samchain/econo-pairs-v1 huggingface dataset:
According to the Commission, less than 2 per cent of EU nationals are resident in another EU member state. The mobility, on an annual basis, of EU nationals within the EU is less than 0.4 per cent of the resident population (about 1.5 million persons). In 1998, migration between states in the USA was approximately 2.4 per cent of the population. The low levels of mobility reflect various institutional differences (such as, for example, professional recognition of qualifications) as well as cultural and linguistic differences between the EU 8 member states. A common perception in Sweden is that the mobility of the labour force will not play any major role - at least within the near future - in stabilising fluctuations in production and employment that arise from country-specific shocks within the EMU area. Let me finally conclude by stating that wage formation is central to the development of the Swedish economy. The Riksbank’s primary task is to uphold the inflation target. The Riksbank shall also, pursuant to the background to the Sveriges Riksbank Act, safeguard growth and employment if this can be attained without neglecting the price stability objective. The challenge of maintaining price stability and a good development in employment will remain if and when Sweden takes part in the Third Stage of EMU. It is therefore important that, for instance, regulatory systems, traditions and labour market policy should lay the foundation for sustainable growth, a high level of employment and a low inflation rate.

A central factor in determining aggregate growth in the economy is the labour supply. The growth rate in the number of hours worked slackened from 2.5 per cent in 1999 to approximately 0.5 per cent in 2001, while employment rose by approximately 2 per cent each year. The weak development in the number of hours worked during the period 1999 to 2001 is mainly connected to an increase in absence due to illness and a decline in the average working hours. The growth in sick leave has brought down the number of hours worked over several years. The number of persons absent due to their own illness increased by an average of 13.6 per cent per year during the period 1999 to 2001. There has also been an increase at the beginning of this year. During the first quarter, the number of persons absent due to illness rose by an average of 2.8 per cent. The rate of increase has thus declined. The question is whether the increase in sick leave is due to cyclical or structural factors. Historically, sick leave has increased, with some time lag, when the Swedish economy has been operating at high pressure (see diagram 1). If the upswing in the number of absences is due to economic reasons, it is possible that the current high level is a repercussion of the economic boom during 1999-2000. In other words, we could expect the absences due to illness to fall when the economic slowdown makes its mark on the labour market.
Recent surveys by MacroMarkets and by Fannie Mae indicate that households expect negligible gains in home prices over the next few years, with many expecting that prices will continue to decline. Macroeconomic consequences The ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery. Housing has inhibited economic activity through a number of channels. First, the strong rebound in residential investment that typically powers economic recoveries following deep recessions has been absent. For example, nine quarters following the ends of the mid-1970s and early 1980s recessions, residential investment had climbed by 65 percent and 55 percent, respectively, above the level at the corresponding troughs. In contrast, during this cycle, there has been no rebound. In the third quarter of 2011, residential investment was still somewhat below the level in the second quarter of 2009. Second, by eroding household wealth, the decline in housing prices has contributed to greater weakness in consumption. For most American households the family home is by far the largest tangible asset, a buffer against misfortune, and often a significant savings vehicle to fund retirement.4 Since home values peaked in 2006, homeowners have lost more than half their home equity – about $ trillion – and expectations of future gains have also declined. At present roughly 11 million households are in negative equity with the aggregate amount of negative equity estimated to be roughly $ billion.5 Third, the weakness in home prices has reduced credit availability.

The Home Affordable Refinance Program, or HARP, was set up to facilitate refinancing of high loan-to-value prime conforming mortgages. The announced goal of the HARP was to  13  We should want the cost of misrepresenting loans to be invariant to the state of the jobs market. 14  Risk retention will also apply to some forms of mortgages in future. 6  BIS central bankers’ speeches  refinance 3 million to 4 million mortgages. However, shortcomings with the original program mean that less than a million HARP refinancings have taken place. Legal risks discouraged lenders from participating more fully in HARP to date. Notably, if a lender refinanced a loan made by another company, it was liable for the underwriting associated with the original loan. The profit from refinancing was unattractive relative to the risk of being forced to repurchase the loan. Given this, lenders had little incentive to compete to refinance loans and this led to higher mortgage rates and less refinancing. Many of these issues have been addressed by recent revisions to HARP and related decisions by Fannie Mae, but more could and should be done. Remaining legal issues could be alleviated by harmonizing standards between Fannie and Freddie. I would like to see refinancing made broadly available on streamlined terms and with moderate fees to all prime conforming borrowers who are current on their payments. This could substantially increase the number of refinancings.
The two most noteworthy examples of this are the Commercial Paper Funding Facility, which was introduced in October 2008, and the Term Asset-Backed Securities Lending Facility (announced in November 2008, but not up and running until last month.) Third, once policy rates were near the zero-bound, we expanded the type of assets that the Fed purchased. In order to put downward pressure on general longer term borrowing rates, particularly mortgage rates, the Federal Reserve has purchased the debt of the GSEs, namely, Fannie Mae and Freddie Mac and the mortgage-backed-securities they issue, and, more recently, longer-term Treasuries. So why has the Fed done so much in terms of special programs? As I see it, there are four major reasons behind the dramatic expansion of the Fed’s liquidity programs: •  To provide liquidity to banks and dealers in order to slow down the deleveraging process. •  To expand the balance sheet capacity of the private sector to counteract the shrinkage underway in the non-bank financial sector. •  To restore and improve market function. •  To ease financial market conditions. This financial crisis has been marked by the rapid deleveraging of the non-bank financial sector. This deleveraging has been driven mainly by the collapse of securitization activity, pressure on dealers to reduce leverage and the spillover of these efforts on to other financial players such as hedge funds. This deleveraging process, in turn, has put intense pressure on the balance sheet capacity of the banking sector.

