samchain/econo-pairs-v1 huggingface dataset:
But growth slowed down towards the end of 2022 and during the last quarter GDP declined. Exports continued to increase at the end of last year. However, household consumption decreased and business investment also declined in the last quarter of 2022, albeit from a high level. Residential construction has declined markedly, reflecting the deterioration in housing market conditions last year. Although house prices have stabilised in recent months, the overall decline has been large. At the same time, one needs to put the decline in perspective with the large increase in both construction and prices in the previous years. I think the effects on the housing market are manageable so far. Last year's labour market statistics show that the troubled economic situation is not yet clearly visible there. Employment rose to a very high level and unemployment fell across the board. So far this year, the labour market has slowed down somewhat. There was strong growth in employment in January. But the number of persons employed fell slightly in February. Unemployment rose slightly in February but, in trend terms, unemployment has remained roughly unchanged in recent months. In terms of economic activity, then, things do not look very dramatic so far, but several forward-looking indicators point to the trend being weaker in the future. The big question, of course, is how weak. There are forces that can alleviate the coming downturn. For example, the Swedish economy may be supported by international economic activity, which has been somewhat stronger than expected.

The second area of reflection that I would urge this meeting to consider is that of building appropriate financing models that have been shown to work in Africa or other developing countries so that we all benefit from the best practices available. In South Africa, for instance, franchising which allows the use of brand names and building capacity have been an  2  BIS central bankers’ speeches  important driver of SME financing since it reduces the perceived risk of business failure. Warehouse receipt financing which guarantee loans with agricultural stock are extensively used elsewhere but not as much in Africa. In some countries in Asia, the use of the SME cluster model has helped to increase SME financing by building greater confidence between lenders and SMEs. The cluster model is based on members of an SME entity seeking financing together and providing collective guarantees to financial institutions. The cluster also ensures credit compliance by members while facilitating constant interaction with financial institutions. Naturally, one must guard against the temptation to adopt other experiences without serious reflection – but, what appears desirable is the need to build financing models that are appropriate and therefore can deliver sustainable financing. We do not always require to re-invent the wheel in this process. The third and last area of reflection for me is that we must understand that the constraints that limit the flow of finance to SMEs is sometimes beyond the scope of what financial institutions can do or outside the inherent adverse characteristics of SMEs.
While existing institutions may need to be transformed, merged or even dissolved, new institutions may need to be established to facilitate management of the new environment. The same will hold true for businesses if they are to remain competitive, and, in particular, if they should venture into new areas and across borders. The fourth category of factors concerns economic and financial management. Macroeconomic policies in most of these economies have been pursued to the limit, rendering limited policy flexibility. Monetary policy accommodation has resulted in substantially low interest rates which have been brought down to near zero levels, while the cumulative fiscal expansion during the period 2007–2009 has amounted to an average of four per cent of GDP. In addition, are the potential intended or unintended consequences of the international regulatory reforms. The reforms have focused on building a stronger global regulatory framework and raising the resilience of the banking system. While still in their early stage of implementation, concerns have been raised on their implications on the cost both to the financial intermediation process and to the real economy. An important change in our environment both at national and international level is the increased inter-connectedness within the financial system and the global economy. This greater inter-connectedness, and hence the greater inter-dependence, requires having in place the governance arrangements for greater coordination. Fifth is that these arrangements have not been put in place both at the national and international levels.

