samchain/econo-pairs-v1 huggingface dataset:
This decision was also dictated by the need to counter harmful speculation at the time about the appropriate level of the exchange rate. Lessons learned One lesson that could indeed be drawn from Malta’s experience is that the discipline imposed by the currency peg was probably the factor that contributed most to the relatively smooth transition to euro area membership, not only in terms of the achievement of the exchange rate criterion, but more so because it helped to focus attention on macroeconomic and structural policies. There was, however, one factor that remained constant as the journey to the euro progressed. That was the small size of the economy and, thus, its vulnerability to shocks. This was compounded by the risk of a speculative attack of the currency, given the combination of still weak economic fundamentals and the dismantling of the capital controls regime which had protected the lira for decades. These realities made the transition from a basket peg to a full euro peg even more challenging. The potential exposure to capital outflows was also a source of preoccupation because the Bank was aware that the typical  6  4  Malta Enterprise. BIS Review 14/2008  interest-sensitive Maltese investor was likely to be attracted by the availability of a wide choice of financial products overseas offering attractive yields. Long before EU accession the Bank had anticipated this challenge by adopting a sequenced programme of capital account liberalisation to test investor reactions.

Michael C Bonello: Malta’s journey to the euro and beyond Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the European Economics and Financial Centre, London, 1 February 2008. *  *  *  A month has passed since the euro became Malta’s new currency. Euro area membership is a major milestone for any country for there are clearly long-term benefits associated with participation in the world’s second most important currency area. There is indeed much evidence that the macroeconomic framework which supports the euro has delivered price stability, job creation and economic growth. For a small, open economy like Malta’s with a heightened vulnerability to external and sector specific shocks, the benefits of the single currency can be expected to be even more valuable. From a central banker’s perspective, moreover, euro area membership means replacing the manifold risks inherent in managing a small, vulnerable currency such as the Maltese lira by the greater security afforded of major reserve unit. Where have we come from? Although the Maltese economy had responded fairly well to the closure of the British military base in1979, it still suffered from considerable structural weaknesses when the authorities applied for EU membership in 1990. These were reflected in the dominant role of the public sector – which at the time provided 40% of all jobs – and in the extensive use of protective trade barriers that only served to entrench inefficient and uncompetitive practices.
William C Dudley: "Remarks at the Economic Press Briefing on the Regional Economy" Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Press Briefing on the Regional Economy, Federal Reserve Bank of New York, New York City, 10 August 2017. * * * Good morning, and welcome to the New York Fed’s Regional Economic Press Briefing. Today, we will provide an update on economic conditions in the region, and then discuss the issue of regional wage inequality. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1  Current Economic Conditions The Federal Reserve has pursued an accommodative monetary policy since the Great Recession to facilitate achieving our dual mandate of maximum sustainable employment and price stability. This policy stance has provided support to the economy and helped lower the unemployment rate from 10 percent at the depths of the Great Recession to 4.3 percent currently. Measures of underemployment have also improved considerably and are near precrisis levels. Stronger labor market conditions are perhaps the best means to improve the economic wellbeing of most Americans, particularly those who have been struggling and are most vulnerable to economic downturns. Improved job opportunities have helped to support household income growth, consumption, and saving, as well as the housing market.

This does not mean that we should revise up expected future returns – perhaps the opposite. 13  NORGES BANK  Chart 12 Low long-term interest rates Ten-year US Treasury yield. Percent 16  16  14  14  12  12  10  10  8  8  6  6  4  4  2  2  0 1960  ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  0 1970  1980  1990  2000  2010  2020  Source: Bloomberg  The expected annual real return is estimated at 3 percent. The estimate was most recently updated in connection with the decision to increase the allocation to equities. Two key variables were used in the calculation. One was the expected return on the fixed income portfolio, and the other the size of the equity risk premium, which is the extra compensation we expect when taking risk in the equity market. The bulk of the fixed income portfolio is invested in long-dated sovereign bonds. When interest rates fall, bond prices rise. The return on the fixed income portfolio therefore held steady through the period of falling interest rates. But this is a one-off gain (Chart 12). Interest rates have now fallen to historic lows, and the expected return on the fixed income portfolio going forward has fallen. Equity prices have risen sharply in recent years. Taking risk in the equity market has paid handsomely. But we cannot assume that the gains will be as high in the future.
And that might feed the illusion that, once the recession is behind, all countries will recover in the same way. But that will not be so. Each country has singular features that will prove pivotal when defining the path to follow once the crisis is over. Accordingly, my reflections will focus on what distinguishes us from others. The Spanish experience shows that, from 1985 to 2008, growth in the economy was outpacing the EU average, with the sole exception of 1992 and 1993. This spectacular growth over the past 23 years has allowed us to draw closer to the welfare levels enjoyed by the most prosperous EU countries. But what will happen to the Spanish economy when we emerge from the current crisis? Will we witness such satisfactory growth as in the past? The reply, as always in economics, is that "it depends". If we do what we have to do, if the necessary reforms are made, we will once again grow above the European average. But if  BIS Review 18/2009  1  we do not reform we will probably grow at or below the EU average, with convergence with our main economic partners being checked. Yet if we have been able so far to advance without these reforms, is it absolutely vital to adopt them now? Before answering that, let us look at the causes of growth in the Spanish economy in recent decades.

