samchain/econo-pairs-v1 huggingface dataset:
Countries with larger fiscal deficits have had a more procyclical policy both in good times and in bad times. A Commission paper finds a significant impact of elections on procyclicality, especially procyclical tax cuts. In addition, the structural deficits are most likely higher than presumed. With lower potential growth, the ECB will need to push the brakes earlier and more forcefully than most people assume. Hence, the long awaited help from growth to fix the deficit problems and the debt-to-GDP ratios will most likely not materialize. Deficits and debts could  4  BIS Review 88/2006  deteriorate even further when pressures from an ageing population will kick in within the next five years. Is there a solution? Let me first note an interesting development: 1999-2004 the average yearly fiscal deficit in the euro area has been 1.9 per cent of GDP while the average yearly (unweighted) surplus of the three old outcountries (the UK, Denmark and Sweden) has been 1.1 per cent of GDP. This despite the fact that the UK has moved from a comfortable surplus position to a deficit of 3.3% of GDP in 2004. Some euro-sceptics will of course attribute this difference to monetary union itself but I think the difference is rather that all three out-countries have been forced to find new ways of building a strong national macroeconomic framework based on clearly stated goals and a transparent evaluation of how these goals are to be met, in addition to the common EU rules.

Otherwise you might rationally expect to end up among the small minority that does not expand and at the same time still have the tighter monetary policy that results from everyone else expanding. This is the classic “prisoner’s dilemma” from game theory. The conclusion is that it is necessary to have rules for fiscal policy that limit deficits and debt when monetary policy is united and fiscal policy divided, and that these rules need to be followed in a credible fashion. But, in addition, the conclusion is also that the temptation to over-expand is as strong during an upturn as during a downturn. In fact this is what we have seen in the euro area during the heyday of the late 1990s and the beginning of the 21st century – a much too expansionary fiscal stance in some euro area countries, especially in good times, which led to tighter monetary policy by the ECB and thus an incentive for others to further weaken fiscal discipline. When the downturn eventually came, the euro area entered this phase with large deficits instead of surpluses. What the Pact then required, a 180-degree turnaround in fiscal policy to a tighter stance, reinforced the downturn and was considered by some as stupid. In fact it was the lack of savings  BIS Review 88/2006  1  during the boom that was stupid. Thus, rules would be needed not only for a maximum deficit in a downturn, but equally some forceful rule for fiscal rectitude in good times.
The Germans have recognised these structural weaknesses and are taking steps to rectify them. However, one major obstacle to German banks divesting their industrial holdings has been the prohibitive capital gains tax. Now a Social Democrat government has proposed tax reforms that will remove this obstacle, and pave the way for banking and industrial conglomerates to untangle their web of cross shareholdings. In Asia, both South Korea and Japan relied on close association between banking and commerce in the earlier stages of their industrialisation. South Korean chaebols, and the banks that lent to them, are now facing painful reforms. Poor lending practices by Korean banks disguised the deteriorating finances of the chaebols, and eventually nearly brought the whole system down in the Asian crisis. In Japan, the pre-war zaibatsu system became the post-war keiretsu system. Each major keiretsu or industrial group consists of companies linked together through a web of cross-shareholdings, including a main bank. Keiretsu members support one another financially and in terms of direct business. The bank in the keiretsu plays a pivotal role, facilitating the financial transactions of the group. While the keiretsu system helped Japan to rebuild and industrialise its economy after the war, many of the problems of corporate governance and unsound banks that now plague Japan are rooted in this structure. The prolonged crisis of the Japanese economy since 1990 has forced a fundamental rethink. The Japanese are now gradually starting to make basic structural changes.

