate as the active instrument. But monetary policy must be set in the light of the fiscal tightening over the coming years, the continuing fragility in financial markets and the state of the banking system. I know there are those who worry that too rapid a fiscal consolidation will endanger recovery. But the steady reduction in the very large structural deficit over a period of a parliament cannot credibly be postponed indefinitely. If prospects for growth were to weaken, the outlook for inflation would probably be lower and monetary policy could then respond. I do, therefore, Chancellor welcome your commitment to put the UK’s public finances on a sound footing. It is important that, in the medium term, national debt as a proportion of GDP returns to a declining path. At the same time, it is important, however, that we work with our partners overseas to reduce the global imbalances and promote an adequate level of world growth. Countries with large current account and budget deficits will need to pursue both fiscal consolidation and policies to improve their competitiveness. And countries with current account surpluses, while understandably wanting to avoid unsustainable fiscal paths of their own, have a responsibility to expand domestic demand so that the imbalances can be reduced. Only if the two sets of policies work in tandem will growth prove sustainable.

The Bank’s sermons on the storms ahead would have had more influence if at the same time a collection plate was passed round the congregation so that money was available in the event that the church roof had to be replaced. But a macro prudential regime also has a key role to play in the downswing phase of the cycle. Since 2008, credit conditions have tightened, jeopardising the recovery and, in turn, threatening renewed losses for banks. By allowing banks to draw on their macro prudential capital buffers, while credit conditions remain tight, the system is counter-cyclical. In other words, a credible macro prudential regime could help forestall both excessive exuberance and unnecessary caution. By altering the pressure on the financial brakes according to circumstances, regulation, far from being an inflexible foe, would become a flexible friend. This type of regulatory regime, and its objectives and tools, are largely untried and untested. But that is not a reason for not trying and not testing. The Financial Policy Committee will be a first. Over the next few years we will put in place a framework for financial stability to  BIS Review 84/2010  3  parallel that for monetary stability. We need both. As we have seen, one without the other is not enough.
While EMU highlights the need for flexible economies, the euro cannot be blamed for the emergence of those imbalances. Rather, this largely reflects a lack of adjustment in a number of Member States. This is particularly true for those euro area countries whose adjustment mechanisms and responsiveness to exogenous shocks is still rather slow. To allow euro area economies to develop their growth potential and to reap the full economic benefits of EMU, it remains indispensable that the countries concerned bring their structural reforms and fiscal consolidation measures more into line with the conditions and rules of monetary union. Overall, the ECB has done well to overcome these difficulties. However, the current global financial distress poses challenges of a significant and unprecedented nature to the ECB and  BIS Review 139/2008  1  other central banks around the globe. With this crisis, EMU is now ultimately experiencing a real test. In these demanding times, some widely-recognised core principles have helped the ECB to weather the storm. The Maastricht Treaty assigns a clear and unambiguous mandate to the ECB to maintain price stability. It also grants the ECB full independence from political influence to fulfil this mandate. Besides these institutional safety belts, monetary policy needs to be forward-looking, medium-term oriented and underpinned by a comprehensive analytical framework. Given the monetary nature of inflation over the longer term, such a framework must include a thorough analysis of monetary and credit developments to allow for wellinformed and consistent decision-making.

As cash becomes increasingly marginalised, it becomes central government’s task to help these people as we cannot expect the private market to do so. Under the framework of the e-krona, we can work with alternative solutions for these groups, such as some kind of prepaid card for example. In addition, it is important to consider whether legislation needs to be updated. Under the Sveriges Riksbank Act, Swedish kronor (SEK), in the form of banknotes and coins issued by the Riksbank, are legal tender. The Swedish Riksdag has thereby given cash a unique position as a means of payment. This provision means, for example, that traders and companies are obliged, in principle, to accept payment in cash. However, this obligation is not applied without exception. In many cases, it is possible for parties to contract that payment shall be made with other means of payment than cash. Shops, hotels and restaurants are thus not obliged to accept cash if they have clearly signalled this to their customers, for example in the form of a sign. It may therefore be appropriate to review whether the concept of a legal tender should be changed and whether the e-krona should be given a stronger position to ensure that it is established and accepted by the market. If the means of payment issued by the Riksbank is not generally accepted, it will be difficult for the Riksbank to perform its task of promoting a safe and efficient payment system.
MAS therefore takes the view that thoughtful and purposeful use of technology to drive innovation have been and will continue to be important for the financial industry to progress. In our regulatory role, the MAS also proactively engages the industry both to understand and even to shape the technology-driven transformations in financial services. 11 Technology can bring about new or heightened risks when mis-used or abused. So while MAS is supportive of financial institutions to experiment with technology to harness potential new opportunities, or to innovate existing processes, we also require that they understand and can manage the associated risks. It is this philosophy that underpins the MAS to be among the first regulators in the world to adopt a regulatory sandbox regime. 12 MAS regulatory sandbox provides a constrained but more flexible space for players seeking to test new technology or approaches before a full launch. Such sandbox pilots are held within defined risk parameters and are time-bound. These restrictions help to limit the impact from unsuccessful applicants but equally important, they allow MAS to also understand the new model up close – how it is run, how the technology or its application is used, how the risks are managed and the value proposition to clients before mainstream use and scalability. This will also allow the MAS to calibrate our final rules that are appropriate to the new business model or start-up while addressing any level-playing field concerns.

