samchain/econo-pairs-v1 huggingface dataset:
Is Home Working Good For You? Speech given by Andy Haldane Chief Economist and Member of the Monetary Policy Committee (MPC)  Engaging Business Summit and Autumn Lecture 14 October 2020  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Jack Meaning and Andrea Sisko for their help in preparing the text. I would like to thank Lena Anayi, Andrew Bailey, John Lewis, Sophie Piton, Jo Place and Chris Young for their comments and contributions, and the organisers of the Engaging Business Summit Autumn Lecture for giving me the opportunity to discuss these issues. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  I am delighted to be speaking at this “Engaging Business” Summit, at such a critical time for business, for workers and for the wider economy. The focus of today, and the excellent background report, is happiness in the workplace. This is an issue in which everyone has a stake. It is particularly pertinent with many people having had to adapt their ways of working as a result of the Covid crisis. Indeed, this year may well have seen the largest shift in working practices ever seen, certainly the largest in modern times. That begs a host of questions about the impact of these changes in working practices on workers, businesses, communities and the wider economy. For economists like me, it raises questions about the impact on productivity and output in the workplace.

Widening adoption of automotive process could lead to work displacement; a large number of individuals, especially those in mid-career, will need to be re-trained and equipped with new skill sets. These changes in business and labor market conditions will have considerable impacts on central bank policies and how central banks operate, including those in macroeconomic analysis, payment systems, and financial supervision. Moreover, growing interconnectedness in trade, finance, and supply-chains have resulted in increased real and financial spillovers and globalized price-level, thus complicating central banks’ job of maintaining price and financial stability. 1/4  Many powerful developments are taking place today, from the growing influence of FinTechs and BigTechs to introduction of cryptocurrencies and electronic payment technologies. For many of us, central bankers, when dealing with new developments that can transform our financial system and how we conduct our policies, several key policy questions are often brought up: What are the risks and rewards of these developments? Should we regulate them? If so, how best to regulate them? How can we make use of these digital developments in our policy setting? And, what roles could central banks play in promoting new technologies and new digital platforms? To begin approaching these questions, we first have to admit that the boundary for new innovations or technologies is limitless and their potential impacts, at current juncture, may not be fully uncovered. There are things that we know and things that we don’t.
Not since the period in the late 1960s and early '70s has our economy experienced growth figures like this. The favourable trend has contributed to rapidly rising employment and decreased unemployment. A look at the statistics shows that this expansion of employment is the strongest Sweden has experienced since the labour force surveys were first published in the early '60s. The markedly favourable trend is not confined to growth, employment and unemployment. Both the current account and the public finances are generating surpluses. Another aspect of the good situation is that inflation has remained moderate. In recent years the rate of inflation, as measured by the consumer price index, has been under 1.5 per cent. This has paved the way for real wage increases on a scale we have not seen since the 1960s. In the light of all these factors – rapid economic growth, rising employment, falling unemployment, internal and external surpluses, low inflation and favourable real wage increases – the picture of the Swedish economy has indeed been very bright. What, then, is the explanation for this advantageous course of events? As always, it has to do with a combination of factors. The economic crisis in Sweden in the early 1990s clearly meant that resources were available when activity subsequently recovered. That reduced the risk of production quickly reaching its ceiling. At the same time, the Swedish economy has been performing more efficiently, particularly compared with the previous quarter-century, when even relatively low growth rates tended to generate inflation.