Legislators and other policymakers made substantial changes to the financial system to hold firms, and their managers and shareholders, more accountable. A great many of those changes have put both firms and the public sector in a better place. Today, regulators and supervisors expect systemically important financial institutions to be more resilient. They must be prepared for unanticipated losses and shocks to the financial system, including through rigorous (if not always popular) capital and liquidity standards. Supervised firms are also required to have a much greater understanding of the governance and controls supporting their critical operations. This includes, for example, governance frameworks, management information systems, and IT resiliency. This last point is particularly notable because, as many of you are now painfully aware from the data breaches at Equifax and Yahoo (and those are just the most recent ones), cybersecurity risk has increased dramatically in the last several years. Resilience goes a long way. It prepares firms to be ready to fight not only the last war, but also the unanticipated stresses of the next one. It prepares them not to rely on past performance as a guaranty of future performance. But, increased preparedness should not be cause for overconfidence. Supervision and regulation should not and cannot drive all risk from the financial system, and the probability of a systemically important institution’s failure will never be zero.
The ageing of the population will be a reality across emerging Asia in the coming years, with the exception of South Asia. Population ageing is happening alongside rising affluence – a combination that underpins strong demand for pension funds and retirement savings products, to provide peace of mind in one’s golden years. Feeling well is about investing with a purpose, to do good while doing well. Where we put our money drives action. And an existential issue demanding action on a global scale is climate change. Investing in sustainable assets imbues investment with a larger social purpose. Let me elaborate on each of these dimensions of wellness in investment. Eating Well: Investing for Yield in Private Markets First, eating well – or investing for yield in private markets, namely private equity and venture capital investments, PE and VC in short, as part of a diversified portfolio. Globally, private market capital has grown at more than double the rate of public capital in the last 20 years. For the first time since 2006–07, the value of listed US companies going private in 2018 exceeded the value of private companies going public, causing a net outflow from the US public markets. An allocation to investments in private markets is becoming more common – and necessary – for a well-diversified portfolio aiming for decent returns. Private market opportunities are growing strongly in Asia. The PE and VC industry in the AsiaPacific1 achieved record growth last year.

1 Includes Southeast Asia, Greater China, India, Australia, New Zealand, South Korea and Japan 2 “Asia-Pacific Private Equity Report 2019”; Bain & Company 3 “Southeast Asia PE & VC: Investment Activity May 2018”, SVCA 4 “World Population Prospects 2019”; United Nations, Department of Economic and Social Affairs  7/7  BIS central bankers' speeches
During the last two decades, the banking sector, which plays a prominent role in the Turkish financial system, has made significant progress in implementing structural changes towards a more financially liberalized Turkish economy. Combined with the effects of restructuring Turkish economy and the efforts for the integration to the modern world of finance, the Turkish banks achieved important changes in their institutional structures on the one hand, and in the quality of services and products on the other. In this very outward-oriented and closely supervised banking environment, the need for highly qualified managers and specialized personnel is obvious. With this in mind, Turkish Banks became more effective in their utilization of human resources. The number of university graduates and postgraduates in the banking sector has steadily increased over the last two decades, as has the level of professional training. The increase in the number of banks and qualified personnel, in turn, enhanced competition and contributed to broad utilization of new financial instruments and techniques. Furthermore, the banks were motivated to attain a dynamic structure through automation. During the last decade, Turkish 3  BIS Review 79/2000  banks became more automated and efficient, along with their foreign counterparts. For example, the number of ATMs in Turkey has increased from zero to over 8,000 in the last decade. Intense competition and a desire to integrate with global financial markets has driven banks to improve the quality and the variety of services through information technology and international payment systems.

  Firstly, there is the federal approach, where you allow for a full delegation of powers to the EU level, including regulation, supervision and crisis management (Figure 2).   Secondly, you can abandon the idea of the internal market and return to a system with full national control of domestic financial systems (Figure 3). Figure 2  Figure 3  The de Laroisière group opted for a third way – the middle way – to reform the EU financial system. In terms of the financial trilemma, this means keeping financial integration and, at the same time, trying to find a reasonable compromise between financial stability and national sovereignty (Figure 4). Somewhat stronger cooperation, but still resting on national sovereignty. Figure 4 Financial stability  Financial integration  National sovereignty  Given the present European crisis, you may well ask whether this is a possible compromise or whether it will be just another damp squib. Only time will tell. But within this concept, there is room to move towards stronger European cooperation. The EU’s new supervisory structure The de Laroisière proposal rested on two major institutional pillars. The first related to the previous “level 3” committees, which were to be strengthened, transformed into authorities,  2  BIS central bankers’ speeches  and given as much power as possible without having to change the European Treaty.
Nor are they likely to choose a robot to look after their young children or elderly parents (tempting as that can sometimes sound). When it comes to forecasting the economy, I can quite believe a thinking machine might over time displace me. But it is less likely an “Andy Robot” will be giving this lecture to the TUC even a decade from now. Even if this diagnosis is right, it nonetheless may suggest a fundamental reorientation in the nature of work could be underway. We may already be seeing early signs of that in the move towards part-time working, temporary contracts and, in particular, self-employment. Some have speculated that these seismic shifts could result in the emergence of a “new artisan” class : micro-businesses offering individually-tailored products and services, personalised to the needs of customers, from healthcare and social care, to leisure products and luxuries. This really will be Back to the Future. Yet the smarter machines become, the greater the likelihood that the space remaining for uniquely-human skills could shrink further. Machines are already undertaking tasks which were unthinkable – if not unimaginable – a decade ago. The driverless car was science fiction no more than a decade ago. Today, it is scientific fact. Algorithms are rapidly learning not just to process and problem-solve, but to perceive and even emote (Pratt (2015)). As digital replaced analogue, perhaps artificial intelligence will one day surpass the brain’s cognitive capacity, a tipping point referred to as the “singularity” (Stanislaw (1958))).

