samchain/econo-pairs-v1 huggingface dataset:
Moreover, unit labour cost growth has been low (2.0 % in 2003, coming down to around 0.7% in the first half of 2004) and it can be expected that it will be contained in the coming quarters by moderate wage developments and labour productivity gains. Notwithstanding these encouraging developments, there are still several upside risks to the outlook for price stability. These risks are mainly associated with oil price developments, possible new increases in indirect taxes and administered prices, and potential second-round effects stemming from wage and price-setting behaviour. The rise in measures of long-term inflation expectations in the euro area in the course of this year is also a cause of some concern. In addition, our monetary analysis points to upside risks to price stability. Since mid-summer, the dynamics of M3 have strengthened again, mainly reflecting continued strong demand for transaction balances, which are included in the narrow aggregate M1, the most liquid component of M3. The acceleration of money growth is driven by the stimulative effect of the historically low level of interest rates in the euro area. The low level of interest rates is also fuelling private sector demand for credit. In particular, the growth rate of loans for house purchase continues to rise in the euro area and is now approaching double digits. This goes hand in hand with relatively fast rises in real estate prices in many euro area countries. In recent months, the annual rate of growth of loans to non-financial corporations has also picked up.

And we have, of course, tried to assess the impact of the dramatic stock market decline from the peaks in 2000 on macroeconomic conditions and financial stability. In this regard, it mattered that, partly linked to the introduction of the euro, the outstanding amount of shares substantially increased in the euro area. For non-financial corporations in the euro area, the annual net issuance of shares increased from 1.7% of GDP in 1995 to 7.3% of GDP in 2000. At the same time, during the late 1990s, the distribution of shares across the euro area population broadened significantly, implying that more households invested in shares in the late 1990s than before. Corrected for valuation effects, the amount of household’s holdings of shares and mutual fund shares increased between 1995 and 2003 by 78%. Against this background, stock prices have become more relevant to economic conditions in the euro area in recent years. And indeed, when stock prices started to fall, we could see that this had a notable dampening effect on the euro area economy in the period 2001-2003. What role do asset prices play in the ECB’s monetary policy? After this description of the current situation, the crucial question is: how do asset price developments enter into the assessment of the outlook for price stability and how they influence the policy-formulation of the ECB. Recently, much attention has been devoted to the question of which monetary policy strategies are optimal in an environment of strong asset price fluctuations.
The tale of the rivalry between Hong Kong and Shanghai is another hotly debated topic. But I have never thought of these two cities as deadly rivals. More than a year ago when Shanghai proposed the establishment of the “Free Trade Zone”, some predicted that, within 2 to 3 years, Shanghai would wrest from Hong Kong the position as Mainland’s offshore financial centre. They thought that further liberalisation of the Mainland’s capital account would enable Shanghai and other Mainland financial centres to take business away from Hong Kong. There is some truth in it. As the Mainland’s capital account liberalises, Shanghai will certainly carry out more cross-border and international financial activities and compete with Hong Kong. However, I would like to point out that the gradual liberalisation of the capital account is a two-way process, meaning a more efficient flow of funds into and out of the Mainland. It will then be much easier for Hong Kong to develop businesses targeting Mainland enterprises and residents, such as financing, debt issuance and wealth management. If we look at the size of the onshore renminbi financial market, with RMB110 trillion in total bank deposits and RMB160 trillion in total financial assets, we can imagine as the capital account continues to liberalise and create the necessary policy headroom for twoway fund flows, it would mean a huge market with enormous business opportunities for Hong Kong’s competitive banks and financial institutions. 8. So, I do not believe Shanghai and Hong Kong are rivals.

