samchain/econo-pairs-v1 huggingface dataset:
There are also relatively large variations between households with regard to the distribution of capital income from capital gains, yield and interest on different types of asset and liability. The effect of an expansionary monetary policy on income and wealth distribution can thus vary for this reason, too. Households’ capital incomes may, for instance, differ in their sensitivity to changes in interest rates. All else being equal, low interest rates benefit household with relatively large debts as interest payments become lower. Households with bank savings are correspondingly disadvantaged and households with relatively large interest-bearing assets thus have a lower yield. Here the maturity of the different assets and liabilities also plays a role. If, for instance, mortgages are mainly at fixed interest rates, the effect of interest-rate cuts will be less than if the loans are primarily at variable rates. A comparison between different income groups shows that liabilities as a percentage of disposable income are more than 250 per cent in all groups in Sweden (see Figure 2). With the exception of the group with the lowest income, however, there is generally little difference in the debt-to-income ratio between the groups. 5 A related question is how income from these two sources develop in relation to one another over time. See, for  instance, Karabarbounis and Neiman (2014) who find that the share of labour income has fallen in many countries and many sectors. 7 [14]  Figure 2.

Globally, efforts towards building climate resilience have intensified, with global supply chains joining the movement. The race towards Net Zero by 2050 has also seen multi-national corporations (MNCs) restructure their supply chains to be more sustainable, putting non-compliance suppliers at risk of being sidelined. As a trading nation, Malaysia stands to lose USD65.3 billion4 worth of annual export revenue if we do not embrace the transition towards a low carbon and climate resilient economy by 2025. Trade partners have started to impose expectations on sustainability as preconditions to transact. For example, Malaysia’s major trade partners (e.g. China, EU, South Korea and Japan) commitments to Net Zero by mid-century and the recently EU’s proposed Carbon Border Adjustment Mechanism will increase the cost of business to export into these markets. It is clear that sustainability is no longer a nice to have but an imperative business consideration critical for long-term survival. It is encouraging to see that the financial sector is stepping up on this front including via the offering of sustainable finance solutions and assistance to companies in their transition journey. Islamic financial institutions have and continue to lead through Value-based intermediation (VBI) practices. VBI stems from the underpinning values of Maqasid Shariah that propagates attainment of benefits and prevention of harm that is consistent with the principles of sustainability.
Firms need this in order to raise equity and find European venture capital; keeping a European capacity in investment banking is a strategic imperative. Financial players need this in order to conduct cross-border mergers: European banking consolidation is overdue, and it is indispensable, not to reduce competition – quite the opposite – but to reach the critical mass necessary to make digital investments and allow savings to circulate. And, lastly, the euro area needs it in order to finally have an effective economic stabilisation tool to weather the shocks affecting some countries: “private risk sharing” is effective between states in the United States. If one doesn’t want a fiscal union – duly noted –, one must make even more resolute progress on the Capital Markets Union. We have talked enough about this, and it is now time to take concrete  Page 2 sur 5 measures: this must be the ambition of the new Commission. The ECB will support it, and France will be a committed player. My second prerequisite is the successful implementation of Basel III. It is vital that we do not forget the lessons from the financial crisis, nor break the promise we made in 2017. But this transposition must be fair – naturally involving the United States – and reasonable. The first estimates of capital requirements are premature and do not give the horizon: Basel III will be finalised only in 2027.

