samchain/econo-pairs-v1 huggingface dataset:
Tarisa Watanagase: Issues important to small and open emerging market economies Speech by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Panel Discussion on Financial Globalisation, Capital Flows, and Challenges for Central Banks, at the 77th Annual General Meeting of the Bank for International Settlements, Basel, 24 June 2007. *  *  *  My discussion will focus on the issues important to small and open emerging market economies. The first is regards to whether the present situation of sustained inflows into emerging markets is really sustainable. What do these seemingly sustained inflows tell us, particularly in terms of investors’ assessment of riskiness of the region? Or from another angle, have risks in the region declined? I will discuss this in the context of financial innovations in risk management, and conclude with a few remarks on how these developments affect central banks across the globe. My first question, therefore, arises from the observable reduction of risk premia for financial assets in the region. On the surface, this low risk premia implies lower risks. But does, it, really? We all realize that the international financial system is currently in an environment with low risk premia across a broad set of asset classes, combined with low volatility in the prices of these assets. Furthermore, this low risk premia has been sustained despite the various episodes of risk aversion in the recent past. This raises concerns about whether prices – and consequently the risk premia themselves – accurately reflect actual risks.

An example of such a change is the wave of worldwide mergers and acquisitions, resulting from globalization, and improvements in efficiency through economies of scale and integration. While this has exerted upward pressure on equity prices, this may not be a great concern for stability. On the other hand, some changes drive prices away from fundamentals. This includes asset price moves caused by excessive investment in developed financial markets, or short term capital inflows into emerging markets in search of yield, or through carry trades, etc., which may result in asset price misalignments. In this regard, the question arises whether the central bank’s price stability objective is enough for financial stability, given destabilizing asset price movements, coupled with movements in the exchange rate, which may not be in line with fundamentals. BIS Review 74/2007  3
Since then growth has been somewhat softer than anticipated, with real gross domestic product (GDP) increasing at only a 1.8 percent annual rate in the first quarter of 2011. A number of factors contributed to the slowdown. Construction activity fell – likely reflecting the continued large supply of unsold homes – and government expenditures at the federal, state and local levels declined. In addition, real, or inflation-adjusted, consumption growth in the first quarter was slower than in the last quarter of 2010. This occurred, in part, because of the rise in gasoline and food prices that pushed up consumer price inflation last quarter and reduced discretionary income. The rise in energy prices contributed to a fall in consumer confidence, which also may have had a negative impact on consumer spending. However, the weakness of real GDP growth in the first quarter probably will prove temporary. In particular, production and business survey indicators, including the New York Fed’s own Empire State Manufacturing Survey, generally continue to signal strength. And financial conditions continue to improve. The temporary reduction in payroll taxes and other fiscal measures also are providing support to demand. In addition, demand abroad – particularly in Asia – remains robust, supporting our exports. Most importantly, the labor market has shown further improvement, as demonstrated by today’s employment report. Although payroll employment growth has been subdued during most of this recovery, the latest figures show the economy added 244,000 jobs in April – and an average of 233,000 over each of the past three months.

William C Dudley: Regional economy and current trends in regional employment Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Quarterly Regional Economic Press Briefing, New York, 6 May 2011. *  *  *  Good morning and welcome once again to the New York Fed’s Quarterly Regional Economic Press Briefing. I am pleased to have this opportunity to talk with the journalists covering our region – and through you, to the people in our District. This morning I will discuss national and regional economic conditions, with particular attention to employment trends in the Second Federal Reserve District, which covers New York; northern New Jersey; Fairfield County, Connecticut; Puerto Rico; and the U.S. Virgin Islands. I will not comment on the outlook for monetary policy today but instead will focus on the economy itself. Following my remarks, my colleagues will provide more detail. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. National economic conditions I’ll begin by commenting on national economic conditions. Since the recession ended in 2009, the economy has grown at a modest pace. When we met in February, the brisker pace of growth in the last quarter of 2010 appeared to be carrying over to the beginning of this year.
There is a painful paradox: the 2008 financial crisis started in the United States and the 2020 pandemic crisis started in China and yet, each time, it has been Europe that has suffered the most. In 2020, US GDP fell by 3.5%, while euro area GDP fell by 6.6%, almost twice as much. In the face of a similar health shock, the number of cases and deaths, relative to the total population, is higher in the United States than in the euro area, even than in France, Spain or Italy. However, recovery paths are clearly diverging:  Page 4 sur 14  Excluding containment measures, two main direct factors could explain this phenomenon: the euro area’s higher dependency on tourism; the digital advance of the United States. Incidentally, the negative impact has been highest in the United Kingdom, whose GDP fell dramatically last year, by almost 10%. The OECD forecasts a modest recovery this year (+5.1%), relative to the plunge. II. Three potential explanations and three cures After the diagnosis, I will now move to potential explanations and cures. For that, let us call to mind two of our most famous economists of the 20th century: Keynes and Schumpeter, who are viewed as opposed in terms of policy prescription. John Maynard Keynes emphasised the importance of both macroeconomic active policies and the welfare state for citizens. Joseph Aloïs Schumpeter focused on what causes dynamism and innovation in market economies.

