samchain/econo-pairs-v1 huggingface dataset:
10  In addition to these cyclical risks, macroprudential policy is also assumed to need to manage what are referred to as structural risks, or cross-section risks, see the Riksbank (2012). The latter concern financial companies having become so closely interwoven and the degree of concentration in the financial system so high that if problems arise in one area they risk spreading rapidly. The effects on the real economy will be similar to those in Figure 1. Of course, these risks may also change over time. 11  Financial Crisis Committee (2013). Parts of macroprudential policy are also discussed in Swedish Government Official Reports (2013), Förstärkta kapitaltäckningsregler[Stronger capital adequacy rules], which was presented on 16 September. The potential design of a Swedish macroprudential framework is also discussed by Goodhart and Rochet (2011), Bryant, Henderson and Becker (2012) and Vredin, Flodén, Larsson and Ravn (2012). 12  The Riksbank (2013). 13  Ministry of Finance (2013). 8  BIS central bankers’ speeches  Interplay between macroprudential and monetary policy important to consider In principle, of course, if monetary policy were initially to try to stabilise both the business cycle and the credit cycle, and there arose a new policy area focusing on the latter – then this would almost by definition ease some of the earlier pressure on monetary policy. But even if we have now made some progress in attaining a framework for macroprudential policy, there are some questions of principle that still need consideration.

Central banks after the crisis – increased differences and country-specific solutions Let me conclude by returning to the question I asked at the beginning – whether the central banks will conduct their operations differently after the crisis than they did before. The answer to that question is that it all depends. It is quite clear that a general conclusion from the crisis is that greater effort must be made to stabilise the credit cycle by preventing overly rapid upturns. However, the role given to the central bank in this regard varies from country to country. In some countries, the task has been more or less entirely allocated to the central bank, while in other countries the central bank has a less prominent role. One consequence of this is that, while there was a trend prior to the crisis for central banks’ policy to look increasingly similar – with flexible inflation-targeting as a basic model – it appears as though the trend is towards greater differences after the crisis. Flexible inflation targeting is still the linchpin, but as management of the credit cycle differs between the  16  See, for example, Blanchard, Dell’Ariccia and Mauro (2013), Carney (2013) and Stein (2013). 17  Jeremy Stein at the Federal Reserve's Board of Governors has expressed it as the advantage of monetary policy being that it “gets in all of the cracks” (Stein, 2013, p. 17). The Riksbank has also raised this argument in various contexts, see for instance, Ingves (2010) and Nyberg (2011).
How aggressively should inflation stabilisation be pursued when doing so imposes costs in terms of lost output and higher unemployment? Low, stable and predictable inflation is a public good. It is not merely that rising prices mean households have to shop around or businesses have to update their prices periodically. High inflation hurts those, particularly the worst off in society, who don’t hold equities or property as well as those whose incomes are fixed in nominal terms. It distorts price signals, inhibits investment, and can ultimately damage the productive potential of the economy. Equally, deflation can imperil growth and employment. In a highly indebted economy, deflation raises real interest rates, increases debt burdens, lowers wages, and reduces growth. In the extreme, these can morph into debt deflation, causing very high and persistent unemployment and financial collapse. The happy medium is low, stable, predictable inflation over the medium term. A little inflation ‘greases the 1  wheels’ of the economy, for example by helping real wages adjust more smoothly. Moreover, a positive inflation rate gives monetary policy space to deliver better outcomes for jobs and growth when shocks hit, without the distortionary costs of high and volatile inflation. 2  Recognising the social value of inflation control is one thing, delivering it is quite another. In the past, many societies could not. This is because the instrument that affects inflation most powerfully – monetary policy – also affects output and employment, at least in the short run.

