samchain/econo-pairs-v1 huggingface dataset:
Both parts are important to provide a positive contribution to economic developments. If one is to find something positive in the current situation, it is that it has brought the international discussions to a head: Do central banks’ monetary policy frameworks need to be adapted to manage the challenges we are facing and, if so, how? Many countries and central banks are now in the same boat. It is increasingly clear that they share the same problem – the low neutral real interest rates being the cause for concern – rather than some central banks been doing the right thing and others not over the past decade. I would like to give my views on this. Interest rate needed as monetary policy tool One very important question is, as I see it: “How can we ensure that monetary policy continues to have the scope to counteract recessions and increased unemployment?”, or perhaps more precisely, “How shall we prevent the scope to counteract recessions declining from its current level?” I would like to begin to respond by addressing three central sub-issues and relating them to the Swedish debate, in particular the argument that the inflation target is obsolete:   Is it useful if the central bank can counteract recessions with policy rate cuts?   Is it easier to counteract recessions if the interest rate is normally rather high than if it is very low?

Lars Nyberg: Some Swedish experiences with financial stability surveillance Speech by Mr Lars Nyberg, Deputy Governor of Sveriges Riksbank, at the Bank Indonesia, Jakarta, 10 December 2003. *  *  *  Introduction First of all I want to express my thanks to the Bank of Indonesia for inviting me to this conference. Financial stability - or the lack of it - is a very topical subject in the light of events in the past decades. Furthermore, financial stability issues seem to be strikingly similar between countries, whether they are big or small. It makes good sense, therefore, to have different central banks talk about their experiences. And, as always, the best experience comes from mistakes made. With this in mind, I shall tell you a little of how we in Sweden look at stability surveillance today. First, some background. Systemic stability came under serious threat during the Swedish banking crisis at the beginning of the 1990s. As was later the case in Indonesia, the risk of severe financial instability led to government intervention. A decision at very short notice was required of Sweden’s government and parliament in the autumn of 1992: Should they choose to support Swedish banks financially without really knowing how expensive the support might have to be, or should they risk a financial crisis with unforeseeable consequences for the Swedish economy? The decision that was taken was the only reasonable option - to rescue the Swedish banks.
As techniques for managing and allocating risk became more sophisticated, the network of counterparties expanded in scale and in complexity. This was clearly a systemic change that was properly understood but not fully captured by regulators at the time. The definition of systemic entities should rely on different criteria beyond size, such as interconnection, complexity or substitutability, and depend on the context in which the entity evolves. Various initiatives to deal with systemic entities are currently being discussed, including tighter cooperation between supervisors, compulsory actions on banks’ structures and, more controversially, additional capital charges and/or taxes and levies. They certainly require further thorough analysis. It is essential to avoid threshold effects and never forget that risks are continuous in nature, time-varying and state-contingent. The debate about systemic firms also echoes concerns about the activities and business models of some institutions. The presumption is that smaller and leaner financial institutions would pose less risk to financial and macroeconomic stability than larger and more diversified ones. Yet, facts suggest that this cannot hold as a general lesson from the crisis. Indeed, the banks that suffered most from the crisis were precisely those that were more specialized, such as investment banks. By contrast, large universal banks, reliant on a large deposit base, were able to withstand the shocks comparatively better. To deal with systemic risks, there is a lot of merit in taking a closer look at what I would call “market options”.

We must go on to the philosophy of transparency where offences and important financial ratios or numbers are publicised, and peer or investor pressure could be used to reduce the flow of resources to wrong-doers. Back to the Credit Bureau, of course, borrowers are very important in all this. Banks shouldn’t lend to bad borrowers, and banks that lend to bad borrowers are bad banks. But how can banks not lend to bad borrowers, if they don’t know who they are? There are, of course, alternative remedies, but the best instrument is to have an industry-wide Credit Bureau which keeps track of the credit standing of borrowers. This is not possible at present because the law does not allow you to disclose clients’ information. The Bank of Thailand has required that prospective borrowers and renewals must sign a form declaring that they will allow their credit standings to be disclosed, but this is a feeble alternative. It is very time consuming and argumentative, with all its consequences. A Credit Bureau Law should be quickly legislated, where, as a price for a better society, bad debtors can be identified. 1  BIS Review 108/2000  As to commercial banks, good governance should be put in place. Audit committees are now required. Independent directors, not voted upon by the major shareholders, are being encouraged. NPL, related lending and fines and penalties imposed must be disclosed by each bank at the end of every month, and are published in the BOT’s web.
Investors did not thus compensate for the extra risk that a property investment entails compared to a risk-free investment such as a government bond. There were, however, periods in the 1980s when the risk premium was negative. The investors accepted a lower return on high-risk property investments than on safe investments in government bonds (see Figure 12). However, there are also major differences between the situation on the Swedish property market then and now. One of the important factors that made it possible for prices to increase so much during the latter part of the 1980s was the deregulation of the credit market. Although lending to property companies has increased during the 2000s, this has not been to the same extent as in the years prior to the property crisis. The construction of new properties has also been moderate in recent years The most important difference, however, is that the interest rate is much lower today now that monetary policy no longer needs to focus on defending a fixed exchange rate (see Figure 13). The banks' credit assessments also focus more on the customers' cash flows and their ability to service their loans. In the 1990s, the banks focused to a greater extent on the value of the collateral, and as the collateral for the loans was often in the form of property the value of the collateral fell quickly in pace with the fall in prices.

