samchain/econo-pairs-v1 huggingface dataset:
Mobility of capital can also promote necessary adjustment to shocks. Moreover, if capital in one part of a union is owned by those in other parts, the effect of a given shock is diluted across the union. Simply put, risks and rewards are shared. Similarly, the ability to borrow from other parts of the currency union in deep and liquid cross-union credit markets or integrated banking systems allows one part of a union to smooth out temporary falls in incomes.19 However, free movement of capital can be a mixed blessing. If the funds provided by one part of a union to another can be withdrawn easily, these outflows can – if the right structures are not in place – undermine financial and economic stability of all members. This brings me to the second feature of a successful currency union – banking union. Banking union Effective currency unions need a wide range of institutions to support an integrated and efficient financial sector. These are often referred to as a “banking union” and include: •  Common supervisory standards,  •  Access to central bank liquidity and lender of last resort facilities,  •  Common resolution mechanisms, and  •  A credible deposit guarantee scheme. Without a banking union, cross-border capital flows can be restricted, the effectiveness of monetary policy impaired and, in the extreme, the viability of the union itself undermined.

Scots have shaped the modern world through their contributions to culture and science. The pioneering work of Scottish economists from Adam Smith to Sir James Mirrlees has had great influence on my profession. Among them is David Hume, born just a short walk from here and a great friend and collaborator of Smith. While better known as a philosopher, Hume’s essay “Of the balance of trade” set out the theory of how trade imbalances between nations sharing a currency (gold) would self-correct as inflows of money to surplus countries raised their prices and reduced their competitiveness. As an empiricist, Hume would doubtless admit that recent euro area experience of persistent current account deficits leading not to self-correction but instead to crisis requires a more elaborate explanation. Fortunately economists have over the years obliged with substantial work on the economics of currency unions. Given the recent focus here on the currency and the fundamental role of the Bank of England in maintaining monetary and financial stability across the United Kingdom, I want to draw on that body of economics today to review some of the most important issues with respect to monetary union. I will stick rigidly to what Thomas Carlyle described as the dismal science. Any arrangement to retain sterling in an independent Scotland would need to be negotiated between the Westminster and Scottish Parliaments. The Bank of England would implement whatever monetary arrangements were put in place.
Rotemberg, J., and M. Woodford, (1997), “An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy”, NBER Macroeconomics Annual, Vol. 12, pp. 297–346. Shirakawa, M., (2010) “Revisiting the Philosophy behind Central Bank Policy”, Speech at the Economic Club of New York, April 22 2010. Taleb, N., (2012), “Antifragile: Things That Gain from Disorder” Forthcoming from Random House (US) & Penguin (UK). Woodford, M., (2003), “Interest and Prices: Foundations of a Theory of Monetary Policy,” Princeton University Press: Princeton, NJ. BIS central bankers’ speeches  19

Have they been transformed into new puzzles and uncertainties? And what does it all mean for policy going forward? The good news is that the recovery has remained strong. Indeed, after the revisions to the past data in this year’s blue book we now know the economy passed its pre-crisis size in the third quarter of 2013. We can talk now of an expansion rather than a recovery. On the latest data, growth in the four quarters to September now stands at 3% – a little stronger than expected back last November. Growth was particularly strong in the first half of the year and the business surveys suggest that may well be revised upwards. In the latest quarter of this year, growth is reported to have fallen back to 0.7%. The burst of pent up demand that propelled the initial recovery was a little stronger and lasted a little longer than we had been expecting last November. But it does now seem to be fading. Moreover, growth has become more broadly based due to the marked pick up in business investment. The shift of the balance of growth towards business investment that the surveys were pointing to last November, has I am pleased to say come through more strongly than expected. Business investment now looks to have driven around a third of the increase in GDP we have seen over the past year. That has made the recovery more broadly based and more sustainable.
The effects of an expansionary monetary policy during economic slumps should be counterbalanced by the opposite effects of a tight monetary policy during booms. It may of course be reasonable to take as a starting point that monetary policy is neutral in the long run. But there are factors that may point to a need to modulate this starting point. Some research results indicate that the effects of expansionary and contractionary monetary policy are not necessarily symmetrical.4 There are also mechanisms that make the risk of staying unemployed increase the longer one is unemployed. Add to this that the income profile over the life cycle improves considerably if one has a job. This could mean that there are motives for conducting a relatively more offensive monetary policy in economic recessions. But here more research is needed to gain a deeper insight into the causes and scope of this type of persistence effects on unemployment and what these effects mean for monetary policy. Monetary policy affects incomes from different sources The effects of monetary policy on income and wealth distribution are in other words rather difficult to disentangle. But let us look at some different ways in which the expansionary monetary policy conducted in recent years may have affected the income distribution. An appropriate starting point could be the functional income distribution of GDP. As we know, GDP can be measured from different sides, for instance as the total of all factor income.

