samchain/econo-pairs-v1 huggingface dataset:
There was also some improvement in the female participation rate, from 35% to 38%. New challenges lie ahead A sense of satisfaction is, therefore, justified. Complacency, however, is not, for much remains to be done. And any further progress will have to be pursued in an external environment that has become even more challenging. In the first place, competition, mainly from Asia, has eliminated any residual advantage in our labour intensive industries, and represents a growing threat even in more capital and knowledge intensive activities. Another worrying development is the increasing prospect of a slowdown in global economic activity, reflected in the recent downward revisions to GDP growth forecasts by leading central banks and multilateral institutions. The full impact of the chain of events set off by the sub-prime mortgage crisis in the United States has yet to be felt, and risks being compounded by the mounting inflationary pressures in commodity markets, especially for oil and agricultural products, with as yet unpredictable consequences. Given the circumstances, while the adoption of the euro will undoubtedly enable Malta to face these challenges from a stronger position than if the convergence process had been slower, the euro alone will not be enough. Against this background, I would be failing in my duty if I did not express concern at the insufficient recognition by public opinion of the risks that the evolving external scenario poses for the Maltese economy and of the need to improve the country’s international competitiveness.

As for the cost of labour, while it is true that since 2004 wages have been growing more in line with productivity, it also the case that not all the loss in competitiveness experienced before 2004 has been reversed. In 2006, in fact, unit labour costs were still 18% higher than in 2000. And although wage growth has been moderate in recent years, it has been even more so elsewhere. Indeed, when compared to those in the euro area, Malta’s relative unit labour costs have risen since 2000. There is little doubt that external competitiveness has deteriorated and that continued wage restraint, therefore, remains an essential ingredient in the recipe for achieving faster export-led growth. Productivity can also be boosted by making education and training systems better attuned to the needs of a competitive economy, by further reducing compliance costs and simplifying administrative procedures, and by improving the quality of the business infrastructure. Together with those suggested above, these measures can make a substantial contribution to strengthening the economy’s capacity to deal successfully with globalization. Lastly but no less importantly, it also needs to be realized that action on all these fronts is essential for preserving a social model that has reduced income inequality and secured wide access to education, health and pensions. Conclusion Mr. President, at this critical juncture in the country’s economic development on the eve of joining the euro area, the national interest calls for a strong sense of realism.
But the effect of monetary tightening on domestic demand is limited through the processes I have described, where long rates react weakly to the increase in the policy rate. In addition, firms and households increasingly borrow in foreign currency in order to avoid even those limited increases in domestic borrowing costs that take place. This foreign currency borrowing is intermediated by the domestic banking system, where the financing is more short-term than the lending. Thus the banking system has a growing balance sheet in FX, with a maturity mismatch but limited LOLR facilities to backstop it. In short, financial risks are accumulating, both in the financial sector and among firms and households. At the same time, the economy is increasingly in an unsustainable position, with an overvalued currency and big current account deficit. The  2  BIS central bankers’ speeches  whole thing then comes crashing down when foreign financing comes to a sudden stop, heralding a currency crisis and even a banking crisis as well. Before I go further, let me warn you, though, that this is only part of the explanation of the financial crisis in Iceland. The offshore activities of the banks and old-fashioned macroeconomic mismanagement were equally important, if not more so. On this topic, I refer you to other speeches and publications by myself and others. 2 What can and should be done about the problems I have laid out?

Prudential limits on banks’ FX balance sheets, in the form of specific LCR and NSFR in FX, have been imposed. In practice, this will greatly limit the size of their FX balance sheets and the associated maturity mismatch that was the proximate cause of the demise of the old banks that failed during the crisis. Finally, a tax or other equivalent measure of the type I just mentioned is being contemplated. 3 Taken together, this will amount to a very different paradigm for economic management than the one prevailing before the crisis. History will tell whether it is sufficient to preserve monetary and financial stability in the rougher seas of freer capital movements that we intend to embark upon. In any case, we need to strike a balance between dynamism and freedoms, on the one hand, and stability, on the other. Thank you very much. 3  4  Further details on these proposals can be found in Central Bank of Iceland Special Publication no. 5: Monetary policy in Iceland after capital controls, December 2010, and no. 6: Prudential rules following capital controls, report of the Central Bank of Iceland to the Minister of Economic Affairs, August 2012. www.cb.is. BIS central bankers’ speeches
In my remarks today, I would like to expand on three points. First, I want to show how a very severe double dip crisis required the ECB to deploy unconventional instruments to ensure price stability. And our measures are proving effective: incoming data confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished. Second, I will discuss the possible side effects of these measures. I will consider the different dimensions in which our monetary policy affects people’s finances and welfare, which are sometimes overlooked in the current debate. Finally, I will outline why the ECB cannot be the only actor contributing to the recovery. Other economic, financial and fiscal policies are essential to ensure a sustained recovery. Recovering from the crisis: the role of monetary policy Let me start by recalling where we came from. The Great Recession, as it is called, resulted in a protracted period of low inflation and low growth. Specifically, the euro area faced two interlinked and successive crises – a financial crisis in 2008 and a sovereign debt crisis that started to emerge in 2011 and derailed the rebound. The recovery that began in mid-2013 lost steam in the summer of 2014 as the external environment became more uncertain. At the beginning of 2014, credit growth was contracting at an annual pace of more than 3%, while overall economic growth was stalling.

