samchain/econo-pairs-v1 huggingface dataset:
I am referring to Dutchess and Orange counties, which comprise the Poughkeepsie-Newburgh-Middletown metropolitan area, and Ulster County – which is also the Kingston metropolitan area. First, what does the mid-Hudson Valley region look like from an economic standpoint? There is a lot of economic activity here. All told, about 850,000 people live here and 420,000 jobs are located here. And, over the past decade, all three counties added people more rapidly than the state. People here are, on average, more highly educated than in the nation as a whole, as measured by the over 30 percent of residents who have college degrees. So, it is not surprising that median household income in all three counties is above the national median. The industrial composition varies by county.   Ulster County employs a relatively large share of people in its hotels and resorts, reflecting the importance of tourism. And, SUNY New Paltz is a major employer in the county.   Dutchess County’s jobs are heavily weighted toward high-tech manufacturing, with growing diversification.   In Orange County, transportation accounts for a relatively large share of employment, partly due to Stewart Airport. West Point Military Academy is a major employer, and many Orange County residents commute to New York City, Westchester or Rockland for work. Now, how has the area fared during the recent recession and recovery? I will address this from three perspectives: housing, credit conditions and jobs. Unlike central and western New York, this region experienced a modest boom and bust housing cycle.

This would enable us to also seize opportunities to tackle these “twin challenges” in an integrated manner. It is my sincere hope that today’s event, along with the release of the report, will encourage broader dialogue and increase awareness around nature-related risks and opportunities, in turn paving the way for concrete action on this important front. I would like to thank the World Bank for this fruitful collaboration, and the esteemed speakers joining us today. I look forward to the engaging sessions ahead. Read Report: An Exploration of Nature-related Financial Risks in Malaysia See also: BNM’s Climate Change website 1  IPBES. 2019. “The global assessment report on biodiversity and ecosystem services: summary for policymakers.” [Link to IPBES]  2 World Economic Forum New Nature Economy Series [Link to PDF] 3 2/3  BIS central bankers' speeches  3 UN Biodiversity page [Link] 4 SDG 8. 5 SDG 3. 6 "Life on land” is SDG 15, “Life below water” is SDG 14. 7 Network for Greening the Financial System. 3/3  BIS central bankers' speeches
This means that domestic demand may be lower at the same time as the situation abroad dampens net exports. In the main scenario the Riksbank counts on GDP growth rates of 1.7 per cent this year and just over 2 per cent in each of the next two years. This means that we have revised the one- and two-year forecasts downwards by four tenths of a percentage point. Resource utilisation is judged to be comparatively high at present despite the economic slowdown. Together with the cautious recovery, this suggests that the path of inflation in the coming years will be relatively stable. In the main scenario we count on underlying inflation (UND1X) being 1.8 per cent one year ahead and 1.9 per cent after two years. As always, the spectrum of risks around this main scenario is also relevant for the formation of monetary policy. The financial market developments have, as I mentioned, heightened the uncertainty about the extent to which the stock market fall and poor earnings prospects are tending to subdue consumption and investment abroad and in Sweden. It is conceivable that the fall to date will dampen consumption more than the main scenario assumes. If the international stock markets were to continue their negative development, or if the effects of the fall become more extensive, the outcome for the Swedish economy could be considerably less favourable. Such a situation would also entail lower inflation.

Our efforts should therefore be focused on jump-starting investment. However, and this was really the crux of my argument, we will only manage to stimulate investment if structural, fiscal and monetary policies mutually reinforce each other. 4  BIS central bankers’ speeches
For this reason, it is not always easy to determine when, and how strongly, it will influence the Swiss franc exchange rate. However, if all other factors remain the same, there is less demand for investments in Switzerland – and thus for Swiss francs – when Swiss interest rates decline. BIS central bankers’ speeches  3  But I am also aware that negative interest rates do not constitute business as usual. In addition to the interest rate differential, nominal interest rates will themselves also return to normal. For this to happen, economic conditions abroad will need to improve to the point that interest rates in Switzerland can rise without causing the Swiss franc to strengthen further. This is currently not the case. At the most recent monetary policy assessment, we decided to leave the target range for the three-month Libor unchanged at between −1.25% and –0.25%. The interest rate on sight deposits at the SNB remains at –0.75%. Despite a slight depreciation, the franc is currently still significantly overvalued. We are convinced that negative interest rates and the SNB’s willingness to intervene as required in the foreign exchange market will make investments in Swiss francs less attractive; both of these factors serve to weaken the Swiss franc. The provisional inflation forecast in chart 4 is also based on a depreciation, along with a Libor rate of –0.75%. The chart shows that, over the short term, inflation will be lower than forecast in June, owing to the lower oil price.