Debt-to-income ratio in different income groups 2016 Percentage of disposable income 400  400  350  350  300  300  250  250  200  200  150  150  100  100  50  50  0  0  1  2  3  4  5  6  7  8  9  10  Note. The columns show the median in each decile group. Data for July 2016. The high debt ratio in the lowest income group should be interpreted with a certain amount of caution, as this group includes, among others, households with highly varied incomes, for example households with negative income. Source: The Riksbank  In addition to households having different sizes of assets and liabilities that are affected by interest rates to different degrees, there may also be other dimensions that play a role in how the distribution of income and wealth is affected by a period of very expansionary monetary policy. For instance, one can imagine that household that are used to managing their assets and liabilities have better conditions for safeguarding themselves against or benefitting from the effects of monetary policy on interest rates and asset prices. However, the distributional effects of monetary policy do not come solely through changes in nominal interest rates and asset prices. Ultimately, it is the effect when consideration is given to inflation that is important. And the composition of household wealth is also significant in this context.
To promote growth in our local communities, we publish extensive data and analysis on the local economy. We provide outreach initiatives, such as our workshops on access to global markets to help small businesses learn about loan programs and sources of credit enhancements. We also run an annual video festival for college students in the Second District. In this program student teams produce videos aimed to help young adults make  4  BIS central bankers’ speeches  sound personal financial decisions. A panel of advertising and video professionals selects winning video productions for screening in local movie theaters. As you know, even states as wealthy as Connecticut have large pockets of poverty. So, we target some of our work specifically to low- and moderate-income groups. We have worked hard to help neighborhoods that face high foreclosure rates. This work is important obviously because foreclosures are a terrible event for those who lose their homes. But beyond that, this work is important because high levels of foreclosures affect neighbors’ home values, the local tax base and economic vitality more broadly. We have provided housing counselors and community groups with the latest information on mortgage conditions via mortgage briefs, roundtables, presentations and an interactive web tool that shows very local monthly delinquency and foreclosure conditions. This past fall we hosted a conference on distressed residential real estate to share new expert analysis with senior policymakers and practitioners from across the nation.

The ideas and experiences shared could then be contextualised to the prevailing local conditions to enhance financial inclusion. This proposal was welcomed by the members and resulted in the first Financial Inclusion Advisers programme conducted in Lusaka, Zambia in April 2009. The success of this inaugural programme hosted led us to this second programme hosted here in Malaysia with the support of JICA. JICA has long been involved in capacity building in  BIS Review 4/2010  1  the African continent, and we look forward to collaborating in the future in this area of building more inclusive financial systems. The Malaysian experience on the financial inclusion agenda In Malaysia, the commitment to the financial inclusion agenda is reflected in the new Central Bank of Malaysia Act 2009 which incorporates financial inclusion as an objective of the Central Bank. With the enactment of the Act in November of 2009, the Central Bank has imbedded in the legislation the financial inclusion agenda to ensure that future generation of central bankers will continue to direct efforts to building an inclusive financial system. Additionally, the Central Bank in the process of formulating a new blue print for the financial sector for the next decade. This blueprint would also ensure the development of a more inclusive financial system. The results of the financial inclusion measures thus far have shown positive results.
However, we also need to take into account the risks associated with household indebtedness in our repo rate decisions. Our balancing act in October resulted in an unchanged repo rate, but a downward adjustment of the forecast for the repo rate (see Figure 18). Such a monetary policy means that we can, on the one hand, attain the inflation target and stabilise employment in the long term and, on the other hand, take the risks associated with financial imbalances into account. However, monetary policy alone cannot eliminate the risks associated with household indebtedness that I have discussed today. It is important to have a wide-ranging discussion among several authorities in Sweden on the need for additional measures. 6  BIS central bankers’ speeches  Figures Figure 1. Repo rate Per cent, daily data 5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Source: The Riksbank  Figure 2. GDP growth in Sweden and the world Annual percentage change, calendar-adjusted data 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  Sweden The world  -6  -6 80  85  90  95  00  05  10  15  Note. The broken line and bars refer to the Riksbank’s forecast in MPR October 2012.

