samchain/econo-pairs-v1 huggingface dataset:
15 Previous fluctuations in inflation, real interest rates and tax rules have created redistributions that have benefited certain generations at the cost of others and that have created an economic middle class of middle-aged and older people with relatively strong economic resources. Increasingly difficult to enter the housing market At the same time, those people outside the owned housing market, the outsiders, have not been able to take advantage of this development, and the high prices have made it increasingly difficult for them to be able to purchase a home at all. Particularly in metropolitan areas, it is difficult to save enough for a down payment without help. Without parents who can contribute to a down payment or stand as co-borrower for a mortgage, it has become more difficult for many firsttime buyers to purchase a home. The development of the housing market has therefore led to great differences in possibilities for people to enter the housing market. Another aspect of the problems on the owned housing market is that the lack of opportunities to purchase a home forces many young people to sublet. Subletting is often expensive and insecure for the subtenant, at the same time as their consumer protection is weak. Difficulties in finding a home also lead to problems in  14 Långtidsutredningen [Long-Term Survey of the Swedish Economy] (2015) and Jahnson, D. and J Lundberg (2013). 15 Långtidsutredningen [Long-Term Survey of the Swedish Economy] (2003). 5 [13]  skills supply.

To be clear, such house price growth relative to earnings would not be at all unusual for the UK – over the five years leading up to the crisis, house prices grew at three times the rate of income growth and there were about 70% more mortgage approvals per month than we have seen since 2014. And in the late 1980s, house prices again grew at well over twice the rate of earnings. 11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  Chart 6. LTI distribution of new mortgage lending(a)(b)  Sources: FCA Product Sales Database and Bank calculations. (a) The Product Sales Database includes regulated mortgages only. (b) LTI distribution of new mortgage lending in 2016 Q4 and at the end of an ‘upside’ 7-year scenario, with or without FPC Recommendations in place. There is a separate but related question about the extent to which the relatively subdued evolution of house prices and transactions between 2014 and 2019 was due to the FPC’s policy, including a general signalling effect on indebtedness. But general economic developments (for example, weaker than forecast economic growth, the post referendum inflation squeeze on incomes, and general Brexit uncertainty) and housing policies beyond the central bank (such as changes to Buy-to-Let tax treatment) have probably played the bigger role. And the flow limit of 15% has never ‘bitten’ in aggregate – since the policy was introduced flows of new mortgages at or above four and a half times income have not exceeded 11%.
In contrast, productivity growth in the financial services sector increased very sharply in the 10 years prior to the financial crisis, underpinned by the process of financial liberalisation and  5  A related mechanism relates to changes in employment shares from high productivity sectors to lower productivity sectors. The scale of the changes in sectoral employment shares to date can account for some, but only a small proportion, of the productivity shortfall. 6  See the box on pages 22–23 of the August 2011 Inflation Report. 7  Employment data may also be prone to revision reflecting possible sampling errors. Headline productivity figures are based on the regular Labour Force Survey of households. The Workforce Jobs measure of employment reported by businesses has been weaker over the recovery to date. If the LFS measure were revised towards Workforce Jobs, that could raise productivity per head by around 2 percentage points. But survey evidence broadly supports the LFS measure of employment and Workforce Jobs data have been revised in the past towards the LFS measure. BIS central bankers’ speeches  3  strong growth in financial sector balance sheets. It does not seem sensible – certainly with the benefit of hindsight – to think that this strong growth would continue indefinitely.

