samchain/econo-pairs-v1 huggingface dataset:
But it can have a stabilising effect in the short run, particularly if inflation expectations are well-anchored so that temporary changes in inflation are not perceived as permanent. However, this means that a conflict may arise between the short run and the long run. A central bank prefers inflation expectations to be stable and low, as this is best in the long run. The central bank may then prefer to conduct a policy that is perceived as sufficiently tight for inflation to remain low, as this creates low inflation expectations. But once inflation expectations are low, it may be tempting to allow the market to be ”surprised” by a more  1  Phillips actually studied the relationship between wages and unemployment, but later studies indicated a similar relationship between inflation and unemployment, Phillips, A. W, (1958) “The relationship between unemployment and the rate of change of money wages in the United Kingdom, 1861-1957”, Economica, 25, s. 283-299. 2  Friedman, M, (1968). “The role of monetary policy”, American Economic Review, p. 58, 1–17. 2  BIS Review 38/2009  expansionary policy that leads to lower unemployment, as it takes time before individuals and companies adapt their behaviour. In this way the central bank risks finding itself in a vicious circle of periods where inflation is allowed to soar, followed by periods where inflation expectations have to be brought down again at a large cost to the real economy.

6 I shall not go further into this, but merely wish to point out once again how important it is to analyse the driving forces behind inflation to be able to explain the monetary policy conducted. This means that we from time to time highlight different measures of inflation. In the current stage it is thus important to distinguish the effects of our own measures which we have implemented to alleviate the effects of the financial crisis on international growth and thus on growth in Sweden. 5  For a detailed discussion of this, see “Should monetary policy stabilise resource utilisation?” Economic Commentary No. 1 2008, Sveriges Riksbank. 6  Inflation measured in terms of the CPIF, which disregards changes in mortgage rates, is around 1.6 per cent on average in 2009. If one also excludes energy costs, the average for 2009 is 2.2 per cent. BIS Review 38/2009  5  Monetary policy is dependent on a functioning transmission mechanism Inflation is affected by the Riksbank’s changes in the repo rate through what is usually known as the transmission mechanism. This influence goes through several different channels, such as short and long real interest rates, the exchange rate and the supply of credit. The impact occurs with different degrees of delay. The repo rate is the interest rate the banks pay when they borrow from or deposit money in the Riksbank for one week against collateral.
In this context, the risk of disruption or a financial crisis matters because of the potential reduction of necessary financial services and economic activity in the future. As I discussed in a talk at this conference a few years ago, a short-term discussion of the balance between firm resilience and the provision of financial services may be reframed over a longer horizon as a dynamic trade-off between the provision of financial services today and in the future.5 This risk/return framework extends that perspective if one cares about the volatility of those financial services across different states of the world and over time. The idea of multiple objectives suggests a policy trade-off with an efficient frontier. In this framework, an efficient financial sector regime can only realize more intermediation if it accepts a higher risk of financial instability and less intermediation in the future. A second premise is that the official sector can impact outcomes relative to this frontier through a combination of rules, regulation, and supervisory policies. For example, a reduction in loan documentation requirements, risk management reviews and supervisory oversight might allow increased lending in the short-run, but potentially lowers loan quality and increases risk over time. A particular set and calibration of policies is efficient if the only way to increase financial intermediation is to accept higher risk of disruption or crisis. Equivalently, an efficient outcome is one where the only way to reduce risk is to accept less intermediation.

Andrew Bailey: Meeting the challenges of a changing world – the view from the Prudential Regulation Authority Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the Association of British Insurers Biennial Conference, London, 9 July 2013. *  *  *  Thank you for inviting me to speak today. It is just over three months since the new system of financial regulation in the UK came into being. There are over 700 insurers in this country now subject to prudential supervision by the PRA and conduct supervision by the FCA (in addition, insurance brokers are entirely supervised by the FCA). Today, I want to talk about how the PRA is going about the prudential supervision of insurers. There are good reasons to argue that the insurance industry has been relatively little affected by the financial crisis in terms of instability in the industry, but of course that does not extend to arguing that the industry is unaffected by the consequences of the financial crisis, that could never be the case. So, there are very real challenges for insurers. Why do we single out banks and insurers for prudential supervision by the PRA?
On the contrary, it is by ensuring that inflation and inflation expectations increase that the Riksbank is able to contribute to an increase in the interest rate level to more normal levels. Monetary policy is having an effect but hitting strong headwinds Allow me to conclude by saying a few words about the effects monetary policy has had, and how I see inflation developing in the future. Many point out that inflation is still low despite the very expansionary monetary policy, and at times it seems that some take this as proof that the monetary policy is now ineffectual. I think that this is a far too simple interpretation, however. In reality we are seeing numerous signs that monetary policy is having the intended effect. One important observation is that the cuts to the repo rate to negative levels have had a broad impact on other market rates, including lending rates to households and companies. Households and companies have thereby had more disposable income to spend on consumption and investment. Another observation is that the negative interest rate does not appear to have led to any clear disruptions on the markets. 15 A negative interest rate is primarily a phenomenon on certain financial markets, the participants of which are specialists who see that things are mostly working the same as when the rate is positive. Households can read about negative rates in the newspaper but have, as before, zero interest on their bank accounts and positive interest on their mortgages.

