samchain/econo-pairs-v1 huggingface dataset:
How can we prevent taxpayers of the good performers in the euro area from being asked to foot the bill for the excesses of the bad performers? EMU is based on two pillars. The first is price stability, ensured by an independent central bank. The second is sound public finances, promoted by the Stability and Growth Pact. This second pillar has not worked properly and needs to be repaired. Including some form of automatic private sector involvement does not repair the SGP. It actually weakens it by delegating discipline to the financial markets, which we know are late and pro-cyclical. It makes debt restructuring easier and thus discourages fiscal discipline. The only way to protect taxpayers in “virtuous” countries is to avoid over-indebted countries from easily getting away with not repaying their debts; the payment of debts should be enforced, through sanctions if need be. When countries go off track they can receive financial assistance only in exchange for strict adjustment programmes, including asset sales, which allow these countries to remain solvent. Respect for contracts is the one of the key principles underlying the market economy. It is also the basis of monetary union between sovereign countries. BIS central bankers’ speeches  5

We are confident that with stronger industry stewardship, we will be able to foster greater market dynamism and growth. My last point today is to touch on the MADANI vision introduced by the Government and share my thoughts on how Islamic finance can further leverage on the concept for the further development of Islamic finance. The word itself has its roots in Arabic and means "being developed in terms of thinking, spirituality and mentality". The Malaysia MADANI concept – or civil society – envisions a country that looks beyond economic wellbeing and materialism to one which emphasises humanity and good values like fair, just and effective governance. MADANI is an acronym for a policy that embraces six core values – keMampanan (Sustainability), KesejAhteraan (Prosperity), Daya Cipta (Innovation), hormAt (Respect), keyakiNan (Trust) and Ihsan (Compassion). Indeed, many of these core values have been embraced by Islamic finance through its Shariah foundation and Value-Based Intermediation. Over the past few years, we have expanded Islamic finance to encompass and strive for higher ideals beyond the generation of profits, among others. For example, embracing sustainability, protecting the environment and strengthening our governance practices. With the MADANI aspirations or values in mind, Islamic financial institutions could look into a broader agenda of empowering the people and alleviating their economic conditions and status.
Yet in recent years, the central banks, including the SNB, have become quite creative and innovative when faced with difficult circumstances. However, two points need to be noted in this respect. On the one hand, central banks must never lose sight of their mandates. There should never be any doubt about their unflinching adherence to their stability mandates. On the other, it is important to recognise that monetary policy cannot be used to solve all economic problems. Otherwise we run the danger that, in the long term, monetary policy will no longer achieve its intended effects, and our money will deteriorate. As far as the Swiss monetary order is concerned, I am confident that the SNB is in a position to fulfil its mandate in the interests of the country – now and in the future –because of the backing it enjoys among the general public. My optimism is also founded in the history of the Swiss currency, which began moving in a positive direction after the memorable Ustertag of 1830. Admittedly, the efforts to achieve sound money in our country were not immediately crowned with success and it was a gradual process. However, our monetary order and institutions have enjoyed broad acceptance and a high level of basic trust for over 100 years now. This has made it possible, while adhering to the basic foundations of the monetary order, to carry out essential adjustments on repeated occasions, while at the same time allowing transient fashion trends to pass and forgoing experiments with uncertain outcomes.