Recessions are actually often credited with improving average levels of efficiency, as less productive firms are forced out of business and others drive through productivity gains in order to stay afloat. Only the fittest – and the most efficient – survive. But this recession differed to those in our recent experience since it was triggered by a financial crisis. Banks’ ability to lend was reduced. Credit conditions tightened. The implications of this for the efficiency with which companies operate are potentially far reaching. Many smaller companies and new businesses, which are a critical source of innovation in our economy, have struggled to secure the finance they need to grow and expand. Company start-ups fell sharply during the recession, and evidence from the Bank’s Agents suggests that many smaller businesses are still struggling to access funds at affordable rates. In that context, it is worth recalling that small companies, employing less than 100 employees, hold over 40% of UK patents, even though they account for less than 20% of total investment.12 Even for those companies that are able to borrow funds, the tightening in credit conditions is likely to have impeded the efficiency of supply. Some companies have become more cautious, preferring to hang onto liquidity or pay down debt rather than invest in increased levels of training and R&D. The increased cost of working capital has led many firms to cut back substantially on their inventory levels, disrupting the efficiency of supply chains.
However it is also because we live in a changing world, where we must adapt as demands on our operations change – demands that may come from various directions. My theme today is that a modern, independent central bank needs to take many considerations in its monetary policy work, not least in its communication. There are above all two aspects that we must always take into account. The first is that we have a responsibility as an authority towards the Swedish people and their political representatives. The second is that we must communicate and interact with the financial markets when we implement our monetary policy. I intend to devote the major part of my speech to illustrating some different aspects of the demands made of us. The areas I intend to talk about are transparency, signalling and the future interest rate path. There are no sharp dividing lines between these areas. How we regard the future interest rate path is, for instance, part of our signalling, and the quality of our signalling in turn has significance for how transparent we are. Transparency in itself is part of our role as a public authority. But I nevertheless consider it worth discussing them under separate headings. The role as authority and interaction with the market Let me before I do so say a few more words about our role as public authority and our interaction with the market. I intend to begin with the latter aspect.

Understanding the forces behind these phenomena or anomalies is important to thinking through what they mean for policy. When Alan Greenspan first used the term “conundrum” to describe the surprising behavior of forward interest rates, he was reacting to the decline in forward nominal rates over a period in which the Federal Open Market Committee was raising its federal funds target rate. This behavior of forward rates, the counterpart of which is the behavior of the bond yield curve, looked anomalous both in comparison to observations from past tightening cycles and with what seemed to be strong evidence about the fundamental soundness of the outlook for the real economy. The source of the relatively low level of nominal rates is still a matter of considerable debate. Part of the explanation lies in the decline in expectations of future inflation and uncertainty about future inflation. Part of the explanation may also lie in greater confidence that the secular decline in the variability of economic growth observed over the past two decades in the United States is likely to continue. However, even with the information provided by the development of the market for inflationindexed government securities, we have less ability than we would like to draw conclusions about what any nominal forward rate means for expectations about the level of future real rates, uncertainty about future real rates, and what those might imply about expectations about future economic activity. This uncertainty makes it harder to assess the appropriate path of monetary policy.
If rating agencies were regulated who would you blame if mistakes are made: the rating agency, the regulator, or both? 9. Implications of networks  Finally we need to consider the financial stability oversight implications of the networks which increasingly hold the financial system together. These are the plumbing or the nervous system of the financial world. This is the world of payments, clearing and settlement systems. Such networks can and do both generate significant economic benefits, but they also create vulnerabilities. The economic benefits of scope and scale from such networks come as a result of the development of standardised messaging, IT protocols and other areas of interoperability. However, the universal  BIS Review 5/2004  5  reliance on these networks makes the financial system increasingly vulnerable to any failure, whether financial or physical. If the market all settles in one system and is faced by single points of failure how could we work around these? Secondly, if there is a failure, what about data retrieval? If an entity containing a series of uncompleted transactions fails, how can that data be retrieved or recreated so that you can get markets up and running again? Fortunately significant effort is being put into developing innovative solutions: something which may give confidence to the many who are unfamiliar with this area. 10.