In addition, corporations or organisations in this new environment can no longer function by departments or sections, but as an integrated organisation. This also requires new governance arrangements. For an economy or a financial system, we have seen how a crisis in one segment was thought to be confined, but it had pervasive consequences on the entire financial system and the economy. Sixth, is that despite the increased connectivity of the world, as exemplified by the swift spread of the financial crisis and economic shocks throughout the global economy and international financial system in 2008, the institutional arrangements for the cross-border dimension of policy-making have yet to reach the levels commensurate with the degree of economic and financial integration in the world. Finally, the response to the crisis needs to be comprehensive. While addressing the weaknesses and lapses is important, equally important is the enabling environment for the measures to yield results. Pro-growth policies are vital for this purpose. During the Asian financial crisis, Malaysia gave equal attention to financial sector resolution to restore the financial intermediation process and thus credit supply. Equally emphasis was placed on addressing the problems of borrowers. Debt restructuring and mechanisms for support were put in place for the corporate sector, small and medium-scale enterprises and the household sector. This supported growth of the economy and at a fraction of the cost of the financial sector resolution.
Resilience in the banking industry should be generated before the crisis Evidently, the improvements in the past decade in terms of balance sheet quality and solvency levels left the global and Spanish banking sector better placed to absorb the current crisis and to continue providing the financing the economy needs. Notably, the effect of the far-reaching international financial reform and, in Spain’s case, the restructuring of the sector implemented in the past decade are, along with the various economic policy measures adopted during the crisis, helping to mitigate and manage the risks generated by the pandemic. Indeed, the financial system is so far acting as a mitigating – and not amplifying – factor of the impact of this crisis. This should be a reminder to us of the importance of having a sound banking industry shored up by prudent global regulatory standards. Let me illustrate this with some figures. Spanish banks’ level of solvency had increased, in terms of Tier 1 capital, from € billion in 2007 to € billion just before the crisis, i.e. by just over 35%. And almost half of this total amount of capital in the sector was in the form of buffers above the regulatory minimum amount, which can, if necessary, be released as part of the prudential response to the crisis. Moreover, in the wake of the global financial crisis, mortgage lending standards have been much stricter and, in the case of loans to firms, they have been much more closely tied to their efficiency.

The Basel reforms that were phased in over the last decade incorporated into regulations the lessons learned during the global financial crisis. The first stage of the Basel reforms began in 2010 and concluded with a second wave of reforms published in 2017. In the first phase, the aim was to boost the level and the quality of banks’ microprudential capital requirements. The intention was to reduce their risk-taking, by increasing their “skin in the game”, and to provide them with greater loss-absorbing capacity. In addition, the releasable macroprudential buffers I referred to earlier were also introduced. The second phase of the Basel reforms focused on a matter that came to light during the first phase, namely the calculation of risk-weighted assets (the denominator of the capital requirements under the Basel standards) and the need to standardise their treatment among institutions. Once again, the aim was to reinforce banks’ credibility with regard to their prudential ratios and the correct measurement of the risks they assume. A crucial aspect of this reform is the “output floor”, which limits the reductions that banks can obtain by using internal models to calculate minimum capital requirements instead of the standardised approach that does not require the use of models and is much less sensitive to new data inputs. 5  The impact analyses of the reform reveal that banks’ capital requirements would increase in some jurisdictions, although they would also be reduced by certain elements.
Indeed, many new areas of growth in Malaysia would benefit from higher investment, such as in niche growth segments in the services sector, as well as in the development of enabling infrastructure such as in broadband and green technology. Investment in green technology has the potential to not only increase the efficiency of the economy, but also to open up new sources of growth. As Malaysia moves from a cost-competitive economy to one that is more knowledge and innovation-driven, it is not just the quantity of investment that matters, but the quality of investment that would dictate our ability to move up the value-chain. An important consideration in ensuring high quality investment is the availability of complementary factors. Here, I would like to highlight three of these factors, namely a private sector-led competitive environment, high quality workforce and the availability of enabling infrastructures. A business friendly environment with minimal market distortions is critical to ensure that the private sector can direct its investment activities efficiently and to areas of the greatest growth and return potentials. Similarly, the availability of skilled workforce and modern infrastructures such as high-speed broadband is key in ensuring that high value-added and high knowledge-content investments take place. Much is currently being discussed and debated on the issues of high quality workforce and information age enabling infrastructures, especially given the Government’s renewed emphasis on them in the recent efforts to transform the Malaysian economy.

