samchain/econo-pairs-v1 huggingface dataset:
the component that is not due to fluctuations in the demand for goods and services in the economy. And this requires completely different measures than those of monetary policy. In particular, it is a question of implementing measures that influence the functioning of the labour market. One indication that the employment problems we are seeing today are largely structural is the big differences in unemployment that exist between different regions and different occupational categories. (Chart 2.) Unemployment figures are twice as high in some regions as in others, and the percentage of people receiving benefit from their unemployment fund is twice as high in some occupational groups as in others. The fact that these differences remain over long periods, even when there is a shortage of skilled labour, suggests that the labour market doesn’t function as well as might be desired. The problems in the Swedish labour market are also underlined by the fact that open unemployment barely came down to 4 per cent when economic activity was at its strongest a couple of years ago. Target deviations and employment How the Riksbank works So, even though monetary policy cannot be expected to have any tangible impact on employment in the long term, short-term effects can arise. This is because a policy aimed at attaining the inflation target may entail changes in interest rates, which temporarily affect demand so that employment rises or falls.

So, although inflation is expected to be slightly higher than previously anticipated, our assessment is that it will be in line with the Riksbank’s target towards the end of the forecast period. Some questions One could say that the Inflation Report revolves around some questions, which I intend to touch upon briefly: •  One question is to what extent the high oil price will significantly hamper international economic activity. Although we, like most other forecasters, still assume that the oil price will fall again over the coming years, our assessment is that the price will be higher during the forecast period than we estimated in May. However, there are indications that the effects of the high oil price on growth will be relatively limited. For instance, the rise in the oil price appears to be largely a result of the fact that the world economy is expanding, although concern over terrorist acts and other factors also appears to have played a role. In addition, western world economies are today much less dependent on oil than they were in the 1970s, while monetary policy is now conducted in a way that makes it difficult for inflationary impulses from oil price rises to gain a foothold. Our current assessment is therefore that the high oil price will dampen, but not derail, the international economic upswing and that the effects on global inflation will be fairly modest. •  Another question is how inflation could be so low thus far this year, despite growth being relatively high.
What I suggest on this front is:   There should be greater market transparency, perhaps ideally via a Trade Repository with open access to aggregate data, so that the world can see what is happening in these very important but opaque financing markets. (That would be helpful for market participants themselves).   Financial firms and funds should not be able to lend against securities that they are not permitted or proficient enough to hold outright.   Non-bank financial firms should be regulated in how they employ cash collateral.   The authorities should be able to step in and set minimum haircut or margin levels for the collateralised financing markets (or segments of them). (That would need to be pursued at international level.3 It might be linked to central bank haircuts). Some of those points are aired in the FSB’s report on securities lending and repos published today4 and will, I hope, be explored intensively in the coming months. I will expand slightly on the last point in my list. The amount of leverage available in the system depends, of course, to a significant degree on the haircuts applied in chains of secured financing transactions; leverage is the reciprocal of the haircuts. The resilience of the system is therefore impaired when a bout of exuberance drives down haircuts. The authorities need to be ready to place constraints on that – through minima that either apply continuously or are specially introduced when conditions are overheating.