Financial institutions in general need to offer structured financing that best suits the Zambian economic landscape. It is only through such activities that we will see further developments in the whole Zambia rather than the few areas along the line of rail. Mr. Chairman, ladies and gentlemen, we have come to Chipata not only to tell you what we expect of you but also to listen to what you expect of us. I therefore declare this meeting open and invite you to make your contributions. I thank you! 2  BIS Review 15/2008
Answer: I will wait for all our accounts to be finalised. Question: In October you considerably expanded the collateral framework for credit operations. Since then you have accepted more risky securities as collateral. How high is the ECB’s exposure as a result? Answer: Like all other central banks, we have been more forthcoming as regards our collateral framework in order to provide the banking sector with appropriate liquidity. Our balance sheet has grown by approximately 55% over the last 12 months. At the same time, we have to permanently ensure that our risk management is improved to take into account the increased volume of risks. Question: The financial sector has been largely safeguarded through guarantees and equity capital aid. Now the car industry is asking for state support. Is this not understandable? Answer: The decision on this falls first of all under the responsibility of the national governments and parliaments. As a central bank, we have emphasised the fact that the financial sector is of systemic importance because it affects all other sectors, all enterprises and their employees. Question: Knowing what we do now, was the interest rate increase in July this year a mistake? And why is it generally so difficult for central bankers to admit to mistakes? Answer: The modest interest rate increase in July was important taking into account the inflationary threats that were visible at the time. Question: What were those threats? Answer: Long-term inflation expectations threatened to become unanchored.

But even if all organisations that were in trouble had been rescued, it would have remained necessary for central banks and governments on both sides of the Atlantic to take extremely bold measures in order to be prepared for systemic liquidity and insolvency risks. Question: How do you explain the fact that, despite the ongoing banking crisis, the ECB’s statistics do not yet indicate the existence of a credit crunch in the euro area? Answer: What is true is that we see a certain weakening in the dynamics of loans to enterprises. But the rate of growth of outstanding loans to non-financial corporations has remained robust in double-digit figures. However, since bank lending standards have been tightening significantly for some time and the financial crisis entered a new phase only in mid-September, we must observe all developments very closely and remain attentive to new facts and figures. Question: The major investor Warren Buffett once described credit derivatives as “financial weapons of mass destruction”. Do you share this view? Answer: I wouldn’t necessarily use that formulation myself. But the level of complexity and lack of transparency reached in the production, marketing and selling of these financial market instruments indeed proved to be destructive and contributed substantially to the fragility of financial markets. 2  BIS Review 1/2009  Question: The reputation of the ECB has been strengthened by the crisis. Has it also profited financially from the brisk demand for the greater amount of liquidity made available?
See, for instance, “Vägen till ett stabilare Sverige” (the road to a more stable Sweden), Economic Policy Group report 1985, Center for Business and Policy Studies (SNS). A retrospective  BIS central bankers’ speeches  3  Almost at once, the question arose of what would guide monetary policy in Sweden, now that the fixed exchange rate had been abandoned. 6 By this time, some countries had already introduced inflation targets: New Zealand was the first in 1990, followed by Canada in 1991 and the United Kingdom in 1992. In January 1993 the Riksbank decided to introduce the inflation target we have now: The annual rate of increase in consumer prices shall be 2 per cent a year. 7 As we saw earlier, it is extremely important that the nominal anchor is credible. The results of academic research indicated that the conditions for attaining low inflation increased if one delegated monetary policy to an independent central bank, which focused on a clearly quantified target. This increased the element of “norm-based thinking” in monetary policy. The motives for short-term deviations from the inflation target declined, for instance, by trying to stimulate demand to gain political sympathies prior to an election. This also reduced the so-called time inconsistency problem in monetary policy, where the long-term objective of low inflation is not compatible with the short-term motives for high inflation. 8 The new Sveriges Riksbank Act meant that we have had an Executive Board with six members and greater independence from the political system since 1999.

The Riksbank’s objectives and means have been influenced by developments in society Figure 1 illustrates inflation in Sweden over the past 140 years and the exchange rate regimes we have had during this period. Something that becomes clear is that even if we have now become used to a flexible exchange rate, over a long period of time a fixed exchange rate has been much more common. However, from time to time socioeconomic developments in general have led to the prevailing monetary policy regime being reconsidered. 1 As you know, Sweden has not introduced the euro as currency, but on the other hand we were part of a Scandinavian currency union between 1873 and 1924. 2 This began a period with different varieties of fixed exchange rate, which – with the exception of the First World War and a brief period in the 1930s – came to last until 1992. During 1931–1937 the Riksbank worked with a price stability target, for some years this was also combined with a fixed exchange rate. It would take another 50 years until we introduced a price stability target again. 1  This also applies to the central bank’s mandate in a broader sense. See Georgsson, M, Vredin, A. and Åsberg-Sommar, P., “The modern central bank’s mandate and the discussion following the financial crisis” Economic Review 2015:1, Sveriges Riksbank. 2  This cooperation largely came to a halt in connection with the outbreak of the First World War ten years earlier.