samchain/econo-pairs-v1 huggingface dataset:
During the second phase, the recovery phase, GDP growth increases and public debt then also decreases, as higher growth leads to lower public expenditure on social welfare and to higher tax revenue. In Sweden, for example, the higher growth after 1996 contributed to reducing the public debt ratio by as much as 28 percentage points during the period 1996–2008. 4 However, there are major differences in the conditions for the Swedish deleveraging and the consolidation of public finances in the euro area that has now begun. Swedish public debt amounted to only 46 per cent of GDP during the initial phase of the debt consolidation. The average for Greece, Ireland, Italy, Portugal and Spain, on the other hand, is still a good 112 per cent. 5 The Swedish recovery phase was also driven to a large extent by strong growth in exports, which was in turn partly due to the krona being allowed to float and quickly depreciating in this period. As a large percentage of trade in the euro area is internal, and they have a single currency and therefore cannot depreciate in relation to another currency in the euro area, there is a risk that the recovery in the debt-ridden euro countries will be more prolonged. The recovery in Sweden was also facilitated by international growth that was stronger than it is now.

The risks I spoke of earlier are ones that monetary policy normally faces and has to relate to. Forecasts change over time and monetary policy has to be adjusted accordingly. We would have a completely different situation, however, if the euro crisis were to worsen dramatically, and there was substantial turmoil on the financial markets and economic activity suddenly dived. In these situations monetary policy needs to adjust to a crisis situation, and we are prepared for this. As a central bank, we need to be prepared to deal with many unexpected events. And we must make an assessment in our forecasts of the probability of these events occurring. A central assumption in our forecasts is that the financial market turbulence will gradually decline and that confidence will gradually improve in the corporate and household sectors. This does not mean that we believe that the road ahead will be straight and narrow. We have to assume that confidence in the countries’ ability to resolve their problems will vary over time, and during the process different countries will come under focus. When we summarise the measures taken since the worst phase of the crisis last autumn, the European Central Bank’s two three-year loans to European banks were one measure that provided immediate relief. An acute liquidity crisis was avoided and the loans have also prevented a tighter credit crunch than would otherwise have been the case. However, they do not solve the long-term problems faced by many euro area countries, which was not really their aim, either.
Harnessing these links is particularly important for absorbing high unemployment and correcting the imbalances built up during the boom years. Economic policy action geared to strengthening growth foundations is of vital importance, particularly the reforms promoting job creation. Such action makes possible the achievement of gains in competitiveness and enhances the economy’s long-term efficiency and productivity. And it is also essential for boosting the external sector and providing for the rapid reallocation of resources towards potentially dynamic goods and services branches. As I have reiterated on many occasions, labour market reform is pivotal here. Indeed, significant progress has been made with the recent approval of the legislation on urgent labour market reform measures. Among the changes made that may contribute to improving the functioning of our labour market, I feel it is important to stress the greater possibilities available to firms to adjust working and wage conditions to the changes arising in demand or in supply-side innovations, thereby limiting the impact of these shocks on employment. It is now for employers and employees to take full advantage of the new opportunities provided by labour reform so that the necessary gains in competitiveness can be had as soon as possible, swiftly ushering in a new phase of economic dynamism and job creation. Slowness  BIS Review 129/2010  5  in harnessing the internal flexibility offered by the reform would but hamper recovery and delay the generation of new jobs.

