samchain/econo-pairs-v1 huggingface dataset:
In view of the harmful long-term effects of expansionary and stop-and-go fiscal policies, the degree of discretion of fiscal policy-makers had to be limited and clear yardsticks for responsible policy choices had to be provided (see Lucas, 1980). Europe’s solution was the Stability and Growth Pact, a rules-based fiscal policy framework binding all Member States and which is essential for the orientation and coordination of national fiscal policies towards sound and sustainable public finances. However, the notion of “the law as the guardian of economic wisdom” (Herdegen, 1998) is widespread: the fiscal responsibility laws in New Zealand, the constitutional obligations to produce balanced budgets in all US Federal States (except Vermont), or the “Golden Rule” of the German Basic Law which prohibits the government from borrowing more than it spends on investment, are all based on this reasoning. It is the same reasoning that led Odysseus to have himself tied to the mast of his ship in order to achieve his long-term primary objective to return home and effectively avoid the temptations of the sirens songs and the potential short-term benefits but also long-term risks they entailed. VII. Concluding remarks  I have covered a lot of ground and I should not further test your patience. But the topic of my presentation involved a variety of issues and policy dimensions. The relationships between economic performance, market structures, economic institutions and social values are complex and characterised by a multitude of direct and indirect interlinkages.

In fact, it has been estimated that one half of the dramatic increase in European unemployment from the golden days of full employment in the 1960s to the high and persistent unemployment levels of the mid-1990s can be explained by institutional factors (Nickell et al., 2002). Which “institutions” are particularly relevant? Let me mention three of them: first and foremost, employment protection legislation. Second, tax-benefit-systems, which determine the so-called tax wedge between workers’ gross and net incomes, the transfers to the unemployed, and the tax burden on the employed. Third, wage bargaining structures and procedures and the role of trade unions. Let us consider employment protection legislation. Workers can be protected against unemployment in various ways: either by strict regulations against layoffs, or through unemployment benefits, or a combination of both. The two are interrelated: in theory, employment protection legislation need not be very restrictive if an unemployed worker can rely on generous benefits, and vice versa. What does the empirical evidence tell us? Generous protection of “insiders”, i.e. those who have a job, seems to have a negative impact on overall employment, since it affects the probability of employment of the “outsiders”, especially women, the young and the long-term unemployed.3 The validity of this proposition is illustrated in Chart 6 on the basis of the evidence from European countries. The lower job turnover and hiring also increases both the duration of unemployment and the proportion of long-term unemployed.
Zeti Akhtar Aziz: Developing a strong and dynamic SME sector Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Launch of SME Credit Bureau, Kuala Lumpur, 16 April 2009. *  *  *  Introduction It is my pleasure to be here this morning to speak at the launch of the SME Credit Bureau. The development of a strong and dynamic SME sector is a priority on our national agenda to promote a vibrant and active SME sector that will contribute towards generating a sustainable and balanced economic growth. Malaysia has therefore adopted an aggressive SME development programme to strengthen the viability and capacity of the SMEs to increase their contribution to high quality growth of the economy. Over the recent five years, the SMEs contribution to economic growth has increased. Indeed, the SME contribution to economic growth in the manufacturing sector has increased from 6% of real gross domestic product in 2001 to 8.4% in 2005. The overall SME contribution to the gross domestic product has increased to 32% while 19% of total exports are by SMEs. Experience has shown in several of the developed countries, that SMEs contribute to at least half of the gross domestic product. Benchmarked against this, there is clearly a significant potential for SMEs in Malaysia to increase their contribution to the economy. Economic outlook and policy response The year 2009 is likely to be a difficult year for businesses.

