samchain/econo-pairs-v1 huggingface dataset:
A major factor driving the slowdown is a dramatic decline in the growth rate of “total factor productivity,” or TFP, a measure of innovation and technological change.3 As Bob Gordon has taught us, U.S. productivity growth tends to cycle between periods of high growth in decades following fundamental breakthroughs in science and technology, and relatively fallow periods of steady, incremental improvements. All the evidence indicates that we are in one of the latter periods of “normal” productivity growth of 1 - 1.5 percent per year, and that things will likely stay that way until the next scientific or technological revolution.4  R-star Descends These global shifts in demographics and productivity have two important implications for the future of our economies and for monetary policy. First, slower population and productivity growth translate directly into slower trend economic growth. Second, these trends have contributed to dramatic declines in the longer-term normal or “neutral” real rate of interest, or r-star. Slower trend growth reduces the demand for investment, while longer life expectancy tends to increase household saving.5 This combination of lower demand for and higher supply of savings, along with other factors, has pushed down r-star. With open capital markets, these global changes in supply and demand affect r-star globally. The evidence of a sizable decline in r-star across economies is compelling.

This experience of slow recovery and persistently low inflation is a symptom of a deeper problem afflicting advanced economies—the root cause of which is a combination of low neutral interest 1/4  BIS central bankers' speeches  rates and the lower bound on interest rates, a topic to which I now turn. What’s Past Is Prologue Underlying these events has been a sea change in the supply side of economies, owing to fundamental shifts in demographics and productivity growth. Two demographic trends are evident: People are generally living longer and population growth is slowing. Overall life expectancy in member countries of the Organisation for Economic Cooperation and Development (OECD) has increased from about 65 years in the 1950s to nearly 80 years today, and is projected to exceed 90 years by the end of this century (Figure 6). 1 Despite this increase in longevity, dwindling birth rates are bringing population growth to a standstill. In OECD countries, population growth averaged over 1 percent back in the 1950s and 1960s, but is now running at half a percent per year, and is expected to gradually fall before dipping into negative figures by 2070 (Figure 6).2 When it comes to productivity, the changes are no less dramatic. In OECD economies, growth in labor productivity—the amount produced per worker hour—has averaged a little over 1 percent per year since 1995, about half the pace seen over the prior decade (Figure 7).
This work is very important, but unfortunately will not mean that, as of now, there will never be any more crises. So what should we do to ensure that it takes as long as possible until the next crisis breaks out? To start with, it is important to develop the financial regulatory framework both in Sweden and abroad, so as to boost the resilience of the financial system. Work on this is currently in full swing, but it will take several years before we will be able to gain a clearer view of how such a new regulatory framework may look. However, regardless of how it may look, it will affect the conditions for monetary policy, one way or another. It is thus important for central banks to continually monitor and analyse changes in the financial regulatory system. The financial crisis has also emphasised the need to better incorporate the financial markets’ significance into the macroeconomic assessment that guides monetary policy. Future developments – the stable development of Sweden’s economy requires the repo rate to be raised The recovery of Sweden’s economy after the financial crisis has now made a lot of progress. Output has largely returned to the pre-crisis level, and unemployment is in retreat. Our assessment of developments is that the high growth rate in the economy will gradually decrease in the period ahead and will approach normal levels. Underlying inflation is increasing and will be close to target by the end of the forecast period (see Slide 10).