This time round, the strong credit market from 2003 to 2005 have lulled investors into placing big bets in high-yielding structured credit instruments, on the assumption that such favourable credit conditions will continue unabated. The second point is on proper risk assessment. Back in 1997, lenders were providing funds without executing necessary scrutiny or appropriately balancing the risks against returns. Likewise, the recent credit turmoil has highlighted the importance of assessing risks. The  BIS Review 11/2008  1  distribution of risk through leveraged structured vehicles or conduits, and complexities in the structures have made it extremely difficult for investors to disaggregate the risks in times of stress and volatility. As a result, over-reliance has been placed on financial models and ratings without full comprehension of the risks of the product and misunderstanding the scope of the ratings that measures default risk. Third, excessive leverage in both crises has exacerbated the problems triggered by the mounting default rates. Excess liquidity led to massive domestic lending; at the same time, investors geared up aggressively and bet on continually rising asset prices as collateral. When the crisis broke, the use of leverage accentuated the losses, which led to widespread risk aversion and uncertain market sentiments. The loss of confidence along with the repricing of credit risk have intensified the volatility in the financial markets; and this contagion spread rapidly beyond the structured credit space and across markets. So what does all this mean for Asia?
Globally, actual and expected demand have increased, output has been contained and inventories have seen some depletion. The baseline scenario of this Report adjusts the projection for the average price of Brent and WTI upwards, placing it at around USD 59 and USD 56 per barrel in 2018 and 2019. The combined effect of higher copper and oil prices and adjustments in the prices of other exports and imports have led to an improvement in the terms of trade, particularly this year. Thus, considering the period 2017-2019, the terms of trade will accumulate an increase of around 10%, which compares with the 7% estimate of last September. Turning to our activity and demand projections, the baseline scenario assumes no major changes from September. This year, the economy will grow 1.4%, inside the range expected in September. For 2018, the growth projection in the 2.5% to 3.5% range is maintained. Part of the improvement with respect to 2017, particularly during the first half of the year, owes to the low comparison base of the mining sector. This same scenario assumes that non-mining GDP will have a more paced recovery. The gradual return to higher GDP expansion rates leans on a favorable external scenario, the end of the adjustment of mining and housing investment, the absence of significant macroeconomic imbalances and a clearly expansionary monetary policy stance. A working assumption is that in 2018 the economy will receive a fiscal impulse in accordance with the approved budget.

Going forward, a deteriorating labor market would affect the sector, particularly those households with less financial capacity to face an income shock. Meanwhile, a scenario of higher rates would have a smaller impact on households' outstanding debts —as they are granted mostly at a fixed rate and long term— as opposed to new borrowing for buying a new home or refurbishing one. All in all, the aggregate impact of this scenario on the sector is greater if the macroeconomic effects of an in interest rate rise are factored in. The banking system's financial indicators remain healthy, although capitalization is lagging behind international standards (figure 14). Banking stabilized profitability and solvency indicators, keeping liquid and currency mismatches within bounds, and without making significant changes in its dividend policies. In terms of credit risk, quality has deteriorated in the individual evaluation of the commercial portfolio, which has been covered with increased collateral. Although this strategy allows reducing the idiosyncratic risk of each bank individually, it causes vulnerability of the banking industry to systemic events that simultaneously reduce the payment capacity of enterprises and erode collateral value. This is a risk factor that must be monitored considering that 45% of total bank lending belongs to this category. Stress tests indicate that an adverse scenario of a slight but prolonged fall in activity would pose a risk to banks comparable to one of a more severe scenario but with a faster recovery.
In order to aid this development process, the Central Bank, on behalf of the government, will continue to tap commercial sources of relatively low cost funds from abroad as a source of development finance within the broader parameters of the Medium-Term Debt Management Strategy (MTDS). Management of the Employees’ Provident Fund As you all know, the Monetary Board of the Central Bank of Sri Lanka, as the safe custodian, is vested with all powers and responsibilities pertaining to management of the Employees’ Provident Fund (EPF). Being the largest superannuation fund in the country, the EPF passed a significant milestone during the year with total assets of the Fund surpassing Rs. 2.0 trillion. It has grown at a compounded average rate of around 13 per cent during last 5 years. Several measures were taken, in 2017, to improve the overall quality of the services provided to members by way of streamlining operational activities. This was achieved by accelerating the automation process for collecting member contributions, real-time updating of member  28  accounts and swift payment of refunds. Notable improvements were also made to services offered for employers in their submission of EPF returns via an electronic platform, while we also partnered with a few licensed commercial banks to offer their EPF paying customers the facility to remit their member contributions online.

