samchain/econo-pairs-v1 huggingface dataset:
In addition, the rise in prices for domestically produced goods and services stabilised, and towards the end of 2004 there was a tendency towards a more rapid rise in prices for these goods and services. Prices for imported consumer goods fell more than expected at the beginning of 2005, while the tendency towards a more rapid rise in prices for domestically produced goods and services has persisted. So far in 2005, inflation measured by the CPI-ATE has hovered at ¾ per cent. The projections in Inflation Report 1/05, published on 16 March, are based on a gradual increase in the interest rate. This is in line with expectations among financial and foreign exchange market participants. It is assumed that the exchange rate will shadow movements in the forward exchange rate. This implies that in the years ahead the krone will remain fairly stable at approximately the current level. With a path for the interest rate and the krone exchange rate in line with the baseline scenario in Inflation Report 1/05, inflation may increase gradually from less than 1 per cent today to close to 2 per cent in mid-2006. Under these assumptions, inflation may stabilise at around 2½ per cent at the three-year horizon. Developments in line with these projections imply that the output gap will widen to about 1¼ per cent in 2006 and then gradually narrow. Developments since the March Inflation Report was published do not provide grounds for changing the perception of the main features of developments in the real economy.

Zeti Akhtar Aziz: Big shift – traversing the complexities of a new world Luncheon address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Khazanah Megatrends Forum 2012: “Big shift – traversing the complexities of a new world”, Kuala Lumpur, 2 October 2012. *  *  *  The global economy has now entered into a period of slower economic growth despite the significant and wide ranging pro-growth policies that have been implemented across the world. Why then has the world not been able to achieve a sustained long-lasting recovery? What has been holding back this prospect? In addition, the rapid and significant changes in the global environment have also brought with them new demands and new challenges. Our understanding of the factors that are containing the global growth prospects and the consequence of the new environment will better position us to face the fundamentally new landscape and to manage its consequent challenges. Let me first thank Khazanah for the invitation to speak at this Khazanah Megatrends Forum. The topic on the Big Shift that is being experienced in the world today is indeed highly relevant. While the international and national attention is currently focused on the immediate challenges of the global environment, equally important, however, is to recognise the long-term changes that will reshape our future. The first part of my remarks today will focus on the immediate challenges of the global economy, taking into account the fundamental factors that are likely to affect the growth outlook.
I would then like to say a few words about the proposed revisions to the capital requirements for international banks, announced last week by the Basel Committee; not just because it is topical but also because these capital requirements are central to the stability of the system and its capacity to withstand shocks; and as cautious central bankers it is important to take stock from time to time. US & UK Economic Ties As a very open economy, and one with close trade and investment links with the US, especially in the financial sector, the UK is a keen observer of events here. While much has been made in recent years of globalisation, the links between the US and UK are long-standing and deep-rooted, not least in the financial sector. For many years US financial institutions have been among the biggest players in the City. US firms take the top three positions in London as bookrunners in international bond and equity issues, and as arrangers of syndicated credits. Through their dynamism and innovation, US firms also play a major role both in maintaining London's pre-eminence as an international financial centre and as a potent force for strengthening the competitiveness of the UK's own financial institutions. Our interest in the continued financial strength of US firms is thus clear. Foreign banks are similarly active in US markets. For example, they account for 40% of the US syndicated loan market regularly surveyed by the Fed.

