samchain/econo-pairs-v1 huggingface dataset:
The capitalist system depends on owners of capital to promote sustainable value creation through market discipline. Is it simply short-term profits that matter? Are there other social or environmental purposes that must be safeguarded? To this end, the Securities Commission’s Malaysian Code for Institutional Investors articulates the stewardship 3/5  BIS central bankers' speeches  role that shareholders ought to play. Ultimately, shareholders need to clarify that – we need more than just the bottom line – immediate profit is not everything. (b) Situation Let us move on to the second element – the “situation”. The system of values creates and maintains various situations. The situation represents the environment or immediate setting in which financial industry professionals operate. This is a broad subject. Today, I wish to focus on two types of situational incentives. Firstly, remuneration structures. And secondly, the attitudes toward speaking up. Remuneration plays a significant role in influencing behaviour, including ethical choices. Admittedly, the task of designing and implementing a remuneration system to encourage professionalism and integrity is not straightforward. However, the intuition is simple and attainable: financial institutions should avoid the folly of rewarding A, while hoping for B. In other words, we cannot hope for or expect ethical behaviour so long as we continue rewarding people for acting otherwise. In this regard, the Bank is currently phasing in requirements consistent with international standards to align remuneration with prudent risk-taking – with a focus on material risk takers.

The second example relates to senior individuals in firms. Earlier this month we introduced the new Senior Managers Regime. The aim of this regime is to establish clear responsibilities for senior managers, including chairs of Board Committees. This is not to create new responsibilities, but rather to be clear on what those responsibilities are, and then to supervise to hold individuals to those responsibilities. In the previous regime, we had too many examples of individuals shirking their responsibilities. My strong view is that senior figures cannot delegate responsibilities. We will then direct our supervision to support this new regime operating effectively. The third example concerns the supervision of governance, executive and Board level. We are in the process of revamping our approach here, recognising that too many problems of the past have had their roots in ineffective governance. This is probably the prime area where supervision is distinct from regulation, because there is very little regulation, rightly so. Supervising governance is inherently a matter of judgement based on evidence. So, to conclude, we should devote more time to discussing the skill of supervision. It has at its heart the understanding of risk. And, we should devote more time to developing supervisors and value then for the skill that they need to do the job well. Thank you. BIS central bankers’ speeches  3
In parallel, the disruption to supply chains I have mentioned above has increased corporate pricing power. After all, for every producer that has difficulty sourcing its inputs, there is supplier one step earlier in the supply chain that faces strong demand and scope to raise prices. Both a tight labour market and strong corporate pricing power are likely to increase the possibility that price and wage setting dynamics add to the intrinsic persistence in inflation. Another influence on intrinsic inflation persistence is the magnitude of the shock itself. Our standard models are linearised around the steady state defined by the inflation target. This approach is robust to small deviations from inflation target. But where deviations are substantial, non-linear effects may kick – and our standard models may underestimate inflation persistence. For example, now that inflation is substantially higher than target owing to the size of the energy price shock, firms may shift from a ‘time-dependent approach’ to pricing behaviour – say raising prices just once a year – to a ‘state-dependent approach to pricing – say raising prices more frequently as energy costs pass different thresholds. [21] Such a change in behaviour will naturally change the dynamics of the inflation response, possibly creating additional intrinsic inflation persistence in ways that are not captured by our existing models. In principle, we can estimate new models incorporating such non-linearities.

[16] And (4) for an energy importer like the UK, the rise in European wholesale natural gas prices represented a substantial deterioration in the terms of trade, with adverse implications for national income. In other words, the price of what the UK was buying from the rest of the world rose significantly relative to the price of what the UK was selling to the rest of the world, making the average UK resident worse off. Although the shock was large, the MPC did not interpret it as a signal that a new persistent upward trend was emerging in wholesale natural gas prices. Rather the substantial increase seen in mid-2022 was viewed as a one-off driven by specific circumstances, which was likely to at least partially unwind in the not too distant future. [17] Taken together, these characteristics implied that the direct and indirect impacts of the rise in wholesale natural gas prices represented a transitory shock to CPI inflation, since once the level of gas prices stabilised or reverted to historical averages, the impact on headline inflation would diminish or reverse. This is the basis for the argument that monetary policy makers can – and should – ‘look through’ the direct and indirect effects on inflation of one-off external shocks to energy prices, about which  Page 7  they can do little.
Recruitment policy might usefully follow in the footsteps of regulatory policy if it, too, is to maximise the organisational and social externalities of diversity. To see how and why, consider a simple example. 71 There are two candidates for a position, A and B. They do a test based on the attributes useful for the hiring organisation. These tests might be state of the art, including all of the diverse attributes one would wish in an organisation – cognitive, interpersonal and experiential skills. In this test out of 10, candidate A scores 8 and candidate B scores 4. Which one should be hired? The answer is easy. The evidence points strongly to A as the candidate best meeting the requirements for the job. They have, quite literally, ticked the right boxes. But let’s add a twist. What if the answers A gets wrong are the ones B gets right? And what if the questions existing employees get wrong are also the ones B gets right? In other words, what if candidate B brings skills to the organisation which otherwise do not exist. The right recruitment decision for the organisation is then to choose B rather than A. Candidate B adds more to the collective ability of the organisation, even though they are weaker individually. The question is, how often would existing recruitment practices deliver such an outcome? In practice, I think rarely. Individuals are typically judged on the alignment between their skills and those of the existing organisation.

