samchain/econo-pairs-v1 huggingface dataset:
The lack of investments in new products and the dependence on a gradually outmoded structure of production helped to impose an adjustment of the entire nation’s material standard. For many years growth in Sweden was weaker than in the world around us. This example shows how a “new economy” at that time resulted in problems for the Swedish economy rather than opportunities. The lack of change, because wage formation did not function properly, led to a weaker economy that was more inflation prone. The period clearly illustrates how globalisation, increased competition and new technology can result in lower growth and higher inflation if changes are not made in time. If the economy is under pressure from strong competition as well as poorly functioning wage formation, there is a risk of economic renewal lagging behind. Concluding remarks As I have said, the new information technology is making rapid progress. As far as we can see today, it will affect production and distribution processes as well as consumer behaviour. That in turn makes the environment more competitive and calls for changes in Sweden’s corporate sector. Put to good use, this transformation can probably create stronger potential growth, lead to higher productivity growth and lower inflation, and favour employment. The favourable changes that have occurred over a number of years in the Swedish economy since the 1980s suggest that such a development is within our grasp. But as I just mentioned, if wage formation does not function properly, firms will be under pressure from two fronts.

3  BIS Review 118/1999  Opinions about the causes of the pronounced change in the Swedish economy are not completely unanimous. The stable prices presumably played a part. When inflation is low or the price level is stable, those who have to plan for the longer run face less uncertainty. Another significant factor was probably the credit system’s development in the 1800s. Banks were established and the abolition of interest controls was followed by more financial expertise. That made it possible to exploit the inventions and finance investments in the emerging industries. An increasingly stable form of government presumably contributed, too. A series of constitutional reforms provided a guarantee of stability. Economic activities benefited from the abolition of trade guilds, freedom to trade and the reform of joint-stock companies. The reform of elementary education was, of course, another important step that ultimately promoted human capital. This catalogue is not intended to be a complete account of all the factors behind Sweden’s transformation from a poor country into a rapidly expanding industrial nation. The point I want to make is that a variety of institutional changes seem to have been needed to provide a stable framework for the subsequent process of industrialisation. It is just this stability in the fundamental conditions for economic activities that was no doubt important for the process that resulted in the industrial revolution, which in itself was full of commercial risks and uncertainties.
This asymmetry contributed to the sharp increase in market volatility, the dramatic reduction in market liquidity, and the impairment in market function following the Lehman failure. Fear that this could happen again if another firm failed, encouraged flight from other dealers perceived by market participants to be relatively weak that might have large potential exposures. Of course, as if this were not bad enough, the opaqueness of the OTC derivatives market made the situation much worse. No one had a clear insight into the financial health of their counterparties. Although each market participant could calculate its bilateral exposures to a particular dealer and the particular dealer could understand its own exposure to each of its own counterparties, this didn’t answer the broader question: how exposed were the clients and dealers to others in the financial system through their derivatives trades and other open positions? Because there was no easy way to know who was in difficulty or not, the incentives were all on the side of assuming the worse – closing out open trades, hoarding liquidity, and retreating to the sidelines. The crisis had made it crystal clear that the regulatory regime had not kept pace with the rapid growth of the global OTC derivatives market. In assessing the shortcomings of the OTC derivatives market after the crisis, a global consensus has been reached. Although I will be over-simplifying in the interest of time, I view the following aspects of reform as the most important.

[3] Moreover, studies have uncovered a significant lag in discerning the benefits of mitigation measures,[4] which makes it much harder to impose costs on society today if measurable results are available much later. By making the costs of a major, truly global crisis more tangible, the pandemic may help to remove the “tragedy” from Mark Carney’s horizon: after COVID-19, the dramatic consequences of a global climate crisis may be much easier to imagine. And given the need for fundamental structural change after this crisis, the willingness to use this chance to take precautions against the even bigger risk of a climate crisis may have increased. In order to achieve the European Union’s target of net-zero greenhouse gas emissions by 2050, our response to the growing risks of climate change has to start with the way we rebuild our economies after the pandemic. In my remarks this morning, I will argue that three complementary pillars are needed to accelerate the transition towards a low-carbon economy: an effective carbon price, a strong investment programme and a greener financial market. I will also argue that central banks have a role to play in mitigating climate-related risks, even within their traditional mandates, because global warming poses severe risks to price stability. Carbon pricing as the central tool So let me start with the first pillar, the introduction of global carbon pricing. Europe is already spearheading global efforts, which is essential at times when a global solution is not in sight.
It is also not unreasonable to expect that traditional business lines between financial services, general commerce or telecoms will increasingly be blurred – and activities may concentrate in the biggest institutions with superior competitive advantages including in the areas of talent, customer base, and customer data. The FAANGs and BATs of this world – the technology giants – come to mind. These may also have implications for financial stability. Indeed, the next systemically important institution could be a BigTech with roots in e-commerce, and therefore, whether such entities require some form of oversight by financial regulators in future. 33 With the increasing use of artificial intelligence (AI) and various forms of data analytics (DA), another area of focus will be around the governance of their use. The MAS recently released a guide that we co-created with some industry partners on a set of principles for Fairness, Ethics, Accountability and Transparency (or FEAT) in the use of “AIDA”. Whether and how the increasing use of machine-learning systems (both supervised and unsupervised), algorithms and data-driven insights can affect behaviours and decision-making in financial institutions will be a rich area for research and attention. Regulators generally like the idea of deploying smart systems that can do a better job in risk detection or risk management. But what about for business decisions or say, personnel decisions? Whether AI-driven systems will perpetuate bias and discrimination is also ripe for more extensive studies.

