samchain/econo-pairs-v1 huggingface dataset:
In a world of popular narratives, where emotions shape decisions and where stories can snowball, aggregates measures of activity may do a less good job of capturing the forces shaping people’s decisions. The qualitative, the conversational, the narrative, the emotional are the new data in this new world – optimism and anxieties about tomorrow, as much as income and jobs today. Harvesting these new data calls for a different set of approaches and reaching new communities in new ways. 71  One example of that is making greater use of surveys of sentiment. The Bank of England recently set up a new survey of companies to assess their degree of uncertainty around Brexit and what impact this was having on their decision-making. It is as much a survey of sentiment and perceptions as investment intentions. This follows previous analysis undertaken by Nick Bloom and Steven Davis in collaboration with the Atlanta Fed. 72  Working with psychologists, the Bank has undertaken research to capture sentiment in financial markets, applying semantic-analytic techniques to the words used by market participants. 73  More generally, the same  semantic techniques used to study central bankers’ words could be applied to the words used by the general public to capture their topics of conversation, their sentiment and their popular narratives on the economy. Clearly, there is further to go.

The added volatility of inflation for these items, over the past months was in response to structural changes in the domestic market and the downward trend of inflation in regional markets. Prices of other items in the basket continued to give low contributions. In spite of the volatility, medium-term inflation trends remain clear. The overall economic and monetary environment is characterised by weak inflationary pressures, reflected, in turn, in low core inflation rates. The analysis of macroeconomic factors shows that aggregate demand remains weak, maintaining economic activity below its potential level. The unutilized productive capacity led to low increases in employment, wages and production costs. Supply-side inflationary pressures remain weak, owing to the downward inflation in our trading partners, low primary commodity prices and stable exchange rate. Inflation expectations remain subdued and close to Bank of Albania’s inflation target. Regarding economic activity, recent data corroborate our earlier assessments for positive growth rates in the first months of the current year. Aggregate demand increased due to the positive performance of domestic private demand, while the public sector’s contribution was negative. Foreign demand continued to grow, as reflected in export growth. Consumption and private investments increased in the first three months of 2014, though at lower pace than in the fourth quarter of 2013. Their performance remained sluggish, reflecting the uncertainties of economic agents and tight financing conditions. The recovery in these components of demand will be a determining factor for the country’s economic growth in 2014.
On the financial sector, beyond the European Union’s borders, and with all our partners, we have to strive to maintain the collective rules of the game that we have put in place since the G20 summit of London in 2009. Nine years later, some actors may be tempted to have short memories and forget the lessons of the crisis. But diluting financial regulation would pave the way for the next financial crisis. So we must now be firmly committed to the “full, timely and consistent implementation” of Basel III, as successfully agreed last December and stated in the last G20’s Buenos Aires communiqué. Neither the United States today, nor the United Kingdom tomorrow, should take the path of unilateral deregulation, and we welcome their commitment. Evaluation and simplifications are obviously possible, under the common FSB umbrella: but regulatory competition would be nothing less than a lose-lose scenario with disastrous consequences. However, we are not done with financial regulation yet. We still have to finalise ongoing initiatives, especially on shadow banking. Indeed, the regulatory priority is no longer the solvency of banks, but the liquidity of non-banks: we stressed these financial stability risks in our Washington meetings last week. Tomorrow, we at the Banque de France will publish the 2018 Financial Stability Review that is focused on fast-growing market-based finance. I stress that we have to better monitor it, test it – through liquidity stress-tests –, and regulate it when necessary.

