samchain/econo-pairs-v1 huggingface dataset:
In the upward phase, obtaining financing is easy and cheap, while it is harder and more expensive in the downward phase. Sometimes, the upturn in the financial cycle results in a financial crisis, but not always. The difference in the time horizon between the regular business cycle and the financial cycle gives rise to conflicting objectives for the central bank. When the cycles head in different directions, there may be a trade-off between price stability and resource utilisation in the short term, and financial stability in the longer term. If a financial crisis actually occurs it will of course have repercussions on both inflation and resource utilization. The trade-off is particularly severe if the central bank only has the policy rate at its disposal. In the Swedish economy, we currently have a low inflation rate and relatively weak resource utilisation, while at the same time credit volumes have been increasing relatively sharply for a long time. There is therefore a trade-off between price stability and normal resource utilisation in the short term, and financial stability in the slightly longer term. For a central bank with only the policy rate at its disposal it is a case of balancing a poorer inflation and resource utilisation outcome in the short term against uncertain but very severe outcomes in the longer term. In such a situation, more expansive monetary policy can provide better fulfilment of inflation and resource utilisation objectives in the short term.

The most important indicator in this assessment is the credit gap, which is a measure of how much credit growth deviates from its long-term trend. The reason for the credit gap having gained a key role in the assessment is that it has proven to be the indicator that warns of an impending crisis best and sufficiently early. A pure mechanical application of the credit gap can provide a certain guide to when the capital requirement would have been activated (see figure 1).6 Figure 1. Time periods when countercyclical capital buffers should have been activated based on historical measures of the credit gap (per cent). 3  2,5  2  1,5  1  0,5  0 81  83  85  87  89  91  93  95  97  99  01  03  05  07  09  11  Countercyclical buffer Households Non-financial corporations  Note: The calculations are based on a mechanical application of the credit gap approach. We can see that the requirement would have been activated on two occasions. The first time would have been a few years before the banking crisis of the 1990s, and the second time around 2005, that is just before the global financial crisis. We can also see which lending makes the credit gap grow by applying the approach separately to different sectors. The driver of activation of the capital requirements in the 2000s is mainly the household sector.
We have an important role and responsibility to help employees adapt to and thrive in roles that are constantly being re-defined. And how we do this needs to evolve from a narrow focus on providing just-in-time training to get jobs done, to one which helps individuals acquire new knowledge, skills and capabilities on a continuous basis to meet business and professional goals. 2/5  BIS - Central bankers' speeches  Work to develop a Future Skills Framework (FSF) for the financial sector, which serves as a single point of reference on future skills and career development pathways for those working or aspiring to work in financial services, is a major step in this direction. In the longer run, the FSF should serve to foster a culture of lifelong learning and skills development within the financial sector workforce. I wish to commend AICB for leading the framework together with the Malaysian Insurance Institute (MII) and the Islamic Banking and Finance Institute Malaysia (IBFIM). Financial institutions here today will have a key role to play in realising the vision for the FSF by helping shape the framework into something that will be beneficial and relevant to institutions and individuals in the financial sector. By supporting the reskilling and upskilling of individuals whose roles may be at risk of displacement, the Future Skills Framework also serves as a risk management strategy for financial institutions that are already facing growing legal and reputational challenges associated with redundancies.