x European Commission, 2030 Digital Compass: the European way for the Digital Decade, March 2021 xi For a discussion in the European context, see Andersen S., Petersen O., Moving from flexicurity to ‘mobication’, February 2012 xii Bloom N., Sadun R., Van Reenen J., “Can European firms close their ‘management gap’ with the US? ”, VOXEU, 2017 xiii For an illustration in the US case, see Gilbert R., Innovation Matters: Competition Policy for the High-Technology Economy, July 2020 xiv Gossé J-B., Hermet E., Mourjane A., Dufouleur M., “Developing the Capital Markets Union to mobilise savings and stimulate investment in Europe”, Banque de France Bulletin, September – October 2020 xv European Commission, Capital markets union 2020 action plan: A capital markets union for people and businesses. xvi BVA, Win, Le Point, International barometer of Trust in the future in 57 countries, February 2018 xvii Nye J., Bound To Lead: The Changing Nature Of American Power, August 1991
We assumed therefore that growth in the world economy would be somewhat weaker in 2008 and 2009. In Sweden on the other hand, economic activity was somewhat stronger than expected. Nevertheless, it was assumed that the weaker prospects for economic activity internationally would lead to a slowing down of growth in Sweden as well later this year and early next year. Signs of this slowdown were already beginning to appear, for example in the data in the National Institute of Economic Research’s Economic Tendency Survey and in the statistics on retail sales and new job vacancies. Our assessment, however, was that the slowdown in Sweden would be relatively moderate. GDP growth remained good, and the potential for future growth was still relatively favourable. The level of saving among households and in the public sector was high. Property prices were fairly stable and the direct effects of the financial turmoil were expected to be relatively slight. BIS Review 68/2008  1  At the same time, inflation was high both in Sweden and abroad. This related above all to higher energy and food prices on the world market. Inflation expectations in Sweden also remained high, and were also way above the inflation target even in the longer term. We thus had to take various counteracting factors into account. On the one hand, growth in the Swedish economy was still good and both inflation and inflation expectations were high.

Lastly, in the 90s, regulatory and supervisory measures and changes in the structure of the financial system in the Turkish economy were not designed for strengthening the system in the long term, by incorporating elements such as prudent supervision, institutionalization of regulation, etc. Instead, the measures mostly sought daily solutions to the problems. As you know well and the research in the area suggests, “Actions to deal with crisis can clearly lead to future moral hazard. If any protection provided to banks in a crisis is greater than they expected, this could increase their risk taking and [the  4  BIS Review 38/2005  possibility of another] crisis in the future.”5 As Bagehot also put it, “any aid to a present bad bank is the surest mode of preventing the establishment of a future good bank.” In my opinion, the 100 percent blanket guarantee that was brought as a part of crisis resolution during the 1994 crisis, but kept in effect until very recently is a good example of this. The measures taken during the 1994 crisis unfortunately paved the way for the moral hazard behavior in the banking sector. All of these distortions in the banking sector and institutional structure of the financial system led to important systemic risks in the Turkish economy. As the 1990s were over, it was impossible for the Turkish economy to operate without reforming its financial sector. Therefore, the restructuring program for the financial sector was launched as a component of the exchange rate based disinflation program in 2000.
My own assessment is that the GDP gap was around + 2 per cent in 2007, prior to the start of the crisis, and that potential GDP has declined by around 4 per cent as a result of the crisis. The GDP gap therefore only fell by around 6 per cent between 2007 and 2009, despite actual GDP declining by around 10 per cent in relation to the trend. The GDP gap was thus approximately – 4 per cent in 2009 when the recession was deepest. According to current forecasts, the GDP gap will have closed by the end of the forecast period three years from now. I intend to begin by talking about what the real economy – in other words, production and employment – means for monetary policy. I shall then go on to talk about how one can measure potential production and resource utilisation – two central concepts in this context. Then I shall discuss what has happened to GDP in conjunction with the financial crisis. After that, I will describe what different methods can tell us about potential GDP and resource utilisation. Finally, I intend to talk about the significance of resource utilisation for inflation and current monetary policy. What does the real economy mean for monetary policy? The overall principles for monetary policy are described in the publication Monetary Policy in Sweden. 1 It states the following:   “According to the Sveriges Riksbank Act, the objective for monetary policy is to maintain price stability.

