samchain/econo-pairs-v1 huggingface dataset:
As a result, when the bubble deflates, it can take the financial system with it. In contrast, because most equities are held on an unleveraged basis by investors, such as pension and mutual funds, a sharp decline in equity prices will not typically threaten the entire financial system. A comparison of the consequences of the technology stock market crash in equities versus the mortgage debt market crash strongly supports this thesis. Although the wealth loss was roughly comparable, the bursting of the housing bubble had a much greater negative effect on the financial system and the macroeconomy. In this cost-benefit analysis, the central bank must understand that it will make mistakes. On one hand, it may fail to temper bubbles that turn out to be disruptive when they collapse. Or, on the other hand, it may try to temper price movement that it thinks are bubbles but are not bubbles at all. The costs of these types of errors much be weighed against the potential benefits of tempering an asset bubble and limiting the damage from its subsequent collapse. 9 So what are the tools with which the policymaker should respond? As I see it, there are three broad sets of tools available: 1) The bully pulpit; 2) macroprudential tools; and 3) monetary policy. Let me now discuss each of these in turn. The first tool available is to simply lean against the wind of conventional wisdom by speaking out about the dangers associated with the incipient bubble.

Despite the fact that it is hard to discern bubbles, especially in their early stages, I conclude that uncertainty is not grounds for inaction. Instead, the decision whether to act depends on whether appropriate tools can be deployed to limit the size of a bubble and whether the benefits of acting and deploying such tools are likely to exceed the costs. That cost-benefit calculus, in turn, depends crucially on the tools we can deploy to limit the growth of bubbles and the consequences when they burst. In this respect, I will argue that, in most cases, use of the bully pulpit and macroprudential tools, such as rules limiting loan-tovalue ratios or leverage, are likely to prove superior to monetary policy. Turning to the first issue of whether there are asset bubbles, I am going to be a bit of a heretic and argue that there is little doubt that asset bubbles exist and that they occur fairly frequently. By an asset bubble, I mean price increases (or declines) that become unmoored from fundamental valuations. I want to be clear that I am distinguishing this from price movements that are tied to changes in fundamentals. I know this runs afoul of the efficient markets hypothesis – which in this context would argue that if a bubble were obvious, then people would take the other side and the bubble would not occur in the first place. There are several reasons why this argument does not hold in practice.
Another measure of this type is the employment rate from the labour force surveys (AKU), which shows the proportion of the population of working age that is in employment. Figure 12 shows that the employment rate this year is close to the average for the years 2000–2008. 13  The assumed long-term GDP growth in Figure 7 after the end of the forecast period in 2013 is 2.3 per cent per year. 14  Reinhart, C. M. and Reinhart, V. R. (2010), “After the Fall”, National Bureau of Economic Research Working Paper 16334. 15  Svante Öberg, “Potential GDP, resource utilisation and monetary policy”, 7 October 2010. 6  BIS central bankers’ speeches  The Riksbank’s indicator of resource utilisation (the RU indicator) summarises about thirty such economic variables regarding levels.16 The RU indicator includes survey data from the National Institute of Economic Research’s Economic Tendency Survey for private services, the retail trade and the construction and manufacturing industries. In addition, capacity utilisation in the manufacturing sector from Statistics Sweden, the employment rate and unemployment from the labour market surveys, and unfilled vacancies from the Swedish Public Employment Service are also included. According to the RU indicator, resource utilisation is slightly higher than normal (see Figure 13). Figure 14 shows unemployment together with an average for the period 2000–2008 and an assessment of long-term unemployment.17 Seasonally-adjusted unemployment is presently higher than this long-term level. But assessments of long-term unemployment are fraught with great difficulties.