However, there is no natural limitation of the indebtedness of the private sector and this becomes a particularly important issue when the repo rate is low. This has led to major problems on two previous occasions. In the 1990s, there was an excessive expansion of credit and many loans were used to fund the purchase of commercial properties. More recently, we imported problems via the banks’ excessive lending in the Baltic countries. Today I am talking most about household indebtedness, but the issue is a general one. We need to focus more than previously on debts and the stock of debts in our analysis apparatus. More specifically-targeted tools are possibly more effective than the repo rate to deal with household indebtedness, for example amortisation requirements and higher risk weights for mortgages. Higher risk weights for mortgages mean that the banks must hold more capital for their mortgages. This is something that the Riksbank has pointed out earlier on a number of occasions and that we analyse in more detail in our latest Financial Stability Report. The issue has also been discussed by the council for cooperation on macroprudential policy set up jointly by Finansinspektionen and the Riksbank. Finansinspektionen recently proposed a floor of 15 per cent for risk weights for mortgages in Sweden. 4 However, of the conceivable concrete measures for preventing risks on the housing market in Sweden, the mortgage cap is practically the only one in place today.
After all, over the last eight decades the world has seen three major episodes, with the associated liquidity traps: the Great Depression, the Japanese experience of the 1990s, and the current crisis. By any standards, three episodes within a period of eighty years cannot be regarded as just an “anomaly” in the functioning of the economy, or as something of only minor relevance. On the other hand, the experience with non-conventional policies during the crisis offers some reassurance that the problem posed by the ZLB may in practice be manageable, and that policymakers may therefore be able, if similar circumstances were to arise again, to avoid once again the slide into deflation. In this respect, let me stress again that the ability, on the part of central banks, to provide both conventional and unconventional stimulus to the economy has been substantially enhanced by the anchoring of medium to long run inflation expectations at a level consistent with their price-stability objective. The crisis has therefore illustrated the advantage deriving from stable inflation expectations, which increase the effectiveness of monetary policy in the face of large contractionary shocks by transmitting integrally moves in nominal interest rates into moves in real interest rates. Let me now turn to a final, and separate, lesson of the crisis, pertaining to the necessity of broadening the spectrum of views available to policymakers, and more generally of being more receptive to opinions and positions outside of the “mainstream”. II.5.

According to some, in the past few years alone Hong Kong has been diagnosed with a whole collection of terminal diseases brought by the handover in 1997, the recent regional financial crisis, the “threat” not just from Shanghai but also from Seoul, Singapore and Sydney, the high cost of doing business, declining educational standards, worsening pollution and, believe it or not, too stable a currency as well, and a whole host of other factors. The impending “catastrophe” of China’s entry into the WTO is the latest spectre on the horizon, and no doubt when that one passes without incident more demons will be conjured up. Yet, in this moribund state, we are still managing to struggle along with GDP growth - projected for this year - of 8.5% and export growth at double-digit rates in recent quarters. The World Bank projections on the effects of WTO entry - a doubling in the space of five years of China’s share in international trade (which is itself projected to grow at the rate of about 6% per annum) - suggests that the business “creation effect” stimulated by WTO accession will far outweigh the “diversion effect”. There should, in brief, be more than enough work to keep both Shanghai and Hong Kong busy for a long time to come, and more than enough skill and enterprise available in both cities to enable each to focus on the opportunities that WTO entry will bring.
If oil prices develop through the rest of 2004 in line with current forward prices, and the other assumptions in the Revised National Budget for 2004 for calculating allocations to the Petroleum Fund for 2004 prove to be correct, purchases of foreign currency for the Petroleum Fund may be resumed this year. This will then be in addition to the regular transfers of profit from the State’s Direct Financial Interest in petroleum activities (SDFI) to the Petroleum Fund, which are invested abroad. Higher oil prices mean higher revenues for the oil companies. International and Norwegian oil companies with activities in Norway increase their capital outflow when profits increase. Thus, in the short and medium term, cumulative profits in the petroleum sector generate little added capital in the domestic economy. If petroleum revenues are disregarded, Norway has a current account deficit. The deficit has been increasing in recent months, and this may also, in isolation, boost demand for foreign exchange in the Norwegian foreign exchange market. The krone appreciation has probably been affected by shifts in themes in the international foreign exchange markets, due in part to an upward adjustment of interest rate expectations in the US in April. In addition, financial market expectations of higher interest rate increases in Norway in 2005 and 2006 relative to other countries have probably contributed. A self-reinforcing mechanism may have been functioning for a short period after the krone began to rise in value at the beginning of March this year.

