samchain/econo-pairs-v1 huggingface dataset:
Fact three is that the productivity gap between the top- and bottom-performing companies is materially larger in the UK than in France, Germany or the US. In the services sector, the gap between the top- and bottom7  performing 10% of companies is 80% larger in the UK than in our international competitors (Chart 5). This productivity gap has also widened by far more since the crisis – around 2-3 times more – in the UK than elsewhere (Chart 6). 8  This third gap is interesting, in part, because it is striking and less well-known. But, more fundamentally, it is interesting because it can help in explaining the first two gaps. A long and lengthening tail of stationary companies explains why the UK has a one third productivity gap with its international competitors. And that same tail is also an important reason why the UK has a one fifth productivity gap relative to the past. To mix metaphors for a moment, the UK is in many respects a tale (tail) of two companies: a small set in the upper tail gazelling along the productivity high road and a much larger set in the lower tail snailing along the 5  For example, Tenreyro (2018), Swinney (2018), Remes et al (2018). An alternative strand of the literature considers the role of market power, for example De Loecker and Eeckhout (2017). There is also a strand that debates mismeasurement of GDP and productivity, for example, Mokyr (2014). 6 For example, Brennan, Haldane and Madouros (2010).

You could think of this as a new piece of critical national infrastructure – a publically-available digital platform for diffusing new processes and practices across the UK company sector, enhancing technological trickle-down to the furthest reaches of the long tail. (b) Supporting Technology Transfer  A second area where progress could be made in creating an improved diffusion infrastructure is by harnessing the UK’s university network. The UK’s top-ranked universities are already playing a crucial role  56  Baldwin (2016). 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  in establishing the UK as an international innovation hub. Their business parks serve as crucibles of creativity. They are an important reason why the UK ranks so highly on innovation and start-ups. The question, raised in a speech of mine last month, is whether the UK’s other universities could serve as spokes for these hubs, helping diffuse innovation more broadly across sectors and regions. In principle, using the university network in this way has advantages. Unlike the Catapults, these institutional spokes do not need to be created anew. And the universities already have extensive regional and sectoral reach. Clearly, this would require a fairly significant repurposing of universities. Any new activities would also need adequate financing. But neither of these problems seems insurmountable. And looking ahead, it seems likely universities will need to rethink their purpose and focus, in the light of profound shifts in the future of work and the skills demands of students.
One solution could be to create more flexible groupings within the Fund to discuss particular topics. For example, the Managing Director’s powers to initiate bilateral consultations about the policy choices of individual members could be expanded to cover multilateral issues discussed by the relevant group of members. If this does not prove practicable, other mechanisms will need to be found to introduce the requisite flexibility in how countries come together under the auspices of the Fund. The institution itself, though, also needs to change. The IMF has the great merit of being a universal institution. But it needs greater focus, independence and legitimacy. In terms of focus the members of the Fund, through the IMFC, could usefully restate the Fund’s mandate in terms of global economic and monetary stability. If it is to be able to meet its remit then surveillance should focus at least as much on balance sheets as on exchange rates. The mandate should make clear both what the IMF is responsible for and what it is not responsible for. But producing more focussed surveillance cannot be achieved in isolation from more fundamental reforms of the Fund. In terms of independence the responsibility for the delivery of a new mandate should be placed more firmly in the hands of the management of the IMF. At present, the Board involves itself in every aspect of the Fund’s activities.