In that case it could be worth discussing a comeback for the tolerance band, but reintroducing the band would neither contribute to higher inflation expectations nor consequently to a rise in interest rates. Monetary policy cannot solve the problem of rising debt and housing prices What can be said then about the growth of household debt and housing prices? After all, one issue central to the criticism is that the low interest rate contributes to further increases in debt and housing prices. 13  The Riksbank (2010). 14  For example, Heikensten and Vredin (1998, pp. 585-586) noted that "A tolerance band could be a reflection of the fact that the central bank does not consider it important to aim for an inflation target in the middle of the band. Instead it may, as long as inflation is contained within this band, want to focus on achieving other targets, such as production or employment for example. This is portrayed at times [...] as "opportunistic" monetary policy. We do not feel, however, that this was the reason certain countries chose to put a tolerance band around their inflation target". 8  BIS central bankers’ speeches  It has been obvious to those who have followed the monetary policy debate that the Riksbank shares many people’s concerns about this development. This is clear from reports, minutes, speeches and a number of debate articles. The Riksbank has therefore pointed out the necessity of measures in other policy areas for several years.
Third, traditional financial institutions in Asia have embarked on a digitalisation journey, enabled by core technologies such as cloud computing. Almost every major financial institution has an active innovation agenda to strengthen its business by harnessing technology. In just the last three years, more than 30 global financial institutions have set up innovation labs in Singapore, testing new technologies and collaborating with FinTech start-ups to develop solutions. Let me give some examples of collaboration from the Singapore FinTech ecosystem: 2/4  BIS central bankers' speeches  Hedge fund managers are using a solution deployed by SQREEM to provide them behavioural insights related to equities, foreign exchange markets or political events like Brexit. Relationship managers are using a solution by AIDA, to predict whether their clients are likely to increase their assets under management or make a withdrawal. FINQUEST is using big data analytics to connect small to mid-sized companies globally to growth capital and potential acquirers. APVERA is helping enterprises detect anomalies in the behaviour of their employees and flag data leakage risks. These three driving forces – FinTech start-ups, e-commerce platforms, and financial institutions harnessing technology in a big way – are creating the synergies that power Asia’s digital transformation. Initiatives to Foster the FinTech Ecosystem MAS has an active and wide-ranging FinTech agenda. In the interest of time, let me highlight three key initiatives we have taken in recent years to nurture the FinTech ecosystem in Singapore and integrate it across ASEAN. First, the ASEAN Financial Innovation Network, or AFIN for short.