From a more prospective point of view, artificial intelligence (AI) will be among the most 1 2/3  BIS central bankers' speeches  impactful technologies in the financial industry for the upcoming years:1 up to 30% of major French banks’ projects in current development are heavily focused on AI and the potential for insurers is equally huge both for the traditional damages insurance as for life insurance products. The expected benefits of AI in customer relationship and risk management are numerous: we don’t know the limits, and we shouldn’t be frightened of AI. To allow its wider use in a secured way, we have set up a Task Force on AI, led by the ACPR and gathering all relevant industry representatives. And I already stress that we have to collectively implement at least three core principles: (i) promoting a greater understanding of algorithms to avoid the ‘black box effect’; (ii) ensuring a sound governance of AI-based systems; (iii) fostering an ethical use of data so that bias-free AI applications promote inclusiveness. Last but not least, green finance represents a new frontier for the 21st century for us as central bankers and supervisors. One of our priorities is to better measure the long-term risks associated with climate change: we need both a “snapshot of the risks” – namely the identification and disclosure of exposures – and a “video of the risks” provided by forward-looking carbon stress tests.
Unemployment has remained low, and the employment rate has increased to the highest level seen in over 10 years. In recent months, economic growth has slowed. The labour market is still tight, but labour shortages have eased. Recently, unemployment has risen slightly. House prices fell in autumn 2022 but have since edged up again. Chart 5: In 2022 wage growth reached its highest level since 2011 In 2022 wage growth reached its highest level since 2011 and is expected to rise further this year. Higher wage growth means higher business costs, and high economic activity may make it easier for businesses to pass on higher costs to their selling prices. Overall mainland business profitability is solid, even though there are wide differences across industries. The Norwegian wage formation model is characterised by a high degree of coordination, and the social partners take into consideration employment and firms'  2/5  BIS - Central bankers' speeches  profitability when negotiating wages. Experience has shown that wage growth adjusts faster in Norway than in other countries when the economy turns. This reduces the risk of wage price spirals, which thereby lessens the need for monetary policy tightening in response to a cost shock than would otherwise have been the case. After the pandemic, Norges Bank was one of the first central banks to raise its policy rate in autumn 2021. But policy rates were then raised substantially in many countries through 2022 in response to the surge in inflation.

For the first time in two years the median price for houses has fallen, according to Swedbank’s Boindex. Moreover, the rate of increase in household borrowing from mortgage institutions is now slightly lower than it was in the spring. Of course, it is impossible to draw any far-reaching conclusions solely on the basis of these observations. However, we will make a thorough assessment of the situation later in the autumn when we publish our twice-yearly Financial Stability Report. Summary and conclusion Let me briefly summarise my message today. •  We have raised the repo rate four times this year and my assessment is that it is reasonable to assume that further increases will be necessary. This will ensure that inflation is close to the target and that developments in the real economy are balanced. •  Our focus is on the inflation target and the central aim is, as before, to anchor inflation expectations in the economy around this target. When we formulate our monetary policy we also give consideration to the way the rest of the economy is developing. You can read more about this in our recently published strategy document “Monetary policy in Sweden”, which can be ordered from our Communications Secretariat. It can also be downloaded from our website and is available in both Swedish and English. •  The social partners can sign new agreements based on the assumption that the Riksbank’s inflation target stands firm.
As for the current account, we expect the surplus to amount to about 4-7 billion US dollar for the whole year, up from the surplus of 2.1 billion US dollar for the first two months of 2008. Distinguished Guests, I now move to the second part of my talk, on the issue of risks to the Thai economy in 2008. I believe that there are two important risks stemming from external sources, namely 1) the US recession and high oil and commodity prices, and 2) the potentially more volatile international financial markets. On the prospects of global growth and global inflation, there is no doubt that the risks for both have increased in the near term. Despite the US Fed’s sharp and substantial interest rate cuts and liquidity support measures to forestall the rise in mortgage interest rates and ease the liquidity and credit crunch, the world now expects the US economy to weaken substantially. In the meantime, global price pressure has not yet peaked as the prices of crude oil and commodities continue to rise as world demand for them strengthens in the face of tight demand-supply situation. Moreover, price pressure could come from potentially adverse geopolitical events, unfavorable weather condition, and further dollar slide in the future. At this point, we cannot be certain that when the oil price finally adjusts downward, such a correction will be substantial enough to bring the global inflation risk down. 2  BIS Review 54/2008  What do these risks mean for the macroeconomic management in Thailand?