Given the fact that the causes and consequences of this crisis have been broadly identified and discussed, in the first part of my speech I will focus more on the main findings of the professional discussion that is taking place nowadays to identify a new financial supervision approach. I am sure you will elaborate on these issues further during this Conference. In the second part of my speech, I will try to give you more detailed information on how we at the Bank of Albania are thinking about the future approach of the public authorities and of the financial industry, in relation to necessary measures to strengthen financial stability. Very shortly I want to reiterate what has now become clear to many: the recent crisis was a consequence of wrong incentives which supported unbalanced financial activity development and misconception of risk assessment, pricing and management. Such wrong incentives were present not only to the financial industry and markets, but also to the balance sheet of households, businesses and entire countries. Given the nature, the size and the impact of this crisis, not only to the financial industry and markets but also to the real economy, public authorities in many countries were forced to adopt swift, coordinated and extraordinary measures, both in the area of monetary and fiscal policies. Central banks abandoned almost any restriction and even adopted unconventional measures in providing ample and low-cost liquidity to the financial markets.
This is largely aimed at institutional features, organisational features, operational features, monetary policy implementation, exchange rate policy and foreign exchange operations as well as capacity building, while aligning both fiscal and monetary policy towards achieving economic targets set in a coherent manner. When setting our monetary policy actions and directions, we cannot disregard the external environment. In the global economy, for the first time since the Global Financial Crisis, there is currently a divergence of monetary policy among the major economies. This is likely to result in greater volatility in capital and currency markets. This requires us to be vigilant. We are aware that interest rate hikes in advance economies such as the US and the UK as well as in emerging economies could have some spillover impact on the Sri Lankan economy through capital reallocation. Meanwhile, economic and political developments in major export destinations, as well as trends in key commodity prices, will also have a significant impact on the domestic economy. 16  3. Financial Sector Policies for 2018 and Beyond Being guided by its mandate, the Central Bank promotes a dynamic and resilient financial sector, which supports sustainable growth, primarily through regulation and supervision of financial institutions, ensuring sound and safe payment and settlement systems, establishing risk management systems and instilling good corporate governance standards and practices in the financial sector.

And as far as I am aware, neither France nor Italy has become a champion of growth in Europe. France and Italy are lagging behind today because of a lack of national reforms. The euro cannot and will never be able to replace them. And this is good news since it means that there remains much room for our domestic policies, our collective debates, and our creative efforts. c) European monetary policy fosters inequality For some, the ECB’s current low rates are generating social inequalities: savers who have put their money in fixed-rate products are being penalised by lower returns, while those who own shares or property are benefiting from the rise in asset prices. The reality is very different. First, because savers and asset holders are generally one and the same. Second, and most importantly, because this very piecemeal analysis ignores the macroeconomic impact of monetary policy, which benefits us all. Our measures create very favourable financing conditions, which are stimulating demand via consumption and investment, and speeding up the decline in unemployment. All this helps to reduce inequality, as unemployment tends to hit the poor and less-qualified the hardest. According to estimates, as a result of our actions, euro area economic growth was boosted by 1.5 percentage points between 2015 and 2018. With regard to inequality, now is precisely the time for us Europeans to talk about our experiences.
An important, though elusive, indicator of inflationary pressure is the gap between total demand and total output. Most indicators suggest that this gap has become somewhat smaller. In the inflation report, however, the Riksbank judges that the supply of unutilised resources is still relatively good. It is not least the high level of total unemployment that indicates this. A high rate of investment and rapid increases in productivity have contributed, at least to date, to an expansion of potential output to meet the growing demand. This has eased inflationary pressure during the upswing. Inflation expectations Another important indicator of inflationary pressure is the expectations of economic agents about future inflation. Along with actual inflation, these expectations have declined in recent years. They also show a tendency to converge around the 2 per cent inflation target. If this is the case, it is a good sign because it can be seen as increased confidence in the inflation target. This means that to a greater extent, economic agents are basing their own plans on expectations of low inflation, which provides better conditions for monetary policy to fulfil the inflation target. In recent months the expectations of future inflation have tended to move up, but this seems to be mainly an adjustment to the increase in registered inflation. The tendency, however, must be closely watched; a clear increase in inflation expectations above the inflation target would give cause for concern. 3.

As FEMR recognised, while fines and sanctions have roles in deterring misconduct, they will not, on their own, bring about the cultural change needed. We must move from an excessive reliance on punitive ex post fines of firms to greater emphasis on more compelling ex ante incentives for individuals, and ultimately a more solid grounding in improved firm culture. This starts with reducing opportunities for bad behaviour, for example, by overhauling the regulation of key benchmarks in FICC markets. It requires compensation rules that align risk and reward. In the UK, a significant proportion of variable compensation now must be deferred for a period of seven years. To address the ‘rolling bad apples’ problem, mechanisms are now in place here to ensure that when individuals move on their history will be known to those who consider hiring them. Firms will be required to share information on breaches of individual conduct rules, their fitness and propriety assessments and outcomes around subsequent disciplinary proceedings. These measures are all very constructive but they are not yet sufficient. That’s why the Bank of England supports initiatives that ensure firms and their employees take greater responsibility – individually and collectively – for their own conduct. UK authorities have used their convening powers to encourage market participants to establish standards of market practice that are well understood, widely followed and, crucially, that keep pace with market developments. Industry has responded. The Banking Standards Board is promoting higher standards of conduct and competence across the UK banking system.
As we can see, both theory and practice have moved, in the last two decades, full-circle: from managed float to corner solutions and back again. Under these circumstances, the best a policymaker can do is to stay open-minded and assess the merits of each individual theory in the context of the country’s particularities. 3. Capital controls vs. free movement of capital flows  Now let me briefly turn to capital flows and related issues. The crisis that broke out in 2007 entailed a massive reduction in private capital flows, which had previously generated developments that led to the accumulation of imbalances conducive to the crisis itself. These imbalances were manifest in the overheating of emerging market economies, the over-appreciation of currencies, the swelling private foreign debt, credit and asset prices, as  4  BIS central bankers’ speeches  well as in the wider current account deficits and the larger currency mismatches in the private sector. However, towards end-2009, the global economy looked poised to exit the financial crisis and capital flows to emerging market economies in Latin America, Asia and Central and Eastern Europe seemed to rebound. This trend looked set to strengthen and expand, in Romania as well, in the early months of 2011. Against this background, the idea of introducing capital controls in emerging market economies has gained increasing support. Even the IMF, which has historically opposed controls, has softened its hard-line approach.