I do not think it is coincidence that arguably the two most significant monetary policy decisions taken over the past year – the decision to reduce Bank Rate by 1.5 percentage points in November and the announcement in February that the Committee had sought approval to use the Asset Purchase Facility to conduct large scale asset purchases – occurred in months when the Inflation Report was published. The quarterly forecast round provides an opportunity for the Committee to reassess thoroughly its view of the economic outlook. This view is then explained and communicated via the Inflation Report and in particular through the projections for GDP growth and inflation contained in the Report. In both November and February, the judgement of the Committee was that, without further substantial easing in monetary policy, there was a significant risk of a large and persistent undershoot of the inflation target. Given the transparency of these judgements and the clarity of the target, it would have been courageous not to have taken the decisions we did. The inflation target is symmetric. Likewise, the discipline it imposes on the MPC is symmetric. The inflation target has been instrumental in ensuring that monetary policy has responded boldly and decisively to the events that have unfolded since the autumn. And, when the time comes, the clarity and transparency of the inflation targeting framework will ensure that the Committee takes the right decisions on the way back up, however courageous or unpopular those decisions might appear.
3  See Meade, Vines and Maciejowski (1983) and Weale, Blake, Christodoulakis, Meade and Vines (1989). 4  See Bean (1983). I showed there that nominal GDP targets had good operating properties in the face of shocks to total factor productivity, as well as to aggregate demand when the main source of nominal frictions lies in the labour market. Bean (2009) explores the connection between Meade’s ideas and modern inflation targeting. 5  There is reasonably close correspondence between four-quarter nominal GDP growth and the sum of four-quarter real GDP growth and CPI inflation (over 1993-2012, the correlation coefficient between the two is 0.9 and the average absolute deviation is 0.8 percentage points) which suggests that this is a reasonable approach. 2  BIS central bankers’ speeches  synthetic forecasts are also shown in Chart 1, denoted by the green and blue lines respectively. These forecasts are always in the region 4%–5%, with one notable exception, namely those made during 2009, when the Committee implicitly expected nominal income growth to recover more slowly than it in practice did. That was because our central expectation was for markedly lower inflation during 2010 than took place, in large part because of unexpected increases in energy prices and VAT, together with an unexpectedly large pass-through from the depreciation.6 So the deviations of nominal income growth from around 5% appear to have been largely associated with forecast errors.

Fourth, as regards public opinion, I trust that we have all to exert maximum efforts to improve explanations, pedagogy, communication with the public at large. We are living in very vivid and exemplary national democracies and in a European Union where the ultimate judge is the people. We have to convince our public opinion at large that each individual would be better off - with more growth and more jobs - if we could deliver the reforms of the Lisbon agenda . The ECB will do all what it can to help improving pedagogy in this respect. And five, I confirm here that we, in the Governing Council of the ECB, know that structural reforms are not easy to work out, that it needs much courage and determination from Governments, Parliaments and social partners. We will back in the future as we have in the past this courage and this determination. BIS Review 6/2004  3
Zeti Akhtar Aziz: Monetary and financial policies in the Asian network economy Introductory remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Tun Ismail Ali Chair Public Lecture by Datuk Seri Panglima Andrew Sheng on “Monetary and Financial Policies in the Asian Network Economy”, Kuala Lumpur, 18 April 2006. *  *  *  Introduction Let me first of all welcome you to the Tun Ismail Ali Public Lecture for 2006. This Public Lecture is part of a series of events organised in conjunction with the Tun Ismail Ali Chair in Monetary and Financial Economics at the University of Malaya. The Chair was established by Bank Negara Malaysia in August 2000 to commemorate the contributions of the late Tun Ismail Mohamed Ali, the first Malaysian Governor of Bank Negara Malaysia . It is our hope that this Chair would contribute to the advancement of new ideas and knowledge in the area of monetary and financial economics. Today, we are indeed honoured to have Datuk Seri Panglima Andrew Sheng, holder of the Tun Ismail Ali Chair for 2006, to speak to us on "Monetary and Financial Policies in the Asian Network Economy". This occasion is particularly meaningful because Andrew was with Bank Negara Malaysia for many years, from 1976 € 89, and during that period, he had worked closely with the late Tun Ismail Ali.

While this will open up new opportunities for enhanced efficiency and productivity gains in Asia, a better understanding of the risks inherent in networks will better prepare the regional economies to address these risks. This will be a shared responsibility within and among the regional economies. Closer regional cooperation, strategic alliances and smart partnerships will be important key responses for enhancing the prospects for higher growth and development in Asia. Thank you. 2  BIS Review 32/2006
BIS Review 97/2008  3

