samchain/econo-pairs-v1 huggingface dataset:
Household debt has increased sharply since the mid-1990s. At the same time, house prices have shown a marked increase. Debt developments in the 1990s can probably be viewed to some extent as a delayed adaptation to the deregulation of the housing and credit markets in the 1980s, after many households burned their fingers immediately after deregulation. In recent years, household income growth has been solid, household confidence regarding the future has been strong and households probably perceive higher income levels as permanent. This may have resulted in a further rise in house prices and debt. In addition, low real interest rates are now making a contribution. In countries that have had liberalised credit markets for a long time, Denmark for example, where credit markets were liberalised over a hundred years ago, the household debt-to-income ratio is higher than in other countries. Norwegian households have a high level of debt, but there are examples of countries where household debt is even higher when we compare Norway with some of our trading partners. Developments in growth in credit to households in Norway nevertheless give cause for concern. We have examples showing that the subsequent effects of a period of unusually high house prices can persist for a very long time. At the end of the 1800s, house prices rose sharply in Christiania (now Oslo). The effects of the very high level of housing construction that resulted from the rise in prices are still perceptible in parts of Oslo. At that time, the housing market collapsed.

These topics, as I understand, will be discussed this afternoon under the two scheduled working group sessions. To broaden the geographical reach of the large pool of useful reference documents on IRB-related issues produced for its meetings or contributed by the member jurisdictions, the AIGV has developed an electronic library on eBIS to store these documents for access by the supervisory community. The hosting of this event is well timed, as some jurisdictions have already entered into the implementation phase of the Basel II IRB framework and other jurisdictions, including many from Asia, are in the pipeline for the introduction of the framework for adoption by their banks. The event is therefore a good opportunity for representatives of jurisdictions which have yet to adopt Basel II to hear from jurisdictions already implementing the framework about the emerging issues, and to facilitate future communications on this topic among participants. As Chairman of the EMEAP Working Group on Banking Supervision, the HKMA certainly welcomes the opportunity to host this outreach event, and would like to thank the AIGV members who have stayed behind after the regular meeting to provide support. A major innovation of Basel II is that it allows banks to calculate their regulatory capital requirements using the output of their internal rating systems, subject to supervisory approval. Under the IRB Approach, banks employ internal rating systems to produce estimates of one or more risk components, which are then used as the key inputs to the calculation of regulatory capital requirements for credit risk.
I see this as an important tool to help banks manage the credit risk associated with lending to SMEs. However, for it to recover it is critical that the regulatory treatment of asset-backed securities (ABS) is based on real data and not the legacy of the US sub-prime disaster. We have a very different experience with ABS here in Europe: between mid-2007 and the first quarter of 2013 the default rate on ABS in the EU was only around 1.4%, whereas it was 17.4% in the United States.6 Structural reforms While financial sector repair can help ensure that credit flows to the most productive firms, we also have to ask the question: where will those firms come from? The incentive for firms to exploit economies of scale, invest and innovate – that is, to be productive – depends critically on the business environment. We therefore need to ensure we have the economic framework conditions that encourage this. This brings me to the key topic of structural reforms. Put simply, there is no way we can achieve higher potential growth in the euro area without them. Structural reforms are essential to raise the trend components of the inputs to production (investment and labour) and the efficiency with which they are used (total factor productivity). Let me explain why. First, while investment in the euro area may pick up as the uncertainty caused by the crisis recedes, to raise trend investment there needs to be fresh opportunities for firms to develop new business models and grow.