Yet it would be absurd to ignore the fact that the Spanish public largely believes the current system protects workers. And clearly, if there is no widespread awareness of the harm the system causes, there will be no reforms. It is therefore absolutely vital to study and publicise the reforms other European countries have undertaken, choosing those alternatives that allow us to raise our productivity, and thus our external competitiveness, to increase our per capita income and quality of life, and to improve the conditions of the most disadvantaged groups. In many respects the current situation of labour protection can be equated with the trade protectionism characterising the Spanish economy until the late 1950s. During that period, import tariffs and quotas were very high in comparison with those in other developed countries. The belief until then was that trade protectionism shielded Spanish firms and workers, but nothing was further from the truth. The goods sold in Spain were expensive and of poor quality, workers' wages were so low that attempting to hold down two jobs was the norm and the level of per capita income even fell relative to that of our trading partners. The situation changed radically with the opening up of the Spanish economy, when we began to resemble other developed countries. Indeed, this process, which started with the 1959 Stabilisation Plan and culminated in accession to the European Union in 1985, has seen Spain successfully converge on European standards of living.
The new framework has largely been set by international standards, and for the UK by the incorporation of those standards in EU law. The Basel reforms to bank capital and liquidity standards have very materially strengthened the protection of capital and liquidity reserves that individual banks hold to meet bad times. Regulatory capital requirements are set to be up to ten times higher than before the crisis for the most systemically important institutions and banks will face internationally agreed liquidity ratios for the first time. In the UK and other jurisdictions, leverage ratios have been introduced in advance of an international standard that is in train and structural separation measures are being implemented. These reforms have strengthened the position of individual firms and in doing so the resilience of the system as a whole. But the Basel and other reforms have also recognised explicitly that these levels of protection need to be set not only to protect investors in individual firms but also to protect all of us, the whole economy, from the damage to the system that can be done when systemic firms get into trouble. Banks that are globally systemic are now required to hold more resources – equity capital – that can absorb losses if and when things go wrong. The extra protection is graded by the systemic importance of the firm. The aim is that these systemically important players can continue to operate within the system, serving the real economy, even in bad states of the world.

And since its inception, the Bank has played a role in shaping the development of the financial sector in the UK and using its influence to promote financial stability. For much of its history, that role was not one of statutory regulation and supervision. The Bank exercised its influence behind the scenes on the small club of actors that dominated the financial system. Indeed, the UK came rather late to the idea that banks and financial firms needed to be regulated by law rather than steered by the eyebrows of the Governor of the Bank of England. The Macmillan Committee (1931), which inquired into financial policy in the wake of the Wall Street Crash, did not advocate statutory regulation. Rather it endorsed the informal role of the Bank in guiding the banking sector, commenting that “financial policy can only be carried into effect by those whose business it is”. 30 years, a Great Depression and a world war later, the 1959 Report of the Radcliffe inquiry into the monetary system concluded similarly that “it is on this relationship, and on the mutual trust and confidence that are the basis of the relationship, rather than on formal power…that the Bank has relied in seeking to inform itself about and influence the policies of the clearing banks”. In the immediate post war period it was not necessary to do a great deal to promote financial stability or the supervision of financial firms.
Recently, it has begun doing so. The Bank has been working with the organisation ‘We Are Futures’ to develop material on the economy to be taught in schools to children aged 11-16. The aim is to help create that missing foundation stone in the economics educational pyramid. 60  The Bank’s programme is called EconoME. As its name suggests, EconoMe aims to link the economy and financial system to people’s everyday lives; it is everyday economics. It seeks to give economics the same characteristics as sticky stories – local, personal, topical. Trial materials are available for teachers now. The programme will be fully launched in Spring 2018, with a state schools focus. Over time, we will seek to broaden the schools coverage and develop materials for 16-18 year olds. To help with this roll-out, the Bank is increasing significantly the numbers of school visits it undertakes, with a target of 200 in 2018. We are working with the charities Speakers for Schools and Inspiring the Future to achieve that objective, again with a focus on state schools. 61  Importantly, these visits will not just include the  Bank’s top brass, but staff at every level. From personal experience, I know just how important and uplifting (at least for the speaker) these visits can be. 62  They are also the best media-training I have ever  encountered, with performance feedback that is instant and brutal.