There is already an official exercise underway to frame the determination of minimum margin levels in the parts of the derivatives market that will not be centrally cleared. At some point down the road, this will need to be brought into a coherent framework with any measures on the collateralised-financing market. Doing so would require deciding whether to apply the same or different approaches to the inter-dealer market and dealer-customer transactions. Conclusion: innovation, evolution and surveillance Those are just a few thoughts for debate, based on some current manifestations of shadow banking. I have not even covered the existing waterfront. For example, we need policies on those levered credit funds that offer near-instant withdrawal rights. In the EU distinctions need to be made within the Alternative Investment Fund Managers Directive and UCITs regime, which allows risky structures to be branded as retail products. But it would be foolhardy to imagine that we can frame policies today that will stand the test of time. The financial system will evolve, and we need to permit innovation. A policy framework on shadow banking therefore needs to be adaptive. And it mustn’t try to shut  3  See Committee on the Global Financial System, “The role of margin requirements and haircuts in procyclicality”, March 2010. 4  See “Securities lending and Repo: Market Overview and Financial Stability Issues”, and interim report of an FSB group chaired by my colleague David Rule. BIS central bankers’ speeches  5  everything down.
More people are becoming increasingly comfortable resuming activities in person, and this is starting to show up in robust consumer spending, job gains, and economic growth. So, now that we are on our second trip around the sun during this pandemic, many are looking to answer the most common question raised when traveling by car. And that is, “are we there yet?" With respect to the virus, I’ll leave that question to the public health experts to answer. But with respect to the economy, I will say this: while I am optimistic that the economy is now headed in the right direction, we still have a long way to go to achieve a robust and full economic recovery. In my remarks today I’ll set the scene for both the U.S. and global economies. I’ll also highlight a few of the factors I consider when evaluating the outlook for the economy. Finally, I’ll explain what that means for our monetary policy decisions. But before I continue, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or others in the Federal Reserve System. Economic Outlook Let me begin by saying that despite the challenges and uncertainties we’ve faced since the pandemic took hold, the economy is now positioned to grow quickly.

Employees shall usually work in the best interests of the company, but can in some contexts have interests of their own that are in conflict with the company’s best. Divisional managers within a corporate group may have an interest in promoting their own division rather than the group as a whole. Company management does not always have the same aims as the shareholders. Many of these conflicts of interest are common and quite natural elements of real life, and rarely cause problems. It is important to bear this in mind when discussing methods of dealing with them. This does not mean that conflicts of interest in financial operations are irrelevant, quite the reverse. The relevant question here, however, is which conflicts of interest are real problems and which are not. The conflicts without problems are those where there is little incentive to improperly favour one interest over another. For instance, most employees are usually loyal to their employer - otherwise they risk losing their jobs. A company that does not take into account the interests of its employees and its customers risks gaining a bad reputation and losing its competitiveness. Other conflicts of interest are more problematic. When an agent has a considerable incentive to favour one party at the cost of another, there could be scope for some form of regulations. Many companies also have ethical guidelines and rules for dealing with the cases where there is most incentive to take other interests into account.
The Riksbank has collected data on thousands of individual households’ finances from Statistics Sweden for several years now. These statistics show that the households with the largest debts also have the highest incomes and the largest wealth. We have also examined what would happen to households’ ability to pay if unemployment or interest rates were to rise. The overall assessment is that households at present cannot cause loan losses to such an extent that the stability of the banking system would be threatened. However, even if the household sector’s ability to pay on the whole is good, there is of course a risk that individual households will borrow too much and may experience payment problems. With regard to financial stability, I see no serious risks in the growing household indebtedness and rising property prices. Are there any risks with regard to the inflation target? This question is slightly more difficult to answer. How developments in the asset markets, such as the housing market, will affect monetary policy for a central bank with an inflation target is a subject debated all over the world by academics and economic decision-makers. The problem can be formulated roughly as follows: The increases we have seen in household indebtedness are not sustainable in the long term; household debts cannot grow twice as fast as incomes over long periods of time.

House prices (index 1986=100) 600  500  400  300  200  100  National average  Greater Stockholm  Greater Göteborg  Greater Malmö  m ar -0 6  m ar -0 4 m ar -0 5  m ar -0 2 m ar -0 3  m ar -0 0 m ar -0 1  m ar -9 8 m ar -9 9  m ar -9 6 m ar -9 7  m ar -9 4 m ar -9 5  m ar -9 2 m ar -9 3  m ar -9 0 m ar -9 1  m ar -8 8 m ar -8 9  m ar -8 6 m ar -8 7  0  Source: Statistics Sweden  4.
Our philosophy is to stimulate ownership of decisions and empowerment in the investment process – and that is appreciated by our managers. Moreover, the mere importance of the mission, as formulated by our Board, "... to safeguard and grow financial wealth for future generations through highly professional management coupled with strict integrity", is attracting resources in and of itself. To wed a business culture to a central bank, with its civil service responsibilities, has posed a challenge in terms of adapting the Bank's governance system to the increased importance of professional investment management. Elements in addressing this include a strengthened focus on accountability by a clear division of responsibilities and a system of checks and balances. Maybe the most important element in our governance system is the establishment of a high degree of transparency for the public by providing open information on performance, risks, costs and investments on a timely basis. All in all, we feel the challenge of managing the Fund has enriched the organisation by forcing the central bank to think outside of the box. And perhaps the central bank perspective and values have added to the depth and long-term horizon of the investment organisation. Let me round off this presentation by recapitulating some of the main insights we have gained in the decade the Fund has existed.

