samchain/econo-pairs-v1 huggingface dataset:
This is very similar to the estimated impact of domestic credit growth, suggesting that foreign credit growth could even be as important as domestic credit growth in explaining movements in each country’s risk of a banking crisis. The research also finds that the effect of foreign credit growth on domestic financial stability is stronger for countries that are more financially open. Taking all of this together underlines the need to think globally. At first blush, this may appear to sit awkwardly with the largely domestic nature of macroprudential tools that have been developed thus far. But there are number of ways in which international considerations form part of the calibration of those tools. Acting locally – the use of domestic macroprudential tools to mitigate risks from abroad  The most obvious way to take international considerations into account is by treating risks emanating from abroad as an important input when setting domestic macroprudential policy. At the Bank of England, for example, spillovers from the crystallisation of global risks play a key part of the design of the Bank of England’s annual stress tests, which are used to inform the Financial Policy Committee’s (FPC) decision on 8  the countercyclical capital buffer. By building resilience to stress, the countercyclical capital buffer allows the banking system to remain an absorber, rather than an amplifier, of shocks, and reduces the probability of a downturn abroad becoming crisis at home. 9  However, we cannot go it alone.

In the scenario where all credit is the economy is provided by banks (the blue line), the policymaker can use this tool in response to a 15pp increase in credit growth in the domestic economy over three years to reduce the probability of a crisis to well below 1% before the cost (in the form of lost output) becomes material. However, if 25% of credit in the economy is provided by market-based finance (red line), the policymaker struggles to reduce the probability of a crisis significantly below 2.5% as tightening the countercyclical capital buffer does not reduce the provision of market-based finance. Acting locally to address the risks of market-based finance  So how can we address risks emanating from global, market based finance? This is the subject of several panel discussions over the course of this conference, and indeed major international workstreams including of the FSB. So rather than pretend to have the answers, I will limit myself to two simple observations about how policymakers acting in their own best interest can help reduce these risks. The first is that by building strong domestic institutional frameworks and deepening domestic capital markets, recipients of global flows can reduce their susceptibility to volatility in those flows. Central bank credibility, a robust macroprudential framework, and fiscal stability all reduce the risk of a sudden stop, and liquid domestic capital markets make it easier to absorb larger inflows. As such they are prerequisites to being able to enjoy the benefits of open capital markets sustainably.
However, we need to go further and ensure that markets understand the reasoning behind the Governing Council’s decisions. To that purpose, we should give a sense of the discussion and the main arguments. In the jargon, the aim is to clarify the Central bank’s “reaction function” and allow financial markets and the public to form reasonable expectations about the future policy. This in turn gives us the capacity to influence interest rates at longer maturities and steer broader financial and economic conditions. It is too early to tell exactly how those “accounts” will take shape. The Governing Council and the Executive Board of the ECB will be testing different possibilities. Many issues have to be considered. We need to preserve the collegiality of the Governing Council’s deliberations, and the ability of each and every member to freely express and exchange views, in order to let them be influenced by the course of discussions. This is essential for the effectiveness of our collegiate decision-making. Like any committee, the Governing Council benefits from the diversity of views and perspectives that are brought to the table. As you all know, members sit and express their views in a personal capacity; they must consider the situation of the euro area as a whole and are forbidden by the Treaty to take any instruction from any Government. We need to take proper account of the specific institutional setting of the euro area and the unique communication challenges in a multi-country monetary union.

