samchain/econo-pairs-v1 huggingface dataset:
With output some 10% lower than it would have been if pre-crisis growth rates had been maintained, it would appear that the margin of spare capacity ought to be large. But the evidence from past sharp downturns after banking crises is that they can have a significant impact on the economy’s supply potential (Chart 8). Downturns typically lead to less investment, more capital scrapping, fewer business start-ups and more business closures and a restriction in the availability of credit is likely to aggravate these effects. Moreover, lower employment can lead to skills atrophying and the long-term unemployed becoming disconnected from the labour market. Business investment has fallen sharply in this recession – down more than a quarter from its peak – though only part of that is likely to reflect a restriction in the availability of credit. Heightened uncertainty is also likely to have played a part. But against that, both business closures and, as noted earlier, unemployment have risen less than feared. So the overall impact of the downturn on the present and future supply potential of the economy is rather uncertain. In addition, in present circumstances the extent of the downward pressure on inflation from spare capacity is also uncertain. Once one allows for the effect of transient factors such as the restoration of the VAT rate, oil price movements and the likely impact of sterling’s depreciation, underlying inflation has been surprisingly resilient. That could be because the impairment of effective supply as a result of the credit crunch is large.

Peak to trough, output fell just over 6% in the United Kingdom, almost 4% in the United States, nearly 7% in Germany and more than 8% in Japan. And in the eight months following the collapse of Lehman Brothers, world trade collapsed by almost a fifth, a figure completely unmatched in peace time. Governments and central banks around the world responded by providing substantial support to their banking systems, relaxing fiscal policy, slashing official interest rates and, in some cases, introducing unorthodox monetary measures. This succeeded in avoiding the worst of the immediate downside risks to activity and employment. China and some other emerging economies have subsequently rebounded strongly, and during the second half of last year, we saw growth resume, albeit at a moderate pace, in most of the advanced economies. It appears to have taken a little longer for expansion to return here but, according to the current vintage of official data, output rose 0.3% in the final quarter of 2009. Production and trade are likely to have been adversely affected by the inclement weather in January, but business surveys suggest that a similar rate of expansion will occur in the first quarter of this year. While a return to growth is certainly good news, it is clear that we still have a very long way to go before recovery from the Great Recession of 2008–9 is complete. A large margin of underutilised resources in the economy remains and it will take time before these are returned to active use.
At the risk of generalizing too much, I would say that CEE economies shared broadly the same development model and problems. We benefited from large capital inflows mainly in the form of FDI, remittances and cross-border loans. Western European banks penetrated our financial system, increasing financial intermediation and facilitating capital inflows. This  BIS Review 173/2010  1  process resulted in fast credit and economic growth based on a consumption lead model. While inflation has been generally under control financial imbalances and vulnerabilities were increasing, in the form of rapid growth in real estate prices and balance sheet exposures in liquidity and foreign currencies. Our economies were hit by the crisis since the first week of October 2008. The fear of contagion was enhanced further by a sharp decrease in the market value of the EU banking groups that operate in the region. It affected negatively the public trust in the system, resulting in widespread deposits withdrawals. Later, as the financial crisis progressed and transformed into a global economic recession, the effects extended to real economy and exchange rate depreciation. Most of the countries in the region faced a rapid liquidity shortage caused by the deposits run, lower remittances and FDI outflows. The balance sheets across the region suffered from both liquidity problems and exchange rate depreciation. This was negatively reflected in consumption and investment, which further deteriorated the financial stability outlook with the possibility of a balance sheet deflation and economic contraction mutually supporting each other in a vicious spiral.

