samchain/econo-pairs-v1 huggingface dataset:
The basic growth mechanism for our standard of living, i.e. labour productivity, now becomes the weighted sum of capital growth per capita and technological progress. Given a constant age structure of the population, and an evenly balanced age pyramid, the basic formula for growth in the standard of living can also be expressed as the weighted sum of capital growth per employee and technological progress (a complication that I will return to later is that the age structure is not constant). Capital formation contributed to lower productivity growth in Sweden Why did it go badly for Sweden during the 1970s and 1980s? First, it should be noted that the majority of industrialised nations suffered a drop in productivity growth from the beginning of the 1970s. This was due to the supply shock associated with the first oil crisis, when the price of oil tripled, followed by a second oil crisis at the end of the 1970s when the price once again increased threefold but this time from a higher level. As we know, the price of oil affects many parts of the economy. Oil is used as energy for transport and heating purposes and its price therefore has a direct impact on the costs of these. Moreover, firms’ costs are affected since oil products are often used as intermediate inputs in, for example, different plastic products. So all countries encountered problems due to the oil supply shock, but productivity growth declined more in Sweden than in other countries. Many explanations have been put forward for this.

Regarding the euro area, a digital euro would also contribute to supporting monetary sovereignty and strategic autonomy, by preventing the use of external digital assets – such as private crypto assets and non-euro CBDCs – as settlement assets, and by facilitating the emergence of a pan-European payment solution at the point of sale, which could serve as a vehicle for the use of a digital euro. But such a digital euro could and should be decentralised in its implementation, in the spirit of public / private partnerships mentioned earlier. On the other side of a mountain, you will obviously always find a side that is less exposed to the sun; here, this northern face is wholesale CBDC. It currently attracts little public interest, although it poses relatively less complex legal issues, and has two strong business cases. First, a wholesale CBDC could significantly contribute to improving cross-border and cross-currency payments, a topic on which we have made progress over the past year. Following a first report delivered to the G20 in July 2021, the Future of Payments Working Group of the BIS has recently finalised a new report outlining options for access and interoperability of CBDCs for cross-border payments. Second, a wholesale CBDC could accompany the tokenisation of securities as a safe and liquid settlement asset for them on a blockchain technology. Failing to offer market participants a wholesale CBDC could open the door to an extensive use of socalled stablecoins, which would pose a systemic risk.
The debate in the USA focuses on  GDP growth in USA percentage change 4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 70 72 74 76 78 80 82  84 86 88  90  92  94  96  98  Source: Ecowin  the stock market, which many consider to have been overvalued for a long time, even if there has been a slight fall in the Dow Jones Index recently. The main question at issue seems to be if, and in that case how, a central bank should act when certain asset prices rise very sharply. Alan Greenspan, Chairman of the Fed, has famously said that stock prices seem to be the result of “irrational exuberance”. Although the current discussion of the role of asset prices in monetary policy focuses mainly on the situation in the USA, I think this issue is relevant to the Swedish debate too. For one thing, it is a matter of general interest and of principle, and for another there is no guarantee that, sooner or later, Swedish asset markets will not experience a situation similar to that in the USA today. How do fluctuations in asset prices affect the economy? One question of crucial importance in this connection is how fluctuations in asset prices affect the real economy. There are several different factors involved here.