Second, there remains significant excess capacity in manufacturing across much of the world. In the 2/6  BIS central bankers' speeches  United States, for example, the manufacturing capacity utilization rate was only 76.4 percent in November, about 2 percentage points below its average since 1972. Third, for manufactured goods, there may be more scope for substituting capital for labor, and/or lowering labor costs by importing labor-intensive intermediate goods. To the extent that this margin of adjustment is available, it would tend to dampen the impact of higher wage costs on prices of manufactured goods. Finally, the so-called “Amazon” effect, which results in greater price transparency for buyers, may weigh disproportionately on goods prices. Although inflation remains somewhat below the FOMC’s 2 percent objective on a year-over-year basis, I still anticipate that it will stabilize around that level over the medium term. As I noted earlier, above-trend growth should tighten the labor market further, pushing up wage inflation and eventually services prices. In fact, we have already seen some increase in inflation in recent months. Over the three months ending with November, core personal consumption expenditure prices rose at a 1.8 percent annual rate, up from a corresponding rate of just 0.4 percent last May. The pronounced slowing of core inflation during the first half of 2017 was due, in part, to transitory factors, such as a sharp fall in prices for cellular phone services. Those influences have been temporarily depressing the year-over-year figures.
Jarle Bergo: Oil revenues, monetary policy and economic cycles Lecture by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the Telemark University College, Bø, 13 November 2002. The text below may differ slightly from the actual presentation. The lecture is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 30 October and on previous speeches. *  *  *  Petroleum activities constitute an important part of the Norwegian economy. A sound economic policy and high oil prices have contributed to the highest current account and budget surpluses that have been recorded in any OECD country. In 1998 when oil prices were down to USD 10 per barrel, we also recorded a surplus that came to 4 per cent of GDP measured in terms of government net financial investment. Societies that suddenly gain access to wealth have a tendency to spend the money and then fall into decline. Access to an abundance of natural resources can result in slower growth. The explanation may be that time and resources are spent on grabbing as large a share as possible of the acquired wealth. Historical experience therefore suggests that it is important to have decision-making systems to provide protection against individual groups gaining strong control over Norway’s petroleum wealth. In addition we must maintain and develop incentives to acquire knowledge and engage in innovative work.

It is nevertheless conceivable that in a situation where a very high rate of inflation is accompanied by sluggish economic growth, Norges Bank may decide to apply a somewhat longer time horizon than two years to reach the inflation target of 2½ per cent. The choice of monetary policy time horizon reflects the fact that there are real economic costs associated with bringing inflation rapidly back to the target. This horizon is thus an indirect expression of the trade-off between the objectives of, on the one hand, stable output, and on the other hand, low and stable inflation. Historical data for Norway and other countries show that interest rate changes affect aggregate demand fairly quickly. Using the RIMINI model, we have estimated the effects of a 1 percentage point increase in interest rates over a period of two years. The chart shows that, in isolation, an interest rate increase of this magnitude may reduce mainland GDP by ¾ -1 per cent after two years. The effect will depend on a number of factors, such as household loan debt and corporate profitability. Household and business expectations may also play a part in determining the impact of interest rates. The band in the chart illustrates some of this uncertainty as shown by our models. In practice, it is often difficult to determine how long the interest rate will be kept at high or low level.
The US certainly has the advantage of having a young and growing population, but Europe has large numbers of unemployed or underemployed people who could become mobilized for increased growth of the  2  BIS Review 70/2002  economy, This need not imply that Europe must adopt US hiring and firing practices, there are other ways of achieving this, with economic incentives, labour market policies and education. Challenges for Sweden ahead of a possible EMU participation Wage formation is also an important challenge for Sweden prior to a possible EMU participation. The main issue after a possible participation in the euro zone will be the loss of the exchange rate and an independent monetary policy as stabilisation tools. If Sweden, within EMU, is out of step with the business cycle in the euro area, neither an exchange rate, nor Swedish interest rates are available to adjust for this. In reality, the exchange rate may in fact be a less efficient stabiliser than expected. It is quite apparent that macroeconomic fundamentals and Sweden's position in the business cycle have not been the only, sometimes not even the major, factors affecting exchange rate developments. If the weakening of the krona in 2001 did indeed cushion the blow from global recession, earlier periods of weakness have run counter to the overall improved relative growth performance. Personally, I believe that there might be a tendency in the Swedish debate to overstate the gains from having a flexible exchange rate in the longer run.