Our financial sector has weathered several crises well. But we cannot take this for granted. There will continue to be risks and challenges in the financial and economic environment. The changes to the capital adequacy requirements that I have outlined tonight will help keep our banking system strong, and preserve Singapore’s reputation as a safe, open and dynamic financial centre. BIS central bankers’ speeches  5
Aside from cyclical factors, where there are elements beyond our control, attaining higher stages of development in a broad sense, depends upon us. Among the many challenges noted by numerous studies are to reduce energy costs, improve infrastructure and provide quality education. Our objective is not only to boost growth; it must also guarantee that the benefits are felt by every individual. We, as the Central Bank, have reiterated our commitment with price stability, stating that we will take every step necessary for the inflation forecast over the policy horizon to be aligned with the 3 percent target. As we have said time and again, that is the main contribution that monetary policy can make to the country’s development and welfare. Without a good macroeconomic framework, development in other areas becomes elusive. Of course, in macroeconomic stability, the Central Bank plays an essential role. Thank you very much. 8  BIS central bankers’ speeches  Figure 1 Business and consumer perception (*) (index, pivot=50) 70  70  60  60  50  50  40  40  30  30 04  05  06  07  08  09  10  IMCE  11  12  13  14  IPEC  (*) Value above (below) 50 points indicates optimism (pessimism). Sources: Adimark and Icare/Universidad Adolfo Ibáñez.

Comparability is key, because it allows policymakers to assess how different proportionate regulation approaches affect intended outcomes in different jurisdictions. The goal here is to identify and disseminate tested and proven proportionate regulation best practices, well supported by empirical evidence. The evidence on proportionality in practice facilitates regulators and financial institutions in implementing innovative solutions because they have the confidence that there would be no adverse unintended consequences to financial stability and integrity. Empirical data can also support Standard-Setting Bodies in designing differentiated guidance for financial services for low-income households and SMEs. While the importance of data collection is obvious, there tends to be under investment and an ‘attention deficit’ among decision makers on such a critical matter. Second, it is crucial to build the capacity of regulators, supervisors and financial institutions so that the ecosystem has the requisite capacity to implement proportionality in practice. The Basel Range of Practice Survey highlights supervisors’ unmet demand for capacity building, as only 30% of supervisors globally had received training on supervision of banking services for the low income segment. The Basel Meeting with Standard-Setting Bodies on 2 October 2014 chaired by Her Majesty Queen Maxima, the United Nations Secretary General’s Special Advocate, also highlighted the importance of technical assistance programmes to build up local knowledge and capacity of national supervisors, so that experience in applying proportionality can be shared.
27  For example, Goodfriend and King (2016), p. 98, write as follows: “We do not think it sensible to extend the objective of the central bank to include numerical targets for employment and output. The experience of forward guidance in both United States and United Kingdom suggest that attempts to use numerical values for these variables can crumble in the hands of policymakers within a short period of time.”  28  See Woodford (2012). 29  See Stein (2014), Billi and Vredin (2014) and IMF (2015). 30  See Bryant, Henderson and Becker (2012) and Acharya (2015) for different arguments. BIS central bankers’ speeches  13  factors, on how well the price stability objective has been met and on how effective macroand microprudential policy are when it comes to promoting financial stability. Flexible inflation targeting involves, as I stated earlier, the central bank allowing certain deviations from the target in order to take, for example, output, employment or financial imbalances more into account. But this flexibility is not just something that is there, one has to accumulate it. A prerequisite for using the policy rate for something other than stabilising inflation is that confidence in the inflation target is firmly rooted and that it works as a nominal anchor in the economy. The higher the confidence in the inflation target, the more consideration the central bank can show for aspects other than inflation – the more flexible monetary policy can be.

Fiscal policy and monetary policy – mutually dependent Sweden and other countries that came through the acute financial crisis of 2008 – 2009 relatively well are characterised not only by an efficient regulatory framework for central bank operations but also by the fact that they have been implementing reforms for a long time that have improved the functioning of the economy, not least as regards how fiscal policy is conducted. The fact that Sweden has, over the last twenty years, managed to reconcile low and stable inflation with good economic growth and sound public finances depends to a large degree on fiscal policy reforms implemented in the wake of the crisis in the 1990s. But experience gained from the latest financial crisis shows that both these sides of the economic policy coin are intimately intertwined and cannot be entirely decoupled from one another. My interpretation of the research situation is that increasing importance is being attached to how dependent monetary and fiscal policy are on each other. 31 It is difficult to believe that it might be possible for a central bank to independently guarantee low and stable inflation, and financial stability, irrespective of how fiscal policy is designed. By the same token, it will be easier to maintain sound and sustainable fiscal policy if there is price stability and financial stability. The difficulties of many countries in countering the economic downturn after the financial crisis via an active fiscal policy has increased the pressure on central banks to stimulate economic activity.