samchain/econo-pairs-v1 huggingface dataset:
4  4 CPI CPIX  3  3  2  2  1  1  0  0  -1  -1 00  01  02  03  04  05  06  07  08  09  10  11  Sources: Statistics Sweden and the  Unit labour costs for the economy as a whole Annual percentage change, seasonally adjusted data 8  8 Unit labour cost Hourly labour cost Productivity  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1 94  96  98  00  02  04  06  Sources: Statistics Sweden and the Rik b k  6  BIS Review 22/2008  Weak GDP growth in the USA in 2008 Consensus and the Riksbank’s forecasts for GDP growth in the United States in 2008 at different points in time 4.0  4.0 The Riksbank  3.5  3.5  Consensus  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0 Jan Feb M ar Apr M ay Jun 2007  Jul  Aug Sep Oct Nov Dec Jan 2008  Feb  Sources: Consensus Economics Inc. and the Riksbank  Monetary policy considerations  Financial turmoil High cost pressures – Inflation above the target Subdued growth in the United States  BIS Review 22/2008  7  The interest rate path is a forecast not a promise Per cent, quarterly average 7  7  90% 75% 50% Repo rate  6  6  5  5  4  4  3  3  2  2  1  1  0  0  Mar-03  M ar-04  Mar-05  Mar-06  Mar-07  M ar-08  Mar-09  Mar-10  Mar-11  Source: The Riksbank  What can monetary policy accomplish?

Most of them were industry-oriented with special tax advantages, but with a fragile financial base and a lack of managerial integrity and experience. Against that background, the system was highly inefficient and proved poorly effective because it was unable to develop its role of channelling saving to the most productive uses and, without any doubt, it held back economic growth. At the same time, the Spanish regulatory and supervisory framework was weak and outmoded, based mainly on a simple leverage ratio. In turn, supervision was geared towards formal compliance with administrative regulations. The need for a change in the supervisory framework to preserve the soundness of the banking system became apparent when the oil crisis of the early 70s prompted the Spanish economy into a profound recession, leading to the deepest crisis of recent Spanish banking history. Up to 50 banks went bankrupt, involving 20% of the deposits of the banking system. It is interesting to analyse the effect of the crisis and the limitations of the regulatory and supervisory framework at that time, in the light of the framework set by the Core Principles [for effective Banking Supervision] developed by the Basel Committee on Banking Supervision. Allow me to summarise the main group of principles that would have been breached. First, the principles related to licensing criteria would not have been accurately met. Indeed, the process of licensing did not consist of a proper assessment of the fitness and propriety of Board members and senior management, including their strategic and operating plan.
Over the last three decades in our journey to develop Islamic finance, a holistic infrastructural ecosystem devoted towards talent development has been conceptualised. To move forward, we need to continuously create distinct value propositions for Islamic finance to chart into new areas of growth. In the case of Malaysia, the need for a new breed of talent is pressing, as we embark on an ambitious target of 40 percent market share for Islamic finance by 2020. The need is also evident at the global level, as many jurisdictions aspire to develop an Islamic finance centre of their own. It is from this perspective that it becomes even more critical for us to nurture the right talents with the best minds to propel the industry into the future, that is estimated to grow its financial assets to USD3.2 trillion by 20201. There is much we can derive from the lessons of history. Historical evidence showed that Islamic civilisation was driven by visionary thinkers and their propensity and ability to engage in vigorous intellectual discourses. Indeed, many of the breakthrough thinking, concept and ideas were only possible because of the conducive environment that emphasised intellectual rigour. Their contributions were immeasurable. Their wisdom and foresight were unsurpassed and far superior to others. In many cases they were a few hundred years ahead of their time.

