samchain/econo-pairs-v1 huggingface dataset:
Let us have a step-by-step look at these channels of influence of globalisation on the monetary policy. Re 1) The growing share of international trade in the global output as well as the increasing international capital flows cause a situation, where the growth rate of a national economy depends increasingly on the developments of the global economy. To illustrate the impact of globalisation on the economic prospects, attention should be drawn to the hot topic in the macroeconomic policy, namely the problem of global imbalances. To give you some facts, the US current account deficit had been growing gradually over the past years to exceed USD 800 billion, i.e. 6.5% of the U.S. GDP, last year. This deficit, which represents import of savings from the rest of the world to the USA, is financed by the Asian central banks, for example the Peoples Bank of China, and by oil-exporting countries. The available forecasts show that the deficit will continue to grow. An animated debate is currently underway to determine whether this is a steady situation that simply reflects the new principles in the global economy 5 , or whether this trend is bound to stop and reverse sooner or later, which may entail a significant increase in the US long-term interest rates, a strong depreciation of the US dollar and a serious slowdown in the global economic growth. The majority of empirical and theoretical studies indicates a growing probability of the latter scenario, especially if no due steps are taken in many countries.

More broadly speaking, the RMB is now the seventh most used payment currency according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and the ninth most actively traded currency according to the Bank for International Settlements (BIS). 4. To me, the extent and pace of the development of offshore RMB business depends on three key factors. The first factor is the relaxation of controls and restrictions by the Mainland authorities. The second factor is the availability of the necessary financial market infrastructure, such as clearing and settlement systems. The third factor is the awareness and willingness of corporates and financial institutions, especially banks, to develop RMB business opportunities. 5. Since the RMB trade settlement pilot scheme was launched back in July 2009, the Mainland authorities have incrementally removed many controls and restrictions on the flow of RMB out of and into the Mainland. Presently all trade and current account  BIS central bankers’ speeches  1  transactions between Mainland China and other parts of the world, as well as inward and outward direct investment into and out of China, can be conducted in RMB. Moreover, some cross-border portfolio investment flows, such as investments into China’s bond and equity markets, can also be made in RMB via the RMB Qualified Foreign Institutional Investors (RQFII) scheme. 6. More importantly, in April this year the Mainland and Hong Kong authorities announced a milestone project, i.e. the Shanghai-Hong Kong Stock Connect scheme.
This corresponds to a deficit of 4.4% of GDP with the pension funds classified outside the general government sector, which will be the binding methodology from next year onwards and which is therefore the relevant methodology for assessing Poland’s future compliance with the European fiscal rules. This implies that Poland is 1.4 percentage points away from meeting the Maastricht fiscal criteria. It is not a demanding medium-term consolidation target for an economy with an expected real GDP growth of close to 5 percent, providing a very good environment to reduce the ratio of public spending to GDP. It is worth noting that Germany may achieve consolidation of this magnitude over the 2006-2008 period, without such a favorable growth environment. However, the Convergence Programme 15 presented by the government in January of this year, does not foresee fulfilment of the deficit criterion in the programme horizon; in 2008 the deficit is to stand at 3.7% of GDP. Such a slow pace of deficit reduction has been criticized by the Council of the European Union 16 , which pointed out that Poland would be failing to comply with the required annual fiscal adjustment of 0.5 percentage points of GDP in cyclically adjusted terms. NBP projections confirm that the deficit path is not an ambitious one.

In case of a favorable macroeconomic scenario, particularly one in which the job-rich growth observed in 2004 and 2005 continues over the period 2006-2008, the deficit could decline more than set forth in the Convergence Programme, even in the absence of consolidation measures but also without the introduction of new, deficit-increasing legislation. A stronger deficit reduction could be additionally supported by the implementation of the new Public Finance Act, which should contribute to more efficient fiscal management. Unfortunately, these upside risks to deficit targets in the Convergence Programme are far outweighed by downside risks in the form of new deficit-increasing legislation. This includes the recently proposed 4.5 point cut in social contribution rates. While this measure would bring about the much needed reduction of the tax wedge on labour income, it would cost the budget more than 1% of GDP in foregone revenue. Therefore it is essential that it should be accompanied by cuts in spending. Instead, it is more likely that spending will increase, with, among other measures, salary hikes promised to various groups of public employees, as well as more generous social assistance and pension indexation formulas. To sum up, in the medium-term horizon, Poland should be in a position to achieve a general government balance in line with the Maastricht fiscal criteria. This would require moderate discipline in public spending, which unfortunately does not appear very likely at the present moment.
Mr Bergström gives a speech on the Swedish economy: new or old? Speech by Mr Villy Bergström, Deputy Governor of Sveriges Riksbank, at Kommuninvest, Stockholm, on 1 March 2000. *  *  *  The Swedish upswing has now begun in earnest and GDP growth is estimated at around 3.5% per year during the next few years. In the course of 1999, it became increasingly clear that we were on the verge of an upswing. The negative atmosphere after the Asian crisis, the Russian suspension of payments and the problems in the hedge fund, Long Term Capital Management, had subsided and been replaced by optimism in many countries. The fact that the financial crises did not have such negative effects on demand as many had feared can probably be partly accounted for by the relaxation of monetary policy introduced by many central banks. The Riksbank was among these, reducing the repo rate from 4.4 to 2.9% between spring 1998 and spring 1999. When the scenario of the Swedish upswing was confirmed and as resource use was accordingly expected to increase, it was natural to conduct a slightly more cautious monetary policy to avoid inflation accelerating. Since November, the Riksbank has therefore increased the repo rate by 0.85 percentage points to 3.75. However, this is still an expansive monetary policy in the sense that the short real interest rates are so low that they should stimulate demand.

