samchain/econo-pairs-v1 huggingface dataset:
The first is that we are striving to attain high GDP, high employment and low unemployment, and resource utilisation is related to these targets. But we should only do this when it is compatible with the inflation target. The inflation target takes precedence. This differs from the United States, where the central bank has the double target of achieving price stability and maximum employment. In addition, the preparatory works for the Sveriges Riksbank Act only refer to “high” employment (as compared with the United States’ ”maximum” employment) and not to any particular level of unemployment.3 The other reason to care about resource utilisation is that it serves as an indicator of future inflation. The positive relationship between resource utilisation and inflation is illustrated in Figure 3, which shows the correlation between three different measures of resource utilisation and CPIF inflation 1–12 quarters ahead.4 The connection is fairly strong 3–8 quarters ahead. The connection is stronger and faster for the hours gap than for the GDP gap and the RU indicator. This may be because the development of the labour market usually follows behind output and because it is very important for the development of prices and wages. Of course, it is difficult to draw any conclusions from the covariation of two variables, but the same type of relationship also exists in more developed empiricallyestimated models.

Considering this, we wrote, in Monetary Policy in Sweden, that the Riksbank, in addition to achieving low and stable inflation, should also strive to stabilise output and employment around long-term sustainable paths.5 This means that we also strive to hold resource utilisation at a normal level. We usually say that the Riksbank is thereby conducting a flexible inflation-targeting policy. We have also chosen to take a broad approach when it comes to interpreting resource utilisation, instead for only looking at a single measure of resource utilisation. 2  Sveriges Riksbank, Monetary Policy in Sweden, June 2010. 3  My colleague Lars Svensson has a different interpretation of our task, namely that, during the forecast period, we should strive to hold inflation measured in terms of the CPIF (the CPI with a fixed interest rate) as close to two per cent as possible and resource utilisation measured in terms of unemployment as close to an estimate of the long-term sustainable level of unemployment as possible. See, for example Lars E.O. Svensson, “For a better monetary policy: Focus on inflation and unemployment”, 8 March 2011. 4  The figure is based on the ten-year period 1997–2006. This period is not extended further than 2006 so as not to be affected too much by the period after the outbreak of the financial crisis in the autumn of 2008. However, the differences do not become so great even if the years 2007 and 2008 are included. 5  Sveriges Riksbank, Monetary Policy in Sweden, June 2010.
The poverty rate in Asia has markedly declined from 80% in 1981 to 16% of the total population in 2005. Beyond dramatically improving basic social conditions, significant strides have also been made in the provision and access to quality healthcare and education. Whilst Asia's urban population has increased by more than six fold, average life expectancy has risen by 25 years to 72 years and average literacy rate to above 90%. What makes these considerable improvements remarkable is that they were all achieved in a relatively short span of less than two generations. This paper consists of two parts. The first explores the development strategies that have contributed to Asia's successful economic transformation in the post-World War II period, with particular emphasis on the recent decade after the Asian financial crisis. The paper then discusses broadly how Asia's development strategies needs to be adapted going forward, especially in light of the current global crisis which has brought significant changes to the global economic and financial environment. Asia’s development strategy over the last 50 years Asia in the post-World War II period What is exceptional about the performance of Asia is the relatively high growth rates achieved by the best performing Asian economies when compared to the champions of earlier eras (Figure 1). The rapid transformation of Asia was led by three global growth leaders over the past 50 years, beginning with Japan in the 1950-70s, South Korea from the 1970s and currently, China.