The system-wide dependence on term Libor fixings is an unnecessary vulnerability. A situation in which robust transactions-based benchmarks were more widely used would improve the resilience of the financial system. This is why the FSB recommended the development and implementation of RFRs. And that is why the Bank – given its interest in effective markets and responsibility for financial stability – is committed to supporting the adoption of near risk-free rates as alternatives to Libor. Put simply, we want to see a transition to a less Libor-centric world. What is the Bank doing? We have taken two important steps to support the implementation of a sterling risk free rate. We have taken on the administration of SONIA, the sterling unsecured overnight interest benchmark, and instituted a reform process to strengthen it. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  And we have set up the Sterling Risk Free Rate Working Group to forge a market consensus on the appropriate near risk-free rate and to coordinate wider adoption. SONIA reform The Bank’s aim in reforming SONIA has been to strengthen a benchmark which is already critical for sterling financial markets, but which is currently based on a market for brokered deposits which has limited transaction volumes. A key change is to broaden the input data to include all overnight unsecured deposits, not just brokered deposits. The Bank was uniquely placed to undertake this reform because we have the necessary data, collected under statutory powers.
BIS central bankers’ speeches  3  Lending to owner-occupiers Second, lending to owner-occupiers at high loan-to-income (LTI) ratios remains significant. The FPC took action in 2014 to counter the risks arising from an increase in the tail of overly-indebted households. Its concern was that an increase in the tail of overly-indebted households posed a threat because such households cut back consumption very sharply in a downturn. 5 Transactions, house price inflation and the proportion of high LTI mortgages all cooled down following the FPC’s actions and other factors at the time like the introduction of the Mortgage Market Review. All of these variables have since bounced back. Prices and mortgage approvals for house purchase are growing at an annual rate of 7.5% and 19% respectively. 6 And nearly 15% of new mortgages extended in Q4 had LTI ratios just below the FPC’s threshold of 4.5 – almost double the proportion in 2008/9. Commercial real estate The third property-related area the FPC has been looking at closely is commercial real estate (CRE). Many countries have experienced repeated booms and busts in commercial property and the UK is certainly no exception. Over the past 100 years, the UK has experienced five CRE cycles and similar cycles have been seen in a range of developed economies. At the end of the 1980s CRE boom documented by Alastair, prices fell by over a third and 25 banks failed or were closed down.

It is, however, clearly not the case that all banking is unprofitable or un-investable. The health of UK retail banking is almost certainly being masked by conduct costs, current and expected, and by outdated and costly business models that need restructuring, especially in relation to investment banking. But the returns expected by investors in banks may well be sticky and have further to fall to come into line with risk. The authorities may be able to assist this by giving greater clarity on the end point of the regulatory structure. 14  This figure excludes RBS which is majority-owned by the UK government. 15  See Baker and Wurgler (2013). 16  See Bank of England (2015). 17  See BIS (2016). 8  BIS central bankers’ speeches  On this last point, the stickiness in investors’ required returns may be part of a more general adjustment to a lower interest rate environment. We are unable to measure them directly, but there is some evidence that despite the very low market rates we are now seeing across the yield curve, hurdle rates for corporate investment – namely, the rate of return required by corporates on new investment – have not reflected lower risk-free rates but rather have been sticky and remained near pre-crisis levels. The Bank is doing more work on this. A recent Bank of England Discussion Paper looking at measures of finance for productive investment cites data on hurdle rates as a material data gap in assessing the availability of finance for productive investment.
Tier 2 capital includes supplementary items such as qualifying subordinated debt and a portion of the allowance for loan and lease losses. See 12 CFR part 225, Appendix A for a full discussion of the items included in Tier 2 capital and the associated limits, restrictions and deductions. Tier 1 common capital as defined for the Supervisory Capital Assessment Program is the portion of Tier 1 capital that is common equity, or Tier 1 capital less perpetual preferred stock, minority interests and trust preferred securities that qualified as Tier 1 capital. Tangible common equity is defined as total equity capital less perpetual preferred stock and related surplus (net of related treasury stock), goodwill and other intangible assets. Four capital ratios are also calculated. The denominator for three ratios – the Tier 1 risk-based capital ratio, the total risk-based capital ratio and the Tier 1 common capital ratio – is risk-weighted assets. The denominator for the tangible common equity ratio is tangible assets, defined as total assets less goodwill and other intangible assets. 5  It had been under 2 percent. 6  These guidelines apply to the individual bank subsidiaries within a bank holding company. BIS central bankers’ speeches  3  Figure 3 highlights that since the worst phase of the crisis, 15 large U.S. banking organizations that have reported continuously through the crisis have made significant progress in improving both the quality and quantity of their capital.