This is to say that crises can happen in any economy, whether it is large or small, developed or emerging, with or without a sophisticated financial system, and regardless of whether the country has a fixed or flexible exchange rate system. And once a crisis happens, the impact will be large because of the globalized nature of markets that drives the spillover and contagion. For emerging markets, this means that the risk of future crises is wide-ranging and can be both internally and externally induced. The externally-induced crisis can either be because of imprudent policy choices elsewhere or because of failures of systemically important markets or institutions. And we have seen in the current crisis, the impact from an externally-induced crisis through contagion can be as, or even more severe, as an internally-induced or a home-grown crisis. BIS Review 36/2010  1  Therefore, to lessen the risk of future crises, prudent and good policy choices must be made in all countries. If not, the chance of crises repeating will remain high in this globalized world because of the interdependence between economies in policies, and because of the interconnectedness of countries in trade and financial flows. The second lesson is that, while monetary policy must remain focused on maintaining low and stable inflation environment, which is crucial for sustainable growth, it is clear from the current crisis that low and stable inflation alone is not sufficient for ensuring financial stability.
Internal SNB studies have shown that short-term changes in demand from neighbouring countries have an especially strong effect on exports; in the case of demand from emerging economies,  1  D. Fauceglia, A. Lassmann, A. Shingal and M. Wermelinger, Backward Participation in Global Value Chains and Exchange Rate Driven Adjustment of Swiss Exports, study on behalf of the State Secretariat for Economic Affairs SECO, 2015. A study by the World Bank has revealed that exchange rate elasticity of industries has decreased worldwide. Closer global integration of the value chain was also cited as the main reason for this development (S. Ahmed, M. Appendino and M. Ruta, Depreciations without Exports? World Bank Policy Research Paper, 2015). 2  BIS central bankers’ speeches  however, long-term developments play a more significant role than they do in the advanced economies. This is why, in recent years, the export industry has increasingly orientated itself towards these emerging economies, where growth has also been considerably stronger. The greater importance of these regions was particularly beneficial during the financial crisis because demand from emerging economies fell much less, and recovered more quickly, than demand from the traditional export markets of Europe and the US. What support can the Swiss economy currently expect from global demand? In the monetary policy assessment two weeks ago, the SNB stated that the US and the UK saw robust economic development in the first half of the year. The muted recovery in Europe continued as well, due partly to the favourable exchange rate situation.

29 Every major period of deficits prior to 1950 has coincided with a time of war. After the Second World War, deficits essentially returned to normal. As you can see, after 1970 there was a significant change – all 6 countries represented in the graph started running sustained budget deficits, and this in times of relative peace. 30 Now take a look at graph 2. It shows public debt for the OECD, as a percentage of GDP, since 1970. Since the mid-1970s, the accumulation of fiscal deficits has led to a near doubling of public debt, as a percentage of GDP, in the OECD area. 31 While public debt can be desirable for many reasons, it is very difficult to argue that the appropriate debt-to-GDP ratios should be this high. Admittedly, the average OECD debt-to-GDP ratio has fallen somewhat since the late 1990s. The Maastricht convergence criteria for EMU countries and robust growth have clearly contributed to this trend. However, fiscal positions in the United States and in Europe have deteriorated again more recently. 32 For a long time, Switzerland stood out as an exception in the pattern of deteriorating OECD debt-to-GDP ratios. But with the economic slowdown of the early 1990s, Switzerland’s public debt increased rapidly, and exceeded 50% of GDP in 2003. Fortunately, it has since been brought back down. It stood at roughly 44% last year. How would Albert Gallatin view such unprecedented increases in public debt-to-GDP ratios? Presumably, he would be dismayed.
Looking ahead, we should also consider whether the allocation to real assets should be increased at the expense of bonds. Historically, equities have yielded higher returns than bonds. We also expect that to be the case ahead. But it is doubtful that equity prices will continue to rise at the same pace as in recent years. Weak or moderate growth in the real economy will feed through to the return on equities. So far, the GPFG has earned an annual real return of 3.8 percent. We must be prepared for the possibility that it will be lower, perhaps below 3 percent. Since the turn of the millennium, the government has received substantial revenues from the petroleum sector (see Chart 13). A large share has been saved and transferred to the GPFG. At the same time, the spending of petroleum revenues over the fiscal budget has increased. The revenue stream from the continental shelf is now declining. We are approaching the point where government spending of petroleum revenues will exceed the revenues deriving from the petroleum sector. Over the past ten years, substantial amounts, about NOK 250 billion a year on average, have been transferred to the GPFG. At today’s oil price, transfers to the GPFG will quickly fall towards zero, soon leading to a situation where its current income is limited to interest and dividend income (see Chart 14). Next year, it may be necessary to spend some of the return to cover the non-oil budget deficit.