We experienced four consecutive quarters of sequential contraction with a cumulative output loss of 9% – our deepest recession since independence. Conversely, with the subsequent recovery in the global economy, Singapore’s GDP rose sharply and now exceeds the level before the crisis. Last year, the economy grew by an estimated 14.7%. 4. Over the course of the crisis in 2008/2009, MAS’ monetary policy responses were deliberately graduated, underpinned by the objective of promoting price stability in the medium term. We did not react to every single development in the economy or the financial markets as this would have introduced unnecessary volatility and uncertainty. Following the significant deterioration in external demand in late 2008, MAS eased policy in October 2008 and April 2009 to provide support to the domestic economy. In early 2010, taking into account the strong recovery path of the economy and rising domestic cost pressures amidst high rates of resource utilisation, MAS shifted to a modest and gradual appreciation of the $ policy band. Subsequently, MAS tightened policy further in October 2010 by increasing slightly the slope of the policy band. 5. Singapore’s financial system experienced some initial strains but otherwise has proven resilient during the crisis. Banks and insurers maintained robust capital and liquidity buffers, and balance sheets were relatively strong. Their prudent risk management allowed them to weather the crisis well. MAS has also remained vigilant through the crisis, with my colleagues working hard to ensure that our regulatory and supervisory efforts remain robust. Challenges ahead 6.
The fall in risk premiums meant that the effect on asset prices were more important than what the changes in the risk free rate alone would suggest. While low risk premiums, taken at face value, signal a healthy economy, many supervisors and central banks were concerned that risk premiums had fallen too far. As we all know, risk premiums in credit market rose dramatically this summer. Uncertainty over the value of US subprime mortgage backed securities then ignited a furious “flight-to-quality”, which actually seized up important segments of the money market. It is too early to tell what the permanent outcome of these events will be. However, it is clear that if they signal a return to higher risk premiums and tighter credit conditions, asset price inflation is likely to slow down. The area where the current regime of low interest rates and small risk premiums has had its most marked impact is probably that of residential property and household debt. The rise in house prices the last ten years have indeed been unprecedented in duration, magnitude and synchronisation across countries. In Sweden, this has caused a substantial amount of public concern, and an often asked question is if there is a significant overvaluation in the housing market and if the households are overly indebted. Answering these questions is a daunting task, and requires an educated opinion on the equilibrium price of residential property and on the optimal level of household indebtedness.

The last decade has seen strong global economic growth, while, at the same time, output volatility have dropped. In practice, two paths have emerged for achieving price stability. One way is through a fixed exchange rate regime, such as a currency board. Under such an arrangement, a country simply imports the monetary policy of a country with a highly credible low-inflation regime. This path has emerged as the weapon of choice of many emerging economies. These countries want to achieve price stability, while avoiding the costly deflations which otherwise might be necessary to anchor inflation expectations. The other way is through an independent central bank with a mandate to maintain price stability. This mandate is often formulated in terms of an inflation target. The inflation target operated by the Swedish Riksbank stipulates that consumer price inflation should be 2 per cent per year, with a tolerance interval of plus/minus 1 percentage point. For all practical purposes this arrangement is close to what is found in, for example, the UK, Australia, Norway and the Eurozone. It should also be said that there is a general consensus that the inflation target in Sweden has been a successful one. Financial stability As I mentioned earlier, many central banks today also have an objective to promote financial stability. While there is close to universal agreement on what price stability means, there has yet to emerge, some attempts none withstanding, a consensus on a working definition of  BIS Review 101/2007  1  financial stability.
The information provided by the SME Credit Bureau can further support efforts by banks to strengthen risk management for their SME portfolios, regardless of the level of sophistication and size of the institutions. Banks with an SME credit model already in place can benefit from the Bureau information in various ways. For example, as the Bureau rating is determined based on diverse information obtained from various sources including CCRIS, trade credit data and the Companies Commission of Malaysia, banks can use such information to bridge any information gaps and address the limited pool of internal data available for their internal models. Such gaps currently exist, as banks in general are highly dependent on borrower information alone. In addition, given the diversity of information available within the SME Credit Bureau, banks would now have access to information on various economic sectors that may not be available within existing credit portfolios. At the same time, Bureau ratings could be used by the banks to validate the robustness of their own internal models by comparing the ratings produced between their internal ratings and that by the SME Credit Bureau. For smaller and less sophisticated banks, the Bureau information will supplement the current SME credit assessment methodology that is traditionally qualitative in nature. Such banks will be able to obtain quantitative information from the Bureau database to enhance the overall credit evaluation process, thereby supporting more informed and objective credit decisions.