Total GDP growth for the three years 2010–2012 is just above 10 per cent, which is four percentage points more than growth according to trend of just above 6 per cent. What does resource utilisation mean to inflation and current monetary policy? Previously, I said that the Riksbank also strives to stabilise production and employment around development paths that are sustainable in the long term, and that by potential GDP I mean the level of GDP that is compatible with a utilisation of available resources sustainable in the long term and that will not push inflation up or down. As you know, the target for monetary policy is to keep inflation at a low and stable level. However, one problem when shaping monetary policy in practical terms is that the link between resource utilisation and inflation is not particularly clear. I will now discuss what resource utilisation means to inflation. 6  BIS Review 130/2010  In Sweden, the link between resource utilisation and inflation has been weaker since the mid1990s than it was previously. This is due to the fact that monetary policy has gained a high level of credibility. As long-term inflation expectations among households and companies are now solidly anchored around the inflation target of 2 per cent, there is simply not much scope for other variables to affect inflation. However, it is also due to the fact that inflation is affected by many other factors than resource utilisation, such as variations in energy prices, exchange rate fluctuations and changes in interest rates.
This highly uncertain setting is also reflected in the dispersion among experts in the oneyear economic outlook for the euro area. This dispersion is very high in the case of GDP – close to the levels observed in the 2008 financial crisis – and stands at an all-time high in the case of the one-year inflation outlook. 3. The role of economic policy In response to the inflationary episode, the ECB has accelerated the process of normalising its monetary policy The sharp rise in inflation prompted the ECB to respond by embarking on a process of monetary policy normalisation in late 2021. In March we discontinued net purchases under the pandemic emergency purchase programme (PEPP). On 1 July, once the conditions set out in our forward guidance had been met, we brought an end to the net purchases under 7  the asset purchase programme (APP). In late June, we raised interest rates by 50 basis points (bp), thereby exiting negative territory for the first time since 2014. September saw a further increase of 75 bp, the biggest hike in the history of the euro. In July we also approved a new instrument, the “Transmission Protection Instrument” (TPI). Subject to fulfilling the criteria established, under the TPI we will be able to make secondary market purchases of securities issued in jurisdictions experiencing a deterioration in financing conditions not warranted by the economic fundamentals, to counter risks to the monetary policy transmission mechanism to the extent necessary.

The circumstance that some households are willing to put off the payment of capital gains tax until the future could be a sign that the ongoing level of taxation is too low in comparison to the level of taxation from a sale. All of this makes it important to make structural reforms in housing and tax policy. Our politicians urgently need to address the problems that have arisen and take a long-term socio-economic view of the housing market. 21  0.75 per cent of the tax value with a ceiling of 7,812 kronor. 22 22 per cent. 7 [13]  The macroprudential policy measures have had the intended effect I support the measures taken by Finansinspektionen to manage the risks inherent in household indebtedness. Amortising mortgages is not unusual internationally. After all, a mortgage is a loan and should therefore be repaid. Sweden has previously stood out in international comparisons concerning amortisation culture and the high proportion of interest-only loans. 23 It is therefore reasonable that Finansinspektionen has introduced amortisation requirements. The amortisation requirements have, however, come in for some criticism. One of the arguments is that first-time buyers without high incomes and wealth are excluded from the market, which ultimately also affects new construction and the construction sector. Naturally, it is correct that the macroprudential policy measures affect the borrowing potential of mortgage borrowers. But this is also part of the actual point of the measures. All other factors being equal, amortisation requirements must also have a restraining effect on the development of prices.
6  BIS Review 17/2005  Table 1: MPC members’ voting statistics from January 1998 (current members in red)1  % of months voted for a rate change  % of changes voted for that were in IR months  Number of meetings attended since Jan 1998  Time of membership  Willem Buiter  79  36  29  1997-2000  Sir Alan Budd  65  30  17  1997-1999  John Vickers  61  29  28  1998-2000  Charles Goodhart  52  36  29  1997-2000  Sushil Wadhwani  51  37  37  1999-2002  Christopher Allsopp  49  44  37  2000-2003  DeAnne Julius  46  47  41  1997-2001  Stephen Nickell  41  50  58  2000-date  Mervyn King  39  41  87  1997-date  David Clementi  37  43  57  1997-2002  Ian Plenderleith  33  44  54  1997-2002  Sir Andrew Large  34  40  29  2002-date  Kate Barker  33  53  46  2001-date  Sir Edward George  30  45  67  1997-2003  Richard Lambert  29  67  21  2003-date  Marian Bell  28  56  32  2002-date  Charles Bean  28  60  54  2000-date  Rachel Lomax  25  80  20  2003-date  Paul Tucker  24  63  33  2002-date  1  Up to and including the February 2005 MPC meeting.