Furthermore, after rising in the second half of 2018, credit default swap premia are now back at roughly the same level as in mid-2018. In the area of resolution, the Swiss big banks have improved their gone-concern lossabsorbing capacity since last year’s Financial Stability Report. Credit Suisse and UBS already meet all look-through requirements on a consolidated basis. Page 1/3  Berne, 13 June 2019 Fritz Zurbrügg  News conference  In addition to those at group level, the Federal Council has drawn up requirements on big banks’ loss-absorbing capacity at the level of individual group entities, and in early April initiated a consultation on a corresponding amendment to the Capital Adequacy Ordinance. These requirements are intended to ensure that not only the group as a whole, but also material group entities have sufficient loss-absorbing capital in the event of a crisis. The SNB supports the proposed amendments to the Capital Adequacy Ordinance. Work is also underway with regard to liquidity in a crisis, known as ‘funding in resolution’. It is aimed at ensuring that the big banks have sufficient liquidity during preparations for and in the phase immediately after resolution. For this purpose, FINMA is drawing up resolution funding plans in line with international standards. In cooperation with the SNB and the two banks concerned, it is currently assessing the big banks’ liquidity needs under possible crisis scenarios.
Irrespective of the uncertainties currently surrounding the timing and pace of policy normalisation in the euro area, it will eventually gain momentum and the impact on the emerging EU economies, to which I will come back later, should not be underestimated. It is debatable if the forthcoming normalisation process involves going back to the pre-crisis normal or rather moving forward to a “new normal”, characterised by lower interest rates and possibly by larger central bank balance sheets. What is certain is that future policy actions of central banks in CEE countries will definitely depend on the way monetary policy normalisation unfolds in Europe. What happened in the emerging economies that are part of the US dollar sphere of influence following the FED’s policy normalisation is quite relevant. Higher interest rates in the developed world would trigger a capital flight away from emerging economies, thus generating depreciation pressures. The response of policymakers in emerging economies will depend on the specific strengths and weaknesses. Where adequate policy buffers are in place and investor confidence is elevated, market mechanisms, countercyclical macroeconomic and prudential policies may be relied upon to tackle a slowdown in capital inflows. Where there is less room for manoeuvre, tightening monetary and fiscal policies may be required to lower financing needs and attract additional inflows. Where foreign reserves are adequate, they may be used to moderate or smoothen exchange rate depreciation.

Let me now move on to the second point of my intervention: how inflation targeting has evolved in response to the post-crisis global economic and financial environment. The NBR, the same as the central banks of Poland, Czech Republic and Hungary, is an inflation targeter. In Romania, we have remained loyal to inflation targeting since 2005, but inflation targeting itself is quite different now from 15 years ago. Indeed, it is rather difficult to say at present what is left of its underlying principles. The outbreak of the global crisis and the post-crisis developments have naturally led to the tailoring of the strategy to the new realities. Some departures from the old orthodoxy are almost unavoidable in 1/3  BIS central bankers' speeches  the present context, marked by a changing global financial and economic landscape. For instance, after the crisis, forex interventions re-entered the arsenal of many central banks, including some of the previously more purist floaters. A case in point is the Czech National Bank, which resorted to the so-called “exchange rate commitment” from November 2013 to April 2017, intervening whenever necessary without time or volume limits to prevent the appreciation of the koruna below a publicly announced floor.
This is despite the well-known difficulties in determining the GDP gap.14 I believe that one can make a fairly good assessment of the GDP gap by combining a production function approach with business tendency data and other short-term statistics.15 GDP is a central variable in the forecasting work and the variable that, despite its well-known deficiencies in measuring welfare, is most closely-related to welfare.16 We should also report fan charts with uncertainty bands for the GDP gap and other measures of resource utilisation, in particular unemployment, to illustrate the uncertainty in these measures, too. It is important to make good judgements of resource utilisation at the outset and to endeavour to ensure it is neither too high nor too low in the coming period. This can contribute to stabilising inflation close to the target. Resource utilisation is namely not only a target variable, but also an indicator of future inflation. Figure 10 shows the correlations between some measures of resource utilisation – GDP gap, hours worked gap, labour  13  See the Executive Board’s consultation response to the report “Evaluation of the Riksbank’s monetary policy and work on financial stability 2005–2010” (2010/11:RFR5), Sveriges Riksbank, 30 November 2011. 14  See, for example A. Orphanides, “Monetary Policy Lessons from the Crisis”, Central Bank of Cyprus, 2010. 15  See earlier speeches: S. Öberg, “Monetary policy and the elusive resource utilisation”, 25 May 2009; S. Öberg, “Potential GDP, resource utilisation and monetary policy”, 7 October 2010; and S. Öberg, “GDP growth and resource utilisation”, 6 October 2011.