There are also those who believe that to maintain Hong Kong’s competitive edge, we must be the only conduit for foreign capital going into and out of the Mainland. It means a “single access” model, with Hong Kong as the only link and conduit between the onshore and offshore markets. The rationale for Hong Kong to continue to monopolise the access to the onshore market is understandable. It also serves practical purposes at the initial stage of the renminbi’s internationalisation. But as the renminbi internationalisation progresses, this model is not sustainable in the long run. The aim of opening up the capital account and internationalising the renminbi is to foster general acceptance of renminbi in global trade and investment and as a reserve currency. To promote the extensive use of renminbi by corporations and investors around the world, renminbi business must flourish in different parts of the world. The development of the offshore renminbi market must shift from a “single access” model to a “multiple accesses” model. We pride ourselves as the world’s most important offshore renminbi centre, still far ahead of other centres in terms of the size of the liquidity pool and various financial intermediation activities. But there is no time for complacency. Our task is to consolidate Hong Kong’s unique advantages and leverage our first-mover position by incessantly upgrading our renminbi platform, making it the ideal choice for companies and financial institutions, on the Mainland and around the world alike, to conduct various types of offshore renminbi business.
Norges Bank’s mandate reads as follows: Monetary policy shall be aimed at stability in the Norwegian krone’s internal and external value,  1  If clothing prices had risen at the same pace as other consumer prices, the overall saving for households is estimated at about NOK 10 billion in 2002. BIS Review 65/2002  3  contributing to stable expectations concerning exchange rate developments. At the same time, monetary policy shall underpin fiscal policy by contributing to stable developments in output and employment. Norges Bank’s implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time. The first paragraph of the mandate sets forth its intentions. The last paragraph specifies what Norges Bank is required to do. The first sentence in the mandate refers to the value of the krone. Stability in the internal value of the krone implies that inflation must be low and stable. Low and stable inflation fosters economic growth and stability in financial and property markets. The regulation also states that monetary policy shall be aimed at stability in the external value of the krone. The krone exchange rate fluctuates from day to day, from week to week, and from month to month. We have free international trade and free capital movements. We do not have the instruments for fine-tuning the exchange rate.

On the one hand it is difficult to measure these intangible assets, but on the other hand one disregards a large part of the companies’ investments if one does not take them into account. US and European studies show that investment in intangible assets comprises around 10 per cent of GDP. 11 The most recent productivity growth and forecasts Let me now comment on the development of productivity last year and during the period to come. 7  Bloom, Sadun and Van Reenen (2007). 8  Håkanson (2007). 9  By productivity is meant total factor productivity, TFP. In the study the comparison has been made with the median company. 10  Brynjolfsson and Hitt (2003). 11  See, for instance, Corrado, Hulten and Sichel (2005), (2006), Hao, Manole and van Ark (2007), Haskel and Marrano (2007). 4  BIS Review 12/2008  Productivity growth in the business sector has been 4.4 per cent a year during the period 2002-2006. In the increasingly mature phase of the economic cycle where the economy is now, it is normal for productivity growth to slow down in connection with an increase in employment. This is also something the Riksbank has been expecting. However, the downturn in the rate of increase in productivity last year was stronger than motivated by the prevailing economic situation and the Riksbank, like many other analysts, was surprised by the strength of the downturn.
The real cost of a loan, that is, the interest cost adjusted for inflation, becomes higher if inflation is surprisingly low. Another way of describing this so-called debt deflation is that surprisingly low inflation means that the real value of debts rises. It then becomes more difficult for borrowers to pay off their debts, at least unless their real incomes also rise.8 One can expect that the problems will be particularly extensive if inflation is surprisingly low during an economic downturn that coincides with high private or public debt. This is because those who try to reduce their debt do so by reducing their expenditure, which means that demand in the economy declines.9 And this reinforces the economic downturn. We are not seeing such a scenario in Sweden right now. Although household debt is high, economic activity is beginning to pick up and household consumption has developed relatively well in recent years.10 The risk that many see with the high household indebtedness is rather that a future economic downturn would be reinforced by households rapidly reducing their consumption. A relevant question – without an obvious answer – is whether such concern should be countered with a tight monetary policy that dampens households’ propensity to increase their nominal debts or with an expansionary monetary policy that ensures inflation does not become surprisingly low. The idea behind the latter strategy is to limit growth in households’ real debts.11 The low inflation could thus worsen the situation for households with a high level of indebtedness.

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.
There are good arguments to create international instruments providing a reliable store of value. There are also conceptual and political difficulties. A choice would have to be made as to the true nature of the “super reserve currency”. Would it be a basket of existing monies such as the SDR today? Or would it be a new “fiat” currency? More fundamentally, a new reserve currency would, in fact, grant a collective guarantee against exchange risk. This guarantee would benefit surplus countries and would be given by deficit countries. When the substitution account was discussed more than 25 years ago, it became clear, at the time that it would have to be part of a package encompassing explicit, binding and symmetric rules on balance of payment adjustments. Most likely, the same questions would be raised again today and the creation of a new reserve currency would have to be part of a broader framework. That may take time, as our Chinese colleagues are fond of reminding us when we discuss those issues. 4  BIS Review 170/2010  In the meantime, financial development in emerging economies can go a long way towards expanding the range of safe and liquid financial assets available to domestic and international investors. Capital markets in local currencies have developed significantly over the last decade as fiscal positions in emerging countries have dramatically improved. There seems to be considerable scope for regional financial and monetary arrangements to prosper in the future.