Not only can banks no longer securitize assets as before, but assets that they thought were off their books have come back on. BIS Review 48/2009  1  Although the deleveraging process is inevitable following periods when the financial system has become overextended, it does matter how this deleveraging process takes place. In the current crisis, the deleveraging process at times has been very violent and dangerous, with powerful reinforcing feedback loops intensifying the process. During these episodes, bystanders who did not engage in excess may be trampled and fail. This may exacerbate the tightening in financial conditions, intensifying the constraint on credit availability and the downward pressure on economic activity. For example, in March 2008, in the run-up to Bear Stearns’ demise, the deleveraging process intensified. Market volatility increased; this caused lenders to increase the haircuts they assessed against collateral to secure their lending. The higher haircuts, in turn, squeezed highly leveraged investors who were forced to sell assets. This drove down asset prices and increased price volatility further, leading to still-higher haircuts. This intensified the deleveraging process, which led to more mark-to-market losses. The Federal Reserve’s facilities for banks and dealers have been designed, in part, to slow down the deleveraging process. The TAF, the TSLF and the PDCF have provided assurance to banks and dealers that they have a place where they can obtain funding for their less liquid collateral.
Given its need to instil confidence in the markets and to ensure the stability of the euro exchange rate, the European central bank is likely to want to be perceived as ready and able to operate effectively in the dollar market, for which substantial dollar reserves may be required. In the short term, the response of non-European central banks to the introduction of the euro is also likely to be cautious. Ultimately, the desired euro holdings of these central banks will largely depend on the decisions they make about their exchange rate regime. A number of countries -- including the central European countries that have applied for membership in the European Union and other countries in Africa -- may decide to peg their currency to the euro. Yet these countries may well wait for the newly-formed European central bank to establish its policy record and clarify its operating procedures before they commit their currencies to a euro peg. Indeed, history suggests that a currency’s role as an international reserve, means of exchange, and store of value is slowly gained and slowly lost -- as the examples of the dollar and pound sterling illustrate. The dollar, in particular, may have seemed on the way to losing much of its international prominence after the demise of the Bretton Woods system in 1973. After declining as a share of international reserves and a means for international transactions from 1974 to the mid-1980s, however, the dollar’s relative use has not changed significantly during the past decade.

The Governing Council does not react mechanistically to a single variable - whether this be a forecast, the exchange rate, unit labour costs or fiscal indicators - but rather takes into account the complete picture offered by all available and meaningful leading indicators of future inflation. In this context, the Governing Council analyses the economic reasons behind the projected risks to price stability. The appropriate monetary policy response to a threat to price stability will depend on the nature of the threat. The Governing Council can only understand the nature of the risk if it is presented with a full set of data. From these, it can attempt to identify the nature of the disturbance to price stability. Having identified the threat, an appropriate policy response can be selected and implemented. Internal forecasts of economic activity and inflation in the euro area can also contribute to the success of an appropriately forward-looking monetary policy. However, the Eurosystem should not be judged on, or held accountable for, the accuracy of its internal forecasts. Thus, publication of the forecasts cannot contribute to accountability. Rather, its performance in maintaining price stability in the medium term should be used by the public to judge the success of the Eurosystem. Allow me to say a few words on certain proposals made in the recent public debate, which may be deemed to suggest that the focus of monetary policy should be shifted towards objectives other than price stability.
(3) In 2004, the foreign reserves stood at Euro 717 million, and in 2011 (April) they climbed to Euro 1 872 million, which is by 2.6 times more, and always ample to respond to the occasional imbalances in the foreign exchange market. (4) The crucial question would be: Was the banking system making enough credits i.e. was the National Bank disabling the “smooth” lending to the private sector, or was it the opposite? The figures speak for themselves! In the seven-year period from 1997 to 2003, the average annual credit growth equaled 11.6% and in the seven-year period from 2004 to 2010, it equaled 23.1%, which is by two times faster. The comparison between the credit growth and the GDP growth shows that in the 2004–2010 period, the nominal credit growth was by 3.12 times faster relative to the nominal GDP growth, while the credit real growth was by 5.7 times higher relative to the real GDP growth. Should this difference be even greater? (5) The banking system also improved substantially. It remained undamaged even during the Great Recession. i. The solvency remained high. The capital adequacy ratio was preserved to a very good level of 16.4%. The liquidity, after the worrying downward trend (2007, 2008 and early 2009), was reestablished, thanks to the undertaken measures, to a very solid level. In March 2009, the liquid assets constituted 20.2% of the total assets, and in December 2010 it made up 30.7%. The household deposit-liquid asset coverage ratio increased from 44.6% to 61.9%.