  Policies will be adopted to reduce cheque usage in Sri Lanka by means of converting to digital payment mechanisms/method. The Central Bank will facilitate and promote private and government institutions to effect payments through any electronic retail payment system.   As Blockchain technology plays an important role to change the entire current financial transaction infrastructure within a digital eco system, the integration of distributed ledger systems into financial institutions and services will be facilitated in line with the regulations in the country.   With the increasing global popularity of digital currencies, the Central Bank intends to carry out a study in order to determine the effects of a digital fiat currency on the current economic landscape of the country.   The Central Bank aims to use a bottom-up approach in creating awareness from grassroot to institutional levels on the available and proposed payment modalities on a continuous basis.   In order to facilitate new developments of payment cards and mobile payments, the Central Bank intends to issue a revised Credit Card Guideline and guidelines on Minimum Compliance Standards for Mobile Applications that will be applicable to any institutions operating, facilitating and proving payment services for mobile applications. With a view to strengthening the financial intelligence environment, we will continue to coordinate with the stakeholders to develop Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) policies to implement the Financial Action Task Force (FATF) recommendations more effectively.
It can also make it hard for management and supervisors to figure out what is going on in a perfectly honest business. The explosion of what I referred to a couple of years ago as Vehicular Finance, with committed credit lines and reputational risk constituting umbilical cords back to parent or sponsoring banks, was precisely a manifestation of that variety of obfuscatory complexity. Supervisors around the world should not allow it. And, related to that, as the Turner Report rightly says, supervisors should get serious about working together on the oversight and regulation of international groups. The long-standing challenges of consolidated supervision are unfinished business, more than thirty years after the first Basel Concordat. 2  BIS Review 39/2009  Micro-to-macroprudential Those issues, and even more those of capital and liquidity, shade into the debate about macroprudential oversight and regulation. One explanation of the parlous state of the industrialised world banking system is that too many banks had made too many rotten individual-loan underwriting decisions. Quite plainly there was some of that: for example, manifestly in the US subprime market, in commercial property, and probably in some Leveraged Buy Outs. It would be the job of the authorities’ bank examiners, as they are termed elsewhere, to detect significant erosion in the quality of individual portfolios or underwriting standards, and get it fixed before it overwhelmed the system.

By April 2008, the FSF had reached consensus on a set of 67 policy recommendations aimed at addressing the vulnerabilities identified in the global financial system. Some of these recommendations concern structural changes and thus can only be implemented over the medium term. However, a number of priority areas calling for immediate action were identified and the relevant recommendations are already being implemented by the competent authorities and the industry. In this respect, a major priority area involves the disclosure of financial institutions’ structured finance-related exposures and their valuation practices. Many large global banks have already applied the methodology set out in the FSF report to their holdings of complex and illiquid instruments in their mid-year financial reports. By doing so, they have demonstrated the willingness of the private sector to contribute to strengthening market confidence by increasing transparency. I strongly support this development and believe that the example set by these banks should be followed by a wider range of institutions. Furthermore, guidance on transparency has been provided and is being further developed by the Basel Committee on Banking Supervision and public sector initiatives, such as the European and the American Securitisation Fora. In the same vein, the International Accounting Standards Board is intensifying its work to enhance the accounting and disclosure standards for off-balance sheet entities and to develop guidance for valuation in illiquid markets.
The fiscal rule states that the government every year shall use the estimated long term real return on the Fund, set at 4 per cent. However, there is no direct link between petroleum revenues and the Fund. The government collects taxes from the whole economy, including the petroleum sector. After all government expenditures are paid, the surplus is transferred to the Fund. The last 10 years, fiscal policy has been geared towards a cyclically adjusted non-oil deficit which corresponds to 4 per cent of the Fund every year. Let me now turn to one very specific Norwegian issue: the management of our oil fund, called the Government Pension Fund Global. For the last 20 years, Norway has been a major petroleum producer. At the maximum, our nation produced about 4 per cent of global petroleum. This geological luck has given the Norwegian state an overwhelming cash flow. The first money was transferred to the fund in 1996. Fifteen years later the Fund stands at NOK 3.2 trillion, or EUR 410 billion. It is probably the second largest sovereign wealth fund in the world. The Fund is now 120 per cent of Norway’s GDP. Norges Bank, as manager of this financial wealth, has laid down several governing principles for the Fund. We seek no controlling stakes. In fact, the maximum ownership in any one company is 10 per cent. We seek as good a return as possible, given the moderate level of risk defined by the Norwegian parliament and the Ministry of Finance.

These are examples of leading practice, and they are not at this point standard operating procedure across the range of institutions where they should be. Systematically assessing the evolving frontier of leading risk management practice is a useful way to ensure that we continue to build on the significant improvements in the overall stability and resilience of the U.S. financial system that have been achieved over the past two decades. This is important to do on a continuing basis to strengthen the shock absorbers in the financial system. It is important to do even when, or perhaps particularly when the overall economic environment looks quite favorable, as it does today. We look forward to working with the foreign banking community to continue to identify ways in which risk management practices can be strengthened. It is in our mutual interest to insure that the practices employed broadly by the industry continue to move towards the frontier of risk management practices. Thank you. BIS Review 36/2004  3