samchain/econo-pairs-v1 huggingface dataset:
It is possible for a month’s activity data to show a steep drop that does not necessarily respond to economic factors and that are later offset in subsequent months, without either being construed as a change in the mediumterm trajectory of the economy. On the domestic expenditure side, a development of the third quarter most worth noting was the strengthening of investment which made up for a mild slowdown in consumption. By investment components, special mention deserves gross formation of fixed capital in machinery and equipment, as its rates of change in annual terms have remained high throughout the year (Figure 3). Our 2018-2020 growth forecast Turning to our projections, after growing 2.8% in the third quarter, we estimate growth for the full year at 4%. This projection—which considers October data up to the statistical closing of the Monteray Policy Report—is in the lower bound of the range estimated in September (4%-4.5%), mainly due to the deterioration of mining activity. However, compared with what we foresaw before September, the growth in 2018 is in the upper bound of the range (Figure 4). For the next two years, we still estimate that the economy will grow around potential, gradually approaching trend growth. 2  Thus, the projection ranges considered in September are maintained: 3.25% to 4.25% in 2019; 2.75% to 3.75% in 2020. For spending, we anticipate a change in composition, to higher growth in investment and some slowdown in consumption.

The main stylized facts revealed by this analysis (Table 3) of Chile’s labor force show an increase in the participation of women and a reduction in that of the youth, which is consistent with the increased coverage of college education for the new generations. Also, human capital has grown significantly, but lags behind developed countries in terms of coverage and especially quality. The return on the  7  working experience of Chilean workers is low by international standards, with marked differences across individuals with different levels of education. About the characteristics of the labor market, we observe that although informal work has decreased in Chile it is still high (around 30% of total employment), well above the standards of developed countries. At the same time, our labor market is very dynamic, with a high turnover relative to other countries and with a significant incidence of fixed-term jobs. Meanwhile, salaried employment is increasingly concentrated in big companies. Real wages have grown strongly for all income levels, but high dispersion persists. The wage differences are correlated with differences in the duration of employment (turnover). Finally, the aggregate unemployment rate shows a downward trend, partly due to the fall in the relative participation of younger workers, and the hours worked have fallen systematically during the last twenty years. Regarding female employment, the data confirm that women receive a lower pay for the work than men, even controlling for such characteristics like education, specific occupation and expertise.
A change in this field was introduced in October last year, which in principle means that pharmacies are obliged to exchange a drug in a prescription for a cheaper equivalent (generic) unless the customer is willing to pay the difference. The effect of this new regulation, combined with patents expiring, has led to significant price competition. Pharmaceuticals companies have gradually lowered their prices through more than 3,500 reductions, which benefits us as individuals when we purchase prescription drugs and as tax-payers as the cost of the county councils’ subsidies for prescription drugs declines. Pharmaceuticals’ costs are included in CPI as one of many sub-indices and are intended to reflect the average household’s costs for prescription drugs. Over the past ten years this index has risen at an average rate of 12 per cent a year. Now this increase has been turned around to a small decrease. The difference between the historical rate of increase and the current price fall corresponds to a 2 saving of approximately SEK 1 billion a year for Swedish households. Correspondingly, the county councils’ costs have been reduced by approximately SEK 2 billion. There are large sums involved here and they deserve some attention. Nevertheless, it is difficult to find articles dealing with these large savings and with the increase in competition. The main aspect appears to have been lost in the media. Instead, one finds articles on the difficulties for our monopoly company Apoteket to adapt, as it exists on a margin of approximately 20 per cent.