The central banks have also cut policy rates rapidly and forcefully, sometimes in coordinated actions, to alleviate the repercussions of the financial crisis on production and employment. Governments have offered guarantees and capital injections to reduce the risk of further bankruptcies in the banking sector. Several countries have also decided on large fiscal policy stimulation packages. 2  BIS Review 25/2009  The measures taken by central banks and governments around the world so far have contributed to reducing the pressure on the interbank markets. Without these measures the financial markets would probably have ceased functioning entirely. One sign that the crisis is no longer as acute is that the TED spreads have fallen in Sweden, as well as the United States and the euro area. The spreads are now back at around the same levels that prevailed immediately prior to the worsening of the crisis in 2008. But the financial markets are still functioning much less efficiently than normal. It is also still difficult for companies to finance themselves in the capital market. The Riksbank has also implemented a large number of unconventional measures to safeguard financial stability and mitigate the negative effects of the financial crisis. During the second half of 2008 the Riksbank increased its lending to the banks by more than SEK 450 billion. Almost SEK 200 billion of this was comprised of loans in US dollars. We have largely financed this through a swap agreement with the Fed.
Carbon Prices and Carbon Markets Climate change is the result of probably the biggest market failure in history. For the longest time, the world did not put a price on the carbon emissions that have steadily degraded our environment and now pose serious climate risks. A meaningful price on carbon is critical to create the right incentives to reduce emissions. The challenge is to arrive at the right price, one that does not unduly impede economic development and yet is sufficient to drive decarbonisation efforts that will enable the world to meet its climate targets. Carbon pricing is gaining momentum. Globally, there are 61 carbon pricing initiatives in place, half of them carbon taxes and the other half emissions trading systems. 1/5  BIS central bankers' speeches  Singapore introduced in 2019 a carbon tax of $ per tonne of greenhouse gas emissions, to establish the principle of a price on emissions. The original intention was to gradually raise the tax from 2023 onwards to between $ and $ per tonne of emissions by 2030. The government is now reviewing both the post-2023 trajectory and the level of the carbon tax to ensure that they provide sufficient impetus for emissions reduction and restructuring towards a greener economy. Asia’s priority, as is Singapore’s, must be to reduce carbon emissions through abatement efforts. But not all firms can turn off the emissions tap fast enough. It may be challenging for some sectors, such as steel and utilities, to significantly reduce emissions in the short to medium term.

CIX can be a test bed for the recommendations of the Taskforce for Scaling Voluntary Carbon Markets. Example: the recommendation to create mechanisms for signalling demand. CIX is forming a coalition of buyers and sellers committed to high quality credits. This will provide suppliers the confidence to scale up supply and catalyse the development of the carbon market. If CIX can demonstrate the effectiveness of the recommendations of the Taskforce, it will build strong momentum for effective carbon credits markets globally. Let me highlight two significant features of CIX: first, the focus on carbon credits generated through nature-based solutions; and second, the use of technology to ensure a transparent and verifiable carbon market. Nature-based solutions are measures taken to protect, sustainably manage, and restore ecosystems. Examples include reforestation, and restoring peatlands and mangroves. It is estimated that nature-based solutions can provide more than 30% of the climate mitigation needed globally by 2030. Yet, such solutions currently only account for 2% of climate funding. Nature-based solutions are an attractive proposition. They not only green the world, but provide social and economic benefits that make it a better 3/5  BIS central bankers' speeches  place to live in. Take for example the restoration of mangroves. Mangroves not only save carbon emissions but also serve as a natural barrier against floods and support biodiversity. Trust is a critical ingredient for any successful marketplace. The use of innovative technology solutions to ensure the integrity of the carbon credits traded will be a key focus of CIX.
When I asked on a recent visit to Northern Ireland about businesses’ top three concerns, the answer was revealing: skills, skills and skills. Surveys of workers tell a similar tale. Households’ outlook for their financial situation is currently in line with historical averages and well above troughs in previous economic downturns (Chart 6). It is easy to be blasé and to forget just how big a societal shift this represents. Job insecurity was the scourge of the latter part of the 20th century. During the 21st, and in particular over recent years, that scourge appears finally and thankfully to have lifted. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 6: Household financial position Net balance 20 15 10 5 0 -5 -10 -15 -20 -25 1985  1988  1991  1994  1997  2000  2003  2006  2009  2012  2015  2018  Sources: GfK and Bank of England calculations. Notes: Question in survey asks, “How do you expect the financial position of your household to change over the next 12 months?” Net balance refers to proportion of respondents expecting improvement minus proportion expecting worsening. The Pay Bust A tight labour market is usually a recipe for rising pay. Yet until recently, there was little sign of pay picking up closer to rates seen before the crisis. Chart 7 plots inflation-adjusted pay in the UK over the past 70 years.

