samchain/econo-pairs-v1 huggingface dataset:
It is the case, however, that mitigating the implicit subsidy to TBTF institutions does correspond to a socially desirable increase in the cost of doing business for these institutions. Is maximising return on equity an appropriate objective? As mentioned in our discussion of the cost of capital, return on equity will be affected. A more highly capitalised bank is expected to have a lower ROE because of its lower risk profile. However, this is socially desirable. The common emphasis on ROE should be handled with scepticism, as ROE is a measure that is not adjusted for the risk profile of the bank and thus can be easily manipulated by increasing leverage. Because ROE depends on the capital structure of a bank, this measure should not be used to compare two banks with different capital structures. If, however, two banks have the same capital structure, does it follow that targeting the highest ROE is the appropriate strategy? If a bank is operating efficiently, its return on equity will be positively correlated with the risk taken: on average, more risk means more reward and thus more profitability. However, as we have seen, there is such a thing as too much risk-taking from society’s perspective, in particular in the context of TBTF or systemically relevant institutions. That is, the amount of risk taken by a TBTF bank can diverge from the risk that society would like the bank to take.

For an open trade-dependent economy, stability in the exchange rates accords significant advantage in enhancing trade and investment opportunities. By eliminating wide swings in the exchange rates, the pegged exchange rate regime has provided a stable environment for businesses to plan their investments and to undertake their operations. At the same time, stability of the exchange rate also provides an environment that facilitates continuous structural reform to improve Malaysia's competitive position. It is through long-term structural adjustments rather than frequent adjustments in the exchange rate that a country can build a strong business foundation, improve efficiency and create the enabling environment that encourage competition and innovation. As a small open economy, Malaysia does not have influence over the external factors that affect the economy. However, by working on strengthening domestic economic fundamentals, Malaysia will be in a stronger position to manage and mitigate the impact of the volatility in the external sector. Three elements are important in ensuring that an exchange rate regime continues to operate effectively. First, it needs to be well supported by the domestic fundamentals. Second, there must be flexibility in domestic markets to enable the economy to adjust and absorb the impact from external volatility. Third, increased competitiveness is achieved through efficiency and productivity gains rather than relying on currency depreciation.
This acceleration is attributable to loans not secured by mortgages, which have been growing since April. Mortgage loans grew at a rate of over 5% in April. There are still no signs of any credit crunch in the survey on bank lending conditions conducted regularly by the SNB. The survey even provides initial indications of a possible trend reversal. During the financial crisis, a number of banks had reported a slight tightening in their loan conditions. However, in the first quarter of 2010, a few banks (for the first time) reported an easing. We continue to observe a considerable increase in loan volumes for residential mortgages. This increase, along with movements in real estate prices, represents a risk that demands the full attention of the SNB. My colleague, Thomas Jordan, will discuss this topic in greater depth. 2  BIS Review 85/2010  Development of the SNB’s balance sheet as a consequence of monetary policy In my following remarks, let me focus on the extraordinary development of the SNB’s balance sheet. As is the case at other central banks, the balance sheet has undergone a considerable expansion and change in its composition since the beginning of the financial crisis. By May 2010, it had nearly tripled in size to over CHF 300 billion. This extraordinary development in the balance sheet is a direct consequence of monetary policy. The SNB had lowered interest rates sharply during the financial crisis, but by the spring of 2009, the traditional interest rate instrument was practically exhausted.

