samchain/econo-pairs-v1 huggingface dataset:
Specifically, the 10year OIS rate, which proxies the euro area risk-free interest rate, has risen by 170 bp since the beginning of the year. Domestic fiscal policy Domestic economic policies also have a key role to play in the current climate. But fiscal policy headroom is constrained by high government debt and structural budget deficits. It is therefore important for domestic fiscal policy to exploit its capacity for highly granular action focused on the households, firms and sectors most vulnerable to this combination of shocks, many of which had not yet fully recovered from the adverse effects of the pandemic. In particular, fiscal policy action should target lower-income households, which bear the brunt of inflation, and more energy-intensive firms. Moreover, again with the aim of minimising their impact on budgetary imbalances, it is important that the fiscal policy measures be temporary so as not to further increase the structural deficit, and that the instruments used do not skew price signals, which would hinder the adjustment in demand. Likewise, averting any feedback into the current inflationary process is further reason to avoid an across-the-board fiscal impulse and the widespread use of automatic indexation clauses in expenditure items. This deindexation must be part of the incomes agreement to which I will return later. It is against this background that the measures adopted to soften the economic and social consequences of the war must be assessed.

Any agreements concerning wage increases should take their lead from the underlying inflation. These recommendations apply to both wage increases and, where applicable, to potential wage guarantee clauses. Arrangements such as these have already been used by the social partners in the past and have proven a useful tool for protecting jobs, making firms more competitive and spurring economic growth.10 Fifth, these guidelines on wage developments should be accompanied by explicit commitments to moderate profit margins. Only then will such wage restraint actually make firms more competitive, while, in turn, limiting the extent to which rising energy input costs are passed through to other goods and services in the economy. And some sort of mechanism would have to be set in place to ensure this restraint in profit margins can be verified. The simulations performed using the Quarterly Macroeconometric Model of the Banco de España (MTBE) underscore the benefits of a successful incomes policy. The MTBE  8  The weight of energy inputs in production and exposure to international competition vary considerably across sectors and firms. 9  To varying degrees, these types of clauses mean that, regardless of the type of underlying shock, any potential future price rises automatically pass through to wage increases, thereby triggering the second-round effects we hope to avoid.
What do we know about interactions among the economy’s moving parts? (c)  Movements between regions  In economic systems, interactions occur among all of the factors involved in production and consumption decisions – people, money, goods and services. Capturing flows of these factors, and their interactions, is crucial for understanding how a complex economic system will function. Below I consider flows of money, goods and services. Let me start by considering flows of people. Chart 15 plots migration in and out of various regions in 2016-17, expressed as a proportion of the regional population. Even gross inflows and outflows are relatively modest, varying between 4% (London) and ½% (Northern Ireland). Net flows of people are even more modest, in all cases bar London averaging less than 0.6%. One of the reasons regions are distinct may be because of their ring-fenced populations. 20  Simon (1962). 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  Chart 15: Migration inflows and outflows between different UK regions  Sources: ONS Local Area Migration Indicators and Bank calculations. Notes: Data refer to mid-2016 to mid-2017, as a percentage of 2017 population. Of course, people living in one region can still commute into another for work purposes. Table 1 looks at commuting destinations across UK regions, as a percentage of each region’s population. With the exception of London and the South-East, worker flows from outside of the home region are modest, averaging only 5% of the working population.

BIS Review 18/2006  1  The other surprising feature of the current economic environment is the pattern of global imbalances, and the size and persistence of the U.S. current account deficit. As Alan Greenspan has explained, the greater dispersion in external imbalances can be seen as the inevitable result of fundamentally healthy changes in the world economy. As the world progresses toward increasingly integrated financial and goods markets, other things being equal, one might expect to see an increase in the number of countries with surpluses or deficits, and potentially larger surpluses and deficits, as flows of both financial assets and goods work to equalize desired saving and investment around the world. If one were confident that observed imbalances simply reflected a more efficient allocation of the world’s stock of saving to its most productive uses, that relative prices adjust freely in response to changing fundamentals and that economies are flexible and agile in adapting to those changes, then we might also reasonably expect these imbalances to resolve themselves through smooth and gradual adjustments in relative prices and flows of goods and services. These conditions do not fully exist today. We do not yet live in a world of perfect capital mobility, one in which savings move across borders to their most productive use without constraint in the form of capital controls or without distortions affecting the behavior of private actors.
The highest body responsible for the Bank of Albania, the Supervisory Council has paid attention not only to complying with the legal obligations of the Bank, but also to strengthening the institutional governance, as an essential precondition for enhancing its credibility. In 2017, the Medium-term Development Strategy of the Bank of Albania, together with the medium-term budget, was updated. The Medium-term Development Strategy of the Bank of Albania sets out the main objectives for the 2018–2020 period. It establishes the priorities in the main functions of the Bank of Albania and development of auxiliary services. Thus, the Bank of Albania has adopted the model of a number of banks of the European System of Central Banks, which have a twofold strategic planning system: (i) a major planning process, once in 3-5 years; and (ii) a yearly update. The span of the application ensures adequate planning support for the guiding medium-term budget of the Bank of Albania for 2019 and 2020. For the first time, this year the capital expenditures and the projects included in the budget were preliminary approved by the Capital Expenditure Committee, a body established as a control measure over major expenditure and investments. With a view to strengthening the internal audit process, the Audit Committee was established in 2015 and is composed of three members of the Supervisory Council. In 2017, this Committee exercised its duties with a view to support the strengthening of internal and external control lines. It met regularly, without the presence of the administrators, with the Inspector General.

