samchain/econo-pairs-v1 huggingface dataset:
Direct greenhouse gas emissions, excluding uptake and emission of greenhouse gases from land use, GHG (kt CO2e)/GDP (USD million). Sources: UNFCCC, OEDCD and Climate Watch. Chart 4. Greenhouse gas emissions Blue bars show the Riksbank’s bond holdings and red bars show bonds sold in 2019, in Canada and Australia respectively. Emissions as a share of GDP 1,4  1,4  1,4  1,4  1,2  1,2  1,2  1,2  1,0  1  1,0  1  0,8  0,8  0,8  0,8  0,6  0,6  0,6  0,6  0,4  0,4  0,2  0,2  0,0  0  0,4  0,4  0,2  0,2  0,0  0  Note. Direct greenhouse gas emissions, excluding uptake and emission of greenhouse gases from land use, GHG (kt CO2e)/GDP (USD million). Sources: Australian Bureau of Statistics, Bloomberg, Government of Australia, Government of Canada, UNFCCC and Statistics Canada  Bond purchases for monetary policy purposes Like many other central banks, the Riksbank has bought bonds for monetary policy purposes. The Riksbank has limited purchases to nominal and inflation-indexed government bonds. As I have already mentioned, the Riksbank can broaden its purchases to other types of bonds, such as corporate bonds, municipal bonds and housing bonds. There is an international debate33 on to what extent central banks should consider sustainability aspects in these types of bond purchases: should they give extra  33  See, for instance, Cœuré (2018), Honohan (2019) and Mersch (2018).

14 [18]  weight to “green assets”34 or perhaps avoid “brown” assets? If climate change is seen as a threat to financial stability, it may seem unreasonable that central banks themselves should hold bonds, the market pricing of which does not take into account the climate-related risk that the company contributes to. An alternative to the purchase of green bonds could be to refrain from buying bonds from companies that create carbon emissions over a certain level. I do not have an answer to the question of what action the Riksbank will take in this issue if we are faced with a scenario where we need to decide whether to extend and broaden our bond purchases. My message today is that we are participating in the ongoing international work to analyse and draft recommendations on an appropriate way forward. These questions are extremely complex. They require analysis of legal frameworks, of how green and brown assets are defined, any potential side-effects, how effective the measures would be compared with other types of measures, and the effects of policy tightening, i.e. selling assets if the economic cycle turns.35  Central banks are taking the climate issue seriously The Riksbank constantly faces new challenges that affect price stability and financial stability. Climate adaptation is one of many changes currently affecting the Swedish and the global economy. Digitalisation, a greying population, trade conflicts and, most recently, the coronavirus are other important issues that also create new challenges for us and for other central banks.
In my view, three other major prerequisites are needed in order to foster robust, sustainable growth and durable job creation, namely : the continuation and strengthening of a policy designed to keep in check unit production costs, the improvement of the competitiveness of the economy, through ambitious structural reforms and lastly, the completion of a fully integrated European capital market. Raising the potential output growth and enhancing the competitiveness of the economy: If Europe wants to secure sustainable growth at levels that are as high as possible, the key variable is potential output growth. The level of potential output growth can firstly be raised thanks to investment: business leaders are completely free to invest wherever they want in Europe or elsewhere in the world. It is thus important that we create economic, legal and fiscal conditions that are as favourable as possible to investment in Europe. The investment appeal of Europe is crucial in this respect : the more we invest, the fewer inflationary pressures we will have, and the stronger potential output growth will be. BIS Review 60/2002  1  Another way of raising potential output growth is to increase the quantity of available labour and to boost gains in labour productivity: the fast transformation of information systems is likely to accentuate the structural transformation of the economies.

