samchain/econo-pairs-v1 huggingface dataset:
The situation today is thus similar, with countries around the world contemplating how best to conduct macroprudential policy. In some areas, particularly in some emerging markets, they already have some experience of what could be described as macroprudential policy. However, the results have been somewhat mixed and it is unclear what lessons can be learned. The research on macroprudential policy has now begun in earnest, but it is still quite new and has not yet generated any very clear conclusions on which to base a policy. It is probably unavoidable, therefore, that practical policy-making in coming years will consist to a great extent of “learning by doing” – with the emphasis on both “learning” and “doing”. Stabilisation of the financial cycle One of the two main tasks of macroprudential policy is to counteract the build-up of financial imbalances in the economy. This task can be described as macroprudential policy trying to stabilise something I here choose to call the financial cycle. The academic literature on this subject contains other similar concepts such as “credit cycle” and “leverage cycle.”1 What this means in simple terms is that the volume of loans, indebtedness, asset prices and attitude to risk in the economy vary over time in a way that is not necessarily linked to the economic cycle. One usually calls this the cyclical dimension, or time series dimension, of macroprudential policy.

A Big Mac was thus around 10 per cent more expensive in the United States than in Sweden, in Swedish kronor. At the beginning of 2008 the krona had appreciated so much that a dollar cost 6 kronor. In the United States a Big Mac cost 3.60 dollars then, which corresponded to 21.30 kronor, while in Sweden a Big Mac cost 38 kronor. Now a Big Mac was instead more than 40 per cent cheaper in the United States than in Sweden, in Swedish kronor. In terms of a Big Mac, the real exchange rate had thus strengthened considerably, both as a result of the nominal krona rate strengthening against the dollar and as a result of the price level rising more quickly in Sweden. 21  20  See also Lagerwall and Nessén (2009). 21  The price in the United States has increased from 2.60 to 3.60 dollars, which corresponds to almost 40 per cent, while the price in Sweden has increased from 24 to 38 kronor, which corresponds to almost 60 per cent. One usually defines the real krona exchange rate as ExP*/P, where E is the nominal exchange rate (for example, the number of kronor per dollar), P* is the price level abroad and P is the price level in Sweden. It thus shows the price level in kronor abroad in relation to that in Sweden. An appreciation in the krona’s real  8  BIS Review 3/2010  Figure 4 shows the nominal and real trade-weighted krona rate since 1970.
Under the solo-approach, capital requirements are also applied to each of Bank A, Bank B and Bank C individually, after having deducted from Bank A’s capital, its investment in B, and from B’s capital its investment in C. Under the sub-consolidation approach, capital requirements would be applied on the consolidated accounts of Bank B, ie after adding the assets and liabilities of B and C and eliminating any intra-group exposures. BIS central bankers’ speeches  3  For groups for which Single-Point-of-Entry – broadly, bail in of debt issued through a holding company – is the preferred resolution strategy, local subsidies need a combination of equity and intragroup GCLAC (ie intragroup bonds) that permits losses to flow smoothly to the topco. By transferring losses upwards, an ailing subsidiary is recapitalised. Whether that suffices for the host authorities will depend on their confidence in the capacity and willingness of the group’s home authorities to execute an effective resolution of the topco. By contrast, for groups for which Multiple-Point-of-Entry – breaking up a group – is the preferred resolution strategy, the host authorities of a subsidiary identified for “separation” must ensure that it has a capital structure and sufficient operational independence to enable them to resolve it themselves with their particular set of powers. Put simply, for firms within a group for which SPE is the preferred resolution strategy, the group as whole is a source of strength on which local supervisors can place weight.