Zeti Akhtar Aziz: Nurturing young talent in Malaysia Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Kijang Emas Scholarship Award Ceremony for High Achievers, Kuala Lumpur, 6 May 2014. *  *  *  While the global economy continues to face uncertainties and significant challenges, the Malaysian economy has every potential to remain on a steady growth trajectory and move up the value chain. This is however only achievable if we can nurture the required talents. Talent development strategies and implementation is therefore one of the key priorities of the nation. We need to invest in our talent pipeline The Kijang Emas Scholarship Award is an eminent scholarship award reflecting the Bank’s commitment in creating a sustainable talent pool for the nation. The Kijang Emas scholarship is distinct from the Kijang scholarship whereby the recipients are given the freedom to pursue any field of study at top-notch universities in any country of their choice. The Bank also does not impose any bond on the recipient except that they return, contribute and take part in the progress and development of our beloved nation. To date, 42 high potential talent have been awarded the Kijang Emas scholarship. The recipients are currently pursuing their studies in diverse field of studies including Medicine, Dentistry, Genetics, Biochemistry, Dietetics, Physics, Engineering, Law, Psychology and Architecture in top universities around the world such as M.I.T., University of Pennsylvania and the University of Cambridge.
Of course it can be a good idea to pay off some of one’s mortgage, as it makes the household balance sheet less sensitive to changes in house prices, but there is no intrinsic value in a household with a mortgage amortising its loan at all costs. Amortisation is a form of saving and having amortised a whole loan, without having saved in any other form, means that one has invested the whole of one’s savings in one’s housing. 3  For a detailed survey of the financing of residential construction prior to the 1990s crisis, see Mats Rönnberg, ”Staten fick Svarte Petter - en ESO-rapport om bostadsfinansieringen 1985-1999” (report on housing finance 1985-1996), Ds 2002:9. 4  See Financial Stability Report 2006:1, page 35. According to "Tobin’s Q”, which is calculated by the Institute for Housing Research at Uppsala University, it was only marginally profitable to build new housing in Kristianstad in 2005. BIS Review 105/2006  3  The most important thing, however, is that a household has some form of saving that can be used to meet unforeseen negative income shocks, renovation requirements, or even to make a pension go further. Regarded as a whole, there is no risk that the Swedish household sector is saving too little – household saving as a percentage of disposable incomes now amounts to around 8 per cent. However, it is unclear which households account for the high level of saving.

Although the housing market may have its peculiarities, it essentially functions like any other market – a high demand and small supply mean high prices. The mortgage market The significant changes in the mortgage market have also contributed to house prices rising so sharply. These changes are based in the credit deregulation that took place during the second half of the 1980s, but it is not until the last few years that they have really made an impact. The crisis at the beginning of the 1990s delayed developments here, too. One important change in the mortgage market is that competition has stiffened and that the mortgage institutions’ margins have been pressed down, which has cut mortgage interest rates more than the general fall in interest rates. Moreover, the mortgage institutions have become more flexible with regard to the degree of borrowing and now offer a broader spectrum of products. One change that I feel deserves a little extra attention is the fact that mortgage institutions have become less strict in their amortisation requirements. One might wonder why the amortisation periods have increased as much as they have and why fewer households are choosing to amortise. For new house owners with relatively ordinary incomes, it may seem meaningless to amortise SEK 1,000 a month on a loan of, for instance, SEK 1.5 million.
Real interest rates and house prices Per cent and index, 2005=100. Note. Real interest rates refer to 10-year zero coupon rates for real (index-linked) bonds for Sweden and the United States and 10-year benchmark rates for real (index-linked) bonds for Germany and the United Kingdom. Sources: Bank of England, Bloomberg, Federal Reserve, Statistics Sweden and the Riksbank. This also points to another trend: While public debt has fallen in recent decades, the debts of private operators have increased. Those who have large debts become unavoidably more vulnerable, and if asset prices rise for too long in a way that is decoupled from developments in the rest of the economy, this can lead to financial imbalances and ultimately to a financial crisis. The Swedish financial markets have grown and look different from at the beginning of the 1990s. Today, the banking sector is bigger in relation to GDP than it was thirty years ago, and mortgage loans have become a larger and increasingly important part of banks' operations. 11 [16]  Diagram 8. Banking sector and GDP over time Nominal amounts, SEK billion 12 000 10 000 8 000  6 000 4 000 2 000 0 1996  2000  2004  2008  2012  2016  2020  Balance sheet GDP  Note. Total balance sheet total for the operations of Swedish banking companies, savings banks and foreign-owned bank branches in Sweden. The measure excludes subsidiaries of Swedish banks abroad. Source: Statistics Sweden.