While as a general rule I am against this invasion of jargon, perhaps in this specific case the initials are preferable to the longer version, because IPSs, the focus of this conference, are not merely “institutional protection schemes”, or legal instruments suitable for securing the benefits of consolidation under capital regulations. They are and should be much more than that. IPSs have arisen as an innovative structure in the banking system and, like all new products, they are best evaluated by organising their assessment in steps, or successive degrees of scrutiny, so that at the end of the process their structure can be fully appreciated. The first step in the process of evaluation will be to judge whether they are timely. The second will focus on their design and construction. The third will be a “use test”. And the fourth and final level of assessment will look at how readily they lend themselves to progressive development so as to cover potential future needs. Allow me to cover these successive steps or facets one by one. Let us start with the first, their timeliness. IPSs are a response to an unquestionable substantive need: the downsizing of the Spanish banking sector, following the excesses of the growth period prior to 2007. These factors left many institutions facing the challenge of a future far removed from the comforts that had characterised the previous period, namely: strong economic growth, abundant liquidity on international markets, extensive business margins and healthy assets.
Conclusions Overall, the outlook for the Spanish economy has improved in the recent period. Its degree of vulnerability to potential shocks has progressively diminished as headway has been made in correcting its imbalances, strengthening economic activity and generating employment. Nonetheless, the effects of the crisis have been very serious and condition our economy’s growth capacity in the short and medium term. Accordingly, economic policy measures should be geared to shoring up the foundations of the recovery and to seeing through the correction of imbalances. The cyclical situation in the euro area and in Spain means the maintenance of a demandside policy mix supportive of the recovery is foreseeable. In the case of monetary policy, this is because of the commitments assumed by the ECB, which I referred to earlier. And in the case of budgetary policy, because adhering to the fiscal consolidation path will be compatible with a progressively less contractionary or more neutral contribution by the public sector to growth. In the current economic circumstances, it will continue to be necessary to complement these measures with reforms aimed at enhancing competitiveness and lowering the obstacles to a more rapid absorption of unemployment. Such actions take on particular significance in a situation like the present in which the aggregate level of debt in the economy is still high and further gains in competitiveness come up against a less propitious environment, given the low inflation in the euro area and the envisaged low growth in productivity.

This has proliferated in various types of institutions, including commercial banks - especially foreign-owned commercial banks, and existing credit card companies. In addition, new foreign-owned non-bank companies, registered as limited companies and not as financial institutions, can undertake the business of lending to individuals, without requiring approval from the Bank of Thailand, as they are not deposit-taking institutions. These companies have opened branches in many major provinces throughout the country. In many cases, these businesses rent a shop-house as an office to provide personal loans to low-income borrowers, for example, at around 4,000 baht per month. While Thai commercial banks charged interest on personal loans at the rate between 12 - 24% p.a., foreign banks charged between 12 to 46% per annum, and foreign-owned non-bank companies charged an even higher rate of 12-58% per annum. Charges by non-bank companies sometimes seem misleading as they split the monthly interest charge into two parts: one part called interest rate, and the remaining part called fee. But their fee calculations are done in the same way as interest rate charges. For example, one non-bank company charges an interest of 0.99% per month plus a service fee of 3.98% per month. Many borrowers, who do not fully understand this financial technique, misunderstand that they have to pay a one-time fee of 3.99% and an interest rate of 0.99% each month, which seems quite reasonable. In reality, however, such a company charges an effective rate of up to 58% per annum.
Evidence shows that, apart from their medium-term effects, structural reforms may have significant favourable effects in the short term, in so far as their introduction may make agents more confident that the foundations for growth are being made more solid and flexible. Such an improvement in expectations may also help to bring forward certain spending decisions, such as investment projects aiming to exploit the new opportunities that these structural changes may give rise to in the future. Now is therefore the time to stress the essential role played by the institutional framework and policies that provide incentives to facilitate economic adjustment. In this respect, as I have already mentioned, obviously not all agents have the same degree of responsibility when facing a period of difficulty, the authorities being the main agents responsible for shaping this combination of positive incentives. Given that the decisions of the private sector (households and firms) depend significantly on the institutional framework and incentives, their role in the adjustment (especially that of households) is highly constrained by the framework in which they operate. This is perhaps the main thing that the authorities should take into account in their response to a period of economic difficulties, both when managing budgetary policy and when designing their regulatory and market-organisation policies. It is necessary to analyse, at all times, whether the policies proposed provide the appropriate incentives for agents to adapt to the adjustment, increasing the probability that the economy will return to a growth path in the medium term.

