samchain/econo-pairs-v1 huggingface dataset:
The three transformations are: first, the rapid advances in financial technology, or ‘fintech’; secondly, the deepening of cross-border banking, particularly in relation to the Greater Bay Area1; and thirdly, the trends in green finance. Fintech 7. First, fintech and its fast adoption by banks and their customers. Hong Kong is among the fintech leaders in Asia. The COVID-19 pandemic has given new impetus to the use of mobile banking and electronic payment services, the most important technology in times of social distancing. 8. Customers who once relied on face-to-face teller services are now paying their bills and transferring money to family and friends through electronic services. Older generations – 1/5  BIS central bankers' speeches  who are especially vulnerable to COVID – have proven that they can be tech-savvy. Some 80% of payments under this year’s Cash Payout Scheme were made through electronic registration, easily beating our expectations. The Faster Payment System, introduced just over two years ago, now has nearly six million registrations and handles about 400,000 transactions a day – over twice the amount compared with last year. 9. Other initiatives transforming the way banks serve their customers include the recent launch of Hong Kong’s virtual banks and the growing adoption of open API2 technology. Retail banks are increasingly adopting artificial intelligence (AI) and big data analytics to provide tailored products and services to customers. These fintech initiatives help promote innovation and competition among banks, while increasing convenience for customers and improving the transparency of choices available to them. 10.

The famous economics author Neil Irwin, in his book titled “The Alchemists: Three Central Bankers and a World on Fire”, called the Governor of the German Reichsbank at the time, the “worst central banker in history”! Let us also look at the other extreme case of price movements, namely deflation. The example that will come to anyone’s mind is Japan, which underwent what was known as the “lost decade”. Now it is termed the “lost 20 years”! Since early 1990s Japan experienced deflation, a continued decline in prices of goods and services. One may think that this is great! But what could be considered good for a consumer in the short-term may not be good for the entire economy, as evidenced by the experience of Japan. Since then, the Japanese economy had experienced negative economic growth, a drop in nominal GDP, declining wages and negative interest rates! Some indications of sustained growth in Japan are seen only now. Fortunately, Sri Lanka has never experienced such episodes in the past, and clearly we want neither hyperinflation nor deflation even in the future. But what about double-digit inflation hovering around 10-20 per cent, as experienced in Sri Lanka for several decades from 1970s? Empirical evidence clearly shows that this kind of double digit inflation is bad for sustained growth.
14 [18]  weight to “green assets”34 or perhaps avoid “brown” assets? If climate change is seen as a threat to financial stability, it may seem unreasonable that central banks themselves should hold bonds, the market pricing of which does not take into account the climate-related risk that the company contributes to. An alternative to the purchase of green bonds could be to refrain from buying bonds from companies that create carbon emissions over a certain level. I do not have an answer to the question of what action the Riksbank will take in this issue if we are faced with a scenario where we need to decide whether to extend and broaden our bond purchases. My message today is that we are participating in the ongoing international work to analyse and draft recommendations on an appropriate way forward. These questions are extremely complex. They require analysis of legal frameworks, of how green and brown assets are defined, any potential side-effects, how effective the measures would be compared with other types of measures, and the effects of policy tightening, i.e. selling assets if the economic cycle turns.35  Central banks are taking the climate issue seriously The Riksbank constantly faces new challenges that affect price stability and financial stability. Climate adaptation is one of many changes currently affecting the Swedish and the global economy. Digitalisation, a greying population, trade conflicts and, most recently, the coronavirus are other important issues that also create new challenges for us and for other central banks.

