samchain/econo-pairs-v1 huggingface dataset:
All this had a marked downward effect on domestic demand. The drop in output—almost 6 per cent in the course of three years—meant in turn that government finances worsened dramatically. From a surplus at 4.2 per cent of GDP in 1990, the budget balance swung to a deficit of 12.3 per cent in 1993. In this period, moreover, registered unemployment shot up from 1.7 to 8.2 per cent. In a way, the economic crisis in the early 1990s can be said to have been generated by political decisions. The combination of a stabilisation policy realignment with some structural reforms did play a part in the course of the crisis. But it should also be underscored that such measures were broadly essential. The problem was not so much the measures that were implemented when an inflationary bubble had already developed as the fact that policy had not been realigned earlier. In recent years, economic developments in Sweden have been favourable. Growth has been stronger than in the high phase in the late 1980s and it has proved possible to combine good growth with low inflation. A couple of years after the realignment of economic policy, inflation had fallen BIS Review 47/1998  -2sharply to around 3 per cent. Moreover, the reduction of current inflation has been accompanied by a downward revision of inflation expectations. Today, neither households, firms nor financial market agents perceive any serious threat from inflation in the coming five years.

Against this background, the Riksbank has contacted the CPI Enquiry, set up by the Government, to obtain assistance in specifying an indicator of underlying inflation that is likely to be widely accepted and can be published regularly by Statistics Sweden. In the future, such an indicator might be able to have a more direct function in monetary policy, either by replacing the CPI as the target variable or by serving as an operational target or aid in the continuous work of constructing policy. The Riksbank has also asked Statistics Sweden to publish, for the time being, one or more indicators of underlying inflation together with the CPI. Perhaps I should emphasise that in no way do these initiatives alter monetary policy’s fundamental commitment to price stability. The current situation for monetary policy The question of transitory effects leads me on to current monetary policy. Transitory effects are playing a major part in the CPI’s present development. As a result of tax changes, lower interest rates and a lower oil price, since December the Riksbank has had to revise the 1998 CPI prediction downwards by about 1.2 percentage points. In 1999, too, transitory effects mean that CPI inflation will be lower than we envisaged earlier. Thus far, however, the altered picture of inflation need not have any sizeable consequences for monetary policy. It is now too late to influence this year’s path for inflation more than marginally.
The substantial increase in new equity investments, despite the effects of the global financial and economic crisis, demonstrates how favourable the Zambian investment climate is in attracting foreign investment. BIS central bankers’ speeches  1  Distinguished Guests, It is also encouraging to note that the Government’s diversification efforts are yielding favourable results. The survey findings show that the concentration of foreign direct investment in the mining sector is reducing as evidenced by the substantial FDI inflows to other sectors such as manufacturing, wholesale and retail trade, and the tourism sector in 2009. Evidence from South East Asia and the recent global financial and economic crises show that high volatility in foreign private capital if not properly monitored and managed, can induce financial and macro-economic instability. In light of this the results of the Foreign Private Investment and Investor Perception Survey are important and intended to assist the Government to effectively monitor and manage these flows. In addition, better information on investor perceptions will assist Government in designing policies and programmes that will help enhance Zambia’s favourable investment climate. Further, the results of the survey should prove useful to the private sector and other stakeholders as they highlight some concerns which Government should address as well as the overall business profitability and performance prospects of various sectors. The importance of timely and reliable information on capital flows in the design of appropriate policy responses by Government and thus enhancing macroeconomic stability can hardly be overemphasised.