The real krone exchange rate as measured in terms of developments in relative prices is an expression of the Norwegian krone’s purchasing power. When the curves in the chart are above zero, the exchange rate is stronger and competitiveness weaker than the average level since 1970. The real exchange rate has fluctuated considerably over time and has deviated substantially from the average level over longer periods. Nevertheless, there has been a tendency for the real exchange rate to revert to this level. In the chart, the point for 2004 shows the real exchange rate with wage and inflation projections for 2004 from Inflation Report 1/2004. In relative prices, the real exchange rate is now about 2 per cent weaker than the average since 1970, whereas it is almost 4 per cent stronger than its historical average measured in terms of relative labour costs. Economic developments Interest rate expectations have been revised upwards in a number of countries. Growth has picked up in the US. As in the second half of 2003, growth is primarily being driven by private consumption and business investment. Following a surprisingly long period of weak labour market developments, employment has begun to edge up and is now higher than at the same time last year. In recent months, inflation has increased from a very low level. As a result, interest rate expectations have been revised upwards, and the key rate in the US is expected to be raised at the end of June.
Does the minimum exchange rate continue to apply? Yes. Without any qualification. The SNB has successfully enforced the minimum exchange rate and will continue to do so, without any restrictions. The Swiss franc is still overvalued and represents a substantial challenge for the Swiss economy. The SNB continues to expect that the Swiss franc will weaken. Should the economic outlook and the risk of deflation so require, the SNB stands ready to take further measures at any time. 2  BIS central bankers’ speeches

Mark Carney: Fortune favours the bold Lecture by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, to honour the memory of The Honourable James Michael Flaherty, P C, Dublin, 28 January 2015. * 1. *  *  Introduction  It is a pleasure to be in Dublin and an honour to give this Iveagh House lecture in memory of Jim Flaherty. Jim’s attitude and actions typified the Flaherty family motto: Fortune Favours the Bold. Born the sixth of eight children in La Chine, Quebec; Jim Flaherty worked odd jobs and won a hockey scholarship to put himself through Princeton. Successful in private and public sectors; he rose to become Attorney General and Minister of Finance of his province before becoming Canada’s 37th Minister of Finance. Once there, his accomplishments were legion, ranging from creating and enhancing support programs for the disabled and care givers to setting the country back on the path to fiscal balance after the crisis and ensuing recession. His tenure as Canadian finance minister was shaped by that crisis and its aftermath. It was my honour to work with him as Canada weathered the storm. And many of you worked closely with Jim as Ireland negotiated agreements with the Troika and devised policies to rebuild its battered economy. I am confident he would be proud of the progress Ireland has made. I suspect he would be more than a little frustrated with the euro area, however.
The difficulties that may arise, not only when reforming but also in opening the debate, may lead some to ask why, without reforms and, in particular, without modifying our labour market institutions, Spain won’t be able to grow as in the past. From what I’ve said already you can imagine my reply. It is possible that Spain may be able to grow as in the past, but it is highly unlikely. And I say that it is possible solely because, following the general failure of most of the forecasts that have been made during the current crisis, we should all be more humble when postulating about the future. Honestly, though, it is more difficult to imagine today how, without reforms, the Spanish economy can perform as favourably in the future as it has done  6  BIS Review 18/2009  in the last few decades. Moreover, what do we gain by refusing to learn from others about what can reduce the rate of unemployment and raise labour productivity and real wages? Even if our economy can grow again as it has in the past, with low productivity and with higher unemployment and lower wages than our neighbours, that would not seem to be preferable to the strategies for growth that they apply. Allow me one final consideration on an argument occasionally deployed, when there are no other arguments left, for not adopting structural measures.

Mr Trichet gives an address on the risks and challenges of the international financial scene Text of the Third Hong Kong Monetary Authority Distinguished Lecture delivered by Mr Jean-Claude Trichet, Governor of the Banque de France, the central bank of France, in Hong Kong on 8 July 1999. It is a great pleasure to be here in Hong Kong and I am greatly honoured to have been invited to deliver the Third Hong Kong Monetary Authority Distinguished Lecture. So I would like to thank you for giving me the opportunity to express my views on the challenges and opportunities of the international financial scene. The international financial scene has been faced with two major changes over the last quarters: í  the recurrence of financial crises, originating generally in emerging or transition economies, which has emphasised the need to reform the architecture of the international financial system;  í  the introduction of a new currency, the euro, which should contribute to a balanced international monetary system. FINANCIAL CRISES AND THE REFORM OF THE ARCHITECTURE OF THE INTERNATIONAL FINANCIAL SYSTEM Two major explanations of the recent financial crises have been put forward: í  one which can be called the “fundamentalist” view argues that Asia’s healthy macroeconomic indicators – low inflation, fiscal balance, low government debt, high rates of savings and investment – offered a misleading picture. This view points out that many Asian governments provided implicit guarantees to the banking sector, which often engaged in borrowing abroad and in reckless lending to unqualified borrowers.