samchain/econo-pairs-v1 huggingface dataset:
Competition - at both the national and international level inevitably means the expansion of some sectors or businesses at the expense of others. Yet it is a necessary driver of the increasing economic efficiency and higher sustainable growth rate that we need to satisfy our aspirations for improving living standards. But the stresses we’ve seen within our economy in the past few years go well beyond normal competitive pressures. For the most part they originate abroad, with, first, the Asia crisis and its aftermath in the late 1990’s, happily substantially  BIS Review 59/2002  1  offset, as far as the UK was concerned, by strong growth in the United States, but then last year by the sharp, synchronised, slowdown into negative growth in most of the world’s major economies. Although the pressures were not confined to manufacturing, and were not uniform within manufacturing, manufacturing was hit harder than other sectors. Manufacturing output fell from its peaks in the year 2000, to its trough last winter by over 16% in Japan, by 7½% in the US and by 6½% in Germany. And manufacturing employment fell by 7¼% in Japan, 9½% in the US and 3% in Germany. In this country manufacturing output fell from peak to trough by around 7%, and manufacturing employment by some 6%. So we were not alone in what happened and the impact was not obviously worse than elsewhere.

Moving forward, the Bank will step up its vigilance of the industry's state of readiness to cope with the changing environment. An orderly transition of the market-led adjustments is vital to ensure that the adjustments does not destabilize the market or undermine public confidence. To this end, efforts will continue to be directed towards building institutional capabilities and putting in place the necessary supporting financial infrastructure to provide a firm foundation for orderly change. Initiatives in the area of financial education for consumers will be intensified to further expand the coverage as well as to promote the fair treatment of consumers. With a strong foundation in place to meet increased competition, further deregulatory and liberalisation measures will be introduced. This will include greater flexibility accorded to foreign insurers to establish branch offices, the progressive deregulation of pricing for tariff-rated insurance products, greater investment management flexibility and removal of limits on management expenses and continuing improvements in disclosure standards to promote greater market discipline in the more deregulated environment. On-going deregulatory measures will also further enhance the ability of insurers to respond more proactively and speedily to changes in consumer demands and market conditions. The prudential framework will also continue to be adjusted to establish principles of sound financial and business practices in the changing environment, with a significantly stronger emphasis on risk-based supervision and effective board and management oversight.
This is particularly important in the euro area – as opposed to, say, the United States – because fiscal transfers go only through the EU budget to compensate regions that lose competitiveness and become permanently depressed. The bedrock of economic union is completing the Single Market to allow for higher factor mobility. To a certain extent, the failure of markets to self-equilibrate before the crisis was because markets were incomplete. For instance, the single market in services remains unfinished, despite the fact that the areas covered by the Services Directive account for more than 45% of EU GDP. There are also significant remaining barriers to labour mobility, for example linked to the portability of pensions and national insurance contributions. However, it clear that competitiveness is a more complex issue that solely factor mobility. It depends on national traditions and economic structures. What role can the centre therefore  8  BIS central bankers’ speeches  play in ensuring competitiveness? For some fundamental issues linked to adjustment within monetary union – like flexibility of wage formation – we could envisage best practices established through guidelines for all countries set at the euro area level. But there are also dangers in over-harmonisation. We are seeing currently that system competition can play an important role in stimulating structural reform. A more nuanced way forward may be to strengthen the framework for encouraging country-specific reforms.