The SNB is now reaping the benefits of having continuously increased its allocation to provisions in previous years. This gave it the room for manoeuvre it needed for measures in times of crisis. The higher allocation to provisions decided on recently has further strengthened the SNB’s capital base. The SNB has sufficient equity capital to withstand even large losses. In the long term, a large part of the liquidity that has been created is excess liquidity. As my colleague, Jean-Pierre Danthine, will explain, the SNB has the necessary instruments at its disposal to withdraw this liquidity. Inflation forecast chart I would now like to comment on the new, conditional inflation forecast in more detail. The (dashed) red curve on the chart represents the new, conditional inflation forecast. It covers the period from the second quarter of 2010 to the first quarter of 2013 and shows the future inflation development on the assumption of the three-month Libor remaining constant at 0.25% over the entire forecasting horizon. For purposes of comparison, the (dash-dotted) green curve shows the inflation outlook published in March, which was also based on the assumption of a three-month Libor of 0.25%. The new forecast shows unchanged inflation prospects. However, new data have led to a slight upward revision in the inflation forecast in the short term, so that inflation arrives at nearly 1% in the second quarter of 2010.
But it began to recover in April 2002. The latest figure for the whole year showed the annualised growth at almost 6%. This was a dramatic turn around. It should be noted that the export recovery did not come entirely from our traditional markets, the US and Europe. What we did see was that export to Asia increased by over 7%, somewhat higher than the average figure, with China absorbing a good 23% more of Thai goods this year compared to last. Second, farm prices improved substantially. Prices increased by 11% boosting farm income by the same percentage for the whole year. Both these factors helped improve our domestic consumption especially the sale of automobiles, motorcycles and construction. Third, there was a strong recovery of other domestic demand. Part of this was helped by the fiscal stimulation. In 2002 the budget deficit was at 3.6% of GDP. The other factor was the low interest rate environment that the Bank of Thailand has maintained for the past 5 years and is now beginning to bear fruits. The accommodative monetary policy resulted in robust growth of mortgage lending as well as other types of consumer loans. Consumer confidence rose to its highest level in recent years. Domestic investments improved too. I agree that at the moment not much of the new business investment was yet financed by bank loans. The entrepreneurs still rely more on their internal cash. But the latest investment indicators showed an annual rate of increase at a high of 23%.

In this respect, I can inform you that the government has made it very clear that they plan to consolidate the fiscal deficit to no more than 3.1% of GDP for fiscal year 2003. This is a good gradual reduction from 3.6% last year. The overall government debt is currently still at 54% of GDP, well under the cap of 60% announced in 2001. The rapid recovery of the general economy also helped boost tax revenue collection by as much as 10% in 2002, and looks set to repeat itself in 2003 as well, helping to narrow the budget deficit. Ladies and gentlemen, No one can plan for 2003 with absolute certainty. We are all following the news minute by minute, and even the best laid out plan for this year must contain several scenarios to cover for contingencies. But the one certainty I can assure you is that the macro economic policies in Thailand that aim for stability and sustainable growth will continue. BIS Review 8/2003  3
Finally, the concerns of non-euro area Member States that the European Central Bank’s capital key would be used as a reference for raising fund contributions have been addressed by the decision to make them proportional to bank liabilities, less own funds and guaranteed deposits, which significantly reduces the participation costs of countries with relatively lower degrees of financial intermediation, such as Romania (34.8 percent of GDP in 2013) or even Poland (53.2 percent of GDP). Still, I think there is one particular issue where equal treatment of euro area and non-euro area members of the Banking Union is not ensured, namely the access to euro liquidity. Unlike euro area countries, which have access to financing from the European Central Bank, in non-euro countries liquidity will have to be provided by their respective central banks, including in euro. I believe there is a need to start discussions with the European Central Bank on short-term access to euro liquidity against non-euro collateral of appropriate quality for domesticallyowned credit institutions. Of course, I see this access as an emergency facility, which can be tapped only under severe or imminent stress to non-Eurozone host country financial stability. The issue is relevant for Central and Eastern European countries, among which Romania, where a significant degree of currency substitution in euro persists from before 2008 in terms of the stock of both loans and deposits (in Romania, more than 50 percent in the case of loans and 30 percent in the case of deposits).

To preserve this advantage, Norway needs to be a leader. Technological developments pave the way for new possibilities – new means of payment are introduced and existing means of payment become faster and cheaper. While most changes result in a more efficient system, they also pose new challenges. New technology and outsourcing require stricter standards for both the risk management framework and contingency preparedness. Responsibility rests with system owners. As supervisory and oversight authority, Norges Bank has a duty to point out any deficiencies and weaknesses. There are also challenges associated with the pricing of payment services. When given a choice of payment solution, customers are not charged prices that reflect actual costs. Does this make the system more expensive than necessary? Banks operate most of their payment solutions at a loss. Does this have to be? Are banks’ incentives to invest in secure and forward-looking solutions being weakened? Risk and costs are drivers of change The main structure of the payment system has remained fixed for a number of years, but there have been changes, both to the part of the system customers encounter and to interbank settlement. Behind many of the changes is a desire to reduce risk or costs, often both. 2  1  See the Payment Systems Act. 2  The discussion of trade-offs between costs and risk is inspired by Kahn et al.
On average, the other new member States have fiscal positions ranging from close to balance to deficits of around 7% of GDP. Malta’s deficit is close to the latter figure and thus acts as a drag on the productive use of resources, and hence also on economic growth. 4  BIS Review 50/2003  Other new member States on average spend 0.8% of their GDP on innovation, research and development. This compares with almost 2% for the present EU members and with a target of 3% to be achieved by 2010. The comparable figure for Malta is not yet known, but preliminary indications suggest that the research and development expenditure undertaken here is even lower than the average for the other new members. And Malta is only now preparing to adopt a specific innovation policy as part of its programme of economic reform. Business investment in the other new member States amounts to almost 20% of GDP. The comparable figure for Malta is not available, but it is known that the combined public and private investment to GDP ratio in 2002 was 21%. This suggests that the ratio of business investment to GDP in Malta is significantly lower than that in other countries. On the other hand, Malta compares relatively well in terms of its educational expenditure which, at almost 5% of GDP, is equivalent to that in other new members and indeed in the EU member countries.