The Bank of England now has extensive powers as a micro supervisor of individual firms and a macro supervisor of the financial system as a whole. Parliament has set objectives for both – primarily, safety and soundness for the PRA,  4  BIS central bankers’ speeches  and the resilience of the system for the FPC. But unlike in monetary policy, we do not have a quantified target – and, to be clear, we do not think that that would be possible. To have such power with limited transparency would be uncomfortable. If nothing else, it would leave the Bank in a position where supervision was of interest only when it obviously goes wrong. We need to engage society – public, Parliament – in debates about the resilience of the financial system and how we are supervising it in the good times as well as in bad times. The FPC and PRA have already taken various steps to help with this – the six-monthly Financial Stability Review, the published Record of FPC policy meetings, the Committee’s statement on the use of its directive powers, the PRA’s Approach document and annual report, and so on. But stress testing can provide a quantum leap in transparency and accountability. For example, the FPC will need to be able to defend its choice of stress against questions and criticisms that the scenarios are too extreme or not tough enough. That will implicitly be a healthy debate about objectives.
Management of the gold and FX reserves shall also help to safeguard the Riksbank’s financial independence, which means rates of return must be healthy. The Riksbank has decided to consider how much the assets contribute to the FX reserves’ overall climate footprint.32 This follows the view of the NGFS on climate risks as a source of financial risk. In our most recent analysis of the FX reserves’ composition, the greenhouse gas intensity of the assets was, for the first time, a factor in the calculations together with rates of return and risk. Chart 3 shows how greenhouse gas emissions vary in different countries. The Riksbank has elected to only invest in Australian states and Canadian provinces with the same or lower greenhouse gas intensities than the respective country as a whole. For this reason, bonds issued by certain Australian states and Canadian provinces were sold off in 2019, see Chart 4. 30  This is the market valuation as of 31 December 2019, see the Riksbank (2020). See Mauderer (2020) for a discussion of this. 32 See also Flodén (2019) for a discussion of this. 31  13 [18]  Chart 3. Emissions of greenhouse gases in different countries. Emissions as a share of GDP 0,5  0,5 In the foreign exchange reserves  0,4  Potential holdings  0,4  0,3  0,3  0,2  0,2  0,1  0,1  0  0  Note.

The stock of Swedish covered bonds (housing bonds) issued in Swedish kronor (SEK) is just under SEK 2,000 billion. This is more than double the size of the outstanding volume of government bonds in the same currency. The stock of corporate bonds issued in SEK corresponds to almost 700 billion, while the stock of municipal bonds issued in SEK by municipalities and Kommuninvest is just over 400 billion. All in all, this means that the Riksbank has the possibility to increase its bond purchases. However, the fact that the possibility exists does not make it an appropriate measure. There are several aspects to consider; for example, how it affects resource distribution in the economy and the risks for to the Riksbank’s balance sheet. Another issue is whether the Riksbank should consider sustainability aspects in its bond purchases. I will come back to this at the end of my speech. Allow me to summarise what I have discussed so far. I feel confident that the Riksbank can act with strength and security if a crisis threatens to destabilise the Swedish economy. However, we should be humble when it comes to the difficult considerations that may then be required in monetary policy. The scope for combatting a severe downturn in the Swedish economy is improved substantially if other policy areas also contribute, in particular fiscal policy.13 The remaining issue is the most difficult – should central banks just try to combat the potential negative effects of climate change or should they also act to combat climate change itself?
The public authority role means that we are at the end of a delegation chain. The people have elected a parliament which has legislated on the Riksbank’s objective and appointed the General Council of the Riksbank. The General Council in turn appoints the Executive Board with six members who are to make the monetary policy decisions. This type of delegation may be appropriate when political decisions risk leading to time horizons that are too short. This problem is dealt with in monetary policy by the Riksbank having a high degree of independence and a clear statutory task. Delegation may also be appropriate if there is a question of technically complicated activities. Monetary policy is such an activity. There are also many other authorities, for example, the Swedish Nuclear Power Inspectorate and the Swedish Civil Aviation Authority, who are responsible for technical issues that have considerable importance to society. Most people probably think that, for instance, the length of a runway at an airport or the design of the cooling system in a nuclear power station should be determined by experts and not through political voting. Some of the demands made of us on the basis of our role as authority are fairly obvious. We must, for instance, to the best of our ability try to meet the price stability target we have been allocated. We must also be able to explain in a good way to the general public why we act in the way we do.