I think it is highly probable that the following situations will emerge: (1)  The more a country is indebted, the more deleveraging it has to undergo. It is inevitable that economic growth and employment will be weak and the living standards in some places where the problem is more serious may even deteriorate. (2)  Some advanced and many emerging economies do not need to bear the pain of deleveraging due to their low level of debt. However, as other advanced economies have to undergo deleveraging, it will not be possible to go back to the “good old days” with everybody enjoying a prosperous economic development. Countries around the world will have to strive to enhance their productivity and competitiveness so as to capture a bigger share in the international trade arena where growth has slowed down. More importantly, major emerging economies, such as China, India, Brazil and Russia, would have to try their best to expand domestic demand and carry out reforms to improve productivity, so as to reduce their reliance on exports to the advanced economies and to achieve slower, yet more balanced and sustainable economic growth. Another question we would like to ask is: what will the global asset market be heading? I wish I have a crystal ball. All I can do is to make some assumptions and analyse different possibilities. (1)  The first possibility builds on the assumption that the process of global deleveraging is not affected by quantitative easing.
Should economic slack emerge and unemployment rise as the latest MPC forecasts imply, that will weigh against domestic inflationary pressure and ease the threat of inflation persistence. It is these two factors – the evolution of energy prices and developments in domestic labour markets – as well as the policy responses to them, such as the fiscal announcements made last week, that drive my current assessment of the outlook for monetary policy. If you like, these are the main arguments of my monetary policy reaction function, especially in so far as the typically more persistent domestically-driven dynamics of inflation stem from the labour market and corporate pricing behaviour. As I have said on previous occasions, in my judgment there is still some more to do with Bank Rate in order to address prevailing inflationary pressures and complete the necessary normalisation of monetary policy following a decade or more of exceptional accommodation. Bank of England  Page 8  In line with the MPC’s most recent forecast and communication and on the basis of the information we have available today, I do not anticipate the levels of Bank Rate priced in financial markets when the forecast’s conditioning assumptions were frozen12 will be required. But, given the need to contain the risk of greater inflation persistence implied by potential second round effects, further action is likely to be required to ensure inflation will return sustainably to its 2% target over the medium term.

Even if the Riksbank had conducted an even more expansionary monetary policy one to two years ago, it is not certain that this extra stimulation and the possibly even stronger lending that would have ensued would have affected the labour market in the way some critics believe. The situation today is quite simply a different one from the classical shortage of domestic demand, where lending and liquidity are weak and an interest rate stimulus would have a considerable effect on demand and thereby employment. Inflation outlook and future monetary policy This brings us to the other question – namely what monetary policy can do today to ensure inflation reaches the target level one to two years from now. What we have seen in the United States, which is considered to be slightly ahead of Sweden in the economic cycle, is that productivity growth is gradually subsiding. When the stimulus from monetary policy and fiscal policy has been maintained sufficiently long, companies are unable to respond with more efficient organisation and outsourcing alone, they have to begin recruiting. Productivity growth is dampened, employment rises and in the United States we have recently seen that inflation also rises. This is also the kind of development we can expect to see in Sweden. The most likely scenario is that over the coming years we will see a more subdued growth in productivity, rising employment and an increase in resource utilisation, despite the pressure for change in the economy.
Some internal model-based banks attach a risk weight to mortgages of as little as 5%. A standardised-approach bank would need to hold at least nine times that amount in capital. These design features of Basel II were intended to provide incentives to banks to move to internal models and thereby improve their risk management. The link from use of models to improved risk management is at best tenuous. But more fundamentally, this design feature may also have potentially perverse consequences for systemic risk and competition. Under the existing approach, capital charges will tend to be highest for those small, simple banks posing least risk to the financial system as a whole. The systemic risk tax is regressive. This regressivity will tend to worsen the too-big-to-fail problem, by providing regulatory incentives for the large to become larger still. The capital surcharges recently agreed for systemically important institutions, while helpful, are unlikely to retilt this balance. Capital regulation may also have acted as a barrier to banking entry, raising the bar for new entrants. Neither outcome (higher risk and lower competition) are desirable from a societal perspective. BIS central bankers’ speeches  7  (c) Transparency and market discipline A final unintended consequence is lack of transparency. A large bank may have literally thousands of models, hundreds of thousands of outputs and several million inputs. The height of this information mountain makes scrutiny and aggregation of regulatory capital calculations near-impossible for either investors or regulators.

