samchain/econo-pairs-v1 huggingface dataset:
Lifting the health restrictions has also resulted in some of the demand for services being released, prompting an acceleration in recreation, hospitality and tourism prices. In addition, changes in practices, such as the rise of working from home, have led to higher spending on household appliances, exerting further pressure on their prices. In the case of the euro area and Spain, analysing the disaggregated data reveals the following stylised facts: 1. The magnitude of the increase in inflation is unprecedented in recent times. In the euro area, August saw the harmonised index of consumer prices (HICP) reach 9.1%. In Spain, it has risen from slightly negative rates at end-2020 to 10.5% in August 2022. For context, to encounter a similar rise we need to go back to 1977. 2. This inflationary episode is characterised by its high persistence. In Spain, inflation has stood above 2% for 16 months. The last time this happened was in 2010-2011. You also have to go back to that period to find such a persistent episode of inflation above 2% in the euro area. 3. In terms of its components, the role of energy stands out. 40% of actual inflation in Spain in August was attributable to electricity (2.3 pp) and other energy (1.9 pp). The percentage is very similar in the euro area (43%). 1  4. The persistence and intensity of the rises in electricity and gas prices have been surprising.1 As a result, they lie behind a highly significant portion of the inflation forecasting errors in recent quarters.

In addition, these prices are significantly more volatile in Spain than in the euro area as a whole. 5  See M. Pacce, A. del Río and I. Sánchez (2022). “The recent performance of underlying inflation in the euro area and in Spain”, Analytical Articles, Economic Bulletin 3/2022, Banco de España. 6  This difference is attributable not only to the larger increase in these prices in Spain, but also to this component's greater weight in Spain’s consumption basket. By contrast, the contribution of transport-related items was slightly smaller than that observed in the euro area, due to both the lower inflation observed in Spain and their smaller weight in the aggregate. 2  8. Compensation per employee grew by 4.8% and 3.4% in the euro area and Spain, respectively, in 2022 Q2, figures markedly lower than actual inflation.7 As a result, households have lost considerable purchasing power. Profit margins are holding relatively stable at aggregate level. In Q2 the ratio of the GDP deflator to unit labour costs was similar to pre-pandemic levels both in Spain and the euro area. Figures from the Banco de España's Central Balance Sheet Data Office also point to a slight reduction in firms’ profit margin (defined as the ratio of the gross operating profit to sales) between 2021 H1 and 2022 H1.8 However, this change belies very high heterogeneity across sectors and firms. 9.
6 Today, digitalisation and improvements in communication technology are pushing up demand for payments to be instantaneous and available round the clock. This demand is largely being driven by the proliferation of mobile payment apps. Instant payments are increasingly becoming the new standard around the world. 7 They will help to improve the efficiency of the payment system and enable synergies with new technologies and business models. The SNB is committed to instant payments. Last year, it helped launch the SIC5 project. SIC5 will introduce improved functionalities, such as a new settlement algorithm and higher processing performance. It will also include a new instant payments module to help make instant customer payments the new normal. To this end, the SNB has decided that participants with a high number of customer payments must be able to receive instant payments in SIC5. The SNB has thereby created the necessary framework conditions for ensuring that the cashless payment system in Switzerland remains efficient, secure and ‘future-proof’. 6 7  Cf. SNB press release of 11 January 2019, ‘Swiss National Bank sets criteria for fintech companies’ access to Swiss Interbank Clearing’. BIS, ‘Shaping the future of payments’, available at www.bis.org/statistics/payment_stats/commentary1911.htm. Page 6/10  Ultimately, however, the specific retail payment solutions will have to come from the private sector. To be genuinely effective, instant payment solutions must be implemented all the way to the end customer. Offering such solutions often requires significant adjustments to banks’ internal payment processes.