The most narrow capital definition on the chart – the ratio of tangible common equity to tangible assets – has risen from a little over 2 percent to almost 6 percent. This reflects both significant raising of external capital as well as dramatic declines in dividends and stock buybacks during the crisis and the early period of recovery. Both of these dynamics have had a significant positive impact on the institutions’ ability to withstand potential future stresses. Figure 4 illustrates the amount and composition of capital – the numerators of the various capital ratios – at the 15 large banking organizations over a four-year period. You can see that there has been an appreciable amount of common equity raised by this group of large banks. The improvement in the quality and quantity of capital is quite striking. An important aspect of this recapitalization has been the supervisory use of stress tests to determine the adequacy of capital, and also in evaluating discretionary capital distributions (such as increased dividend payouts). The supervisory use of the stress tests is relatively new. It is worth noting and discussing the fact that it is not just capital regulation, but also supervision, that has been a driver of the recapitalization process. Stress tests and improving the quantity and quality of capital Now I would like to delve a bit deeper into the role that stress testing has played in encouraging more rapid recapitalization of U.S. banks, during the financial crisis and the early stages of the economic recovery.
Caleb M Fundanga: The role of insurance brokers in the growth of the Zambian economy Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, on the occasion of the annual dinner of the Insurance Brokers Association of Zambia, Lusaka, 24 May 2006. * •  The Chairperson  •  Distinguished Guests  •  Ladies and Gentlemen  *  *  It gives me great pleasure to officiate at this annual dinner and to talk to you on the subject “The Role of Insurance Brokers in the Growth of the Economy”. It is my hope that our interaction this evening will give us a better understanding and appreciation of the important contributions that insurance brokers have made to the economic growth of this country. The insurance world will continue to have a vital role to play as we continue to move the economy towards further stability and growth. Mr Chairman, before I talk about your role in the growth of the economy, I would like to begin by giving you a brief account of the macroeconomic developments in Zambia in the recent past. I know that many of you have been following the economic developments in the country. The economy has performed relatively well in recent years, with inflation and interest rates coming down. The exchange rate has relatively stabilized, following a steep appreciation in 2005. The growth in real Gross Domestic Product (GDP) averaged 4.7 percent per annum during 20012005.

This has been as a result of Government’s sound macroeconomic management and the critical contributions that various sectors of the economy have made, of which the insurance sector is a part. Let me once again thank you for inviting me to share my thoughts with you on the role that your noble profession plays in this economy. On our part as Bank of Zambia, we shall keep on facilitating the development of, among others, the insurance sector by continuing to improve macroeconomic conditions that are critical to the expansion of your businesses. In turn, it is expected that other sectors of the economy will benefit and contribute to accelerated economic growth and development that the country is craving so much for in order to reduce poverty. May I, at this juncture, point out that in order to facilitate your work, you may track some of the developments in our economy on the Bank of Zambia website, which you can visit on www.boz.zm. You can also contact us directly for any information you may require on the economy. I thank you for your attention. BIS Review 72/2006  3
Miguel Fernández Ordóñez: Immigration and the inflation moderation debate Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Symposium “The Phillips curve and the natural rate hypothesis”, Kiel Institute for the World Economy, Kiel, 3 June 2007. *  *  *  Introduction It is a pleasure to be here today at this Symposium in such distinguished company. The organisers have put together an impressive programme on a key topic for policymakers and central bankers in particular. As you know, the relationship between inflation and economic activity has always been at the heart of the macroeconomics discipline. And theoretical developments in this field have had a significant and direct influence on actual monetary policymaking. We are currently in a unique situation. For an unusually long period, in the context of high global growth, inflation has remained low and stable. Many commentators – and not only central bankers – would agree that better-managed monetary policy has had a lot to do with this favourable inflation performance. And there is a lively debate about which specific aspects of monetary policymaking have been responsible for it. Let’s look at three questions this debate has raised. First, do central bankers now have better knowledge of the economy and of monetary policy transmission and, consequently, are adopting more effective decisions? Second, have monetary policy regimes shifted towards making price stability a more prominent target?

While recognizing that a desirable credit growth is necessary to encourage domestic production and diversification of the economic structure, the 2007 budget clearly sets out the need to curb credit expansion towards non-essential items which brings in demand pressures on prices. 2  BIS Review 7/2007  Support for financial system stability By introducing appropriate measures to encourage the financial community to proceed on a prudent lending path, the fiscal policy expects that the relevant authorities will maintain financial system stability. The 2007 budget also recognized the need to reduce high spreads and margins by banks which enhance transaction cost to the nation. In this regard, the way forward or the path ahead will be to support the potential growth sectors in the economy and reduce transaction cost of financial services. This is also aimed at increasing access to finance by all segments of the population. Amalgamation of state owned small development banks for greater efficiency Consolidation of the state owned, small scale banking institutions to ensure that access to finance by SMEs and micro enterprises will strengthen banking institutions. Accordingly, the 6 regional development banks, the SME Bank and the Lankaputhra Development Bank will be amalgamated with a solid capital base of over Rs. 5 bn. It is planned to increase the consolidated capital to Rs.10 bn. in the next 5 years, and rationalize the existing branch network of these banks for a better outreach.
The new liquidity rules will make deposits a strategic source of funding. Retail banking stands a good chance of reclaiming its role as the bedrock of banking. Insurance companies, facing higher capital requirements and ageing demographics, will be under pressure to boost returns on investment and enhance asset-liability management. Many of them will be motivated to access new and under-penetrated markets, and seek higher yielding investments within the constraints of regulations and their mandates. Exchanges will continue to consolidate and adopt a “multi-asset class” approach. Companies will explore other avenues for raising capital, including private placements. There will be more standardised derivative products and new types of market infrastructure: central counterparties for clearing, trade repositories for reporting, and swap execution facilities for trading. High-volume, low-margin platforms will likely become more competitive. A big unknown is the future of long-term finance. •  First, banks are likely to play a reduced role in providing long-term financing, especially for infrastructure. Basel III will raise the cost of issuing long-term corporate and project finance loans above the cost of issuing mortgages and short-term loans. •  Second, insurance companies may be discouraged from investing in long term assets, as a possible consequence of Solvency II. •  Third, institutional investors such as pension funds and endowments often face restrictions on portfolio allocation that discourage them from providing long-term financing.