9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Innovations in retail payments can transform checkout and ecommerce platforms can open new financing to SMEs. Innovation in, and greater connectivity across, wholesale payment systems have the potential to cut the costs of doing business across borders and unlock new trading opportunities. Intelligent use of big financial datasets could transform credit markets, closing the gap between financing opportunities available to small companies and those enjoyed by their larger competitors. Given their position at the heart of the financial system, central banks have a crucial role to play in supporting the development of this new finance, not least through creating the new infrastructure that it will require. 32  Monetary Policy’s Role in Managing the Transition As a former central banker, Whitaker would have recognised the importance of maintaining price stability during periods of large structural change. The appropriate setting of monetary policy will be influenced by the structural changes wrought by the Fourth Industrial Revolution, including in the labour market, by its impact on price dynamics and on the equilibrium rate of interest. To be clear, as these structural changes are real in nature, monetary policy cannot prevent them, and it would be unwise to attempt to accelerate them. For example, running the economy hotter is unlikely to be effective at increasing the rate at which workers displaced by technology can find new roles because it does not address the underlying frictions, particularly the lack of suitable skills.
What the country should do is to plan for the future, so that Sri Lanka could conveniently get itself integrated to the globalised services industry. As argued by Thomas L Friedman 9 , the world has become flat and the world nations, including USA, should recognize the flattening process of the world. If a country stubbornly and arrogantly refuses to accept this fact, it stands to lose, while others continue to move forward on an accelerated high gear. India, being one such country, has identified many areas which were previously non-tradable and took action to promote them actively. The advancements in ICT through a wired globe have enabled India to do so at a rapid pace. As indicated by Friedman, business process outsourcing (BPO) coupled with such personal services as secretarial services, provision of tuition, accounting and tax advisory services, on-line medical consultancy etc. are booming in the southern part of the Indian sub-continent, creating wealth and opening new opportunities to otherwise unemployed educated youth. Though India started its ICT much later than Sri Lanka, its export of software now amounts to US $ billion per annum. India’s present plan is to raise it US $ billion by 2010. This indicates the tremendous capacity which ICT alone would have for a country to create new wealth for its citizens. Ireland and Israel have exploited this opportunity profitably.

India’s ascent to a formidable global ICT power has been mainly driven by economic reforms, establishment of a free market democracy, perseverance of some unbeatable private entrepreneurs and above all, continuous human capital development in engineering and electronic fields. 10 The last development came from the high educational standards maintained by a web of reputed state owned Indian Institutes of Technology (IITs) and permission given to private sector to set up higher learning institutes. This is definitely an eye opener for Sri Lanka. Even in the midst of growing evidence from India and elsewhere that privately owned institutes of higher learning could make a significant contribution to the globalization of education and training, Sri Lanka still keeps education as a closelyguarded relic in the public sector. As a result, its capacity to meet the demand for higher education is woefully low with one place being offered to satisfy about 16 aspirants. This has led aspiring youth to seek higher education in other countries at a high personal investment cost. Since every investment should yield commensurate returns, it also has compelled them to seek employment elsewhere. Whatever the intention, the closely protected public university education system has become a waste of scarce public resources, since only a fraction of the total registered students is reported to be in 11 attendance in classes. Hence, to gain reputation as a global centre of learning, it is necessary that the Sri Lanka’s university education system should undergo a complete overhaul and reform.
I believe we should continue to play a support and resource role, in the further development of tools, such as the Code of Banking Practice and guidance on procedures, for the handling of complaints, and a monitoring role in ensuring that the system of self-regulation developed by HKAB and its members is working effectively. We can also help from an educational point of view by clarifying the options that members of the public have should they wish to complain about banks and by disseminating information on this through leaflets, our website, and other tools. A part of this clarification must set out the limits on what the HKMA can and will do in the taking on of banking consumer complaints: we are currently working on such a clarification. Self-regulation in the market, with support and guidance from the regulator, is, in my view, a sensible and appropriate way forward for a market economy such as Hong Kong. I am therefore very pleased that the general consensus seems to point in this direction. Whether this approach succeeds depends very much on the effort and energy put into it by the banking sector. It will also be influenced by trends in complaints over the coming months - rising, falling or otherwise - in the light of the many factors that  4  BIS Review 39/2002  give rise to complaints.

Initiatives by the banking industry in co-operation with the HKMA have been taken over the past year to promote this process. They include the major revisions to the Code of Banking Practice, setting out basic standards for personal banking services - and on issues such as debt collection - and placing an emphasis on transparency. They also include monitoring of compliance with the Code by the HKMA and specific guidance from the HKMA on the handling and processing of complaints. In view of the recent surge in number of complaints, both the HKMA and the industry associations have written to AIs to urge that sufficient resources be devoted to handling of complaints and to remind them to step up monitoring of the performance of their debt collection agencies. We believe that these initiatives have been of some help in promoting higher standards and consistency in the handling of complaints. We shall supplement these initiatives as appropriate. But, no matter how high the quality of service, or how smooth and efficient the handling of dissatisfied customers may become, there will always be complaints and misunderstandings. In fact, quite often the more easy it is to complain, the more the complaints - even at times when the general quality of service may be improving. Higher expectations on the part of the public, a greater complexity of services and products all contribute to a greater volume of complaints.
The distinction here is between policies that are designed to bolster deficient aggregate demand and those that facilitate the necessary reduction in indebtedness and unwinding of the misdirected investments – most obviously in housing and construction – made before the crisis. The latter requires balance sheet repair of households and banks, including the writing down of debts that cannot be plausibly repaid and the closure of unviable businesses. That in turn allows resources to be reallocated to where they can be used more productively. Now there is some validity to this critique. Bolstering aggregate demand through sustained low interest rates and quantitative and credit easing will indeed tend to work against the desired rebalancing of demand away from consumption towards saving and net exports – this is what the previous Governor of the Bank of England christened the “paradox of policy” (see King, 2009). And the present period of low interest rates may indeed allow some businesses to survive that do not have a viable long-term future. BIS central bankers’ speeches  1  But against that, it is easier for households, businesses and banks to repair balance sheets when demand is strong than when it is weak. A sustained period of weak demand may also push many businesses that are perfectly viable in the long run into insolvency, especially if the supply of credit is impaired.