Since the summer of last year we have cut our policy rates into negative territory, launched a credit easing package and begun purchasing private and public sector securities under the asset purchase programme (APP). A large body of evidence has accrued in that time that our instruments are powerful. And that evidence has allowed us to refine further our understanding of the amount of stimulus required to bring inflation back to 2% without undue delay. For example, since we launched our credit easing package in June 2014, composite lending rates for firms have declined by more than 80 basis points for the euro area as a whole, and by between 110-140 basis points in stressed economies. That is a formidable pass-through. ECB staff estimates suggest that we would have needed to reduce the standard policy rates by around 100 basis points in June 2014 to achieve a similar effect on bank lending rates. Improving financing conditions have also fed into improving macroeconomic conditions. According to Eurosystem staff assessments, our measures will add almost 1% to GDP between 2015 and 2017. And we are seeing an effect even on smaller firms that are typically harder for monetary policy to reach. In our most recent survey on smaller firms in the euro area, for instance, we saw for the first time since 2009 that the net percentage of small firms registering an improvement in business activity has turned positive, for all size sub-groups. Crucially, our measures are also gradually feeding through into inflation.
Lower real interest rates mean that it becomes cheaper for households to take out loans when buying housing. The low interest rates are therefore an important driving force behind the price increases. Secondly, developments in the real economy have been favourable after the crisis. Although unemployment has periodically been high measured by Swedish standards, households’ disposable incomes have increased substantially. Higher incomes have meant that households can afford to pay more for their housing. Thirdly, prices have also been affected by the fact that construction declined considerably directly after the crisis. When the demand for housing accelerated, it took some time before this could be met by a growing number of new houses on the market. Quite simply, it takes time to build houses. It was not until around 2000, when house prices had become higher and made new production of housing more attractive, that construction really accelerated. Moreover, there have been some significant changes in the mortgage market, which have also contributed to house prices rising so sharply. I will return to these changes shortly. The development of these factors largely explains why house prices have risen as much as they have in recent years. It does not appear to be a question of general over-optimism among households and lenders. I therefore do not see any serious risks to financial stability from developments in house prices at present. Household indebtedness has also risen substantially Household indebtedness has kept pace with property prices and has thus risen substantially.

Lars Nyberg: Developments in the property market Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Fastighetsvärlden (Swedish newspaper), Stockholm, 30 May 2007. *  *  *  I would like to begin by thanking you for the invitation to come here to Fastighetsvärlden and talk about the Riksbank’s view on the property market. The property market is a subject that arouses considerable interest and is discussed frequently in many different forums, both in Sweden and abroad. I have on several occasions held speeches on the subject of the property market and I see good reasons for returning to this field to give the Riksbank’s views on current developments. In recent months the US mortgage market has come under focus, mainly because of developments in the subprime market. An increasing number of US households have experienced problems in paying their loan costs and some US mortgage institutions have gone bankrupt in recent months. This has given rise to some concern that we might see a similar development in Sweden. However, I believe there is very little likelihood of this. I will explain why a little later on. Today I intend to speak mainly about how we at the Riksbank view the recent developments in the property market. In many respects, I am basing my answer on the reasoning put forward by the Riksbank in the Financial Stability Report published last week.
I would like to express my special thanks for the good cooperation with all parties involved on these important issues. Even though important milestones have been attained, sound operation of payment systems will remain an important and extensive task. A multicurrency country? Every so often the question has cropped up of whether Iceland is destined to become what has sometimes been called a multicurrency country. This apparently refers to when a large share of business transactions are conducted in more than one currency and liabilities of various kinds are mostly denominated in foreign currencies. Indications that have been cited include performance-related wages in the fisheries sector, which represent indirect indexation of wages to the exchange rate; an increasing trend for corporate accounting to be conducted in foreign currencies;  4  BIS Review 18/2004  and the fact that recently even households have been offered foreign currency-denominated loans. Other factors mentioned have been greater globalisation, the growing importance of external trade, and of foreign investment. There is a tendency to paint a rather exaggerated picture of Iceland’s dependence on global trade. Admittedly, foreign trade has been on the increase, but is still quite small relative to the size of the economy. Direct foreign investment is proportionally much lower than in most advanced economies, while the scope of foreign indirect investment is similar to that in neighbouring countries. Foreign currency deposits are an established feature of the banking system in Iceland.

However, if we scale it to the country’s GDP, it was in the range between 6.1 to 6.9% over the past five years. Thus, despite the headway we have made in advancing e-payments, the persistency of cash among the public and small and medium sized businesses remains high. This opens up the economy to risks as cash is still being used by criminals to launder illegal proceeds, as we 3/5  BIS central bankers' speeches  have seen from some high-profile cases over the past year or so. Similarly, this is the preferred mode to finance terrorist activities, which will involve transacting in cash. Therefore, it is timely for us to look at ways to strengthen the controls to mitigate financial crime; namely the cash threshold reporting requirement. When we compare Malaysia with other countries, our current threshold is too high and disconnected from the size of our economy, especially relative to our purchasing power. Hence, it needs to be updated. In this regard, we would like to announce that we will be lowering the daily cash threshold report to RM25,000 effective 1 January 2019. This will bring the cash threshold report in Malaysia to be more at par with other countries. We do not anticipate any impact in terms of economic activity but an increase in effectiveness in taming the black economy that is still heavily reliant on cash transactions.
Before one has managed to gain experience of the effects of a particular package of measures within the framework of the Swedish financial system, it is difficult to assess to what extent it affects monetary policy. Managing uncertainty in monetary-policy decision-making My impression is that we are now in a situation where the conditions for monetary policy are perhaps even more uncertain than usual. However, monetary policy decisions must nevertheless be made, and I therefore want to discuss my views on how this uncertainty should be managed and how it has affected by own stance recently. An obvious measure that I have already mentioned is to try to acquire more knowledge of the sources of uncertainty and in this way reduce the uncertainty we are facing. We of course follow international developments closely and rely on both our own and other analysts’ assessments of what they may entail. With regard to inflationary pressures in Sweden, as I mentioned earlier, we have put a good deal of energy into analysing the available statistics and into gathering new information from companies regarding their pricing behaviour. On the question of household indebtedness, we are currently calculating what effects an amortisation requirement would have. At the same time, we are developing our analysis of how monetary policy and indebtedness will affect the risks in the Swedish economy in the coming period. I think that when making the actual decision, one must be sensitive to the difficulty of quantifying everything that needs to be taken into account. Models cannot capture everything.