That analysis should lead to an assessment of the risks to the world economy as a whole. The second task is to encourage countries to abide by their commitments to each other by promoting greater transparency about national policies. In agreeing the Second Amendment of the Fund’s Articles, all member countries made a general commitment to each other to pursue policies consistent with the objectives of stable global growth and low inflation. Only in relation to exchange rate arrangements were members asked to specify what framework they would follow to be consistent with this commitment. As Tim Adams, Under Secretary for International Affairs at the US Treasury, has noted recently, the nature of those commitments was left unhelpfully vague and should be clarified. In doing this, we should not lose sight of the fact that the policies of all significant members have spillover effects and all should be required to be more precise about their policy making frameworks. Clarity about the objectives of policy of member countries should make it easier for all countries to formulate their own policy. And by making their national policy frameworks sufficiently transparent, countries will be making it possible for the IMF to hold them to account and to fulfil its role as an umpire. The third task is the provision of a forum for national authorities to discuss risks to the world economy.
The independence of a central bank is not a law of nature, nor is it something that can be taken for granted politically. Rather, it exists because the public is convinced that price stability is a sensible objective that can best be ensured over the long term by delegating the responsibility to an independent central bank. This conviction is in turn based on solid scientific evidence. Independence in areas that go beyond a narrowly defined mandate is not democratically acceptable, nor does it have any scientific foundation. If the mandate is interpreted too broadly, or if legislators expand it beyond the core task of price stability, over time this will inevitably lead to public debate. Broader action by central banks might initially be welcomed by politicians and the general public, but that can quickly turn in the opposite direction. Overall, this would ultimately also entail the risk of constraints on the central bank’s independence in conducting monetary policy. Central banks should therefore advocate a narrowly defined mandate, and should not take on any tasks that require political decisions and for which they do not have effective instruments. The institutional framework in Switzerland tallies with these principles. The Constitution and law entrust the SNB, as an independent central bank, with the pursuit of monetary policy in the overall interests of the country. In order to legitimise its independence, the SNB has a clearly defined, narrow mandate that compels it to focus on ensuring price stability while taking due account of economic developments.

Among the EMEs, this period of low global interest rates has seen strong growth of credit in many economies, and while this has supported consumption and domestic demand, it has also led to increased household, corporate, and government indebtedness. The world today is even more indebted then it was before the crisis. I am sure that some of that debt went into productive uses, but it also the case that when something is cheap, it is used wastefully. It should also be obvious after the crisis, that economic growth fuelled by high credit growth is  BIS central bankers’ speeches  3  essentially growth borrowed from the future; higher growth today will be at the cost of lower growth tomorrow. Lastly, risks can also emerge from the current account of the balance of payments. It is important to understand that changes in the current account can be both the source, as well as an outcome, of changes in capital account. The traditional interpretation is that a country has a saving-investment gap that is reflected in its current account deficit, which then drives it to rely on foreign savings to fund that deficit. But, it is equally possible that countries can have large capital inflows resulting in excess domestic liquidity and low interest rates. Add to that an appreciating exchange rate, and you have the key ingredients for domestic consumption and investment booms, leading to higher imports and driving the current account into a deficit or a lower surplus.
In Section Three, we provide a brief summary of the financial sector in Zambia. This will be followed by a discussion of financial access in section Four. In sections Five and Six highlights on the issue of sustainability and concluding remarks are provided, respectively. 3.0  The financial sector in Zambia  The financial sector in Zambia comprises banks and non-bank financial institutions (NBFIs) and are regulated and supervised by three agencies, namely, the Bank of Zambia (BoZ), the Pensions and Insurance Authority (PIA), and the Security and exchange Commission (SEC). 1 However, the presentation will focus on the component of the financial sector under the regulatory and supervisory ambit of the BoZ. It is expected that the rationale for such a focus will become clear as the presentation progresses. As participants may be aware, the mission statement of the Bank of Zambia is to “formulate and implement monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in Zambia.”  1  The Pensions and Insurance Authority (PIA) regulates and supervises insurance companies and pensionfunds, while the Securities and Exchange Commission (SEC) regulates securities firms.

In my view there are two main areas today where this applies: first, ensuring that banks retain the incentives to lend in markets where to all intents and purposes they are irreplaceable, namely for SMEs; and second, ensuring that they have capacity to do so. Ensuring that banks’ retain incentives to lend Ensuring that banks retain the incentives to provide an elastic supply of credit to SMEs involves a variety of issues, but the priority in the current environment is addressing the factors that could drive unwanted adjustment in the sector: in particular, the cyclical, legacy and regulatory factors I described above. Cyclical factors matter for banks’ incentives because the longer weak demand conditions persist, the greater the risk that banks will shrink their balance sheets more than is necessary. Thus, a stronger recovery with stronger credit demand is a key part of repairing the bank lending channel. Achieving this means economic policies must do their utmost to bring the economy back to potential as quickly as possible, by strengthening both supply capacity and aggregate demand in the economy. As this is now high on the EU policy agenda, I will not dwell on it today. In terms of legacy factors, the main issue today is dealing with non-performing loans (NPLs).
The ADB, one of the sponsors of this forum, has played a vital role in nurturing growth and technical advances in Asian economies, and this role has in recent years both deepened, in the assistance it has been offering, and broadened in the geographical scope it has been covering. The ADB’ s joint sponsorship of this forum is one of many examples of the good work it is doing to address regional concerns. The co-sponsor of the forum, the Institute of International Finance (IIF), has, in two timely and important reports issued in March this year, argued strongly for private-sector, as well as publicsector, initiatives to address global financial crises. The co-sponsors have brought together a diverse and experienced forum of participants from private-sector and public-sector organisations, all of which have a large stake in ensuring that our regional and global financial systems work properly. The Hong Kong Experience As a regional and international financial centre, Hong Kong’s livelihood depends, perhaps to a greater extent than other economies, on the proper functioning of the international financial system. Our stake in this, arguably, is larger than other economies. This perhaps explains why we seem to have been quite forthcoming, in both our views and our actions, on issues affecting international monetary and financial stability. This unusual stance has caused some controversy, particularly when we intervened last summer in the stock and futures markets to deter market manipulation and correct market failure.