Chart 7: Average risk weights for major UK banks by counterparty(a)(b)  Chart 8: Average risk weights for major UK banks under different approaches (a)  Per cent 100  Per cent 120  80  100  Basel II IRB Approach Basel II Standardised Approach Basel I  80  60  60 40 40 20 0  20 (c)  Financial Households Other institutions corporates  SMEs  Sources: Bank of England, FSA regulatory returns and Bank calculations. (a) Based on June 2011 data for Barclays, HSBC, LBG, Nationwide, RBS and Santander UK. (b) Cover credit and counterparty credit exposures. (c) Financial firms other than regulated banks and investment firms are included within ‘Other corporates’. (d) Only includes data on SME credit exposures from internal ratings based portfolios. 12  (d)  0 Sovereigns  Banks  Corporates  Retail Other retail mortgage  Source: Pillar 3 disclosures, Bank calculations (a) As of end-2011. Weighted average. BIS central bankers’ speeches  Chart 9: Survey responses to “How much do you trust risk weights?”(a)  Chart 10: Survey responses to “Has your confidence in risk-weighted assets gone up or down?”(a) Per cent 70  45% 40%  60  35% 50  30%  40  25% 20%  30  15% 20  10%  10  5% 1 - not trustworthy at all Source: Barclays Capital.
For instance, would we use cash less and cards more, or vice versa? Perhaps we are using methods of payment that require an unnecessarily large use of resources? This could mean higher costs than necessary and thereby higher price increases in the retail trade or less favourable interest from the bank. We at the Riksbank have devoted considerable time and effort to analysing what different forms of payment cost and how we as consumers affect the efficiency of the Swedish payment system when we choose our method of payment. BIS Review 68/2008  1  Today I intend to describe some interesting results from this research. Firstly, what are the social costs of using cash and cards respectively? Secondly, what is in our estimation the better choice between card and cash payments, from a welfare perspective? Thirdly, how does the general public choose between cash and cards in practice? One result of our analysis is that we as consumers probably use more cash and fewer card payments than we would do if we realised what cash management costs – and if we had to pay for it. Why is cash used more in Sweden than in other Nordic countries? In Sweden, card payments have increased substantially since the mid-1990s. But seven years ago Swedes still appeared to be using card payments less than other Nordic residents. At the beginning of the 2000s the number of card payments per capita in Sweden was only half as high as in the other Nordic countries.

9  The average consumer was defined was a 41-year old man with upper secondary school education and an annual income of SEK 350,000-400,000 and who lives in a two-person household. 4  BIS Review 68/2008  they charge the retail trade. 10 In the long term this would benefit us consumers in the form of lower goods and services prices. Perhaps the retail trade could also discuss charging a fee of those of us who insist on using the most expensive credit cards – that is where the hidden cost of the payment is highest. Charges on ATM withdrawals have been a hot political topic in Sweden. Should we have to pay to take out our own money from our own accounts? But isn't it time to defuse the question of ATM charges? It costs money to manage cash. And isn’t it better that we can see the costs than that we pay a hidden price in some other way at the bank or the supermarket? 10  According to an earlier study made by the Riksbank, the loss made by an average major bank in 2002 in connection with cash management was approximately equal to the profit it made on the card market. There is evidently some subsidising between the card and cash markets. See Guibourg and Segendorf (2007). BIS Review 68/2008  5
However, credibility is about the long term, about consistency, and about actions rather than words. We have the second-highest international reserves in Europe after Switzerland. A strong central bank is now a firm anchor in the economy. Over the next six years, monetary policy should be more restrictive, or rather interest rates should be higher, than in the, say, six to ten years before Covid. We need to motivate people, firms and also the government to save. It's the only road towards less debt. This is the first policy for a strong koruna. Second policy for a strong koruna – fiscal policy Inflation was last at the CNB's target in 2018, a period when public finances were in a surplus. In 2017, the public finance surplus in the Czech Republic was 1.5% of GDP. In 2018 it was 0.9% of GDP and in 2019 it was 0.3% of GDP. That is no accident. 2/4  BIS - Central bankers' speeches  Defeating inflation is conditional on monetary and fiscal policy coordination.6 The key question is: will the higher inflation observed after Covid be persistent? The answer depends not only on monetary policy, but also on the government's credibility regarding its willingness to stabilise debt. If fiscal policy generates rising deficits, monetary policy alone cannot ensure permanently low inflation. If the central bank increases rates, it will cause a recession. In an entitlement economy, the government will attempt to compensate people for the recession with accommodative fiscal policy. This in turn will fuel inflation.

