samchain/econo-pairs-v1 huggingface dataset:
However, experiences show that it may take time before exchange rate changes have an impact on foreign trade. In the short term, the value of imports adapts in that import prices in kronor rise as a result of the weaker exchange rates. The initial effect of a weaker exchange rate on net exports can thus be negative. However, in the slightly longer term producers and consumers adapt and export and import volumes are affected. When the exchange rate weakens, exports increase while imports decline, as domestically-produced goods and services become relatively cheaper. The effect of a weakening in the exchange rate can thus be that net exports follow what is known as a J curve; first they weaken and then they improve. 12 In the long term one can thus expect a weaker exchange rate to lead to increased net exports, which in turn has a positive effect on total production (GDP). Overall view is important Although it may be informative to reflect on the isolated effects of exchange rate changes on the economy, it is difficult to know what causes what. At the same times as the krona weakened in connection with the financial crisis, production fell substantially, partly as a result of a large fall in the demand for exports. It is difficult in this type of scenario to isolate the effects of the weaker krona from the effects of other changes.

In response to these developments, the international community adopted in 2009, under the impetus of the G20, an ambitious reform programme including Basel III, which is a key element for the banking sector. Indeed, a banking system that is more robust as a whole and capable of absorbing major shocks is vital to avoid the repetition of such chain reactions in the future. In this respect, despite the delay in the reform agenda in the United States, Europe must clearly press forward: the credibility of our banks and our economies is at stake. Basel III is naturally based on Basel II which establishes the current capital adequacy rules. However, Basel III goes further than merely changing and updating the existing rules. –  Basel III indeed considerably strengthens the capital requirements that banks must meet, but this reform is more extensive in that it significantly enhances the prudential framework: in addition to capital requirements, it establishes liquidity requirements, and a leverage ratio is set to be introduced in the medium term. From this point of view, Basel III is a far-reaching reform of banking regulation. BIS central bankers’ speeches  1  –  Furthermore, and most importantly, I believe that Basel III is a major step forward in that it leads to a much closer interaction than has been the case to date between the individual supervision of banks, known as microprudential supervision, and the overall supervision of the banking and financial system, or macroprudential supervision.
It is rather a symptom of what might possibly be termed ‘temporary growing pains’. It remains to be seen how serious this setback will be, above all for the U.S. economy, but sooner or later the transformation will pick up speed again. How far have we come in the IT revolution? Turning now from history to our own time, the question of how far we have come is obviously not an easy one to answer. It has been calculated that the economic impact of technical advances such as IT 5 takes forty to fifty years to materialise in full. If the microprocessor’s breakthrough in the early 1970s constitutes the starting point, then it will presumably be another couple of decades before any sizeable economic effects are discernible. Counting instead from the invention of the computer in the mid 1940s, however, means that we could already be in the beginning of a phase of rising productivity and growth. Nevertheless, I believe it is till early to be able to provide an unequivocal answer to this question. What is clear is that electronics and microprocessors have revolutionised telecommunications and household appliances such as TV sets, videos and music equipment. We give little thought to the fact that microchips are now to be found in the simplest kitchen appliances. They are a part of our daily round. Bear in mind, moreover, that there are no doubt applications that have not yet been exploited with the more powerful and, above all, cheaper capacity of new computers.

Some observers draw parallels with earlier revolutions in economic history, for example the introduction of steam-engines in manufacturing in the 18th century and the breakthrough for the combustion engine and electric motors in the late 19th century. A closer look at these two earlier industrial revolutions shows that in Sweden the impact of the steamengine was delayed. Developments here had more to do with the transformation and commercialisation of farming in connection with land reforms. It simply took time to build up the institutional arrangements that made a widespread use of steam-engines possible. Sweden did not begin to participate in the first industrial revolution until the middle of the 19th century, when the construction of railways gave steam locomotives a crucial part to play in the new form of communication. At the time of the second industrial revolution, however, when the conditions for production were changed again by the petrol engine and the electric motor, Sweden was in a better position to reap the benefits. In that the social structure was more suited to adopting and utilising the new technology, the pace of modernisation was faster. Production became increasingly efficient as the industrialised society took shape. Electrification, motor vehicles and aviation all left their mark on developments in much of the 20th century. At the same time, it was probably not the new inventions as such that provided the conditions for the rapid economic growth in the 19th and 20th centuries.
In the United States, the risk-focused approach that the Federal Reserve and other bank supervisors have adopted over the past five years allows us to tailor a supervisory plan appropriate for each bank. This marks a radical shift in the way that we evaluate a bank’s condition in the United States. Rather than reviewing mainly the quality of individual loans and other items on a bank’s balance sheet, for example, our bank examiners now try to identify the most important risks to which each bank is exposed – and then determine whether bank management employs robust processes to control those risks. This is a much more "top-down" approach to supervision, as we are evaluating the integrity of the managerial process in a bank rather than only testing the strength and quality of individual transactions. This helps us to determine whether a bank that is healthy today will continue to be so in  2  BIS Review 35/2001  the future. I’m pleased to note that banks have welcomed this change in approach, as we have enhanced our ability to compare the quality of one bank’s control structure to those of other banks that face similar risks. We thus are better able to share our views of the "best practices" we see in industry risk management.