I will look at both the underlying economics of the Fund, and on how we have structured our management model. As our "liabilities" are rather intangible, a broad approach is necessary in order to convey the major principles behind our model. The source of our Fund is commodity wealth. So let me start by putting the petroleum sector in Norway into perspective. In 2006 government oil revenue amounted to 36 per cent of total government revenues. That is a high figure, but it also implies that Norway has a substantial tax base (64 per cent) in addition to our natural resources. The Government Pension Fund has two main objectives: One is to serve as a savings instrument with an aim to distribute our national wealth in an equitable manner across generations. The petroleum resources are part of our national wealth and belong not only to the current generation but also to future generations. Second, even though Norway has a fairly diversified tax-base, the large variability in the price of oil would have caused large demand fluctuations in the Norwegian economy, if petroleum revenues were to be used as they accrue. Moreover, internationally exposed industries would suffer a negative impact from high-level spending of petroleum revenues through a deterioration in competitiveness. Hence, an important objective for the Fund is to shield the economy from fluctuations in prices and extraction rates in the petroleum sector, which is one reason why the Fund is not allowed to invest in Norway.
And we are fortunate to have Jerry Corrigan engaged in working to shape a set of recommendations to help us get the balance right. Regulatory structure Apart from the mix of incentives and constraints set by regulatory policy, the structure of the regulatory system in the United States needs substantial reform. Our current system has evolved into a confusing mix of diffused accountability, regulatory competition, an enormously complex web of rules that create perverse incentives and leave huge opportunities for arbitrage and evasion, and creates the risk of large gaps in our knowledge and authority. This crisis gives us the opportunity to bring about fundamental change in the direction of a more streamlined and consolidated system with more clarity around responsibility for the prudential safeguards in the system. In this regard, Secretary Paulson's blueprint outlines a sweeping consolidation and realignment of responsibilities, with a clear set of objectives for achieving a better balance between efficiency and stability, between market discipline and regulation. This proposal has stimulated a very constructive set of discussions, and will help lay the foundation for action when the dust settles. BIS Review 74/2008  5  The most fundamental reform that is necessary is for all institutions that play a central role in money and funding markets – including the major globally active banks and investment banks – to operate under a unified framework that provides a stronger form of consolidated supervision, with appropriate requirements for capital and liquidity.

The assessment made by the Riksbank so far is that average working hours will show a tentative rise when economic activity improves. To summarise, there is reason for considerable concern regarding the future labour supply. If there is reason to be slightly more optimistic over productivity growth, the opposite applies to the labour supply. A number of factors, such as demographic developments, absence due to illness and the proposal for shorter working hours all indicate a decline in the labour supply over the coming decade, unless there is a change in policy. 4  BIS Review 16/2003  Future potential growth What does all this mean for the assessment of the economy's potential growth capacity right now and in the coming years? If we uncritically assume the simple model I outlined earlier, we could calculate an estimate of potential growth by simply adding together the trend values I showed in the diagram on productivity growth and the number of hours worked. I have done this in my next diagram (Figure 9). Measured in this way, potential growth was just over 1.5 per cent up to around 1992. Since then it has risen gradually to approximately 3 per cent in 2001. However, my discussion of the causes of the decline in actual growth in recent years showed that there are good reasons to believe that 3 per cent is an overestimate of the growth potential in the Swedish economy today.
This model is supportive of Asia’s new growth model of a regional production hub and increasing intraregional trade. Moreover, it is a key development strategy for ASEAN to ride with rising Asia as part of an even bigger economic hub of ASEAN+3 and ASEAN+6. The +3 include China, Japan, and Korea, with the+6 expanding to cover India, Australia, and New Zealand. In addition to trade liberalization in goods, liberalization in services will also spur competition. This in turn would lead to lower prices and increased quality of services, as well as better transfer of know-how from outside and within the region, in areas such as business  BIS central bankers’ speeches  1  organization and management, and risk management capacity through foreign participation in financial services, for example. But, since services liberalization can involve short term adjustment costs, its progress has been subject to domestic regulations as a country’s institutional and regulatory environment needs to be strengthened before and during liberalization in order to reap eventual benefits. A single market and production base for ASEAN cannot be complete without the free flow of skilled labor. It is also complementary to other freedoms, such as freedom of capital flows (particularly FDI) and services, and together they have important implications for productivity growth and investment. Indeed, it is logical to expect that ASEAN integrated business organizations would be more effectively run by regional than local managers.

