samchain/econo-pairs-v1 huggingface dataset:
It is clear that the labour market situation calls for moderate wage increases. Unlike the situation prevailing during the two previous bargaining rounds, unemployment has increased and employment has declined recently. Nor are there any labour shortages, other than in a few areas. It is also a positive sign that the rate of wage increase has been declining over the past year and that the same applied to expected inflation. Given the present low inflation rate, even limited nominal wage increases will lead to a fairly good development in real wages, which trade union representatives usually emphasise. The nominal wage increases put forward now are lower than those of recent years. Meanwhile, there is of course always a risk of shocks from the actual negotiation process. It is not unthinkable that some of the increase in productivity is used as justification for higher wage-paying capacity. This could be particularly worrying if the wage negotiations assume that the improvement in productivity is permanent and it later shows a rapid decline. At our meeting last week we considered that there was reason to make a further slight downward revision to unit labour cost figures, which in turn had effects on domestic inflationary pressure. The labour market has been weak and most indications are that there is reason to be slightly more pessimistic with regard to employment in future. The rate of wage increase could therefore be slightly lower than we assumed in December.

Over the Christmas holidays I read a book by the former US Treasury Secretary Robert Rubin.1 He takes up this issue and motivates why he strongly advised President Clinton against holding public opinions on monetary policy, advice followed by the President. According to Rubin, there is always a risk that the bond market will be affected if there is the slightest suspicion that the central banks' actions are governed by political pressure.2 I think that the fact that he - with his decades of experience on Wall Street - brings up this argument and that he does so despite the widespread respect enjoyed by Greenspan's Federal Reserve, shows that the argument cannot be waved aside. One could object that the Riksbank's legal independence is greater than that of the Federal Reserve. On the other hand, the low-inflation regime is relatively new in Sweden and our market is also small and influenced to a large degree by external agents, who often lack in-depth knowledge of how our system works. At present, the economic and political developments in Sweden are so stable that political manoeuvring of the type we have seen hardly has any effect on the markets, although some concern has been expressed by foreign analysts. However, politicians who enter the discussion with strong opinions in a stable situation should probably reflect over how they might act in future in more problematic situations.
Economic activity would have been lower and unemployment – particularly youth unemployment – higher. This would have had a disproportionately higher impact on the incomes of the poor and the young. At the same time, inflation would have been lower, which research shows transfers wealth from younger households to older households, who are more likely to be savers.3 So the ECB not acting also carried distributional implications. Further, the deeper and more prolonged recession would likely bring about greater hysteresis, depressing future growth and hence returns for savers. Overall, households would have been worse off had the ECB not acted. Counterfactual discussions aside, how have households fared across the euro area? To gauge the effect on different euro area households, we can draw upon results from the Eurosystem’s Household Finance and Consumption Survey (HCFS), conducted in 2010 and 2014. Even though these surveys do not cover the period since the introduction of the negative deposit facility rate, they do coincide with declines of 2-year euro area benchmark bond yields by 130 basis points and 10-year bonds by 110 basis points. Euro area net financial income as a fraction of total household income fell slightly. When looking more closely at households grouped by wealth quintiles, we find that households with the lowest net wealth, whose debt payments are higher than their financial income, had an unchanged position. Households with the highest net wealth, whose financial income is much higher than their debt, had the most marked fall in income.