Liquidity management in the Islamic financial system and the institutional arrangements for resolution are among the other areas that need further development. Of critical importance is for the board and management of Islamic financial institutions to institute higher standard of leadership and a comprehensive governance culture and framework. Mutual recognition in Shariah and human capital challenges On this occasion, I would like to touch on two areas confronting Islamic finance firstly on, the issue of mutual recognition in Shariah and secondly the human capital development in the industry. Malaysia takes cognisance of the diversity of Shariah views within the region and among jurisdictions. Although Islam welcomes diversity of views, there is also a need to promote greater harmonisation among jurisdictions on the specific issues relating to Islamic finance. Such convergence is important for the long-term sustainability of the sector. Malaysia has taken the initiative to organise Regional Shariah Scholars Dialogue in 2006 and 2008 as part of the efforts to foster greater engagement among the Shariah scholars in the region. Indonesia has been active in these dialogues. Moving forward, the newly established International Shariah Research Academy (ISRA) has been entrusted to intensify the regional Shariah Dialogues as well as to enhance further the international engagement among Shariah scholars in our pursuit for Shariah harmonisation. Most encouraging is the greater appreciation and understanding that has been achieved in these deliberations of the Shariah practices that are peculiar to the respective jurisdictions.
Figure 12: The average lifetime cost of risk factors associated with sexual exploitation Average cost per individual  Preintervention Postintervention Control group  Going missing  Substance abuse  Accommodation Total needs  £  Disengagement from education £  £  £  £  £  £  £  £  £  £  £  £  £  £  Source: PBE (2011). BIS central bankers’ speeches  25  Figure 13: Benefit of Centrepoint intervention to the public purse, average per Centrepoint client Central scenario £ 2010/11 prices) 6,989 12,332 2,639 46 188 117 –136 22,174  Avoided welfare benefits Tax raised Crime (avoided costs) Mental health issues (treatment costs avoided) Class A drugs (treatment costs avoided) Cannabis (treatment costs avoided) Alcohol (treatment costs avoided) Benefit of Centrepoint intervention to the public purse Source: PBE (2013). Note: row totals do not add to the total benefit due to rounding. Figure 14: Reasons for not participating in volunteering-related activities, 2010/2011 (% of respondents) Work commitments  60%  Doing other things with spare time  34%  Looking after children/the home  31%  Studying commitments  14%  Not knowing any opportunities to help  14%  Not knowing of any groups needing help  14%  Looking after someone elderly or ill  8%  Feeling too old  3%  Feeling too young  1%  Source: UK Civil Society Almanac (2014), Citizenship Survey (2010/11). 26  BIS central bankers’ speeches

Another problem sometimes mentioned is that there may be difficulties in communication in the cases where the central bank has a different view from the market as to what constitutes a reasonable future development for the policy rate. 7 The forecasts for developments in the real economy and inflation that are published will under such circumstances not be the ones that the central bank believes to be the most likely and the value of the published forecast is therefore diminished. This is the same type of problem as with constant repo rate forecasts, although the problem is probably less on average over time. Most of these problems can be avoided if the central bank instead bases its inflation forecasts on its own forecast for the development of the policy rate. 8 However, the primary reason for publishing one’s own interest rate forecast is that it makes it easier for the central bank to steer expectations. With this assumption for the interest rate, the central bank can explain more clearly to the general public and the financial markets how it envisages future interest rate developments and how it reasons when making monetary policy decisions. The interest rate development that follows on from market expectations does not always give a good picture of all of the considerations a central bank must make when discussing what provides a reasonable development in interest rates.
An economist 3 in Norges Bank has found, using a stylised model, that in order to minimise restructuring costs over time, petroleum revenue spending should be limited in such a way that a constant share of imports can be financed by petroleum revenues for an indefinite period. Furthermore, he found that spending one per cent of total petroleum wealth per year would achieve this. Petroleum wealth comprises here both financial wealth accumulated in the petroleum fund and the value of oil and gas under the seabed. The rule implies that petroleum revenue spending would not affect the real exchange rate. This work focused on minimising restructuring costs, and did not analyse the issue on the basis of a more general welfare function. Moreover, the flexibility of the economy to adapt to a shifting economic environment may change over time. Increased flexibility and efficiency in labour, capital and goods markets may reduce the need to take restructuring costs into consideration. I will come back to our current fiscal rule for petroleum revenue spending shortly. The need for some sort of rule in fiscal policy aimed at restraining petroleum revenue spending should become clear when we look at our experience over the last 30 to 40 years. The government began at an early stage to budget on the basis of future strong growth in petroleum revenues. The result was that we spent a large share of our petroleum income in the 1970s and 1980s. Welfare schemes were expanded significantly.