It is also an appeal for application of a timehonored managerial principle: greater autonomy and discretion of local management to develop a tailored approach that balances risk, complexity, and effectiveness appropriate for the needs of a particular institution, and a corresponding accountability upon local management for the results. Absent this sensibility I will state my fear plainly: beware the risk management industrial complex. Provocative Question Number 3: To what extent might the invocation of manual procedures in “protracted outage” scenarios exacerbate rather than assuage from a financial stability perspective? As you know, the CPMI-IOSCO cyber guidance exhorts financial market infrastructures to consider alternatives for processing critical transactions in the event automated means of recovery are not successful. We are therefore compelled to consider not merely “star wars” resiliency but also “stone age” contingency. Locally, this work proceeds across multiple fronts, including analyzing and parsing our transaction flow to identify systemic activity, developing procedures and tools to facilitate 3/5  BIS central bankers' speeches  operations in a manual mode, and conducting simulation exercises with systemically important customers and interfacing financial market infrastructures to test our hypotheses and procedures. I would be remiss, especially in recognition of our Clearing House venue, not to herald our partnership to support each other in the event either the Fedwire Funds Service or CHIPS experiences an operational disruption from which it cannot recover on a same day basis.
Available at: https://www.creditsuisse.com/corporate/en/media/news/articles/media-releases/2012/07/en/42035.html 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  The Bank of England values diversity for three reasons. First, it is the right thing to do; a public institution should reflect the people it serves. Second, diversity can build the trust required to deliver our remits, as people are more likely to trust people they recognise, reducing misperceptions that we are experts making esoteric decisions in ivory towers for the benefit of others.5 Third, diversity leads to better decision-making, more creative thinking and reduces the risks of groupthink and bias.6 This last point is critical. Almost all decisions in finance are taken under uncertainty, making it especially important that decision makers are exposed to a range of views, and engage in open debates with people whose perspectives challenge the prevailing wisdom. Articulating why diversity and inclusion are important has helped the Bank move the dial. When I joined the Bank, only 17% of senior managers were women, so we set an ambitious target to reach 35% by 2020. The Bank is on track to achieve this: today, 32% of senior management are female, considerably above the 14% industry average. Our pipeline of future leaders also looks healthy: 46% of colleagues below senior management are women. This didn’t just happen. Reaching this point has required a deliberate, concentrated effort throughout the organisation. The power of organisations like the WIBF is that they help such approaches permeate through the industry.

Indeed, it will take only a few seconds to authenticate our currency notes. For example, to apply the simplest “Look” technique, what is needed is only for us to hold the currency notes against a light. This will allow us to verify simultaneously at least four important security features in all of our currency notes; the 3D Agong’s watermark, bright electrotype numeral, perfectly register see-through mark or windowed colour shifting security threads with texts. This technique is the easiest and the simplest manner as no special gadget is required. Coupled with a few other techniques contained in the My Ringgit apps we can make a firm conclusion on the authenticity of the currency notes. BIS central bankers’ speeches  1  Similarly, our new coins are also sufficiently protected by unique security features. In the course of designing the coins, the Bank had engaged with various stakeholders to ensure that the new coins are not only practical but sufficiently protected as well. Each coin denomination is unique in term of size and security features to ensure no fake coins can pass through the coin authentication machines. As part of our financial education effort, Bank Negara today is launching a mobile application called My Ringgit. This application enables the general public to learn about the most practical and easiest techniques to authenticate our currencies and learn in greater detail the security features found in our currency notes.
If importers expect a price change to be temporary, they will no doubt be more prone to absorb the exchange rate fluctuations in their profit margins. That this may have been the case is indicated by some preliminary studies. BIS Review 75/2001  5  •  Generally increased confidence in the low-inflation regime may also have tended to reduce the exchange rate’s pass-through to inflation. More stable expectations about future inflation should make prices less volatile. •  During the 1990s, moreover, competition in the Swedish economy has generally increased, for instance as a consequence of EU membership, continued tariff cuts, the reduction of other barriers to trade and deregulation of the domestic economy. Increased IT trade and the advent of new low-cost producers have had a similar effect. Although such changes are of the one-off type, in the past decade they have affected a series of markets and thereby presumably had a more protracted effect on the aggregate price level. Fig 2. Exchange rate impact on consumer prices 0.20  0.20  0.15  0.15  0.10  0.10 Recursive estimations of TCW coefficients lagged 3 quarters  Jan-01  Jan-00  Jan-99  Jan-98  Jan-97  Jan-96  Jan-95  Jan-94  Jan-93  Jan-92  Jan-91  Jan-90  Jan-89  Jan-88  Jan-87  0.00 Jan-86  0.00 Jan-85  0.05  Jan-84  0.05  Source: The Riksbank  The conclusion from all this is that the pass-through from the exchange rate to consumer prices has probably decreased.