In this regard, the Eurosystem welcomed the ambitious Financial Services Action Plan (FSAP) launched by the European Council in Lisbon in 2000. This plan is aimed at harmonising and improving the conditions under which issuers, investors and intermediaries conduct their activities in the European Union. The European Council set a tight timetable so that this plan can be implemented by 2005, and even sooner, by 2003, as regards the measures relating to the securities markets. At present, 30 out the 42 FSAP objectives have already been brought to a successful conclusion, allowing significant breakthroughs in various crucial areas. All these objectives involve far-reaching reforms, such as, for instance, introducing a single passport for issuers, with the planned Prospectus Directive, setting up an adequate framework for the oversight of the activities of financial conglomerates or harmonising rules concerning the use of collateral in financial transactions, especially in a cross-border context. The Eurosystem also supports the strategic conclusions of the Committee chaired by A. Lamfalussy on the integration of the European securities markets, ratified by the European Council meeting in Stockholm in 2001 and approved by the European Parliament in early 2002. We are convinced that the implementation of these broad guidelines and the new cooperation structures at the European level will help make it possible to take full advantage of the introduction of the euro.
It could be said that the Swedish economy, including monetary policy, is in a process of normalisation. This also means that issues that were being analysed before the crisis erupted, such as commodity prices and the development of the krona, are again on the agenda, now that the need for acute crisis management has decreased. One example of this is formed by the alternative scenarios in the last monetary policy report, which dealt with both the stronger krona and commodity prices, which are now rising rapidly on the world market (see Slide 11). I will return to these scenarios later. Another sign of normalisation can be seen in the occasional differences between the Riksbank’s repo rate forecast and different measures of market expectations of the repo rate. During the financial crisis, there was unusually great uncertainty regarding where the economy was going and how various monetary policy measures would affect developments. BIS central bankers’ speeches  5  Consequently, it was not surprising that different analysts arrived at different conclusions regarding the future development of the repo rate. During 2009, most measures of market expectations indicated that participants expected earlier repo rate increases than were indicated by the Riksbank’s repo rate path. The situation in 2010 was the opposite: that is, the market expected slower increases of the repo rate than were suggested by the repo rate path. The direction of Sweden’s economy is now clearer and this may explain why different measures of market expectations have moved closer to the Riksbank’s forecast (see Slide 12).

These developments and the banking crisis contributed to the currency crisis that struck in the first half of 2008. The Bank’s two publications on post-capital controls monetary policy and prudential rules have stood the test of time, as many of the proposals in them have already been implemented. We now intervene in the foreign exchange market with the aim of smoothing out fluctuations due to temporary capital flows and mitigating short-term exchange rate volatility. We no longer have a free-floating currency, but a managed float. We have adopted prudential rules that severely limit the banking system’s ability to take risk in foreign currencies. We have established a Financial Stability Council and a Systemic Risk Committee in order to monitor financial system risk more effectively than we did previously, and we are developing prudential rules and macroprudential tools to respond to systemic risk. This will also support monetary policy. One important step remains, however: to develop policy instruments that can be applied so as to curtail carry trade-related capital inflows when such inflows interfere significantly with the transmission of monetary policy along the interest rate channel, as was the case last summer and autumn. Analysis of the options available has been underway in the recent term, but these mainly involve a tax or a special reserve requirement. In both instances, statutory amendments would be necessary.
The implications for monetary policy will depend on the relative magnitudes of these effects. In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer. The Committee will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report. In August, we will also discuss further the range of instruments at our disposal. These judgments will benefit from the Bank’s joined-up approach. For example, the PRA’s direct line of sight of banks, building societies and insurers, and the FPC’s oversight of systemic risks, allows the Bank to understand better the net impact of any monetary actions on financial conditions, and ultimately businesses and households. As we have seen elsewhere, if interest rates are too low (or negative), the hit to bank profitability could perversely reduce credit availability or even increase its overall price. There are also interactions between prudential rules and the provision of credit in the face of large macro uncertainty. The Bank of England is well positioned to understand these interactions and will work across its policy committees to maximise the coherence and effectiveness of their efforts. I can assure you that in the coming months the Bank can be expected to take whatever action is needed to support growth subject to inflation being projected to return to the target over an appropriate horizon, and inflation expectations remaining well anchored.