But the most debatable issue is the imposition of new restrictions on temporary hires, especially if permanent hiring does not improve sufficiently. In the current conditions, with more than 4.5 million Spaniards unemployed, all job creation opportunities must be kept open and not in the least impaired until the new channels for permanent hiring prove effective. In short, the fiscal consolidation programme, the pension reform proposals and the labour market reform measures are three areas in which significant advances have been made by the authorities in the last few weeks, but in which much work remains to be done. Let me now move on to the area of reform which falls directly under the responsibility of the Banco de España, namely the restructuring of the financial system and, more specifically, of the savings bank sector, where there has been appreciable progress in recent weeks. In the last few months a very significant portion of Spanish savings banks has concluded merger agreements with other savings banks, in what is the largest restructuring of the Spanish banking sector in a long time. These movements started with the creation of the FROB (the Fund for the Orderly Restructuring of the Banking Sector) in June 2009, nearly two years into the international banking crisis affecting the markets and financial systems of all developed countries, and to which Spanish financial institutions were exhibiting a marked resilience that most have maintained to date. This new Fund responded to the need to downsize the Spanish banking sector, particularly the savings bank segment.
Whether the measure would be the right option or not depends on the reason for the high risk premium. The measure could have a rapid effect. Short5/9  BIS central bankers' speeches  term money market rates play an important role for Norwegian banks’ funding costs. A reduction in risk premiums will therefore have an impact on much of banks’ outstanding debt and not just on new loans. Foreign exchange market measures A few words on the exchange rate. For small open economies like Norway, the exchange rate is an important transmission channel for monetary policy. Changes in the exchange rate influence both inflation and the real economy via firms’ competitiveness. Foreign exchange interventions have been used, and continue to be used, by many central banks worldwide. Inflation-targeting countries use interventions less, and often not at all. Norges Bank has not intervened to influence the exchange rate since 1999. The policy rate is the primary instrument of monetary policy and the exchange rate is free floating. In recent years, the exchange rate has been a valuable shock absorber for the economy. Chart. Exchange rate floors for Switzerland and the Czech Republic Some inflation-targeting countries have intervened directly in foreign exchange markets over the past decade. The Swiss and Czech central banks have kept their exchange rates weaker than a given level against the euro.

But an environment in which borrowing is free and the real interest rate is considerably lower than trend growth in the economy is unlikely to be sustainable over time. Chart: Estimates of the neutral interest rate The neutral interest rate cannot be observed and must be estimated. In the Bank’s Monetary Policy Report, the current neutral real interest rate in Norway is assumed to be around zero. The estimate is based on calculations from a range of different models. As we can see in the chart, these calculations show that the neutral interest rate has fallen to a historically low level close to zero over the past 20 years. With an inflation target of 2 percent, this means that setting the policy rate at zero would enable us to bring the real interest rate down to 2 percentage points below its equilibrium level.1 2 In Norges Bank’s assessment, monetary policy has sufficient room for manoeuvre with an inflation target of 2 percent. First, international experience has shown that the room for manoeuvre in monetary policy is not exhausted when the policy rate is close to zero. I will come back to this. Second, our calculations show that over the past 20 years, the real interest rate has normally remained less than 2 percentage points away from its estimated equilibrium level.3 This may suggest that a real interest rate that is 2 percentage points below equilibrium has in most cases provided sufficient economic stimulus.
Other ways of making monetary policy more expansionary could be by intervening on the foreign exchange market and giving loans directly to companies via the banks. Mortgage borrowers more sensitive to interest rate changes The falling real interest rates are one of the reasons that indebtedness has risen over the last twenty-year period. Inflation targeting was formally introduced in 1995 when households’ debt-to-income ratio – debt in relation to disposable income – was around 90 per cent. Today, just over 20 years later, indebtedness has pretty much doubled and is almost 180 per cent. 12 The rising indebtedness and many people choosing a variable interest rate on their mortgages has made households more sensitive to interest rate adjustments. The importance of monetary policy for households with high indebtedness, in practice mortgage borrowers, has therefore become greater. In an example calculation, four economists from the Riksbank have attempted to shed light on how an interest rate rise today would affect mortgage borrowers’ consumption, compared with 20 years ago. 13 The following scenario could provide a backdrop to these calculations. To fund loans for housing, the Swedish banks issue mortgage bonds, among other things. These are partly funded by foreign investors. If these foreign investors, for whatever reason, should lose confidence in the Swedish economy and the mortgage bonds, the banks may become very vulnerable. They may find it more difficult to obtain funding on the international markets, at the same time as interest rates start to rise.