The various lockdown measures have accelerated existing trends in digitalisation and automation. This will have consequences for areas of central bank activity such as payment systems and the use of big data and artificial intelligence techniques in financial markets. With all these trends, cybersecurity has become more important. Possibly the most important lesson from the crisis is that there is no such thing as being overprepared. The SNB must remain flexible and agile. We must continue to identify and analyse the key trends, invest in new technologies, and – inasmuch as this is possible – prepare for the future. 13 14  SCION is a new internet architecture, which enhances the security and reliability of internet communications. A DDoS attack is a special type of cybercrime in which attackers deliberately seek to make a service or server unavailable.
Defining the objective is possible only in the broadest sense, measuring how close we are  BIS Review 43/2001  1  to it is even more difficult; there is certainly no agreed single indicator or set of indicators which tell us when we have achieved financial stability or when we risk failing to achieve it. Importance of financial stability In part this is because we still lack evidence. This comment may strike some of you, perhaps those from Scandinavia or Japan, as ironic; you may feel that the body of evidence we have is already disagreeably large. However, whilst banking crises are not exactly rare, they are episodic rather than regular and they tend to exhibit a number of idiosyncratic characteristics. This is in some sense reassuring – at least banks and the authorities do not keep making exactly the same mistakes – but at the same time it makes predicting crises very difficult. The causality is complex and difficult to grasp. In some cases, fragility at individual banks can turn into system-wide fragility and in turn into systemwide crisis. In others, a macro-prudential shock or policy error can impact on individual institutions, revealing underlying systemic weakness and triggering a crisis. However, the papers to be presented at this conference each address, in various ways, one or more of these issue s – about definitions, objectives, and policy mechanisms – and I am confident that at the end we will have achieved our aim of a real advance in our understanding.

Finally, we have to do our best to ensure that market discipline is exercised in a relatively benign and gradual way – graded differentiation of spreads on debt for example, rather than sudden refusal by the market to rollover debt at any price. This means we need to think hard about the frequency as well as detail of disclosures, and specifically the trade-off between the two. Too frequent disclosure might not only be too onerous but also add to the volatility of company ratings. Too long and the potential for large step changes in an institution's risk profile will increase market uncertainty and volatility. Of course, there may be times when this cannot be avoided – the sudden emergence of fraud for example – which is where crisis management by the bank concerned and by the authorities comes into play. But we should not overemphasise the relevance of these new disclosure initiatives in this particular sort of situation: publicly owned banks are after all already required to disclose any information which could significantly affect their share price. BIS Review 43/2001  3  Impact of the New Basel Accord Turning to the Basel proposals on minimum capital, their aim is to align regulatory capital much more closely with risk. This should have financial efficiency benefits, as I explained just now. To the extent that seriously undercapitalised risk taking by banks will in the future be more difficult, there are also clear financial stability benefits.
Malaysia then embarked on policies to transform the economy towards becoming manufacturing based. Government agencies courted global firms to set up shop in Malaysia. This 1972 photograph from Penang speaks volumes of those days, and how far we have come since then. A night of heavy rain meant that cars would get stuck in the mud. The car you see in this picture belonged to Andy Grove, the CEO of Intel back then. Intel – along with eight other leading E&E companies – had visited Penang to take up the Government’s invitation to plant roots on Malaysian soil. Fast forward to today, Malaysia has established itself as a bustling hub for Malaysia’s E&E manufacturing industry, playing an important role in the global supply chain. The policies and reforms from those years ago proved far-sighted and well-sequenced – leaving Malaysia transformed for the better. This is what we need to do again, in the aftermath of the pandemic – to put in place reforms that reimagine and completely transform the economy. 24. This ability to rise above challenges also enabled us to quickly bounce back from the COVID-19 pandemic. In large part, this is a testament to the strength, resilience and agility of the Malaysian economy. Where we are today is not by luck or an accident. 25. And so, as we look towards the challenges ahead, we must continue to build on and fortify the strong foundation of the economy and once again, transform our economy as we did in the past.

Table 3 Growth in housing prices (1) (real annual growth, percentage) 2002-2007  2009-2T2012  Nation-wide total (2)  3.1  5.7  Average of districts with significant increases (3)  1.6  8.3  (1) Averaged y-o-y growth between first quarter of initial year and last quarter of final year in each case. (2) Obtained using stratified method. (3) Average of districts with structural growth breakdown, according to methodology of Ferreira and Gyourko (2011). Source: Central Bank of Chile based on Internal Revenue Service (SII) data. BIS central bankers’ speeches  11  Figure 6 Housing sales by building phase (percentage of total) 100  100  80  80  60  60  40  40  20  20  0  0 08  09 Completed  10 Finishes  11  12  Structural work  Other unfinished  Source: Cámara Chilena de la Construcción. Figure 7 Mortgage debt to collateral ratio (*) (percentage) 90  90  85  85  80  80  75  75  70  70  65  65 07  08  09  10  11  12  (*) Preliminary figures of new operations approved in respective quarter. Source: Superintendence of Banks & Financial Institutions (SBIF).
This is a dangerous situation, as continued price increases then become a condition for continued mortgage increases and to uphold consumption. But this is evident in a low saving ratio. The saving ratio at the end of the 1980s was strongly negative. This indicates that households were living above their means, which is an unsustainable situation. This was also the case in the United States before the recent crisis, when the saving ratio was very low and consumption was funded by higher mortgages. The situation in Sweden now is quite different. House prices may rise or fall because of changes in the real economy. The consequences for monetary policy of a fall in house prices need not be so problematic. If this led to a fall in consumption, it would be a demand shock, which would cause lower inflation and resource utilisation. However, this could to a large degree be counteracted by more expansionary monetary policy, particularly if a relatively high percentage of borrowers with variable-rate mortgages meant that monetary policy had a greater impact. 3 Levels are more important than growth The main message in the most recent Monetary Policy Reports and Updates has been that the Swedish economy is strong. GDP growth is good and unemployment has begun to fall. This has justified raising the repo rate. But at the same time, the levels of GDP, investment and exports are still low, compared with the pre-crisis levels. At the same time, the level of unemployment is much higher.