Our own experience in Malaysia with the Centralised Credit Reference Information System or CCRIS that is managed by Bank Negara, and the experience in other developed and developing countries where SMEs form the backbone of the economy have shown that greater access to credit information has in fact contributed to greater access to financing and reduced loan processing times. By enriching the information available to financiers to support credit risk assessments, the asset quality of financial institutions are also improved, thereby reducing the cost of financing to borrowers and enhancing the capacity of financial institutions to continue extending credit to deserving SMEs. Allow me to elaborate the benefits to SMEs, with particular reference to the SME Credit Bureau: Firstly, the Bureau assists the SMEs to build track records. One of the key factors in credit evaluation is the historical conduct of accounts. SMEs that have no previous banking history would not have the “reputational collateral” that would otherwise give them easier access to financing. The SME Credit Bureau will be able to address this information gap by collecting and disseminating information from a wider base, including trade credit data that captures the dealings between SMEs and their suppliers. In this manner, SMEs which have no financial relationships with banks, but which have strong credit standing among their trade creditors and suppliers, will be rewarded through favourable ratings that can be used to support financing applications when the need arises.
I would also like to make it clear that the views on wage formation that I express in this speech today are my own and are not necessarily shared by my colleagues on the Executive Board of the Riksbank. Wage formation in a longer perspective High wage increases and devaluations in the 1970s and 1980s I think that every one here would agree that wage formation has functioned better in the last fifteen years than in the 1970s and 1980s. One way of illustrating this is to compare the development of inflation in Sweden and Germany. In the 1960s, inflation was on average just over one percentage point higher in Sweden than in Germany. Following the breakdown of the Bretton Woods system in the early 1970s, inflation in Germany was seen as a nominal anchor for inflation in Sweden in that the Swedish krona was pegged to a currency basket dominated by the D-mark. This strategy did not work. During the 1970s and 1980s, inflation in Sweden was on average more than four percentage points higher than in Germany (see Figure 1). This is largely related to the development of labour costs in the two countries. Labour costs per produced unit – unit labour costs – increased much more rapidly in Sweden than in Germany during the 1970s and 1980s (see Figure 2). In order to increase the competitiveness of Swedish industry, the Swedish krona was devalued several times in the late 1970s and early 1980s.

Labour productivity in entire economy Annual percentage change, seasonally-adjusted data 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1 -2  -2 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11  Note: Squares are the Riksbank’s forecasts. Outcomes are quarterly data and the forecasts are annual averages. BIS Review 154/2008  Sources: Statistics Sweden and the Riksbank  11  Figure 7. Cyclical variation in GDP and number of employed Percentage deviation from trend 6  6 GDP  4  4  Employment  2  2  0  0  -2  -2  -4  -4  -6  -6 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  Note: Trend calculated using Hodrick-Prescott filter. Broken lines are the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank  Figure 8.
The relentless upwards march of the accountant and hairdresser, at the expense of the downtrodden (but presumably better-coiffed) farmer, is one of the lesser-known societal power struggles of the post-Industrial Revolution period. But transition on this scale is not costless, with complex shifts in the pattern of skilled employment and wages. In its first phase, the Industrial Revolution appears to have led to a shift towards unskilled employment as “the artisan shop was replaced by the factory and later by the assembly line” (Acemoglu (2008)). The share of unskilled UK workers doubled between 1700 and 1850, from around 20% to 40% (Chart 19). The same was true, somewhat later, in the US (Katz and Margo (2013)). 6  BIS central bankers’ speeches  Later in the 19th and into the 20th centuries, the demand for high-skilled workers also began to rise. Rising incomes created a demand for new goods and new, more complex and technical, ways of producing them. That increased the demand for operatives, engineers, mechanics and managers, in addition to hairdressers and accountants. Between 1850 and 1910, the share of skilled workers in US manufacturing rose from 3% to around 12% (Katz and Margo (2013). The share of low-skilled jobs also increased, from around 58% to 65%. Over the same period, the share of mid-skilled workers shrank from 40% to 23% (Chart 20). In other words, there was a “hollowing out”, or U-shape, in the pattern of employment – the hollowing-out, in effect, of the artisan.