6 By many measures, the global banking system is more resilient. For example, compared to earlier this decade, Common Equity Tier 1 risk-weighted assets of internationally active banks stand at around 13%, from about 7% before. Their leverage ratios average about 6% now, from less than 2% previously. Implementation of post-crisis regulatory reforms 7 We should also remember that the global banking regulatory standards are minimum requirements. National supervisors can use other levers of the Basel framework to apply higher standards or additional requirements on their banks, as appropriate, based on idiosyncratic considerations. 8 There is a general consensus that the financial system is safer than before. But the followon question can be: safer, yes – but is the system safe enough? 9 To say that regulators have addressed all that can go wrong would be great hubris. Indeed, this will be contrary to the evolving and adaptive nature of financial activity. The reality is a recurrence of financial crises in economic history. I would add that no amount of regulations and supervision can prevent crises; what regulators seek to do is to reduce the likelihood and negative impact from one. This will require banking regulators to remain vigilant against emerging risks, and hence the importance of forward-looking supervision to complement regulations. 10 On the other hand, with the last global financial crisis becoming a distant shadow of sorts, there are already calls that “this time it is different” and to dial down the enhanced regulatory requirements – just as all the crises before it.
In such a situation, the mean squared gap in Figure 3 would lie in a north-west to south-west direction and determining monetary policy would entail weighing up whether to stabilise one more or less than the other. BIS Review 60/2010  7  Figure 4. The mean squared gap for CPIF inflation and output and hours worked respectively. Source: The Riksbank  Figure 5: The decision-making situation for Norges Bank in 2005 Figure 5 shows the policy decision facing Norges Bank in March 2005, which is an example of a case where there was a conflict between stabilising inflation and stabilising resource utilisation. 5 The problem at that time was that the inflation forecast was under the inflation target of 2.5 per cent, so that the gap between the forecast and the target was negative, while the forecast for the output gap was positive. In such a situation, a lower repo-rate path stabilises inflation around the target better but the output gap less well, and vice versa for a higher repo-rate path. The mean squared gap then lies in a north-west to south-west direction. This case is discussed in more detail in my Umeå speech and in my chapter “Inflation targeting” to be published in a new North-Holland Handbook of Monetary Economics. 6  5  Norges Bank (2005). 6  Svensson (2010b). 8  BIS Review 60/2010  Figure 5. Monetary policy alternatives for Norges Bank, March 2005  Source: Norges Bank  Are there any arguments against an extended repo-rate path?

