samchain/econo-pairs-v1 huggingface dataset:
As regards the timing of this type of monetary policy measure, it is generally true to say that if the Riksbank waits too long before making a necessary repo rate adjustment, when the increase does come it may have to be larger than otherwise in order to arrest the overheating and inflationary tendencies. That could introduce undue instability into output and employment. A higher repo rate does not necessarily impede the continuation of a favourable economic trend; it may even be required for a good and sustained development of employment and growth, as is illustrated by how the Federal Reserve has acted in the United States. A judicious series of increases in the federal funds rate seems to have contributed to the longest post-war period of growth in the United States. Since it was raised by degrees from 3% from 1994 to 1995, the American instrumental rate has moved between 4.5 and 6%. Having said this, it must be realised that there is no simple answer to the question of what constitutes a judicious timing or magnitude of a repo rate increase. One alternative, of course, is to act early and make a small increase even though indications of growing inflationary pressure have not actually shown up. Such a line can be seen as insuring against the adverse consequences an acceleration of inflation might entail. In my opinion, however, there are other aspects that it is important to analyse and incorporate in the assessment. Lower inflation propensity?

But this does not mean that the international economy has been inoculated against new, unexpected shocks. Remember that noone predicted the extent and course of the Asian crisis. Neither were the risks that led to last autumn’s international financial turbulence highlighted in advance. Our knowledge of phenomena of this kind is limited. It may be asked whether it will ever be possible to predict such matters accurately. The models with leading indicators that are being tested at present  1  BIS Review 106/1999  tend to be too blunt. They are liable to sound the alarm about things that never occur and miss those that do happen. The picture is bright at present but we know that some countries are in a vulnerable position that can suddenly deteriorate. Stock market prices are notably high, not least in the United States. The existing imbalances in the US economy may have effects in the future. But as the course of such events is genuinely difficult to foresee, central banks have little option but to deal with a new situation if and when it arises. Repo rate too low in a longer perspective After the series of reductions, the repo rate is currently 2.90%. Over a complete business cycle, such a level would probably be too low, even in an economy where inflation expectations have settled down around the targeted rate of 2%. So the present monetary stance can be said to be relatively expansionary.
Mr King gives a speech on reforming the international financial system: the middle way  Speech delivered by Mr Mervyn King, Deputy Governor of the Bank of England, to a session of the Money Marketeers at the Federal Reserve Bank of New York on 9 September 1999. *  1. *  *  Introduction  One of the roles which international financial officials are sometimes required to play is to describe disasters as triumphs and to make the dramatic seem bland. So, on 16 September 1992, following massive speculation against sterling and its withdrawal from the Exchange Rate Mechanism, the then Chancellor of the Exchequer, Norman Lamont, opened his statement with the words: “Today has been an extremely difficult and turbulent day”. In the seven years since, several finance ministers have had cause to echo those words. Officials have spoken of the risks associated with capital flows. Well they might. Sharp reversals of capital flows to emerging markets have caused crises with a frequency and on a scale that threaten support for an open, market-led international economy. These crises have created millions of victims, whose circumstances and aspirations were totally unrelated to financial markets. In Korea unemployment tripled, in Indonesia several years of economic growth were wiped out leading to political instability and similar results have been visible in other parts of Asia as well as Latin America. Over the past century, governments in the industrialised world have, in the wake of domestic financial crises, taken steps to regulate and strengthen the financial system.