During the past four-year period, real wages have increased on average by almost 4% per year despite low nominal wage increases. This is to be compared with the fact that real wages only increased by a half per cent per year during the period of high inflation from 1975 to 1995 despite nominal wage increases during these years totalling 8% on average. The development clearly indicates that there has not been a positive correlation between high nominal wage increases and the development of real wages. High credibility for the goals of monetary policy has led to a reduction in inflation expectations. And stable inflation expectations per se reduce the risk for pay negotiations leading to higher wage increases than there is room for. Stable inflation expectations reduce the uncertainty of the parties as to what a nominal wage demand means for the real wage. This can in turn reduce the risk for wage spirals. Increased competition in globalised markets could also contribute to increased flexibility in wage formation. Globalised highly competitive commodity markets probably reduce the ability of businesses to compensate high wages by price increases. At the same time, it is probable that the strongly globalised capital market makes it more difficult for businesses to press down profit margins even in the short run. A conclusion is that businesses’ opposition to wage costs increases that cannot be sustained by productivity increases may have increased. Another change in the Swedish labour market is the tendency towards increased short-term employment.
Muhammad bin Ibrahim: The changes in Malaysia’s insurance sector Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 6th Malaysian Insurance Summit, Kuala Lumpur, 18 October 2016. *  *  *  Reaching the point of inflection on the “S-curve” Over a decade ago in the Insurance Annual Report 2000, Bank Negara Malaysia projected that Malaysia’s insurance sector would expand following the trajectory of an “S-curve”. Growth in both the life and general insurance markets would significantly outpace the economy, ascending the steep slope up the “S-curve”. Since then, total assets of the insurance and takaful sector have expanded at an annual rate of 13.3%, more than tripling in value from RM52 billion in 2000 to RM181 billion in 2010. Life insurance penetration increased from 33% to 51% of the Malaysian population over the same period. In the more recent years however, this growth has started to plateau. Life insurance penetration has remained stagnant at 55% for the past 3 years, while in the general insurance sector, domestic capacity for larger and more specialised risks appears to be reaching its limits. This in turn has contributed towards sustained reinsurance outflows which have an impact on the country’s long term current account balances. Based on our observations, the industry appears to be approaching the point of inflection in the “S-curve”. Yet we know that its growth potential remains significant, with Malaysia still a long way from being a saturated market.