Captives could metaphorsise from perceived brass plates models into legitimate commercial vehicles that serve a real economic purpose. Perception management is pivotal for the future existence of captives. Captives must be seen as supporting and contributing to the broader economic transformation and growth. These three developments; the emergence of more diverse captive models serving a broader spectrum of companies, technological advancements and more considered regulations, are likely to foster a greater convergence between the intended economic outcomes of captives, and the required and appropriate regulatory framework. I hope that this forum will seize the window of opportunity to bring together mutual interests that have long been somewhat at odds. As a collective, all of us here today, have a common interest in ensuring that captives demonstrate genuine value and valuable economic purpose. Achieving this calls for strong corporate governance practices, greater transparency and sound financial management that commensurate with underwritten risks. Ultimately, a new reality needs to be embraced by captives. In the long term, investing in technology, technical expertise, better and stronger compliance frameworks are worthwhile endeavors. It’s no more a choice. At stake is the viability of individual captives and an enduring captive industry that will add breadth and depth to insurance markets. Conclusion The captive industry may well be at a turning point. In moving forward, how we start matters. Efforts to develop the captive industry should be focused on better risk management, promoting macro-economic stability and encouraging new growth rather purely concentrated on tax planning.
Second, an increase in the pace of productivity improvement may have made it possible for output to grow more rapidly without adding to inflationary pressure. On the face of it, however, there is little evidence for this hypothesis. Productivity in the private sector - measured as output per hour worked has grown at an annual rate of around 2 ½ % since 1995, around the average rate in the period 1980-1995. In the United States, private sector productivity growth increased from 1 ½ % in the earlier period to almost 3% after 1995. It is striking that productivity growth in the private sector was higher in  BIS Review 61/2004  1  Britain than in the United States for most of the past quarter of a century, although our level of productivity remains inferior. Only in the past few years has American productivity accelerated. No such change is yet visible in the official data for the United Kingdom. It is possible that the effect of productivity improvements, especially the temporary boost to profits, was obscured by the impact of the rise in sterling since 1996 and by global competition which have lowered prices and compressed margins. So it is too soon to dismiss the possibility of an acceleration in productivity similar to that experienced in the United States. Indeed, productivity growth has increased to more than 4% over the past year.

Household debt in relation to disposable incomes is now at the same level as just before the banking crisis at the beginning of the 1990s, just over 120 per cent. The bulk of households’ loans have in various ways been secured on homes. A number of factors can help to explain this development. In the housing market the supply of new apartments has been low since 1993 (Figure 2). In the centres of the major Swedish cities, where prices have risen most, it is difficult to build homes at all. Meanwhile, demand has picked up as a result of robust growth in households’ incomes. Disposable incomes have risen by 35 per cent since 1995, measured in current prices. Moreover, migration to the big cities has boosted demand in the very areas where the supply is most limited. During the IT boom, the demand pressure in Stockholm was high, which was reflected in prices. When the equity market and particularly technology companies dropped in value, prices in Stockholm stagnated, but they continued to rise in Gothenburg and Malmö. In the credit market, falling interest rates have of course increased demand and made households more inclined to borrow. Households may also be borrowing more because they are less uncertain than before about how interest rates and inflation will develop. The future seems more predictable, which should increase the willingness to borrow at each given interest rate level. Since the mid-1990s we have gone from a period of high, fluctuating inflation to low and stable inflation.
It seeks to provide banks with stronger incentives to employ the most advanced techniques to calculate risk exposures and, hence, to push risk-management towards the best available practices. Specifically, Basel II makes these general principles operative by building on three complementary pillars. The first pillar is intended to achieve a more precise and sensitive mapping between banks’ actual risks and the minimum regulatory capital requirements. Under the new framework, banks are allowed and, indeed, encouraged to rely on their own measures of certain risk parameters, thus fostering a wider usage of the best available techniques and tools for that purpose. The Committee firmly believes that a better alignment between regulatory and economic capital is conducive to a more efficient allocation of credit and a less distortionary regulatory system. The framework is also extended to operational risks, which have proved to be more relevant in an increasingly complex world that demands highly sophisticated processes. The second pillar, supervisory review, requires banks to assess their own capital needs for their overall risk profiles, including whether any activities or exposures may incorporate more risk – and hence may require more capital – than is assumed in Pillar 1. Supervisors, in turn, must evaluate the banks’ assessments and processes, and respond if these are not appropriate.