We need to see increased dynamism, particularly in those sectors which are not as directly affected by the current slowdown. Other measures are also necessary, such as liberalisation and deregulation policies, to improve competitiveness. Policies aimed at improving the human capital of our workers and increasing labour mobility should also be encouraged. Finally, a comment on fiscal policy. The current fiscal situation in Spain is sound, having ending 2007 with a budget surplus and reduced public debt. Indeed, let me recall that our public debt to GDP ratio, at 35%, is the lowest among the big EU countries. It is important to maintain this stance in the face of the current slowdown. Expansionary demand policies could prove counterproductive. We should avoid a deterioration of the budgetary situation beyond that implied by automatic stabilisers. Let me turn now to the financial sector. So far, the impact of the recent turbulence on financial stability in Spain has been limited. This is largely thanks to the actions of the banks themselves, who have not entered into the kinds of business that have been most directly affected. Spanish banks have demonstrated that you do not need to turn to the originate-todistribute model to become an efficient and profitable banking business. Plain vanilla, traditional business can be compatible with high returns on equity and efficiency. It also has the added value of implying greater stability. But I think that the Bank of Spain’s approach to supervision has also had a positive effect. Let me emphasise two key characteristics in this respect.
These developments may place our 4  BIS central bankers’ speeches  competitors in an advantageous position once the recovery is underway, and this will raise the bar that must be exceeded if competitiveness is to be maintained and improved. Returning to the COLA issue, this should not be imposed on collective agreements by legislation as happens today, but really should form part of the negotiation process. Indeed, already a number of collective agreements incorporate the COLA increase, and I suggest that this should be the norm. It is the whole wage that has to be supported by productivity, and negotiations at the firm level are best placed to ensure that the balance between productivity growth and wage increases is not lost. Otherwise competiveness would be eroded and jobs endangered. Moreover, the COLA is not the sole impediment to adjustments in relative wages. In particular one has to realize that the minimum wage too constrains wage adjustments. It should be kept in mind that this wage is the legally set minimum compensation of employees with limited or no skills, such as school-leavers who unfortunately have not acquired any particular skills. Returning to the minimum wage issue, one commonly used criterion of the impact of minimum wages measures the minimum wage relative to the average wage level, and then compares it with other countries, as shown in Chart 10.

One step towards effective early intervention is the establishment of the Single Supervisory Mechanism (SSM). This will endow the ECB with the ultimate responsibility for specific supervisory tasks related to the financial stability of banks across the euro area. The need for a single supervisory mechanism arises from the increasing interconnectedness between financial institutions and financial markets across the euro area, such that problems that originate at a national level can quickly spread across national borders and imperil the entire European banking system. A central authority is better placed to spot these risks. However, the SSM framework alone will not be sufficient to successfully address significant threats to financial stability across the euro area, particularly in the light of the possibility of cross-border spill-over effects in the event of bank crises and the link between sovereign debt and bank debt. The European Commission has therefore identified the need for a banking union to strengthen the banking sector and restore confidence in the single currency, and this is projected as part of a longer term vision for economic and fiscal integration. Hence, the idea goes beyond the SSM or single-rule book. As President Van Rompuy points out in his report entitled Towards a genuine Economic and Monetary Union, the components of this integrated financial framework have to include not only bank supervision (as delivered by the SSM), but also bank resolution as well as bank deposit insurance.
1  2  These global pipes fulfill three functions :   international payments systems enable money to move at the click of a mouse – and incidentally mean that central bankers are no longer at risk of getting their heads blown off trying to effect cross border payments;    international securities settlement enables the ownership of financial assets to change hands quickly and safely, often without the movement or amendment of any physical documentation of ownership; and,    central clearing systems enable participants in international financial markets to manage the counterparty risks in financial contracts that can last for decades. “Clearing” of financial activity has a number of meanings. I am here referring to central clearing, to the central counterparties (CCPs) that manage the risks of financial contracts rather than to the clearing of payments. 3  Three points are worth highlighting about this global plumbing. First, it is true that it is almost entirely private sector built and owned either by their users or as independent profit-maximising companies. 1  Based on Bank of England calculations, using data from 23 jurisdiction. Data from Bank for International Settlements, ‘Statistics on payment, clearing and settlement systems in the CPMI countries: Figures for 2015’. December 2016. http://www.bis.org/cpmi/publ/d155.pdf 2 I have excluded Trade Repositories from this list; the Bank does not supervise Trade Repositories. 3 Financial sector participants in a network will have both claims on each other and liabilities to each other.