One mechanism is the wealth effect, which  US Stock Market Prices 450  450  400  400  350  Index: 1990-1999  350  300  300  250  250  200  200 Index: 1980-1989  150 100 50 0  150 Index: 1970-1979  3  100 50 0  BIS Review 128/1999  means that households consume more since rising asset prices make them feel richer, and vice versa. Another factor - which many regard as at least as important - has to do with the interaction between the credit market and companies’ balance sheets. When asset prices rise, the value of the collateral that households and enterprises can provide when they borrow for consumption and investment rises too. Higher assets make it easier for them to borrow, or to borrow at lower cost, as a result of which aggregate demand increases. Large fluctuations in asset prices can have substantial effects on the real economy. Why should a central bank worry about the development of asset prices? One obvious reason is that it is natural for a central bank with a declared inflation target to follow asset price trends since, as I just mentioned, they can affect aggregate demand in the economy. And changes in demand in turn ultimately affect inflation, as we all know.
New technologies could allow operations all year round and 24/7, and reduce the number of intermediaries involved. -  A CBDC can also facilitate cross-border payments thanks to the use of distributed ledger technology and the interoperability of CBDC systems in different jurisdictions. We have this year joined forces with the SNB, the BIS innovation hub and a private sector consortium led by Accenture, within a project named JURAiii, which would allow the use of Swiss franc and euro CBDCs on a DLT platform. We are also working with the Monetary Authority of Singapore to test cross-currency payments with CBDCs. -  Existing market infrastructures (like T2S) and players, and future systems based on distributed ledger technology will need to be interoperable. Decentralised finance is still not mature enough to handle large volumes of transactions, and therefore will not replace conventional systems from one day to another: centralised and decentralised systems will have to coexist securely and efficiently. This is the purpose of two experiments that we recently completed respectively with SEBA Bank,iv for the settlement of listed securities, and with Euroclear/Agence France Trésor on a collateral operation involving a French OAT. 3/ When: getting ready to introduce a CBDC rapidly if necessary We therefore need to prepare ourselves, without hesitation, to introduce a CBDC rapidly if necessary:  Next July, the Governing Council could give the green light to launch an investigation phase, which could begin in the autumn and last until 2023.

And this year, we will consult on giving greater access to our balance sheet as well as our infrastructure to non-bank payment providers. There is also still considerable opportunity to improve the domestic retail payment systems. FPS is not available, unlike in some other countries, at the till. And while the card schemes offer instant transaction it can take a number of days for merchants to receive the value of the transaction. These add to costs which are eventually borne by consumers. Two years ago, the 3 main scheme companies in the UK were consolidated into one entity that now is developing a new single ‘instant payment’ interbank system - the ‘New Payments Architecture’. The aim is to provide a faster, more resilient, and more efficient interbank system that is open to bank and non-bank payment service providers, and one that will enable and encourage innovation and competition including instant payment at the point of sale. Innovation and competition can lead to better, cheaper, payments services in the economy. But, the payment systems on which we depend have to be reliable and robust, prudentially and operationally. Regulation, therefore needs to keep pace with the changes in the payments landscape and the proliferation of new actors. The same risks have to be subject to the same regulation. The current regulatory regime focusses on the banks and core payment systems that have traditionally performed most of the functions, the ‘chain of actions’, involved in making transactions.
It allows countries to leverage on the respective comparative advantage and complementarities to reinforce mutual growth. This would be important in the current environment to facilitate cross border economic activity. The liberalisation of the capital account in the form of removing restrictions to foreign exchange transactions would also increase the flexibility of managing such foreign exchange transactions. This would increase the potential to better manage its associated risks, while  BIS central bankers’ speeches  1  the increased efficiency gains would also reduce the cost of doing business. Finally, it is also argued that in a more liberalised environment, there would be greater market discipline which would in turn promote financial stability in the domestic financial system. This however, relies on a sufficient level of disclosure and transparency to allow the efficient functioning of the markets. The internationalization of financial systems is however, not without risks and challenges. The risk of contagion following from the increased connectivity increases significantly, in terms of the extent and speed. The contagion can result from external events and developments that can range from failure of large and important international financial institution to the eruption of wars or political incidents that have regional or global repercussions. Meanwhile, global developments including from global policy spillovers have also resulted in more volatile capital flows. The increased openness of the financial system also increases the vulnerability to economic cycles in other parts of the world.

