samchain/econo-pairs-v1 huggingface dataset:
This study and other recent research show that European financial integration has resulted in increasing opportunities to share risk. The paper by Ignazio Angeloni, Luc Aucremanne and Matteo Ciccarelli concentrates on determinants of inflation dynamics in different euro area countries, notably the evidence on the price-setting behaviour of firms and on factors explaining inflation persistence. A thorough analysis of aggregate inflation dynamics and of the inertia characterising core inflation is of direct relevance to the formulation of monetary policy and also contributes to the diagnosis of the causes of growth fluctuations and of the high unemployment in Europe. One general conclusion that emerges from the papers prepared for this workshop is that the divergences observed in the euro area are fundamentally the consequence of structural and not of conjunctural factors – even if current divergences may also have been influenced to a certain extent by conjunctural events. The policy implication of this general diagnosis is that more economic reforms are needed to address the structural impediments to growth and the causes of growth and inflation divergences. Of course, structural reforms are not always easy to implement, they may be politically costly, and their positive effects may not be immediately visible – which makes it difficult to communicate them and convince the public at large about their benefits. Nevertheless, only the implementation of appropriate economic reforms can address effectively and permanently the root causes of the euro area’s economic problems.

One could expect that easing regulations and fostering competition would lead to higher labour productivity growth in the industries concerned, as has happened, for example, in the telecommunications sector. Yet, over the past decade the euro area as a whole has experienced a decline in trend labour productivity growth. A number of other effects of integration on trade should also be looked at: for instance, whether labour regulations and taxation that hamper technological innovation could lead to a decline in exports within the euro area, as well as resulting in lower exports from the euro area to the rest of the world. As regards the latter effect, it appears that the product composition of euro area exports might involve risks for the future export performance of the euro area, if the under-specialisation in fast-growing high-tech sectors is not adequately addressed. Richard Baldwin’s paper offers a very useful and comprehensive treatment of the issues related to the euro’s trade effects. And what he found – or did not find – should certainly provide fertile ground for a fruitful discussion in the first session. Inflation and growth divergences in the euro area and policy implications The existence of divergences in growth rates and inflation in the euro area, and the associated challenges posed for economic policy in general, and the single monetary policy in particular, are issues that have been debated extensively and intensively since the creation of the euro.
3  Laeven, L and F Valencia (2013) “Systemic Banking Crises Database”, IMF Economic Review 61(2), 225–270, IMF. Output losses are computed as the cumulative sum of the differences between actual and trend real GDP over the crisis period in relation to pre-crisis GDP. 4  Basel Committee on Banking Supervision (BCBS) (2010) An assessment of the long-term economic impact of the new regulatory framework, August. The loss of output represents referred to represents the median cumulative discounted output loss reported by a number of academic studies assessed in the study, measured over the period from the peak to the end of the crisis. The output loss does not include permanent losses in GDP, i.e. where the GDP trend does not recover to the pre-crisis level. 5  The bank stating this was Merrill Lynch. Source: FCIC. BIS central bankers’ speeches  3  capital markets.” – This bank incurred USD 13 billion losses in Q1 2008 and USD19 billion in writedowns on real estate and related structured credit positions.6 I can assure you that there are many more similar examples to quote – the message being that the proposed reforms were overly restrictive, would damage the market and reduce activity. This illustrates that we need perspective when assessing the feasibility of reforms.