At the same time, more than 70 percent of total credit was in foreign currency with EURO making the biggest share of the outstanding stock. The tune of that period was the same in the entire region. The overall impression that the financial innovations had reduced the risk and the abundant global liquidity created a very optimistic picture. Despite some truth in this, the pace at which financial intermediation grew annually was frenetically high. In particular there were two main aspects of financial intermediation that were particularly troubling in my opinion. First, economic agents created financial excesses using mostly the financial system. While meeting their needs, the financial system aligns and matches agents’ positions according to length of maturity and liquidity. This holds true under the assumption that all claims and obligation will be fulfilled in timely manner in the same order. Otherwise if they violate this assumption and end up overlapping each other than financial system might become unstable. Our concern was that too many gaps were opening to fast and the Albanian economy seemed to experience some sort of what latter came to be named as risk-taking channel. Second, there appeared to be a general mispricing of risks from the banking sector. High concentration in particular sectors or clients indicated undue risk analysis or risk management from banks, while lending to  2  BIS Review 173/2010  un-hedged borrowers in a flexible exchange rate regime seemed to be a potential moral hazard issue.
Since the start of the crisis, output per hour worked has fallen by around 5%, leaving it more than 15% below where it would have been if it had simply continued growing at its pre-crisis trend rate. As discussed in past Inflation Reports, as well as numerous speeches by MPC members, there are a variety of explanations for this weak productivity performance. These include: specific factors, such as the decline in North Sea oil production and an exaggeration of productivity growth in the financial sector before the crisis; the hoarding of overhead and skilled labour through the downturn; unusually low rates of investment on the back of heightened uncertainty about the outlook; the adoption of more labour-intensive production techniques, encouraged by the high degree of wage moderation; thick-market externalities, which make it easier to find and transact business when demand is strong; and a misallocation of credit as banks repair their balance sheets, with heightened forbearance shown on existing loans to low productivity firms, coupled with caution as regards lending to risky businesses that offer the prospect of higher productivity. Some of these mechanisms depressing productivity can be expected to unwind naturally as demand recovers. But others might take longer and require the restoration of the banking system to full health. And some of the lost productivity growth may prove to be permanent, for instance because of the foregone opportunities for learning by doing.

Ravi Menon: Data and technology for climate action Keynote remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at COP26 Investor Action on Climate Webinar, 29 June 2021. * * * Distinguished guests, ladies and gentlemen, good morning. Why are we here? Three reasons: First, climate change is the defining crisis of our time – it is already happening, the worst is yet to come, and there is much at stake globally for lives and livelihoods. Second, finance has a key role to play in supporting the world’s transition to a greener and more sustainable trajectory. Third, to enable green finance flows and address climate related risks, we need trusted, timely, and relevant data. I take it we are all on the same page on the fact of climate change and the role of green finance, so let me focus on issues relating to data – which is a critical foundation for the green economy architecture the world needs to build. Financial institutions need accurate, granular data to assess and manage the environmental risks in their portfolios. What kind of data? For example: geographical, climate and weather-related data on their assets as well as along the supply chain; data on firms’ carbon footprint, historical carbon emissions, and pathways to reduce emissions over time; data on energy use and efficiency of physical assets, such as real estate; and data to monitor customers’ compliance to ESG standards and to measure the impact of transition activities on the climate.
It also provides us with additional information on areas not covered by official statistical sources, and we learn which issues are of particular interest to enterprises. Information received from the regional network supported the picture presented in the June Inflation Report: enterprises are reducing costs while households’ financial position is strong. We are waiting to see if the results of the current round of talks will point to increased optimism in the business sector and in public entities or if the prospects for the future continue to be regarded as somewhat negative. Inflation is low in Norway. The rise in consumer prices adjusted for taxes and excluding energy products (CPI-ATE) has slowed primarily due to developments in prices for imported consumer goods. Low inflation is due to the appreciation of the krone throughout last year and low inflation abroad. The rise in prices for domestically produced goods and services has also slowed. This is particularly the case for domestically produced goods influenced by world market prices. Domestic price inflation has nevertheless remained close to 3 per cent, due to high wage growth over several years. In July, the year-on-year rise in the CPI-ATE was 0.7 per cent, which is lower than projected in the June Inflation Report and substantially lower than the inflation target. There are also prospects that inflation will be low for some time ahead.