If the first part of the 19th century had seen substitution effects dominate, the latter half saw compensation effects in the ascendancy. Moving into the 20th century, and the third industrial revolution, these emerging patterns in jobs and wages have become clearer. Technology appears to be resulting in faster, wider and deeper degrees of hollowing-out than in the past. Why? Because 20th century machines have substituted not just for manual human tasks, but cognitive ones too. The set of human skills machines could reproduce, at lower cost, has both widened and deepened. Chart 22 shows the employment pattern in the UK over recent years, ranking professions’ skills by their average pay, while Chart 23 shows the picture for a set of countries over a similar period. They tell a striking and consistent story of mid-skill jobs being lost, counterbalanced by employment gains at the high-skill and, to lesser extent, low-skill segments of the workforce. The U-shape, or “hollowing out”, has deepened and widened. What has happened to these displaced mid-skill workers? Some appear to have “skilled-up”, typically through higher or further education. In the UK, total numbers in higher education have increased from around 130,000 in 1970 to over 2 million today. In the US, total numbers in higher education have increased from 2.4 million just after the Second World War, to over 20 million today. As in the late 19th century, this skilling-up has enabled workers to keep one-step-ahead of the machine. But some displaced workers have not been on the up-escalator.
In September 2020 we proposed in response two possible and complementary expectations on the level of modelled residential mortgage riskweights: (i) a risk-weight of at least 7% for individual mortgages; and (ii) an exposure-weighted average of at least 10% for the whole portfolio.5 We’ve now received the responses to our consultation, including some very helpful and detailed data submissions. As we speak, the PRA team is forensically considering all this information to assess the likely impact of our proposals against our original assessment – including whether both floors are needed, the exact calibration, and the timing of any implementation. Four points stand out so far. First, there is a strong prudential case for some minimum expectations on model risk-weights. Given the capital held on modelled mortgages that stems from risk-weights has decreased by more than a third in the last decade, you should not be surprised to hear me say this. Second, in addition to the prudential benefits, such floors should in my view benefit competition between larger firms on modelled and smaller firms on nonmodelled approaches, an issue our competition team has been alert to for some time. Third, however, it is not yet clear whether both floors are needed, or what exactly the right calibration is, as it is not the intention of the policy to significantly increase capital across all mortgage providers; the new data we’ve received will help us expand our assessment on this point.

The euro is now used worldwide, with around 15 billion notes in circulation worth over 900 billion euros in all. That’s broadly comparable to the total value of the US dollar bills, no mean feat in just 12 years. Today is also a chance to highlight the importance of maintaining people’s trust in the euro. One of the main reasons for introducing a new series of notes is to ensure that everyone who uses them can continue to do so with complete confidence. That’s why we have drawn on a number of new technologies to modernise the security features, making the notes even more resistant to counterfeiting. In addition, the new banknotes have an innovative coating that makes them more durable than the first series. The five euro and ten euro notes are not always treated kindly. By protecting them better, we can prolong their service life and reduce their environmental impact. The new ten is the second note in the Europa series and follows the new five, which started circulating in May last year. As I’m sure you’ll agree, the note you’re going to see is instantly recognisable as a ten. It certainly resembles the ten euro notes you have in your pockets, with its distinctive Romanesque architecture. However, perhaps it will have more of a visual impact, as the images are larger and more defined, the colours are stronger and the bridge has added depth.
Central banks' balance sheet totals, percentage of GDP 30  30 The Riksbank  25  25  ECB Federal reserve  20  20  15  15  10  10  5  5  0 Jan-07  0 Jul-07  Jan-08  Jul-08  Jan-09  Jul-09  Sources: Bureau of Economic Analysis, Eurostat, Statistics Sweden and the respective central banks  As we have discussed earlier, the Riksbank has also implemented unconventional measures – measures in addition to the policy we would probably have conducted under more normal circumstances. The effects of these measures are in many cases similar, which means that it is difficult to compartmentalise them. However, even if the boundaries are not razor-sharp, it is possible to divide them up according to their basic purposes. There are measures which are explicit monetary policy measures with the aim of stimulating demand in the economy further – since the repo rate is close to zero, the possibilities to use the “traditional” interest rate tool are limited. There are also measures that have been implemented to safeguard financial stability. …to attain the inflation target... To attain the inflation target, it has been necessary to make use of new tools to get the financial markets functioning better, to increase the access to loans and to try to bring down various interest rates and risk premiums that have counteracted monetary policy.

One fundamental factor is that households endeavour to make realistic calculations of how much interest expenditure and amortisation they can manage in the long run, not only when interest rates are as low as they are now. Something that can be said to be the flip side of the same coin is that the banks make responsible credit assessments when lending money. If these two basic components are in place, there is a good chance of avoiding an out-ofcontrol situation further ahead, although as I said before there are many other factors that may be important. Finansinspektionen (the Swedish Financial Supervisory Authority) carries  4  BIS Review 138/2009  out very important work here in that they monitor developments in the banks and credit institutions and are prepared to take action if they consider it necessary. Underlying inflation stable around target of 2 per cent The impact of monetary policy on households’ living costs is something that creates large fluctuations in CPI inflation during the forecast period (Figure 5). The fact that the repo rate has been cut heavily over the past year has contributed to a rapid fall in CPI inflation, as changes in households’ mortgage expenditure are included in this index. With effect from autumn 2010, however, the repo rate is expected to rise relatively quickly, which will correspondingly mean that CPI inflation will be close to 4 per cent at the beginning of 2012.