samchain/econo-pairs-v1 huggingface dataset:
Given that it could happen more rapidly, the challenge of workforce adjustment could be more difficult. The shifts required in employment from jobs involving heads to those with hearts and hands could be far greater each year than seen in previous episodes. Moreover, unlike in the previous industrial revolutions, the more rapid pace of adjustment and longer working lives means workers may not have the option of retiring. This 22  Analysis by the IMF indicates that the extent of job polarisation depends far more on the ease of substitution between labour and technology than it does on the relative price of technology. 23 Calculating the labour share using gross national income and removing distortions that stem from how multinational corporations account for their global operations by excluding retained earnings of firms that have re-domiciled to Ireland, the depreciation of foreignowned intellectual property assets located in Ireland, and the depreciation of aircraft owned by aircraft-leasing companies. 24 The low level of automation in the UK – which Hal Varian has suggested could be linked to the size of the automobile and electronics sectors – may be one reason why the UK labour share has remained resilient. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  raises risks of substantial skills mismatch, leading to increased structural unemployment and adverse macroeconomic outcomes. What could we do to shorten the lags? What does history teach us about building Whitaker’s adaptability today?

Experience has shown that fiscal policy alone cannot ensure a high level of employment. The structure of the labour market and of wage formation is probably of greater importance. The direct regulation of credit, interest rates and capital movements broke down and was phased out in the 1980s. The krone no longer has a fixed value relative to other currencies. Its value is determined from one minute to the next based on supply and demand. We say that the krone is floating. Price regulation no longer plays a role as a macroeconomic instrument. The scope of business policy has become more general. At the same time, the tax system has become more efficient. Tax rates are lower and the tax base broader. State ownership in the Norwegian business sector remains extensive, but the management of ownership has been completely changed. A number of markets in which the state used to be the sole owner have been opened up to the private sector. The competition in the power and telecom markets and in aviation and broadcasting that you would regard as a matter of course today did not emerge until the 1980s. State-owned companies were listed on the stock exchange and unprofitable enterprises are no longer kept artificially afloat. Norwegian businesses also face increasing global competition. International agreements, through our close collaboration with the EU and through the World Trade Organisation, have provided for freer flows of labour, goods, services and capital in and out of the country.
However, the balance of risks is complex. The Norwegian economy still features high capacity utilisation. The rate of increase in consumer prices was slower than expected in July, at a year-on-year rate of 2.7 per cent. Measured from June, the total index fell by 1.4 per cent. The decline, however, primarily reflects the decrease in excise duties, notably the reduction in VAT on food and petrol taxes. Excluding changes in excise duties and energy prices, the rate of increase in prices, as calculated by Norges Bank, was about 2.6 per cent. At the same time, there is a shortage of labour and labour costs are rising at a fairly rapid pace. The rise in service prices where wages are a dominant factor moved up from 6.3 per cent in June to 6.9 per cent in July. Credit growth is also high and growth in household loan demand is still on the rise. Against this background, there is a risk that domestic pressures may translate into stronger inflationary impulses than we have projected. On the other hand, growth in the world economy has slowed markedly, with the risk of even slower growth and a longer recession. Around the beginning of the year, most forecasters expected that the slowdown in the US economy would be relatively short and that the effects on the rest of the world would be limited. This picture has now changed.

The EMEAP Group believes that ABF2 will promote the development of index bond funds in the regional markets. We are also working with our ASEAN counterpart on an investors seminar to take place later in the year to raise global awareness of our capital markets. The treasury industry continued to grow robustly. Foreign exchange and credit trading activities were underpinned by market volatility and a slew of bond issuance in Asia. To support the broad-based growth in the financial services sector, much attention was placed over the past year on manpower and skills development. The Financial Sector Manpower Conversion scheme, launched recently, will contribute to ensuring a ready supply of skilled manpower in relevant growth areas. V  Playing a more active role in the international arena  Over the last year, we have continued our active role in regional cooperation, formulation of international regulatory standards, and active dialogue with our regional and international counterparts. This reflects our recognition of the importance of closer cooperation in a highly interconnected global market. These efforts are also in keeping with Singapore’s role as an international financial centre. 2  BIS Review 43/2004  We work closely with our ASEAN counterparts to speed up financial sector liberalisation in the region. Beyond ASEAN, we are actively involved in EMEAP. Last week, we successfully hosted the EMEAP Governors’ Meeting as well as the first EMEAP-Eurosystem high-level seminar.
First, the capital requirements have been raised so that internationally active banks must have common equity ratios of at least 7 percent of risk-weighted assets when the standards are fully phased in by 2019. This 7 percent standard consists of a 4.5 percent minimum plus a 2.5 percent capital conservation buffer. Banks whose capital ratios fall into the buffer range will face increasingly stringent restrictions on capital distributions such as dividends and share repurchases and discretionary bonus payments to staff. This should act as a form of “automatic stabilizer” to their capital resources and change the incentives banks face during periods of stress. Second, for many globally active banks, the amount of capital required will also rise because the amount of risk-weighted assets against which the capital ratios are calculated will increase. Explicit capital requirements for operational risk and counterparty credit risk, as well as increased requirements for certain trading activity and transactions between financial institutions should result in a significant rise in risk-weighted assets. On the quality side, capital requirements have been toughened by narrowing the definition of what can be counted toward common equity capital for regulatory capital purposes. The emphasis has been put on common equity because of the superior loss-absorbing capacity of this type of capital on a going concern basis.