Direct greenhouse gas emissions, excluding uptake and emission of greenhouse gases from land use, GHG (kt CO2e)/GDP (USD million). Sources: UNFCCC, OEDCD and Climate Watch. Chart 4. Greenhouse gas emissions Blue bars show the Riksbank’s bond holdings and red bars show bonds sold in 2019, in Canada and Australia respectively. Emissions as a share of GDP 1,4  1,4  1,4  1,4  1,2  1,2  1,2  1,2  1,0  1  1,0  1  0,8  0,8  0,8  0,8  0,6  0,6  0,6  0,6  0,4  0,4  0,2  0,2  0,0  0  0,4  0,4  0,2  0,2  0,0  0  Note. Direct greenhouse gas emissions, excluding uptake and emission of greenhouse gases from land use, GHG (kt CO2e)/GDP (USD million). Sources: Australian Bureau of Statistics, Bloomberg, Government of Australia, Government of Canada, UNFCCC and Statistics Canada  Bond purchases for monetary policy purposes Like many other central banks, the Riksbank has bought bonds for monetary policy purposes. The Riksbank has limited purchases to nominal and inflation-indexed government bonds. As I have already mentioned, the Riksbank can broaden its purchases to other types of bonds, such as corporate bonds, municipal bonds and housing bonds. There is an international debate33 on to what extent central banks should consider sustainability aspects in these types of bond purchases: should they give extra  33  See, for instance, Cœuré (2018), Honohan (2019) and Mersch (2018).
These dealers maintained the liquid secondary market for Treasuries and served as counterparties for open market operations. This state of affairs continued until 1970, when the Treasury introduced auction offerings of coupon-bearing debt. Auction participation, like market making, was a risky, capital-intensive activity, and dealers – especially primary dealers – began to play an increasingly important role in the primary market. Though the transition was gradual, this period represented the moment in history when the same set of counterparties began to participate in both open market operations and the primary issuance of Treasury securities. Recent changes More recently, the Federal Reserve’s approach to designing an effective counterparty framework has been informed by our experience of conducting asset purchases as well as other balance sheet actions and exercises necessary to implement policy in the post-crisis period. In these years, we have ventured beyond the primary dealers to conduct open market operations with a wider and more diverse range of market participants. The introduction of daily reverse repurchase agreement (RRP) test operations in September 2013 required several years of work by the Desk to establish relationships with an expanded set of counterparties beyond the primary dealers or entity types that are currently eligible to be primary dealers, and to develop an approach to evaluating the capabilities of these firms that is distinct from the process for assessing primary dealers.

The significant increase in the share of OIC member states in our exports might be, at first sight, attributed only to the economic slowdown in the European Union. However, related figures indicate that the share of OIC members in Turkey’s exports had already increased from 13% to 19% between 2000 and 2007 before the start of the global financial crisis. Besides, visa exemptions probably played an important role in the recent improvement in Turkey’s trade with the region’s countries. Distinguished Guests, Regional collaborations have made a significant contribution to the increase in the volume of intra-emerging markets trade. Although tradable products can be transported to markets of any distance owing to advancements in transportation infrastructure and technology worldwide, distance is no less important than it was previously. Due to increased competition among countries, factors such as distance and transportation costs continued to be among the leading determinants of competitiveness. Various academic studies also confirm that the distance elasticity of trade is on the rise. As it is known, complementary value added chains have been formed particularly among Asian countries, and having benefited from the proximity of neighbor countries and their individual advantages in different fields, these countries have experienced a high-speed development process through regional cooperation, where low-costs-for-all have boosted the competitiveness of all economies in the region.
In other countries, such as Italy, where competitiveness fell sharply prior to the crisis, there has so far been no evident correction of competitiveness. In other words, the pace of adjustment has been different across countries; imbalances have not been corrected everywhere to the same extent. [Slide 5] Finally, we have observed a very strong improvement in structural primary fiscal balances – that is, fiscal balances adjusted for the economic cycle and for one-off factors. In Greece, the structural primary balance in percent of GDP, which had reached extremely high levels in 2009, is estimated to have improved by more than 13 percentage points cumulatively between 2009 and 2012. In Portugal, the structural improvement has been  2  See ECB Monthly Bulletin Article (2011), The ECB’s non-standard measures – impact and phasing out, July 2011, pages 55-69. 3  Cheptea, Fontagne and Zignago (2012), European Exports Performance, Banque de France WP 393. 4  Buti, M, and A. Turrini (2012), Slow but steady? Achievements and shortcomings of competitive disinflation within the euro area, ECFIN economic brief, Issue 16, November. BIS central bankers’ speeches  3  about 6 percentage points of GDP. These improvements give an idea of the real adjustment effort made by these countries. [Slide 6] But being cautiously optimistic does not mean that there are no major challenges or tasks ahead of us. Indeed, the economic and social priority is to reduce the very high unemployment level.