Will inflation remain under control? Will the financial system do its job? Will I keep mine? Such issues are why monetary and financial stability are fundamental pre-requisites for effective economic adjustment and sustained prosperity. Discharging the Bank’s responsibilities for these public goods demands rigorous analysis, objective judgement, and effective transparency. We will not shirk from these obligations. The Bank and its independent policy committees will continue to provide analytically based, clear-eyed assessments of the economic and financial outlooks. And we will outline the risks to these forecasts so that we and others can prepare to manage them. The near-term challenges facing the UK economy can’t be wished away. But they can be addressed. A clear plan is needed, and its measures must be implemented with resolute determination. After briefly reviewing the relationship between uncertainty and the economy, I want to review how the Bank of England’s contribution to that plan will unfold over the coming weeks. But at the outset, I want to re-emphasise that the Bank has taken all the necessary steps to prepare for these events. And we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward. 1.
The best that we – as economists – can do is continually to learn about the changing nature of the economy. It is impossible to write down any stable “reaction function”. Even if we could identify the shocks hitting the economy, judgement as to how we should react to each of them cannot be set in stone. The structure of the economy changes through time as does our knowledge of the way it works. The MPC is there to exercise discretion about how to react to shocks. Central to the design of a framework for monetary policy is our ignorance and uncertainty about how monetary policy works. The MPC is an institutional response to that ignorance.9 The best way to make technical judgements under uncertainty is by making use of the accumulated wisdom of a committee whose members can pool their knowledge and expertise. This is the motivation behind the MPC and explains its two key features.10 First, it is a committee of experts who, before making their decision, discuss their interpretation of the economic data and learn from each other.11 Our Wednesday afternoon discussions take the form of a debate, not a series of presentations. And on Thursday mornings when the time comes to go round the table and make a decision, it is common, as, for example, happened at our most recent meeting in April, for members to want to listen to the views of other members before making up their mind which way to vote.

2  BIS Review 76/2010  Development of insurance sector in Malaysia Despite the challenging external conditions posed by the global financial crisis, the Malaysian insurance industry has, on the whole, remained resilient. The industry-wide Capital Adequacy Ratio stood at 242% at the end of the first quarter of 2010, well above the benchmark supervisory target of 130% set under the RBC framework. Total net premiums and contributions for insurers and Takaful operators grew by 8.2% during 2009. This was driven by growth in the ordinary life segments of the life and family Takaful industry, and a broad-based demand in the general sector. Also of significance is that insurers in Malaysia have performed considerably well in managing and responding to the challenges of lower investment returns and the lower interest rate environment following the global financial crisis. Also notable is the rapid progress of Malaysia’s Islamic financial industry which has become a competitive sector and one of the key drivers of economic growth in the country. As Malaysia evolves and emerges as a major international Islamic financial hub, Bank Negara will continue to play an active role in promoting Islamic financial products and services, supporting the enhancement to the payment infrastructure and progressively deregulate and liberalize the financial system. More recently, the liberalization to allow for greater foreign participation in the domestic financial markets will create further international linkages for Malaysia’s Islamic banking and Takaful industries.
We will see a negative inflation rate this year if we measure inflation by the consumer price index, the CPI. But this is largely due to our own interest rate cuts. The low inflation rate is temporary and should not trigger expectations of future deflation. Inflation expectations according to, for instance, Prospera’s survey, are anchored in a slightly longer perspective around the target of 2 per cent. My view at the April meeting was that we should begin to see signs next summer or autumn that the extremely low interest rate needs to be raised. I said then that it was not merely a question of an upturn possibly being on the way; I also pointed out that monetary policy is forward-looking and its effects come after a time lag. It is therefore more guided by developments in 2012 and 2013 the closer we come to this period. I also emphasised that although inflationary pressures were not a problem at that point, or in the near future, the situation could look very different in a year or two. For example, commodity prices could have begun to rise more than we had predicted, or the expansionary monetary policy and fiscal policy conducted in large countries could have pushed up international inflation with a risk of increased imported inflation. I also mentioned that we could not be certain that the krona would strengthen in the way we had assumed, or that productivity would recover as we had predicted.