Many of the mortgages are also interest-only loans. This means that there is a risk that housing prices and indebtedness will now be driven up to unsustainable levels. For those of us making the monetary-policy decisions, the key issue is what measures will be taken to slow down the build-up of debt and, not least, what effects these might have on household consumption and ultimately on inflationary pressures in the Swedish economy while our monetary policy is taking effect. This is an important source of the uncertainty we have to deal with. Unfortunately, there is so far little experience to learn from with regard to the effects of socalled macroprudential policy measures. This makes it difficult for those making decisions and for those of us assessing what the decisions will be and what effects they may have. 1  “Results from a survey on company pricing”, Economic Commentary No. 4, 2014. 2  The Riksbank’s Business Survey, September 2014. BIS central bankers’ speeches  3  One trade-off concerns “dosage”. What one wants to achieve is that the growth in debt and housing prices slows down, but at the same time one wants to avoid a heavy fall in housing prices. This is a delicate task. Another question concerns the fact that macroprudential policy involves getting banks and borrowers to behave in ways that they would not otherwise, for instance, amortising their loans quicker than they do now.
Although economic activity slowed down rapidly in the second quarter of 2020, the decline in many areas was slightly smaller than was feared during the spring and, above all, the economies began to recover quickly later in the year (see Figure 8). It is unusual for a recession to be so short-lived. Without the comprehensive support programmes, the development would probably have been quite different. Figure 8. Quick recovery after the pandemic Index, 2019 Q4= 100 respective percentage of population aged 15-74 years  Note. Seasonally adjusted data. Sources: Statistics Sweden and the Riksbank. Second, purchases of bonds other than government bonds appear to have pushed down the rates on these bonds. The left-hand panel in Figure 9 shows that rates on covered bonds and local government and corporate bonds fell more than the  20 See Gustafsson and von Brömsen (2021) for a detailed description of all the measures. 21  Covered bonds accounted for almost 60 per cent of purchases, government and municipal bonds for about 20 per cent each, while purchases of corporate bonds were limited to SEK 10 billion, i.e. 2 per cent of purchases. 12 [30]  rate on government bonds after the Riksbank had presented its purchase plans. The figure shows that the risk premiums on these assets were also lower than before the pandemic, which was hardly the intention of the measures.22,23 This indicates that market participants now considered that the authorities had entered the market as guarantor of the risks on these markets. Figure 9.