A bank must hold enough capital to cushion both depositors and senior lenders against losses, while leaving the bank able to meet the needs of its customers. Banks must maintain capital commensurate with the amount of risks that they take and hold enough to weather financial storms, which can at times be severe and of considerable duration. Banks with low equity capital ratios and a high variability of operating earnings have proven particularly vulnerable to financial distress. However, banks do not just hold capital to overcome distress, but also because it provides them with financial flexibility. Banks that are strongly capitalized can take advantage of growth opportunities. Also, strongly capitalized banks are better able to promote innovation, whether in the form of new products, new services or new distribution channels. This is not just a capital resource issue, but a human resource issue. Bank managers who are able to focus on the business of banking, strategy and competition, rather than on financial difficulties, can create and innovate and, therefore, add value for shareholders. Banks also hold capital as a sign of strength to their customers. Clearly we know this to be true with depositors on the retail side, but it is equally true on the wholesale side. When an institution or corporation enters into letter of credit guarantees or swap contracts, it needs to be confident that its bank will be around in three or five years, at the maturity of the contract.
The second way out of the crisis is the “classic” IMF prescription, that is to say, fiscal discipline, debt restructuring and currency devaluation. Note that to make such a scenario easier some aid is also very desirable at least in the form of support for the drachma from the ECB and/or European authorities (among others) to avoid an overshooting after the exit from the eurozone. Note that we are currently seeing a rather disorderly effort along the lines of the first scenario of keeping the current eurozone together. In the same spirit we could see an orderly exit from the eurozone, if there is the political will. In short, to minimise the costs, either scenario needs to be carried out in an orderly way, while disorderly implementation results in dramatically increased costs in both cases. Therefore, instead of the current muddling through, one of these two ways should be chosen and clearly communicated to markets, voters and others. Otherwise, we risk a further loss of credibility for everyone involved in Europe and very likely for the IMF as well. Further continuation of the current uncertainty will  BIS central bankers’ speeches  3  continue to cause significant economic costs for the EU and Europe in particular. At present, the risk of an event pushing Greece (and/or others?) into unexpected default is shooting up. That would surely be the most costly outcome, at least in the short term.

They are not. Competitiveness is the real issue for these countries. No economy can survive and thrive unless it is competitive. The upshot of the recent U-turns is that the markets are completely confused and do not see any predictable outcome to adjust to. They see no will to allow Greece to leave the eurozone and depreciate, but they also see no willingness to support the country sufficiently. The solution to the crisis has already been made unavoidably costly due to past incredible and unclear communication. There are two possibly costly but credible ways to restore competitiveness. The first is a solution within the framework of the eurozone. This would involve restructuring the debt and imposing and rigorously enforcing fiscal discipline. But the structural reforms are hardly enough to restore competitiveness within a short enough period of time in such a scenario. In addition, tens of billions of euros in aid would have to flow from the strong eurozone economies to the weak ones to restore competitiveness. Such generous aid would very probably have to be conditional on the distribution of the aid not being managed by the Greek authorities. The ECB would provide liquidity support – and assurances of such support – to the Greek banking sector. I believe that given the relatively small size of Greece – and even, if need be, of Greece and Portugal – both those actions are within the realm of the politically feasible.
Good links between these institutions and the academic world are also desirable; in a European context I consider that in this respect we are already in the forefront. It is likewise important that we participate in the international work on these issues, primarily in the context of the European Union and the ECB but also in the OECD and the IMF. And although we are doing relatively well internationally, a good deal is being accomplished elsewhere that we can try out here in Sweden. As a member of the Governing Council of the ECB, the Riksbank will have cause to go on working on these issues at the European level. I also think it would be natural to continue to publish the Inflation Report twice a year; that would be a way of presenting analyses of the interplay between cyclical activity, monetary policy and the government finances and thereby contribute to the discussion of economic policy. A qualified ongoing analysis is needed for a small country like Sweden to play a meaningful role in the international cooperation. Besides the traditional issues of stabilisation policy, there are grounds for the Riksbank continuing to be deeply engaged with developments in the financial sector, for instance with the Stability Report. A conceivable evolution of the existing structure as regards the basis for fiscal policy could be a more direct involvement of the Economic Council that is attached to development work in the Ministry of Finance.

There is much to be said both about the actual construction of the processes and what they have achieved to date. Moreover, knowledge of these matters is generally lacking in Sweden. Today, however, I shall be very brief. As I see it, there is a tendency towards an increased coordination of fiscal and structural policies. This takes many forms. The issues are discussed together, both at the highest level and further down among civil servants and experts. It is partly a learning process, an exchange of thoughts about good examples, a communication of ideas and so on. New, more specific knowledge is also being generated. At present, for instance, common principles are being drawn up for the measurement of budget outcomes and capacity utilisation. This is necessary for effective surveillance of compliance with the Stability and Growth Pact. Similar work has begun in the field of pensions. These quotidian efforts should not be underrated. They help to make many problems more understandable and promote a consensus about how they should be handled. Sweden has much to gain from this kind of international collaboration. To exemplify how international discussions can influence matters I can mention that when we at the Ministry of Finance were aiming to alter the economic policy agenda in the late 1980s, we were greatly inspired by the work that had been done under the auspices of the OECD and others.
Initially, the impact of the crisis seemed to be concentrated in the US and a handful of European banks in Germany, the UK and Switzerland which had pursued particularly risky strategies. The euro area as a whole did not see a marked reduction in credit growth. Meanwhile the emerging economies of Asia continued to boom. With wages and prices rising, many of the people I met in India and China at the start of the year rather welcomed the prospect of a fall in Western demand as a means of taking a little of the heat out of their own economies. But despite different starting points and policies, we have now seen bank failures in many countries in Europe and acute pressures develop everywhere. And the US, Japan, the euro area and the UK have all entered recession. This summer has also brought a slowdown in growth in the Far East and other emerging economies which is likely to test political as well as economic regimes. The challenge for policy It was clear last autumn that the financial crisis was leading to a squeeze on credit and lowering the prospects for growth and inflation in the UK. That was why the MPC, which had been raising rates as late as July, cut Bank Rate in December last year and followed with two more reductions in February and April. While the euro area started with lower rates and initially seemed less affected than the UK by a credit crunch, expected increases in rates were delayed.