For both historical and geographical reasons, our country is exposed to a considerable commercial risk in Europe, with 60% of our exports going to European countries. These European markets are no longer the most dynamic, nor will they become so in the future. Clearly, in recent years, the emerging economies in Asia have become one of the vibrant regions of the global economy. This is precisely why globalisation makes sense for an economy open to international markets, such as ours. Therefore, it is essential that we step up the diversification process so as to ensure the expansion of our export sector. It is in our own best interests to further strengthen economic relations with Asia. With our liberal philosophy and sound financial standing we have the necessary tools to pursue a policy of openness and enhance our strong presence abroad. Our monetary framework Switzerland is well-known for its stable monetary framework. Average inflation over the last 20 years has been 1.8%, and for the last 13 years, we have had price stability. We have never gone through monetary reforms as many European countries have done over the past few decades. Our monetary regime has been unchanged since 1973, when the peg to the US dollar was removed. Today, the Swiss franc is freely determined by market forces. As a representative of a country that has had floating exchange rates for over thirty years now, I can only underscore the importance of an exchange rate regime that reflects the realities of the market.
Given that the inherent principle of Islamic finance requires that financial transactions be accompanied by underlying economic activity, it already ensures the close link between the expansion in financial assets with the real economy. As the Islamic financial system transitions from being banking centric to becoming more diversified and comprehensive, it has been able to provide the spectrum of financial products and services to the range of activities in the economy, as required by small businesses to conglomerates, and by households to the high networth individuals. The development of intermediaries that previously was dominated by banks now comprises the range of financial institutions that also includes investment banking, specialised banking institutions, takaful, capital market intermediaries and microfinancial institutions. Financial  BIS central bankers’ speeches  1  markets, including the Islamic money and sukuk markets have been instrumental in intermediating funds in the Islamic financial system. The Islamic money market not only facilitates liquidity management but also the implementation of monetary policy. The sukuk market has facilitated the raising of funds by businesses, while providing investors with a range of instruments for investment, thereby facilitating the mobilisation and allocation of funds to productive economic activity. Accompanied by research and development, innovation has intensified. Islamic finance however has the governance arrangements which require the approval process by the Shariah advisories. This ensures avoidance of the creation of financial instruments that have its origins from other financial instruments.

In a totally closed, national, economy I suspect that the most effective way of achieving this would be to aim to stabilise the rate of consumer price inflation – at some very low level representing effective price stability. We might, certainly, as an intermediate step aim to stabilise the rate of growth of the money supply, if we were confident that the demand for money was sufficiently stable and predictable, but the reason for targeting the growth of the money supply would ultimately be to stabilise the rate of inflation, so the distinction is operational rather than substantive. But it is important to understand that effective price stability would not be intended simply as an end in itself. In order to maintain price stability, what in fact we would need to do is to keep overall demand in the economy continuously broadly in line with supply-side capacity, so that the actual rate of inflation is really a measure, or barometer if you like, of our success in maintaining macro-economic stability in a much wider sense. If we succeed in maintaining such stability, that would also contribute, indirectly, to improving the supply side of the economy by reducing nominal uncertainty as a factor in spending or saving or investment decisions and thereby improving resource allocation. Macro-economic stability in this sense can of course be affected by either overall fiscal policy or by monetary policy.
In short, there are two arguments for this: (i) engaging in such behaviour – let’s call it “leaning against the wind” – in situations when an asset price is changing due to non-fundamentals can dampen the effects of the unmotivated price change on the real economy and thereby prevent an inefficient allocation of resources; (ii) if the market knows that the central bank engages in “leaning against the wind” activities the probability will fall of non-fundamental price changes arising in the first place. The key issue here is, of course, identifying price changes that are driven by nonfundamentals. This problem cannot be overly emphasized. But difficult or not, it is an issue that central banks cannot ignore. If prices of houses or other assets are partly driven by factors that are hard to explain and that are believed to give rise to inefficient allocations and risks of large fluctuations in real economic activity and inflation, such events will, in one way or another, find their way into our thinking about monetary policy. Extending the forecasting horizon In practice, most inflation targeting central banks have chosen to adopt forecast horizons of two to three years, at least in external communication and official documents. In this environment, the idea that a central bank can need to extend the horizon over which it constructs inflation and output forecasts is one that has been heard from many central banks.