First, banks play a crucial part in the transmission of monetary policy. There are various channels through which monetary policy is transmitted to the economy, but the primary channel is via changes to the short-term nominal interest rate, in other words, via the cost of borrowing and the return on savings. Monetary policy thereby affects investment and consumption decisions throughout the entire economy, thus influencing business level activity and price dynamics. In its implementation of monetary policy, the SNB provides short-term liquidity to the banking system, and not directly to firms and households. Banks, as financial intermediaries, in turn transmit these monetary policy decisions to the real economy. The extent, however, to which the banks respond to these decisions – by changing their interest rates on deposits, loans and their credit supply – depends on a number of factors, such as the degree of competition, but also the banks’ balance sheets. The effects of monetary policy can thus be impaired if banks have poor balance sheets. Thus, the banks’ function as financial intermediaries is a welcome and influential channel through which the SNB’s monetary policy decisions affect the economy. There is, however, a downside to this role. The banking sector can also propagate large financial shocks to the rest of the economy. In other words: the financial industry itself can have a large impact on the economy. In Switzerland, the propagation of financial shocks to the real economy is potentially large in magnitude.
In addition, as the returns in Islamic banking are uncertain and can only be ascertained on an ex-post basis, well-developed IT systems would be necessary to enable Islamic banking institutions to make projections on future returns so as to reduce the degree of uncertainty in the returns to be paid to the depositors. This would also strengthen the potential competitiveness of the Islamic financial services industry. Another facet to risk management is the need for the Islamic banking industry to develop a derivatives market. In the current increasingly uncertain global financial environment, investors need to be in a position to mitigate and manage these emerging new risks. Islamic banking institutions, in particular, have to a large extent long-term assets which include long-term Islamic housing mortgages and Islamic financial instruments, that are funded by short-term deposits, thus giving rise to a maturity mismatch between the assets and liabilities. There is therefore a need for the development of a broader range of Islamic financial market instruments to provide the industry with effective risk mitigating instruments. In addition to the derivatives market, the Islamic financial system also needs deeper and more efficient money and capital markets to facilitate sound asset and liability, and liquidity management by Islamic financial institutions. In this regard, Bank Negara Malaysia will issue Sukuk al-Ijarah, to meet the requirements of participants in the Islamic money market.

Additionally, an important feature of development of the financial market is the gradual fall in significance of intermediation of the banking sector with a simultaneous increase of significance of the market intermediation 15 . As a consequence, the central bank’s channels of influence on the economy are changing. In the past the bank loan channel was deemed more important; it is now loosing its significance in relative terms. Until recently, the investment rate in the economy was to a large extent dependent on the domestic savings rate, which by the way was contradictory to one of the fundamental assumptions of some economic models of the full integration of capital markets. The economy was featured by the so-called home bias i.e. greater inclination of domestic investors to invest in domestic assets rather than in foreign assets 16 . The latest research 17 suggests that home bias over the past years could have dropped significantly, at least in the OECD countries. The decrease may be attributed to the very  11  Chen N., Imbs J., Scott A. “Competition, Globalization and the Decline of Inflation”, CEPR Discussion Paper No. 4695, 2004. 12  Melick W., Galati G. “The Evolving Inflation Process: an Overview”, BIS Working Paper No 196, 2006. 13  Hannoun H. “Internationalisation of financial services: implications and challenges for central banks”, Conference of the SEACEN Governors Bandar Seri Begawan, Brunei Darussalam, 4 March 2006. 14  McKinsey Global Institute, $ Trillion and Counting: Taking Stock of the World’s Capital Markets, February 2005.
Income per capita is only half of the highest GNI in the group, or only 33% of the average GDP per capita (PPP terms) of the 27 EU countries. We have a strong need of funds and permanent technical assistance in order to continue with and accelerate our structural reforms. The Greek example is a newest lesson. European and other funds, without all the painful and grave structural reforms, could not protect the country from facing the present crisis. However, it seems that, without structural reforms, they just boost the illusion. The recent crisis has highlighted the need for the international financial institutions to have adequate level of resources and flexible, innovative and swift technical infrastructure. It is a prerequisite for a well targeted, timely, coordinated and efficient response to global shocks. The strong increase of IBRD disbursements, policy based lending and advisory services in 2009, the dominance of social protections programs, on the background of the social implications of the crisis, pinpoint the rapid and well targeted adjustments in the lending policy and expertise provided by the World Bank. The share of the World Bank financial support to the region in the total WB financing in 2009 rose to 20% (compared to the average of 16% for the previous three years). Significant weight was put on the enhanced social protection, regulation adjustment for the purpose of trade promotion, financial sector reforms and improved governance. Dear guests, Let me once more repeat that looking forward, the role of the World Bank becomes even more pronounced.