The two most noteworthy examples of this are the Commercial Paper Funding Facility, which was introduced in October 2008, and the Term Asset-Backed Securities Lending Facility (announced in November 2008, but not up and running until last month.) Third, once policy rates were near the zero-bound, we expanded the type of assets that the Fed purchased. In order to put downward pressure on general longer term borrowing rates, particularly mortgage rates, the Federal Reserve has purchased the debt of the GSEs, namely, Fannie Mae and Freddie Mac and the mortgage-backed-securities they issue, and, more recently, longer-term Treasuries. So why has the Fed done so much in terms of special programs? As I see it, there are four major reasons behind the dramatic expansion of the Fed’s liquidity programs: •  To provide liquidity to banks and dealers in order to slow down the deleveraging process. •  To expand the balance sheet capacity of the private sector to counteract the shrinkage underway in the non-bank financial sector. •  To restore and improve market function. •  To ease financial market conditions. This financial crisis has been marked by the rapid deleveraging of the non-bank financial sector. This deleveraging has been driven mainly by the collapse of securitization activity, pressure on dealers to reduce leverage and the spillover of these efforts on to other financial players such as hedge funds. This deleveraging process, in turn, has put intense pressure on the balance sheet capacity of the banking sector.
William C Dudley: Restoring confidence in reference rates Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Salomon Center for the Study of Financial Institutions, New York University Stern School of Business, New York City, 2 October 2014. *  *  *  Thank you for the opportunity to speak with you today.1 In my remarks today, I will focus on the development and use of reference rates for financial market contracts. This is a story of both spectacular success, and at the same time, spectacular failure. To borrow from Charles Dickens:2 “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity.…” While Dickens was writing about events leading up to a political crisis, his words also are apt with respect to our recent financial crisis. Over a period of just a few decades, reference rates grew greatly in terms of their role and importance in financial markets. For example, the use of one of the best known reference rates – the London Interbank Offered Rate, or LIBOR – has soared, so that it is now referenced by approximately $ trillion dollars of financial contracts. Reference rates have become a ubiquitous but largely hidden fiber in the fabric of financial markets.

How LIBOR worked in practice Now that I have described how LIBOR was intended to work in concept, how did it work in practice? It turns out that unappreciated design weaknesses and incentive structures at certain large submitting banks, in combination with the phenomenal success of reference rates, undermined the system. Conflicts and problems emerged both at the bank level and at the individual submitter level. Investigations are on-going to determine the scale and full extent of these problems, but I would like to discuss a few of the well-documented problems. Let’s start at the level of banks that submit estimates. The enforcement actions and investigations into potential LIBOR manipulation have shown that, at times, individual institutions faced incentives to understate their hypothetical borrowing rates in order to avoid the perception that they might have higher counterparty credit risk. Some of the reported misdeeds occurred during the heart of the financial crisis when market participants faced considerable uncertainty about the health of particular institutions. This uncertainty was manifest in a wide range of financial market prices for financial institutions – low and volatile equity prices, record CDS spreads and greater variation in borrowing costs across different LIBOR-submitting banks. At that time, the BBA was publishing firm-specific contributions to LIBOR from submitting banks. Given this publication process, some of the submitting banks reportedly became concerned about reporting a rate that would suggest that they were being treated by the market as a greater counterparty credit risk than their peers.
This search for marginal borrowers is a normal function of competitive markets, and does not imply that all resulting loans will turn out to be poor quality. The FPC’s concerns about the rate at which consumer lending is growing have been well-flagged already and, very recently, the PRA published the findings of its review of consumer credit lending, focusing on asset quality and underwriting practices for credit cards, unsecured personal loans and motor finance – and the 47  issues it wants firms to address . I’m aware that, other than in a minority of cases, such lending is not undertaken by societies. The regulatory requirements following the Mortgage Market Review have also rightly put affordability at the heart of mortgage lending decisions but, as with any rules or regulations, complying with the spirit as well as the letter of the law is important. By way of example, I would highlight a recent trend in increasing loan terms: where 25 years might once have been the normal maximum term for a mortgage, now 35 years or even longer seems to be increasingly common. Of course, increasing the term reduces the level of each monthly instalment and makes the loan more affordable in the short term; however, it also increases the total amount of interest paid over the life of the loan quite significantly, and it increases the possibility that the final instalments may have to be met from post-retirement income.