The second obstacle is the still-low appetite of banks to expand lending. This behaviour continues to reflect the effect of two factors: (i) deleveraging policies for reducing exposure in the countries of the region, including Albania, implemented by parent banks from the euro area; and, (ii) perception of credit risk at home. While banks’ balance sheets have improved and the credit risk has diminished, the policies for reducing their exposure in countries outside the EU remain conservative. Such policies reflect also EBA’s new supervisory rules on reducing the exposure of European-based banking groups in South East Europe. In the context of addressing this issue, the Bank of Albania has signed a memorandum of cooperation with the European Banking Authority College in 2015, on exchanging information and harmonising supervisory policies. Regarding non-performing loans, the Bank of Albania continues to be committed to implementing the measures set out in the national plan for reducing them. The reduction of the credit risk, in parallel with the improvement of the banks’ balance sheets and economic growth, should be accompanied by more realistic lending policies by the banking system. This is a recurring appeal I have made in my public appearances. The implementation of such policies would create the conditions for fulfilling the needs of the economy for financing, which are expected to be upward in the future. The third obstacle is the development level of financial markets and the narrow range of financial instruments.
For example, Malaysia’s top halal export markets (e.g. China, Singapore and Japan) are signatories to the Net Zero target and non-sustainability practices will lead to an increase cost of business exporting into these markets. Malaysia’s halal food and beverages segment, which makes up 80% of Malaysia’s halal production and 86%5 of total halal exports may be adversely affected by climate change. An increase in temperature will lower the resilience of the agroecosystem against pests and pathogens, resulting in lower yields and quality of crops, affecting the supply of raw materials. In addition, more MNCs are embracing the sustainability agenda compelling halal SMEs to factor in sustainability as part of their business strategies, operations and decision making. It is heartening that prominent halal MNC manufacturers have already started imposing sustainable practices across their supply chain. Nestle for example, has established the Paddy Club back in 2012 as an initiative to ensure rice used for the company’s cereal products is sourced sustainably and responsibly. Another example is the Sustainability Agriculture Code as a pre-requisite for suppliers to enter Unilever’s supply chain as part of the group’s ambition to sustainable sourcing. Towards this end, the Islamic financial institutions have put together a lot of efforts and resources in place, underpinned by the concept of Value-based intermediation (VBI) such that financing and banking activities are in line with sustainability practices.

The VBI Community of Practitioners have collectively issued sectoral guidelines on palm oil, renewable energy and energy efficiency, that serve as an impact-based risk assessment toolkit to assist financial and investment decisions of banks. The takaful industry has followed suit with the issuance of the VBI for Takaful Framework that integrates the principles of VBI into products and business practices that promote financial resilience and climate risk management. Conclusion Before I end my remarks, I would like to touch on the importance of the right skill set that can future-proof our halal industry. As we navigate beyond the pandemic, leaders in halal business community have to be agile and forward looking. This includes keeping abreast of the latest technology and constant up skilling to embrace digitalisation. In recognising the potential of digitalisation as a key ingredient to assist halal businesses, the Bank provides an enabling environment for financial institutions to foster innovation such as through the fintech regulatory sandbox and facilitation of pilot projects. These avenues enable the Bank to identify potential adjustments or responses to the existing regulatory framework that commensurate with the risk and scale of activities. The Bank has also established the SME Automation and Digitalisation Facility (ADF) in March 2020, which aims to encourage SMEs to automate processes and digitalise operations to increase productivity and efficiency. In March 2021, an additional allocation of RM700 million has been provided for the ADF, bringing the facility’s total size to RM1 billion.
BIS Review 7/2008  7  Chart 5: Mortgage arrears and possessions rates  Chart 6: Household secured and corporate credit availability Net percentage balances(a) Easier credit 30 Corporate 20  Percentage greater than 3 months in arrears  Percent  Household Secured  7  0.9 0.8  6  10  0.7 5  0.6  0  4  0.5 0.4  -10 -20  3  Possessions (LHS)  -30  0.3  2  0.2  Arrears (RHS)  1  0.1 0 1990  -40 -50 -60  0 1993  1995  1998  2001  2004  2006  Source: CML Back cast data before 1994  Tighter credit  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Reported change, past three months Expected change, next three months Source: Bank of England Credit Conditions Survey  Chart 7: Quoted mortgage spreads  Chart 8: Mortgage product availability (a)  Thousands  Basis point spread to funding rate 250 SVR  Credit impaired Prime  200 150  Bank Rate Tracker 100  5 yr fixed  50 0 2 yr fixed -50 2001  2002  2003  2004  2005  2006  2007  Source: Bank of England. (a) SVR mortgages spread over one month lag of Bank Rate; Tracker mortgages spread over Bank Rate; 2 yr, and 5 yr fixed rate mortgages spread over one month lag of 2 and 5 year swap rates.