Preserving a strong focus on professional standards Second, future talent strategies must not lose sight of the critical importance of preserving a strong focus on professional standards to regulate conduct and behaviour. Over the last decade, Malaysia's banking industry has made important strides in raising standards of professionalism. This is evident from the number of accredited banking professionals that has more than tripled over the last four years. Customers expect banks to stand with them through the good and bad times. The economy relies on resilient banks performing a critical intermediation function through economic cycles. The standards applied to professional bankers must therefore also stand the test of time. This means preserving high ethical standards that underpin the character of bankers, while expanding standards on professional skills and competencies expected of bankers to respond to a fast-changing landscape. I commend the exemplary leadership shown by GBEStB in pioneering the development of global education standards in new areas such as sustainable finance and digital financial literacy. In Malaysia, we also see efforts by our own professional development bodies to raise the bar through initiatives to refresh the Chartered Banker programme and the development of the Certificate in Climate Risk (CICR). A strong focus on standards should continue to direct these efforts to ensure that skills and competencies acquired will be fit for the future. The industry will also need to be more deliberate about integrating a sound risk culture into standards adopted for banking education and professionals.
Ineffective regulation of financial markets led to unrestrained growth in global liquidity, rising indebtedness ratios and formation of systemic risks in financial markets. Lack of transparency in financial transactions blurred the boundaries of who owes what to whom, preventing the proper valuation of risks. Failure of credit rating agencies, inadequacy of risk assessment methods in addressing systemic risks and pro-cyclical accounting standards overtook prudential measures. BIS Review 73/2010  1  To put a long story short, if you look for a snapshot of the roots of this crisis in one simple statement, it is nothing but “households consuming the present value of their future wealth, which they do not actually possess in the first place”. In the aftermath of this crisis, households have increased precautionary savings to cover their debts and clean their balance sheets. This has caused a very sharp negative demand shock, especially in advanced economies. Furthermore, a significant part of the real sector was not able to pay off their debt leading to large-scale write-offs in the financial sector. In response, governments have both increased public spending to offset the fall in domestic demand and bailed out troubled financial institutions to prevent the collapse of the financial system. In other words, they have acted as both “consumer-of-last-resort” and “lender-oflast-resort” at the same time. By doing so governments have prevented a repeat of the Global Depression that we experienced in the 1930s.

Thanks to financial engineering and innovative products, only a small portion of financial institutions’ assets is in government securities. Therefore, asking for government securities as collateral in open market operations would no longer provide enough liquidity to the financial system. In the meantime, as banks have lost their dominance in the financial system, corporations and non-bank financial institutions have joined the conventional banks as the counter parties of central banks in market transactions. The question in this context is (1) whether the innovative policies we have seen in the last year will lead to longer-term changes in central banking doctrine and behavior, (2) whether in parallel to new developments in financial structure central banks will adopt a more flexible approach in operational practices, and (3) maybe more importantly whether central banks will maintain their influence in the financial markets, which has grown rapidly due to extraordinary actions during current crisis? These are important questions to discuss and I hope this conference would provide new insights to policy makers as we sail through uncharted waters. While concluding my remarks, I would like to extend my thanks to the members of the Forum Istanbul, who have contributed to the constitution of constructive criticism environment that I perceive as an important element in building the future of Turkey. Thank you for your attention. 4  BIS Review 73/2010
Mr. Chan reports on the Hong Kong dollar post-July 1997 Speech by the Deputy Chief Executive of the Hong Kong Monetary Institute, Mr. Norman T.L. Chan, at the Hong Kong Business Summit ’97 organised by The Hong Kong General Chamber of Commerce on 4/12/97. I am honoured to have been invited by the Hong Kong General Chamber of Commerce to attend Business Summit 1997. This year’s Summit carries special significance because this is the first Summit after the return of Hong Kong’s sovereignty to China. As Hong Kong enters into a new era under the framework of “one country, two systems” and “Hong Kong people ruling Hong Kong”, our attention has recently been focused on the financial turmoil in the region and its effects on Hong Kong. In view of the limited time available, I do not propose to go into the background why this financial turmoil has occurred. I would instead like to take this opportunity to clarify a few points which have been the subjects of extensive debate recently. 2. Firstly, I should reiterate that the Government’s resolve in maintaining the linked exchange rate system is absolute. Given Hong Kong’s small and open economy, the link has been and will continue to be the most suitable arrangement for Hong Kong.