The issue is whether this world, however desirable, is realistic. There are some reasons for doubt. Financial system reinvention One of the likely consequences of the crisis, and the resulting regulatory response, is that the financial system will reinvent itself. Financial activity will migrate outside the banking system. And with that move, risk may itself change shape and form. What previously had been credit and maturity mismatch risk on the balance sheet of the banking system may metastasize into market and illiquidity risk on the balance sheets of non-banks. This could have important implications for the stability of the financial system and the broader economy. With more activity outside the banking system, and with the banking system itself better protected, the financial system and economy may become less prone to the low-frequency, high-cost banking crises seen in the past. But that is not the end of the story. Risk, like energy, tends to be conserved not dissipated, to change its composition but not its quantum. So it is possible the financial system may exhibit a new strain of systemic risk – a greater number of higher-frequency, higher-amplitude cyclical fluctuations in asset prices and financial activity, now originating on the balance sheets of mutual funds, insurance 4  BIS central bankers’ speeches  companies and pension funds. These cyclical fluctuations could in turn be transmitted to, and mirrored, in greater cyclical instabilities in the wider economy. In this world, it would be very difficult for monetary, regulatory and operational policy to beat an orderly retreat.
If we look at developments during the 1990s, growth since 1992 has shown an average rate of 3 per cent a year, despite the fact that inflation was under the target level for several years. At the same time, unemployment has fallen from 9 per cent to approximately 4 per cent. This can be compared with the 1970s and 1980s, when inflation was at around 8 per cent and growth an average of 2 per cent. Price stability and the importance of achieving it are also well established among the general public in Sweden. This is important, as understanding and acceptance of monetary policy is important for inflation expectations and thereby for behaviour on the labour and goods markets. It is you particularly those of you with your own businesses - who set the prices and who must be able to trust that it will turn out as we say; that inflation will not rise above or fall below the target of 2 per cent for a longer period. This is also the reason why we members of the Executive Board often travel around holding speeches. Communication with the Swedish public and the operators on the various markets is important for monetary policy. As monetary policy operates impact with a certain time lag, the instrumental rate is adjusted so that the total assessment of future inflation, taking into account the risk scenarios, 1 to 2 years ahead is in line with the target. Interest rate decisions are based on forecasts of future prices.

The high productivity figures in Sweden were partly connected to the rise in the telecommunications products industry, but a rise in total factor productivity has also been seen in other parts of Swedish trade and industry, mainly in the engineering and pharmaceuticals industries. Despite the fact that the importance of IT is now being played down, the extensive use of computers, networks and the Internet in Sweden will make a positive contribution to productivity. Efficiency gains should arise, for instance, when tax authorities, social insurance systems, municipal services, etc. move over to Internet-based self-service. The connection between IT use and internationalisation of trade and industry appears particularly strong, with increasingly advanced networks of specialised sub-contractors. It appears that the countries which had good productivity growth during 1995-2000, such as the USA, Finland, Australia and Sweden, all had trade and industry that opened up to international exchange more quickly than other OECD countries, parallel with an increase in IT use. Challenges The question is whether these improved conditions are enough to provide Sweden with stable, good growth over the next five to ten years. Can we trust that the problems of the 1970s, 1980s and 1990s are definitely over? Or are there other institutional or structural changes which the economy need to undergo? Some of the growth during the 1990s was probably a temporary effect of the economy making a recovery after having been so hard pressed at the beginning of the 1990s.
1987-2003 10  10  8  8  6  6  4  4  2  2  0  0 1987 1989 1991 1993 1995 1997 1999 2001 2003  SG CME 08.06..2004  Source: Statistics Norway  2  The exchange rate remained stable up to autumn 1996, partly because wage growth was low and overall demand did not generate pressures in the economy. Gradually, the krone began to show wider fluctuations. The experience of the last half of the 1990s demonstrated that monetary policy cannot fine-tune the exchange rate. Developments in international financial markets led to more pronounced fluctuations. And more fundamentally, exchange rate developments no longer provided signals to wage formation and fiscal policy when labour market pressures mounted and incomes policy failed. High petroleum revenues, fiscal slippage and expectations of increased use of petroleum revenues contributed to this. Hence, the exchange rate was no longer appropriate as a nominal anchor. Norges Bank therefore placed increasing emphasis on low and stable inflation. A formal inflation target for monetary policy was introduced in the spring of 2001. The mandate for the conduct of monetary policy is provided for in the Regulation on Monetary Policy, issued by the Ministry of Finance on 29 March 2001. The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. The idea of an inflation target for monetary policy was not new.