With pressures on their capital and new capital expensive where it is available, banks are likely to attempt to increase their margins and to slow down new lending, thereby reducing their capital requirements, for example by tightening non-price terms and conditions on new loans. One factor which regulators are watching carefully at present is the impact of the shift this month to the Basle II system of capital requirements for European banks. While Basle II improves on its predecessor and removes many undesirable incentives, it retains some procyclical features and any transition needs to be managed carefully. 8 The impact on expectations and confidence The other channel by which the financial market turbulence is likely to have macroeconomic effects is by prompting more cautious behaviour by households and firms. This might simply reflect uncertainty about the future. Firms may temporarily postpone investment because of greater uncertainty about the future path of demand. We saw an effect like this after 9/11 for example. But it might also reflect a revision by households and firms about the sustainable path of income and wealth in the coming years. The change in expectations may reflect the higher costs of borrowing and a higher risk of unemployment. Again a reduction in confidence about future growth may lead directly to lower consumption and investment. It is also likely to affect equity and property markets. Potential buyers may decide to wait before purchasing if they sense that there is a chance that prices may fall. Such behaviour can be self-fulfilling.
Subordinated debt may well help to protect depositors in the event of liquidation, but it cannot absorb losses on a going-concern basis and so does little to avoid the incentive to run or, therefore, the slide into resolution. Nor does subordinated debt alter the position of retail depositors, who can look to the deposit-protection scheme, especially now that it provides 100% cover up to £ Subordinated debt can enhance recoveries made by the Financial Services Compensation Scheme. But it is not directly stability-enhancing. The composition of regulatory capital was allowed to become too complicated. Including debt instruments is effectively to allow double leverage. The Basel Committee is itself returning to this question. As with liquidity, I do not want to say much today about how to measure the risks that capital should cover. I applaud the Turner Report’s analysis of “trading book” risks; as discussed in the Bank’s Financial Stability Review a few years ago, making Value at Risk the bedrock of market risk requirements allows capital to fall, or leverage to rise, during periods of unusually low volatility. The Basel Committee are addressing this. More generally, the degree of stress that capital should enable banks to withstand, whether against default risk or market risk, should be decided by the authorities not by individual banks, precisely because of the systemic significance of banks to the payments and credit system.