The transposition of European Union Directive (PSD), which is considered as one of the most avant-garde pieces of legislation in this field, is a concrete initiative in this regard. The Bank of Albania, in collaboration with the experts of the World Bank and Bank of Italy, has prepared a draft-law, which will be subject to public discussions very soon. To support these initiatives, the Bank of Albania is analysing the possibility of innovative 1/2  BIS central bankers' speeches  developments in the systems we operate, such as: instant payment, which, based also on international experience, would reform the payment markets from the digitalisation point of view. ****** Dear participants, Given its very nature, this new dimension of payment systems development requires certainly broader cooperation by all the stakeholders. In this regard, the inter-institutional cooperation has resulted as very effective through the organisation and functioning of the National Payment Systems Committee. The Committee is a collegial advisory body, chaired by the Bank of Albania, and is making important steps forward toward reformation and modernisation of retail payment systems. Its vision for the future is “creating a contemporary and all-inclusive retail payments market,  supported by safe and efficient infrastructure, and a broad range of instruments and services that satisfy the needs of the users”. The realisation of this vision requires legal, regulatory and infrastructural developments.
The mind of a researcher engaged in scientific inquiry There are certain qualities and prerequisites which a researcher engaged in scientific inquiry should possess. The most important of these is the open mind with which the researcher should commence his inquiry. The researcher is not a propagandist, nor is he a person bent on superimposing his views on others. He should be humble enough to reject even the views he would have held for long, if his inquiry does not support them. In other words, he should conduct his inquiry, not with the objective of establishing the views held by him, but with the objective of subjecting them to a free inquiry. This is known as rational and objective thinking. The Buddha, in a discourse He preached to members of Kalama clan, outlined the nature of rational and objective thinking, though its purpose was to guide them to distinguish good from bad. “Oh, Members of Kalama clan…” the Buddha said. “…Do not rely on an opinion because you have heard it often and you are familiar with it. Do not accept it because it is in accord with tradition or found in the scriptures or logical or conforms to theory. Do not accept it because it is preached by your teachers or by a respected priest” (Anguththara Nikaya). The researcher who plans to engage himself in scientific inquiry should be free from the influence of previous knowledge or the traditions and should not be guided by mere logical considerations.

Notable among other factors that distort the efficient allocation of resources are regulation and the public procurement system.17  13  Anghel and Lacuesta (2020). 14  If this misallocation of resources had been avoided, this period would have seen total factor productivity grow by 10% overall, instead of fall by 8%. Gopinath, Kalemli-Özcan, Karabarbounis and Villegas-Sanchez (2017) and García-Santana, Moral-Benito, Pijoan-Mas and Ramos (2020). 15  Albrizio, González and Khametshin (2023). 16  Gopinath, Kalemli-Özcan, Karabarbounis and Villegas-Sanchez (2017). 17  García-Santana, Moral-Benito, Pijoan-Mas and Ramos (2020). 5  As regards the quantity and quality of regulation, an abundance of increasingly complex rules and regulations that vary from one region or municipality to the next can have a negative impact on both economic agents’ decisions and the ability of governments to guarantee market unity, both domestically and at European level. This limits firms’ ability to grow and expand geographically, while stifling their incentive to innovate and specialise. As an example, I need only mention that, in 2022 alone, central and regional governments approved almost 11,000 new pieces of legislation.18 Some of these regulations may in fact directly influence the size of firms, given that firms are subject to stricter regulation above certain headcount thresholds. Regulatory improvement should be implemented by strengthening two important mechanisms already existing in our legal system. First, the Law on Market Unity establishes mechanisms to protect economic operators that allow them to file complaints.19 After ten years in force, 575 decisions have been issued.
Over the period from 1985 to 2018, there is a continuing link between labour cost and price inflation in the four major euro area economies and across the three main sectors.11 Passthrough is on the whole strongest in the services sector, where wages account for around 40% of costs. That is important for the current inflation outlook given the resilience of services to the growth slowdown. What appears to be delaying the pass-through today is the fact that firms are absorbing labour cost increases by squeezing profit margins. This reflects two cyclical factors. First, the euro area is coming out of a prolonged period of low inflation, which historically leads to 12 3/6  BIS central bankers' speeches  a slower pass-through.12 One reason is that price dispersion is narrower when inflation is low, implying that if an individual firm were to raise its prices, it would attract the attention of consumers and lose market share. Firms are therefore more reluctant to pass on cost increases to consumers.13 The second factor is the softening of activity in 2018. Labour costs are typically passed on more strongly to prices when demand is stronger, 14 so the fact that the euro area has recently experienced a negative demand shock is likely to have held firms back from raising prices. The delay in pass-through may also be explained by an additional factor, which is lower imported inflation over the last two years.