According to Statistics Norway’s business tendency survey, the shortage of labour and intermediate goods is now at a higher level than during the booms in the 1980s and 1990s. The strong rate of growth has only to a limited extent fed through to a higher rise in prices for consumer goods and services. Consumer price inflation adjusted for tax changes and excluding energy products (CPI-ATE) has admittedly picked up gradually since late summer 2006, but in relation to the economic situation, underlying inflation remains low. The year-onyear rise in the CPI-ATE was 1.4 per cent in July. Other measures of underlying inflation show approximately the same rise in prices. According to our assessment, underlying inflation is between 1 and 1½ per cent, as it has been for a longer period. The year-on-year rise in the total consumer price index (CPI) has been just under ½ per cent in recent months. This is because electricity prices have been substantially lower this year than in 2006, when unusually high electricity prices due to low precipitation levels pushed up the year-on-year rise in the CPI close to the inflation target. In recent months, electricity prices have been at their lowest level since 2002. There are probably a number of reasons why inflation has been low in an environment of high economic growth. First, Norway’s terms of trade have improved. Prices for oil and gas, freight, fish, industrial commodities and engineering products have increased considerably. In addition, market growth abroad has provided market opportunities for Norwegian export goods.
This means that the discussions conducted by the Executive Board take place on an open stage, almost, through the publication of the minutes from the monetary policy meetings and through the speeches held. In many other central banks these differences of opinion never see the light of day. 27  Svensson (2012a). The estimate is of course uncertain. As shown in Svensson (2012a), a 95-per cent confidence interval for the estimate 1.3(=1/0.75) percentage points gives an interval between 1/1.1= 0.9 percentage points and 1/0.4=2.5 percentage points, corresponding to a confidence interval for the estimate 65,000 unemployed between 45,000 and 125,000. An estimate using the Riksbank’s model Ramses, in accordance with the effects of various repo-rate paths as described in Svensson (2010), leads to roughly the same estimate of 1.2 percentage points. 28  If 3 percentage points lower unemployment corresponds to around 10 per cent higher housing prices, then 1.3 per cent higher unemployment will give roughly 1.3*10/3 = 4.3 per cent higher housing prices. 29  With even higher inflation and an inflation rate above the target, which according to Qvigstad’s (2005) criteria is justified when unemployment is higher than the long-run sustainable level, unemployment could have been even lower, and housing prices marginally higher. BIS central bankers’ speeches  13  This openness naturally has consequences, and not all of them positive.

From this we should deduct a figure for sustainable growth in disposable income, say 4 per cent – 2 per cent real growth and 2 per cent inflation. This leaves us with 1 per cent. See Svensson (2012b). 8  BIS central bankers’ speeches  The household debt situation is also analysed in Finansinpektionen’s (the Swedish financial supervisory authority) report, The Swedish Mortgage Market. Finansinspektionen observes in this report that the loan-to-value cap has had an effect. Households’ loan-to-value ratios for new loans fell in 2011, and the percentage of houses with a loan-to-value ratio of more than 85 per cent has halved since 2009, to just under nine per cent. The banks make stringent credit assessments of borrowers using a “left-to-live-on” calculation with a high mortgage rate.17 Stress tests also show that most households that have taken out a new mortgage and which should be the most vulnerable, have a good debt-servicing ability and are resilient to increases in interest rates, falls in housing prices and increases in unemployment.18 In contrast to what was the case during the 1990s crisis, however, large interest rate increases probably will not coincide with high unemployment. Finansinspektionen’s conclusion is that “Only a limited portion of the households are affected even when simultaneously applying assumptions of sharp drops in house prices and sharp rises in unemployment, which indicates that Swedish mortgages are currently not a threat to financial stability.“ Moreover, this resilience has also been tested in real time.
The longer inflation is deliberately allowed to deviate from 2 per cent, the greater the risk that one begins to question what target the bank really has. We have seen elements of this in the recent debate on monetary policy in Sweden. This could also have significance for how the central banks’ principals perceive the way monetary policy is conducted, which can ultimately affect the banks’ mandate and position. The Riksbank has a mandate to work independently to maintain price stability and, without prejudice to this, to support the goals of general economic policy. On the one hand, this means that it is up to the Riksbank to determine which risks are relevant for its decisions. But on the other hand, the Riksbank is accountable to the Riksdag, which determines the Riksbank’s mandate. The Riksbank therefore needs to be able to show in a convincing manner that the trade-offs it makes are anchored in its mandate. And given the current mandate, it may be a problem if one accepts deviations from the inflation target over a long period of time. If the trade-offs in monetary policy are not clear and concrete, it will be difficult to assess whether it has been conducted in a reasonable manner and within the mandate. The costs are clear, but what have we gained?