Instead, the goal of the CCAR was to help ensure that large bank holding companies have strong, firmwide risk measurement and management processes to support their internal assessments of capital adequacy and that their capital resources are sufficient given their business activities and the resulting risk exposures. 4  BIS central bankers’ speeches  The second important strand of reform is to ensure that regulatory oversight is sufficiently broad to include the activities of the so-called shadow banking system. This aspect of reform and oversight is still in its early days. But work is underway. For example, the Financial Stability Board is undertaking work to identify potential sources of vulnerability caused by the activities in the shadow banking system and how such vulnerabilities could be addressed. Also, in the United States, the Financial Stability Oversight Council (FSOC) views its mandate broadly with respect to identifying systemic risks and proposing remedies. For example, on an ongoing basis, the FSOC will monitor and assess which non-bank financial intermediaries in the United States are systemically important and, thus, require greater regulatory oversight. But the focus will not just be on large financial firms. Activities and practices that occur outside of the core institutions are also important. For example, the activities of money market mutual funds is one area receiving close scrutiny. As you know, a run on the money market funds developed in the fall of 2008 when the Reserve Fund broke the buck when Lehman Brothers failed.
This provided, in the statistical jargon, ample degrees of freedom for modellers, enabling them to devise risk frameworks which, on the face of it, were very precisely calibrated in-sample. And there’s the rub. The sample in question was, with hindsight, most unusual from a macroeconomic perspective. The distribution of outcomes for both macroeconomic and financial variables during the Golden Decade differed very materially from historical distributions. Charts 1-8 illustrate this small sample problem. They look at the distribution of a set of macroeconomic and financial variables, comparing the Golden Decade with a sample stretching back in some cases to the 17th century. Even visually, these distributions plainly suggest that the Golden Era distributions have a much smaller variance and slimmer tails. More formally, Table 1 looks at the first four moments of these variables, comparing the Golden Era with the full sample. For the macro time-series, the differences in variability are striking. The long-run standard deviation of UK GDP growth has on average been 4 times greater than during the Golden Decade; for unemployment 5 times greater; for inflation 7 times greater; and for earnings 12 times greater. Put differently, as part of the Basel II regime the FSA require banks to simulate the effects of a 1-in-25 year stress. In 2007, the worst such GDP growth outcome over the preceding 25 year period was -1.4%; the average 1-in-25 year stress over the full sample is -3.8%. For financial time-series, small sample problems are even more acute, especially for events in the tail of the distribution.

In other words, the problem is often not so much about the “people” or the “bad apples”, but the “bad barrels” – that lead to shocking behaviour. The ethical challenge for us as leaders in the corporate and public sectors is to build this conducive culture. The need is to cultivate the situational environment and broader system that encourage genuine professionalism and integrity of the people in the system. Let us focus on these three elements of (a) system; (b) situation; and (c) people. (a) System Let us begin at the highest level, the system. This represents the values and assumed beliefs that underpin an organisation and the financial sector in general. The baseline standards of 2/5  BIS central bankers' speeches  acceptable conduct and behaviour are articulated formally through laws and regulations. In Malaysia, the legal and regulatory frameworks for the financial sector are stewarded by Bursa Malaysia, Securities Commission Malaysia, the Companies Commission Malaysia and Bank Negara Malaysia. Various efforts have been, and are, taking place on the professionalism and integrity fronts. The Bank recently issued the enhanced corporate governance standards for the financial sector – calling for a culture that reinforces ethical, prudent and professional behaviour. I understand that the Securities Commission is currently finalising a revised Malaysian Code on Corporate Governance which will be applicable to Bursa-listed firms. Just this month, a Code of Conduct for the Malaysian Wholesale Financial Markets was issued by the Bank.
On 15 January, the Swiss Franc moved by more than 30 standard deviations. For rough scale, an 8 standard deviation move should happen once every three billion years or so for normally distributed data. You may at this point recall the saying popularised by Mark Twain, about “lies, damned lies and statistics”. I think I can be reasonably confident in saying that the fact of these events happening does not mean that we should expect low volatility in financial markets for at least the next three billion years. I am not going to spend time discussing the causes of these events; suffice to say that there was news of an unexpected sort, and the size of the resulting moves points to greater sensitivity in the response of markets. The ability of markets to trade without triggering major price moves was limited. That said, by the end of both days, volatility had reduced, prices had retraced a portion of their peak intra-day moves and liquidity returned. This quick stabilisation helped to limit contagion to other markets, and thus wider effects on the stability of the financial system. Should we therefore be concerned? My answer to that is we should certainly be keenly interested. I agree with the conclusion of the Federal Reserve Bank of New York that understanding the manner in which the evolving market structure is affecting market liquidity, efficiency and pricing is highly important (Potter (2015)).