I’ll highlight two areas where markets have evolved in ways that raise questions about their resilience, even if all the intermediaries are safe. They might mean investors aren’t able to take the liquidity of markets for granted if they adjust. In both cases, there is no proven problem for markets or the economy. Inquiries are, as the police like to say, ongoing. Through our market intelligence gathering, I’m pleased to say that market participants are helping with those inquiries. And I look forward to the contributions of this Centre too. i) (Mis) use of volatility measures  Against a backdrop of relatively stable markets, some investors may have developed an appetite for betting that a range of markets, including bond markets, will remain stable. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  That means selling options – effectively insurance against moves in market prices. A put option, for example, is insurance against falling prices. An investor who buys this insurance is guaranteed a sale price for the asset insured, regardless of what happens to the market. If prices are currently higher but then fall below the guaranteed price, an investor that wants to sell will incur some loss – think of this as the insurance excess – but the insurer will pay for the rest. If markets stay stable, as the insurer is betting they will, no payout is made and the insurance collects a premium. While markets are stable, it’s a nice little earner for the insurer.
Moreover, on 23 December 2009 the ECB launched a public consultation on the establishment of loan-by-loan information requirements for ABSs in the Eurosystem collateral framework. 34  BIS Review 10/2010  debate in the United States, where the most independent institution, namely the Federal Reserve, is subject to attacks and pressures from various corners, including legislative initiatives aiming to curtail its powers. A final concern regarding international cooperation is this: there is no doubt that the “Volker rule” represents a new topic for discussion and that there is a risk that not all countries will want to follow this path, out of a wish not to penalise the financial institutions based in their own countries through the new regulations on separation. As has been the case in the past, it can be expected that vast financial resources will be employed in an attempt to influence political decisions and to stand in the way of a proposal of this kind. It would be a shame if the authorities in major countries put the interests of these institutions ahead of those of the taxpayers and ahead of global interests. This brings me to the role that central banks can play in supporting more sustainable credit flows. Recent work shows that price stability is necessary, but not sufficient to ensure a homogenous flow of credit to the economy and avoid financial instability. In particular, if monetary policy concentrates solely on inflation objectives, it might, in some circumstances, end up being too accommodative of credit cycles and fuel speculative bubbles.

This systematic monitoring framework is then augmented by careful deliberation of the policy measures that integrates analyses from both our supervision and monetary policy groups. So far, our experience with such approach has been positive. Let me now turn to the second issue: Should the implementation of macroprudential policy be based on discretion or subject to rules? To me, this is a complex and is still an unsettled issue. On the one hand, given the complex nature of how financial instability develops, regulators may understandably wish to retain some degree of freedom in choosing the timing and instrument to address the sources of risks as they emerge. In this sense, there appear to be good cases for the use of discretion. On the other hand, there is also a danger that discretionary prudential measures can add to the multitude of shocks and exacerbate rather than absorb them. Therefore, a sound practice of macroprudential policy should at least be partially governed by rules, in order to minimize the chance of adverse outcomes and to ensure that policy is consistent with the promotion of long-term financial stability. As you can see, there are strong validities on both sides. The third issue is the international dimension of macroprudential policy. As I see it, going forward, the major source of risk to financial stability in Asian emerging markets is likely to be external.
The same applies in principle to consumers, who can search the internet quickly for inexpensive goods and services. It is still the case, however, that the price difference between products sold on the internet and in shops is relatively small. But this will probably change as the internet is developed and more people use it. Sweden, spearheaded by the telecom company Ericsson, is one of the countries where the IT sector is large. This sector is also contributing a growing share to our annual output. Sweden is, moreover, one of the countries that is spending most on the introduction of new information technology in various economic sectors. The introduction and development of information technology in Sweden is facilitated by a capital market that is efficient, particularly as regards the supply of venture capital. I mention this to underscore the part that the deregulation of capital and currency markets in the 1980s is playing for the path of growth today. Another crucial factor has been the removal of transaction taxes on equity and bonds after an experimental phase in the late 1980s; that, too, is worth recalling as the old idea of a Tobin tax is being revived in some quarters. Improvements in productivity and flexibility National accounts data from Statistics Sweden suggest that our economy is now capable of growing faster than in recent decades. It looks as though the higher productivity growth is not only attributable to rising activity.