This could adversely affect prices and construction activity of high-end housing in such states. If the economy continues to grow at an above-trend pace in 2018, the labor market should tighten further. In fact, I anticipate that the civilian unemployment rate will fall below 4 percent this year and reach the lowest level since at least 2000. If this scenario proves accurate, this should lead to further firming of wage growth. On this point, some wonder whether the relationship between tight labor markets and higher inflation has broken down. I have not lost faith in this relationship. As the labor market has tightened over the past few years, we have seen a discernible firming in the wage inflation trend from 2 percent to around 2½ percent.5 Also, data at the state level indicate that states with lower unemployment rates tend to have firmer wage trends. This supports the case that tighter labor markets tend to be associated with higher wage growth. As the labor market tightens and wage growth firms further, I would expect these conditions to push up price inflation, particularly for services. Research by the New York Fed has found that prices of manufactured goods do not appear to be sensitive to labor market tightness.6 In contrast, tighter labor markets tend to be associated with higher price inflation for services. This difference presumably reflects several factors. First, prices of manufactured goods are determined in global markets, whereas prices for most services are determined locally.
It incorporated key aspects of flexible inflation targeting, a monetary policy framework that had gained wide acceptance around the world. This framework served us well, but the need for change was clear. In the past eight years, basic facts that shaped the original framework have fundamentally changed. First and foremost is the dramatic decline in the neutral interest rate, that is, the short-term interest expected to prevail when the economy is operating at its full potential and inflation is at its longer-run target. Since January 2012, FOMC participants’ median estimate of the neutral nominal rate has fallen by 1-3/4 percentage points, from 4.25 percent to 2.5 percent. A similar decline is seen in private sector forecasts and bond yields.2 This secular decline in interest rates is not limited to the United States—we’re seeing it across the globe—and it reflects longer-run trends in demographics, productivity, and other factors that are unlikely to reverse anytime soon.3 Lower neutral interest rates constrain the ability of monetary policy to offset negative shocks to the economy. This effect has been seen most clearly in the behavior of inflation. Over the past decade, inflation in the United States has been below our 2 percent longer-run target most of the time, and measures of inflation expectations have drifted down. These declines in trend inflation and inflation expectations can create a pernicious feedback loop of reduced policy space and even lower inflation expectations.

These changes are mutually reinforcing and will meaningfully improve our ability to achieve both of our dual mandate goals in an environment of a very low neutral rate. I’ll conclude with this: The new framework represents both an important evolution in our thinking about how to achieve our goals and another step toward greater transparency. It reaffirms key aspects of the original statement that have stood the test of time and refines others in line with experience and evolving practices. It also makes some more significant changes in light of developments and lessons learned in recent years. And most importantly, it positions us for success in achieving our maximum employment and price stability goals in the future. 1 See Board of Governors of the Federal Reserve System, Statement on Longer-Run Goals and Monetary Policy  Strategy, as amended effective August 27, 2020. 2 Longer-run forecasts of interest rates can be found in Blue Chip Financial Forecasts (Wolters Kluwer). For the  decline these forecasts over this period, see the June 2012 and June 2020 issues. 3 See John C. Williams, Three Questions on R-Star, FRBSF Economic Letter, 2017–05 (February 21, 2017), for a  discussion of the decline in the natural rate of interest. Estimates of the natural rate for the United States, Canada, the United Kingdom, and the euro area are available at Federal Reserve Bank of New York, Measuring the Natural Rate of Interest.
The increase in the relative significance of the financial sector in most Asian economies can be seen in terms of the momentum in the financialisation of savings and the increase in the volume of financial transactions being conducted through the formal financial sector. These trends are being reinforced by the shift of activities that is taking place from the traditional sectors to the industrial and services sectors. On average, the industrial and services sector now accounts for 74% of the economy in Asia, compared to 60% in 1980. In contrast, agriculture now accounts for 12%, compared to 26% in 1980. Involved in this transformation, women have demonstrated a high degree of mobility, participating in all segments of economic activity. Most discernable is the increasing participation of women in the services sector. Here in Hong Kong, the percentage of women in the services sector relative to the total population increased from 43% in 1980 to 87% in 1999. Similarly in Indonesia, the rise was from 32% to 42%, and in Malaysia, it was from 33% to 57% and in Thailand, from 18% to 34%. In Asia, the demographic structure also reinforces the economic potential of Asia. The population in Asia continues to grow at a relatively high and stable rate to account for more than half the world’s population. Of significance is the relatively young demographic structure in Asia. More than 50% of women fall in the age group 15 to 49 years, similar to that for men.