What matters is that the system as a whole has the right level of liquidity to cope with volatility in derivatives markets in a stress and that liquidity is in the right place  We need to understand which market participants were caught flat-footed and why. Thanks to post- 2008 liquidity reforms, banks seemed able to handle the liquidity pressures they faced in March, including from margin calls. But non-banks such insurers, pension funds, hedge funds and asset managers have grown in importance over the past decade - we need to examine how well prepared they were to face the liquidity demands around margins. It’s too early to reach policy conclusions. But to preview the options in front of us: It’s possible we’ll want to explore solutions that could reduce the need for CCP margin to rise as much in stress by pre-positioning more liquidity at CCPs during quiet periods. It’s possible we could accomplish this by spreading existing good practices in CCP model design. It’s equally possible we’ll want to focus on better liquidity risk management, particularly for non-banks. This could make sure market participants self-insure against margin calls on their own balance sheets – rather than pre-positioning initial margin at the CCP. Improving transparency around potential margin calls could help support this. It’s possible that we’ll want to do some of both. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  The right balance of policy responses will depend on what evidence we find.
2002, No 2, and Beyer, A., Gaspar, V., Gerberding, C. and Issing, O. (2009), “Opting out of the Great Inflation: German monetary policy after the break down of Bretton Woods”, Working Paper Series, No 1020, ECB, March. 26. ECB staff estimates find that the change in market pricing of the short-to-medium term interest rates and in survey evidence of Eurosystem balance sheet expectations between December 2021 and the assumptions implied in the September 2022 ECB staff projections would on average subtract around 1 percentage point from annual real GDP growth each year until 2024 (i.e. annual real GDP growth is estimated to be reduced by around one percentage point on average in 2022, 2023 and 2024). Since the September 2022 ECB staff projections, tightening expectations have further increased, implying a further impact on GDP growth. The estimated impact refers to the average across a set of models used by the ECB for policy simulations, including the NAWM-II model (Coenen, G., Karadi, P., Schmidt, S. and Warne, A. (2018), “The New Area-Wide Model II: an extended version of the ECB’s micro-founded model for forecasting and policy analysis with a financial sector“, Working Paper Series, No 2200, ECB, November (revised December 2019)), the ECB-BASE model (Angelini, E., Bokan, N., Christoffel, K., Ciccarelli, M. and Zimic, S. (2019), “Introducing ECB-BASE: The blueprint of the new ECB semi-structural model for the euro area”, Working Paper Series, No 2315, ECB, September) and the MMR model (Mazelis, F., Motto, R. and Ristiniemi, A.

We can expect stronger domestic price pressures over the next few years, and hence slightly higher inflation than we have seen historically. Slightly higher inflation does not mean runaway inflation. MAS will remain vigilant and calibrate monetary policy to ensure that this does not happen. We will not allow inflationary pressures to become entrenched or inflation expectations to build up. Managing risks to economic and financial stability MAS is preparing for risks to economic and financial stability posed by escalation of Eurozone crisis Besides watching growth and inflation trends, MAS has been focusing on downside risks to Singapore’s economic and financial stability. We monitor the risks closely, take steps to mitigate these risks where we can, and draw up contingency measures to manage them if they materialise. The key risk facing the Singapore economy and financial system is the ongoing crisis in the Eurozone. While Eurozone governments have taken important steps to deal with crisis, we must be prepared for a more adverse turn of events. The escalation of the Eurozone crisis can affect Singapore in three ways: first, the impact on economic growth; second, stresses on our financial markets; and third, the safety and soundness of our financial institutions. Let me begin with economic growth. A deeper recession and credit crunch in Eurozone can impact our growth through trade and financial channels. The trade channel will be more direct and impactful. The Eurozone is our largest export market, and Singapore’s exports to the Eurozone have been declining since Q3 last year.
If there is a shortage of labour and other economic resources, a tight monetary policy stance will reduce inflation through its effect on prices for imported goods and on aggregate demand for goods and services and for labour. When monetary policy is aimed at stabilising inflation, it will also contribute to stabilising aggregate output and employment. If it appears that inflation, with unchanged interest rates, will be higher than 2½ per cent, the interest rate will be increased. If it appears that inflation, with unchanged interest rates, will be lower than 2½ per cent, the interest rate will be reduced. Monetary policy functions with considerable and variable lags. Therefore, the current level of inflation does not provide an adequate basis for determining the level at which interest rates should be set today. Our analyses indicate that a substantial share of the effects of an interest rate change will occur within two years. Two years is therefore a reasonable time horizon for attaining the inflation target. It is nevertheless conceivable that in a situation with a high rate of inflation and sluggish economic growth, Norges Bank may decide to apply a somewhat longer time horizon than two years to reach the inflation target of 2½ per cent. By influencing inflation over time, monetary policy will not in itself cause unnecessary disturbances in the economy. BIS Review 51/2002  1  Norges Bank has one instrument: the interest rate. Changes in the interest rate have a broad impact.