Monetary policy responded with a force never previously seen in history. Today, the most likely shocks or downside risks to the economy are very different in their source and impact. They arise from factors such as global trade wars and Brexit. These shocks are different in their duration – more slow-burn than spontaneous conflagration. And they are radically different in their source, as they hit the supply potential of the economy, as much as its demand side. 31  El-Erian (2016). 32  All speeches are available online at www.bankofengland.co.uk/speeches  32  Consider the effects of Brexit uncertainty on the UK economy. By far the largest effects have been on companies’ investment and productivity. According to our Decision Maker Panel, investment among UK companies is estimated to be between 6-14% lower, and firms’ Total Factor Productivity (TFP) around 2-5% lower.32 These are large negative shocks to the economy’s supply-side potential. They are hits that monetary policy is not itself well-placed to mitigate. There is a risk of people normalising the deviance in monetary policy since the crisis. Around a quarter of adults in the UK working population have never experienced Bank Rate above 1% in their adult lives.33 In these changed circumstances compared with a decade ago, it is important that monetary policy is not a prisoner of its past, that the monetary cavalry are not called at the first whiff of grapeshot, that a dependency culture around monetary policy is not allowed to develop.
And, in Sweden, the Riksbank has indeed important functions in this context, both in preventing financial crises and tackling them should they occur. In addition, the ongoing parliamentary inquiry into the Riksbank will examine this matter and others in more detail, and I look forward to its conclusions with interest. My discussion today has centred on my view that monetary policy and the policy rate are better suited to focus on an inflation target – and that good conditions exist for them to continue to do so. Of course, monetary policy systems and frameworks do not last forever. But, so far, I consider that there are good reasons to keep the one we have. 14 [20]  References Andersson, Björn, Vesna Corbo and Mårten Löf (2015), ”Why has inflation been so low?”, Economic Review 2015:3, pp. 5–46. Blanchard, Olivier (2016), ”The US Phillips curve: Back to the 60s?”, Policy Brief No. PB16-1, Peterson Institute of International Economics, January. Borio, Claudio (2017), “Through the looking glass”, OMFIF City Lecture, London, 22 September. Borio, Claudio, Piti Disyatat, Mikael Juselius and Phurichai Rungcharoenkitkul (2017), “Monetary policy in the grip of a pincer movement”, paper presented at 21st Annual Conference of the Central Bank of Chile “Monetary policy and financial stability: Transmission mechanisms and policy implications”, Santiago, Chile, 16-17 November. Borio, Claudio and Philips Lowe (2002), “Asset prices, financial and monetary stability: exploring the nexus”, BIS Working Papers, no 114, July.

The effect on inflation of a given level of resource utilisation can certainly vary over time, which is to say that the slope of the Phillips curve is not necessarily always the same. The time dynamics may also vary, that is the time lag of the impact of resource utilisation on inflation is not always the same. In addition, inflation is, of course, affected all the time by a series of other factors – various shocks, in the vocabulary of economics. 14  See Borio (2017). 15 See, for example, Blanchard (2016) and The Economist (2017). 10 [20]  These can be highly temporary, but also relatively persistent. However, I find it very hard to swallow, not to say completely unlikely, that, other things being equal, there should be no relationship between resource utilisation and inflation. My conclusion that it is important not to lose sight of inflation and inflation expectations is also quite well in line with the Yellen camp’s view, in the sense that the inflation target and confidence in the target are seen as vital. It is worth noting that there is a debate, not least in the United States, which has come the furthest with its policy rate rises, about how rapidly monetary policy should be made less expansionary. 16 The concern is precisely that excessively rapid changes will make inflation and inflation expectations fall below target again – something that there thus is reason to avoid.
The NBP projection released in April - which assumes unchanged interest rates at 4 percent - points to economic growth within the range of 4.5 to 5.5 percent in the years 2006-2008 and inflation gradually returning to 2.5 percent target sometime in 2008. The statement issued after the April Monetary Policy meeting stated, and I quote 14 : “The Council maintains its assessment that with large probability inflation will in 2006 Q2 and maybe Q3 remain below the inflation target mainly due to short-term factors. If the developments in the economy were consistent with the April NBP inflation projection, then the current level of the reference rate of the central bank would support a gradual return of inflation to the target over the projection horizon and would also be conducive to keeping economic growth at a pace, which is consistent with the potential output growth, determined by the structural features of the Polish economy. The fact that inflation and core inflation has stayed below the previous forecasts for a relatively long period may be an indication that the impact of the factors which may slow down the returning of inflation to the target in relation to that accounted for in the projection is stronger than previously assumed.

