samchain/econo-pairs-v1 huggingface dataset:
At the same time, tax financing may be politically difficult to implement.4 In the short term, the politically easiest way of financing war, but in the longer term perhaps the most harmful, is through the printing of money, as this almost inevitably results in higher inflation. A fairly large share of the literature on the effects of war on inflation is about the financing of war. A review of the effects on inflation of the United States’ wars from the American Revolution to the First Gulf War shows that when the US has been involved in more limited wars, they have usually been financed through higher taxes or increased borrowing or a combination of these. However, in the case of major wars, the point where these two methods of financing have been considered exhausted has often been reached, and the government therefore turned to the printing press. The result has often been a considerably higher inflation rate.5 The two world wars are examples of this. After a war, sovereign debt has often increased considerably. At the same time, it may be difficult to raise tax revenue in the same way as before the war. This may be because the political situation has become more unstable or the economy's production capacity has declined. In such a situation, there may be a great temptation for a government to try to alleviate the situation by using the printing press to finance current expenditure and pay off the loans.

Moreover, there is plenty of evidence, accumulated over recent years, which suggests that identity-diversity can yield significant social benefits, in part at least because it serves as a proxy for cognitive and experiential diversity. For example, research by McKinsey has looked at how gender and ethnic diversity affect firm performance. 45 Looking at a wide cross-section of international firms, it finds that companies with higher levels of ethnic and gender diversity have tended to out-perform less diverse companies, often by material amounts. These effects are stronger, the greater is the degree of diversity on these companies’ leadership teams. Diversity, in short, supports the bottom line of the annual report, not just the CSR paragraph. And what is true of companies appears also to be true of cities. Researchers have created “creativity indices” for cities measuring their degree of technological innovation and  41  Alesina et al (1999)  42  May and Anderson (1991), Watts (2002), Haldane (2009)  43  Alesina and La Ferrara (2000). 44  Page (2007). 45  McKinsey (2015). 8  BIS central bankers’ speeches  dynamism. 46 There is a striking correlation between these indices and a city’s degree of sexual and ethnic diversity – cities such as San Francisco, Boston and Seattle in the US, and also London, Dublin, Vancouver and Sydney. It seems a vibrant city both helps create, and is created by, a diverse and cosmopolitan populace in a virtuous loop.
One such area, in which both the Financial Policy Committee and Prudential Regulation Committee have been taking a keen interest, is leveraged lending – in other words lending to highly-indebted companies. We have said a lot about this over the last year so I will confine myself to a brief comment only. That comment is that sometimes horizon-scanning does not require binoculars, because the object of study is already at the front gate. I think it would be very odd if we did not pay close attention to a class of lending which grew globally at a rate of 16% last year, and in which there has been a very significant slide in underwriting standards. Further, much of the lending is being funnelled through banks to a variety of end-investors who may or may not understand what they are getting into. A key determinant of risk in these products is the 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  leverage, but measuring leverage is difficult. Analysts often adjust leverage measures to remove large one-off costs and account for optimistic future growth in earnings. These so-called ‘add-backs’ have been growing steadily in recent years, so the risk metrics in an analyst’s company report are increasingly likely to contain some heroic (or unrealisable) assumptions. The potential risks to banks here are both direct, and indirect through the impact of corporate indebtedness on the economy. Compared to this, the move up the risk curve of UK lenders in the mortgage market looks rather benign.

‘Building Societies’ excludes Nationwide.
I would like to propose the following possible solutions to the monetary policy problems:   Consistently choose a repo rate path that best stabilises inflation around the inflation target and resource utilisation around a normal level, regardless of whether growth is high or low, and regardless of whether the repo rate is high or low.   If the chosen repo rate path then offers a threat to financial stability – which would appear to be a rare situation – take this into account and exclude the repo rate path if this is appropriate, with a clear justification.   Take into account house prices and household borrowing if they affect the forecasts for inflation and resource utilisation in the short or long term.   If the level of house prices and household borrowing become unsustainable, or are otherwise judged to entail problems, use other and better instruments to deal with this than the repo rate. Trying to use the repo rate to slow down house prices and household debt could lead to high costs for the real economy in terms of lower production and employment, and higher unemployment. However, before choosing the right instrument we must specify the problems more precisely.   Start the decision-making process by forecasting inflation and resource utilisation on the basis of market expectations in Sweden and abroad according to implied  1  The market expectations and market interest rates discussed in this speech are those at the monetary policy meeting in October.