Internal SNB studies have shown that short-term changes in demand from neighbouring countries have an especially strong effect on exports; in the case of demand from emerging economies,  1  D. Fauceglia, A. Lassmann, A. Shingal and M. Wermelinger, Backward Participation in Global Value Chains and Exchange Rate Driven Adjustment of Swiss Exports, study on behalf of the State Secretariat for Economic Affairs SECO, 2015. A study by the World Bank has revealed that exchange rate elasticity of industries has decreased worldwide. Closer global integration of the value chain was also cited as the main reason for this development (S. Ahmed, M. Appendino and M. Ruta, Depreciations without Exports? World Bank Policy Research Paper, 2015). 2  BIS central bankers’ speeches  however, long-term developments play a more significant role than they do in the advanced economies. This is why, in recent years, the export industry has increasingly orientated itself towards these emerging economies, where growth has also been considerably stronger. The greater importance of these regions was particularly beneficial during the financial crisis because demand from emerging economies fell much less, and recovered more quickly, than demand from the traditional export markets of Europe and the US. What support can the Swiss economy currently expect from global demand? In the monetary policy assessment two weeks ago, the SNB stated that the US and the UK saw robust economic development in the first half of the year. The muted recovery in Europe continued as well, due partly to the favourable exchange rate situation.
In my view, a turnaround in the  trajectory of underlying inflation – be it actual or expected with sufficient certainty –, should be a trigger for stabilising our rates.i  Page 4 sur 7 • The strength of the transmission of our policy measures, or in other words the extent to which the “plumbing” of monetary policy is effective, and fast: from what is still in the pipe, to the ultimate and concrete impact on economic activity and prices. It takes some time – usually about one or two years – for monetary decisions to take full effect. There has been some debate recently in the United States on whether this lag is shorter or longer under the current conditions: but let us acknowledge we don’t know enough on this issue, and need to dig further. Let me accordingly sum up where we are in our ECB monetary policy: we may possibly still have a little way to go on rate hikes at our next meetings, though I think it premature to decide now what we will do in May, but we have already completed most of our rate-hiking journey and the strongest economic effect ahead of us will be the pass-through of what is already in the pipe. In other words, the deferred effect of our past rate hikes will be more significant than the one of our future decisions. And it will be key to then stay the course for as long as necessary.

In my view, without pretending to be exhaustive, these global issues on which  Page 6 sur 7 interests and deliverables could converge encompass the following three “Cs”: climate, crypto-assets, cross-border payments. 1. Of course, addressing climate change comes to mind first. In the wake of the IPCC’s January Synthesis Report, it is estimated that if emissions continue at current levels, the carbon budget to have a 50% chance of limiting global warming to 1.5°C with limited overshoot would run out in around six years. The latest IPCC report is the final warning from the scientific climate community to all of us policy makers. From a financial standpoint, the collective priority is to make green finance more mature. The path is clear: better data and better standards will allow us to shift from voluntary to mandatory climate-related disclosures, and still more developed climate stress-tests and transition plans for all financial institutions. At the international level, we must ensure the convergence, or at least the interoperability of the various disclosure standards currently under development. ISSB should be the international standard, and be assured the European standard – EFRAG – will be somewhat more demanding but fully compatible. 2. Second, crypto-assets. In light of last year’s debacle, there is a broad consensus in international fora on the need to regulate them. But this consensus must now be leveraged and translated into concrete action.
In that light, it could in theory be cast as an enriched Taylor Rule, where a single policymaker “sets” both the risk-free policy rate and the credit spread on bank lending.24 This is, of course, an elegant and illuminating thought experiment. But can we do it? The “cyclical” macroprudential tools most discussed are variations of capital or liquidity or margin/haircut requirements. For now, I do not think we know enough about how they will work to control spreads and risk premia. And nor would we know precisely where we wanted to put these premia even if we could control them. This is not remotely a counsel of despair given the goal here: to choke off tail risk. Instead, I find it easier to think about the broad goals of macroprudential policy in terms of balance sheets. The regulatory reform Bill currently going through Parliament enjoins the Bank’s Financial Policy Committee to take heed of unsustainable levels of debt, leverage or credit growth, with the aim of ensuring that the financial system becomes and remains resilient. In other words, consistent with the theme of my remarks this evening, the FPC is to act upon the balance sheets of financial intermediaries, and indirectly to influence the balance sheets of other sectors of the economy. That means making judgments about incipient risk to the financial system from its own balance sheet and from borrowers.