For Asia, the impacts have been uneven across countries, depending on the size of the initial capital inflows and the maturity composition of external debt. Nonetheless, because of the higher levels of reserves, the absence of significant currency mismatches, and greater flexibility in the exchange rate regimes, emerging markets in Asia have been able to adjust better to the shock without undermining economic and financial stability. However, it may be noted that, so far, the impact from the trade channel has been the most severe. This is because of the large share of exports and manufacturing in the region’s GDP. For example, exports from the five ASEAN economies fell by about 12 percent in the fourth quarter of last year, and by 28 percent in the first quarter of this year, while GDP growth over the same two quarters fell by 0.6 percent. This decline is large and shows that Asian emerging markets remain closely tied to the global business cycle. Therefore, without improvements in the world economy, a sustained recovery in Asia will be difficult in the nearterm. Reflecting this, the focus of the policy response, at least in Thailand, has been to help the economy adjust to the impact of the crisis through a supportive stance of monetary and fiscal policies while maintaining the overall policy discipline. As for banks, the supervisory approach has been to ensure that the banking system remains healthy, and continues to operate fully to support the economy with good risk management and adequate capital.
Annual average dynamics of unit labour costs in the second quarter of 2007 in CEE accounted to 8 per cent and in the group of Baltic and Balkan states the figure was over two times higher. This shows that sooner or later (rather sooner) enterprises will stop cutting their profit margins and will be forced to pass growing operational costs on consumers. 3. Productivity growth. We live in a global knowledge economy, which is driven by innovation – technological, business-process or customer related. The crucial factor to succeed in the global knowledge economy is the country’s ability to develop intellectual capital. Only those who understand the importance of innovations for growth will thrive and prosper in the coming decades. Unfortunately, CEE region lags badly behind the leaders in terms of its current and future ability to generate innovation. One of indicators measuring current ability to innovate is the number of researchers. In the mid-1990s CEE-4 (the Czech Republic, Hungary, Poland and Slovakia) and NIEs regions had similar number of researchers per million people, while two years ago NIEs had almost twice as many persons employed in R&D per million people in comparison with CEE-4. Future knowledge potential of particular country or region can be measured by tertiary enrolment ratio. Tertiary enrolment ratio in the CEE-4 countries improved to 50 percent in 2004, but still remains well below 62 percent in the EU-15 and 82 percent in the United States.

When the Bank was founded in 1968, Malta formed part of the sterling area, reflecting its past as a British colony and its strong ties with the United Kingdom. When the Bretton Woods system collapsed in 1972, the Maltese monetary authorities decided to break the exclusive link with the pound sterling and to peg the lira to a trade-weighted basket of currencies. During the 1980s the composition of the basket was revised on several occasions until, in 1989, the number of component currencies was reduced to three, the ECU - which had replaced several European currencies - the pound sterling and the US dollar. In 2002, the weight of the euro was raised to 70%, while those of the dollar and the pound were set at 20% and 10%, respectively. Following Malta’s accession to the European Union, in May 2004, the authorities resolved to move swiftly to adopt the euro. A year later, the Maltese lira entered Exchange Rate Mechanism Mark II (ERM II) with a unilateral commitment by the Maltese authorities to maintain its value unchanged at the central parity rate. This central parity rate then became the conversion rate between the Maltese lira and the euro when Malta adopted the single currency at the beginning of 2008. In effect, Malta has moved from a currency union with the pound sterling to membership of the euro area, with a period characterised by a basically fixed exchange rate in between.