Measures of underlying inflation that exclude the effects on CPI of our own interest-rate changes have been closer to the target of 2 per cent, as have inflation expectations (see Figure 1). BIS Review 96/2007  1  Figure 1: Inflation Expectations in Sweden Money market agent expectations, annual percentage change 5  5 Inflation expectations CPI  4  4  3  3  2  2  1  1  0  0  -1  -1  -2 1994  -2 1996  1998  2000  2002  2004  2006  2008  2010  2012  Sources: Prospera Research AB and Statistics Sweden  Figure 2: Real estate prices Index 1996 4th quarter = 100 350  350  Australia UK United States Sweden  300  300  250  250  200  200  150  150  100  100  50  50  0  0 97  98  99  00  01  02  03  04  05  06  07  Sources: Australian Bureau of Statistics, Nationwide, OFHEO and Statistics S eden  Since my remarks are to be on the role that house prices have played in Swedish monetary policy in recent years the following should be noted too. Since 1996 nominal house prices in Sweden have more than doubled (the increase is around 140 per cent, see Figure 2) and the average price for a coop condominium has risen even more.
It has been easy to find employment. Norwegian owners and shareholders have also fared very well. Although the share of value added accruing to wage earners has decreased since the beginning of the 1990s, real wage growth has been high. On average, today’s wage earners earn real wages that are 50 per cent higher than in 1990. This corresponds to annual growth of over 2 per cent. At the same time, employment has risen. Business and labour market conditions have been unusually favourable in recent years. Should export prices fall, productivity growth slacken and foreign workers return to their home country, the wage share and unemployment will increase and business sector profits will fall. Even in the absence of these developments, low unemployment and high profits may be difficult to sustain. Developments will depend on how far businesses – in their search for qualified labour – will bid up wages. The economic policy reforms of the 1980s and 1990s set the stage for invention and innovation and the development of a market for equity capital and loans in Norway. This has resulted in restructuring in the business sector, increased productivity, real wage growth and a high level of job creation, but also very high earnings for successful businesspeople and entrepreneurs. We will probably have to learn to live with our entrepreneurs and capital owners, and they must live with the society that has provided them with favourable business conditions. In Norway, there is a relatively even distribution of income, as illustrated in the chart.

Few knew who was exposed to losses, and banks, funds and financial establishments started to question counterparties’ financial situation, and held on to their money. This resulted in a surge in banks’ premia on short-term interbank rates. Moreover, banks had to bring back on their books loans from companies they had established, which further reduced their capacity and willingness to provide new loans. Several large foreign banks have received capital infusions from sovereign-wealth funds in the Middle East and Asia to bolster their financial strength. What began as isolated losses in a small segment of the US home mortgage market led to a confidence crisis, which spread to money and credit markets in many countries in autumn 2007. In the US, there is a risk that the losses will increase in other segments of the property market and on ordinary consumer and business credit. Many of the new financial instruments which were forged to diversify risk have proved to be non-viable. It is now difficult for many companies to raise new capital or procure long-term funding. There are also signs that prices and activity in property markets have reversed and are falling in many European countries. Around the turn of the year, doubts were raised as to the financial strength of some US banks. The new year was ushered in amid fears of a setback in the US and a sharp decline in global equity prices.
This is because the private cost of an institution’s failure underestimates its social cost. In other words, the externality implies that the appropriate risk calculus, taken from the perspective of a single institution, leads to excessive risk-taking from the perspective of society. The institution’s failure may be the unfortunate consequence of risks that, in the best case, were justified from the perspective of the institution itself. But it imposes additional costs on other financial and economic institutions and market participants. These extra costs were not taken into account even if the decision-making process was privately optimal. In what follows, let me discuss the appropriate recipe in the presence of an externality. Economic theory mainly suggests two measures: either restoring the appropriate incentives via a Pigovian tax8 or applying direct quantity regulation. Limiting the size of the bank One extreme solution to the TBTF problem falling within the second category of measures is to adopt the following precept: if an institution is too big to fail, then it is too big to exist.9 According to this view, the state should limit the size and scope of banks to levels where the TBTF externality does not materialise. Renouncing the benefits associated with scale and scope is the price to pay for this radical solution.10 Potentially even more costly is the fact that all benefits associated with size and scope that might be discovered in the future are also forgone!

There are five broad areas where reforms are urgently needed: first, reforms to improve education (and on-the-job training), boost research and development, enhance innovation and facilitate the diffusion of technological advances, so as to fully exploit the potential of an increasingly knowledge-based economy; second, reforms to increase competition in product and services markets; third, reforms in labour markets to increase flexibility and adaptability of the workforce; fourth, policies and institutions to create a more favourable business climate; and fifth, reforms to promote integration, enhance competition and foster innovation in European financial markets, with a special emphasis on venture capital. Time constraints do not permit me to go into detail on the multitude of the necessary reforms that I mentioned. What I would like to do, in line with the topic of my presentation, is to examine and explain how and why the necessary adjustments to market structures should be accompanied by fundamental adaptations of the pertinent economic institutions and changes in social attitudes (which are much  4  BIS Review 43/2007  harder to achieve), in order to improve the performance of the European economy.2 To this end, I will now concentrate my remarks on the labour market. In other recent papers, I have examined the role of the financial sector and of education in fostering Europe’s growth performance. The importance of institutions for the functioning of labour markets in Europe can hardly be overstated.