See Gordon, R.J., (2016), “The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War”, Princeton U.P. and Goodhart C., P. Pardeshi and M. Pradhan, (2015), “Workers vs pensioners: the battle of our time”, Prospect Magazine, December. 3 Adam, K and J. Zhu, (2014), “Price level changes and the redistribution of nominal wealth across the euro  area”, Journal of the European Economic Association, 14 : 871–906. 4 Deutsche Bank Research, Focus Germany – Difficult times for German savers, 4 October 2016. 5 Bundesbank monthly report October 2015. 6 Rostagno M., Bindseil, U., Kamps, A., Lemke, W., Sugo, T. and T. Vlassopoulos, Breaking through the zero line –  The ECB’s Negative Interest Rate Policy, Brookings Institution, Washington DC, 6 June 2016. 7 For a more detailed discussion of the challenges for euro area banks and the interlinkages with monetary policy  see Praet, P. (2016), “Monetary policy and the euro area banking system”, Speech at ECMI Annual Conference, Brussels, 9 November 2016. 5/5  BIS central bankers' speeches
The Stability and Growth Pact and all the efforts of the Eurogroup over the years to maintain a coordinated and disciplined fiscal policy have been vital and should be continued in the future. But in addition to continuing along these lines in the coming decade, efforts should focus on designing and adopting the necessary structural policies. If we observe how these divergences are perceived in the different countries, we can gain insight into the importance of efforts to push through structural reforms. Many in Spain believe that the divergence problems witnessed in the Spanish economy in recent years are to do with the fact that certain euro area countries are lacking in dynamism and therefore have much lower growth potential than we do. And it's true. Spain has a higher degree of privatisation that makes its economy much more dynamic. Also, the weight of public spending in the economy is much lower. Advances in competition in many industries affords higher growth potential for Spain than for other euro area countries. The problem of being in an area with countries with lower growth potential is that when the ECB set its interest rates in the 2000-2004 period, it did so at a level which, though arguably high for these other countries, was very low for Spain. And that entailed higher debt, higher inflation and, therefore, a loss in competitiveness for our country. But look now how such divergences are seen from the other countries.

Those of us privileged to meet every fortnight in Frankfurt bear constant witness to the success of this undertaking, which is unique in the process of European construction. The Eurosystem blends centralised and decentralised decision-making, reflecting perfectly the common European project. On one hand the ECB takes centralised decisions for three hundred and thirty million citizens who have the euro as their common currency, while on the other, the Eurosystem operates in a highly decentralised and co-operative manner. The National Central Banks are involved in many joint projects. But allow me to discuss one with which I have been closely concerned in recent years: the launch and design of Target 2 securities which, behind this singular acronym, is an ambitious project that will facilitate securities settlement throughout Europe. This platform is being designed and constructed by four central banks: Germany, France, Italy and Spain. Any pro-European would be most satisfied to see officials of the banks from these countries working together every day on a common project. BIS Review 24/2009  1  Critics of the euro, who are quite frankly a minority today, try to argue that the divergences observed across the Monetary Union members in terms of inflation and growth during its first ten years have been a problem. But the figures are not on their side. Over the past decade, inflation and growth diversity among the EMU members has been very moderate compared with what had previously occurred.
In addition, more countries have shown signs of further tightening in their labor markets, which will continue to put pressure on wages (figure 7). 3  Against this inflationary backdrop, most central banks have raised their benchmark rates and/or signaled a path of faster withdrawal of monetary stimulus. The Fed made its largest rate hike in two decades, anticipating additional raises at upcoming meetings and a reduction of its balance sheet from June onwards. Sweden, India, and Australia surprised the market by initiating monetary normalization in the face of increased inflationary pressures. The European Central Bank confirmed that it will end unconventional stimulus in the third quarter of this year, although it remains more cautious about raising rates. Central banks in Latin America have continued to raise policy rates in the face of growing inflation. (figure 8). In this context, and comparing with the closing of the March MP Report, global markets are increasing their risk aversion, reflected in higher long-term rates, falling stock prices, and an appreciated dollar. In any case, these trends have seen important changes in the period, with some recent reversal of these changes. The Chilean market has had a more favorable performance compared with its external peers. Compared to the end of the previous MP Report, long-term rates have remained unchanged, the depreciation of the peso is around the average of emerging economies and stock prices have risen, although specific factors have played a role in the latter (figure 9).