Residential mortgage-backed securitisation (RMBS) was the largest part of the EU market before the financial crisis and the subsequent decline in the overall market is primarily explained by the fall in RMBS issuance. A large part of that decline may be explained by fundamentals – banks have cheaper ways to finance themselves at present. But, in the long run, I think we will need robust RMBS markets so that at least part of the risk on long-term housing lending is financed from long-term savings rather than short-term bank deposits. I prefer to focus on the long-term goal of building sustainable securitisation markets rather than reviving securitisation in the short run. Comparing current issuance with pre-crisis levels misses the point that the pre-crisis market was fragile, based on investment by leveraged funds and bank treasuries. Building a stable market will require a broader, real money investor base. The market also needs to be based on genuine risk transfer not regulatory arbitrage, such as synthetic sales of thin mezzanine tranches intended to maximise the reduction in regulatory capital at minimum cost. I hope the future will be transactions in which banks look to sell down the capital structure, subject to meeting risk retention requirements. Transferring the entire risk on a portfolio will be the only way to achieve a reduction in the exposure measure used for the leverage ratio. And the new Basel risk-weighted capital requirements announced in December also move in the direction of incentivising transfer of senior as well as mezzanine tranches of portfolios.
So much so, it was said that when the USA got a cold, the others got pneumonia! However, recent trends show that the world economy is no longer overwhelmingly reliant on the advanced economies only. In fact, the weights seems to be gradually shifting with the emerging global economy recording strong growth performances during recent years, while the advanced economies are basically recording moderate growth. It may therefore be useful to “flag” this important aspect when we are discussing the issues relating to harnessing sustainable growth in emerging markets. Let us consider as to what extent the current expansion in emerging markets and developing countries is due to the implementation of good policies, or as to whether it  BIS Review 29/2008  1  was just good luck that made this happen. What is the secret behind this remarkable performance of emerging economies? A simple assessment may probably tell us that the main driver of the recent expansion has been the fast integration of these developing nations with the global economy, and the rapid opening out of their economic activity. All three major emerging economies, China, India and Russia, were basically “closed” economies a couple of decades ago. Emergence of these three giants, who collectively account for 20% of land area on the earth and serve as home for 40% of world population, has dramatically changed the shape of world trade, direction of capital flows and the growth sources of the global economy.

One detailed factor that has complicated monetary policy recently is the effects on measured retail price inflation of regulated and administered prices such as above-inflation rises in utility bills, university tuition fees, rail fares etc. Individually these may be perfectly sensible public policy choices and I do not want to be interpreted as criticising their motivation. But the effect on CPI inflation is important. These prices – which are about 16% of the CPI basket – will contribute around one percentage point to the CPI inflation rate in the next couple of years, largely regardless of what happens to domestic demand. Pushing inflation down to 2% would require very low price rises in the other 84%. The risk of overall deflation is much less likely as a result. At our February meeting we faced, as so often in the recent past, a difficult choice. Should we offer more monetary stimulus, or should we not? My own choice, on a balanced assessment of the risks, was that we could and should do more now to support a nascent recovery with a further monetary injection. I do not believe the assertions of those who claim that that QE is noticeably less powerful than previously – although I have noted that there are limits to what monetary policy can be expected to achieve on real growth and it is impossible to measure the impact of monetary policy with any degree of precision. As with changing interest rates, the precise effects will always depend on the state of the economy.