Malaysia 's own experience in managing the financial crisis in our part of the world over 1997-1998 was that a decisive and comprehensive response at an early stage of the crisis not only produced an early recovery but it also reduced the cost of the crisis on the financial system and the economy. The crisis was a defining moment for Bank Negara Malaysia . The Bank's efforts to sustain stability did not end when the Asian financial crisis abated, and when economic recovery was firmly in place. The key lesson was that foundations for resilience are built during the good times. Once stability was restored, the Bank therefore embarked on a comprehensive restructuring and reform of the financial sector. This included the aggressive development of the domestic financial markets and the strengthening of the regulatory and supervisory oversight. This has been reinforced by a higher level of regional cooperation and collaboration. Therefore, it is not what we are currently doing to cope with this international financial crisis but the efforts that have been undertaken over several years that have ensured the resilience of our financial system during these most challenging of times. Over the course of these recent months, we have witnessed the introduction of massive fiscal stimulus packages, sweeping proposals for regulatory reforms and various unorthodox policy measures being introduced to stabilise and restore market confidence in the financial system. Whilst these measures were necessary and have contributed towards some stabilisation in global financial markets, more importantly is the long-term sustainability of this trend.
However, my suspicion is that one of the answers is that the EU has started concentrating too much – and in many areas almost exclusively – on the process of deeper and deeper political integration. It is almost a mainstream ideology which states that the answer or solution to virtually any problem in the EU is more integration. Whenever we discuss problems with colleagues in Brussels, the mainstream view typically argues: we need more EU integration to solve this. And if integration has not brought what we hoped for, it means we need even more integration. We probably did not have enough of it. Well, I have some doubts about this approach, at least as regards the impact of political integration on the economy. The concept is based on a simple idea that the bigger the state, or the bigger the economy, the bigger also the wealth of the citizens of such a state or economy. This idea fails terribly when compared with simple statistics and facts. If you take a look at the correlation between the size of an economy and a measure of well-being such as GDP per capita, you will see that on average the bigger, or more populous, economies in the world are not generally richer economies. Rather, it is small open economies (including those in Europe) that tend to be richer, the only exception to this rule being the United States. So bigger does not mean richer.

A subject that often comes up for discussion is the cost of living allowance or COLA. It has to be recognized that in Malta the allowance is determined on the basis of a basic or social wage, and COLA is a flat euro amount, granted regardless of the level of pay. This limits its impact on competitiveness. Nevertheless, the award of COLA is disconnected from productivity gains and hence may constrain firms’ ability to respond to changing market conditions. It also raises the risk of secondary cost increases after an initial price shock, which may come for example from an increase in imported prices. It may not be possible to neutralise such increases in imported prices and simply compensate for them in wages without significantly losing competitiveness of the enterprises concerned, especially if our competitors are absorbing these external shocks through an internal devaluation. It is relevant to note that the world economy is going through unusual times where some countries are undergoing internal devaluations. Malta cannot afford to be oblivious of the impact that these realities exert on its competitiveness. The list of euro area countries passing through significant corrections is impressive, namely: Ireland, Portugal, Spain, Italy, Slovenia, Cyprus and Greece. This apart from other non-euro area member states that are also going through difficult and corrective changes in their economies.