Much has been said about how the banking system has remained broadly resilient to date, and how banks have not been “part of the problem” in exacerbating the economic crisis. This is in no small part due to the fact that banks entered the pandemic on a much more resilient footing that during the Great Financial Crisis, thanks to the initial set of Basel III reforms, and the ongoing cooperation among Basel Committee members over the past year. In addition, the unprecedented range of fiscal and monetary measures taken by jurisdictions around the world to support the real economy have largely shielded banks to date from losses. 1/3  Yet in order to safeguard global financial stability, it is crucial to lock-in the benefits of the outstanding Basel III reforms by implementing them in a full, timely and consistent manner. Doing so would ensure that the regulatory fault lines of the global banking system – most notably with regards to excessive variability in risk-weighted asset, the gravity of which remains as important today as it was pre-pandemic – are adequately fixed. These reforms benefited from an extensive consultation process with a wide range of stakeholders. The finalised standards took on board many of the comments received from stakeholders and reflect the differences in views among our members. They are a compromise by their very nature. I should further note that the majority of the adjustments made in the finalised standards reflected the views of different European stakeholders.
In a changeable economic environment, in which these things may not be so easy to infer directly, it may also want to say more about its potential reaction to such outcomes (its “reaction function”). Expectations of future interest rates affect current demand and policymakers clearly have an interest in their behaving appropriately as economic news comes in. There are various ways of doing that – speeches, simulations, perhaps even published rate paths. But whatever the medium monetary authorities need always to think that the message – not least the point that future policy will depend on how the outlook for inflation evolves – is well understood. I’ve received helpful comments from colleagues at the Bank of England. I’d like to thank Jack Meaning, Alberto Polo and Tuli Saha for their help in preparing the speech. Particular thanks are due to Fabrizio Cadamagnani and to Rich Harrison, who ran the simulations for Charts 46 and wrote the appendix. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Financial Policy Committee or the Monetary Policy Committee. 1. I’ve chosen the former because it’s smoother than the actual interest rate, and the latter because it’s a monthly rather than quarterly series 2. King (2005), ‘Monetary policy: practice ahead of theory’. 3. Broadbent (2013), ‘Conditional guidance as a response to supply uncertainty’. 4. See Krugman (1999), ‘It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.’ Brookings Papers on Economic Activity, no. 2: 137–87. 5.

Some mortgages have interest costs tied directly to Bank Rate but most are now fixed for at least two years. And these longer-term rates depend in their turn on expectations of how the short-term interest rate evolves over the future. So they matter. Equally, however, these expectations should – and generally do – respond to the news about the economy of their own accord, without the need for any explicit prompting by the central bank. The private sector forms its own views about how the economy might evolve over the future, views that are continually adjusted as new information comes in. As long as people also understand the objectives of the central bank, and therefore the appropriate response of policy, they should then be able to work out for themselves what that news means for the likely path of interest rates. Sometimes, when economic conditions are relatively stable, there isn’t that much to work out, as one can observe the central bank’s “reaction function” – how it responds to incoming data – pretty much directly. In the years prior to the financial crisis, official interest rates in the UK  were very tightly correlated with economic activity (and exhibited very little dependence on anything else). Chart 1 is one way of representing that relationship: it plots the change in the average interest-rate vote on the MPC, in basis points, against a survey-based measure of economic growth[1]. At least until 2008 the correspondence was extremely tight.
Let me develop the first point: The 2008 crisis illustrated that the so called « shadow banking sector » played an important role in propagating and amplifying financial instability throughout the financial system. Shedding some light on these entities and regulating them to prevent contagion and regulatory  BIS central bankers’ speeches  1  arbitrage has been therefore a key milestone of the G20 Financial regulation agenda ever since. The Banque de France has been involved in this policy work from the outset. A first part of the work consisted in defining what the “shadow banking sector” is about. It does embody a wide variety of institutions worldwide which accomplish credit intermediation along with maturity transformation outside of the “traditional” banking sector. As an output, it transforms illiquid assets into liquid ones. The approach of shadow banking has progressively expanded to a variety of actors and activities: Money Markets Funds; Securitization, Repos and Securities Financing Transactions. The work dedicated to preventing the financial risks arising from the shadow banking system became intertwined with the work aiming at ending “too big to fail”. In the wake of the Globally Systemically Important Banks, the Financial Stability Board started working on identifying and defining a regulatory regime applicable to Globally Systemically Important Insurers (GSIIs), Non-Bank-Non Insurance SIFIs (NBNIs), Critical Market Infrastructures/CCPs. The focus of the work also shifted from monitoring/statistical reporting to rule making.