Interestingly, the controversy over this issue, which has now happily subsided following the success of the operation, was then more intense outside of this region than within, and was especially strong in the developed markets. I would attribute this difference in sentiment to the relative lack of appreciation, outside of this region rather than within, of the predicament that smaller, open markets face in the increasingly liberalised international financial system. Hong Kong supplies a particularly striking example of this vulnerability. Our markets are very free and open. They are big and liquid enough to attract substantial international capital. But they are also small, by comparison to the developed markets and the amount of international capital flowing around the globe, seeking opportunities for profit. They are small to the extent that the prices of those markets are capable of being pushed around by big players, particularly those in a position to influence market sentiment. Being a very externally oriented economy, we pursue an exchange rate policy that promotes a stable external value for our currency to provide for predictability for all those who engage in economic activity relating to the predominant external sector. In pursuing this policy,  1  BIS Review 47/1999  we have gone as far as to adopt currency board arrangements that operate with a high degree of transparency while eschewing the exercise of discretionary monetary management. This eclectic combination of characteristics and policies, which is quite a common feature of economies in this region, offered great temptation to market manipulation.
Ideally all of these issues would be addressed in a cooperative and symmetrical way, as part of the overall agreement the UK will strike with the EU-27. Whatever is agreed, there are risks to financial stability both in the transition to the new relationship and in the new steady state. These risks include disruption of services, a further weakening of investment banking profitability and the potential for greater complexity in firms’ legal structures. Increased complexity would place greater demands on firms’ risk management and on supervisory oversight, and pose challenges for effective resolution. We expect firms to plan accordingly. So today, Sam Woods, the CEO of the PRA, is writing to all firms with cross-border activities between the UK and the rest of the EU asking them to inform us of their own planning in response to the UK’s decision to leave the EU. These include, for example, subsidiaries of US investment banks based in London doing business throughout the EU under passporting arrangements, as well as UK banks doing likewise, and branches of institutions from other EU states operating here in London. The main purpose of this letter is to ensure that all firms are making, and stand ready to execute in good time should the need arise, contingency plans for the full range of possible scenarios. The FPC will oversee this process of contingency planning to mitigate risks to financial stability. 13  Asking firms to plan thoroughly is the hallmark of the prepared and professional approach we take to promote financial stability.

This might include actions to 1)  prudently expand access to mortgage credit for homebuyers, including by limiting putback risks that discourage loan origination and addressing problems with appraisals;  2)  eliminate frictions and lower costs to refinancing for all borrowers with prime conforming loans;  3)  enable borrowers who are “underwater” on their loans but continue to make their monthly payments to earn accelerated principal reduction over time;  4)  provide bridge financing for borrowers with proven ability to service their debts who lose their jobs and may take longer than normal to find new jobs in today’s weak labor market; and  5)  manage the disposition of homes repossessed by creditors in a manner supportive of large-scale conversion into rental units. I am encouraged by the recent decision by the Federal Housing Finance Agency (FHFA) to make it easier for certain borrowers with high loan-to-value ratios to refinance. I hope this initial step will be followed by others that collectively move in the direction of stabilizing house prices. I believe this would not just be good economic policy, but it would also be extremely beneficial for taxpayers, who now effectively own the credit risk of those home loans guaranteed by Fannie Mae and Freddie Mac. On the fiscal policy front, ongoing support for demand from the public sector at a time when many households are deleveraging sustains jobs and incomes.
It is another matter that things may not go quite as quickly and become as widespread as the greatest optimists foresaw just a year or so ago. People in Sweden do not suddenly stop going to shops just because websites make it possible to buy clothes, shoes, cars and food, for example, on the internet. Alternatives in the form of mail order firms, newspaper advertisements and the telephone have been available for many years, yet many people still prefer to do their shopping in the traditional way. But it does seem very probable that computers in various forms will render many production and purchasing processes increasingly efficient as time goes by. The effects of the new technology will occur in various parts of society. It is easy to think of a number of uses. And as the innovations become cheaper and cheaper, there will be growing incentives to  2  BIS Review 90/2001  apply them in many economic activities. The price of computers, for example, has fallen in the past four decades by around 20 per cent a year. In literal terms, that means that a computer which costs 10,000 kronor today would have cost almost 50 million kronor in the early 1960s. So prices have fallen dramatically. Our own history clearly shows that the combination of major technical breakthroughs and a sizeable price fall can lay the foundation for outstanding economic growth.