And undoubtedly, they thought the chances of getting caught were slim. However, when the scheme to inflate contracts and pay the associated bribes are made in U.S. dollars, the settlement of those transactions will usually be routed through the United States. This means that U.S. prosecutors will be able to take action against those involved – even if their local governments will not or cannot pursue criminal or civil cases in their home country. Many of the schemes I just mentioned were identified by banks around the globe and reported to authorities via Suspicious Activity Reports (SARs). Those banks helped root out international corruption schemes. The United States has robust anti-money laundering laws that date back to 1970. But every so often the U.S. makes major changes to its laws and regulations in response to a significant event or risks. The most prominent was the PATRIOT ACT after the 9-11 attacks in 2001. One year ago, the U.S. passed another significant piece of legislation – the Anti-Money Laundering Act of 2020, which has strengthened the position of the U.S. government to act against many financial crimes. Some of the measures include:  2/3  BIS central bankers' speeches  The unmasking of the true owners and controlling members of shell companies in the United States will establish transparency that is so vitally needed in our financial system. The increased obligations of foreign respondent banks that maintain accounts in the U.S. to comply with requests for information from U.S. agencies and commensurate penalties for ignoring those requests.
Conducting monetary policy was considered to be relatively straightforward: the central bank controlled the short-term interest rate with effects on the real economy, mainly through three channels: long-term interest rates, inflation expectations and asset prices. The credit channel of monetary policy was deemed weak; and the banking sector was ignored by most macroeconomic models used in Central Banks: banks were believed to work well and most market failures were attributed to product and factor markets. Financial markets were assumed to be efficient at distributing and pricing risk. Financial innovation was welcomed as it promoted gains in efficiency and welfare, leaving a reduced role for central banks on this area. One of the main implications of this consensus was that price stability was considered to be sufficient for macroeconomic stability. This led most Central Banks to limit themselves to a predominantly micro-prudential approach to regulation and supervision, focused mainly on the soundness of individual institutions. There was a certain neglect of the importance of the stability of the system as a whole. After the crisis In 2007, and especially after September 2008, the world was hit by a global financial crisis which not only produced the most severe worldwide economic contraction since the Great Depression, but also put into question our confidence on the “science of monetary policy”. It is probably still premature to identify the new model that will emerge from the crisis.

It requires instruments that impose tighter standards for individual institutions whose contribution to system-wide risk is larger, the so called Global Systemically Important Financial Institutions (G-SiFis), whose list was last updated by the Financial Stability Board (FSB) in November 2012. The second one, looks at how aggregate risk evolves over time. This requires the use of instruments that contribute to moderate the typical pro-cyclicality of the financial system. I will come to that later on, when commenting on the new Basel III capital framework. Before this, allow me to mention the Spanish experience with the so-called “dynamic” or “statistical provisions” which were introduced in 2000. This can be considered a pioneering case of a macroprudential response. The tool proved to be useful in Spain during the financial crisis in the two dimensions identified earlier: mitigating the build-up of risks – even if to a limited extent – and providing capacity of loss absorption to the banks. But the Spanish experience also showed that “dynamic provisions”, although, in my opinion, well targeted and designed, should have been complemented with other instruments. In order to develop and implement this new policy, the main developed economies have created new authorities in charge of macro-prudential supervision, such as the Financial Stability Oversight Council in the United States or the Bank of England’s Financial Policy Committee.
So the gain in leaning monetary policy against the wind is small in relation to the relatively large costs of such a policy in terms of inflation undershooting the target and negative effects on the real economy. Ultimately, the size of the gains and the costs is an empirical question, as is the question about the effectiveness of macroprudential policy. But judging by the debate in Sweden, both of these questions appear to have been decided already, and it would appear that the only correct point of view is a modified Jackson-Hole consensus, to return to Smets. My impression is that the debate in Sweden has to a large extent been coloured by the few existing quantifications of the costs of leaning against the wind and of the effects of monetary policy on the risks linked to household indebtedness. This is despite all of these quantifications being very uncertain. This uncertainty should also permeate the policy conclusions drawn from the quantifications. Take, for instance, the estimates of the effects of monetary policy on indebtedness.