4  Represented by, for example, Bernanke (2005), “The Global Savings Glut and the US Current Account Deficit”. 5  See King (2011), “Global imbalances: the perspective of the Bank of England”. BIS central bankers’ speeches  3  So we need richer stories to make sense of what happened. It is precisely in that spirit that colleagues at the Bank for International Settlements6 have stressed the importance of gross capital flows. As Cecchetti has emphasised, whereas global current account balances (the counterpart of net capital flows) expanded in the twenty years to 2007 from about 1% of world GDP to about 3%, the gross capital outflows of all countries increased from around 3% to over 15% of world GDP (Chart 5). And the aggregate international investment position of all countries7 increased from under 50% to over 150% of annual world GDP. Opening up the possibility that gross capital flows matter transforms the picture. For example, as Borio points out, Europe’s gross capital flows were enormous, accounting for around half of gross inflows into the US in the run up to the crisis. And sufficient of that was invested in US ABS for the US’s mortgage crisis to be transmitted across the Atlantic, including to France and Germany, pretty well instantly in 2007 – and before the solvency of the banking system was in doubt. Even if gross and net flows had been equal, wouldn’t the composition of those flows have made a difference?
The advantages of pegging fully to the euro area should nonetheless be considerable, as the euro area already accounts for more than half of Malta’s external trade in non-primary products. For the EU as a whole, the share is even higher. This share is set to increase as Malta integrates further with the EU and as more of the current non-euro area Member States join the euro area. While prospects for the UK’s entry in the euro area remain uncertain, the analysis does not change much, as a large number of companies operating in the UK have already switched to the euro as an accounting currency to gain exposure on international markets and to preserve their competitiveness. This trend is set to continue and is likely to spread to other countries as the euro continues to establish itself as an international currency. This means that the local business community could face pressures to make payments in euro even while Malta is outside the euro area, acquiring new currency mismatches in the process. There comes a point, therefore, when delaying adoption of the euro results in more pain than gain. Membership of the euro area will also present considerable financing opportunities associated with the large size and liquidity of financial markets in euro. Businesses will be in a better position to shop around for the cheapest terms and the highest return.

Once Malta is an EMU member, the foreign currency and local currency rating will be equalised but at what level will depend mostly on the fiscal account.”  BIS Review 61/2004  3  ECB; and that even if the degree of business cycle synchronisation with the euro area is already significant, national economic and financial structures might respond to the ECB’s monetary policy stimuli differently from the average euro area Member State. While this might not matter much when other tools of adjustment such as the exchange rate are available, the argument continues, the use of these tools is thwarted in a single currency area such as EMU. On the one hand, exchange rate flexibility is conditioned by the maximum allowable bands in ERM II, and is given up altogether upon the irrevocable fixing of the exchange rate at the point of euro adoption. Additionally, the Stability and Growth Pact constrains the use of fiscal policy for fine tuning the economy. Consequently, any underlying imbalances in the economy are bound to persist. While based on sound theoretical principles, this argument is largely not applicable to Malta. In particular, the business cycle is already fairly synchronised with that of the euro area, and the degree of trade integration is also quite significant. At the same time, sectoral GDP and employment data both reveal a strong correspondence with euro area economic structures, after allowance is made for the relatively more dominant role of tourism in Malta.
Salience can be achieved by prompting about moral codes—through language that emphasizes words like “moral,” “ethical,” and “good.” Discussions by leaders and key culture carriers—that is, esteemed colleagues regardless of rank in a hierarchy—can also help if they address ethical dilemmas that arise in the course of business decisions. Finally, salience occurs through proximity of decision-makers to those affected by decisions.12 So, look for ways to make the human consequences of choices more apparent. In my view, a habit or culture of considering what is right, and not merely what is permissible, will help any organization attract, retain, and develop high-quality employees. It will promote individual wellbeing and will contribute, over time, to an industry that makes fewer errors of judgment. Do not rest Above all, remember that this is a marathon, not a sprint. So your organization now has three lines of defense—great! But your work is not over. You still have to question whether your organization can be better controlled vis-à-vis its risks. The challenges and opportunities facing your firm do not stop changing. You need to adjust accordingly. I encourage you to ask questions about the three lines of defense model and how it is applied in your organizations. Here is one of the questions on my mind: How do the three lines of defense take account of advances in technology? Technological solutions in financial services are becoming cheaper, faster, more easily available—almost off-the-shelf—and help make your business more efficient and profitable. But do you know how these solutions work?