It took 50 years before the interest rate returned to this level, which we now regard as abnormally low. However, prevailing views on monetary policy at that time is probably of more interest. Brofoss said the following: “Increasing the discount rate will probably be widely regarded as the most important monetary policy measure. The interest rate is, however, a controversial instrument, both in Norway and in other countries. Nonetheless, an increasing number of countries use it. Whether the purported good results can be ascribed solely to interest rate policy is another question. The effects in Norway may differ somewhat from the effects in other countries. Countries with major currencies can influence short-term capital movements via the interest rate. This is only possible to a limited extent in Norway. A substantial share of business investment is self-financed and is not affected by the interest rate. The same applies to shipowners that finance new ships built in other countries with their foreign exchange earnings. As a cost factor, the interest rate will probably curb debt-financed investment. The question is whether this will eliminate the lowest priority investments. In the long run, we are dependent on long-term investment. Interest rate changes may therefore have adverse effects in Norway that do not occur in other countries.” This stands in contrast to the current view, as expressed by Norges Bank’s delegating authority, the Ministry of Finance:2 “The new guidelines for economic policy also imply that monetary policy has been given a clear role in stabilising economic developments.
This is done for instance in our Financial Stability Report, which is published twice a year, and in speeches held by Executive Board members. We also try to influence market participants who are important to financial stability. Part of this work includes regular contacts with the banks, other government agencies and our central bank colleagues in other countries. Most of our work concerns preventing problems and ensuring that the payment system functions as smoothly as possible. We can do this in many different ways. Some concrete examples are the recent actions taken by the Riksbank and other government agencies. I shall return to what these actions entail shortly. We work to prevent financial crises from arising. But if they do nevertheless arise, it is also our task to manage them. We have to be prepared to take action although we hope that we will never need to do so. This preparedness includes, for instance, regularly holding crisis exercises, both internally and together with other Swedish authorities, and sometimes together with central banks and authorities in other countries. The work on financial stability is reminiscent of fire safety work. We have to provide information about the risks, but it is also our job to be prepared to put out the “fires”. And to be able to do this efficiently, we must have practised. In purely practical terms, we have the possibility to take a number of different measures if this should prove necessary.

Mervyn King: Reform of the International Monetary Fund Speech by Mr Mervyn King, Governor of the Bank of England, at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi, 20 February 2006. *  *  *  Sixty years ago delegates from around the world were gathering on Wilmington Island in Savannah, Georgia, to celebrate the baptism of the Bretton Woods twins, the International Monetary Fund, or, simply, “the Fund” and the World Bank, “the Bank”. India was represented by Sir Chintaman Deshmukh, Governor of the Reserve Bank of India, and Britain by John Maynard Keynes, Lord Keynes as he had become. The two men got on well, as can be seen from their official reports on the Savannah Conference. As Sir Chintaman wrote later: “this meeting remains memorable mainly as the occasion when the Indian delegation worked in effortless accord with the British delegation under Lord Keynes and there were many occasions when there happened to be agreement between us on the need to take some steps which would increase the utility, independence and creativity of the international bodies". 1 In his speech at this first meeting of the Fund, Keynes drew an analogy with the christening-party in The Sleeping Beauty, which, as Chairman of Covent Garden, he had seen danced at the reopening of the Garden only two weeks earlier.
Peter Pang: Managing the next phase of growth in Asia Welcome remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority, at the IMF’s Asia and Pacific Regional Economic Outlook, Hong Kong, 28 April 2011. *  *  *  1. Good morning. It is my great pleasure to welcome you all to the launch of the latest issue of the IMF’s Asia and Pacific Regional Economic Outlook (REO). We are honoured to have Mr. Anoop Singh, Director of the Asia and Pacific Department of the IMF, and his colleagues to share with us today their views on the region’s economic and financial developments, the outlook and the challenges, and what can be done to manage the risks and promote sustainable growth in the years ahead. 2. I like the theme of this issue of the REO – “Managing the Next Phase of Growth” – as this is what concerns us most in Asia at this juncture. We are now some two-and-a-half years after the outbreak of the global financial crisis, and Asia has been leading the global recovery – a recovery that is maturing as rightly pointed out by the IMF. The question is where and how we should move on from here. And looking ahead, managing the next phase of growth is very challenging as we are facing complications of unprecedented scale and dimensions. 3.

In recent weeks, the yields on German sovereign debt have on a few occasions started to move together with the yields of the periphery...  g.  Let’s turn our attention from clear fiscal solutions to monetary solutions and other ideas. Currently a lot of plans are being motivated by the idea that a eurozone-wide political commitment to a long-term plan for a deeper integration project is going to stabilize the markets. I will neglect the fact that to many observers these plans look like better or worse masked commitments to significant future fiscal transfers within the eurozone and that the markets are rather skeptical about Europe’s long-term projects. After all, the eurozone was one such project. In addition, the route to even the earliest targeted dates – in the second half of this decade – takes in one or more elections in most of the countries in question. Perhaps the markets would appreciate  2  BIS central bankers’ speeches  a nearer-term plan, one that signals, for example, that political players are willing to shift the voting powers on some pan-European solutions to bigger economies with larger stakes and more resources to spend in absolute terms. h.  Let’s go back to Philip Coggan’s observation that a “majority in failure” breaks financial systems based on the interests of savers. There are seven clearly conservative creditor countries in the eurozone: Estonia, Germany, the Netherlands, Finland, Slovakia, Austria, and Luxembourg. Seven is some way short of a majority in a group of 17.
Financial institutions also have a strong starting position in this regard, having amassed a great deal of information on their customers over the years. Evidently, they need to retain access to these data, while always observing high standards of compliance with privacy and data management rules and best practices. Yet it is not merely a question of having this information, but also of having the capacity to take full advantage of it. In other words, being able to process it so as to measure risks properly, analyse profitability and costs on a case-by-case basis, offer quality services and compete on equal terms with the new players. Banks’ position has so far gone unscathed by the entry of competitors. However, this may change with PSD2. Specifically, authorised third parties have access to customers’ bank data, yet banks are not afforded similar treatment. Indeed, rather than banking business opportunities per se, these new operators are more interested in the data. The report rightly states that in order to compete with BigTech on equal terms, a broad exchange of data – and not just financial data – is required. In this connection, the European Commission has already started on various lines of work that seek to improve the re-utilisation of information in the market. Also, proposals such as the Digital Market Act may somewhat mitigate some of the undesired consequences of BigTech’s advantages stemming from anti-competitive conduct.