Considerable efforts have also been placed in regional financial market development, especially for a deeper and more liquid secondary bond market. On the supply side, the Asian Bond Market Initiatives (ABMI) seeks to develop deeper and more liquid capital markets that facilitate the channelling of the large pool of savings in the region to fund productive investments, thereby enabling further regional economic development. Recently, the establishment of a Credit Guarantee and Investment Mechanism by ASEAN+3 to support the issuance of local currency-denominated corporate bonds, with an initial capital of USD500 million, was announced. Meanwhile, the Asian Bond Fund (ABF) Initiative focuses on addressing demand-side issues by broadening and deepening domestic and regional  BIS Review 130/2009  7  bond markets through pooling reserves for investments into regional bond markets. Two funds, totalling USD3 billion, have been established to catalyse market development. Regional financial integration has accelerated in this decade. A more diversified financial system, together with strengthened financial infrastructure and capital account liberalisation, have seen the share of intra-regional portfolio investment, in both debt and equity, as a share of total portfolio investment has increased to 24% in 2007 from 15% in 2001. Mergers and acquisitions (M&A) have also been growing, with intra-regional M&A as a share of total M&A in the region rising to 47% in 2006 from 32% in 2004. Most of the investments were into the services sector, such as financial services and real estate.
However, the Swedish Financial Supervisory Authority, Finansinspektionen, which has had the responsibility for macroprudential policy since 2014, has taken measures and as a result of this, and possible for other reasons, prices have slowed (see Figure 5). Although lending to households has continued to increase, this has dampened criticism against the effects of the expansionary policy on debt and housing prices. A gradual slowdown in the rate of increase in debt accumulation has probably also played a role. Recently, the discussion has instead focused on the development of the Swedish krona. The expansionary monetary policy has, via the normal exchange rate channel, contributed to a depreciation of the krona. But in countries with inflation targets, like Sweden, it is the inflation target that should anchor long-term expectations while the exchange rate will vary. In recent years, the krona has developed in a similar way as the currencies of other small open economies, although it has been relative weak very recently (see Figure 6). Neither is there reason to believe that Swedish inflation relative to abroad will cause a trend depreciation of the krona exchange rate, as virtually all countries in the world have an inflation target of more or less exactly 2 per cent, just like in Sweden. This is of course in itself no guarantee that we will not see trends in the krona exchange rate.

Re-establishing it may require a prolonged and costly process, which should also be taken into account. It is such fears that largely explain the policy conducted by the Riksbank in recent years. Does a policy that “leans against the wind” require there to be confidence in the inflation target? It is probably possible to construct theoretical and quantified examples in which the recession that is prevented or mitigated by “leaning against the wind” is sufficiently long and deep for it to be worth taking the cost of losing, and having to re-establish, confidence in the inflation target. But in practice, it is very difficult to imagine how a central bank, seeing that confidence in the inflation target is being eroded, could stick to a tighter policy and risk inflation expectations staying permanently low in order to perhaps prevent a financial crisis sometime in the future. I am not saying that this is a reason to never conduct a policy that “leans against the wind”. On the contrary, I am personally in favour of the idea as such, and can well imagine formally integrating such a policy into the monetary policy set-up, in the way it has been done in Norway. But one can argue a policy that “leans against the wind” is in practice a “fair-weather” policy – windy but sunny, in other words. Only as long as confidence in the inflation target is intact, there is scope to use monetary policy to counteract financial imbalances.
Furthermore the pattern of economic growth has changed. Today, the main sources of growth are the improvement in productivity and increasing export performance. In addition to this, the role of the private sector in economic growth has increased considerably in the last few years. Recent Turkish experience showed that tight and prudent fiscal policy is not necessarily contractionary, especially if and when an economy is facing fiscal dominance. The economy is expected to keep its growing trend in 2006 and onward and the aim obviously is to achieve sustainable growth rates at high levels. 2  BIS Review 19/2006  Secondly, substantial progress in financial stability has been achieved with the help of the restructuring of the banking sector. Financial markets are now deeper and much less fragile. Parallel to these achievements, both nominal and real interest rates have declined significantly. The average maturity of the Treasury issues increased considerably and Turkish Eurobond spreads, used as a proxy for the country risk premium, have dropped significantly since 2001. Volatility in exchange rates has gradually decreased thanks to the transparent and consistent operation of the floating exchange rate regime. All these together triggered the reverse-dollarization process: Though the process has been interrupted from time to time and more progress is necessary, the weight of Turkish lira denominated investments in portfolio preferences is now on an upward path. And finally, integration of the Turkish economy with the world has increased, leading to a more competitive environment in the real sector.