Any change in the exchange rate regime would be on the basis of longer-term structural considerations and not on account of short-term movements in capital flows and transient shifts in exchange rate expectations. Ladies and Gentlemen, In spearheading the development of the financial sector, Bank Negara Malaysia's objective is to develop a dynamic, competitive and resilient financial sector. In the year 2005, focus will be accorded to strengthen the effectiveness of the banking sector in meeting the new requirements of the economy, enhance competition and hence efficiency and to strengthen the infrastructure for consumer protection. These initiatives would be taken in the context of preserving the soundness and stability of the financial system. An important component of a strong financial sector is the institution of a robust regulatory and supervisory framework. Two main principles will be taken into consideration in the formulation and implementation of prudential policies. First, is the creation of a regulatory environment that fosters innovation and competition, while promoting best practices to preserve financial stability. Policies will therefore balance the need to attain efficiency whilst preserving stability. Second, regulations will increasingly be "principle-based". Regulations will focus on identifying parameters within which banking institutions must operate, whilst retaining sufficient flexibility to allow institutions to determine their own individual strategies and approaches within these parameters. This is in the light of the improved corporate governance and risk management practices within banking institutions. The Board and management will be accountable for strengthening individual institutions.
Let me briefly elaborate on three aspects which lie at the core of stability-oriented policies in the accession countries: first, the need to enhance central bank independence; second, the importance of fiscal discipline; and, third, the implementation of further structural reforms. As regards the first point, most accession countries have modified - or are in the process of modifying - their respective EMU-related legislation to ensure compliance with the requirements of the Treaty. However, central bank independence in accession countries should not be seen only as a legal requirement under the acquis communautaire but also as an important impetus to and precondition for policies geared towards monetary stability and nominal convergence with the EU. Indeed, if the drafters of the Treaty placed a strong emphasis on central bank independence, it is because of the conviction that the achievement of price stability is best served by an independent institution with a well-defined mandate. In line with this approach, the forerunner of the European Central Bank (ECB), the European Monetary Institute (EMI), established a list of parameters of central bank independence, which form the basis for assessing accession country compliance with this requirement by the ECB when evaluating the new Member States' convergence processes. The process of enhancing central bank independence has not been smooth in all accession countries but, overall, it is now well advanced and its benefits are already apparent. Indeed, most accession countries have made significant progress in terms of disinflation.

It is worth emphasising that for no fewer than 12 years before the launch of the euro, six of the currencies which now make up the euro—and represent close to two thirds of the GDP of the euro area—had proven to be remarkably stable, not being subject to any realignment within the E.R.M. This high level of confidence is also supported by the homogeneous functioning of the Eurosystem: the European monetary team, composed of the ECB and the national central banks of the -nowst twelve euro area countries as we have welcome, on the 1 of January 2001, a new member, the Bank of Greece. All the components of the Eurosystem work constantly hand in hand. The Eurosystem is a single monetary team, with the ECB acting as a coach and the NCBs as the players on the field, with a single team spirit and this team spirit is one of the priceless assets of the euro area. c/ Third, the credibility of the Eurosystem rests, fundamentally, on its stability-oriented monetary policy strategy. I would like to allay the fears and doubts expressed by some observers as regards the clarity of our monetary policy strategy. The Maastricht Treaty has given us a mandate for maintaining price stability. We have decided to be as clear and as transparent as possible by announcing a clear definition of price stability, featuring a year-on-year increase in the Harmonised Index of Consumer Prices for the euro area of below 2%.
On that view, and given the recent moderate decline in sterling's effective exchange rate, it is reasonable to look forward to a gradual improvement - and I emphasise gradual improvement - in the external environment which would clearly be very helpful from a UK perspective. I don't deny that there are downside risks to this scenario. The Eurozone has for example recently put back its projected expansion until later this year. And financial markets, and both business and consumer sentiment, have recently been severely affected by uncertainty over Iraq - though financial markets, certainly, now that the war has started, have factored in its rapid conclusion. I hope they prove to be right - for more than purely economic reasons. Notwithstanding these risks, I still think that the most likely outcome is that we will see a gradual pickup in the pace of global recovery over the next year or two - which is the view shared by the Monetary Policy Committee in our February Inflation Report and by most other economic commentators. On that basis we would also expect to see a gradual recovery in domestic business investment as we go through this year and into next. And, while fiscal prudence is clearly important for the stability and efficiency of the economy over the medium term, the Chancellor's projected increase in public spending is in my view positively welcome in the immediate situation confronting us.