We cannot rely exclusively on controls or process to achieve desired outcomes. Not every situation can be anticipated. Not every decision can be automated. Controls can be out-maneuvered—sometimes unwittingly, but other times on purpose. For all these reasons, good processes are necessary but not sufficient. There will be situations in which your employees have to make choices. Ignoring the moral dimension of choices carries significant risk.8 If you want your organization to be well controlled with regard to its risk, you have to consider the quality of choices, not just the reliability of processes.9 An organization should therefore develop the capacity of its employees to make good choices, not just permissible choices. So, how do you practice moral reasoning? Bill Dudley has offered what I thought was a good starting point. Get rid of the notion that a separate morality applies at work than at home.10 Bankers—and, for that matter, lawyers—cannot check their morals at the door when they step onto a trading floor or into a courtroom. Here are some other ideas, courtesy of a 2016 report by the Financial Conduct Authority entitled “Behaviour and Compliance in Organizations.”11 The report argues, among other things, that ethical considerations need to remain salient in order to promote good choices.
So it is particularly important at present to ensure that the current low levels of interest rates do not mask the likely cost of mortgages and so create more headroom for prices to rise. It is possible that affordability constraints, reinforced by lenders’ underwriting standards, will increasingly act as a brake on the speed at which house prices are growing and as a brake on mortgage debt. In that case, having recovered much of their fall following the crisis, we will see house price growth slow to match the pace of earnings growth – a soft landing. This is not without precedent. In 2004, having risen at an average rate of almost 20% over the previous 2 years, house price growth began to slow with the annual growth rate falling to just 2% by the middle of 2005. The 125bps increase in Bank Rate in the 13 months to September 2004 was no doubt part of the story. It proved, however, to be short lived episode. Amid a period of easing credit conditions, the pace of house price growth began to rise again through 2006, reaching double-digit rates by 2007. But it is probably an example of how affordability can brake the market. However, there is another way the story can play out – a major overshoot in prices and build up in debt followed by a sharp correction with negative equity and an overhang of debt for many households.

Legal systems and competitiveness of financial centres  Fundamentally, the legal system should ensure that contract and property rights are sufficiently clear and predictable; if there is a dispute, participants in the contract do not feel  1  I wish to thank L. Stracca, M. Svoboda, S. Kerjean, F. Recine and C. Zilioli for their contribution. 2  Mishkin (2005). 3  Precisely through its negative impact on the quality of institutions and law enforcement. BIS Review 122/2007  1  the need to take legal action unless as a last resort. Moreover, if there is litigation, the court is independent and able to resolve the claim effectively and in a reasonable time. Furthermore, the judgment, once delivered, has to be quickly enforced. To underline the importance of this aspect let me give the example my own country. There is a growing literature suggesting that one of the reasons for the relatively slow pace of financial development in Italy is the slowness of the civil courts, with the result that, for example, mortgage debt is still a fraction of what it is typically in other advanced countries. 4 At this point it should be clear that an efficient legal system is a key ingredient of competitiveness among financial centres. One of the reasons of the traditional lead of US financial markets over Europe (and the rest of the world) is greater standardisation of legal norms and systems, while the European financial system is still characterised by considerable fragmentation of legislation, regulation and enforcement.