They failed to see the nature of the exchange rate regime and that changing such concept could only make greater damage. We endured. The situation consolidated. The data on credit growth, which, even back than, was not within the negative zone, unlike most of the European countries, and the banking sector stability justified our beliefs. Certainly, there are other sensitive situations. They will maybe take their turn on some other occasion. Not now during the pre-election period! Dear all, As I already said, the economy is an open equation with constant unknown variables. The financial crisis and economic recession denied many lessons developed to the level of a  BIS central bankers’ speeches  3  dogma. The central banks started a new post-recession period. They will have to take care more of the financial stability, because it turned that the price stability is not sufficient to ensure financial stability. It raises many new issues that will not be discussed now. I am convinced, however, that this institution becomes more capable to face all challenges. I wish that Dimitar and all staff members achieve better results and certainly, a personal happiness. I would like, once again, to thank you for being here tonight, for the cooperation we had, for each word of kindness that we exchanged and for everything that could join us in the future. I also wish you professional satisfaction and personal happiness. Thank you. 4  BIS central bankers’ speeches
And this quest for shareholder returns was in turn aided and abetted by creditors who, far from pricing this rising risk, charged a low and falling interest rate to the banks, further fuelling risk-taking incentives. This risk-shifting crystallised as the crisis broke. At that point, yields on bank borrowing shot up and risk-taking was crushed. Creditors bore large losses, which would have been larger still without government support. This experience makes clear that risk-shifting is not a theoretical phenomenon; it is very much real, with large costs for creditors and for the wider economy. Indeed, the welfare implications of risk-shifting are doubly troubling. Not only does it generate excessive risk-taking and credit creation during upswings. As importantly, it also contributes to excessive caution and a credit crunch during the downswing. Risk-shifting results in twosided deadweight costs, for creditors and for the macro-economy. 19 Both have been much in evidence over recent years. (b)  Risk-alignment  A related, but distinct, micro-economic risk friction concerns how rights are allocated to different stakeholders in a company. Standard corporate finance theory sets out, on the face of it, a coherent allocation of control rights and risks. Shareholders have a junior claim on the profits of a company, in that they are paid out after employees, creditors and the taxwoman. Theirs is the riskiest piece of the profits pie. This means “ownership” is really a misnomer when applied to shareholders. What defines shareholders is not that they own most or all of the company.