The expected policy rate 3 months ahead is based on STINA contracts combined with STIBOR T/N and the policy rate. Both this series and the rate on treasury bills are shown as 10-day moving averages. Sources: Nordea markets, the Swedish National Debt Office and the Riksbank. The right-hand panel in Figure 3 instead compares the rate on covered bonds with the expected policy rate.8 According to the portfolio balance sheet theory, purchases of government bonds can also push down rates on other bonds with similar maturities, such as covered bonds. But it is difficult to see any such effect in Figure 3.9 During 2015, the rate on covered bonds instead rose in relation to the expected policy rate. Later during the purchase period, the interest rate differential declined, but to approximately the same level as before the start of the purchases. What conclusions can we draw from these observations? First, we have already observed that the rate on short government securities was lower than the policy rate. This reasonably means that, although the policy rate was cut to −0.50 per cent in 2016, it was not at its technical lower bound.10 The Riksbank's asset purchases meant that two short market rates were established, the Riksbank's policy rate, which was still indicative of pricing in the interbank  8 Covered bonds are issued by banks and mortgage institutions and used for financing mortgages to households. 9 All this is in line with Krishnamurthy and the Vissing-Jorgensen (2011).
In March this year, we issued a circular, telling financial institutions to be alert to additional money laundering/terrorism financing risks when dealing with legal persons and arrangements which are used for wealth management purposes, including family offices. Family offices in Singapore are already substantially covered for money laundering risks. Multi Family Offices, which manage third-party funds and are licensed by MAS, are already subject to the same anti-money laundering controls that we apply on all regulated financial institutions. Likewise, the majority of SFOs in Singapore – which are granted tax incentives by MAS – are required to have an account with a bank in Singapore, and are thus subject to the anti-money laundering controls applied by our banks. The remaining SFOs are likely to have engaged the services of other financial institutions or professional services entities such as lawyers or corporate service providers in Singapore who are similarly required to apply suitable anti-money laundering measures on their clients. MAS will take additional measures to strengthen surveillance and defence against money laundering risks in the SFO sector. Specifically, we will require all SFOs to: notify MAS when they commence operations and also annually; and maintain a business relationship with an MAS-regulated financial institution that would perform anti-money laundering checks on these SFOs. MAS will soon release a public consultation paper on these proposals. Even as we manage the risks posed by wealth inflows, it is important that the management of this wealth benefits Singapore and serves a larger purpose.

It can take various forms, including a carbon tax, in which case part of the resulting public receipts should be invested in low carbon alternatives, and another part redistributed to households in order to mitigate its social effects. A price on carbon should be supplemented with other climate regulations and subsidies to help develop alternatives sufficiently early. The second and opposite temptation is that of “ostrich policies”, which consist of burying our head in the sand to avoid seeing or hearing what is going on. This is not an option either. We are directly concerned, in two different ways [slide 2]. Page 2 sur 8  First as supervisors, insofar as climate-related risks are clearly among the long term risks to which financial institutions are exposed: monitoring these risks is not a “nice to have”, or part of a CSR policy, but a “must have”. Second, we are concerned as central banks in charge of price stability. Just to clarify, we shouldn’t waste too much time here in the legal and political debate on centralbank mandates. Central banks’ core mandate worldwide is price stability, and climate change already affects the level of prices and activity – think of severe drought in Argentina which cost 3% of GDP i, of floods in Pakistan with losses and damages equivalent to 8% of GDP ii, or of the recent rise of food prices everywhere –: hence we have to deal with the effects of climate change on the economy.
Bank of England  Page 16  Chart 9: “Excess deposits” have fallen only slightly but households’ overall financial wealth is down sharply  125 120  Household financial wealth relative to disposable income 410 Household M4 (LHS) 390  115  370  110 350 105 100  330  Net financial wealth (RHS)  95  310  90 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022  290  2022 Q3 data points are estimated. Sources: Bank of England, ONS and Bank calculations. But to varying degrees these cushions have since been eroded. The saving rate has fallen sharply and is now around a percentage point below its long-term, pre-Covid average. Most of the excess deposits remain, it seems. But one might ask why they do – why, at a time of significant reported pressure on household finances (when consumer confidence has been setting new record lows), more of them haven’t been spent – and therefore whether it’s realistic to think that they will be in the near future. As many have pointed out, these deposits are probably skewed towards the upper end of the income distribution (and therefore away from those for whom rises in energy prices are the most burdensome). It’s also worth recognising that other household assets have been weakening sharply this year. Despite higher deposits, households’ overall net financial wealth is quite a bit lower than before the pandemic.

It’s understandable that employees and firms should want compensation for these losses, by raising wages and domestic prices. Unfortunately, and at least collectively, these efforts will not make us better off. The effect is to raise domestic inflation with no ultimate impact on average real incomes. The potential for these “second-round effects” was always uncertain. On the one hand, empirical estimates suggested that, since the 1970s and 80s, domestic inflation had become less susceptible to shifts in real income, perhaps because of improvements in labour-market flexibility. On the other hand, the economy hadn’t experienced a hit to real income on this scale. As it is, monetary policy has had to respond to the rise in domestic inflation as and when it’s become apparent in the data. The justification for tighter policy is clear. It remains the case that most of the overshoot in headline CPI inflation, relative to target, reflects the direct impact of higher import prices. It also remains likely that much of this is likely to fade as those prices stabilise. This appears already to be happening in areas most affected by the pandemic. The path of wholesale energy prices is highly uncertain but here too rates of inflation – annual rates have averaged over 300% in the past six months7 – are in time likely to fall significantly. Indeed financial markets suggest we’re more likely to see negative than positive inflation in wholesale gas prices a couple of years from now.