As stated in the World Bank Annual Report 2009 “targets that it would have been difficult to reach even before the crisis are now considered implausible, and a real risks exists that the financial and economic crisis that begun in United States may develop into a humanitarian, political, and security catastrophe in the world’s most vulnerable regions.” The ECA Region was the hardest hit region by the global crisis. The decline of external demand, unfavorable terms of trade, decline in capital flows, as well as spillover effects to the domestic demand resulted in a fall of region’s GDP in 2009 of about 6%. With the real sector of the economy contracting and financial flows being constrained, unemployment and poverty have risen. Although all countries in the region faced with challenges during this turbulent time, still the crisis has had a disproportionate impact on the vulnerable in the less developed countries calling for bigger assistance to mitigate social impact. The World Banks’ assistance was of a paramount importance in the past and will continue to be. It is not only about the financial support, but the support and guidance in implementing structural reforms. The mix of the World Bank programs aimed at creating broader based growth, efficient public sector and social protection, has yielded in decrease of the poor or vulnerable population in the region (18% of the total population has exited this group, since 1999).
As real convergence is progressively achieved and as structural reforms proceed, the case for a narrow band would also become stronger. Should this latter path be followed, the burden of adjustment to external shocks would, of course, have to be borne by the real economy. In the first instance, this means pursuing a prudent fiscal policy. The current aim of fiscal policy is indeed to reduce the deficit to GDP ratio to around 2.5% by 2004, from 5.3% last year and over 10% in the late 1990s. By restraining domestic absorption, tighter fiscal policy should enhance the credibility of the exchange rate peg. Moreover, a smaller borrowing requirement also frees up resources for the private sector and helps to contain upward pressure on interest rates, thereby stimulating economic growth. Finally, bringing the budget deficit closer to balance will then give fiscal policy the leeway to respond in the event of adverse shocks or cyclical downturns. The response to shocks will also depend on the degree of flexibility in the economy as a whole. Unlike most accession countries, Malta has a long experience of a functioning market economy, driven by private ownership of productive assets and with much of it exposed to international competition. In general, therefore, the private sector has already proved that it can cope with adverse shocks. In this regard, the flexibility of the labour market has been especially important. This flexibility must, however, be enhanced in order to safeguard competitiveness.

This has been confirmed in an ECB assessment of Malta’s monetary and exchange rate policy in connection with the Pre-Accession Economic Programme Report for 2002, where it is noted that the current regime has served Malta well in promoting real and nominal convergence. In view of these considerations, and given the importance which exchange rate stability has for trade and investment, the current regime remains the preferred arrangement for Malta. Taken together, therefore, the institutional arrangements governing ERM II and the successful experience with the current fixed exchange rate regime suggest that the way forward will consist of a gradual reduction in the weight of the US dollar and sterling in the currency basket, such that by the time Malta will be ready to join ERM II the euro will be the sole reference currency. If the United Kingdom were to join EMU in the meantime, this would automatically raise the proportion of the euro in the currency basket, making the approach to ERM II that much easier. Consistently with this objective, the weight of the euro in the basket was increased from 56.8% to 70% last August. BIS Review 70/2002  3  Given that Malta’s optimal exchange rate strategy in the run-up to ERM II has been identified, the next question concerns the choice of the central exchange rate and the fluctuation bands. The choice of the central exchange rate and fluctuation bands Some might argue that the choice of the central rate is not vitally important.