Monetary policy that is oriented towards low and stable inflation will contribute to a stable krone exchange rate over time. If we take steps to counteract an appreciation of the krone when there are pressures in the economy, we reduce the possibility of curbing inflation and increase the risk of fluctuations in the economy. Maintaining stability in the internal value of the krone must thus take precedence. The implementation of monetary policy has been delegated to Norges Bank. Norges Bank sets the interest rate on the basis of our understanding of the regulation. Our interpretation places emphasis on the Government’s rationale behind the regulation, on the objective as formulated in the first paragraph and on our knowledge about the relationships between the interest rate, the krone exchange rate, output, employment and inflation. The interest rate influences price inflation indirectly via domestic demand and via its effect on the exchange rate. When interest rates rise, it is more profitable to save and more costly to borrow. This has a dampening impact on consumption and investment. Lower demand in turn curbs the rise in prices and wages. Higher interest rates make it more attractive to take krone positions and borrow in foreign currency. As a result, higher interest rates normally lead to an appreciation of the krone. This reduces prices for imported goods. In addition, a strong krone curbs activity, profitability and the capacity to cover labour costs in the internationally exposed sector. It is important to be aware of the relationships between employment, output and inflation.
This hump in inflation is largely due to the food and energy price pick-up that we have seen and that has become worse in recent months. However, at the moment, we have no reason to believe this would be more persistent. The growth situation maybe a little bit trickier to analyse. The events in Japan and the continuing events in the Middle East and North Africa could be interpreted as a downside risk on growth. At the same time, we see continued evidence of rather robust growth in some parts of the euro area, so I would not say that the overall growth outlook has shifted downwards despite the negative events I mentioned earlier. The risks may be to the downside, but my baseline scenario has not shifted. BIS central bankers’ speeches  1  Q. How would you describe the monetary policy stance. Is it appropriate now? When it comes to interest rates, I would say that monetary policy is accommodative. In my view, it is appropriately accommodative. It is appropriately accommodative in the sense that we still have some way to go towards repairing the damage that has been experienced as a result of the crisis we have been living through during the past three years. Q. Does that mean that you don’t see interest rates going up for, say, over the next three months? As you know, the Governing Council of the ECB never pre-commits on interest rate policy decisions.

But beyond that, it is not the ECB’s role to have additional involvement. What we have in the case of the European Union is additional responsibilities for crisis management, which are responsibilities of the governments in the euro area, not the responsibility of the ECB. Q. The Irish Central Bank has an emergency liquidity assistance programme. Do you think there could be a similar one for Greece or is there actually already one in place? I would not comment on emergency liquidity assistance. This is a national responsibility that each national central bank in the euro area may apply as is necessary in their own context. Q. Cypriot banks hold a sizeable quantity of Greek debt. How damaging or potentially damaging could that exposure be? Could the Central Bank have taken any steps to limit banks exposure to a single borrower? With respect to the exposure of Cypriot banks to Greek debt, we have examined the situation and we have come to the conclusion that even though there is exposure in our banking system, that exposure is manageable because our banks are very well capitalized. 4  BIS central bankers’ speeches  So even in the highly unlikely situation, if you wanted to run the counter factual, for example, of imposing losses on the holdings of Greek debt, our banks would manage to weather that. To understand how well capitalised our banking system is, a comparison may be useful. Our banks already meet the stricter capital requirements that are being phased in under Basel III.
SPEECH DATE:  29/05/2018  SPEAKER:  Deputy Governor Henry Ohlsson  VENUE:  Örebro University  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Data, correlations and economic policy challenges∗ At the beginning of the Riksbank’s monetary policy reports, there is a page describing the monetary policy strategy. The basis of the strategy is that the Riksbank shall strive towards an annual change of 2 per cent in the consumer price index with a fixed interest rate (CPIF). Given that there is confidence in the inflation target, monetary policy shall also support good growth in output and employment. The Riksbank therefore conducts what is generally referred to as flexible inflation targeting. This is the basic framework for monetary policy. Within this framework, the Riksbank must cope with the fact that the economy and the way it works change over time. My intention here today is to discuss some of the challenges facing monetary policy and economic policy in general as a result of changes that have occurred over the last decade. In brief, it is a question of surprisingly subdued wage increases, the apparent difficulty in reducing unemployment further via expansionary policy alone, and the apparent deterioration in matching on the labour market. I intend to discuss this with the help of a simple survey, in which I look at how five key variables covary. The time period I’m studying is 2007–2018 and I’m using monthly data.

One is that what is normally referred to as “structural unemployment”, the unemployment level in a situation with normal activity in the economy, has fallen. 2 An overestimation of structural unemployment implies that there is more spare capacity in the economy than originally thought and it is thereby possible to stimulate demand more before wage growth kicks in. The fact that structural unemployment cannot be observed and also varies over time obviously makes it difficult to verify the hypothesis. Purely theoretically, the observation that wage increases are unexpectedly low is well in line with an overestimation of structural unemployment. Personally, I am a little sceptical  2 For example, Bell and Blanchflower (2018) think this is the case in the United Kingdom. 7 [16]  about this hypothesis as far as Sweden is concerned. I will come back to this later on. Another possible explanation for the low wage increases has to do with how inflation has developed after the financial crisis. For about six years, between 2011 and 2017, CPIF inflation was below and often well below target. It would not be particularly surprising if this has had a certain impact on what economic agents generally believe about inflation. It is true that inflation expectations, as they are measured in surveys, indicate that economic agents are now once again expecting inflation to remain on target in the long term. It also appears that employee organisations are increasingly seeing the inflation target as the basis for wage negotiations.