But harmonization takes time as the devil is in the details. And harmonization may go beyond regulations on the trade or issuance of bonds. As cross border initiatives, they inevitably involve regulations over international capital flows which we need to also respect both host country and home country authorities. For instance, the home country may allow their savers to invest abroad, but the recipient countries still maintain controls on inflows. Other regulators may permit non residents to make use of tools such as repo, as liquidity enhancing mechanism, but others may look at this measure as way to engage currency speculation. These are all delicate balancing acts which we would need to tackle as we strive to integrate our financial markets further. And while we pursue development and liberalization objectives we also need to strengthen our regional safety net. Today our regional cooperation has multilayer safety net consisting of Cross Border Collateral Arrangement (CBCA) for our banks to avail themselves of liquidity from the host central bank using collaterals at their home or head office, bilateral foreign exchange swap line, and the Chiang Mai Initiative Multilateralisation (CMIM) serves as second line of defense and should continue to be enhanced to counter possible market turbulence. As you have heard from the Minister of Strategy and Finance of Korea, Mr. Bahk Jaewan, the ASEAN+3 Finance Ministers and Central Bank Governors have made progress on important features of the CMIM. We have announced the doubling of the total size of the CMIM from $ billion to $ billion.
The step from forecast to repo-rate decision is also affected by other considerations. One issue is whether our assessments should stop short at the end of the forecast horizon. Another issue is that positive and negative deviations from our inflation target may entail different costs and affect the balance of monetary policy. Finally, I would like to underline my view that flexibility is crucial in monetary policy. The fact that we quickly changed the course of monetary policy during the crisis is a clear sign of flexibility. But even in more normal times it is important to remember that our knowledge of the future is incomplete and uncertain I am therefore in favour of repo-rate changes being made gradually in normal circumstances. This makes it possible to continuously analyse developments and to determine whether to continue to follow the chosen path, to call a halt or to change direction. Sudden and dramatic changes in monetary policy can then be avoided. We cannot do without forecasts I worked with macroeconomic forecasts long before I became a member of the Executive Board of the Riksbank. At that time I was involved in the nitty gritty of forecasting, now I am part of a process in which the spadework is done by others. My role in this process is to contribute assessments. A question I have often been asked is why economists bother producing economic forecasts – everyone knows that they often prove to be wrong.

Eichengreen, B. and K.H. O’Rourke (2010), “A Tale of Two Depressions: What do the New Data Tell Us”, in http://www.voxeu.org. Rancière, R., A. Tornell and F. Westermann (2008), “Systemic Crises and Growth”, Quarterly Journal of Economics 123(1): 359–406. BIS Review 84/2010  5
Compared with other countries it is perhaps above all the changes in fiscal policy that have made Sweden stand out, in spite of the fact that the limits in the fiscal policy framework have been stretched somewhat in recent years –  1/7  inflation targeting is, after all, now conducted in some twenty countries around the world and there also are other reasons than inflation targeting that have contributed to lower price increases globally. The comparatively sound central government finances have been a great strength for our country over the past ten years. In the years ahead demands will rise even further if we are to meet the challenges posed by an ageing population. More surprising, in a positive sense, has perhaps been wage formation. It is not that long ago since Swedish wage formation used to be highlighted in economic circles as a warning to other countries. But with the odd exception wage formation in Sweden since the mid-1990s has worked well from a macroeconomic perspective. I think the fact that the Swedish Trade Union Confederation has said that “the Riksbank is a wage-earner’s best friend” clearly shows that something has happened. Real wages have grown positively in negotiations that have set out from stable inflation expectations (Figure 4). That is not to say that wage formation and the way the labour market functions are perfect. The future is likely to involve even greater requirements for a more productivity-based local or individual wage formation.

Continued weak growth in the labour supply will mean in concrete terms that the Swedish economy will reach its capacity ceiling at an earlier stage and that the Riksbank may be forced to raise the repo rate at a lower growth rate than would otherwise have been the case. Another dimension of the problem is that the ageing population gives rise to greater expenditure on medical treatment, care of the elderly and pensions, which burden government budgets. At the risk of sounding repetitive, as this is something pointed out by many in the debate, I would nevertheless like to emphasise that the only realistic means of alleviating these effects is for more people to work and pay taxes and for fewer to be dependent on the social welfare system. This area will offer one of the largest challenges to economic policy in the future. Another factor that has proved surprisingly negative is the development of the krona. If someone had said to me ten years ago – when I first came to the Riksbank – that we would have as good macroeconomic growth as we have had, I would never have imagined that the krona would develop as weakly as it has done. The question is why this has happened? Traditional explanations based on competitiveness, relative inflation rates or growth rates are not sufficient. The Riksbank has therefore begun a large-scale study with the aid of external academics to try to understand this development.
One example of this is a repo rate path that initially coincides with the grey repo rate path, but then from the middle of 2012 onwards changes over to the yellow path given by market expectations. It may very well be the case that an even lower repo rate path provides an even better outcome for inflation and unemployment. However, more careful analysis and alternative forecasts are needed before the best repo rate path can be established, particularly because so much of the analysis at the most recent  10  BIS Review 158/2010  monetary policy meeting focused on what I consider to be the unrealistic main scenario in the Monetary Policy Report. Given this, I therefore considered at the meeting that the grey repo rate path shown in Figure 9a, with an unchanged repo rate at the meeting and then a gradual rise to a level of 2.7 per cent at the end of the forecast period, which is roughly mid-way between the main scenario and market expectations, would be a reasonable compromise for now, until a new review is made prior to the next monetary policy meeting. Such a discussion could well result in a lower repo rate path.