The second is a mismatch between the maturities and/or currencies of the assets and liabilities on either side of the balance sheet. Consider a simplified bank balance sheet, shown in Chart 4, with the bank’s holdings of loans, securities and reserves financed by a mixture of: (insured) deposits; other debt of various forms, including borrowing from other financial institutions collateralised against the bank’s assets, repurchase agreements, unsecured bank debt; and finally equity capital. This last category is the initial absorber of unexpected losses and is a key determinant of sustainable balance sheet size and thus of the supply of credit to the economy. That is, by the way, rather different from the standard textbook model, in which banks’ holdings of reserves and loans are financed solely by deposits and the size of the bank’s balance sheet  3  This could come about through: conventional asset substitution; an attempt by investors, such as pension funds, to maintain returns in order to match their commitments (Raghuram Rajan, 2005); or a movement down the risk spectrum as banks expand loans in order to maintain leverage as the value of their existing assets, and therefore also of bank equity, rises (Tobias Adrian and Hyun Shin, 2009). 4  Though Adam Posen (2010) notes that equity booms precipitated by technological innovations are typically less costly than real estate booms. BIS central bankers’ speeches  3  is determined by the product of its holdings of reserves and the money multiplier.
Another variant of an asymmetrical disturbance is that asset prices – the property market and stock exchange – due to a too strong economic development are forced up for a short while. However, in situations such as this, the required tightening can usually be managed with the help of fiscal policy. Naturally, stabilisation policy via the budget has its limitations since it only works with delay and is dependent on many other long-term considerations. In addition, the Stability and Growth Pact, which Sweden is included in whether or not a member of the EMU, provides a limitation on increased government expenses. The most important “shock absorber” even if we do not join the EMU, but especially if we do, is that wages can adapt to changes in the competition situation, i.e. that there is a high degree of flexibility and pliability in wage formation. It would thus be possible to avoid an increase in unemployment during an adaptation period. Naturally, it can be more difficult, politically, to achieve this than to adapt an exchange rate. A single monetary policy therefore requires greater discipline from labour market parties since the connection between wage costs/inflation and monetary policy will be less obvious than is the case today. The krona The reasoning I have pursued so far has assumed that the exchange rate actually functions as a shock absorber: that the floating exchange rate adapts to competitiveness and the business climate, i.e.

that the krona has been affected by a net outflow of capital from Sweden. The development of the krona and the stock market has shown a strong correlation since the beginning of 2000. This is probably connected with foreign investors selling Swedish shares in line with falls on the stock market, which has affected Sweden more than other countries, as a large part of the stock market value is owned by foreign investors. Moreover, Swedish investors have bought a large amount of foreign shares, which is probably connected with the new pension system and the freer investment regulations for the AP pension funds. It has been possible for the AP pension funds to increase their foreign exchange exposure, i.e. the percentage of foreign assets, from 10 to 15 per cent with effect from this year. The funds can increase their exposure by five percentage points a year to a maximum of 40 per cent in 2006. On top of this comes a factor that is difficult to explain on the basis of classical exchange rate theories. The krona is affected to a large extent by general unease on the global financial markets. During times of financial unrest the krona weakens when investors leave the Swedish market for ones considered a safer investment. This was particularly noticeable during the Mexico crisis of 1995 and the Asia crisis of 1997-98. The recent unrest on the financial markets in connection with uncertainty over the global business climate has once again had a negative effect on the krona.