These scenarios include those that seem highly implausible but might prove very damaging, as well as those that seem more plausible but might alter the outlook less. To complement this, we look at the implications for monetary policy of alternative scenarios for the outlook—what should we do if the world moves in a different direction. And we also look at the impact on the outlook for growth and inflation of different paths for the fed funds rate. These approaches help illustrate the size and sources of uncertainty we live with at any moment. They do not give us the capacity to attach precise probabilities to alternative scenarios or to quantify with precision the implications, but they help frame a discussion of the material risks to the outlook and the potential consequences of different types of policy mistakes. And they can help inform choices about how central banks should affect expectations about future interest rates. Along with these analytical tools, many central banks have adopted a decisionmaking structure that is designed to bring a diversity of independent perspectives to the table. Although the FOMC's discussions begin with the presentation of a forecast prepared by the staff of the Federal Reserve Board, the committee members bring to the discussion substantial information based on independent efforts to understand the underlying dynamics of demand and inflation and their implications for monetary policy. This can provide a stronger foundation for decisions, particularly where uncertainty is inherently great.
After this I shall discuss in greater depth the individual items on the balance sheet, to see how they have been affected over the past year. I shall conclude by looking ahead and discussing the question of when and how the extraordinary measures can be phased out. The Riksbank’s balance sheet Let us begin by looking at how the Riksbank’s balance sheet looks in rough outline under normal circumstances and at how it has changed during the crisis. The Riksbank’s balance sheet, like those of other companies and organisations, reflects the activities we conduct. The liabilities side shows how our activities are financed and the assets side show what the financing is used for (Figure 1). Figure 1 The Riksbank’s balance sheet  Assets Gold and foreign currency reserve Lending to banks Other assets  Liabilities Banknotes and coins Deposits from banks Other liabilities Own capital  Under normal circumstances the Riksbank primarily finances itself by issuing banknotes and coins and through its own capital. Banknotes and coins in circulation normally comprise the largest individual item on the liabilities side. Own capital is the next largest. In addition, the  BIS Review 160/2009  1  liabilities side in principle consists of deposits from banks and the item “Miscellaneous”. These items are usually small and less important than banknotes and coins and own capital. The Riksbank’s assets normally consist mainly of gold and the foreign currency reserve.

This meant that it became expensive and difficult for the banks to fund themselves. In this situation the Riksbank began to lend money to the banks at longer maturities to secure their funding. During three months in autumn 2008 the Riksbank increased its lending to the banks by more than around SEK 450 billion. To begin with the Riksbank granted loans in kronor at three-month and six-month maturities, but gradually the maturities were increased to twelve months. Lending at a variable interest rate has declined over the past six months, but has been supplemented by the previously-mentioned lending at a fixed interest rate of almost SEK 300 billion (Figure 7). Figure 7 The Riksbank’s lending in SEK and USD SEK billion 600  500  600  SEK, Commercial paper USD SEK, variable rate SEK, fixed rate  500  400  400  300  300  200  200  100  100  0 Jul-08  0 Oct-08  Jan-09  Apr-09  Jul-09  Oct-09  Source: The Riksbank. The Riksbank has also granted loans in US dollars. During the crisis there was a shortage of dollars around the world and the banks experienced difficulty in obtaining funding in dollars. At most, lending in dollars corresponded to around SEK 250 billion in spring 2009. Since then the banks’ interest in borrowing dollars from the Riksbank has declined.
Structural changes generate developments that are often referred to at present as a “new economy”. The marked improvement in productivity maintains profits and keeps prices down. During the transformation, a good circle is created but it is difficult to tell how long it will last. It can be described, if you like, as a period of extensive rationalisation and heightened efficiency. The growth trend is raised for an indefinite period, enabling the economy to expand more rapidly without inflation taking off. It should be born in mind that the adaptation to the new information technology does not occur automatically. It is not the case that one day we suddenly find the new technology has begun to be implemented in ways that are leaving their mark on economic developments in general. The late 19th century provides important lessons about the necessary conditions for this good circle. At the beginning of the 1800s Sweden was still a poor country with an unstable form of government, a chaotic monetary system and a general shortage of credit facilities. Ninety years later the Swedish economy had undergone a dramatic transformation. Inflation was low, with an orderly monetary system. The nation was bursting with vitality in every field. An impressive range of products, many of them world leaders, were being developed on the basis of Swedish inventions. Swedish financial experts were engaged in the exploitation of the inventions at an early stage. Employment was provided for more and more people, living standards rose and growth was among the highest in the world.

Profitability will be depressed both by increased competition and by rising wage costs. Investment will be held back and the transformation will proceed too slowly or not at all. There will then be no quick renewal of capital stocks. Firms will not make good use of the new information technology. I have cited wage formation as a conceivable factor that may hamper a transformation, but of course there are other factors as well, for example the tax system, the educational system, etc. It is not a function of the Riksbank to point out specific factors that can affect the pace of structural change. But perhaps we can contribute to a broader discussion of the new economy. Various factors that hamper or check an adjustment could thus result in the Swedish economy following a lower, not a higher, path for long-term growth, with a stronger, not a weaker, inflation propensity and a continuation of high unemployment instead of a reduction to the low level that most people want. These risks seldom feature in the general discussion about the new economy. The changes that many people refer to as the new economy unquestionably present a number of challenges to the Swedish economy in the present situation. My comments have indicated, moreover, that the notion of a new economy is not correct; that is not what it is all about.