As Hong Kong has to import almost all the raw materials and equipment, devaluation of the currency does not mean that the export prices would necessarily be lowered by the same extent of the devaluation. As you know better than I do, although price is always important, competitiveness does not depend on price alone, whether or not you are talking about manufactured goods or services. Competitiveness depends on a host of factors, including better cost control, innovation, entrepreneurship, marketing and constant striving to achieve productivity gains. In this context, I cannot help tell an old, but true, story involving a conversation with an American friend 6 or 7 years ago, when the $ was depreciating and the DM and the Yen surging to new highs. He was complaining that many countries, including the Southeast Asian economies, were manipulating their exchange rates to gain trade competitiveness. As a result, American goods were having a hard time selling overseas because they were too expensive. I told him that, while it may or may not be true that some countries were deliberately keeping their exchange rates low, the apparent difficulty experienced by US manufacturers to penetrate the Asian markets was not caused by pricing alone. For example, how could the Americans expect to sell their refrigerators to Hong Kong households if most of the refrigerators they tried to sell were almost as big as the kitchen of an average flat here in Hong Kong?
BIS Review 150/2007  3  First, since the early 1980s, we have witnessed broad-based and sustained political momentum to deregulate and liberalise economic structures, enhance the role of market forces and attempt to reduce the role of governments in the global economy. Looking back, Ronald Reagan’s confrontation with the air traffic controllers union in 1981 marks the beginning of this process. Most of you in this room would probably concur with the premise that the secular trend to strengthen the role of free markets and competition as the overarching organising principles of the global economy has contributed significantly to the long period of prosperity that the world economy has enjoyed. In this context, SWFs represent a potential threat. Sizeable state-sponsored foreign investments in mature economies can be perceived to be a threat to free market forces. 14 Moreover, such investments run the risk of triggering protectionist reactions in the recipient countries. Second, one of the basic premises of open global capital markets is the idea that capital flows freely worldwide in search of investment opportunities that yield optimal risk-adjusted rates of return. The fact that large and government-controlled investment companies make substantial investments in privately owned companies in other countries raises concerns about the validity of the hypothesis that capital seeks optimal risk-adjusted rates of returns. Governments of recipient countries may have doubts about the motivation behind such investments. Are SWFs in pursuit of a variant of the traditional motive to maximise returns?

Second, decisions on interest rates are taken each month by the Monetary Policy Committee (MPC) comprised of nine individuals with expertise in monetary policy – five executive members of the Bank and four non-executives – who operate on the basis of one person, one vote. There is, therefore, an appropriate division between the objectives of monetary policy, which are set by the democratically elected government, and the implementation of those objectives, which is delegated to a group chosen for their expertise. The third, and crucial, component of the regime is that the monetary policy process is characterised by a high degree of transparency and openness. Minutes of the MPC meetings are published within two weeks and the Bank’s quarterly Inflation Reports contain the Committee’s views on the outlook for inflation and output. It is important that the Monetary Policy Committee explain its decisions, not least to make future decisions as predictable as possible in the light of the evolving economic data. Of course, it is always easier to explain policy when the decisions are popular. We have to redouble our efforts when decisions are less popular, and so I am delighted to have an opportunity this evening to explain and to listen. I shall leave plenty of time for questions because one of the purposes of visits such as these is to see things from your perspective.
The subdued developments in money and loan growth continue to support the assessment that the underlying pace of monetary expansion is moderate and that inflationary pressures over the medium term are contained. The downward impact of the steep yield curve on monetary growth, which is reflected in the allocation of funds into longer-term deposits and securities outside M3, is gradually waning. Moreover, the impact of the narrow spreads between different short-term interest rates on the growth of the components of M3 is continuing to diminish. As a result, the annual growth  2  BIS Review 113/2010  rate of M1 has continued to moderate from high levels, and stood at 8.1% in July 2010, while the annual growth rate of other short-term deposits has become less negative. The still weak annual growth rate of bank loans to the non-financial private sector continues to conceal positive growth in loans to households and diminishing negative annual growth in loans to non-financial corporations. These developments are consistent with a normal, lagged response of loan developments to economic activity over the business cycle. Given the subdued developments in banks’ overall balance sheets, the challenge remains for banks to expand the availability of credit to the non-financial sector when demand picks up. Where necessary, to address this challenge, banks should retain earnings, turn to the market to strengthen further their capital bases or take full advantage of government support measures for recapitalisation. To sum up, the current key ECB interest rates remain appropriate.