All of this is to say that climate strategies are set to be a key focal point of financial institutions’ business and risk decisions going forward. Within the property sector, it is encouraging to see major banks in Malaysia already offering targeted financing solutions for green residential homes in what used to be a niche market for a handful of smaller institutions. Also important are solutions that can help reduce GHG emissions from existing homes on the books of financial institutions, and increase their resilience to climate hazards. Such products are putting sustainability at the forefront of consumers’ minds not only when they decide to purchase a property, but also in making future decisions regarding renovations, or energy and water supply systems. The introduction of such products is also an important start to collecting critical data for the assessment of risk differentials between green and other mortgages by financial institutions. While these developments are encouraging, experience in other markets would suggest that there is much more that financial institutions in Malaysia can do to unlock the potential to scale up green housing finance. For example, current financing activities are largely focused on the end consumer, which is just one part of the housing value chain. The incorporation of green considerations in funding extended to developers and those involved in construction activities such as engineers and raw material suppliers remains largely untapped, and can help offset or spread over time the generally high upfront costs associated with green buildings.
Because we definitely think this is an important issue, and we definitely want to be helpful and use the resources we have, both in terms of research and our convening power, to try to take this forward. So, let’s have a conversation. Dr. Olajide Oladipo: Next question please. I’m still expecting a student. 10 / 15  BIS central bankers' speeches  President Dudley: Good morning. My question will be in the form of appeal. This is for small homeowners. Recently, the Fed announced about increasing the interest rate. But I don’t know how long the Federal Open Markets Operations committee will actually sit for that. But what I’m appealing for is for that period to be extended. We just came out from an economic recession. Thank God we didn’t get to the depression part of that business cycle. Many homeowners basically, particularly small homeowners, they are struggling to fix their credits. And because their credit scores are so terrible, they cannot refinance, and therefore they are locked in with high interest rates – we are talking about thousands and thousands of dollars. Banks are making money off them because they cannot refinance. If you go ahead and increase that interest rates when they are still struggling to pay what they have now, I think many will lose their homes. So, my appeal is for the Fed to please, let the current interest rates stay – give a little bit more room for small homeowners to fix their credit scores so that they can refinance.

But unfortunately people offer these things, and it’s really quite tragic, because the people who fall for these things often are people that are not so sophisticated, of not so large means, and they can’t afford to be sending money to fraudsters hoping that there might be a big prize from the Federal Reserve Bank in New York or somewhere else down the road, which of course there’s not. Dr. Olajide Oladipo: Thank you. I think we have – I just have time to take only one more question. Audience Member: Actually, the question I wanted to ask is for the students. Why do you refuse to ask questions? Dr. Olajide Oladipo: Somebody wants to ask now. Thank you. Audience Member: How are you, sir? My question for you today is what are, or were, your daily habits or rituals that helped you get to the level of success that you have today? President Dudley: Oooh, I can’t think of any rituals. Habits. I guess what I would say is I’ve always just tried to learn more. So basically, it’s always about trying to find opportunity to, what I call, grow my human capital. So, I think – my view of the way to success is find a job that’s interesting to you, because you need that passion about what you do. If you don’t have passion about what you do, it’s not going to feel like a lot of fun and you’re not going to do it with a great enthusiasm.
This may result in additional tax liabilities and hence higher issuance costs for sukuk when compared with conventional bonds under the existing tax regime. 7. It is therefore necessary to refine our tax laws to provide a tax framework for sukuk that is comparable to the one applying to conventional bonds. But this does not mean that we are going to confer special tax favours on the Islamic finance sector; rather, our aim is to level the playing field so that financial instruments of similar economic substance will be given similar tax treatments. 8. On this, I am very pleased to see that an amendment bill has been introduced into the Legislative Council earlier this year. The bill adopts a prescriptive and religion-neutral approach, and covers five of the most common types of sukuk globally. Products that can meet the key features and qualifying conditions specified in the bill will be given tax treatments similar to those currently afforded to conventional bonds. This means that sukuk issuers and investors alike will no longer be subject to additional tax and stamp duty charges over and above what they would need to pay for conventional bonds. So, passage of the bill will be a very positive step forward in furthering the development of Islamic finance in Hong Kong. Synergy between Hong Kong and Malaysia 9. With the legal infrastructure to be in place soon, the next important step will be to develop the Islamic financial markets here.