The GPFG is nearing the peak The decline in oil revenues ahead gives rise to new challenges for the Norwegian economy. But we must not forget that we have a good starting point. During a period of high oil prices, we have transformed oil in the ground into financial wealth. We have avoided making public sector budgets dependent on volatile income. The GPFG and the fiscal rule have been the main elements of the policy pursued. Let me recall the background for the fiscal rule. The fiscal rule emerged from the economic discussion around the turn of the millennium. During the time before the rule was established in 2001, inflows into the GPFG increased sharply thanks to high oil prices and there were expectations of considerable future  BIS central bankers’ speeches  7  revenues. It was demanding to restrain spending, while it was clear that future pension obligations would be substantial. The fiscal rule provided us with a long-term strategy for spending petroleum revenues. Even though most of the income was to be saved, the rule provided for increased spending of petroleum wealth. The phasing-in of petroleum revenues was to be adapted to the economic cycle and be in line with the expected real return over time. The capital was to be preserved so that it would also benefit future generations. Fiscal policy was not set on autopilot. The rule was simple, but flexible. This has been one of its strong points.
Since 2009, the measures in this area have adhered to a set of common principles, although changes in economic conditions and in the markets have meant governments have had to adjust them. These principles include most notably to limit as far as possible use of public funds and to minimise the length of time the State has a stake in the banks; to promote integration and restructuring processes to counter the excessive fragmentation and size of the sector; to pursue the clean-up of bank balance sheets to withstand asset quality impairment; to reinforce bank solvency; to resolve the structural weaknesses of the savings bank model, and to promote transparency. Among the measures adopted in 2011 to which the Annual Report refers is Royal Decree-Law (RDL) 2/2011 on the strengthening of the financial system. This legislation raised core capital requirements to 8% generally, and to 10% for unlisted banks with a high dependence on wholesale funding, which were those on which doubts were greatest. To ensure that all banks could meet these requirements, it was decided that the Fund for the Orderly Restructuring of the Banking Sector (FROB) should act as a backstop. Further, the RDL stipulated the obligation for those institutions requiring public aid to operate as banks, with the aim of reinforcing their fund-raising capacity, and transparency towards investors. These measures, along with pension reform, contributed most positively to the easing of market tensions witnessed in the first half of 2011, with the risk premium falling at one point below 200 bp.

But another important aspect to ensure the independence of these institutions is to prevent governments or interest groups affecting such independence. In the specific case of the Banco de España, the respect of the authorities for its independence and reputation is crucial for maintaining confidence in our banking system at home and abroad, and for overcoming the major challenges we currently face. Naturally, this respect for the independence of regulatory and supervisory agencies should unavoidably be accompanied by an obligation on their part to account for the performance of their functions before Parliament. Such accountability to the representatives of the nation should not only be an obligation for these agencies but also their right, since the transparency provided by Parliament is a mainstay for safeguarding the independence of the institution from possible interference by authorities and interest groups. Allow me to thank those here, the Deputy Governor, the Governing Council members and the Directors General, and all the Bank’s staff for their collaboration these past six years. I deeply recognise the competence and dedication with which they discharge their important responsibilities. But I should like to conclude expressing my particular appreciation of those who have participated in the supervisory function of the Banco de España these past years.
And absent significant intervention from authorities here and in other countries, would have risked tightening financing conditions significantly and made the impact of the pandemic much worse. Tackling the causes of that is today a major area of work both internationally and domestically. For banks, we tested rigorously to ensure safety and soundness, and particularly that banks could support the economy through these very hard times. Indeed, we tested to make sure this support could continue through even harder times, and the answer was positive. This matters greatly because having a resilient system has meant that business lending could be sustained, and mortgage servicing pauses to support households seriously affected by Covid and its economic effects were extensively available and used, all to assist with dealing with the consequences of Covid. It has been the first major test of the post-financial crisis reforms to regulatory standards. In my assessment this outcome mainly passes the test of resilience, accepting both that we have work to do on the lessons from the dash for cash, and that we can never stand still because the positive benefits of innovation also create their own challenges. But, what is meant by the idea of resilience? A resilient financial system has the resources and flexibility to respond to a range of shocks of different sorts. In doing so, it will support stronger growth over the long-run, helping the economy to bounce back and reducing long-term economic scarring caused by the shock.