It is this excessive credit cycle – the risk of “go and stop” seen during financial crises – that a moderate capital buffer must seek to smooth out. It should be noted in passing that a clear majority of Member States of the European Union have adopted other macroprudential measures  Page 3 of 6 to specifically limit residential lending, constraining households: in my view it is out of the question in France. II. To reduce fragmentation and improve private risk sharing in Europe, we must now complete the Banking Union. We must now resolutely work towards completing the European Banking Union. I would first like to explain why. The finalisation of the Banking Union should, alongside the Capital Markets Union, contribute to improving private risk sharing within the euro area. Private risk sharing fulfils an economic stabilisation function: in the United States, for example, private financial flows between the federal states are a more powerful damper than budget mechanisms involved in public risk sharing. Furthermore, this private risk sharing should help to channel the euro area’s large savings surplus – EUR 390 billion in 2017 – towards European companies, within a real Financing Union for Investment and Innovation at the European level. We have taken a step forward with the agreement of 25 May at the Ecofin Council meeting on the "banking reform package" set out in the Commission's legislative proposal of 23 November 2016.
A study carried out a few years ago found that all of the four major Swedish banks were among the ten banks in Europe with the highest percentage of encumbered assets.8 After the financial crisis, we can also see that Swedish banks are mortgaging more of their assets than before. The matching between lending and funding may also comprise a risk, both with regard to maturity and currency. In Sweden, the matching between maturities is relatively poor.9 I therefore take a positive view of the plans to introduce new rules to improve matching between maturities for lending and funding. We should be able to create more stability with longer maturities for the banks’ funding. I said at the start that I would keep to the stability and systemic-risk perspective, and have therefore not discussed the level of household indebtedness or the relationship to household assets. This would require a speech that was twice as long! My message is that household indebtedness is at a high level and that we have constructed a housing funding model that has made us sensitive to shocks. We need to have firmly established confidence in the Swedish housing market and the marker for covered bonds from both Swedish and foreign financiers, to ensure that our model functions properly. I am well aware that the risks linked to household indebtedness and the housing market entail very complex questions. I also know that rapid and drastic changes risk leading to severe and dramatic adjustments of debts and housing prices.

IS Schedule Interest rate sensitive sectors need to respond sufficiently to the tightening of policy in order to moderate demand, without tipping the economy into a sharp or broader downturn. Tighter financial conditions can restrain demand via transmission channels working through higher mortgage rates, more selective credit underwriting and wealth effects from lower equity prices. If these channels begin to restrain growth in 2022 at a time when corporate and household balance sheets are still strong, they contribute to achieving a soft landing. Phillips Curve Combined with labour supply improvements, employment needs to moderate sufficiently to cool wage growth without eliciting a sharp rise in the unemployment rate. Some relief could come from a rise in the LFPR. Post-Covid normalisations could see the return of some of the “missing” 1-1.5 million workers that have exited the labour force because of the pandemic. The present strength in labour demand is reflected in an unusually high ratio of two vacancies for each unemployed person. Some reduction in vacancies will not generate negative income effects in the same way that outright layoffs would. For a “soft landing”, the Non-Accelerating Inflation Rate of Unemployment (NAIRU) would have to converge to its lower pre-Covid level at a faster pace than actual unemployment rises. A return of the NAIRU to its value before 2020 would verify the absence of labour market scarring. Soft Landings A recent Bank for International Settlements (BIS) study [1] usefully identified some stylised facts on hard versus soft landings in the global economy.
One thing that is immediately apparent when comparing today’s balance sheet with the one from ten years’ ago is that the debt items the Riksbank does not pay interest on, that is, notes and coins and equity, have gone from comprising almost 100 per cent to hardly 40 per cent of the Riksbank’s total funding today. This means that the probability of the Riksbank making losses in certain years has increased. I will return to this, but let us first look a little closer at the changes in the Riksbank’s balance sheet. The foreign currency reserve has strengthened The largest change in the Riksbank’s balance sheet is the strengthening of the foreign currency reserve. One can say that a central bank has three reasons for holding a foreign currency reserve. The first is to make interventions in the foreign exchange market, the second is to maintain a readiness to supply the financial system with liquidity in foreign currencies and the third is to meet obligations to international organisations. The Riksbank’s foreign currency reserve was strengthened partly because Sweden’s commitments to the International Monetary Fund (IMF) have increased, but mainly because the Riksbank is to manage the task of ensuring that the payment system in Sweden functions safely and efficiently. The serious situation abroad and the Swedish banks’ extensive funding in foreign currencies mean that the risks of disruptions to the financial system are higher than before.