Even now, four or five months into recovery, recession is out-Googling recovery by a factor of 15 to one, above its pre-Covid level. The prevailing popular narrative on the economy has remained recessionary. Chart 5: Ratio of Google Trends topic searches for the term recession vs economic recovery  Ratio of searches for recession:economic recovery  Economic growth  200 Monthly GDP  Q2 GDP  released showing growth  release  180 160 140 120 100 80 60 40 20 0  Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20  Jul-20 Aug-20  Source: Google Trends  A particularly revealing episode is associated with the notable spike in the pessimism ratio on the 12 August. This was when the Office for National Statistics published second quarter GDP figures for the UK. These showed a huge fall of over 20% in GDP, the largest quarterly fall on record by far. This, understandably, was one of the top three new stories on the day. Here are some of the headlines that accompanied it:  8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  Yet the irony is that the only news in this release was GDP growth for the month of June, the final month of the quarter. This saw an almost 9% rise in activity, by far the largest rise in any month ever and above market expectations. Yet negative media headlines outnumbered positives by many multiples. Positive economic news was media-filtered into an extreme negative event.
Reputation costs in the sense that it is more damaging to good will to be among the first to raise prices, than to be one of many during a wave of price increases. This means that once some companies have started raising prices, many others soon follow. For this reason, if the central bank misunderstands the situation and allows a positive inflationary pressure to prevail as long as the  2  BIS Review 13/2002  inflation rate remains low, the general public’s image of the central bank’s behaviour will change. This in turn will affect pricing behaviour and once the increases have started, more will follow in the shadow of the first. This is why inflation often comes at a late stage during an economic upturn and it can mean that inflation remains too high during a period when economic activity is declining, despite falling demand and production. It is something of a paradox that a credible central bank can have greater difficulty seeing the signs of price pressure in time. In my opinion, there is a risk that Swedish inflation has been held down through deregulation and increased competition in such a way that we have been lulled into thinking that the inflationary tendencies in the economy are lower than they actually are.

For instance, the interest rate influences the general public’s decisions regarding investment and consumption. A higher interest rate normally means that growth in demand is slightly subdued, which is assumed to entail that the amount of free resources in the economy increases slightly in the long term. The effects on demand often come after a few quarters and thus also subdue price increases at an even later stage. A change in the interest rate also affects the exchange rate. An increase means that the return on assets in the home country’s currency is slightly higher. This also means that expectations of growth and inflation are subdued somewhat relative to developments in the rest of the world, which according to the textbook can contribute to a slightly stronger exchange rate. If the krona appreciates, it becomes slightly cheaper to import to Sweden, which can be assumed to lead to import prices on input and consumer goods increasing at a slower rate. A stronger krona also subdues global demand for Swedish export goods, which helps subdue growth in demand. On the other hand, if there is little confidence in the country’s economic policy, an increase in the interest rate risks resulting in a weaker exchange rate rather than the reverse, because confidence in growth is low. Monetary policy can also affect price developments via households’ and companies’ expectations of future inflation. In this context it is important to point out that there are a number of different measures  BIS Review 13/2002  1  of inflation expectations.
To bridge this shortcoming, the region’s financial markets need to be substantially expanded and developed so that the region’s markets can effectively allocate surplus savings within the Asian region. The current focus on regional bond market development is therefore a step in the right direction. But my point today is that while developing the bond market is important, two additional areas of market developments in tandem with the work on the bond market should also be looked at to ensure a balanced development of financial infrastructure in Asia. The first is human resource: that is the need to build a steady supply of high quality financial personnel to serve the Asian financial markets. In the short term, this issue can be partly addressed by promoting a greater role of Asian financial institutions in cross-border transactions or businesses within the Asian market. The expanded role of Asian financial institutions will enhance the experience of Asian financial firms in cross-border transactions and help transfer financial skills and technology among market participants in the region. For the long term, we should be thinking of establishing a regional finance institute that aims specifically to train and develop financial personnel for the Asian market. To me, this type of initiative looks practical and is economically feasible because Asia’s large domestic market will always call for substantial demand for trained financial personnel.