Since in recent years a part of household wealth has taken the form of property investments, if the number of houses used to generate funds through rental could be increased, it would also help many owners to meet their debts. A third area in which reform is fundamental is the labour market. The performance of this market will probably be the key to determining whether the current adjustment will be rapid and slight or whether it will be prolonged and far-reaching. It is often said that the Spanish labour market is very flexible, and the evidence cited for this is the high proportion of  4  BIS Review 117/2008  temporary workers. Indeed, the existence of a relatively high proportion of temporary contracts may mean that some firms have a greater capacity to respond to changes in economic conditions, but these contracts are not evenly spread across sectors, nor would they seem to be conducive to the proper training of workers. Moreover, the idea that the labour market is flexible because it allows the burden of adjustment to fall on temporary workers is hardly equitable, since it means that a very specific group (generally the last entrants to the labour market) bears the main burden of that cost. However, as I noted at the beginning, it is of interest to explore decision-making areas other than that of the authorities.
Historically, real assets like equities have yielded more than nominal assets like bonds. Equities have also proved to be more risky. However, the short-term variations in equity prices largely stem from changing discount factors or risk appetite, not from variations in income forecasts for the companies. 1 With the fund’s long-term perspective, such changes in risk premiums are of minor importance. Thus, the fund has ample capacity to bear this risk. Sixty percent of the fund capital is invested in listed equities. Recently, a new asset class was introduced – real estate. This improves the fund’s balance between risk and return. According to the fund’s management mandate, up to five percent of the fund is to be invested in real estate. Real estate investments are currently concentrated on 10 global cities in Europe and the US, but a large chunk is also invested in logistics property in various countries, including Italy. Property in major Asian cities may be included in the fund’s assets this year. The fund’s second-largest asset class is bonds or fixed income. The purpose of the fixed income portfolio is to protect the value of the fund from heavy losses when the stock market falls, and to provide liquidity. The strategic bond weight is currently 35 percent. Seventy percent of the fixed income portfolio is invested in government bonds in developed markets. These investments are distributed across countries on a GDP-weighted basis.

Based on the kind of systematic adjustments indicated above, a tailor-made operational portfolio has been constructed. This reference portfolio serves as a basis for more traditional selections of securities. The fund’s largest holdings in terms of ownership share, both in equity and fixed income, are based on our own analyses of investee companies and countries. Chart: External managers The large majority of the fund’s investment decisions are made within our own organisation. Still, we have always used external management companies in areas where developing inhouse capabilities has not been an efficient option. Most of the external mandates have in recent years been directed to specialists in specific sectors or countries. The fund is a long-term, responsible investor. The objective of our management is to achieve the highest possible return at acceptable risk levels. Norges Bank’s work on responsible investing underpins this objective. As a long-term investor, we are dependent upon healthy and sustainable developments in investee companies and markets. Our work with responsible investment rests on three pillars: We promote international principles and standards, and express our expectations as an investor on certain issues. We exercise active ownership through voting and engagement with companies. And we integrate environmental, social and governance issues into the investment process and risk management. BIS central bankers’ speeches  5  Chart: Responsible investment I Promoting good industry standards is an effective way of safeguarding our investments and assets in the long term.
What we can do rather is to better use the levers we have at hand to facilitate convergence among regulators and supervisors in the way to address this trade-off, so as to limit ring fencing and prevent a race to the bottom in that area and the resulting market fragmentation: - The first lever is the agreement to and implementation of internationally agreed regulatory standards. Hence the importance for instance at the current juncture of the fair and complete 2/3  BIS central bankers' speeches  implementation of Basel 3. Hence also the importance of ensuring that national regulatory frameworks do not diverge unduly beyond internationally agreed standards and remain equivalent, the importance of the commitment of regulators and supervisors to such convergence, and also the importance of efficient processes to reassess regularly such equivalences - The second lever is the use of forum for information sharing and cooperation among supervisors. Significant progress has been made in that direction that should bear fruit. In Europe, the introduction of resolution and AML colleges for banks and of oversight colleges for CCPs have been helpful to increase the involvement of home and host countries in the supervision of cross-border groups or entities. However, we should also recognize that convergence of regulation and cooperation between supervisors may also have their limits in some circumstances. This is certainly the case when considering the regulation and supervision of central clearing activities, given their systemicity and their natural trend to concentrate and eliminate substitutes.

In that context of extended need for cooperation and coordination among regulators and supervisors, my last comment is related to the levers at hand to promote trust and reliance on foreign supervisors to prevent the development of a trend towards ring fencing and the risk of market fragmentation. Let me say first that I don’t think that promoting mutual trust and reliance among supervisors can move us to a world free of ring fencing. This is because it has its root and it is the result of the trade-off each regulator and supervisor has to face, in normal time and during crisis, between the need to preserve the stability of financial intermediaries or the financial system as a whole for which it is accountable and the need to preserve their competitiveness through their integration to the global financial system. For instance, for banks with cross-border activities, regulators and supervisors need to balance requirements for pre-positioning of capital and liquidity in their jurisdiction and the need to leave to those banks enough flexibility in the management of those resources at group level. And this without mentioning the development of idiosyncratic financial stability risk which might call for macroprudential approach and specific additional capital requirements at a country level, and might add to the complexity to maintain this delicate balance.