One reason for the popularity of securitised subprime mortgages was the development of collateralized debt obligations, CDOs, based on portfolios of these mortgages. The rating agencies have been actively involved in developing these products. Mortgages were often packaged in such a way that the securities in the most secure or senior tranches were given an AAA rating. This gave the subprime market access to funding from insurance companies and other investment managers that otherwise would not have invested in this market. High lending growth would probably not have developed without this type of financing. The securities in the least secured tranche (equity tranche) were in demand from investors seeking high returns, such as hedge funds. It has been difficult to price CDOs. As a rule, the issuer has calculated a fair value using complicated mathematical models. Because of the pricing difficulties, there has been little trading in these securities since their issue. This has resulted in problems for funds interested in selling, or who were forced to sell. In winter 2007, the rise in defaults on subprime mortgages resulted in a sharp increase in credit spreads for bonds backed by this type of mortgages. The credit spread for bonds backed by subprime mortgages rose further in June in the wake of problems in two funds specialising in investment in this kind of bonds.
In particular, it has led to a “search for yield” by investors who have been seeking more profitable and riskier investments. This is evidenced at least by three facts: increasing leverage, the high share of debt at risk and the relatively high valuations of certain assets. Now the current phase of ultra-loose monetary policy is coming to an end. In the US, after seven years of interest rates around the zero lower bound, monetary policy is being normalised. Other advanced economies, such as the UK or Canada, have also started to raise interest rates. Regarding the euro area, the ECB Governing Council anticipates that, subject to incoming data confirming the medium-term inflation outlook, net asset purchases will come to an end in December 2018. In this context, two main developments in international financial markets warrant attention as, in my view, they might currently pose key threats to financial stability and global growth. First, the economic and financial situation of some emerging markets is under pressure as a result, among other factors, of the combination of monetary policy normalisation and strong fiscal stimulus in the United States. Last summer financial conditions in most emerging market economies were tightened, giving rise to considerable outflows and steep exchange rate depreciations, particularly in Argentina and Turkey. This sharp market reaction should be a reminder of the risks that the normalisation of monetary policy at the global level could entail, in particular for those countries that have accumulated macroeconomic imbalances.

Suppose that price and cost inflation in Norway were allowed to be higher than in the euro countries. The nominal exchange rate would then have to depreciate in order to keep the real exchange rate constant over time. Thus, stabilising inflation at around the level aimed at by the ECB is a means of achieving exchange rate stability against the euro. In a situation with the prospect of increased inflationary pressure and a depreciating exchange rate, an increase in the interest rate may at the same time bring the exchange rate back towards its initial range and reduce inflationary pressure through lower demand and lower imported goods inflation. This in turn will contribute to long-run stability in the exchange rate. Similarly, with an appreciating exchange rate and a low inflation and activity level in the economy, a lower interest rate will contribute to stabilising the exchange rate in both the short run and the long run through a stable inflation level. On the other hand, we can think of situations where we would need to set a high interest rate in order to keep the exchange rate close to the initial range in the short run, creating a deflationary recession in the economy. Normally, a deflationary recession will lead to a weakened krone exchange rate, which means that the high interest rate set to keep the level of the exchange rate unchanged in the short run in itself will induce exchange rate instability in the long run.
As regulator, our mandate is to ensure the financial stability of the economy. In this regard, our competencies as micro- and macroprudential supervisor require us to be able to assess and quantify the risks entailed by the transition to a more sustainable economy, both for each individual bank and for the financial sector as a whole. Indeed, the transformative measures to change our productive model will affect bank borrowers. In some cases, they will give rise to opportunities, but there is no way of hiding that these transformations will adversely impact the business model of certain sectors. Therefore, it should come as no surprise that as supervisors we require that banks measure the risks derived from the transition process and incorporate them into their management. It is well known that the ecological transition process entails two types of risk: (i) physical risks, caused by the direct effects of climate change, storms, floods and natural disasters, and (ii) transition risks, which refer to the potential effect on specific borrowers of technological changes, changes in customer behaviour and preferences and the regulatory measures taken precisely to prevent physical risks from materialising. The measurement of these risks poses significant challenges. For example, the long time horizon over which the effects of physical risk are observed far exceeds that used to measure conventional banking risks.