The algorithms of automatic trading have rules embedded in their code such that quotes are immediately pulled if there is a severe market liquidity event. Moreover, the algorithms often have automatic rules that activate circuit breakers or socalled “kill switches” should the aggregate notional risk on a firm’s book exceed programmed limits. On 15 January, the algorithms acted quickly to pull the so-called “streaming prices” when liquidity in the reference market for these prices dried up. Where this did not happen simultaneously, it resulted in large open positions being accumulated by the banks, quite literally within seconds, as an overwhelming balance of client sell orders were automatically executed. Once pre-determined risk accumulation limits had been breached the algorithms instantaneously shut down. Whilst each algorithm, operating independently, may well have been quite prudently calibrated to protect the bank from building an exposure that exceeded its risk appetite, collectively, the impact on market liquidity was akin, albeit temporarily, to a cascading failure across a power grid. As a consequence, the foreign exchange market reverted to human voice orders as the substitute for automated trading. There were therefore outcomes that appear not to have been expected. So, at the risk of quoting Shakespeare inappropriately, all was well that ended (reasonably) well, but the risk that this would not be the outcome is too great to ignore. In summary, there is good evidence that financial market conditions have evolved in ways that reduce the likelihood of continuous market liquidity in all states.
In other words, we are not “inflation nutters”, who want to bring inflation back on target as quickly as possible, whatever the cost. The importance of inflation forecasts for interest rate decisions Let me move on to talk about the assumption for the repo rate that we use when making forecasts in our Inflation Report. 2  BIS Review 84/2006  The forecasts in the main scenario in the Riksbank’s Inflation Report have been based over the years on the assumption that the repo rate is held unchanged during the forecast period. This assumption had the advantage of providing a very simple and clear policy rule for monetary policy: If the forecast for inflation at the end of the forecast period was below two per cent, the repo rate would normally be cut, and if it was above two per cent the interest rate would be raised. If the forecast was very close to two per cent the repo rate would remain unchanged. Of course, this rule could not capture all of the nuances in the monetary policy discussion, but it provided a rough explanation of the monetary policy decisions. However, there were several disadvantages with the assumption of a constant repo rate. In situations where the market expected clearly rising or falling interest rates, it was difficult to compare our forecasts based on the assumption of a constant repo rate with those made by other forecasters.

Two years into the crisis, the world economy has entered a new stage, in which fiscal policy is increasingly being discussed. The joint effects of monetary and fiscal policy have been central in averting a much deeper crisis. However, disentangling the effects of each one on the economy’s performance and determining the best course of action remains the topic of heated debate within academia and in policy circles, in particular, on the speed and timing of the fiscal retrenchment. This is largely dependent on the strength of each country’s fiscal accounts. The ten papers to be presented during the Conference will be organized into three sections. The first will assess the effects of fiscal policy on macroeconomic outcomes. The first contribution to this section, by Tommaso Monacelli, Roberto Perotti and Antonella Trigari, will focus on the effects of tax cuts on the labor market. Joachim Voth will present work that  BIS Review 143/2010  1  analyzes the extent to which fiscal retrenchment can take place before civil unrest is provoked. Rodrigo Caputo and Miguel Fuentes will examine the long-run effects of fiscal transfers and investment on the real exchange rate in a broad panel of countries. Mauricio Villafuerte, Pablo López-Murphy, and Rolando Ossowski will close with an examination of fiscal policies among resource-exporters in Latin America and the Caribbean. The second section will investigate the interactions of fiscal and monetary policy.
But this is not to say that history is not instructive and no useful lessons can be drawn from it. To understand how to face the challenges ahead of us, it may be useful to understand how similar challenges were faced and overcome in the past, and particularly how some were able to make progress while others lost ground at times when the pace of globalisation accelerated. Much has been written recently on this subject. Niall Ferguson and Ian Morris, for instance, examine the reasons why the West has “ruled” the world – at least until now.1 In essence, they assert that civilizations developed and rose to dominance when they were open to innovations from abroad and were able to develop and use them to their advantage. This applies to both migratory flows and imports of agricultural or manufactured goods, ideas and scientific innovations, in a context of competition. Those who were closed to globalisation declined, even if they had achieved a leading position in economic, technological or military matters. That is the reason why, according to Jared Diamond, a European, rather than a Chinese explorer, discovered America at the end of the fifteenth century, even though China’s economic development was much more advanced and had a much greater army and navy.2 I would like to quote briefly Diamond: “Christopher Columbus, an Italian by birth, switched his allegiance to the duke of Anjou in France, then to the king of Portugal.