In Sweden CPI inflation has fallen from around 5 per cent in 1994 to approximately 2 per cent in 2003. Even in a more long-term perspective, inflation shows a downward trend, which is illustrated in a figure showing inflation in OECD countries. Other parts of the world have experienced a similar development. The IMF’s previous chief economist Ken Rogoff has demonstrated in an article that global inflation has fallen from 30 per cent to 4 per cent between 1993 and 2002. Which factors could lie behind this remarkable slowdown in the rate of price increase? I believe that it is mainly a combination of three factors: (1)  A change in monetary policy with independent central banks applying inflation-targeting,  (2)  IT investments enabling large-scale cost savings and  (3)  Globalisation that entails, among other things, increased competition from new low-wage countries and pressurises producer countries towards greater productivity. 1. Independent central banks with inflation targets  At the beginning of the 1990s, in the aftermath of the years of overheating and crisis, a process of reorientation of economic policy began in Sweden: the tax system was reformed and combating inflation was given priority. The Riksbank decided at the beginning of 1993 to introduce an inflation  BIS Review 21/2004  1  target, defined as 2 per cent with a tolerated deviation interval of plus/minus one percentage point, and fiscal policy was increasingly oriented towards budget consolidation. Similar developments took place at around the same time in many other countries.
By observing the exchange rate, the central bank can thus observe expectations of the future price level. Higher inflation expectations and thereby a higher expected future price level lead then to a depreciation of the currency today, all else being equal. A measure that raises expectations of future inflation and the future price level should thus show up in a depreciated currency. A strengthening of the currency may therefore be ominous and interpreted as a sign that inflation expectations are falling. 11  9  www.rba.gov.au. 10  A well-argued proposal on a combination, a hybrid, between a price level target and an inflation target is presented in Giavazzi, F and Mishkin, F. S. ”An Evaluation of Swedish Monetary Policy 1995-2005”. (2006/07:RFR1), www.riksdagen.se. 11  See equations (8) and (9) and more details in the appendix to this speech. BIS Review 19/2009  5  The exchange rate as a policy instrument – "The Foolproof Way" to escape a liquidity trap The direct link between the current exchange rate and the expected future price level first leads, as mentioned, to the insight that the current exchange rate depends on the expected future price level and can be used as an indicator of the latter. But the link also leads to the idea that cause and effect can be reversed. Instead of the expected future price level determining the current exchange rate, the current exchange rate can determine the expected future price level.

It is important to intervene upstream in the process well before retrenchments take place. MAS  is working with financial institutions to identify early on jobs that might be at risk in the future. We then work with these financial institutions to proactively up-skill these workers through professional conversion programmes. These are all early efforts still and will take time to bear fruit. On the positive side of the jobs equation, we continue to see good demand for professionals in several areas of finance. These include compliance, risk management, insurance underwriting, and asset and wealth 9 / 10  BIS central bankers' speeches  management. Within the technology area, there continues to be strong demand for expertise in cyber security, data analytics, network architecture, artificial intelligence, and machine learning. MAS is working closely with the industry to build the relevant skills and competencies at all levels within our financial institutions. To ensure graduates are job-ready, we are partnering with institutes of higher learning to develop curriculum in new growth areas, for example risk analytics for insurance. To support mid-career finance professionals deepen their specialist skills so that they stay relevant, we have launched the SkillsFuture Study Awards, with a total of 170 awards to be granted this year. To equip capable Singaporeans to take on regional or global leadership roles in financial institutions, we are co-funding leadership programmes at NUS and SMU focusing on international exposure, Asian market insights, and professional networks.
At the same time, politicians and the authorities have the task of creating the business conditions which will support the banks in fulfilling these prerequisites. With the business conditions in mind, I will comment today on four factors which I regard as essential: First, relevant and effective regulations; second, maintenance of Switzerland’s economic and political stability; third, protection of the privacy of honest tax-paying bank customers; fourth, ensuring access to foreign markets. I would like to begin, however, by talking about the economic importance of the banking industry for Switzerland, as well as the fundamental challenges faced by this industry at present. Economic importance of the banking centre in Switzerland The banking system is often described as the life blood of the economy. With good reason. General economic prosperity and the development of the banking industry are closely related. When intermediation between capital supply and demand works well, a significant contribution is made to the prosperity of a country.1 It works the other way round, too. The banking centre benefits from a prospering economy, because the demand for financial services from companies and private households increases, not least in the area of management and investment of assets. Switzerland is a prime example of the positive interdependency between financial developments, on the one hand, and overall economic prosperity, on the other.

Responding to a question by Investor.bg, BNB says that given the lev’s fixed exchange rate, delaying the entry into ERM II cannot create direct financial and macroeconomic risks for the Bulgarian economy. Could the opposite happen, however? Is it possible for ERM II membership to be negative for Bulgaria if it comes during unfavourable times for the European economy? To put it in different words, should we be in a hurry for the eurozone or should this goal be consistent with the conditions and trends for the time being? We should follow our strategic plan with a focus on the quality of the process. Due to the nature of our monetary regime, based on a fixed exchange rate, as well as our firm commitment to not change it until country’s eurozone accession, our currency being part of ERM II will not lead to any changes in our macroeconomic position. The direct effects will be rather positive, such as increasing Bulgaria’s credit rating and improving the overall investment environment. Spanish economist Daniel Lacalle told Bloomberg TV Bulgaria in an interview that he believes the ECB’s policy of stimulation has long exhausted its efficiency and the only thing it is currently doing is to transfer funds from productive to non-productive sectors of the economy. Lacalle also recalls that negative interest rates have played a significant role in Japan’s difficulties with inflation and growth. What’s your opinion? Is there a risk for the eurozone to get into the Japanese scenario? The global economic environment is far from being conventional.