Figure 7(a) foreign currency reserve in relation to GDP and to the Swedish banking system’s foreign funding and Figure 7(b) foreign currency reserve as a proportion of the country’s short-term debts in foreign currency 2016 7(a ) 15  7(b) 100  Reserves to FX funding Reserves to GDP  342  90  322  80  12  124  70  66  60 52  9  50 41  40 6  36  30  26  20  0 0  02  04  06  08  10  12  14  16  14  18  9 10 6 7 8 8 3 4 4 4 4 5 1 1 2 2 2 3 3  IRL CYP NDL GRC MLT BGR FRA DEU BEL GB SWE prel FIN EST ESP ITA SVN CAN AUT SVK AUS SWE SGP NOR HKN JPN CHE CZE ISL KOR  10  3  Note. Fi gure 7(a), per cent. Foreign funding refers to Swedish banks’ (including Swedish subsidiaries but excl uding foreign s ubsidiaries) market funding and deposits i n foreign currency. The broken part of the l ine represents the Riksbank’s forecast based on the reduction of the currency reserve proposed i n the draft. Figure 7(b), countries marked in grey belong to the euro a rea. Sources: IMF, Statistics Sweden a nd the Riksbank. Conclusions for monetary policy I opened by noting that these are unusual times in the Swedish economy.
Having previously also served on the interim Financial Policy Committee (FPC) for 2 years, and the MPC for 5 years, I want to use this lecture today to set out how the three policy committees of the Bank work together. I have seen and heard assertions in the press and other commentary that the three committees with their different objectives will inevitably be in conflict. Whilst there are many difficult policy challenges for each of the committees, and different judgements can be reached by reasonable people on any policy question, I will argue today that conflict is not inherent in the structure in the sense of having to choose between competing objectives. There should not be any compromise in terms of achieving those objectives over the medium term, even if the actual setting of each policy lever needs to take others into account. The key to realising this outcome is effective co-ordination. Much of the economics literature around policy co-ordination traditionally focussed on two problems: the coordination of monetary and fiscal policy, especially in the case of an independent central bank; and international macroeconomic policy co-ordination 1. In the past decade or so there has been rather more on inter-institutional coordination 2. I will be drawing on that body of established work and applying it to the challenge of co-ordination faced by the Bank’s three policy committees: the MPC, the FPC and the PRA Board. First, what are their objectives?

Coherence vs agreement I believe I have set out so far a reasoned view that the three Bank policy Committees – the MPC, FPC and PRA have a coherent set of objectives, structures, appropriate policy tools and coordination to ensure that there is not any inherent absolute conflict in the framework. And the strategic changes internally at the Bank announced earlier this year could be seen as being a reinforcement to that structure by maximising the synergies across the Bank, including the PRA. But coherence doesn’t always mean agreement. There will no doubt be disagreements at some point. Indeed, the appointment of independent members to the policy committees is intended to ensure challenge and the absence of “group-think”. Dissenting views on the MPC are not only an established part of the culture but actively encouraged by the Treasury Committee in Parliament. The FPC and PRA Board, in contrast, generally work by consensus, although there are provisions for recording dissent and votes if necessary. But disagreements over judgements between individuals are normal – that’s why we have decision making by committee in the first place. What we have not seen is any reason why the structure should be regarded as internally conflicted. How likely is it that there will be dissent across committees? There are mitigants in place to reduce the chances of that.
Looking at the region as a whole, after some very difficult years, inflation has come down dramatically from very high levels at the beginning of transition to single-digit levels today. Long-term interest rates have also fallen substantially, reflecting the gradual anchoring of inflation expectations. The countries of the region have also made remarkable progress in terms of institutional and structural convergence. In particular, we have witnessed the building of appropriate institutions, increased trade integration with the euro area and improvements in the business environment. Naturally, this progress has been reflected in per capita income convergence. Over the last 20 years, per capita income has risen to an average of 63% of the EU average if adjusted in terms of Purchasing Power Parity (PPP). But combining low inflation with real convergence has posed a serious challenge in many countries. Let me elaborate on this. The very process of real convergence entails upward pressures on prices, which can be hard to avoid in terms of both relative prices and the overall price level. Among other things, these pressures stem from high productivity growth as well as the processes of price liberalization and tax harmonization. Price increases related to productivity growth are usually referred to as the BalassaSamuelson effect. But most studies have found this effect to be relatively limited.1 Convergence in price levels, which stood on average at two thirds of the EU average in 2010, seems to have surpassed convergence in income levels in all countries of the region.

A bombardment of high definition images of nature in photographs and film, may have numbed some of us to nature’s wonders. For example, I am not sure how many of us are still captivated or awed anymore by the sight on television of yet another leopard pursuing its lunch. The human hand makes for a much more intimate experience of nature. Back in the days of Maria Merian and General Farquhar, there was no other way of recording the world around us. Now we are seeing a return to paint and other traditional art forms. I am told that painting in general is the art medium that has shown the biggest resurgence recently. Some of the paintings in this exhibition look like photographs, which is a mark of the skill 1/3  BIS central bankers' speeches  of contemporary artists. Malaysian painters are as good as any in this category, and they have no shortage of nature at their disposal to paint, compared with their counterparts in New York, London or Shanghai. We should all be celebrating the world around us, not just as artists or eco-tourists, but as inhabitants of Planet Earth. These paintings bring us up close and personal with nature, as it should be. The skilled precision of the work featured by the artists does not diminish the connection and passion that the artists have with and for their subjects. Indeed, it enhances our experience viewing these beautifully executed pieces. Please also do take some time to read the statements by the artists.