Each has its advantages and limitations, stemming from differences in their geographic and political situations, and their regulatory and corporate environments. They will surely compete amongst themselves to gain market share and critical mass, and anchor in Asia some of business which presently goes to London and New York. But in my view they also have  2  BIS Review 50/2001  considerable scope for co-operation, as each will occupy a distinct market niche and none can dominate in all aspects of finance. Singapore will never have the advantage of Tokyo's large economic base. Nor do we have Hong Kong's physical proximity to China. But we seek to provide a world-class regulatory environment that responds to the needs of global markets and global institutions, and the most efficient infrastructure for businesses to use as a platform for all of Asia. Singapore plays host to some 6,000 multinational corporations and the financial institutions that are their global advisers, many of which use Singapore as their regional headquarters. And our strategic location at the heart of Southeast Asia and within 7 hours of key markets in Northeast Asia, South Asia, and Australia positions us well to serve as a financial centre for all of Asia. Singapore While the external environment is not within Singapore's control, our strategies and policies are. We believe that the right strategies and policies will help us to capitalise on opportunities and overcome disadvantages arising from our size.
Per cent of labour force 3) Projection  Sources: TRCIS, the Directorate of Labour and Norges Bank JB 7. februar 2003  Annual wage growth1) in 2002 Forecasts made at different points in time by Norges Bank, Statistics Norway and the Ministry of Finance. Per cent 7 NB  SN  MF  6 5 4 3 2 1  01 Ap r0 1 Ju n 01 Au g 01 O ct 01 De c 01 Fe b 02 Ap r0 2 Ju n 02 Au g 02 O ct 02  Fe b  De c  00  0  1) Statistics Norway: Wages per normal person-year Sources: Norges Bank, Statistics Norway and the Ministry of Finance JB 7. februar 2003  Relative labour costs: deviation from historical average 1970-2003 25  25  20  20  15  15  Local currency  10  10  5  5  0  0  -5  -5  -10  Common currency  -15 1970  1975  1980  1985  1990  1995  -10 -15  2000  Sources: Statistics Norway, TRCIS/IMF and Norges Bank JB 7. februar 2003  Manufacturing employment, 1970-2001 In thousands employed 45 0  40 0  35 0  30 0  25 0 1970  1 9 75  Source: Statistics Norway JB 7. februar 2003  1 98 0  1 98 5  19 9 0  1995  2000

What was once something that was inhibiting her business line is now something that is helping her protect it. She may find that compliance as a constructive and independent partner can offer ways to avoid problems . Greater clarity about roles is a good starting point. Here are some additional ways in which compliance may strengthen its influence while preserving its independence. First, compliance should insist on getting involved earlier. Influence delayed is influence denied. If a firm is considering restructuring a unit or designing a new product, compliance should be at the drafting table with an opportunity to hear and to be heard. If a new trading strategy is to be implemented, compliance should review sooner than on the eve of execution. I understand that time is money, but investing time early in a compliance review may save years of investigation later. Second, compliance should keep an eye out for larger, more systemic compliance risks and issues. As a centralized function, compliance is well-situated to connect the dots and identify broad issues that are not always visible to management. The compliance function typically serves the entire organization, and can use that enterprise-wide view to spot systemic problems. 3/6  BIS central bankers' speeches  One type of systemic compliance risk that I think about is what Gillian Tett of the Financial Times has called The Silo Effect. Silos can result from the specialization common in hierarchical organizations working in highly technical fields. Silos are at risk of breaking away from the main.
However, some problems remain with regard to the institutional settings of the labour market, which may have to some extent inhibited the full realisation of employment gains from greater competition and innovation as illustrated by the still relatively high unemployment rate 7.7% in 2006 3 . All in all, the rise in employment did not cancel out structural weaknesses of labour markets and there is still considerable room to increase the level of labour resource utilisation in Europe. - Productivity is the other major factor determining growth. Over the last decade, the diverging trend in hourly labour productivity growth has been the main reason explaining the growth differential between the euro area and the US. During the 1980’s and the first half of the 1990s, hourly labour productivity in the euro area grew on average by 2.4%, then it decelerated to 1.3% between 1996 and 2006. By contrast, US hourly labour productivity growth rose from 1.3% to 2.1% over the same period. At the sectoral level, the gap in labour productivity growth between the euro area and the US has been mainly driven by some market service sectors intensively using Information and Communication Technologies (ICTs) namely the wholesale and retail trade sectors as well as the financial sectors. In contrast to the US, in these two sectors, labour productivity growth significantly decelerated in the euro area over the last 15 years.