In particular, they find that the first phase, QE1, triggered portfolio rebalancing out of emerging economies into US equity and bond funds – perhaps reflecting the role of QE1 in reducing tail risks in the United States – while the opposite occurred under QE2. Finally, to the extent that the unconventional policies are successful in their aim of boosting activity in the originating country, they will generate aggregate demand spillovers onto other countries through increased demand for imports. It should be obvious from this discussion that the spillovers from unconventional monetary policies are diverse in nature and ambiguous in overall sign. But from the point of view of the world as a whole, there has to be a strong presumption that these unconventional monetary policies have been expansionary. And with the world economy still suffering from deficient global aggregate demand and underutilised resources that surely has to be a good thing. That said, I would not wish to underplay the difficulties that some recipient countries have faced in absorbing large inflows of relatively short-term capital in a safe fashion. The presence of these complex spillovers has led to suggestions that monetary policies need to internalise these spillovers and be better co-ordinated (see e.g. Committee on International Economic Policy and Reform, 2011). While I can accept the logic of this, I am afraid I do not think we know nearly enough about the magnitude – or even the sign – of these spillovers to make this a viable option.
15  Jefferson was elected president in 1800, but did not appoint Gallatin until 1801 – even though it had been his intention from the start. See for example Wright and Cowen, op.cit., p. 93, for details. BIS Review 106/2008  3  priorities included a change in Hamilton’s tax structure in order to better reflect the Republican Party’s ideology and its constituencies. He also focused on the need to increase transparency in fiscal policy. He progressed rapidly on both fronts. Internal taxes were soon abolished. The federal government came to rely almost exclusively on import tariffs, which Gallatin saw as luxury taxes that did not burden his farming constituency. 16 Gallatin also convinced Congress to pass the law of 1801, which required an annual report by the Secretary of the Treasury to the President. He submitted the first of these reports later that year. Moreover, the minting of dollars was somewhat scaled back under Gallatin. To compensate, he allowed foreign coins to circulate along with the dollar. These measures were not taken because Gallatin was opposed to the Mint. Rather, the Mint proved to be very costly for the federal purse. Therefore, Gallatin saw the reduction of its operations as a way for the government to save money, in line with his primary objective of fiscal consolidation.

Let me limit my observations to the value of fiscal prudence and sustainability. Arguably, the most important lesson of Gallatin’s achievements is that public debt reduction requires unwavering political commitment to fiscal discipline. This lesson is certainly relevant in the context of today’s fiscal challenges. Gallatin faced an unexpected fiscal time bomb in the form of a war with Great Britain. The developed world now faces a predictable and rapidly ticking fiscal time bomb in the form of aging populations. The demographic strains on government budgets in the developed world are already visible. Pressures will almost certainly intensify in coming years. The implication is that in the not-too-distant future, spending on public goods and services will have to contract. Alternatively, taxes could be raised in an attempt to maintain the level of public  27  Wright and Cowen, op.cit. 28  For all these references, see Chernov, op.cit., p. 647. 6  BIS Review 106/2008  goods and services we currently enjoy. Given these longer-term fiscal strains, we should be building up a fiscal cushion rather than becoming more indebted. Allow me to review very briefly some trends in budget deficits and debt levels in the developed world. Historically, government budget deficits have been typically used to finance wars. War time deficits have then been compensated by surpluses in times of peace. This cycle of deficit finance and subsequent debt reduction is illustrated in fig 1. It shows historical deficits for G7 countries excluding Germany.
It is in the process of selecting the target rate of interest that art comes into the picture. The econometric models are not sufficient. Judgment is needed. This judgment is of a sophisticated nature. The Board members have to understand the limits of the models in order to be able to identify the weakness of their results. They also have to understand what is actually going on in the economy despite imperfect statistical data. “The art of central banking requires more than just intuition.”7 At the Swiss National Bank, we review monetary policy at least every quarter. In addition, our economists produce quarterly financial stability reports. Our economists pursue programmes of academic research and regularly publish their papers in refereed journals. The Swiss National Bank pretty much resembles a department of economics at university. The professors are there, the research economists and the statisticians are there. The students are lacking. But many of us continue to teach at one of the Swiss universities. This picture of the activities of economists at a central bank is not unique for Switzerland, but is similar to that found in most central banks. 7. Conclusion  The title of my paper is “Economics is What Economists Do”. By presenting a review of what this may mean at university, in government, in business and in central banking, I hope I was able to support your motivation for your study of economics.