Supervisory review of capital Supervisory review and market discipline are two other elements that can create incentives for responsible behavior, and are of such importance to contemporary supervisory thinking that they have also been adopted as two of the three "pillars" of the Basel Committee’s proposal to revise the international standards on bank capital requirements. There’s been a good deal of public discussion about the first pillar, in which the Committee recommended changes to the guidelines that set minimum capital requirements for banks. Tonight I will concentrate on the importance of the other two in promoting financial stability. Adequate capital is, of course, the foundation of a safe banking system, as it provides banks with a "cushion" against unexpected losses. Supervisors aim to ensure that banks set aside sufficient capital relative to the underlying risks that each institution faces, including whether the banks are addressing the relationship between different kinds of risk. This will be no easy task, as banks under the new Capital Accord will increasingly rely on their own internal models to determine the kinds of risk they face and to what degree. The Basel Committee proposed that supervisors review the methodologies through which banks set their capital levels to ensure that banks have an incentive to develop effective processes for aligning their capital levels with their risks.
i The past growth path is calculated here using the December 2019 macroeconomic GDP projection, extrapolated from 2023 onwards using the potential GDP forecast at that time. ii F. Villeroy de Galhau, Europe’s growth gap reconciling Keynes and Schumpeter, Speech, March 2021. iii European Commission, Impact assessment, Stepping up Europe’s 2030 climate ambition, Commission staff working document, 2020. iv J. Pisani-Ferry, Climate policy is macroeconomic policy, and the implications will be significant, PIIE Policy Brief No.2120, August 2021. v T. Allen, J. Boissinot, L. Clerc, S. Dees, Developing climate transition scenarios to manage financial risks, Bulletin de la Banque de France No.237/9, by T. Allen, S. Dees, C. M. Caicedo Graciano, V. Chouard, L. Clerc, A. de Gaye, ... & L. Vernet, Climate-related scenarios for financial stability assessment: An application to France, 2020. Page 16 sur 15 vi  Spain and Italy have the lowest scores in the Programme for the International Assessment of Adult Competencies (PIAAC), 252 and 250, respectively, in adult literacy, just behind France (262), compared to 284 for the Netherlands, 278 for Norway and 279 for Sweden. In France, 22% of workers are low-skilled, in Spain and Italy around 27%, in Sweden and Norway around 13%. Shares of high-skilled workers: France 8%, Spain 5%, Italy 3%, Sweden 16%, Norway 14% Based on PEICA 2012 and OECD 2013, qualifications in terms of skills.

The most striking symptom of this is the recruitment difficulties reported by 52% of companiesix , with around 300,000 unfilled jobsx, even though France still counts 2.4 million unemployed, xi including 600,000 young people. This is an economically unacceptable paradox, but even more so socially. Page 9 sur 15  There is no greater priority than to get out of this French impasse, and in order to do so, to understand the problem by comparing our situation with that of Germany, which is at full employment (with an unemployment rate of 3.4%xii). While hourly productivity is similar, the average number of hours worked per capita is 10% higher in Germany. This difference is largely due to our low employment rate. While in the mid-2000s, our employment rate stood at 63%, which was roughly identical to the German rate (64%)xiii, it is now clearly lagging behind even though it has started rising (67% compared to 75%).xiv This gap is partly due to the more widespread use of part-time work and work-study schemes in Germany. Nevertheless, for a working-age population of just over 40 million people, this gap represents a shortfall of close to 3 million jobs, which mainly concerns young people (1.2 million missing jobs) and seniors (1.3 million). So let's first talk about young people, then seniors, and then about the measures for all working people. Page 10 sur 15 For the past decade, the share of young people who are not in employment, education or training (the so-called NEETs) has remained stable overall.
American companies have a strong collective interest in sustaining public support for global integration, improving the quality of public goods the government provides in education, health care and infrastructure, and in preserving confidence in U.S. fiscal sustainability. Thank you. 4  BIS Review 84/2007

All the prominent scholars who are presenting papers today will analyse some of the aspects of how and why market risk premiums vary. Financial regulations and financial frictions are  BIS central bankers’ speeches  1  important to our understanding of why risk premiums change over time. A thorough understanding of financial regulations and financial frictions might also be important in identifying unique investor characteristics. Axel Weber will shed light on the implications of financial sector regulation on the functioning of markets and the pricing of assets. Lasse Pedersen has provided valuable research on the micro structure of funding markets and how liquidity risks create systemic problems. In particular, he will cover frictions in financial markets. It is quite clear that the Government Pension Fund differs from the average investor in important respects. In addition, we need to understand how variation in risk premiums can be consistent with highly competitive financial markets. Why don’t all investors buy “value” or rebalance? Ken Froot will talk about rare events and disaster risks, how these events are priced in markets. He will also give insights on individual investor characteristics which give comparative advantages in holding these priced risk premiums. Ken French will speak about two ways for an investor to generate excess returns: informational advantages and systematically harvesting risk premiums which the investor has a comparative advantage in holding. Both Froot and French will mainly talk about average portfolio weights in highly competitive markets.
By 2030, 20 years from now, the centre of gravity of global trade patterns is projected to shift even further to within Asia, with China accounting for 17 out of the top 25 bilateral trade routes, overtaking trade links between developed countries like Japan-USA, Germany-USA that will grow but they will grow much more slowly. Within Asia, trade patterns will evolve. With increasing urbanisation and consumer demand, China’s trade with developed Asia, will change. It will start to import relatively more finished  BIS central bankers’ speeches  1  consumer goods from Japan, Korea and Singapore. These bilateral trade routes are not new, but they will rise in importance. China’s trade with developing Asia, particularly with Malaysia, Thailand and Indonesia, will propel these bilateral trade routes into the top 25 bilateral trade routes by 2030. Indonesia in particular, with low wage costs and proximity to China, is well placed to become the next manufacturing hub and sell low-end manufactured products back to the Chinese. The shift in centre of gravity of world trade to Asia is more than a China story. As developing Asian economies become wealthier, they will consume more and trade more with each other. For example, bilateral trade between Thailand and Indonesia is projected to be almost five times as high in 2030 as it was in 2009. To support this Asian integration, countries in Asia have already come together on regional platforms to foster greater openness and cooperation.