For the households, the financial system provides a means to optimally spread their income and consumption over their life cycle. Accumulating wealth via saving, investment and borrowing in the initial years, and de-accumulating of the wealth during the later years, such as through pension products and annuity schemes during retirement. This is particularly important as a population matures. The absence of these products will impose tremendous burdens to the government fiscal position and the overall standards of living. The Malaysian experience has been to encourage diversity of financial product offerings to ensure that the needs of all segments of the population are met. This includes, from having basic banking products at negligible cost for lower income groups, to the wider range of  BIS central bankers’ speeches  1  savings, investment and protection products for the middle income groups and for the higher income groups, wealth management and comprehensive advisory services. In the area of financing, a key priority for any country is financing to promote home ownership. This is to meet an important basic need of society and to encourage wealth accumulation among households. Malaysia approached this by initially establishing Cagamas, a national mortgage corporation, which enables banks to source long-term funding to match long-term housing loans. The national mortgage corporation has continued to evolve to promote the secondary market for housing loans via securitization and mitigating risks in mortgage financing through the provision of mortgage insurance.
But it is possible to find both arguments in favour of stabilising inflation a couple of percentage points above 2 and arguments in favour of a target that is lower, perhaps even 0 per cent. One argument for having an inflation target above zero is that it reduces the likelihood that the economy will suffer periods of deflation. If the target were to stabilise inflation around 0 per cent, inflation would probably fall below 0 during certain periods. That is, prices would periodically fall instead of increasing. There would then be a greater risk that inflation expectations – which should be around 0 per cent – would slide downwards so that households and companies would begin to expect a more lasting fall in prices. This could, for instance, lead to households and companies delaying their consumption and investment until later, when prices have fallen even further, thus leading to a decline in demand. This could in turn reinforce expectations that prices will fall and it could create a negative spiral that is difficult to reverse. Having an inflation target that is slightly above zero thus gives some protection against this. So, the inflation target should perhaps be greater than zero, but not too high. A few years ago, professors Francesco Giavazzi and Frederic Mishkin made an evaluation of monetary policy in Sweden during the ten years we have had an inflation target. One of the questions they discussed was the size of the inflation target.

We are in a different place with insurance: we consider that the levels of capitalisation secured under the current regime are consistent with our objectives, and therefore, unlike in the banking case, we see a low risk to those objectives in allowing firms plenty of time to adapt to the new standard. European legislators foresaw this and therefore (very sensibly in my view) included within the Directive transitional measures which allow firms significant breathing space as they adapt to the new regime. As a safeguard, the benefit from the transitional deduction from technical provisions (TDTP) is capped to make sure financial resources cannot drop below those required under the current UK regime as a result of using the transitional. The practical expression of the stance I have just described is therefore that the Bank will allow full use of transitional measures by those firms that qualify to use them, and that the transitional asset created by the TDTP will qualify as Tier 1 capital. This is consistent with the approach being taken across Europe, and I was glad to see Gabriel Bernardino’s recent comments on this topic. He said: ‘‘It is also fundamental that market analysts and investors understand that Solvency II adjustments and transitional measures are a legitimate part of the regime.
Given these developments, Switzerland is facing an increasing risk, both of defaults in the mortgage market and a sizable correction in property prices, either of which might impair financial stability in the medium term. Specifically, an adverse shock – such as rising interest rates, lower growth or increasing unemployment – would leave some borrowers unable to service their loans, increasing the possibility and number of defaults, and ultimately leading to a vicious feedback loop of falling property prices and impaired balance sheets throughout the banking sector. At the same time, Switzerland currently serves as perfect example for the afore-mentioned argument that the interest rate is unlikely to suffice as instrument to ensure financial stability (slide 5). Notably, it is clear that the current exchange rate situation invalidates the interest rate as an available instrument to dampen the persistently strong growth in credit volumes. At present, the interest rates required for monetary policy objectives differ considerably from those required for financial stability policy objectives. This perfectly demonstrates the need for specific instruments to be able to address both policy objectives – financial and price stability – simultaneously. Against this background, the Federal Council announced a package of measures in June 2012 addressing these risks in the mortgage and real estate markets. In addition to the CCB, this package consists of a structural revision of capital requirements for residential mortgage lending as well as a revision of the banking industry’s self-regulation guidelines.

As I stated earlier, it is also crucial that public and private institutions endeavour to raise awareness of and draw attention to gender equality and sustainability. In this regard, the Banco de España has implemented an Interdepartmental Environmental Awareness and Sustainability Training Plan for all employees. This plan consists of a series of conferences, coinciding with the International Day of Climate Action on 24 October, focused on explaining and understanding climate change’s impact on our lives through different and complementary perspectives. 9  Allow me to conclude. Before this pandemic, the world was undergoing extraordinary change; unprecedented technological innovations, but also far-reaching social and structural changes thanks to women’s role in our economies and the policy drive to achieve gender parity in the workplace. With the outbreak of the pandemic, the work-life balance measures that organisations had been slowly and painstakingly introducing were imposed to safeguard health. These include new ways of working from home, managing teams and even contacting third parties. Starting a conversation by asking about the other person’s health and that of their family, friends and work colleagues is now an everyday occurrence. The pandemic has forced us to keep our distance, but in many cases it has brought us nearness and much-called-for flexibility. Yet in some cases it has reversed some of the headway made in terms of worklife balance.