Implementation Has Been Satisfactory But More Needs to be Done Achieving international consensus on the key elements of bank regulatory reforms is laudable. But for the reforms to have their intended effect, implementation is crucial. •  The FSB has formed a Standing Committee on Standards Implementation to monitor the implementation of the financial reforms among its members  •  I chair this Committee and so have particular interest in the issue of implementation. The Basel III standards have generally been implemented in a timely manner. •  Basel III risk-based capital rules have been rolled out in all 24 FSB jurisdictions. •  Final liquidity rules have been issued in all but two jurisdictions. In bank resolution, progress is more mixed. •  On the positive side, regulators have set up crisis management groups and developed recovery plans for all G-SIBs  But significant work remains on operationalising these resolution plans. •  And not all FSB jurisdictions have bank resolution regimes that are in line with FSB’s Key Attributes of Effective Resolution Regimes. Implementing reforms in a timely manner is one thing; implementing them in a consistent manner across jurisdictions is another. Ensuring consistency and level playing fields, and minimising opportunities for regulatory arbitrage have become the focus of implementation monitoring. The Basel Committee conducts in-depth assessments of member implementation of the Basel III capital standards to check for consistency.
But in the long run, attempts, for example, to make the economy grow faster than its long-term sustainable rate would only result in higher inflation without any change in output or employment. As I mentioned, the economy’s long-term capacity is limited by the size of the factors of production and their productivity. These factors cannot be governed by monetary policy. By changing the interest rate, the Riksbank can affect actual output growth in the short term but not the potential, long-term growth rate. Monetary policy can possibly indirectly lay the foundation for good growth in the long term by ensuring that our payment and price-setting system functions in an efficient and confidence-inspiring manner. What determines long-term growth? As you understand from what I have said this far, it is important for the Riksbank to make a good assessment of the Swedish economy’s potential growth capacity in order to conduct successful monetary policy. We therefore return to this issue fairly often in, for instance, our Inflation Reports. One difficulty is that potential output and potential growth cannot be observed directly in the same way as actual GDP and employment. Instead, the measure must be estimated using statistical methods and there are a number of these, each with its own advantages and disadvantages. In other words, there are several different ways of drawing the orange line in Figure 1, and the different methods have demonstrated fairly differing results. The Riksbank therefore uses several different methods of calculating the output gap.

The Riksbank has chosen not to specify any exact figure for potential growth, but instead has decided to state a range of between 2 and 2.5 per cent. We have not considered it possible to be more precise than this, given the difficulties in measuring growth, etc. If we look ahead, it is reasonable to believe that growth will in future be somewhere within this interval, although where depends on how far ahead one looks. Over the coming years, growth will probably be closer to 2.5 per cent than to 2 per cent. In the longer perspective, when the demographic effects on the labour supply are greater, it is reasonable to believe in a figure closer to 2 per cent than 2.5 per cent. How much closer depends to a great extent on how much the labour supply can be stimulated during the period. Thank you! Figure 1.GDP and an example of potential GDP 1950-2003, SEK million 2300000  2300000  GDP  2100000  2100000  Potential GDP (example)  1900000  1900000  700000  500000  500000 2000  700000 1995  900000  1990  900000  1985  1100000  1980  1100000  1975  1300000  1970  1300000  1965  1500000  1960  1500000  1955  1700000  1950  1700000  Sources: Statistics Sweden and the Riksbank  8  BIS Review 64/2004  Figure 2.