This progress has been driven by a combination of factors, but the most important has been the Asian financial crisis itself, which prompted policy makers in the region to recognize the potential benefits of financial cooperation as a mechanism that can allow the region to prevent or to better manage the risks of financial crisis. Since the 1997-98 crisis, regional financial cooperation has been strengthened in three main ways: The first is the strengthening of liquidity arrangements, the second is the introduction of regular policy dialogue and surveillance, and the third is the coordination of efforts to develop the region’s bond market. So far, progress which has been made includes an expanding network of Bilateral Swap Agreements between ASEAN and Plus Three countries under the Chiang Mai Initiatives to provide short-term liquidity. There is also the Formal and Informal ASEAN+3 Finance and Central Banks Meetings to exchange information and discuss policy issues, as well as the discussion under the APEC platform. Also, new developments from the Asian Bond Market Initiative and the APEC Forum have also been launched to develop the region’s bond market. My point is that these achievements are important and their realization would not have been possible without the awareness and the determination of the authorities concerned to make them happen. But notwithstanding the progress made, more can definitely be done to bring regional financial cooperation to a level that is on par with the region’s economic and financial potentials.
But others might argue that the structural changes of the eighties and nineties which were consistent with an appreciating real rate because of much more rapid productivity gains in the tradable than in the non-tradable sectors, cannot be repeated, so that the assumption of a continuing secular uptrend is invalid. On that view, the net appreciation over the past couple of years may be deemed to have dragged us away from our preferred path. It is hard to judge where the proper balance of these views lies. I recall how, 15-20 years ago, the doom merchants were prophesying the end of Hong Kong’s long run of growth because we were rapidly losing competitiveness in much of manufacturing. Presumably they did not 1  Slides are not included in this text document. 1  BIS Review 54/1999  foresee the remarkable extent to which the service sector would develop as an alternative wealth-generating lynchpin of the economy. Now, the next generation of doom merchants is prophesying imminent disaster as competitiveness in certain parts of the service sector appears to have been eroded. Will they be wrong again? Have they failed to appreciate the true workings of the market economy and comparative advantage? Do they not realise how difficult it is to foretell exactly how an economy will evolve, even though the evolution is taking place right under our noses?

Conclusion A market in the transition to a net zero world is being built. It will reveal how the valuations of companies could change over time as climate policies adapt and carbon intensity declines. It will expose the likely future costs of doing business, of paying for emissions, and of tighter regulation. It will help smooth price adjustments as society’s opinions and government policies change. As countries build their policy track records and their credibility grows, the financial system will amplify the impact of those policies and pull forward adjustment to the net zero carbon future, Consistent with the ambitions of America’s Pledge, the next year will be critical to mainstreaming sustainable finance. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4
The unemployment rate decreased from 10.0% at end 2016 to 8.9% at end 2017 on the back of job creations of around 250K in the private sector, which exceeded expectations. In this context, the unemployment rate is expected to further decline and hit at end-2020 (7.9% in 2020 Q4) its lowest level since end-2008. [slide 8] This economic recovery and higher inflation in France as well as in the euro area as a whole (1.7% and 1.3% respectively for year-on-year harmonised inflation rates in March) have been decisively supported by our non-standard monetary policy measures. We are now following our central course of gradual normalization. And there is at present a high convergence in our views within the Governing council: whether our net asset purchases stop in September or December is not a deep existential question. Along with this clear sequencing of gradual normalisation, we also agree that our monetary policy will remain accommodative for an extended period of time. In particular, keeping a sizeable stock of assets is key for easing financial conditions over a long horizon by compressing term premia. So we are predictable, but we are not precommited. What could slow down this course of gradual normalisation? Certainly not fiscal dominance: let me be crystal clear, nobody should expect us to delay a warranted monetary normalisation in order to accommodate the debt problems of any Member state.

On the contrary, combining flexibility and skill adaptability will lead to a higher job turnover, but also to a better allocation of labour and a lower structural unemployment. Currently, the French lifelong training system is unable to provide the appropriate skills, as shown by the disconnection between job vacancies and the unemployment rate, here on an inverted scale. Unfilled vacancies represented more than 200 000 lost jobs in 2017. Apprenticeship is insufficiently developed, resulting in a high youth unemployment rate. Lifelong training and the apprenticeship system are currently being reformed, with ambitious and accurate proposals by the government. The lifelong training reform will strengthen training rights, especially for the least qualified and the unemployed. It will simplify arrangements for businesses and streamline the governance and financing of the system, while 14bn € will be dedicated to it in the 5-year investment plan. Add the announced bold plan for primary and secondary education, as well as for the access to University, and you can really expect that the French labour market and skills will dramatically improve. [slide 13] My final illustration is the interaction between labour and product market reforms. Labour and product market reform both imply an alleviation of red tape and ease business activity. 3/4  BIS central bankers' speeches  There has been significant progress in the past, as reflected by the decrease in OECD’s Product Market Regulation or network industries regulations indicators.