These are the correction of macroeconomic imbalances, which I have often characterized as the need to live within our means; the need to respond to, and exploit the competitive forces unleashed by globalization; and the deleterious economic effects of population ageing and of environmental degradation. These challenges are by no means unique to Malta. Economies all over the world at different stages of development are similarly affected. They can, and must, therefore, be transformed into opportunities, because economies which are more successful than others in overcoming them will enjoy a significant competitive advantage. In Malta’s case the task is particularly difficult because all of these issues need to be tackled at the same time. Indeed, undue postponement of the necessary reforms could have serious consequences. The Correction of Macroeconomic Imbalances The Maltese economy has been devoting far too many of its relatively scarce resources to consumption. Household and government consumption have increased steadily over the past decade from 80% to 85% of GDP. The household savings rate has meanwhile declined from almost 16% to around 1.5% of disposable income during the same period. These trends are a source of concern. First, because a reduced savings pool will compromise future economic growth by curtailing investment. Indeed, the share of resources devoted to productive investment has shrunk from almost 30% a decade ago to just over 20% today. Second, because excessive consumption threatens the sustainability of the economy given the high import content of  BIS Review 50/2003  1  domestic expenditures.
This would hit the regions impacted by the crisis hardest and the number of industrial jobs would decline more rapidly. Another important question concerns the implications of the division of the economy for the Industrial Agreement’s normative role in wage bargaining, a role which has been very important during the most recent agreement periods. The Industrial Agreement has been a restraining force, contributing towards retaining the competitiveness of that part of the Swedish economy exposed to international competition and keeping inflation at a low and stable level at the same time as real wages have risen and growth in the Swedish economy has been strong – until the financial crisis. In the period ahead, a drawn-out recovery, weak labour markets and low price and wage increases are also expected internationally. The sector exposed to international competition is the area of the Swedish economy to be most tangibly and directly affected by these external conditions for wage developments within Sweden. This suggests that this sector should also play a normative role in this year’s collective bargaining. The service sector is not as sensitive to cost increases, but finds it easier to pass these on to prices. If the service sector plays a normative role in this year’s collective bargaining, it is likely that wage increases, and thereby inflation, will be greater than would be the case if the sector exposed to competition were to be normative. Another issue that may play a major role is uncertainty concerning the future.