Thomas Jordan: Repercussions of the financial markets crisis in Switzerland Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the Zuger Wirtschaftskammer, Zug, 28 April 2008. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The turbulence in the financial markets that began in August 2007 is having a generally negative impact on the Swiss economy and is spreading through different transmission channels. The downgraded growth prospects for the US economy are resulting in fewer imports from the rest of the world. Since net exports and the global economic developments are of particular importance for Switzerland, they are having a negative effect, which may be reinforced by the appreciation of the Swiss franc. Because of the major importance of banking in the industrial structure of the Swiss economy, falling turnover on the financial markets can also affect Switzerland more severely than other countries. Moreover, rising credit risk premiums result in higher financing costs for companies, and the deterioration in bank balance sheets could be an additional factor in compromising the availability of credit in Switzerland. Finally, the increase in commodity prices has had a significant impact on the inflation rate in Switzerland. Despite the fallout from the financial crisis, the outlook for Switzerland‘s economy remains good. In Europe – which is crucial for Switzerland – the economy will probably weaken only gradually.
All these forces could lead to changes to some of the balances of the current international monetary system. Admittedly, despite its gradual erosion from around 65% in 2016 to 58% in 2022, the weight of the dollar is likely to remain strong in the medium and long term. vii However, many currencies, including not only the euro but also the Canadian and Australian dollars, are already being increasingly used as reserve assets. A collective move towards a more multipolar international financial system therefore seems to be underway. However, a confrontational (non-) system, or disorderly fragmentation, would only lead to instability and inefficiency. viii In order to increase monetary confidence, we also need to preserve certain virtues of the current IMS: stable, based on collective rules, market-oriented, and that offers widely accepted safe assets. Page 4 sur 6 III. The euro as a complementary asset for a more multilateral IMS We Europeans must be proactive and involved in what depends on us: the euro should play a greater international role. It is already the second most widely used currency in the world, but its current weight, around 20% by most measures, ix does not reflect its potential. As an emblem of the qualities of the type of IMS one would wish for, it is the currency of a jurisdiction with strong and stable democratic institutions, independent central banks, the rule of law and deep financial markets. It is supported by a soft power based on compliance with international rules, multilateralism and openness.

Most of the research concerning unconventional measures has been focused on quantitative easing of Fed and the research concerning the ECB measures has been scant. A recent empirical investigation on the matter, published in September 20166, deals exactly with the spillovers of the ECB’s non-standard monetary policy into the CESEE economies. The empirical investigation employs an event study methodology, assessing whether the announcements of the ECB non-standard measures affected the nominal exchange rate, long-term sovereign yield, stock market indices and portfolio inflows. The findings suggest that ECB measures had moderate impact on all of the variables. Furthermore, the study proceeds with empirical investigation of the effects on the dynamics of cross-border capital flows, distinguishing between portfolio investment and international bank lending. The results reveal that ECB non-standard measures may have enhanced cross-border flows to the CESEE region. We will try to tackle some of the above-stated questions, by observing the most recent data on balance of payments, which can be used as an indication of the dynamics and the structure of the capital flows. We will observe the period before and after the crisis, and in the latter one, in order to observe the most recent changes, we will focus on the last three years, in particular. 6  Ciarlone A. and Colabella A., "Spillovers of the ECB's non-standard monetary policy in CESEE economies", Bank of Italy, Occasional Paper no.351, September 2016. Chart 7: Cumulative financial inflows as % of GDP, changes in p.p.
Over the years there has been clear evidence of this in connection with excessively high expectations in the stock market or the property market, for example. In the end, it becomes difficult to justify prices in terms of economic fundamentals. Elements of this have been apparent in recent years, for instance in the United States. One issue is whether central banks ought to consider asset prices when setting the interest rate. The notion here is that asset prices may influence the path of inflation. An increase in household wealth on account of rising share prices, for example, is likely to affect consumption and thereby demand in general and the price trend. Effects from expectations are also involved. Rising share prices may mirror expectations of permanently higher corporate profits and lead to expectations of higher lifetime incomes. If confidence in the future becomes much stronger in this way, the effects on demand may be considerable. Share price increases may perhaps affect the corporate investment propensity in a similar way. The Riksbank takes this into account as far as possible in the inflation assessment. But much remains to be done, theoretically as well as empirically, when it comes to understanding the nature of these relationships. A lively discussion is in progress, at the Riksbank as well as among those who scrutinise us, about what a given development of asset prices should imply for monetary policy. There is even less agreement as to whether central banks should conduct policy so that the development of asset prices is affected directly.