We know from experience that the inflation outlook can change rapidly. During the late spring and summer of last year we were concerned over inflation being too high, even though this was mainly due to rising oil and food prices. Rising unit labour costs were also taken into consideration. Fears that high inflation expectations would become entrenched also formed part of the picture. We then raised the interest rate despite beginning to see signs of weaker economic activity in the future. The assessment was that this was necessary to attain the inflation target a couple of years ahead. When developments turned out differently, we had to quickly change our course. We are of course always prepared for situations like that. We are ready to act as quickly and as forcefully as is necessary, both to attain the inflation target and to carry out our financial stability responsibilities. Unconventional measures There have been many discussions on what the Riksbank could be expected to do if developments turn out weaker than we are now assuming. And our toolbox is not empty because the repo rate is so close to its lower limit. Put simply, the way the repo rate tool works is that the banks either borrow or buy Riksbank Certificates with a maturity of one week from the Riksbank at the price of the repo rate. In addition, there are what is known as daily fine-tuning operations between the Riksbank and the banks at an interest rate very close to the repo rate.
Examples of structural factors are the design of the taxation and social insurance systems,  6  See, for example, the article “The effects of the financial crisis on the labour market – a comparison of Sweden, the euro area and the United States”, Monetary Policy Report, February 2011, and “The relationship between the business cycle and the labour market in Sweden”, Economic Commentaries no. 2, 2010, Sveriges Riksbank. 7  Okun’s law shows the short-term relationship between the level of unemployment and GDP. 4  BIS central bankers’ speeches  competitive pressures in the economy, labour market legislation, the negotiating strength of employers and employees and so on.8 These are the factors that determine equilibrium unemployment. So affecting these would require broad-based economic policy measures. Although it is obvious, it is still important to bear in mind that monetary policy cannot affect these fundamental conditions for long-term growth and employment. Breaking down unemployment – a complicated story On the other hand, however, monetary policy is able to influence the cyclical part of unemployment via effects on the aggregate demand in the economy. In theory, this is a matter of using monetary policy to keep actual unemployment as close to the equilibrium level as possible. In practice, this is difficult, as equilibrium unemployment is not observable but must be calculated indirectly. These calculations are highly uncertain, something which is true of all gap calculations in which various actually-measured quantities are related to an estimated, unobserved quantity.

Exports were expected to move upwards, driven by the progressive recovery of foreign markets in 2016 and by the effects of exchange rate depreciation heightening the gains in competitiveness built up over the last few years. Imports were projected to remain buoyant, in line with final demand. The data on foreign trade transactions for the first half are in line with this forecast made in June. Until June the balance of payments performed more strongly than last year. In the first six months the current account balance reached a surplus of 0.6% of GDP compared with a deficit of 0.1% last year. The bulk of this improvement derived from the smaller energy deficit due to cheaper imports, and from the smaller income deficit. By contrast, the non-energy goods surplus has continued to shrink due to the greater vigour of our imports of this type of goods. The dynamism of imports stems in part from the momentum of domestic spending. It should be kept in mind that gains and losses in competitiveness manifest themselves not only in export capacity, but also in competition in the domestic market between national production and imports. The vigour with which imports are reacting to the upsurge in demand signals the need to maintain and further pursue the improvements in competitiveness. The recovery of output has been accompanied by the somewhat more expansionary behaviour of employment than might be expected from historical patterns.
Following the arrival of monetary independence, and the departure of banking supervision and debt management, what exactly is our interest, as central bankers, in the way financial services evolve? After that I will talk a bit about some of the forces which are working to produce fairly rapid change in the financial services landscape. One of these forces – and certainly one of the most prominent just at this moment - is the advent of the euro. So I will undertake a spot of crystal ball gazing, and try to assess how financial markets in Europe may develop over the next ten to fifteen years, and what this means in terms of opportunities and challenges for UK financial services. It is in the nature of an assessment of this kind that a good deal of it may turn out to be wrong. But making judgements about an uncertain future is part of any business, and there is no reason why central bankers should shy away from it more than anyone else, so long as the uncertainties involved are acknowledged from the start. Another, almost certainly more persistent, factor is the pace of technological change. Related to that, we are seeing a trend towards consolidation – at first nationally, but now also internationally – amongst financial services providers. So I also want to make a few remarks about these factors. Before I go into these issues in more detail, I just want to sketch out how the Bank stands in relation to UK financial services.

This is partly a reflection of cultural investment differences; greater reliance on bank finance; greater state and family ownership (still equity of course, but not easily marketable); and reliance on public rather than private pensions. As a result equities form rather less than 20 % of institutional portfolios in France, Germany and Italy. In the UK they represent more than 70% of portfolios. In the medium term, I would expect to see more equity issuance; and much greater institutional holdings, especially cross border. The latter is one area where the euro may have a fairly rapid impact on institutional portfolios, since many institutions remain unable to diversify into foreign currency assets. This process of equification will of course take time – but there are signs that it is under way, especially in the relatively strong growth in the market for continental high technology stocks. What about the traditional banking market? I leave this to last because some of the likely changes are just the counterpart of factors I have already mentioned. But for instance, greater reliance by capital users on equity as opposed to debt capital, and bond as against bank finance, would, other things being equal, be expected to lead to some shrinkage in banks’ balance sheets in relative terms. The extent to which this may happen is of course uncertain. It will depend on many factors, including the impact of any changes to the Basle Accord.