It suggests a sharp bifurcation in demographic trends in developed and emerging economies. Among advanced countries, an ageing population results in a decline in the middle-aged share, from a peak today of almost 30% to around 25% by 2050. For developing economies the reverse is true, with a continuing rise in the fraction of middle-aged individuals from 20% today to around 25% by 2050. Cross-country correlations suggest a relationship between this prime-saving cohort and saving behaviour. Chart 22 suggest that every 1 percentage point rise in the middle-aged population share raises the national savings rate by around 1.75 percentage points. 5 Taken together with emerging population trends, this suggests some potentially important life-cycle pressures on the global pattern of savings in the period ahead. To bring these pressures to life, Chart 23 projects saving rates in a selection of countries out to 2050 based on population and GDP projections. This is plainly a gross over-simplification. These projections take no account of a whole host of other factors that may push in the other direction, including later retirement dates which may boost saving in countries with an ageing population, and falls in saving rates in emerging countries as the social safety net is widened. But based on demographic and convergence trends alone, saving rates in the BRICS, already high, are projected to continue their ascent.
The drivers of this change in lender behavior are complex, but are likely to include a combination of more regulation and stress testing of banks’ portfolios, more conservative practices by the government sponsored enterprises Fannie Mae and Freddie Mac—which tend to dictate underwriting practices for a large part of the market—and banks’ own experience from the crisis period, when so many lenders faced extreme stress and residential real estate seemed to be the main culprit. The fact that housing prices declined so much and that the foreclosure process was so often drawn out may also have caused lenders to reassess how much to rely on the housing collateral as security for their loans. In response, lenders may have shifted their underwriting to put more weight on the creditworthiness of the borrower rather than relying mainly on the value of the collateral. This is consistent with the fact that mortgage credit is now much harder to get for lower credit-rated borrowers than during the housing boom. So, what’s next? When and to what extent will households again start tapping home equity to fund their consumption? Answers to these questions will determine the degree to which housing equity growth will add to income growth as a fundamental driver of consumption. We do not want to repeat the experience from the housing boom, but there are prudent ways for households to access their housing equity.

Over the past two decades, there has been a significant change in the financing of higher education—with state and local funding covering a smaller share, and students and their families bearing a greater proportion of rising college costs. While the federal student loan program has undoubtedly helped mitigate the impact of higher costs on college enrollment, more students now leave college with higher amounts of debt. At the same time, college dropout rates remain stubbornly high, and empirical evidence indicates that graduates from some colleges have had trouble finding good-paying jobs. Another important question concerns the consequences of growing student debt for the overall economy. To investigate this question further, we linked our CCP dataset to student enrollment records from the National Student Clearinghouse in order to analyze the relationship between homeownership, educational attainment and student debt. Not surprisingly, our research shows a strong positive association between educational attainment and homeownership, consistent with the fact that higher educational attainment is associated with higher average earnings. Interestingly, this relationship appears to hold irrespective of family background, suggesting that colleges may be successful in “leveling the playing field” across students from different socioeconomic backgrounds. At the same time, our analysis reveals that those with significant student debt are much less likely to own a home at any given age than those who completed their education with little or no student debt.
2  For more analysis of the impact of quantitative easing, see: David Miles, “Interpreting Monetary Policy”, speech at Imperial College Business School, London, 25 February 2010; and Spencer Dale, “QE One Year On”, speech at CIMF/MMF Conference, Cambridge, 12 March 2010. BIS Review 31/2010  3  That brings me naturally to inflation, the MPC’s mandated target. One might expect that, after such a sharp downturn, inflation would have dropped back. Indeed, inflation had fallen as low as 1.1% last September. Since then, it has moved up sharply, reaching 3.5% in January and triggering an open letter of explanation from the Governor to the Chancellor. That volatility in inflation can be explained in terms of a variety of factors impacting on the price level: the restoration of the standard rate of VAT to 17.5%; recent movements in the oil price and a year earlier; and the pass-through into consumer prices of the higher import prices associated with the depreciation in sterling. When setting monetary policy, the MPC looks through effects that can be expected to affect inflation only transitorily, to the underlying determinants of inflation in the medium term: inflation expectations; and the margin of slack in the economy. Despite recent volatility in actual inflation, inflation expectations, according to a variety of measures, have remained stable and reasonably well anchored at levels consistent with the target. There is, however, considerable uncertainty about the extent of the downward pressure on inflation from economic slack.