In 1999 the GDP growth rate is expected to be rather more than 3 per cent. This implies that in 1998 and 1999 growth will be stronger than the increase in potential output, for which the annual trend is estimated to be just over 2 per cent. That means that today’s surplus capacity will be activated by degrees. It is difficult to tell how quickly this will happen. The Riksbank considers that the output gap -- a way of attempting to gauge unutilised capacity in the economy as a whole -- is currently about 2 per cent of GDP. With the growth rates envisaged above, the gap would then close some time in 1999. Other information with a bearing on when inflation might be likely to accelerate was also included in the inflation report. Estimates of structural unemployment and thereby, indirectly, of the level of unemployment that can be combined with stable, low inflation, suggest that risks of inflation also exist less than two years ahead. The rate at which capacity utilisation rises may likewise play a part. A rapid reduction of unutilised resources might generate inflationary impulses even though there is still a capacity surplus at total level. Risks in the wage negotiations Wage formation is particularly relevant at present because the settlements that are due in the coming six months will cover a large part of the labour market. Labour shortages are not yet being reported from more than a few sectors, but experience shows that the domino effects can be substantial.
Achieving fiscal surpluses in expansionary phases, as established under the new budgetary stability laws, not only proves suitable for easing demand pressures, but also for retaining sufficient room for manoeuvre in the face of potential deviations from the scenario of economic dynamism and, naturally, for further restructuring public finances in order to absorb the future consequences of population ageing. This is, unquestionably, the main challenge for public finances in the medium term. The agreement reached last year under the Toledo Pact also addresses the goal of ensuring the sustainability of the pensions system, although the measures adopted are still of limited scope. It should be recalled, however, that the high growth of public revenue has a difficult-to-estimate temporary component that is linked in part to the strength of the real estate sector. Accordingly, budgetary consolidation may require an additional effort to control primary spending. The collaboration of regional and local government is vital in this connection, as they are responsible for major spending components such as public investment, health and education. This consolidation strategy should, moreover, be compatible with an improvement in the quality of public finances, since that is essential for raising incentives and for helping overcome the shortfalls in education, innovation and productivity.

As early as November 1973, at the Conference on Managers in a Changing Hong Kong Environment, Sir Philip spoke on, amongst other things, the role of public policy. He said that, “the Government must accept such responsibilities as are necessary to ensure that management decisions are not frustrated by imperfections in the operation of the market mechanism, leading to economic inefficiency or social distress which only the Government can remove.” In September 1979, he talked about interventionism and the adjustment mechanism, amongst other things, in a speech on the Hong Kong Economy in Transition. He said that: “A pragmatic view dictates an admission that interventionism can be relevant to the maintenance of economic stability in Hong Kong even in the general context of a philosophy of positive non-interventionism”. In the same speech he cautioned against taking for granted the “efficiency with which [the] essentially automatic adjustment mechanism operates in restoring equilibrium”. He then went on in the same speech to identify areas that could be collectively referred to as market imperfections which justifies market intervention. BIS Review 67/1998  -2But it was the speech he made to the Federation of Hong Kong Industries in December 1980 (and as Principal Assistant Secretary for Economic Services then it was my honour to have a hand in drafting part of the speech) in which he made abundantly clear his stance on the policy of positive non-interventionism. Here I quote two paragraphs of his speech in full.