The EU has started on this journey by making payment and data interconnectivity between banks and non-banks mandatory, through the Payment Services Directive 2. Australia has also announced that it will legislate a national Consumer Data Right in 2018, allowing consumers open access to all their data including banking-related ones. While these hold a lot of promise by promoting consumer interests and welfare, there are other details to consider. For example, what primary data rightfully belongs to the customer, and what about secondary data about the customer that a bank had made sense of? How should a customer’s data be packaged for onward sharing? How do we develop technical standards to share this information efficiently and securely? Who should pay for these? In Singapore, we subscribe to the notion of banks sharing their data openly as a larger good. Some of the operational details have to be worked out. In MAS’ engagement with the banking industry, there is broad consensus as to the benefits of open banking. What we see is an opening up of customer data as a ground-up process led by the banks themselves. We believe this is a constructive development, that industry players themselves see the value in doing so. Role of financial regulators In my remarks so far, it should be obvious that financial regulators will have active roles in the business and technology transformation in the banking industry. Regulators need to have a sharp understanding of emerging technologies and new business models, and to be alert to potential risks.
Bernanke’s proposal of a temporary price level target can therefore be regarded as a special application of Yellen’s “makeup strategy”, where one aims to make the “makeup” mechanism specific and potentially more credible by formalising it in terms of a temporary new target definition for the central bank. Higher inflation target A proposal for which Olivier Blanchard, former chief economist at the International Monetary Fund (IMF), is one of the strongest advocates is to raise the central banks’ inflation targets. 28 The idea is straightforward. With a higher inflation target, say 3 per cent, the nominal policy rate would be on average 1 percentage point higher compared to when the inflation target is 2 per cent, assuming that the new target is credible. There would therefore be a further 1 percentage point to reduce the rate before it reaches its lower bound. An increase in the inflation target to 4 per cent would increase the scope for reducing the policy rate by another percentage point, and so on. However, some argue that raising the target is not a good idea. One fear is that higher inflation would mean that inflation would also vary more, which indeed ap-  26  See also, for instance, Evans (2012). 27 One might also therefore call this approach a temporary target for average inflation. A target for average infla-  tion is a strategy reminiscent of a price level target, but nevertheless different in certain aspects, see Nessén and Vestin (2005) or Andersson and Claussen (2017).

The effect would then be in practice the same as if the target had been lowered to 1 per cent. With a lower expected rate of inflation the nominal interest rates in the economy, including the repo rate, will on average be lower. This means that in future economic downturns the distance between the repo rate and the lower bound may be smaller than before. If the repo rate hits its lower bound earlier, and remains there for longer periods, it will be a less effective tool in counteracting economic downturns. It will be even more difficult than it is now to bring down the real interest rate as low as one might need. The essence of this is that “preventive” increases in the repo rate would ultimately not result in more ammunition, but less. It is therefore important that increases in the repo rate are not made in such a way that inflation will be tangibly lower and confidence in the inflation target is put at risk. Cut the repo rate further? Another possible means of counteracting an economic slowdown is to cut the interest rate more than to the −0.5 per cent level which has so far been the lowest point. It may be possible to go even lower − for instance, the policy rate in Switzerland is at −0.75 per cent. But personally I think the possibilities here are fairly limited.
Backing this trajectory is the foreseeable progressive widening of the output gap and the increase in labour costs observed in recent quarters. At this moment, once the Eurosystem has ceased to acquire new assets under its purchase programme, the expansionary stance of the common monetary policy at the start of this year has been mainly determined by two developments: the ECB Governing Council’s announcement that interest rates would remain unchanged at least until the summer of 2019; and the reinvestment over a prolonged period (in any event, for the time needed to prompt the sustainable convergence of inflation on its medium-term reference) of the financial securities acquired under the ECB’s quantitative easing programme. 1.2  The Spanish economy: developments and outlook  In this setting, in 2019 the Spanish economy will remain on the expansionary course on which it embarked six years ago. But there will be a further easing in its growth rate, to 2.2%, compared with the increase of 2.5% estimated for 2018 (see Table 2). The expected slowdown is largely in response to the weaker international setting I mentioned earlier. Nevertheless, the Spanish economy has, in recent quarters, proven significantly resilient, slowing to a lesser degree than our main area of reference, namely the euro area. The contributing factors include, among others, the boost to household income arising from the entry into force, in the second half of 2018, of certain measures included in the Draft Budget for 2018.

The targets for the less discretionary items taken as a whole are in line with the estimates of the models used by the Banco de España. This is particularly so for pension expenditure (the behaviour of which is determined by the increases agreed for 2019 and population ageing), unemployment benefits (which depend mainly on the behaviour of unemployment) and interest in National Accounts terms (which reflects the behaviour of government debt and of interest rates). 2.2  Projected revenue in the Draft Budget  On the revenue side, a broad set of legislative changes is proposed, including notably an increase in personal income tax and in wealth tax at higher income levels, the establishment of a minimum rate of 15% of taxable income for large corporations, the limitation of double taxation exemptions, and an increase in hydrocarbons tax, focused on diesel. On official estimates, these changes would raise government revenue by some € billion in 2019. Also, the Draft Budget includes the new taxes on financial transactions and certain digital services, with an officially estimated impact on revenue of some € billion in 2019. The Draft Budget revenue projections are also affected by the introduction in July 2017 of the system known as “immediate supply of VAT information” (SII by its Spanish initials).
The problems started in the US mortgage market, but quickly spread to other financial market segments. Banks, funds and financial undertakings had to bring bonds back onto their own balance sheets, they began to doubt the financial position of their counterparties and held on to their money. As a result, premiums on interbank loans rose markedly. Norwegian banks rely heavily on international markets for their funding. The rise in money market premiums in the US and Europe therefore rapidly spread to Norwegian interest rates, even though Norwegian banks are profitable, enjoy confidence and have limited loss exposure. When banks would no longer lend to each other, many central banks provided liquidity with a longer maturity and lower collateral requirements than usual. Norges Bank has also, in periods, increased the volume of lending to Norwegian banks. We have provided extra shortterm liquidity, for example through currency swaps. We have also offered banks loans with longer maturities than earlier. We have not changed the collateral requirements for loans. This is because we already accepted a broad range of collateral than those central banks. This is because – for reasons we appreciate – the Norwegian government bond market is very thin. For a long time, nor did we have a well developed market for other bonds. At the same time, bank demand for loans from Norges Bank is considerable in some periods of the year.