Another, not mutually exclusive, explanation is that by virtue of holding large “trading” books that were marked to market, banks found themselves having to make very large portfolio write downs in the face of sharp rises in liquidity premia in asset markets. As highly-levered institutions – as banks are unavoidably: deposits are debt – those mark-downs depleted their net worth to the point of imperilling solvency. That caused a retrenchment in the availability of credit, helping to plunge the world economy into recession, and so impairing traditional loan books, in a vicious spiral. The point of this account is that it emphasises the role of banks’ leverage. Combined with maturity transformation, this unavoidably makes banks brittle. And that underlines just why our predecessors placed such great weight on the safety and soundness of banks. Indeed, the original reason for regulating capital was that an assurance of capital adequacy, for all but the most extreme circumstances, would make runs less likely. But that was hardly meant to lead to the neglect of liquidity highlighted a few years ago by one of my predecessors, Andrew Large, and others. Liquidity We therefore welcome the Turner Report’s exploration of “core funding”. And we very much support, and have encouraged, the FSA’s plan that all banks should in future hold a minimum level of high-quality government bonds, on the grounds that only they carry a reasonable assurance of market liquidity in stressed conditions. I hope the same approach can be adopted internationally.
I have also tried to communicate that monetary policy has considerable potential to influence the development of inflation, but that this influence does not necessarily presume that monetary policy also has substantial effects on economic activity. Expectations of the Riksbank’s ability to meet the inflation target are sometimes too low, while expectations of our ability to reduce average unemployment are too high. It is monetary policy that determines how high average inflation will be. The average level of unemployment, on the other hand, is mainly determined by factors beyond the Riksbank’s control. 26  The fact that goods prices have fallen can be seen in Figure A2, while the rapid fall in prices of technologyintensive goods can be seen in Figure 5. 27  Figure A5 in the appendix shows that services prices have increased faster than goods prices since the beginning of the 1980s. 28  This conclusion assumes that the average rates of increase for energy and food prices are not far above two per cent. BIS central bankers’ speeches  13  Finally, I would like to repeat what I said at the beginning of my speech. I am not trying to say that the Riksbank can control inflation with any precision. It is neither desirable nor possible for monetary policy to continuously hold inflation stable and close to the inflation target of 2 per cent. But monetary policy can prevent inflation from falling way below the target over a long period of time.

The reasons I will take up concern wage formation, the credibility of monetary policy, a too high real interest rate, and arbitrary reallocation from borrowers to lenders. I consider these to be serious problems. But at the same time I find some of the recent discussion on the problems with deflation – falling prices – to be exaggerated and focused on the wrong risks. Second, I wish to discuss the ability of monetary policy to prevent inflation from falling too low. Sweden is a small open economy and is affected to a great extent by international developments. This fact sometimes causes commentators to question rather resignedly whether the Riksbank can actually influence inflation. I consider this attitude to be wrong. Monetary policy determines how high average inflation will be. Having said this, I am not claiming that we can control inflation with precision. Monetary policy can prevent inflation from falling way below the target over a long period of time. It is, however, neither desirable nor possible for monetary policy to continuously hold inflation stable very close to the inflation target of 2 per cent. But let me start by commenting on where we are coming from and the current situation. Inflation has been on average 1 per cent in Sweden for the past three years, when measured in terms of the CPIF.1 The Riksbank and other analysts have had forecasts that have shown that inflation would be low over a relatively long period of time, but that it would gradually rise.
Against this background, each bank's capital needs were identified on the basis of a rigorous stress test and, in accordance with the European authorities, restructuring or orderly resolution plans were drawn up and approved for those banks requiring them. In 2012, backed by public financial assistance, the institutions classified under “group 1” of the Memorandum of Understanding were recapitalised, and their problem construction and real estate development-related assets were transferred to SAREB (the asset management company for assets arising from bank restructuring). Into 2013, the “group 2” institutions subject to the exercise have been recapitalised, their troubled assets have been transferred to SAREB and the hybrid instrument management (burden-sharing) exercises have been conducted at all banks requiring them, except at one, where they began recently and will be concluded in the coming days. The public financial assistance to financial institutions in various forms of capital, since May 2009, has risen to € billion, € billion of which were under the Financial Assistance Programme agreed with the European authorities. Verification by the international authorities of the fulfilment of the conditions agreed in the July 2012 Memorandum of Understanding, the last round of which concluded only a few days ago, confirms that the Memorandum and its deadlines have been strictly adhered to and that the main objective, the restructuring and recapitalisation of our banking system, has progressed satisfactorily. As earlier stated, the Council of the European Union will shortly approve the Regulation governing the SSM, which will commence operating after a transitory period of one year.

I shall therefore refer solely to the State and Social Security budgets. The draft State budget for 2014 is set against a macroeconomic background in which real GDP is forecast to grow by 0.7%. This macroeconomic scenario, whose central forecast is export growth above 6%, is prudent and in keeping with the forecasts of most national and international agencies. It outlines a gradual recovery in activity and employment in a setting in which the ongoing budgetary adjustment and the deleveraging of households and firms will continue, and in which the competitiveness regained in 2012 and 2013 will not be lost. In step with our European commitments, an overall general government budget deficit target, in National Accounts terms, has been set at 5.8% of GDP, against the figure of 6.5% forecast for 2013. In terms of the different agents, a National Accounts deficit target of 3.7% of GDP has been set for central government, against 3.8% in 2013, and in the case of the social security system and the regional governments the figures mark an improvement of 0.3 pp of GDP, taking the respective deficits to 1.1% and 1%. Local governments should maintain in 2014 the balanced budget already forecast for 2013. As in previous years, three expenditure items – the public debt interest burden, pensions and unemployment benefits – will continue to condition budgetary programming.