It does appear likely that the high level of productivity growth has to some extent been cyclical and a result of the composition of growth. It is reasonable to believe that productivity will increase at a slower rate in future as growth is expected to be linked to a greater extent to strong domestic demand and increased production in the private services sector. All in all, declining productivity growth and higher wage increases as the labour market improves ought to lead to a gradual rise in companies' production costs. However, the cost increases look to be moderate, and we expect that cost pressures will remain relatively low over the coming years. It should be emphasised that it is difficult to determine exactly how far productivity growth will slow down and thereby how much companies’ costs may increase in future. It is likely that the rate of increase in productivity has risen as a result of the large-scale investment in information technology made by companies at the end of the 1990s and due to the effects of globalisation on competition and output. However, it is fully possible that we will have reason to revise up our forecast for productivity growth even more in coming years. It is just as conceivable that productivity growth will prove to be weaker than estimated. Gradually rising inflation Inflation has remained low since the end of 2003.
There is, of course, no silver bullet that could be applied universally to all countries. Nevertheless, euro area policy-makers should look closely at the recent experience of the Baltic countries and draw the appropriate lessons. I see at least one encouraging take-home message: if properly designed and effectively communicated, if fully supported by international lenders, economic adjustment does not necessarily imply political suicide. III. Lessons for Latvia  Being here in Riga, let me conclude with a few observations about the lessons for Latvia itself. The end of the programme should not mean the end of the adjustment efforts. Key challenges remain also for this country to ensure the sustainability of the fiscal adjustment, to strengthen the fundamental drivers of sustainable and balanced growth and to prevent macroeconomic imbalances from building up again. As regards euro adoption, the challenges that some euro area countries are currently facing illustrate clearly the importance of sustainable convergence. Very careful preparation is required to make sure that convergence continues also after euro adoption. Measures to reduce inflation temporarily or easily reversible measures to lower the fiscal deficit do not represent sustainable convergence. The decision to adopt the euro is a very fundamental one and should not be taken lightly. The ECB published its Convergence Report 2012 last week and we came to the conclusion that Latvia does not yet fulfil all convergence requirements. So there is still a way to go for Latvia and the euro will not come for free.

The cumulative output decline was 24%; unemployment peaked at 20%. Compared with this economic collapse, even some of the euro area peripheral countries were faring relatively better. Keeping the euro peg was considered by many as a “mission impossible”. External devaluation was presented as the only way forward. But Latvia did not choose the easy “quick fix”. It embarked on a courageous fiscal consolidation path and structural reforms. Two years later, the speed of the economic rebound is as extraordinary as the depth of the recession. Against all the odds, Latvia recorded a real GDP growth rate of 5.5% in 2011. While domestic demand was the main driver of growth last year, exports have also recovered very strongly. Evidently, Latvia’s competitiveness has improved, even though many challenges still lie ahead. The economic dynamics behind this swift stabilisation and recovery merit close examination. Equally interesting is the political economy of the Baltic adjustment. Jean-Claude Juncker once said: “we all know what to do but we don’t know how to get re-elected afterwards”. This saying, often referred to as “Juncker’s curse”, unfortunately seems to be confirmed by the crisis in vast segments of the euro area. Italy, Greece, Ireland, Portugal: in all of these countries the government fell directly as a result of its handling of the economic crisis. Latvia seems to be the exception to the rule. Despite harsh austerity measures the Prime Minister managed to get re-elected twice. Many ruling politicians in Europe these days may look upon this with incredulous admiration.