I am "cautiously optimistic" that the overseas environment will improve as we move through the year, and that by this time next year we here in the UK will have seen a return to somewhat stronger and better balanced growth, with unemployment not far above its recent lows, and with continuing low inflation. If that is indeed how things turn out, we will have weathered the international storm as well as anyone could reasonably have expected. So it is in the hope - and indeed the expectation - of improving prospects for the internationally exposed sectors of British manufacturing that I ask you all now to rise and to join me in a toast to the Engineering Employers Federation, and it's President, Mr Paul Lester. BIS Review 10/2002  3
Given the impressive amount of studies produced every month in these areas since the financial crisis broke out, I am fairly hopeful that it will be possible to gradually incorporate these aspects in a fruitful manner into practical inflation-targeting policy.7 But there clearly remains a lot to do. But what is important is that this is all about continuing to develop the inflation-targeting policy. The financial crisis should not be regarded, as some would appear to claim, as a sign that the inflation-targeting policy has been an unsuccessful monetary policy “experiment” and a blind alley – this is not the case. Important to plan crisis management in advance, but this is rarely the case I have so far mainly talked about preventing crises and in particular what role monetary policy should play. Let me now go on to focus on the challenges with regard to managing the situation once a crisis has occurred. How one manages cross-border financial crises – or not – is a question that is very topical right now and will probably remain so for a long time to come. My first thesis here is that when one allows a financial system to grow and the dependence between the financial agents in different countries increases, one should carefully consider what regulations and institutions are needed to manage different crisis situations.

Both the force and speed of action has increased substantially. But all of this concerns how one can avoid crises, not how they should be managed once they occur. Nor did the Larosière group discuss, other than marginally, crisis management or winding up insolvent banks. However, the European Commission’s newly-published proposal does deal with this, and so do new UK and US legislation that have arisen since the crisis. This is, of course, an important step in the right direction. Greater clarity with regard to how banks should be wound up will to a great extent affect both how the supervision is designed and how the banks act. As I said, it is wise to begin at the other end.11 …but difficult with cross-border agreements However, the focus in the legislation, naturally enough in the UK and US legislation, but also the European proposal, is on how to manage national banks in distress. The cross-border problems are avoided to a great extent, even in the Commission’s report. The fact that an integrated financial system in Europe also requires methods to resolve cross-border crises remains to be discussed. And of course this is connected to what I mentioned earlier, namely that it is much too sensitive an issue to discuss how the costs should be divided. 10  The supervisory heads do not have the right to vote in the ESRB. A 2/3 majority is required for recommendations and decisions on publishing warnings and recommendations.
The rapid, unconventional and coordinated response by central banks at the peak of the crisis undoubtedly averted a collapse of the system, and the vigorous measures to maintain the functioning of financial systems have been largely effective – so far. Nevertheless, the crisis itself, and the very scale of the response, have brought central banks more into the foreground than ever before. As the full implications of what has happened unfold there will undoubtedly be questions about their role and the policies they pursue. The appropriate response to this is for central banks, international organisations, and government authorities to seize the initiative for reform so that financial crisis does not become a crisis of confidence in the system itself. Since, as recent events have resoundingly demonstrated, the financial system is a global system, the reforms must be organised along international lines. The limited achievements in international co-operation following the Asian financial crisis might make us sceptical. But, in fact, the signs are positive. Co-ordination among central banks in crisis management has been effective. Technical blueprints for regulatory reform on an international scale have already been drawn up. And the political will has been demonstrated in the commitment by the world’s largest economies to implement far-reaching reform. One area of progress is the movement towards greater participation by developing economies in international forums and in the process of reform.

As Governor Zeti has persuasively argued, Islamic finance encourages business activities that generate legitimate profits, and rests on principles of fairness, shared risk and ethical practices.1 There is, I think, much for us all to reflect on in this when considering how badly things have gone wrong recently in what might be called "traditional" finance. No institution with such a long history can have escaped controversy, and BNM has had its fair share. What is interesting, however, is that perhaps the most controversial action by the Malaysian authorities in recent years – the response to the 1997-8 Asian financial crisis – has now come to be understood as appropriate and effective. At the centre of this response was the imposition of capital controls to contain speculative capital flows, stabilise the ringgit, and give the economy a breathing space. This was widely criticised internationally as a retrograde step. Yet it was a limited and temporary measure, which, along with other policies succeeded in stabilising the system and providing the conditions for economic recovery. The role of Bank Negara in promoting international understanding of this measure was crucial to its effectiveness. It is not, of course, my purpose to recommend capital controls as a general solution to financial crisis. The lesson here is that unorthodox measures can be effective, provided that they are well thought out and properly implemented.
While many of these initiatives are driven by the public sector, their benefits will only materialise if the private sector use them. And it is important that the private sector can shape them. The new Industry Taskforce on Payment System Interoperability and Extension, chaired by Ulrich Bindseil from the ECB, will provide a valuable forum to discuss and shape implementation and market practices. Page 6  Cross-border data exchange and message standards Message standards are crucial to the continued evolution of payment services. Currently, the data-carrying capacity in payments messages can be limited by the network technology developed in the last century. When developing the message formats a generation ago, each local infrastructure focussed on delivering the best solution for their own market. Over time, the type and structure of information transmitted has diverged, both between jurisdictions and across infrastructures. And the amount of data has not increased to meet the demands of this data-hungry world. Adopting ISO20022 worldwide will be a gamechanger. It is a common, global, non-proprietary standard. And if widely adopted it can enable payments to include a much richer set of information (for example the purpose of the payment, tax information, and an address of the house being bought). That can improve efficiency: by helping process more payments without the need for manual intervention and harmonising data transmitted through international payment systems and ultimately avoid unnecessary delays and costs in the cross-border payment journey. ISO20022 can also support regulatory compliance and enhance financial crime and fraud detection.