Keynote speech at the 6th ECB Central Banking Conference “Approaches to monetary policy revisited – lessons from the crisis”, 19 November 2010. ECB. Stein, Jeremy C. (2013), Overheating in Credit Markets: Origins, Measurement and Policy Responses. Speech at the research symposium Restoring Household Financial Stability after the Great Recession: Why Household Balance Sheets Matter. Federal Reserve Bank of St. Louis. Stein, Jeremy C. (2014), Incorporating Financial Stability Considerations into a Monetary Policy Framework. Speech at the International Research Forum on Monetary Policy, 21 March 2014. Board of Governors of the Federal Reserve System. BIS central bankers’ speeches  11  Svensson, Lars E.O. (2012), Comment on Michael Woodford “Inflation Targeting and Financial Stability”. Sveriges Riksbank Economic Review, 2012:1, Sveriges Riksbank. Svensson, Lars E.O. (2013), The Riksbank is wrong about the debt – a higher policy rate increases (not reduces) the household debt ratio. Post on the blog Ekonomistas, 26 August 2013. Available at ekonomistas.se. Sveriges Riksbank (2013), Financial imbalances in the monetary policy assessment. Article in Monetary Policy Report, July 2013. Sveriges Riksbank (2014), The effects of monetary policy in household debt. Article in Monetary Policy Report, February 2014. White, William (2009), Should Monetary Policy “Lean or Clean”? Working Paper No. 34, Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute. White, William (2013), The prudential regulation of financial institutions: Why regulatory responses to the crisis might not prove sufficient. SPP Research Papers 6 (33). Woodford, Michael (2012), Inflation Targeting and Financial Stability. Economic Review 2012:1, Sveriges Riksbank. 12  BIS central bankers’ speeches
On the basis of current information, annual HICP inflation is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016. The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on the possible repercussions of dampened growth dynamics, geopolitical developments, exchange rate developments and the pass-through of our monetary policy measures. Turning to the monetary analysis, data for August 2014 continue to point to subdued underlying growth in broad money (M3), with the annual growth rate increasing moderately to 2.0% in August, after 1.8% in July. Annual growth in M3 continues to be supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 5.8% in August. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) remained negative at –2.0% in August, after –2.2% in the previous month. On average over recent months, net redemptions have moderated from the historically high levels recorded a year ago. Lending to non-financial corporations continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) was 0.5% in August, broadly unchanged since the beginning of 2013.

Since the global financial crisis, Mainland China has taken steps to allow a greater use of RMB outside the Mainland. The rationale behind this policy move is easily understandable. At present, much of the cross-border trade and investment between the Mainland and other jurisdictions are conducted in US dollars. As the Mainland continues to expand its international trade and investment, and becomes more economically integrated with the rest of the world, Chinese traders, investors and financial institutions will face growing foreign exchange risk if they continue to rely on the US dollar. Thus, it is a natural development for Mainland China to allow a wider use of RMB in its cross-border trade and investment. 17. From Hong Kong’s perspective, this policy move presents unprecedented opportunities to us, as we can leverage on our strengths as an IFC and our unique position as a gateway between China and the world to provide a premier testing ground for offshore RMB activities. 18. Offshore RMB business has been conducted in Hong Kong since 2004. While the scope of RMB business was limited to retail banking initially, it has been expanded substantially to cover bond issuance, trade settlement and further to wealth management this year. These developments have built a solid foundation for developing Hong Kong into a RMB financing centre, RMB trade settlement centre and RMB wealth management centre. I will briefly cover these three dimensions. 19. The first dimension is RMB financing.