Stable economic policy interacts with structural changes and IT In order to see why the Swedish economy is doing better than it has been for a very long time, we need to consider how economic policy has been realigned in the past decade and a half. Credit and currency markets have been deregulated, the tax system has been reformed, components of the system of transfers have been modified and competitive pressure has increased. All this has helped to improve the workings of our economy. Moreover, price stability is now monetary policy’s statutory objective and it has been explicitly assigned to what has become even a formally independent central bank. Low inflation is admittedly not an ultimate objective for economic policy in general. It serves instead as an instrument. All those who experienced the economic situation in Sweden in the 1970s and 1980s know that inflation can never be associated with an economic development that is lastingly favourable. That is why price stability is an integral part of any economic policy’s strategy for rising prosperity and high employment. In order to provide a stable and credible framework for the new direction of economic policy, the government budget was successfully consolidated. Difficult political considerations and decisions were involved in this process and opinions may differ about particular items or aspects of the consolidation policy; but that does not detract from the main impression of a successful outcome in the sense that economic policy’s commitment to stability was rendered credible.
In a shorter-term perspective the past five years appears to have been a period of unusually high productivity growth. Productivity in the business sector increased by an average of around 4 per cent a year during the years 2002-2006. From this high level, the rate of increase in productivity is now declining. At the beginning of the period 2002-2006 employment fell, but in the past two years it has increased rapidly. This is the explanation as to why growth is still high, despite the fact that productivity is now increasing at a slower rate. The statistics on productivity for the first quarter of this year are an excellent example of this. More or less the entire increase in GDP was due to the number of hours worked increasing rapidly, while productivity contributed to a very small degree. Reasons for the strong productivity growth I have now come to the first of the issues, which concerns the reasons for the strong productivity growth in recent years. BIS Review 61/2007  1  Structural changes have the greatest significance The strong productivity growth in recent years is mainly due to structural changes – deregulation of product markets, increased globalisation, increased use of information technology, and so on. Economic activity is also significant in the short term, but developments in recent years have been dominated by structural changes. Several markets were deregulated during the 1990s. This includes taxis, domestic airlines, post, telecommunications and electricity. Deregulation opens up the current market to competition, which triggers productivity.

What the New York Fed does By way of introduction, I will briefly review what my colleagues and I do at the New York Fed. The New York Fed is one of 12 regional Federal Reserve Banks that, together with the Board of Governors in Washington D.C., make up the Federal Reserve System, our nation’s central bank. The Federal Reserve is independent within our government. By law, we are charged with managing the nation’s monetary policy – taking actions that raise or lower interest rates to promote full employment and price stability. The Federal Reserve is also charged with promoting financial stability, without which we cannot achieve our economic objectives. We play an important role in the nation’s payments and settlements system, which some people call the financial system’s “plumbing”. For example, we help ensure that banks’ ATMs have cash and that the checks you write move the money to the recipient. In addition, we have a specific mandate to promote economic development in each of our regions. BIS central bankers’ speeches  1  As president of the New York Fed, I serve as the vice chair of the FOMC, the Federal Reserve committee that meets eight times a year in Washington to set interest rates and make decisions about monetary policy. The members of this committee all strive to achieve our statutory mandate of full employment and price stability. Sometimes we have different views on the specific policy choices at hand, and our policy decisions reflect a full discussion of these differences.
Most of money in the economy is currently made of deposits that result from the maturity transformation—from short-term deposits into medium term loans—that banks perform. Banks meet their liquidity needs for disbursement and reserve requirements by borrowing from the central bank. Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank. 2  Central Bank of Chile 29 June, 2017  Slide 2  Central bank functions and tools ▪ Monetary policy and macro regulations operate through the financial system, particularly banks ▪ Most of money in the economy is currently made of bank deposits ▪ Banks resolve their liquidity needs—emerging from disbursement and reserve requirements—by borrowing from the central bank ▪ Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank  [SLIDE 3] Today money and financial operations are overwhelmingly composed of balance sheet records. For this reason, banks need to be strictly regulated and the central bank must manage monetary policy to ensure stability in the purchasing power of money. The transmission of monetary policy to the economy and, in the end, to inflation, depends on the smooth operation of commercial banks. At the same time, banks operate as a network and provide liquidity to all sorts of activities. Any disruption in the operation of a bank or in the transmission or provision of funds can have serious economic consequences.

5  Central Bank of Chile 29 June, 2017  Slide 8  Insurance companies coverage: international comparison Penetration of the insurance industry, 2015 (direct gross premiums as a percent of GDP) 40 35 30 25 20 15 Life  10  Non-life  5 LU IE KR US DK UK FR SZ JP IT SE PT DE BE AU NO AT FI ES NL SI IL CL CA NZ EE CZ BR PL AR SK CO IS HU LV MX GR PE TR  0 Source: OECD. [SLIDE 9] The development of finance in developed countries of course didn’t prevent them from getting into a big crisis a decade ago. But if you think that was big you should consider crises in developing countries, like the debt crisis of the early 1980s, the Tequila crisis of 1994 or the economic and political crisis in Argentina in 2001. [SLIDES 11 and 12] They devastated the entire financial system of those countries, evaporated or froze deposits, brought countries into deep recessions and massive unemployment and were only resolved after massive bailouts and debt write offs.