In January, the Bank forecast that inflation would average 2.6 percent between 1997 and 1998, and 2.3 percent in the course of the year. It seems clear that inflation during the first quarter of this year has been lower than expected in January. Government Finances In 1997, the Treasury recorded a welcome surplus of 1.3 billion kronur on a cash basis despite tax cuts, a rise in the wage bill and special interest payments associated with government bond redemptions. In order to compare the outcome with the budget it is necessary to exclude the special interest payments of 3.5 billion kronur. Thus adjusted, the Treasury’s surplus was 4.7 billion kronur. A Treasury surplus had not been recorded since 1984. On an accrual basis, which includes accrued interest and pension liabilities, the Treasury’s finances appear to have been close to balance in 1997. The Treasury repaid debt during the year. Amortization of foreign debt exceeded new borrowing by 6.5 billion kronur, or the equivalent of 5 percent of the Treasury’s foreign debt; this marked the first time since 1986 that amortization of foreign debt exceeded new borrowing. Domestically, new borrowing exceeded amortization by 3.4 billion kronur. While this turnaround in the Treasury’s finances is certainly to be welcomed, it is, nonetheless, a somewhat mixed blessing.
Immigration can be divided up into people who intend to stay and people who are in a country temporarily, for  19 See also Olli Segendorf and Theobald (2019) for a more in-depth discussion. 16 [24]  instance, to fill a shortage of labour. One problem with the official statistics is that they in many cases miss the temporary immigration. This can also make it more difficult to assess resource utilisation. If the supply of labour is greater than the measurement in the official statistics, there is more spare capacity than the statistics reveal, that is, resource utilisation is not as strained as the official statistics would imply. An improvement in the statistics in this respect would be desirable so that we have a better, more correct, basis to make our monetary policy decisions, for instance. Falling long-term real interest rates in Sweden and on the global financial markets I began by showing that the long-term real interest rate is important to the longterm level of the policy rate. In small open economies like Sweden, with free movement of capital, interest rates are strongly affected by interest rates abroad. This means that the long-term real interest rate in Sweden is largely determined by interest rates abroad. One difficulty in the monetary policy analysis is to calculate the long-term real interest rate, since this is not directly observable. There are many different methods for calculating it in the literature, but none that is generally accepted.

Sources: The National Institute of Economic Research, the National Mediation Office, Statistics Sweden and the Riksbank  This development has not been unique to Sweden; we have seen similar tendencies in several other countries, see Figures 4a–d. In the euro area, the other Nordic countries and the United States, both inflation and wage increases have been lower after the financial crisis. At the same time, resource utilisation in terms of labour shortages has been at roughly the same level as prior to the financial crisis and policy rates have been very low in an historical perspective, as in Sweden. The United Kingdom stands out with a somewhat higher inflation and Germany stands out with higher resource utilisation following the financial crisis. No consensus has yet emerged among economists and researchers regarding the causes of the relatively low outcomes regarding prices and wages, either in Sweden or abroad. During the years immediately following the financial crisis, the low inflation in Sweden was said to be explained by weak international economic activity combined with low energy prices that held back cost increases. Other causes were a stronger krona and companies having squeezed their margins to a greater extent than previously. 10 On a general level, the increasing globalisation and technological developments, with an increasingly rapid digitalisation, are probably important causes behind the low increases in prices and wages. Now that more products are being produced in  10 See Andersson et al. (2015).