In these circumstances, monetary policy in maintaining price stability on a medium term perspective, contributes also to reduce the output gap, as the literature on flexible inflation targeting has shown long ago. 9 With risks to inflation well-contained, the ECB has lowered its policy interest rate to the historic low level of 0.75% and provided banks with access to unlimited liquidity at this price. However, before September this year, the transmission of our policy rate to the real economy was seriously disrupted across countries. For instance, when the ECB cut interest rates by 125 basis points between November 2002 and August 2003, lending rates to non-financial corporations across euro area countries responded homogeneously. By contrast, following the 75 basis point cuts implemented between October 2011 and July 2012, the range of bank lending rates across the euro area widened significantly. Indeed, in some countries interest rates for non-financial corporations actually increased. In an economy like the euro area where more than two thirds of firms’ financing comes from banks, a disruption in monetary policy transmission has material effects for investment and employment. But this effect is particularly exaggerated when countries are simultaneously undertaking large fiscal and structural adjustment. Indeed, it was the countries with the greatest adjustment needs that were being most cut off from monetary policy support. They were at risk of entering a vicious circle of rising interest rates, falling growth and deteriorating public finances. It was against this background that the ECB introduced its programme of Outright Monetary Transactions, or OMTs.
I recall, by the way, that I said roughly the same thing two years ago, when I was regarded as being a dove. It may also be worth noting that I am not the only one who from time to time prefers a higher or lower repo rate path than the published one. The same applies to market expectations regarding the future repo rate. For instance, during most of 2009 market expectations were largely above the Riksbank’s repo rate forecast. Since the beginning of 2010 they have instead been below our path. In this context it is important to point out that there is no “true” measure of market expectations of monetary policy. The expectations I am talking about here are the expectations of the repo rate that can be read from forward rates. To produce these expectations, one must among other things adjust for various types of premium in the forward rates, and there is no obvious way of doing this. So one should remember that discrepancies between the Riksbank’s repo rate forecast and market expectations as understood from forward rates could be due at least in part to measuring problems. Regardless of these difficulties, it is also worth emphasising that there are no particularly strong reasons to believe that the market is always “right”, in the sense that the repo rate the market is expecting is the one that will be realised.

It cannot therefore be argued with great conviction that it is possible to identify one particular interest rate forecast that provides the indisputably "best" trade-off in monetary policy. More often than not, there will be a number of possible interest rate paths that might be said to provide a reasonable balance, in view of the uncertainty involved. The results of balancing this trade-off are published in the Inflation Report in the form of a chart that presents central projections for the interest rate, the exchange rate, inflation and capacity utilisation in the economy. The formulation of a precise inflation target, our projection for the interest rate 3 - 4 years ahead and our desire to achieve a balance between output and inflation stability may perhaps give an impression of excessive optimism with respect to managing the economy and invite a repeat of earlier attempts to fine-tune the economy. But it is important to bear in mind the lessons drawn from the 1970s and 1980s, i.e. high stabilisation policy ambitions may lead to wide fluctuations in the economy, with high  BIS Review 90/2006  3  and variable inflation. In our conduct of monetary policy, we must not underestimate the uncertainty surrounding the decisions taken. Even if the Bank publishes a forecast for the interest rate, this does not mean that the interest rate will follow the forecast throughout the projection period.
This type of fundamental question of principle is central to monetary policy and, given that the current framework for inflation-targeting has worked well over a long time, any changes should be made slowly and cautiously – and are hardly in the pipeline in the near term. Quite simply, we will have to see what takes shape after the international discussions. In the Swedish debate we need to begin by taking a stance on the conclusions of the external evaluation of the Riksbank’s monetary policy that is published next year. 19 But even if the experiences of the past eight years have had limited impact on monetary policy strategies so far, the financial crisis has nevertheless had clear effects on the work of the central banks. If I use the Riksbank as a starting point, for instance, the significance of the financial conditions for macroeconomic developments and for monetary policy have come under much greater focus than before, as have financial and banking questions in general. One can see this in the research conducted in the bank, where these areas are currently of central importance. The changes we recently made to our Monetary Policy Report are also marked by the need to better highlight the links between financial conditions, the macroeconomy and monetary policy.

The reason for the figure of 2 per cent was not that research had determined that this was the absolutely most appropriate level; it was probably more because this was the approximate level of inflation in most of the countries that began to introduce inflation targets and it appeared to be a reasonable figure in general. And until the financial crisis there was no real reason to question whether an inflation target of 2 per cent entailed a sufficient buffer for monetary policy. However, since the crisis, many countries have cut their policy rates to the “near zero lower bound” and been forced to change over to other, more unconventional means of conducting monetary policy, sometimes for several years. If the inflation target had been set higher from the start, there would have been a greater possibility to stimulate the economy in the normal way, through lower real interest rates. It is possible that the effects of the crisis would then have been less and it would have been easier to emerge from it into a more normal situation, some people argue. 15  Examples are Blanchard et al (2010), Ball (2014) and Krugman (2014). Representatives of central banks have also taken up this issue recently, see Rosengren (2015), for instance. BIS central bankers’ speeches  7  Many say that the motives for a higher inflation target have recently been reinforced and are not merely linked to the fact that it would be easier to extricate oneself from crises.