There are many sides to this. One has to do with whether monetary policy ought to allow for other matters besides inflation, for instance the real economic situation or the risk of problems that might threaten financial stability. I shall be returning to that shortly. Another is the timing of an interest rate adjustment. It is, of course, primarily the inflation forecast that guides monetary policy. But there may be room at the margin for other aspects. Normally it is a matter of whether a measure can be taken a little sooner or later than otherwise. This may be desirable to ensure that the measure is well received in the financial markets, for example. On other occasions we have prepared the general public for future decisions in order to avoid unnecessary conflicts and discussions in society. When we raised the interest rate in 1997, for instance, the decision was timed with a view to sending a clear message in advance of the wage negotiations at that time. 4. Should we take output and employment into account? Price stability is the Riksbank’s policy objective. The antecedents to the Riksbank Act state that, without prejudicing this objective, the Riksbank should also endeavour to promote other economic policy goals that the Riksdag has established, for example a favourable development of growth and employment. One reason for focussing on low inflation is that most things suggest this is a prerequisite for a favourable long-term development of growth and employment.
‘Building Societies’ excludes Nationwide.

Our job is to make sure that both moves are properly managed and capitalised in the firms we regulate. This is much easier said than done for another type of corporate lending, largely carried out by investment banks. This type of lending is secured against equity holdings of the borrower, often in a related entity – so-called “margin loans”. The first observation about this is that it will often create wrong-way risk because the value of the collateral may well be linked to the credit-worthiness of the borrower, which can cause problems in times of stress even though collateral haircuts tend to be 30-50%. Largely due to this, we estimate that banks in London lost more than € in a single deal in 2017. But the broader observation is that this type of lending is not well captured by today’s capital framework for banks – in part because it tends to sprawl awkwardly across credit, market and operational risk requirements. I don’t ask you simply to accept this statement at face value – our analysis (presented in anonymised form in Chart 8) of the capital held against one such recent exposure by a range of banks illustrates it well: even allowing for differentiation in terms across firms, this level of variation simply cannot be right.
It follows that if the supply side of the economy works better, then its demand side can expand more rapidly without leading to bottlenecks and inflation. One of the driving forces behind the new and better functioning of the US economy is sometimes said to be the rapid advances in data and telecommunications. By improving production and distribution processes, the innovations are seen as a basis for stronger productivity growth. Some consider that, for the United States, the potential growth rate has been raised from 2 to 3%. It also looks as though the potential growth rate for Sweden has become somewhat higher – still compared with the 1980s – but it does not seem to have reached an annual rate of as much as 3%. 1  I refer here, not to the consumer price index but to an index of underlying or core inflation, e.g. UNDIX, which Statistics Sweden publishes regularly on behalf of the Riksbank. That index excludes house mortgage interest expenditure and indirect taxes. If the Riksbank were to raise the interest rate prematurely, the resultant increase in house mortgage expenditure could cause the CPI to overshoot the target, while UNDIX is on the low side. This is the reverse of the situation in recent years when the interest rate was lowered. 3  BIS Review 92/1999  A common, but not entirely certain estimate is that today the Swedish economy can sustain an annual growth rate of between 2 and 2.5%.

The models being tested at present are simply too rough and ready. They tend to sound the alarm about events that never occur and miss those that actually happen. Although the picture looks bright, we know there are countries in the global economy that are vulnerable, with a situation that may deteriorate. Share prices, moreover, have climbed very high, not least in the United States. There are also imbalances in the US economy that may affect the future course of events. There is also the possibility, however, of demand growth in Sweden becoming even stronger. We do not know how other components of economic policy will be constructed in detail. I am thinking in particular of the current discussion about the direction of tax policy. The Riksbank is in no way opposed to tax cuts. On the contrary, strategic tax reductions could make the Swedish economy function better and thereby lead to higher growth. But we have a duty to issue a warning about a tax policy that would give additional force to a growth of consumption that is already rapid and thereby lead to economic overheating in Sweden. At the same time, I believe that decision-makers are aware of these risks. Taken together, all these factors make it difficult to assess the future development of demand. So there is reason to monitor developments closely. Conclusion At present I do not for my part see any direct, immediate threat to price stability in the Swedish economy.