High level of international mobility If one looks at this period in diagram form, it is quite striking how much growth varied, even if a fiveyear sliding average is used. The fluctuations in economic activity were considerable and this of course put households in a vulnerable position, as there was broadly speaking no social welfare system at that time. Although living conditions improved rapidly, they were still insufficient for many people. There was extensive emigration. However, a large number of these emigrants returned to Sweden and we had a widespread interchange with other countries. There were very few limitations to international mobility for people, capital, products and ideas. If we instead look at price developments, we can observe average low rates of price increase around 2 per cent a year during this time, and during the period as whole. However, there are also substantial variations. There were general price falls - deflation - on a number of occasions. Deflation is normally associated with very large shocks such as those during the 1930s depression in the USA and Germany, but at the end of the 19th century, there were also price falls in Sweden during an otherwise favourable economic climate. One important explanation for this is that deflation is not necessarily caused by weak demand in the economy. Rapid productivity growth can also generate a price fall and this was what occurred periodically during the second half of the 19th century.
I am not denying that a capital regime to cover market risk is necessary, particularly for those countries like the United States whose banks are heavily involved in trading activities. We are intending to introduce the regime in Hong Kong by the end of this year, and a number of countries in the Asian region are intending to do the same. However, they are doing so largely to be seen to be adhering to international standards, rather than because their banks are running substantial trading risks. Even in Hong Kong, which has the fifth largest foreign exchange  BIS Review 55/1997  -3-  market in the world and the seventh largest derivatives market, the incorporation of market risk will have only a minor impact on most banks’ capital adequacy ratios. The concentration on market risk has perhaps led to other supervisory areas not receiving the attention which they deserve. In particular, credit risk still remains the main risk facing most banks, and it is therefore disappointing that there are still no internationally agreed guidelines in areas such as loan classification, bad debt provisioning and non-accrual of interest on non- performing loans. Most countries in Asia, including Hong Kong, do have their own rules in these areas but the lack of an agreed standard makes it difficult to undertake cross-country comparisons of asset quality. I hope, therefore, that this is an area which can be addressed by the Basle Committee in the near future.

Second, when trying to enforce new supervisory guidelines and rules on our local banks, one of the first questions they will ask is what is being done elsewhere. It is thus very helpful to be able to point to the relevant international standard in order to confer legitimacy on what we are trying to achieve. Of course, this presupposes that international standards are relevant to individual countries and territories. The Basle Committee on Banking Supervision has played a major role in setting standards which do have such relevance. In particular, the Basle capital adequacy ratio, which is still called the “Cooke ratio” in parts of Asia in deference to our chairman here today, has become the de facto capital standard in most supervisory systems around the world despite the fact that it was originally intended to apply only to internationally active banks. Despite this enormous achievement, however, it can be argued that the subsequent work of the Committee did become somewhat too narrowly focused on issues which are of principal interest to supervisors from G-10 countries. This is only natural since these are the people who comprise the Basle Committee but it perhaps left something of a vacuum in the setting and promulgation of standards with more global relevance. In particular, much of the work of the Basle Committee has been dominated in recent years by the formulation of its recommendations to extend the capital adequacy regime to cover the market risk arising from trading in derivatives and other financial instruments.
This leads – again temporarily – to higher growth and more inflation. If, on the other hand, the central bank wishes to curb inflation, it increases its policy rate. I deliberately used the word ‘temporarilyֹ’ because if monetary policy were to target real interest rates below the equilibrium rate on a sustained basis, inflation would go on rising but this policy would not result in higher real growth in the long term. On the contrary, uncertainty about the path of inflation would reduce growth potential. This is one of the reasons why central banks are tasked with ensuring price stability. For this mandate to be fulfilled, the policy rate must be set such that, at the desired inflation rate, the real interest rate corresponds with the equilibrium rate in the medium term. It is likely that the real equilibrium interest rate is lower today than in the past. The case for this hypothesis is supported by the fact that real interest rates have been falling globally for a 1  In fact, there are several possible definitions. The ‘ex ante’ real interest rate is the nominal interest rate less expected inflation. The ‘ex post’ real interest rate is the nominal interest rate less the effective inflation rate. Page 3/16  considerable time because, it is argued, people are investing less and simultaneously displaying a greater propensity to save. The propensity to save is increasing due to population ageing.