However, I think it is also fair to recognise the recent climate commitment, signed  on the occasion of the COP25, and the launch of the Centre for Responsible and Sustainable Finance (FinResp by its Spanish abbreviation), which convey the sector’s commitment to this fight. The Paris Agreement of 2015 is considered to be the turning point that highlighted the role that finance can play in the transition process. Over the last five years, so-called ‘green finance’ has become more visible and climbed up the agenda of international financial organisations. On the central banking and banking supervision front, the work by the Network for Greening the Financial Sector (NGFS) is undoubtedly noteworthy. This network was created in late 2017 with the aim of analysing, defining and promoting best practices relating to the management of climate risk in the financial sector. The Banco de España actively participates in the work of the NGFS, whose membership has grown exponentially to now comprise around 72 members and 13 observers. I say ‘around’ because there are so many applications to join that it is easy to lose count. In short, I believe that there is a high degree of consensus among official authorities, society, firms, the banking sector and supervisors and regulators as regards the need for changes to address this unavoidable challenge. The work of the financial sector in this collective challenge is undoubtedly important. Allow me to briefly refer to what we are doing in the Banco de España to foster the financial world's contribution to sustainability.
The new rules provide pension funds in particular with incentives to lengthen asset maturities, improving the balance between asset and debt maturities. Increased demand for long-term bonds push up bond prices and push down yields. Normally, an investor will, on an expectations basis, be compensated in the form of a positive term premium for holding long-term bonds instead of rolling over short-term bonds. Various conditions  3  Though the literature is vast, see for example Ahrend, R., P. Catte and R. Price (2006) ‘Factors behind low long-term interest rates’, Working Papers 490, OECD, www.oecd.org, IMF (2005) ‘Global Imbalances: A Saving and Investment Perspective’, World Economic Outlook September 2005, www.imf.org, IMF (2006) ‘Awash with cash: Why are corporate savings so high?’, World Economic Outlook April 2006, www.imf.org, and Rajan, R. G. (2006) ‘Is there a global shortage of fixed assets?’, Remarks 1. December, www.imf.org  BIS Review 10/2007  7  relating to saving and investment patterns in the world economy and new accounting and solvency rules may have led to a marked fall in term premia in recent years. In some markets, they can even be negative. The level of long-term interest rates is frequently used as an indicator of the normal interest rate level. If low long-term interest rates are caused by extraordinary conditions and not expectations of low growth and low inflation, long-term market interest rates may underestimate the normal interest rate level. When preparing an interest rate forecast, we must have a view of what the normal interest rate level is.

The aim of preventing inflation expectations from becoming entrenched markedly below target was one of the main reasons for reducing the key policy rate to a very low level when inflation fell and approached zero in 2003 and 2004, at a time when there was also spare capacity in the Norwegian economy. We indicated that the interest rate would remain low until we saw clear signs of rising inflation. Since summer 2003, the Norwegian economy has been in a clear upswing. Low interest rates, high oil prices and a favourable global environment have been important driving forces. Growth is strong in most industries, and profitability in the business sector is solid. Underlying inflation is still considerably lower than the inflation target. However, several factors point to higher inflation further ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy. Employment is  BIS Review 10/2007  1  rising rapidly and unemployment has fallen markedly. There are signs of higher wage growth and expectations of rising inflation. We are now normalising the interest rate gradually. Since summer 2005, the key rate has been increased by 2.0 percentage points and there are prospects of further interest rate hikes. The shortest money market rates are determined by the central bank via the key policy rate. But private-sector consumption and investment decisions depend more on expectations regarding future developments in the key rate. To be successful, monetary policy must be able to influence these expectations.