Moreover, such a contraction and even the closure of some firms in the industry can be understood, in some cases, as efficient outcomes on purely economic grounds. While concepts like full efficiency or maximum social welfare are “too grand” to be operative, I think we can still make some progress on this issue by posing the question in relative terms: will Basel II unduly exacerbate the tendency towards procyclicality inherent in banks’ business? In response, I find it helpful to focus on certain key determinants of bank capital supply and demand, for their interaction will ultimately determine the conditions under which banks may gain access to capital markets and withstand a general downturn. On the demand side, under Basel II higher overall uncertainty about debtors’ solvency during a recession will admittedly tend to put upward pressure on the regulatory capital. But we shouldn’t view this effect as economically artificial, since we know from basic contract theory that lenders, i.e. depositors, will optimally require a larger amount of own resources from investors, i.e. banks, whenever the former perceive higher risk in the projects to be funded. In plain terms, while regulatory capital is rising in such a situation, economic capital goes up as well. I firmly believe that the latter is the most relevant variable for understanding banks’ decisions about the amount of credit to be extended and its price. Nowadays, well-managed banks already allocate economic capital and take decisions on the basis of incurred risks.
Chart: The fund mechanism The Norwegian parliament passed the act relating to the oil fund in 1990. Under the act, the net fiscal surplus, including oil revenues, is transferred to the fund, and invested in international markets. A main purpose of the fund mechanism is to make the actual spending of oil revenues transparent. Towards the end of the 1990s, inflows to the oil fund increased, and there were expectations of considerable petroleum revenues in the future. There was increasing political pressure to spend more. In a climate of high inflows and even higher expectations, it was demanding to restrain fiscal spending. At the same time, it was clear that future pension obligations would be substantial. Economic policy guidelines were clarified in 2001 through the introduction of the fiscal rule. Under these guidelines, government spending of oil revenues – measured by the non-oil budget deficit – is limited to the expected real return on the fund – estimated at 4 percent annually. The idea is to leave the capital in the fund untouched, saving it for future generations. Chart: A growing fund The fiscal institutions that were established proved to be well suited to managing the revenues from the petroleum industry. Even though most of the income was to be saved, the fiscal rule provided for a gradual but sustainable increase in petroleum revenue spending. Fiscal policy was not set on autopilot. The guidelines provided for countercyclical fiscal policy in the short term, around the longer term path.