This demographic trend can be measured using the old age dependency ratio, which measures the ratio of people over 64 to the working age population. An ‘older’ population has a higher old age dependency ratio. Chart 3 shows that the old age dependency ratio in Switzerland, as in many other countries, is rising. Pensioners live off their savings. And an ageing population needs to save more today in order to be able to finance a specific level of consumption in the future. Another cause of the increased supply of savings is the integration of China into global financial markets. Savings in China are high as a result of its ageing society and its rudimentary state pension system. In the current economic situation, uncertainty regarding the future development of the economy in certain parts of the world may also have pushed up the supply of savings. While the propensity to save has increased, the willingness to invest may also have fallen. On the one hand, this may once again reflect heightened uncertainty over future economic conditions. On the other, expectations of lower productivity growth might also be playing a role. Furthermore, industrial economies are being transformed into service economies, with potentially lower capital needs. All these factors have resulted in a relatively low real equilibrium interest rate today – across the world, and thus also in Switzerland. Moreover, global monetary policy is expansionary due to undesirably low inflation and subdued economic growth in the wake of the financial crisis.
This should take into account an insurer’s legal and professional obligations, the wider impact on society, issues of equity and fairness, and preservation of virtues such as honesty and compassion. These issues I raised are delicate issues that can involve complex ethical choices. It will test the values of corporations, its people, its leadership. Specific issues for regulation and supervision Let me mention a few words on specific challenges for regulation and supervision in the future that is before us. First, the lifespan of regulations is getting shorter and shorter, with new areas of risk emerging faster than regulators can write new rules. Second, and adding to the complication, potential threats are also creeping in from beyond the traditional regulatory perimeter. This can be both from non-traditional players, or unfamiliar business models or technologies. Third, we may have to simply accept that we may never fully grasp or understand emerging risks facing the industry, in a timely manner. Allow me to offer some reflections on these issues. First, we need a better and effective approach to collate intelligence, including from non-traditional sources. Technological advancement offers additional opportunities. There is clearly vast potential on the use of big data and machine learning to improve risk identification and assessments. Last year, the US SEC successfully charged a bank for failing to adequately train its representatives in the sale of certain complex debt instruments, using custom analytics. Tools were developed to sift through millions of trading records, a task that would have been impractical with traditional investigative techniques.

Of course, it is never easy to judge what levels of financial asset prices are realistic, and the risk of volatile adjustments remains, as we have seen in recent days, but the important point is that the downwards adjustment experienced last year, which could have been abrupt and might have generated wider economic effects, was in fact achieved without significant repercussions on the real economy. In both cases, the result is a better foundation for the prospects for sustaining growth in the economy. Let me now turn from the year past to the year ahead. I have stressed the encouraging performance of the economy over the past year, and the confidence we can hopefully take in its underlying soundness, because we undoubtedly face serious challenges and a material increase in uncertainty in  BIS Review 22/2001  1  the year ahead. Most notably, we have to manage the UK economy against the background of an international environment in which the US economy has begun to experience a sharp slowdown. Each quarter the Bank of England publishes an Inflation Report which sets out the MPC's considered view of the prospects for growth and inflation looking two years ahead. Let me start from our latest Inflation Report, published last month. That recognises that the weaker outlook in the US will depress global demand and dampen growth prospects in other countries. The UK cannot, of course, expect to be immune to this weakening process.
Now, of course, it all depends on how badly you need that car, and in reality some price levels may stay elevated and some may not. Monetary policy should not respond to supply shocks which do not become generalised through their impact on inflation expectations. In more modern times, and certainly in the life of the MPC, supply shocks have tended to be temporary in terms of their impact on inflation. But if that is not likely to be the case in our assessment, we will step in and adjust policy as needed. Nothing has changed in our approach. To illustrate this approach, let me briefly summarise the announcement we made at the end of our meeting last week, drawing out the differences of view, which are very reasonable differences. The MPC emphasised that the inflation target applies at all times, with a clear focus on medium-term prospects for inflation rather than transient factors. The judgements required by this medium-term focus are particularly important and challenging at a time like this of very large shocks to the economy. For most members of the MPC, the outlook for the labour market – as I described earlier – is highly uncertain and to some degree likely to be resolved in fairly short order, and this justified a wait and see approach on policy in view of the continuing belief that higher inflation will be temporary.

Our view is that the price pressures will be transient – demand will shift back from goods to services, global supply  The hard yards ‐ speech by Andrew Bailey | Bank of England  Page 3  chains are likely to repair themselves, and many commodity prices have demonstrated mean reverting tendencies over time. But, the pressures are very much still with us, and there is still we believe pass-through to retail prices to come, and manufacturers’ output prices are still rising rapidly. Added to that is the uncertainty around how the labour market puzzle resolves itself, and how that will affect employment and earnings. Meanwhile, just to remind, the recovery is weakening. A lot therefore turns on how effectively supply capacity is rebuilt and over what time, and how the labour market evolves. These are truly hard yards. For most of the rest of my time, I am going to turn to the setting of monetary policy. Monetary and fiscal policy have operated independently but consistently – unsurprisingly I would emphasise – to provide the bridge through Covid, supported I should add by the stability of the financial system and macroprudential policy. We have had to rely on asset purchases to do a lot of the work because of the proximity of interest rates to the lower bound. There is plenty of debate around QE, some parts of that debate are better founded than others.
One of the more pronounced differences with earlier periods is that Sweden has broken the pattern of high inflation, recurrent cost crises and devaluations that characterised the 1970s and 1980s. Surveys and other information indicate that for some time now, households and firms have adapted their inflation expectations to the Riksbank’s target. In that it influences the behaviour of those who set prices and wages, this in itself assists our endeavours to keep inflation down. Estimates by the Riksbank suggest, moreover, that the long-term component of inflation decreased appreciably in the 1990s, in which case there is a more permanent restraining force that is not directly dependent on how the real economy is functioning. But as I mentioned earlier, there are good grounds for supposing that a low, stable path for inflation can generate positive indirect effects on the real economy. There are also certain signs that the cyclical fluctuations in inflation - and not just its average level - have been smoothed in recent years. 5  BIS Review 18/2000  Thus, there are some indications that the present cyclical upswing will not generate the same acceleration of inflation as its predecessors. But as output in the Swedish economy has been below the sustainable trend ever since the beginning of the 1990s - so that what we have experienced, strictly speaking, is a long period of low activity - it is difficult to tell whether the behaviour of inflation over a complete cycle has in fact changed.