It has yet to recover. This mirrors the fall in trust in institutions and experts generally. Tellingly, the UK and US have suffered a greater erosion of institutional trust than most other countries. 15  If the Twin Deficits in economics are wide, and possibly widening, what have been the root causes? They seem to be two-sided. In part, the deficits reflect the how well (or, rather, badly) economic material is conveyed to the general public. And in part they reflect how well (badly) the public are able to digest this material. The public’s own views make clear the two-sided nature of the Twin Deficits problem. A survey last year found that a significant majority of the public think that economics is inaccessible to them, even when it is intermediated by the media or politicians. 16  Only 12% believed the opposite. Inaccessibility  problems are particularly acute when it comes to financial products. There are over 12 million people in the UK who feel they do not have the information they need to choose wisely between insurance products. 17  This inaccessibility problem extends to public bodies charged with safeguarding the economy and financial system, like central banks. One way to gauge this is by studying the way these public bodies communicate in public. By measuring the complexity of their public communications, we can infer how easy it is for the public to make sense of what these public bodies are saying to them. Central banks are one such body.
(2015) indices of capital controls policy for Chile and other EMEs (net easing)  Inflows  Outflows  4.0  12  4.0  3.5  10  3.5  3.0  8  3.0  2.5  6  2.5  2.0  4  2.0  1.5  2  1.5  1.0  0  1.0  0.5  -2  0.5  -4  0.0  Total number of policy actions: 1 Jan 2001 - 31 Dec 2015 (*) baseline models include the 11 most active countries  300  15 250 10  200 150  5 100  0  50  01 03 05 07 09 11 13 15  -5 01 03 05 07 09 11 13 15  EGY CZE MEX MAR POL IDN CHL HUN RUS COL BRA PHL TUR THA ZAF ARG KOR CHN MYS PER IND  0 0.0  (*) Blue bars are countries with fewer than 32 actions in sample. Red bars are those with at least 32 actions in sample. Red/blue shaded bars represent countries with more than 32 actions in sample but no inflow targeting actions. Sources: Pasricha et al. (2015) and BIS. Besides the Chilean approach to deal with FX risk at the banking level and the recent trend that has deepened financial liberalization, the possibility to activate capital controls under extreme circumstances is still part of our constitutional law.

In the public sector, where employment growth has been strong the last few years, budgets will only allow a moderate increase in employment in 2003. Overall, employment is projected to fall by ½ per cent in 2003 and remain unchanged in 2004. Employment followed a similar course in the early 1980s. At that time, employment rose markedly as a result of continued strong growth in the labour force. Labour force participation in Norway is currently at a record-high level, and the demographically determined supply of labour is low. At the same time, labour force growth may be lower than implied by demographic trends for various reasons. More people may choose to study until the situation in the labour market improves. Some of the unemployed may exit the labour market on retirement schemes. Outflows from the labour market and low labour force growth as a result of demographic trends may limit the increase in unemployment. Nevertheless, unemployment is projected to rise, especially in manufacturing. The increase through 2002 primarily reflects a rise in unemployment in the service sector. Manufacturing unemployment remained stable until end-2002, but has increased substantially in the last few months. More lay-offs and lower expectations regarding manufacturing employment point to increased unemployment in the manufacturing sector ahead. In addition, statistics show a 40 per cent reduction in the number of  1  Labour costs’ share of value added after direct and indirect taxes (factor income). BIS Review 14/2003  3  vacancies in manufacturing advertised in the last year.
It is for this reason that, in addition to the CPI, the Riksbank also looks at the CPIF measure, in which interest rates are fixed and not allowed to vary. Figures A2 and A3 in the appendix show the developments in prices in recent years for goods, services, energy and foods. BIS central bankers’ speeches  3  development has generated some attention, as the rate of increase in service prices was relatively stable during the years prior to this. Energy prices are volatile but usually increase faster than the inflation rate, but they have been unusually stable during the past two years. Finally, we have interest expenditure, which has pushed down CPI inflation via lower mortgage rates. Why is inflation low? Our examination of developments in prices for the sub-groups behind the CPI measures shows that the fall in inflation is broad and not due to any individual component. It is also difficult to point to any individual factor that has led to inflation in Sweden being low. It has rather been a combination of factors. One important factor that can hardly be disregarded is monetary policy. The repo rate has been held higher due to consideration of risks linked to household indebtedness than it would have been if the aim was solely to stabilise inflation around the target. It was after the Riksbank began to raise the repo rate in summer 2010 that inflation in Sweden – unlike inflation in other countries – began to fall (see Figures 2 and 4).