Underlying inflation has fallen in both geographical areas since the middle of 2008. One contributing cause of this low and, for a period, negative inflation is the weak development of the labour market. In the United States, employment levels have continued to decline during the autumn, with unemployment rising to approximately 10 per cent. Likewise, in the euro area, the situation in the labour market has continued to deteriorate and unemployment has increased to approximately 10 per cent. An expected weak growth in wages together with low inflation expectations is contributing towards dampening inflation. Falling market expectations for the policy rate during the autumn may also be compatible with lower expected inflationary pressure. Both survey results and implied forward rate curves indicate that market participants’ monetary policy expectations in the United States and euro area have fallen somewhat during the autumn. Sweden also experiences recovery but low resource utilisation Developments in the rest of the world have impacted small, open, export-dependent countries such as Sweden hard. However, even in Sweden, the lowest point of the recession has been passed and recovery has started. GDP increased slightly during both the second and third quarters of 2009, after having previously fallen four quarters in a row. The National Institute of Economic Research’s Economic Tendency Survey and Swedbank’s Purchasing Managers’ Index have also reached levels indicating growth in the Swedish economy (Figure 10).
Petar Goshev: Brief overview of the financial crisis and its impact Opening speech by Mr Petar Goshev, Governor of the National Bank of the Republic of Macedonia, at the international economic forum “Faster towards the European Union”, organized by the Economic Chamber of the Republic of Macedonia, Ohrid, 2 November 2008. *  *  *  Honorable President Azevski, Dear presidents, business leaders, honorable excellencies, ladies and gentlemen. Let me thank Mr. Azevski for the given honor to speak in front of you this evening, in this exceptionally turbulent, exciting and at the same time challenging period in the economic and financial history of the world. From the invitation I can read that I have the honor to address representatives of ten countries in the region, primarily people who face all sorts of challenges in solving the puzzles from the real economic life, every day. From the statistics I looked through, I may conclude that I have the pleasure to speak in front of representatives of nearly 64 million citizens (63.89 in 2007), whose GDP was around 507 billion Euros altogether in 2007, as opposed to the GDP of 40,000 billion achieved by the world (i.e. 1.27% of those 40,000 billion), in front of the representatives of the 64 million citizens who during the same year exchanged goods and services with the rest of the world in the amount of 295 billion Euros, as opposed to the 20.4 thousand billion of realized foreign trade of the whole world, i.e. a share of 1.43%.

This will lead to increasing the confidence in the financial system. The Basel Committee on Banking Supervision and the Board for International Accounting Standards have already undertaken certain activities. •  The regulation on determining and measuring banks' solvency deserves special attention. The appropriate level of capital is the main anchor for a stable banking system. When this issue is discussed internationally, primarily a reference is made to the New Capital Accord, the so-called BASEL II. It is being criticized even before its full implementation and therefore it is inappropriate to refer to it as one of the reasons for the current crisis. However, it is important to mention that draft amendments have already been prepared as a response to the new developments. Those are, inter alia, the following: -  Improvement of the manner of covering the risks arising from the use of structural financial products. -  Changes in determining the capital necessary for covering the risks from banks' trading portfolio, especially of those instruments characterized with lower liquidity on the market. -  Measures for reducing the effects from the economic cycles on the level of the capital requirement. The purpose is: to allocate more reserves in periods of expansion in order to provide sufficient capital for covering the losses in times of crisis. This is Spanish experience, known as "dynamic provisioning". -  Expanding of the type of data which the banks will be obliged to disclose.
Since 1970, the labor share of GDP in the United States has declined about 5 percentage points. Similar declines are evident in most developed and emerging market economies. Second, the distribution of labor income has become more skewed. Since 1970, the top 1 percent of households in the income distribution has more than doubled its share of the nation’s income. Third, despite the notion of the American dream, income mobility in the United States remains relatively low compared to many other countries. Also, the potential for income mobility is not evenly distributed. Research has shown that where you are born and raised in the United States still has significant implications for your future prospects. As a country, we need to address these issues. With respect to the labor share of income, maintaining the U.S. economy at full employment should help. As the unemployment rate has fallen over the past two years, the labor share of income has moved up almost 1.5 percentage points. Supporting maximum sustainable employment is part of the Fed’s dual mandate, so we can play an important role here. With respect to the rising concentration of income and the low level of income mobility, I think considerable improvements are also achievable. Income distribution can be influenced by tax policy and by educational opportunities. Income mobility can be influenced by local policies on education and housing. As Raj Chetty’s pathbreaking work makes clear, income mobility depends on where one is born and lives.

•  In Singapore, liberalisation spurred the consolidation of Singapore banks from seven banking groups to three, a process which may otherwise have taken much longer. •  Foreign bank participation in the domestic banking system must therefore be strong enough to encourage the strengthening of the local banks but not so strong as to overwhelm them. •  It is a judicious balance that each country must find for itself. Third, selective and stringent admission. Singapore has always had a very open policy towards foreign banks in wholesale and offshore banking activities. But when we selectively liberalised foreign bank access to retail banking, MAS considered three sets of factors: •  First, the banks’ prudential strength, credit ratings, and quality of risk management. We only admitted strong, well-run banks. •  Second, we took into account the relationship we had with the home regulator, as we needed to be able to work with them on consolidated supervision of these banks and trust them to regulate the head office in a sound manner. •  Third, we evaluated the banks’ long-term business plans and how they could contribute to the Singapore economy. Liberalisation is not an end in and of itself. It must ultimately lead to a stronger, safer, and more competitive financial system that serves the needs of the economy and country.