2  BIS Review 61/2006  entry into the euro area have made the Polish T-bond market, with the average daily net turnover of PLN 6 billion (the largest and the most liquid market in the region), more attractive to foreign investors. EU membership has enabled institutional investors, that are allowed to invest in instruments issued within the Community, to increase their exposure to Polish securities. In 2004, non-residents’ investments in T-bonds issued in Poland rose by about PLN 20 billion, and in 2005 - by a further PLN 7 billion. The beginning of 2006 was also marked by new records on the Warsaw Stock Exchange amid purchases made by foreign investors and domestic investment funds. In 2005, the number of IPOs amounted to 35 and the market capitalization increased by almost 50%. However, one should not take these favorable global liquidity conditions for granted. Federal Reserve has already raised the interest rate to 5 percent. The ECB is in the process of normalizing interest rates and the Bank of Japan has announced an end to quantitative easing and markets started to price in first increases of BoJ interest rate. This may expose some emerging markets, which have weak fundamentals to a change in investors’ sentiment, may lead to the depreciation of local EM currencies and a significant drop in market liquidity. 11 Some risks are also related to the changing structure of our financial markets.
The depreciation in the Kwacha was largely on account of reductions in emerging market premia due to continued interest rate hikes in major global economies, which resulted in reduced participation by foreign portfolio investors in the domestic securities market, a change in the commodities market sentiment aligned with lowering copper prices and uncertainty associated with the run-up to September 28, 2006 elections and the period immediately following the elections. 5. Another important milestone in 2006 was the licensing of credit reference bureau. As you are all aware, one important objective of a credit reference bureau is to help separate truant borrowers from good borrowers thereby help reduce the cost of borrowing in Zambia. As you endeavor to deliver daily targets of newspapers and electronic media that are in a hurry to report on a daily basis, there also needs to be some commitment to create a longer term trail of rigorously investigated news that is backed by authoritative evidence. Bank of Zambia, commercial banks, the Central Statistics Office and other information providers amass a lot of detail that is reflective of what has happened in the economy. I would encourage business and financial writers to  BIS Review 10/2007  1  monitor and highlight trends that can help us forecast where our economy and business sector is actually headed. If economic indicators are tracked effectively by the media and progress highlighted, it helps to generate even greater confidence in those seeking to make Zambia an investment destination.

The idea was that a fixed exchange rate for the krona would mean that inflation in Sweden was adapted in the long term to inflation in the countries with currencies to which the krona was pegged. Confidence in the fixed exchange rate would mean that the expectations of inflation in Sweden would largely be the same as the expectations in the countries to which we were thus linked. But in Sweden, as in many other countries, it proved impossible to prevent inflation soaring with a fixed exchange rate regime. Other countries which tried to control inflation by means of targets for the money supply also faced problems. The Riksbank announced its inflation target in January 1993, after the krona had been allowed to float earlier in the autumn with a great hullabaloo. The Bank then announced that the target for monetary policy would be to hold the annual change in the consumer price index at 2 per cent. The target would formally apply with effect from 1995. In this way Sweden became one of the first countries to choose to formulate its monetary policy in terms of an explicit inflation target. BIS Review 2/2008  1  Despite being aware that it would be difficult to attain the target exactly, the Riksbank chose to formulate the target with a specific figure for inflation. One of the most important reasons for this was to try to create an anchor around which inflation expectations could be stabilised.
Let me conclude my speech with the words of Ivy Baker Priest, former Treasurer of the United States between January 1953 and January 1961. "The world is round and the place which may seem like the end may also be only the beginning", Ms. Priest said. The idea of this quotation may appear as a truism but it is relevant for today's state of the financial system. It may prove to be the key lesson to learn from "today's" crisis unless it may have been the lesson that mankind thought it had already learned every time a crisis occurred. BIS Review 56/2009  5  References: 1. The High-Level Group on Financial Supervision in the EU report, chaired by Jacques de Larosière, Brussels, 25 February 2009. 2. London Summit – Leaders' Statement, 2 April 2009. 3. Jean-Claude Trichet, President of the ECB, Introductory remarks, Brussels, 30 March 2009 (Hearing before the Economic and Monetary Affairs Committee of the European Parliament). 4. Mugur Isărescu, Criza financiară internaţională şi provocări pentru politica monetară din România, Cluj-Napoca, 26 February 2009. 5. Mugur Isărescu, Criza financiar-bancară şi economică: strategii, programe şi măsuri anticriză. Implicaţiile şi perspectivele unei agende naţionale, Braşov, 6 March 2009. 6  BIS Review 56/2009

We need to ensure that any new requirement provides the right incentives to financial institutions, gives a certain degree of flexibility to the authorities and does not create disincentives to make headway in the energy transition process. Modest, adaptable, yet determined. Because there is a battle to be won and because the current market signals – overly low carbon prices and an overly short time horizon – are insufficient to ensure full mobilisation. There are a large number of private initiatives. But there is also a need for a public framework to ensure the general and lasting alignment of interests. We are determined to play a full part, from Basel to Paris and elsewhere. Thank you. 4  BIS central bankers’ speeches