From a resolution point of view, internal MREL requirements could be a tool to facilitate the resolution of institutions, but they would become meaningless if calculated on a national basis. Indeed, having internal MREL in all countries could be an obstacle to the single market and European banking crossborder mergers. Finally, we should address business and legal impediments to cross-border mergers: information asymmetry, non-performing loans (NPL) or anti-takeover legal structures in different countries. As a first concrete step, I suggest that the European Banking Authority publish a comprehensive stock-taking of all the regulatory and supervisory obstacles to cross-border activities and mergers. The aim is crystal clear: within a Monetary and Banking Union, a crossborder merger must not be more difficult and cumbersome than a “domestic” merger. The logic of the banking union is that it should be considered for banking purposes as a unique jurisdiction. Before I conclude, I would like to add a few words on financial regulation. No one, I hope, can seriously dispute that after the financial crisis it was necessary to significantly strengthen regulation to reduce risks. Is there any need to recall the disastrous consequences that this crisis inflicted on the real economy, the social dramas, and the democratic fragmentation with the rise of populism? Financial stability is a common good that needs to be guaranteed. Remarkable achievements have been carried out since 2009 under the impetus of the G20 and the Financial Stability Board.
Of course, greater economic integration in Europe has been accompanied by greater institutional cooperation. Although now supplemented by the (still untested) Chiang Mai Initiative, the framework for economic policy cooperation in Asia involves less deep and intense collaboration than in the European Union. The single monetary policy in the euro area is the acme of Europe’s economic integration. And the situation in the 1990s in Asia was much less developed than now. Several Asian countries (notably Malaysia at an early stage) introduced capital controls in the face of the financial crisis, something which cannot be done in Europe given the depth of financial integration and the commitments made to the free movement of capital within the Single Market in the EU Treaties. 4. Policy responses to the crises  The much deeper set of economic and institutional linkages within the EU and euro area today compared with those that existed in Asia in the mid-1990s has important implications for the policy responses. In particular, the lack of a regional framework in Asia placed the responsibility for addressing the financial crisis in the 1990s immediately and squarely on the international financial institutions, notably the IMF. By contrast, the close cooperation between EU countries has meant that the IMF has played a less prominent role in the recent crisis, even though it makes a significant contribution to the design and implementation of the adjustment programmes implemented in Greece and Ireland.

The conditionality imposed on IMF financial support was associated with the application of “shock therapy” to Asian countries’ financial sectors: losses had to be written down immediately, banks were closed or sharply restructured and many institutions were sold to foreigners, arguably at “fire sale” prices. Within the euro area, various buffers – not least, the Eurosystem’s provision of liquidity support – have tempered the stresses in the financial system. This reflects the recognition that, within such a deeply economically and financially integrated region, “shock therapy” adjustments may, through spillovers, weaken the financial system in other parts of the euro area. However, we must also ensure that such liquidity support to the banking sector does not delay or hinder the fundamental reforms required to address the underlying weaknesses the financial crisis has revealed. In the end, the crisis-hit countries have no alternative: they have to make fundamental reforms to their banking systems, involving substantial restructuring and, in some cases, very significant downsizing. Liquidity support can help to reduce adjustment costs by smoothing the transition. But those costs should not be used as a pretext for delay. 5. Concluding remarks  Financial markets are testing the strength and resilience of the euro area and the willingness and ability of the euro area authorities to preserve the integrity and stability of the euro as a currency. The institutional response to their challenge has been swift, strong and resolute.