In the wholesale and retail trade sectors, hourly labour productivity significantly accelerated in the US from 0.7% to 2.6% over the periods 1980-1995 and 1996-2004, while at the same time it decelerated in the euro area from 2.3% to 1.3%. In the financial sectors, over the same periods, hourly labour productivity growth has also accelerated in the US and has been roughly 4 times higher than the growth rate observed in the euro area over the period 1996-2004. Several causes have been mentioned to explain this downward trend in the euro area. Specific policies aiming at increasing employment particularly in the unskilled segment of the labour market may have contributed to the observed slowdown in labour productivity growth. However, this apparent trade-off between labour utilisation and productivity is likely to be a temporary phenomenon that should progressively fade, when the economy reaches a higher “equilibrium” labour/output ratio. There is another major reason that explains the big difference in the rate of labour productivity growth in Europe compared with the US, which in my view is a major policy issue, namely the fact that the European economy, being more inflexible, does not fully take  2  OECD Employment Outlook. Data for 2006 are partly estimates. 3  There is in particular considerable scope to raise the employment rate of young people and further reform needs to be undertaken to achieve the more ambitious long-term objective of a 75% overall employment rate.
Certainly, more can also be done to increase awareness and further increase the take-up rates for financial assistance programmes introduced by the Government such as Skim Rumah Pertamaku (SRP), Skim Jaminan Kredit Perumahan (SJKP), Skim Deposit Rumah Pertama (MyDeposit), Skim Pembiayaan Fleksibel for PRIMA homebuyers and Skim Pembiayaan Fleksibel (SPEF) for PR1MA homebuyers. We only have a few hours ahead of us to discuss a very complex and important issue that has no easy solutions. We need to think creatively and act collectively, and today, we have an opportunity to do both. I am therefore excited to hear the insights from our distinguished speakers, as well as the constructive exchange of ideas between everyone here today. As we do, we should keep in mind that the goal of affordable housing is not just about owning property; it 3/4  BIS central bankers' speeches  is about building stronger and more resilient communities – with greater opportunities created for those within them to succeed in life. This could well change how we see the problem and approach its solutions. 4/4  BIS central bankers' speeches

It is the role of monetary policy to ensure that the nominal appreciation of the króna as a share of the real exchange rate rise is conducive to bringing inflation down to target by the time the adjustment is over. *  *  *  The economic policy framework is determined by the collaboration between the authorities and the International Monetary Fund (IMF). According to the IMF programme, the main task of monetary policy at the outset was to arrest the fall of the króna and then promote exchange rate stability, but without formally resorting to a fixed exchange rate regime, as it was considered desirable that the króna should appreciate afterwards. This strategy was triggered by the currency crisis, which has sent the exchange rate far below the levels previously thought likely, let alone desirable, and by the large share of exchange rate-linked loans in private sector debt. The problem, however, was that achieving exchange rate stability with conventional tools, such as interest rates and foreign exchange market  2  BIS Review 39/2010  intervention, would require astronomical interest rates and/or larger foreign exchange reserves than Iceland had, partly because of foreign investors’ large holdings in krónur. As a result, it was decided to impose temporary capital account restrictions, in the hope that they would provide monetary policy with the elbow room to base its decisions on the slack in the economy while establishing exchange rate stability. Another goal was to create some shelter for private sector debt restructuring.
There are diminishing returns in terms of the benefits of ever higher capital requirements. Setting the bar at too high a level would increase intermediation costs too much and drive activities offshore or into areas that are not as closely regulated. At some point, higher requirements would not make the financial system safer, just the regulated sector much smaller. On this last point, some argue that the new standards are too severe. They argue that, in the short run, the higher standards could lead to a significant constraint in credit that could hurt the nascent economic expansion. And, they argue, in the long run, that the higher capital standards will inevitably drive up lending costs and that this will hurt economic performance. Although I believe the new standards do impose some real costs on the financial system in order to achieve real benefits, I believe that concerns over the costs are exaggerated. Turning first to the issue of the transition to the new regime, we cannot precisely predict the size of the adjustment costs as they will depend importantly on the strategies bank managers employ to meet the new requirements, and how bank investors respond to these actions. Nonetheless, I believe the transition is likely to be quite manageable for three reasons. 4  BIS Review 131/2010  First, many of the large U.S. banks already have large amounts of tangible common equity. In part, this represents the regulatory response during the crisis.