There is at present a long list of reform agenda items being debated internationally: these include strengthening financial institutions by requiring them to hold more capital and liquidity; changing compensation practices to discourage excessive risk taking by bankers and reforming regulatory structures to ensure more effective supervision, especially of large and complex firms that have systemic implications. 5. It is therefore very timely today that we have five very distinguished speakers joining this Panel to share with us their insights into this complex and important question of how we should go about reforming the international financial architecture and regulatory regimes in different jurisdictions. They are, by order of their appearance in the programme: (i)  Mr Rintaro Tamaki, Vice Minister of Finance for International Affairs of Japan;  (ii)  Dr Jong-Goo Yi, Standing Commissioner of the Financial Services Commission of Korea;  (iii)  The Honourable Chris Bowen, Minister for Financial Services of Australia;  BIS Review 7/2010  1  (iv)  The Honourable Mr Ahmad Husni Hanadzlah, Minister of Finance Two of Malaysia; and  (v)  Professor KC Chan, Secretary for Financial Services and the Treasury, HKSAR. I understand from the organiser that we will invite Professor Chan to speak first as he may need to leave earlier for the Legislative Council meeting. The order of other speakers will follow the programme. Professor Chan, please. 2  BIS Review 7/2010
Stability in the elemental sense I have described was profoundly threatened last autumn – when the universal crisis of confidence triggered by Lehmans’ failure tore the fabric of international commerce. That stability has been sustained owes everything to governments stepping in, effectively being prepared to borrow from the future in order to prop up the banking system now. In that sense, we are, of course, “beyond Financial Stability”, insofar as, ordinarily, we would regard instability as a state of affairs that requires such support. The Turner Report rehearses the analysis of how we got to that point. It rightly places weight on the baleful effects of persistent and cumulative global current and capital account imbalances. I dearly wish that the international authorities had taken on board the lessons from the 1990s EME crises about the vital importance of monitoring, and where necessary managing, national balance sheets – for large countries as well as EMEs. It is striking, however, that other analysts, including recently from the IMF, are starting to play down the part played by the international monetary system. I do not go along with that. There can  BIS Review 39/2009  1  surely be no disputing that macroeconomic imbalances have mattered greatly to the crisis, as they contributed to the build up of debt and, through the compression of risk-free rates and risk premia, the appreciation of asset prices. But in acknowledging that, we do not have to claim that of themselves such imbalances lead inevitably to financial instability.

Investing even more government capital in Norway would reduce the return on investments in the Norwegian business sector and prompt other investors to invest elsewhere. Using even more capital in the Norwegian economy would probably also lead to a rapid relocation of jobs to other countries, as the krone would tend to appreciate. BIS Review 18/2002  3
As head of the Hong Kong Monetary Authority I have repeatedly been asking our community to stick it out. We have seen downward adjustments in asset markets of about 50% in less than twelve months. While not taking a view as to whether BIS Review 85/1998  -5-  such adjustments are adequate in the circumstances, we can do without the excessive and destabilizing interest rate volatility brought about by market manipulation. We can do without what is now clearly proven to be the excessive interest rate premium brought about by the continuous presence of the market predators. We can do without the market overshooting that many of our neighbouring economies have been made to suffer. We can do without confidence being undermined by the greed of those that are intent only on making profits at the expense of our people. We have the wherewithal to tackle the situation and we did so decisively. The third accusation is that we have dangerously departed from the currency board discipline and ventured into discretionary monetary management. We have not. And without bothering you with too much technical detail, the measures introduced recently have the effect of strengthening the currency board arrangements of Hong Kong rather than eroding them. There has been much confusion about this matter, stemming from the somewhat academic debate as to whether a currency board should also be responsible for the provision of liquidity to the banking system that involves an increase in the monetary base.