There are several measures that have a greater effect on house prices and household borrowing than the policy rate, and at the same time entail lower costs for the real economy. In general, the problem needs to be analysed and specified, for instance, in the form of which market failures or which externalities or which consumer protection inadequacies it entails, to determine what measures can be used to deal with the problem closest to its source and at the lowest cost. The most suitable measure is probably one that is currently under the jurisdiction of another government agency, and not the Riksbank. To avoid the current problems with large differences between the repo rate path and market expectations, the decision-making process should start with forecasts for inflation and resource utilisation conditional on market expectations of interest rates in Sweden and abroad, that is, forecasts for the repo rate and policy rates abroad that are in line with market expectations according to implied forward rates in Sweden and abroad. The Riksbank used to make such forecasts earlier, before forecasts conditional on an own repo rate path were introduced, and the Bank of England and the ECB make such forecasts now. The methods for producing these forecasts may need improvement. The forecasts can then be used as a starting point for assessing whether a repo rate path that deviates from market expectations is necessary to best stabilise inflation and resource utilisation.
As we know, this framework is based on four pillars: an enhanced supervisory intensity; the requirement of a higher loss absorption capacity; the existence of effective resolution regimes; and an improved resilience of market infrastructures. Substantial progress has been made in implementing this framework. In particular, the so called “Key Attributes of Effective Resolution Regimes for Financial Institutions” have been endorsed by the G-20 as a new international standard. 2  BIS central bankers’ speeches  Substantive reform has been implemented or is going to be implemented soon in the main jurisdictions in which G-SIFIs operate. In Spain, Law 9/2012 adopts and implements many of the principles set forth in the “Key Attributes”. In the European Union, the Bank Recovery and Resolution Directive is expected to be adopted later this year. It will be an important step towards full implementation of the “Key Attributes” in all EU Member countries. The two main new elements of this new framework are, first, planning for orderly resolution; and, second, the scope of the resolution tool known as “bail-in”, which is linked to the existence of an adequate level of loss absorbing capacity in each G-SIFI. Work on resolution planning is currently under way within Crisis Management Groups (CMGs), now set up for all the G-SIBs. There has been considerable progress in developing resolution strategies and identifying conditions relating to the firms’ legal, operational and financial structures and their impact on resolvability. I would now like to comment on the resolution strategies being developed for global banking groups.

If changes in the balance sheet are now acting as a substitute for changes in the federal funds rate, then one might expect balance sheet decisions to also be governed to a large extent by the evolution of the FOMC’s economic forecasts. The earlier purchase program, in contrast, did not demonstrate much responsiveness to changes in economic or financial conditions. Indeed, the execution of the program largely involved confirming the expectations that were put in place by the two early announcements. Third, how persistent should movements in the balance sheet be? An important feature of traditional monetary policy is that movements in the federal funds rate are not quickly reversed, which makes them more influential on broader financial conditions. A change that was expected to be transitory would instead move conditions very little. For similar reasons, one could argue that movements in the balance sheet should have some persistence in order to be more effective. Fourth, to what extent should the FOMC communicate about the likely path of the balance sheet? The FOMC often communicates about the path of the federal funds rate or provides other forward-looking information that allows market participants to anticipate that path. This anticipation of policy actions is beneficial, as it brings forward their effects and thus helps to stabilize the economy. For the same reason, providing information about the likely course of the balance sheet could be desirable.
To do this, ASEAN has advanced the target date of establishing an ASEAN Economic Community from 2020 to 2015. ASEAN Leaders will, at their Summit in Singapore in November, issue a legallybinding blueprint to implement the ASEAN Economic Community by 2015. You may think that the time-frame is not ambitious enough but remember that ASEAN is like a centipede in its movement where all legs must move in unison. Also, the 10 countries are at very different stages of development, with per capita ranging from a low of $ for Myanmar to a high of $ for Brunei. With the ASEAN Economic Community, ASEAN will eventually evolve into a single market with free flow of goods, services, investment and talent. An integrated ASEAN is expected to boost the region’s GDP by 10%. For businesses, an integrated ASEAN means greater market access and more harmonized rules and standards. For investors, an integrated market of half a billion people will be an attractive investment destination. ASEAN’s combined GDP of $ trillion is not insignificant. It is, in fact, bigger than India’s $ billion and more than a third of China’s $ trillion. ASEAN Finance Ministers have identified capital markets as a key area to fast-track integration. ASEAN bond markets have tripled, from $ billion in 1997 to $ billion in 2007. From 2001 to 2006, ASEAN market capitalization has grown by more than 120%. ASEAN has in place further initiatives to harmonise and integrate financial markets and boost liquidity.