15  In a letter of 27 June 2008, the Ministry of Finance has asked the Financial Supervisory Authority of Norway to assess the need for regulatory revisions to the Norwegian Banks’ Guarantee Fund. BIS Review 110/2008  7  Conclusion The experience so far is that inflation targeting has provided a good basis for stabilising inflation and inflation expectations. Interest rate setting and interest rate forecasts have also contributed to stabilising output and employment and prices in property markets. In some areas, regulations and frameworks can result in amplifications of fluctuations in asset prices and credit flows. For example, tax subsidisation of homeownership can be a source of recurrent instability in house prices and credit. The turbulence in financial markets has prompted many countries to consider measures to improve regulation and the functioning of markets. In Norway, the authorities can also strengthen the work on preventing systemic risk. With our cross-border banks, broader Nordic cooperation, particularly between finance ministries and supervisory authorities, would be appropriate. But there is also work to be done at home. Norges Bank is proposing, for example, revisions to the Norwegian Banks’ Guarantee Fund with a view to reducing moral hazard. Thank you for your attention. 8  BIS Review 110/2008  BIS Review 110/2008  9  10  BIS Review 110/2008  BIS Review 110/2008  11  12  BIS Review 110/2008  BIS Review 110/2008  13  14  BIS Review 110/2008  BIS Review 110/2008  15  16  BIS Review 110/2008
In my view, therefore, there are three priorities for regulators [slide 6]: monitoring, testing and regulating. Monitoring first, thanks to the compilation of detailed data on shadow banking. The FSB already contributes to this with its annual report on shadow banking, as does the ESRB with its European Union shadow banking monitor. But we need to go further: we need an even more precise picture of the sector as participants and business models can vary considerably from one country to another, and are sometimes extremely complex. It is particularly crucial to put together a mapping of the interconnections within the shadow banking sector and with traditional banks and insurers. The second priority is to be able to test for systemic risks, using appropriate tools. In order to measure the global impact of shocks, we have a particular need for liquidity macro stress-tests that take into account investment funds: the latter are especially vulnerable to runs, in the event of a stock market crash for example, if they are open-ended and have no system of gates. To achieve this, we need to develop, jointly and at a global level, a harmonised framework for systemic stress tests: the FSB already recommended such tools in 2017, but there is a real risk that they will remain in the exploratory phase, and that no action will be taken at the level of the financial system. The third and last priority is to regulate.

Following the finalisation of the Basel III reform in December 2017, the main focus for financial regulation is no longer bank solvency, but non-bank liquidity. We nonetheless need to avoid making two mistakes. The first would be to favour one sector over another, be it banks or shadow banking: the existence of opportunities for regulatory arbitrage could to lead to the transfer of capital-intensive activities to less regulated, or even unregulated entities, which would be counterproductive. The other mistake would be to impose banking regulation on shadow banking, as the risks are not the same; in particular, the same 2/3  BIS central bankers' speeches  capital requirements cannot be applied. At the global level, the non-bank sector needs to be provided with microprudential and macroprudential regulations that are tailored to its particular business model and risks. With regard to macroprudential regulation, France is a pioneer in this field with its decision to introduce, as of 1 July this year, a measure regarding large enterprises that also takes into account their market debt. We shall publish details on how it will work this week. But we need to be honest with ourselves and admit that our experience of using macroprudential tools outside the bank sector is still very limited. One of our priorities in terms of regulation should also be to develop liquidity management tools for investment funds, and to refine the measurement of their leverage, two issues that, fortunately, the FSB has already identified.