Sweden also tops the United States in the domain of mobile Internet, as witness both Microsoft’s decision to locate the development of such systems here and the first WAP phones in Swedish shops. Internet use in Sweden is also well in line with the United States. Market surveys by IT consultants admittedly indicate that in relation to total retailing, Internet shopping for goods is somewhat higher in the United States but Sweden is ahead of many other countries in Europe. Most of the portals and e-commerce sites are also American. But a considerably higher proportion of Swedish banking is done on the Internet and Sweden has been an early starter with models for Internet business-to-business transactions. We also know that in the latter part of the 1990s, IT-related sectors, including the successful telecom industry, accounted for almost a tenth of manufacturing output in Sweden. Figures from the Association of Swedish Engineering Industries show a remarkable increase during the decade, from a share of just over 2% in 1993 to more than 12% in 1999. According to the same source, one fifth of Sweden’s GDP growth from 1995 to 1998 came from the IT and telecom sector. Comparing statistics can be difficult but a similar indicator - from the Department of Commerce - of the IT and telecom sector’s share of GDP growth in the United States shows that in the same period this sector made approximately the same contribution there. 3.2 Another important aspect in America has been efficient markets and strong competition.
The results also indicate that a low equity ratio in the banking sector can be an early warning of future instability. While indicators and empirical models can provide support in the assessment of financial imbalances, they can of course only go so far. Their ability to produce a precise estimate of systemic risk is limited. No two financial crises are alike, and the financial system is constantly evolving. In addition, the assessment of systemic risk must include an analysis of the consequence of a crisis. Assessments of systemic risk are therefore always based on judgement. The primary aim of the countercyclical capital buffer is to make banks more robust. The buffer may to some extent also dampen the build-up of financial imbalances. However, its impact on markets will depend on how banks increase capital ratios. Roughly speaking, banks have two options at their disposal: they can 1) increase equity capital or 2) reduce risk-weighted assets. Chart: Increased capital requirements in Norway Over the past few years, in order to meet the new requirements, the six largest Norwegian banks taken together have almost doubled their capital adequacy ratio, measured by Common Equity Tier 1 capital. This is primarily the result of a significant increase in capital. 4 Retained earnings contributed the most, and banks widened their lending spreads in 2013. Equity issues have been of minor importance. The second option I mentioned involves improving capital ratios by reducing risk-weighted assets.

This means that the central bank gives weight to fluctuations in output as well as to inflation. The expected future paths for inflation and output are included in the loss function. Let us now include a variable that captures the transmission of financial market instability to the wider economy. In this stylised model, the variable, called zt, enters the aggregate demand function. To simplify, we assume that there are only two states with respect to financial stability: either normal times with well-functioning financial markets or a situation of financial market stress (cf. the α parameter). If instability in financial markets emerges (i.e. α equals 1), the impact on the real economy will depend on the level of the financial imbalances. Within this framework, the risk of financial instability is endogenous, and monetary policy can influence this risk. A higher risk of instability can depress expected growth and inflation. When the central bank assesses the future path of inflation and output, it therefore has an incentive to dampen the build-up of financial imbalances. In this way, the central bank can contribute to a smoother expected path for inflation, output and employment over time. Let us now introduce an economic situation that is not unlike the one experienced in Norway in recent years: interest rates abroad decline and there are prospects that they will remain low for a long period. This results in a widening of the differential between interest rates at home and abroad, leading to an exchange rate appreciation.