Beyond the yearly shadow banking monitoring exercises, policy makers intended to make sure that no part of the financial system would be left unregulated and that a similar set of rules should apply to a similar set of risks. For the sake of a better regulation of globally systemically important institutions, some progress remains possible in the monitoring, and the need for relevant data in particular as regards the better understanding of inter-linkages among G-SII. Cross-sectorial consistency was seen as a key factor to prevent any opportunity for regulatory arbitrage and preserve appropriate level playing field. The Financial Stability Board following the G20 recommendation has launched an ambitious regulatory program which aims at better controlling risks which are related the shadow banking sector. Indeed, the US have recently adopted a regulatory framework for Money Market Funds (July 2014). Other reviews are still ongoing, I am thinking of the assessment of risks and systemicity of asset managers whose assets under management have experienced a major growth these last few years, or the rapid development of ETFs providing real time liquidity on their liability while their matching assets have a lower liquidity. In Europe, this global initiative translated into a number of regulatory initiatives such as the Securities Financing Transactions Regulation (repos and SFTRs) or the Regulation of Money Market Funds. The final objective was to turn the shadow banking sector into a safer and regulated “market-based financing”. 2.
This would involve enhancing the ability of users of financial services to make discerning financial choices that best suit their needs, while increasing their confidence to take advantage of the new spectrum of channels and tools for financial management. This would result in better financial planning and more stable consumption patterns as well as the ability of individuals to better withstand the macroeconomic shocks that are now occurring more frequently in the global economic environment. Increased financial capability would also contribute towards evolving more inclusive financial systems and the broader financial stability. There is greater expectations on the potential for  BIS central bankers’ speeches  1  financial education to deliver improvements in responsible financial behaviour; encourage stronger market discipline and lift the poorest segments of society out of poverty in addition to helping communities adjust to the changing economic and financial conditions. The achievement of these outcomes will increasingly hinge on consumers of financial services being financially competent. Over the years, important progress has been made to provide the foundations on which enhanced financial capability can be built. These foundations include: (i) greater provision of truthful disclosures on financial products and services; (ii) expanded financial knowledge; (iii) an environment which is supportive of consumer choice, including the ability for consumers to exercise their preferences without impediments; and (iv) effective redress mechanisms. Policy makers, the private sector and market participants have a key role in building these foundations.

Additionally, we will also help build more resilient and inclusive financial systems and thus contribute towards achieving more balanced growth and development. Thank you and I wish you productive discussions at the Symposium. 4  BIS central bankers’ speeches
This can be compared with the 1970s and 1980s, when inflation was at an average rate of around 8 per cent and growth amounted to an average level of 2 per cent. This positive development is due to a large number of factors. One factor is that there were a large number of vacant resources to begin with, but it appears likely that a more credible economic policy also has contributed. Fiscal policy has also played an important role in giving credibility to the economic policy pursued. The value of the budget consolidation can scarcely be exaggerated. Concerning the functioning of the labour market, the changeover from fixed exchange rates and a relatively high rate of inflation to flexible exchange rates and an inflation target implies that high inflation and devaluation, like those Sweden experienced during the 70s and 80s, will no longer take care of the effects of excessively high wage increases. In that sense one could say that the responsibility for employment to a greater extent has moved over to the social partners. Recent developments in the Swedish labour market During the course of 2001, growth in the Swedish economy was subdued, while inflation, excluding so-called transitory prices, rose slightly. This raises questions regarding the development of the supply  BIS Review 40/2002  1  side in the economy. A possible explanation as to why inflation has increased at the same time as demand has weakened is that the growth rate in potential output has been weaker than was anticipated earlier.

Both production and investment are determined by fundamental factors such as demography, households’ preferences and institutions, as well as regulatory systems. These factors in turn determine the development of production factors such as labour, capital and production techniques. The long-term sustainable growth rate is also very important to households’ and companies’ expectations of future growth in income and profits. Willingness to consume and to produce - both supply and demand - are in the long term determined by the same fundamental factors. It is reasonable to assume that the variations in factors such as demography and institutional conditions are relatively limited in the short term. However, demography is likely to become a constraint on economic growth to an increasing extent throughout Europe. Deviations between actual and potential production can arise. When consumption or production exceeds the long-term sustainable growth rate, the level of resource utilisation rises, which may exert inflationary pressure in the economy. The fact that deviations can arise between actual and potential production is due to a number of slowmoving factors in the economy. Market imperfections, such as a lack of competition and transaction costs make both prices and production factors slow-moving, and mean that it takes time for actual production and consumption to adapt to changes in supply and demand in the economy. When adapting to changes in the fundamentals that determine growth or to disturbances, the rate of price increase often increases or declines during a period of time.