RQFII) scheme. 5. Hong Kong is fortunate to have made a good start in offshore RMB business. Since the introduction of offshore RMB business in 2004, we have developed a wide variety of RMBdenominated financial products. In particular, the offshore RMB bond market in Hong Kong is by far the largest in the world. We also possess the largest RMB liquidity pool outside of  1  KFH Research. 2  Zawya. 3  KFH Research. BIS central bankers’ speeches  1  Mainland China. As at the end of 2012, the aggregate amount of RMB customer deposits and certificates of deposits has reached a high of 720 billion yuan. Notwithstanding these, when it comes to Islamic finance, Hong Kong is a relative newcomer and would need to catch up in this area. Legislative exercise to promote the development of sukuk market 6. In developing Islamic finance, we are taking a step by step approach. As a first step, our current focus is to put in place the supporting legal infrastructure. Specifically, the HKSAR Government is set to change the tax laws in Hong Kong to facilitate the development of the sukuk market. In terms of economic substance, sukuk are no different from conventional bonds. However, since Islamic law prohibits the payment and receipt of interest, sukuk are often structured with the use of special purpose vehicles and multiple transfers of underlying assets.
The system is mandatory for all workers at companies that are part of the agreement. In this system, 4.5 per cent of labour income is allocated up to a cut-off point. If a worker earns more than the cut-off amount, 30 per cent of the difference is added to the original allocation.4 The individual also has a number of investment options to choose from in this system. Once again, the conclusion here is that pension wealth among those included in this pension scheme agreement is more evenly distributed than other wealth. Another way of expressing this is that many people in Sweden do not own their own home and have no financial assets but as a result of their labour income, they benefit from elevated asset prices as they have a share in funded collective pension systems. So how many of them are there? We don’t know at present, as no wealth statistics on the individual level have been recorded since 2007. A government inquiry has recently started to look at whether Sweden shall once again compile wealth statistics on the individual level.5 The Riksbank has been stressing for a long time the importance of reintroducing these statistics as soon as possible. An important reason is that household indebtedness has shown a rising trend in recent years and we now know more about households’ debt than about their assets.

Addressing the problems and challenges at an earlier stage will contain the deterioration, and will enhance the prospect for a positive solution. As our economy evolves and transitions towards higher value added activities, the financial support services that is being provided by the financial institutions also needs to evolve. Financial institutions have to recognise that SMEs will increasingly become specialised and diversified, and will require a much more customised and differentiated financial services. Financial institutions will also need to broaden their dimension to look beyond the traditional business activities and be positioned be able to provide financial services to businesses in new areas of growth such as green technology, medical sciences, and information technology. Today, the true value of companies is also not just measured by their tangible assets, but also includes their intellectual capital. The adoption of more dynamic methodologies to assess the businesses value should therefore be beyond collateral and historical performance. For this, financial institutions have to continuously be ahead of innovation and the new growth areas to be able to take into consideration the new related risks in their assessment. Technology will also have a vital role to support efficient services and greater outreach. Financial institutions should also encourage technological enhancements by SMEs through the provision of financing, including adoption of end-to-end supply chain management solutions and greater expansion into regional production networks. On this note, let me take this opportunity to congratulate Institute of Bankers Malaysia for the launch of this book. I applaud the initiative undertaken.
However, this does not prevent giving consideration to the real economy – growth and employment – when this can be done without jeopardising the inflation target. This is also clearly stated in the preparatory work on the Sveriges Riksbank Act. The Riksbank uses the repo rate – the rate at which the banks can borrow or deposit funds in the Riksbank - as its monetary policy instrument. When interest rates are low, demand is usually high households save less and companies invest more - which leads to a gradual increase in prices. The reverse applies when interest rates are high. However, the interest rate should not be higher than it needs to be to guarantee that the Riksbank’s inflation target can be met. With hindsight, we can note that inflation was below target in 2004-2005 and that the interest rate was therefore too high. The main explanation for this is that productivity growth was higher than expected and international price developments were weaker. Competition has also become stiffer in many different markets and has contributed to low inflation. It is very difficult to predict at an early stage what is happening in the economy and the Riksbank was far from alone in being mistaken in its forecasts. Almost all other analysts made similar, or larger, forecasting errors during this period. At the previous monetary policy meeting, the Executive Board unanimously decided to hold the repo rate unchanged.

If the economies of our most important trading partners recover, and if the financial markets begin to stabilise, it is likely that the Swiss economy will also pass through the cyclical trough during the course of the year 2010. Faint signs that the economy is gaining a little ground have recently become evident abroad. The SNB’s measures are aimed at reducing the danger of deflation in Switzerland. To maintain price stability in the future, pinpointing the optimal date for exiting from the current zero interest rate policy will be critical. Although the reduction in liquidity can be carried out swiftly and easily in technical terms, the practical details are extremely challenging. Correct assessments by decision-makers are very important in view of the particularly high level of model uncertainty at present. In addition, firmness will be required in the face of political pressure so that necessary, but unpopular corrective measures can be taken in good time. BIS Review 54/2009  1