Before the crisis, when talking about the policy mix anyone would think of the coordination between monetary and fiscal policies. Afterwards, when financial instability has undermined macroeconomic stability, despite low and stable inflation, it became obvious that additional tools are needed in complementing monetary policy in countercyclical management. As macro-prudential tools emerged as the most important candidates, it makes sense to assign the objective of financial stability to the central bank, if the central bank is given control of the supervisory and regulatory instrument. 2  BIS central bankers’ speeches  In the recent period some economists have asserted that central banks tend to fuel speculative bubbles by keeping monetary policy rates too low. This behaviour can create incentives for banks to overleverage or reduce efforts in screening borrowers, or can lead other economic agents to seek more risks in order to yield higher returns. The effects are likely to be worse if monetary policy is too accommodative for too long during expansions. This led to the conclusion that other instruments, which can directly affect leverage or risk taking, are required. Because the cost of cleaning up after an asset-price bubble burst can be very high, as proved by the recent financial crisis, early interventions by the central bank might be needed when a severe bubble is identified. In this context, macro-prudential instruments are the best option, without excluding de plano the recourse to monetary policy instruments.
In effect, the existing regulatory departments will be transformed into new departments with respective responsibilities for financial sector development, prudential policy, consumer protection and market conduct, and financial surveillance across both the banking and insurance sectors. The supervisory functions will similarly be integrated for financial service groups that include both banks and insurance companies under their umbrella. We believe this organisational change will deliver a more comprehensive overview and cohesive approach to the development of the financial system, while facilitating a clear distinction between the objectives of prudential regulation and financial stability, and the broader developmental objectives. It will also sharpen the regulatory focus on the management of risk in the financial system in a manner that will more effectively address the basic components of credit, market, operational and insurance risks. For the regulated institutions, this new structure is also intended to promote greater efficiency and competition in the financial system by:•  minimising regulatory overlaps and duplication within the system;  •  preserving regulatory neutrality in the management of similar risks between different financial service providers; and  •  ensuring more efficient use of regulatory resources. The Bank will be communicating the details of the new structure to the licensees in November and December this year. A smooth transition will be ensured to maintain continuity in the major ongoing regulatory initiatives currently being undertaken by the Bank, and clear arrangements will be made for dealings between licensees and the Central Bank during the transition.

Thus, for instance, fiscal policy coordination mechanisms have been the focus of particular attention, with monitoring and surveillance procedures to avoid excessive budget deficits (of over 3% of GDP) and high public debt proportions (over 60% of GDP) coming into play. Indeed, these thresholds, along with the procedures for their prevention and ultimate correction, took the form in 1997 of an agreement known as the Stability and Growth Pact. In contrast, the rules for coordinating “structural” policy (e.g. those governing the workings of the labour market or the markets for goods and services) were fairly lightweight as a result of their broader scope for application and of the difficulties involved in setting common objectives. Also, in the area of financial regulation and supervision policies, countries continued to enjoy a high degree of independence. The limitations of the monetary union’s adjustment mechanisms As events have shown, the constraints imposed by the institutional framework were not powerful enough to ensure the appropriate response by national authorities in the face of potential slippage from the stability levels required. It was hoped that the very fact of monetary union membership would activate sufficient response mechanisms.
In this respect, it should further be borne in mind that the maintenance over a prolonged period of time of a strong expansion in domestic demand, driven by substantially generous monetary and financial conditions, entails pressures which, if they build up, may emerge precisely when some of the factors upholding growth begin to show signs of petering out. The foregoing comments indicate that the favourable growth prospects for the coming years cannot be taken as guaranteed over the longer term. The Banco de España has been signalling the fact that the prevailing growth pattern harbours certain risks that may emerge in the form of a deterioration in competitiveness and financial imbalances in the households and non-financial corporations sector. Although the trajectory of the Spanish economy has not yet been hampered by the emergence of these risks, any future deterioration could impair further progress in real convergence. Competitiveness can be undermined on several fronts. The first of these is the maintenance of a persistent inflation differential with the euro area. This differential is partly related to the fact the Spanish economy is ahead in the cycle, but it has also to do with the presence of elements of inertia in wage and price formation in Spain associated with structural shortcomings in certain markets for factors, goods and services. Another significant front is limited productivity growth, which is not only lower than in the United States but also than in most of the European countries.