More importantly, ASEAN has made two important strategic moves: •  First, deepening linkages with external partners; and  •  Second, accelerating intra-ASEAN integration. Enhancing links with external partners ASEAN has stepped up its links and integration with external players and major trading partners. ASEAN regards China and India as two powerful engines which will help the region lift off. ASEAN has already started negotiations for Free Trade Agreements (FTAs) with both China and India. We target  BIS Review 47/2007  1  to complete them by 2010 and 2011 respectively. These FTAs will provide even greater connectivity and opportunities for businesses. They will increase trade and investment flows. Besides China and India, ASEAN is also enhancing links with other economic centres. ASEAN signed a regional Trade and Investment Framework Arrangement (TIFA) with the US last August. It is negotiating FTAs with Japan, South Korea and Australia and New Zealand. And last week, ASEAN and the European Union decided to launch FTA talks. This shows that ASEAN is confident and outward-looking. These agreements will form the economic spokes radiating from the ASEAN hub. Accelerating ASEAN integration ASEAN knows that the hub itself must be strengthened if it was to grow and benefit from external linkages. Hence, ASEAN is pressing ahead with closer and deeper economic integration, and strengthening the organisation politically. This will also help ASEAN to overcome the challenges of globalisation and global economic competition. Our aim is to transform ASEAN into the third engine of growth in Asia.
Core inflation is now around 1.5% at mid-year and we expect it to rise further, approaching 2% by year-end as the labour market continues to tighten. Monetary policy is predicated on baseline projections of growth and inflation. It does not aim to pre-empt tail risk scenarios. While we are closely monitoring the global risk factors mentioned earlier, our baseline forecast is for continued economic expansion and gradually rising inflation. The threat of a disruptive trade war has risen, but remains a tail risk for now. Our approach therefore has been to begin monetary policy normalisation but to do so in an incremental fashion in view of still-benign inflation and growing trade-related tail risks. In the short term, the policy band provides sufficient room for the $ nominal effective exchange rate to accommodate modest shocks to the Singapore economy. Future adjustments to monetary policy will depend on how the economy evolves and our updated assessments of inflation and growth prospects. PROPERTY MARKET AND MACROPRUDENTIAL POLICY The Singapore property market has seen a resurgence in prices and transactions over the past year. Prices of private housing have increased 9.1% since the trough in Q2 2017. This has mostly offset the cumulative price decline of 11.6% during the four-year period between mid2013 and mid-2017. The number of property transactions over the last 12 months was around 25% higher than during the previous 12 months. New housing loans over the last twelve months have risen by 34% year-on-year.

Thin Margin, a start-up that offers online money-changing at competitive exchange rates, is creating a hassle-free experience for its customers. LumenLab, is experimenting with distributed ledgers on gestational diabetes insurance, which can trigger claims payout automatically to the insured upon meeting certain conditions. This has been a learning journey for MAS too and we have been trying to improve how we manage the regulatory sandbox. We have streamlined our internal processes and made the sandbox application form more straightforward, reducing the processing time for sandbox applications. We are now exploring the idea of “pre-defined sandboxes” where firms can start their experiments more quickly without going through the rigorous review with the current caseby-case approach. CONCLUSION Let me wrap up. The global economy has had a good run so far and signs are that the rest of the year will be reasonably good. But as you know from following the World Cup, things do not always turn out as expected. The risks that could derail economic growth have heightened somewhat and bear close 10 / 11  BIS central bankers' speeches  watching. The financial sector has been doing well. Not only growing in importance as a global financial centre, but also serving Asia’s economic development, and facilitating Singapore’s transition to an innovative and digital economy while creating good jobs for Singaporeans. And Singapore has been able to do this, not only because of the strong partnership between the industry and MAS, but also the stability and trust that underpin the financial system.
Housing cost overburden rate by income quintile  1,500  50  12  1,200  40  9  900  6  600  3  300  15  percent  30 20 10  2-room standard flat price to income  3-room standard flat  average price/sqm (rhs)  Source: imobiliare.ro, NBR, NBR calculations  quintile 1  quintile 2  quintile 4  quintile 5  2016  2015  2014  2013  2012  2011  2010  2009  2008  0  2007  Bucharest  Timișoara  Cluj-Napoca  country  Bucharest  Timișoara  country  0  Cluj-Napoca  0  quintile 3  Note: Share of households where housing costs exceed 40 percent of disposable income. Costs include interest payments or rent, utilities expenses, etc. Source: Eurostat 27  Map of risks to financial stability in Romania Deterioration in investor sentiment in emerging economies Tensions surrounding macroeconomic equilibria Higher household indebtedness through both banks and NBFIs Weak payment discipline in the economy, vulnerabilities in firms' balance sheets Faster increase in property prices severe systemic risk high systemic risk moderate systemic risk low systemic risk Note: The colour shows risk intensity. Arrows indicate the outlook for risk in the period ahead. 28