The Governing Council has today also decided to continue to conduct its main refinancing operations (MROs) and its special-term refinancing operations with a maturity of one maintenance period as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of this year’s twelfth maintenance period on 18 January 2011. The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time. Furthermore, it has decided to conduct the 3-month longerterm refinancing operations (LTROs), to be carried out in October, November and December 2010, as fixed rate tender procedures with full allotment. The rates in these 3-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO. The Governing Council has also decided to carry out three additional fine-tuning operations on 30 September, 11 November and 23 December when 6-month and 12-month refinancing operations mature. Overall, the current monetary policy stance remains accommodative. Monetary policy will do all that is needed to maintain price stability in the euro area over the medium term. This is the necessary and central contribution that monetary policy makes to fostering sustainable economic growth, job creation and financial stability. All the non-standard measures taken during the period of acute financial market tensions, referred to as “enhanced credit support” and the Securities Markets Programme, are fully consistent with our mandate and, by construction, temporary in nature.
Another indication that the workings of the economy may have taken a turn for the better is the Riksbank’s upward revision of potential output in the light of, for example, good productivity growth and very moderate inflationary tendencies even when GDP growth has been comparatively high. At the same time, methods have now been developed that probably enable us to get a little closer to the mark than before. The current output gap estimates, which represent the difference between actual and potential GDP, suggest that total production will rise above the potential level in the coming years. There is nothing dramatic about this, however. In the longer run one would expect the economy to be above its potential level about as much as it is below. As regards potential growth, the Riksbank, like most other observers, now counts on a rate somewhere between 2 and 2.5%. One approach to estimating this rate is based on the trends for labour supply and productivity. The latest assessments from the Medium Term Survey, based on such factors as demographic changes and labour force participation, put the annual increase in the labour force up to 2008 at 0.5%. Labour productivity, according to the available statistics, has risen faster in the 1990s than it did in the 1970s and 1980s; whereas the annual increase in the period 1974-93, for example, averaged approximately 1.4%, since 1994 the rate has averaged about 1.9%.

In this respect there are some notable differences in Sweden. External competition in markets for goods has also tended to grow in Sweden. Since the mid-1980s the traditionally high GDP share for imports has almost doubled. Domestic competition has also increased, for instance in markets that have recently been deregulated - electricity and telecommunications, of which the latter is particularly strategic for IT. Even so, price levels in Sweden are still high in many areas - higher than in most other EU countries as well as compared with the United States. Differences in taxation clearly play a part but so does a lack of competition. This in turn may have to do with the degree to which markets for goods are  BIS Review 18/2000  4  regulated. In the OECD index of product market regulation, Sweden is admittedly lower than many other EU countries but appreciably higher than the United States. A breakthrough for the new economy is also dependent on the situation in factor markets. The Swedish risk capital market has undergone major improvements and relative to GDP is now the third largest in Europe, after the United Kingdom and Ireland. And whereas in 1983 it was only a quarter of the relative size of the risk capital market in the United States, by 1998 it had already become half as large. A notable feature in recent years is the greatly increased input of foreign capital.
Some of that is inevitable, and some retrenching from the excess levels of finance in relation to the real economy is probably beneficial at this stage, both at the national and the global level. The risk, however, is that the process could go too far. Yes, there are risks to financial globalisation, but there are also benefits. In order to reap those benefits, we need a safer framework for cross-border banking at the regional and global level and some ground rules for capital flows and capital controls. Let me briefly turn my own country, Iceland, into a case study of some of the issues involved. During the financial crisis, three small European countries that had relatively big banking systems but no apparent fiscal problems prior to the crisis have suffered very serious financial and economic crises. These are Iceland, Ireland, and Cyprus. In all three countries, the balance sheets of the banks were around 8–9 times GDP. All three are members of the EU single market – in Iceland’s case, through the agreement on the European Economic Area. That includes free movement of capital and provision of financial services. The underlying principles are those of home licensing for operation anywhere in the area and of a level playing field for competition, where size and location are not supposed to matter. It therefore goes against the underlying principles of this framework to consider the size of banks relative to GDP as a metric for concern, as is now so rightly in fashion.

After rising initially with the substantial costs associated with bank recapitalization programs, in recent years public debt ratios have generally been declining as a share of GDP. Monetary policy regimes have become more mature, with some progress toward greater de facto independence for central banks, with clearer mandates for price stability. Exchange rate regimes in the crisis countries have become somewhat more flexible, providing greater scope for monetary policy to sustain the domestic conditions for price stability. Financial systems are substantially stronger. Bank capital ratios now provide a significantly larger cushion against potential losses – though capital ratios in Asian banking sectors are still generally lower than those in other emerging economies. The quality of bank assets has improved. Nonperforming loans, estimated to have peaked at between one-quarter and three-quarters of total loans in the crisis countries, are now under 10 percent of total loans. Financial institutions that required government intervention have largely been restored to private ownership. Domestic capital markets  2  BIS Review 65/2007  are an increasingly important channel of intermediation in financial systems that had historically been dominated by banks. These are impressive achievements by any measure. And the changes that have taken place provide a strong foundation for future growth and they make it much less likely that these economies will be vulnerable to the type of crises of a decade ago. This progress is reflected in a broad range of financial market indicators of risk. Risk premia in domestic interest rates markets are low.