Back in 2006 we made the first stress test based on a possible worse development in the Baltic region and noted that if this were to occur, the banks’ resilience would deteriorate and their scope to manage other negative shocks would be reduced. The Riksbank’s Deputy Governor Lars Nyberg informed the board of Finansinspektionen (the Swedish financial supervisory authority) of his fears regarding developments in the Baltic. Mr. Nyberg raised the issue in Finansinspektionen, in the summer of 2008, that the capital adequacy requirement for Swedish-owned banks with operations in the Baltic region should be raised to compensate for the higher risk. However, the board concluded that bank groups’ capital already exceeded the legal minimums on a consolidated, group-wide, basis and thus the parent bank could transfer part of its excess capital to a subsidiary in the Baltic countries, if necessary. Hence, no further measures were required. The Riksbank has regularly informed the Swedish banks of our assessment of risk in the Baltic countries. We have also required that the banks send us supplementary information so we can analyse the potential risks in greater detail. In addition, together with Finansinspektionen we have visited the banks’ subsidiaries and branches in the Baltic countries to study in detail, for instance, their loan management. The Riksbank has for several years now carried out regular crisis management exercises regarding financial crises. In 2007 a crisis management exercise was held together with all of the Nordic and Baltic countries, where the scenario involved a crisis in a cross-border Nordic bank.
And yet, one might think perversely, we have also swung from an over abundant supply of credit to a much more restrictive supply of new credit. The global insurance industry provides an interesting contrast with banking in this respect. For sure, it too is capable of systematically misjudging risks. But when a shift in risk appreciation and pricing occurs, the reinsurance industry often separates the run off of old portfolios containing mispriced contracts from the establishment of new vehicles, capitalised separately to take advantage of attractive terms on new business. And for regular insurance, many contracts are annual, so adversely priced business can run off fairly quickly. Banking  2  BIS Review 38/2008  typically works quite differently. Banks around the world are carrying portfolios of term loans that are the legacy of the boom years. There is uncertainty – amongst banks’ management, shareholders and funders – about the degree of fundamental impairment in those portfolios. New loans are booked to the same balance sheets. And so many banks face a choice between, on the one hand, conserving capital and liquidity to support legacy portfolios; and, on the other hand, deploying capital and liquidity to write new business on what some see as the attractive terms and conditions now available. The banking system simply is not structured routinely to insulate new business from the legacy of past mistakes; funding and capital are fungible. This predicament may be exacerbated by other features of the current environment.

There should be wider benefits from contracts based purely on the risk-free rate rather than embodying liquidity premia and credit-risk premia of various kinds. That is something for the industry. But better liquidity-insurance technology and better risk management will not abolish the credit cycle. Looking further ahead, the big question will be whether the authorities can tame the credit cycle without sacrificing the incentives to enterprise that are so important in a dynamic economy. The debate about the micro regulation of banks will need to take account of whether or not we can deliver that macroprudential objective. For too long, the debate has got sidetracked. Into whether we can rely on monetary policy “mopping up” after bubbles burst. Or into whether monetary policy could be used to control asset prices as well as doing its orthodox job of steering nominal trends in the economy, which I should say can include taking account of prospective risks of inflation volatility over the medium term. Ideas circulating already include minimum margin requirements or capital ratios that vary not only across firms but also through time as credit conditions change. We need calmly to explore whether there are also other possibilities. But let me make this absolutely clear: there are formidable obstacles to finding a solution. In the monetary sphere, a regime of floating exchange rates allows individual countries to pursue their own domestic monetary objectives.