This can be seen in our Central Bank International Account Services, where we have more than $ trillion in foreign assets under our management. Some of those assets glisten on the bedrock of Manhattan. The gold vault at 33 Liberty Street remains the world’s largest depository of monetary gold held on behalf of foreign governments, central banks and official international organizations. This international orientation was also very much in evidence during the crisis as we negotiated foreign exchange swap agreements with a number of foreign central banks and then operationalized the provision of dollar liquidity worldwide through a coordinated system of dollar auctions. Third, and perhaps most importantly, we have an unusually talented and dedicated group of people working at the Bank who are committed to promoting the mission of the institution and serving the public interest. While we may not, on occasion, be as nimble as we might like, the attitude of our staff is to always find a way, to do whatever it takes (within the law and the scope of our responsibilities, of course), and to not rest until we have come up with the best plan of action. That attitude was most clearly and publicly evident during the Bank’s response to the financial crisis, where we played a critical role within the System in preventing a financial panic from turning into a world-wide depression. We continue to display that spirit each and every day at the Bank.
Basic industries also outperformed other industry in terms of productivity, with vigorous productivity growth in particular during the second half of the 1980s. In the iron and steel industry, for example, productivity rose sharply between 1977 and 1984, reflecting extensive rationalisation measures especially as regards the manufacture of merchant steel. As I said earlier, Swedish capital formation as a percentage of GDP was halved in the mid 1970s. Thus, factors other than a good supply of cheap real capital have been behind the favourable development of basic industries. Our country has specialised in capital-intensive process industry based on inexpensive energy and a good supply of raw materials, notably wood. Thus, the driving force has mainly been the supply of energy and raw materials rather than cheap real capital. Another important factor is growth in total factor productivity. This is a result of technological progress and essentially measures how much production can rise during a given period without needing to increase labour and capital. Total factor productivity depends in turn on how many resources the country and industry invest in R&D. In 12 of 19 industrial sectors, R&D intensity is higher in Sweden than in the other OECD countries. Relative R&D intensity is particularly high - that is R&D compared with corresponding sectors in other countries - in basic industries, i.e. in the steel and paper industry. Besides a cheap supply of energy and raw materials, the success of basic industries is also due to the relatively sharp focus on R&D compared with other countries.

So, as regards net investment, in other words the contribution to capital formation, this was more than halved as a percentage of GDP in the mid 1970s. This meant two things. First, capital growth per employee, or per hour worked, fell. For a number of years, investment dropped so much that capital per employee in the business sector actually declined. In other words, each employee worked with less capital. In order to illustrate what capital per employee means, we can take an extreme example, namely what a lone worker can accomplish when digging with a spade and iron bar compared with a hydraulic excavator. The latter represents considerably more capital per employee than just digging with a spade, as well as substantially less physical effort for the worker. Therefore, we should expect productivity growth to fall when capital per employee declines. But there is also another indirect effect. With new capital, new technology is introduced into the production process. Investment is the means for putting new technology and research into practical production. Through investment, new methods and new technology are ushered into production processes. For this reason, we should expect less technological progress in production when capital formation falls. An excavator is so much more than a large number of spades; it represents entirely new technology that affects the whole production process. Figure 1 shows that capital formation, net investment as a percentage of GDP, fell in the mid 1970s from around 15 per cent of GDP to about 5 per cent.