This has been reflected, since late summer 2017, in a growing discrepancy between the growth of the GDP deflator and core inflation. The GDP deflator has followed a more pronounced upward trend, rising from 0.6% at the end of 2016 to 1.5% at the end of 2018. One development that may have contributed to lower imported inflation was the appreciation of the euro exchange rate by around 8% in nominal effective terms over the last two years. ECB internal analysis suggests that this had an impact on non-energy industrial goods inflation in 2018, especially for durable goods.15 The upshot is that the pass-through of wages to prices is likely to be moderate until these various factors have played out. But there are several reasons to believe that they will unwind over the medium term. Our monetary policy will remain accommodative and will respond to any changes in the inflation outlook. The effects of exchange rate appreciation have now reversed. Demand should recover, so long as the downside risks to our outlook do not materialise. And with stronger demand, firms should be able to rebuild margins. Moreover, even if the economy were to slow more than expected, the risks to wage growth may be contained. Since the end of 2017, wage growth has been driven less by wage drift16 and more by negotiated wages, which are more persistent and react more slowly to cyclical labour market conditions. Negotiated wages for 2019 have to a substantial degree already been set by previous negotiating rounds.
The aim is not only to cement global economic recovery, but also to counter the backtracking seen in inequality and poverty as a result of this pandemic and to jointly tackle the common structural challenges derived from digitalisation and the fight against climate change. And this without forgetting the need to strengthen pre-emptive and common response mechanisms to systemic crises like the present one. In this respect, the G20 resolutions reached to respond to the impact of the crisis on lowincome economies via debt-relief measures are praiseworthy; but consensus must now be forged to address the situation which middle-income countries are also facing (a category in which a good number of the Ibero-American community countries fit), with limited room for manoeuvre in their national policies. With these same objectives, international institutions must complement and improve coordination with regional institutions and mechanisms, which may be more effective in providing solutions for countries that share a common institutional framework or similar economic structures. Following this introduction, allow me to move on to the first panel of the Conference, which will focus on analysing the role of monetary policy in the context of the pandemic.

Globalisation and Increased International Competition Such considerations lead us to another major challenge, that of globalisation and increased international competition. Malta is particularly susceptible because it has a very open economy. Developments in the international market place are indeed likely to become even more relevant because the process of globalisation continues unabated. Facilitated by the progressive dismantling of trade barriers, this process has been characterised by a rapid growth in factor mobility and crossborder investment, and has given rise to harsh competition based on innovation, dynamism, improved  2  BIS Review 50/2003  quality and low cost. It has also become easier for new entrants to gain access to global markets, including the countries of Central and Eastern Europe, many of which are now our competitors. Globalisation has, therefore, brought more uncertainty because there will be winners and losers. Although the process probably involves more than simply a zero-sum game, it is also true that countries which adapt to the new competitive conditions more rapidly will grow at the expense of those which are slower to react. This is a crucial consideration for Malta, which is a very small player in the global market place, and therefore a price taker, but which depends heavily on exports to maintain the living standards of its people. While there are many enterprises in Malta which are rising effectively to this challenge, the cost pressures associated with the macroeconomic imbalances and the inefficient practices described earlier are proving to be too much of a burden for some others.