I am grateful to Sarah Breeden, Jon Cunliffe, Lee Foulger, Karen Jude and Ali Moussavi for their assistance in helping me prepare these remarks. 1 For more on resilience and its importance in recent times, see Markus K. Brunnermeier, “The Resilient Society”,  Endeavour Literary Press, 2021  3/3  BIS central bankers' speeches
It also underscores the power of incentives to drive individuals and firms to do things that are imprudent and/or unethical.4 And, the governance and control framework that the banks and the LIBOR administrator had in place proved woefully insufficient to prevent misconduct that stemmed from poor incentives. In this context, one could say it was a situation ripe for exploitation. The openness and brazenness of misconduct as captured in the recorded transcripts also point to serious deficiencies in bank culture. My New York Fed colleagues and I have commented frequently on the need for sound culture and incentives as a complement to effective regulation and supervision. While there has been some progress on this issue in recent years, the LIBOR and other rate-rigging scandals—not to mention more recent breakdowns at individual banks— point to the need for further strengthening of bank culture.5 I look forward to the discussion with Minouche and Andrew on improving culture in the fixed income, currency, and commodity markets in the following panel. One of the key lessons from the financial crisis was that critical pieces of financial system infrastructure must be both strong and resilient, and the LIBOR scandal underscored this need.6 The essential problem with LIBOR is the inherent fragility of its “inverted pyramid,” where the pricing of hundreds of trillions of dollars of financial instruments rests on the expert judgment of relatively few individuals, informed by a very small base of unsecured interbank transactions.

Support for using macroprudential tools in the United States has also been bolstered by our experience during the financial crisis. The U.S. housing boom and subsequent bust might have been less severe had a set of macroprudential measures been in place at the time to limit the degree of leverage and speculative activity in the housing sector. The housing boom was fueled by optimistic expectations for house price appreciation, combined with lax underwriting standards embodied in such practices as no-doc mortgages and widespread speculative activity by investors. I remember, for example, the website, Condoflip.com, which says it all in terms of the degree of speculative fervor that was evident at the time. If underwriting practices had been held to high standards (e.g., strict mortgage service-toincome ratio limits had been honored) and speculative activity had been constrained (e.g., by lower loan-to-value ceilings for investors with multiple mortgage liens outstanding), this might have limited the size of the boom and subsequent bust. My own view is that while the use of macroprudential tools holds promise, we are a long way from being able to successfully use such tools in the United States. There are two major sets of difficulties. First, unlike monetary policy and microprudential regulation, there is not a welldefined framework for identifying emerging imbalances and applying macroprudential tools in response. A recent tabletop exercise conducted by a number of Federal Reserve Bank presidents, which I will discuss a bit later, indicates some of the difficulties here.
Emergence of faster-pay infrastructures and mobile financial services within our region like the FAST payment and Wing in Cambodia, Wave Money in Myanmar, or PromptPay here in Thailand have helped reduce the cost of financial services for financial institutions and the public at large. For Thailand, the PromptPay infrastructure has helped cut down cost of retail fund transfer so much so that most financial institutions now offer online transfers free-of-charge. These infrastructures are critical foundations for which new add-on services can be built upon to support growing e-commerce activities in our region. b. In addition, we have seen firms experimenting with using alternative online data and machine learning for credit scoring model. A credit 2/5  scoring model created from data of payment receipts should help financial institutions better assess credit risks while ensure that borrowers, especially small enterprises, gain funding at a fair price. c. Another initiative undergoing testing here in Thailand is the use of blockchain for cross-border financial transactions. This technology should make cross-border payments more secure, more efficient, and more affordable to businesses and a larger population in the near future. Ladies and gentlemen, All of these are just some examples of the developments happening in our financial landscape. What is more important is that we must recognize that financial technology is a powerful tool for us to improve on productivity, immunity, and inclusivity. Efficiency in financial services is enhanced, as new payment ecosystem can enable more efficient transfer of funds and significantly lower transactions costs for consumers.

This conference is focused on one important element of this: the role of financial markets in the setting and transmission of monetary policy. That is covered in the Bank’s publications on how the economy works, including the Committee’s 1999 paper on the Monetary Transmission Mechanism (MTM), and books describing the models used in forecasting. 1 But those high-level descriptions miss out an awful lot about how the real and financial parts of the economy connect. Financial variables are limited to the short-term interest rate, the exchange rate, and equities. Nothing on the role of long-maturity interest rates, or on credit spreads and risk premia – which misses out a whole universe of financial asset prices. Very little on credit more generally. Next to nothing on money. And nothing at all on the role of bank intermediation. These gaps were perhaps underlined by a degree of confusion amongst commentators about the way in which Money and Credit featured somewhat more prominently in the Committee’s discussions during the backend of 2006 and into this year (Chart 1). With both having been strong for a while, some asked whether this marked some kind of change in the reaction function, implying a greater stress on nominal variables. Given the near identity of deposits and bank lending, Money and Credit are often used almost inseparably, even interchangeably, with wider measures of non-bank credit looked at only when assessing the health of corporate and household sector balance sheets.