It is well known that the strong growth of household and corporate demand has been accompanied by a notable rise in borrowing and in their debt ratios. Although this has not led to any deterioration in the financial position of these sectors (because their assets have also risen in value) or to rises of the same magnitude in their debt burden (thanks to lower interest rates), their higher indebtedness has made them more vulnerable to adverse changes in economic and financial conditions. Household debt cannot grow indefinitely at the rapid pace of recent years. The higher indebtedness and the increasing weight of floating rate loans, along with the rising share of equities and real estate in households’ asset portfolios, have made their spending decisions more sensitive to interest rate and asset price movements, in a situation complicated by the limited disposable savings remaining after debt service. The property market is particularly significant in this respect because most household indebtedness is linked to house purchases. Although the supply of housing has responded fairly flexibly to the increased demand and the price trajectory has not departed substantially from the pattern seen in previous upturns, a certain degree of overvaluation of these assets is detectable in Spain. This overshoot, which was not corrected in 2003, makes it particularly necessary for buyers and sellers in this market to act cautiously. A gradual absorption of the overvaluation would establish a frarmework of greater financial stability for households and forestall interference in their consumption decisions.
•  We will introduce by next year a new corporate structure for investment funds – the Singapore Variable Capital Company (S-VACC) • The S-VACC structure will allow asset managers to achieve greater synergies through co-locating their management and domiciliation activities. •  We have simplified regulations to facilitate the activities of VC and PE managers. • The increased availability of alternative investments like VC, PE, and infrastructure has helped to attract sovereign wealth funds and pension funds. •  We are strengthening the ecosystem for family offices. • The quality and capability of service providers of family offices – like lawyers, consultants and tax advisors – has deepened. By welcoming a broader range of institutional investors to set up base in Singapore, we aim to build a deeper and more diverse pool of capital for Asia. As global players invest in Asia, they will need solutions to manage their risks in the Asian time zone. As a global FX and derivatives centre, Singapore provides a wide range of risk management options for investors  http://www.imas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statem... 21-07-18  Connecting Global Markets Supporting Asias Growth  •  Page 5 of 7  Singapore is the third largest FX centre globally after London and New York, and the largest in Asia. • Every day, over half a trillion US dollars of FX is traded here. • All top 5 global banks have their regional FX trading desks here. •  Singapore has the most diverse range of futures and options traded in its three exchanges.

On top of all this, in the middle of the recession, Spain’s public finances worsened markedly from a surplus of nearly 2% of GDP in 2007 to a deficit of more than 11% of GDP in 2009, and, in addition, the severe job destruction over the last five years has raised the unemployment rate to over 25% of the labour force. The labour market was also subject to certain illusions during those years. The enormous growth in the construction sector lay, without a doubt, behind the major immigration flows, and this strong population growth drove buoyant consumption and, by extension, the increase in activity and employment in all sectors, delaying the reforms that would have led to a more balanced adjustment between wages and employment. To overcome the crisis further reforms are needed at the national and European levels However, it should also be noted that the size of the imbalances that built up in the Spanish economy was not only a consequence of insufficient adaptation to the conditions and restrictions of euro area membership. They are also related to the deficient functioning of the disciplinary mechanisms with which the euro area is equipped and the fragilities inherent in its institutional design and its system of governance. Hence the Spanish crisis is closely related to the euro crisis, and overcoming it also depends on Europe’s ability to respond to the institutional problems of the Monetary Union.