After the reforms were introduced, the Swedish economy quickly turned upwards and prosperity increased more than expected. At the same time, it is clear that not everything has developed for the better. Vulnerabilities have been built up that can make policy tightening painful; high private debt, a housing shortage, a divided labour market and lack of investment. 8 [16]  These are structural problems that make the Swedish economy vulnerable. I will talk about this in more detail soon. But when we think about our frameworks and their future, we also need to bear in mind, as I said earlier, that the Swedish and global economies have changed since the 1990s. The Swedish and global economies are different from thirty years ago The first thing I want to highlight is globalisation over the last few decades. The primary manifestation of globalisation is the entrance of China into the global economy. This has meant that the working population in the world has increased significantly, as have goods and services originating outside Europe and the United States. China's entrance has also meant an increase in the global supply, which has probably dampened consumer prices and kept inflation down.8 Diagram 5. China's share of the world economy from 1970 Percentage of global GDP  Source: World Bank. During this time, global real interest rates have fallen trend-wise, partly because of globalisation and China's entry into international markets. Real interest rates are now at historically low levels.
Valuations lead lending by around a year, with a correlation coefficient of around 0.75. 2  BIS central bankers’ speeches  One way of slowing that pro-cyclical spiral would be to base lending decisions not on spot, but on medium-term or sustainable valuations. Any ramping-up of property prices above their sustainable value would not then automatically give the appearance of safety and thereby encourage looser credit conditions. That, in a nutshell, is the aim of the recommendation in the “Vision” document. Needless to say, there is further work to be done by the industry to make these proposals operational. The very first minutes of the Forum highlighted property statistics and valuations as two areas where greatest improvement was needed. Twenty years on, that remains the case today. A continued effort will be needed by the industry to complete the job. Next, regulators. For much of the period prior to the financial crisis, credit and asset price cycles were only of interest to policymakers to the extent they posed a direct risk to inflation targets or to the solvency of individual firms. Were a bubble to blow, then the most likely response was a combination of benign neglect on the upswing and lower interest rates in the downswing. The role of policy was to “mop” after the flood. That orthodoxy has been sunk by the crisis. After perhaps the largest credit boom in human history, central banks globally are still frantically mopping with unprecedented degrees of monetary stimulus.

Cycles of the past Let me start with the bad news. The Forum has assuredly not solved the problem of boom and bust in the commercial property market. Indeed, the environment today – slow recovery from a jarring commercial property bust – is eerily reminiscent of the situation twenty years ago when the Forum began. As Yogi Berra reportedly said, it is a case of déjà vu all over again. The Forum was born out of the commercial property crash of the early 1990s. Between 1989 and 1993, UK commercial property prices fell by 27%. This followed a long period of rising prices, high liquidity, expansive lending and weakening credit standards. These ingredients combined to create a classic pro-cyclical spiral. Higher valuations supported ever-larger  BIS central bankers’ speeches  1  loans on ever-finer terms, boosting valuations still further. When that pro-cyclical spiral went into reverse, it left banks, developers and investors all licking their wounds. Today, the situation is much the same. Commercial property prices are 37% below their peak. For secondary properties, they are more like 50% below their peak. This fall-to-earth came after a long wave of rising commercial property prices, deeper liquidity and rapid and, in many cases, imprudent lending practices. The subsequent crash has left banks, developers and investors not just licking their wounds but in some cases requiring life support. The commercial property bust has contributed to several UK banks departing the high street and the economy suffering its most painful contraction since at least the 1930s.