The analysis of BOT staff is intellectually rigorous yet very clear in their message, enabling me to fully grasp the issues, and the Monetary Policy Committee to make appropriate decisions. However, in a country where the functioning of financial market mechanism is not fully efficient, there is an important role for public communication to help enhance the effectiveness of monetary policy. Public understanding of monetary policy would lead to desirable change of market behaviour and adjustment process. Effective communication would also enable financial market participants to anticipate the direction of monetary policy, thereby enhancing the transmission mechanism of monetary policy. It is in this area that I feel I could contribute. Series of efforts have been made to improve Bank of Thailand’s public communication and I believe nowadays the public is more receptive to monetary policy, while financial market participants could correctly anticipate the direction of monetary policy and adjust their behaviour accordingly. Because this award is based on the work in the monetary policy area, I therefore humbly accept this award-not only for myself, but also on behalf of the Monetary Policy Committee as well as the staff of the Bank of Thailand. And as Mr. Caplen mentioned earlier on, the Thai banking sector also deserves congratulatory note for delivering economic growth in Thailand. The Bank of Thailand would therefore like to thank the banking community for its steadfast adherence to the reform efforts, for its cooperation in strengthening our financial sector and for its support to the recovery of the Thai economy.
David Willetts, for example, emphasises the role of universities with just as much vigour as Newman in his recent book, A University Education. 54 55 56  See, for example, Acemoglu and Restropo (2018) for an organising theoretical framework. For example, Acemoglu and Restrepo (2017), Susskind and Susskind (2015). Martinelli (2017) and Standing (2017), for example, discuss universal basic income. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  (a) Human Capital Let me start with human capital, workers’ skills and experience. Two fundamental shifts in the jobs and skills market are likely in the period ahead. The first is demographic. A young person born today can be expected to live a 100-year life. 57  That being the case, it is likely they will have a career of 60, perhaps 70, years. Given changes to the future world of work, multiple changes of career, not just job, are likely during a lifetime. This has never before happened in human history. The second secular shift is in the demand for skills. In the past, this skill-shift has been uni-directional. There has been a secular rise in demand for cognitive skills and a corresponding decline in demand for technical skills involving routine and repetitive tasks. That is why cognitive skills have attracted a rising wage premium (Chart 6). Put differently, demand for skills of the “head” (cognitive) have dominated those of the “hands” (technical) and, to lesser extent, those of the “heart” (social) over the past 300 years.

25  And each caused a stretching of the social fabric, often to close to breaking point. It is now well-established that each industrial revolution caused a significant loss of livelihood for workers whose set of tasks was most susceptible to automation. The upshot, often, has been a “hollowing out” of jobs across the skill distribution. 26  Because reskilling and retraining takes time and effort, job displacement  worsens pay prospects for a great many, significantly and persistently. 27  And these losses were often made  worse because they were concentrated occupationally and geographically. 28  A second, accompanying adverse side-effect of technological disruption has often been rising levels of income inequality. Historically, those skilling-up to keep one step ahead of the machine saw demand for 22  Levine and Renelt (1992). Acemoglu and Robinson (2012). 24 North (1990). 25 Haldane (2015b). 26 Katz and Margo (2013), for example, show that skilled blue collar employment in US manufacturing declined while white collar and unskilled manufacturing employment increased. 27 Autor (2017) documents lower relative wages for those in US most exposed to international competition. 28 Autor (2017). 23  8  All speeches are available online at www.bankofengland.co.uk/speeches  8  their skills rise and, with it, their wages. By contrast, those at the other end of the skills distribution saw their incomes fall, due to reduced demand and increased supply of their skills. The resulting rise in income inequality has tended, historically, to heighten popular discontent and worsen social cohesion.