On the securities side, we are in the process of introducing a series of reform measures to lessen the potential for market dislocation. I am happy to say that our actions have been successful. There has been no indication of further market manipulation since the end of August. We have seen substantial unwinding of the short positions in our currency by the hedge funds, with considerable losses. And with the stock market having recovered substantially from the level at which we entered the market in the middle of August, more considerable losses were incurred also in their short positions in the stock index futures. Much of the interest rate premium of the Hong Kong dollar over the US dollar has disappeared, clearly reflecting with hindsight the extent of the excessive pain that had been so mercilessly inflicted on the community by the manipulative plays. I hope you are now more sympathetic towards the controversial actions that we have taken. But in case you still have doubts, let me specifically address four accusations that have been hurled at us. The first accusation is that we were trying to jack up the market against trends dictated by fundamentals. Alan Greenspan used those words. But this is simply not true. We do not mind where the level of the market is, if that is what the adjustment process demands. No official view on the “right” market level has been taken and there never will be such a view.
That is the limitation we face and will always face in the banking sector, and that’s why no perfect and once-and-for-all accepted way of achieving the “ideal state of affairs of banks” will probably ever be established. All the more so as the reality makes achieving any ideal less likely in the future than it is now. Look, for instance, at the issue of resolvability of banks. Yes, we in the EU have the BRRD  BIS central bankers’ speeches  1  (Bank Recovery and Resolution Directive) as our European answer to the question of resolvability. Let’s put aside the fact that its practical implementation and the enforcement of its key principles have not always been convincing so far. And we are not sure that these principles (namely bail-in) will be applied in a dynamically consistent way across countries and banks in the future. But still many believe we have made banks more resolvable (and also resilient) since 2008. And I think there are underlying real-time processes that are actually making banks less resolvable now compared to the past. Why? What worries me is that over time many end-users (and also policy-makers) tend to look at standard commercial banks as utilities with all their typical features. One of those features is that the population is becoming more and more incrementally dependent on the services such utilities provide, quite often without the very same population even noticing it. A typical example is electricity.

An additional element threatening the stability of the global financial system was that virtually all of the leveraged Treasury bond investors had similar positions, including major financial institutions. Banks’ direct exposures may be an important aspect of financial instability in periods of financial market volatility. In addition, banks may hold significant exposures with non-bank financial institutions, which themselves suffer from direct market exposures. The Barings crisis in 1995 is an example of the first case, while the LTCM case is an example of the second. In my view, the eventual scale of a systemic crisis might depend on the magnitude of the deviation of asset prices from fundamentals. How, then, do asset price bubbles get created in the first place? They may be created or exacerbated by some form of herding and overly buoyant investor expectations, as groups of investors imitate leading institutions’ strategies. Bubbles may be further boosted by a lack of adequate disclosure, problems of conflicts of interest, and destabilising trading or investment strategies. Once bubbles burst, portfolio insurance strategies in the event of falling prices - or dynamic hedging might heighten the downward spiral. Particularly in earlier episodes of equity-driven financial instability, such as the 1987 stock exchange crash, the initial wave of the sale of equity futures appears to have resulted in an accelerated decline in stock prices. However, the jury is still out on the role of tools such as portfolio insurance or automatic trading rules in exacerbating aggregate financial risk.
I didn’t expect to say “those were the days” about 2007. It was natural that the first response to the financial crisis in terms of reforms was focused on the bedrock prudential issues of capital and liquidity in banks. This has been supplemented by the drive both internationally and domestically to solve the too big to fail problem through a combination of resolution measures at the centre of which is agreement on total loss absorbing capacity for those banks which require such a bulwark to ensure orderly resolution in the event of failure. This is crucial to break the dependence of failing banks on injections of public money and likewise to break the impact of solvency problems in banks on the public finances. This is an international as well as domestic agenda of reforms aimed at fixing the fault lines that caused the financial crisis, building a more resilient and open global financial system, and deepening and building trust across jurisdictions. I have said before, but I think it justifies repeating, that we are unwavering supporters of an open global financial system which finances the investment and trade necessary to support strong, sustainable and balanced growth. As we see and seek to deal with new risks to the world economy and to global financial stability it is always important to remember that free trade and free capital flows are the foundation of a successful world economy with all the benefits that brings for the welfare of people.

Andrew Bailey: Progress on prudential regulation and three areas to complete Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the City Banquet, Mansion House, London, 22 October 2015. *  *  *  My Lord Mayor, Ladies and Gentlemen – it is a great pleasure to be here again at the regulators dinner, and it is very good of you to entice so many people here tonight with the prospect of an evening with regulators. I won’t speculate on how this ranks on the scale of evenings spent in our cosmopolitan capital city. It is also a great pleasure to be speaking here tonight with Tracey. This evening I want to describe the progress we have made on prudential regulation and then examine a number of topical issues for the PRA and the Financial Services industry: the Senior Managers and Certification Regime; structural reform and ring fencing; and what the PRA is doing to pursue its secondary objective on competition. A common theme here is getting the incentives right to support good outcomes in relation to both prudential and conduct objectives. Progress It is over eight years now since the financial crisis began in this country. And to continue Tracey’s theme for a moment, it is possibly salutary to recall that amidst the many bad events of Autumn 2007, England reached the Final of the Rugby World Cup.