Indeed, the SME Credit Bureau initiative represents a convergence of different objectives by various stakeholders, namely the Government, SME financiers and creditors, CGC and D&B. It is a big step in bridging the current gaps in the availability of credit information on SMEs. Nevertheless, the real and largest beneficiaries of the initiative would be the SMEs themselves. On this note, I would like to congratulate CGC and Dun & Bradstreet Malaysia Sdn. Bhd. in their new venture. I am also confident that this will open up a new chapter in the history of credit bureaus and enable these entities to play an even greater role in the future development of the financial industry in Malaysia, and consequently, enhance access to financing by SMEs. 4  BIS Review 67/2008
14  BIS central bankers’ speeches  Chart 5: Cost of default protection for euro area core and periphery banking systems Periphery  Core  Basis points 800 700 600 500 400 300 200 100  2009  2010  2011  2012  2013  0  Sources: Markit Group Limited, SNL Financial,Thomson Reuters Datastream and Bank calculations. Notes: Asset-weighted five-year senior CDS premia for major banks in each country. 'Periphery' covers Greece, Ireland, Italy, Portugal and Spain. 'Core' covers Austria, Belgium, France, Germany and the Netherlands. Chart 6: Real economy lending growth – core/periphery divergence Core Periphery  Percentage changes on a year earlier  30  20  10  0  2004  2006  2008  2010  2012  -10  Sources: ECB and Bank calculations. Notes: Periphery includes Greece, Ireland, Portugal and Spain. Core includes Austria, Finland, France, Germany, Luxemburg and the Netherlands. Lending to non-MFIs excluding general government (adjusted for sales and securitisation). Weighted using 2012 GDP weights. BIS central bankers’ speeches  15  Chart 7: Euro area non-financial corporations loan rates – core/periphery divergence € Periphery Core  Interest Rate, per cent  8  6  4  2  2003  2005  2007  2009  2011  2013  0  Sources: ECB and Bank calculations. Notes: Average interest rate on new lending to NFCs (excluding revolving loans and overdrafts, convenience and extended credit card debt). Core: Austria, Belgium, Germany, Finland, France and Netherlands. Periphery: Italy, Portugal, Spain and Ireland.

I think part of the story was China, but I think part of the story was also worries about the slowdown in China leading to a big commodity bust, and that commodity bust then putting a lot of pressure on especially emerging market economies that were actually selling a lot of the products to China. China’s been on a much more sort of stable growth path this year. They’ve also clarified what their foreign exchange rate regime is. So I think people are a lot more comfortable in terms of how they’re managing the renminbi. I think there are still challenges in China and they’re still trying to reorient their economy from investment-led growth to consumption-led growth. They’re still an economy that I think that credit is growing quite rapidly and so you sort of worry about how sustainable that is over the long-run. 9 / 13  BIS central bankers' speeches  But I think it’s much less of a focus of the markets today than it was a year ago, and I think the anxiety about the emerging market economies is much more focused on individual countries rather than sort of broad like it was a year ago. I mean financial conditions really, if you look at the financial markets post-election, we’ve seen stocks up, we’ve seen the dollar a little bit firmer. We’ve seen credit spreads narrow quite a bit, and we’ve seen bond yields up a little bit. But net-net, financial conditions haven’t actually changed very much post-election.
In my time today I will focus on my Bank responsibilities for payments and give a real-life example of why having real-time data matters and also point to how we could make payments data even more useful through the message that communicates the data. I will conclude with a brief recap on UK financial market developments this week and highlight the use we are making of real-time data to respond to those developments to meet our objective for financial stability. Use of real-time payments data The Covid-19 pandemic continues to impact on us in many ways and to change how we do things. In the context of today’s panel the pandemic acted as a catalyst for extending use of the Bank’s payments data. Right from its start in March 2020 we knew that the pandemic and the necessary response to it would have very serious but also very different impacts on different sectors of the economy. But it was much less easy to be confident of the scale of those differential impacts and over what time frame. Extracting a signal from an understandably very noisy and very uncertain situation was complicated by the fact that many of the sources we traditionally rely on were not that high frequency or were only available with a lag. To get a clearer and faster real-time snapshot of the economy, the Bank, like many other institutions, turned to new sources of more timely information.

Page 3  One such source was CHAPS, the UK’s high value payments system, which we have operated within the Bank of England since 2017. This provides individual payment-level data on corporate revenues received from debit and credit card expenditure. As the operator of CHAPS, this transactional data is accessible in real time to the Bank. Such data will only ever give a partial picture and the Bank’s Monetary Policy Committee and the staff who support them, are experienced in contextualising and framing such data in nowcasting and other applications. The most obvious benefits of the data were its timeliness, granularity and availability. GDP data is published with a lag of weeks and sometimes months whereas we had a proxy for it in two days. The CHAPS data provided signals on sectoral performance. And it was coming in to the Bank via our payments systems at a time when a lot of official data couldn’t even be collected because of the pandemic. The MPC referred to the use it made of the data in supporting its policy response in its March 2020 minutes and subsequently[2] . In case anyone is worried that we kept this public good to ourselves be assured that as soon as we could we made it available to our statistical authority the ONS who included it in the regular data release they developed as one of their responses to the pandemic. Improving the quality of payments data I’ve provided what is hopefully a relevant case study but it’s a narrow one.