The application of distributional accounts is even more significant during economic crises like the COVID-19 pandemic, where both the effects as well as the mitigating policies can differ significantly across heterogeneous households. The OECD, Eurostat, IMF, UN, and the World Bank joint effort is to provide household distributional information, in line with the national accounts’ totals, on the dimensions of income, consumption and wealth. The new G20 Data Gaps Initiatives have as well incorporated recommendations. Fintech and innovation Technological changes are transforming the financial sector and the economy in general, offering payment services, including cryptocurrencies, international remittances, and cross-border payments and credit. With market innovations also come risks. Central banks should therefore promote the global adoption of a revised classification of economic activities that takes greater account of financial technology service providers, supporting the IFC's recommendation to revise ISIC at the UN level. When new entrants fall outside the perimeter of regulation, it can be difficult to assess risks, including threats to resilience and financial stability. The advances in regulation can be leveraged for statistical purposes and should allow us to move forward in measuring the services offered by these non-bank or unregulated financial intermediaries. As regulation moves into focus into these areas we should develop, for instance, financial inclusion indicators based on the digital financial  3  services offered by Fintech companies. Cryptoassets and digital currencies are another area where regulation can be leveraged for statistical purposes.
For sure, potential output estimates are chronically unreliable and often subject to substantial revisions ex post. Faced with the despair of failure, we often tend to underestimate our ability to overcome crises – a phenomenon I will return to in a minute. Moreover, recessions often tend to have a permanent effect on the level of potential output. It is much less clear, however, whether the crisis will also leave a permanent footprint on the trend 1/9  BIS central bankers' speeches  potential growth rate – something Laurence Ball called “super-hysteresis” effects. In fact, on the right-hand side of the first slide you can see that potential output growth had been slowing in the euro area well before the crisis, mainly reflecting a long-term slowdown in total factor productivity (TFP). So the question I would like to ask today is not so much why potential output growth appears to be decelerating in the long run, or whether we are entering a period of secular stagnation – the jury is still out on this. It is whether the crisis, and the persistent shortfall in aggregate demand, has accelerated, or not, the decline in potential growth. The first point to consider is whether the crisis has had a significant effect on labour participation – that is, the size of the total labour force. Hysteresis effects might be caused by unemployed workers becoming discouraged and discontinuing their search for employment, leading them to become detached from the workforce and lose their skills over time.

Other scratches also need early and effective treatment to avoid becoming scars. For example, insofar as investment is being affected by post-crisis legacies, such as the debt overhang in parts of the private and public sector – the famous Fisher-Minsky-Koo channel of debt deflation – history suggests that effective deleveraging nearly always involves a combination of growing out of debt and writing down debt – which is to say, structural policies are also key.15 And action also at the EU level is crucial. Efforts to complete the Single Market, for example, would incentivise more firms to invest and grow as they have a larger market to serve and exploit economies of scale. Progress with the Capital Markets Union (CMU) would likewise help to raise productivity by facilitating capital reallocation. Conclusion So, to conclude, the evidence suggests that hysteresis as it is often understood – meaning rising structural unemployment – has not yet materialised meaningfully in our economy. We see more scratches than we see scars. And unlike “classical” hysteresis, these scratches are currently reducing price pressures, warranting our currently very accommodative monetary policy stance. We can be confident that this stance will have the desired effect. The ongoing broadening of the recovery, together with the gradual disappearance of downside risks, increases the chances that those who want to work more will be able to do so. This, in turn, will create the necessary price and wage pressures for a return of inflation towards levels closer to 2%.