With that strongly in mind, supervisors will maintain the normal supervisory approach and focus on the biggest risks at each firm. For some businesses, Brexit will be a key risk and will, justifiably, warrant supervisory attention – we must not lose sight of risks as structures and business models change, or as activities move around or adapt. Equally, firms’ management should remain focused on the full spectrum of risks that they face. As we would any other identified risk, we expect to have discussions with firms about their contingency plans as part of our regular interaction. But in terms of how supervisors go about their day-to-day business, we remain focused squarely on the task in hand – safety and soundness of all firms and policyholder protection for insurers. Returning to the punchbowl? As well as a determination to inform our approach to current risks by having regard to lessons learned in the past, PRA supervisors are forward-looking and pay close attention to emerging trends and potential future 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  risks. I would like to take this opportunity to highlight some issues of particular relevance for building societies. We observe that net interest margins at societies are coming under increasing pressure, and, although they are still well above levels seen in 2010, the trend seems to have turned downwards.
It is a fundamental priority of the HKMA to ensure that the community can have full confidence in the system. 15. Confidence in our banks is also key to the functioning of our economy and society. And our work in this area in the last 10 years has affected all of you here today. 16. I think the most high-profile example is the loan-to-value ratio and debt-serving ratio limits on property mortgage loans. The last 10 years have seen strongly rising property prices, and competition between banks has been fierce. To some observers, including home-buyers, mortgage caps seem like a nuisance and make it harder to buy a property. But to the HKMA, it is an important matter of credit risk management and the stability of the banking system. We call these measures “counter-cyclical macroprudential”. And it would be highly irresponsible of us if we did not impose these limits. 17. This is also the case with Mainland-related lending. You all know the ways we have stepped up our supervisory efforts in this area, to ensure credit underwriting standards and risk management. As with property lending, the basic principle is “prevention is better than cure”. To take one example, we are collecting granular data from banks more frequently, to help identify emerging risks. As with mortgage caps, this might not please everyone – but it serves the wider public interest. 18. More generally, we have been implementing Basel III.

Rapid growth of leveraged lending – typically loans to non-investment grade firms that are highly indebted or are owned by a private equity sponsor – meant the share of debt owed by companies with debt more than 4 times their regular cash flow had increased from less than a quarter to more than a third. These companies won’t have much cash and will find it harder to raise new debt finance. In effect, the economy entered this crisis with a weakness that may make it more prone to scarring. The UK is by no means an outlier in this regard. In the United States, growth of leveraged lending was almost twice of that in the UK in recent years. The Federal Reserve has noted how this weakness in corporate balance sheets is likely to amplify the adverse effects of the virus disruption.9  There will be lessons to learn. We had warned about this since 2017 and ensured banks doing the lending could withstand the losses. When this is over and we can step back, we – and other central banks – will need to return to the question of whether unconstrained growth of corporate leverage in the good times puts the wider economy at greater risk of harm in the bad and, if so, whether measures are called for to limit the growth of corporate leverage.
According to the textbooks, exchange rates are governed, to a large extent, by differences in present and future monetary policies between different countries. In principle, by raising and lowering the repo rate you can control the exchange rate. This affects import prices directly and indirectly, with a certain lag. The same applies to demand and to general price trends. The conclusion has, however, been drawn many times during the last decade that the world is not as simple as this. One recent example is from 1998 to 1999. It is hard to believe that the weakening of the krona during the autumn of 1998, were effected in a larger extent of the interest-rate cuts which were made at that time. The krona strengthened considerably during the following winter, when exchange rate differences, compared with the outside world, remained unchanged. The fact that the krona has weakened during the past year can, of course, be to some extent due to monetary policy. But stock market trends, fluctuations in expectations of growth and the outflow of portfolios have also played their part. A reasonable conclusion is that short-term interest rates can have an effect on the exchange rate, but that their importance varies quite a lot over time, and is dependent on many other factors. These factors are not always as easy to identify, even after the event. BIS Review 38/2001  3  One comforting factor in this connection is that the link between exchange rates and price trends seems to have weakened during the 1990s.

It has taken us several years to become convinced that we should see the exchange rate primarily as one of several inflation indicators. I think we have every reason to keep to this approach. Closing comments Finally, let me give some general reflections on clarity and flexibility. It is sometimes asserted, with quite varying overtones, that the Riksbank is much too restricted by principles. We should act more pragmatically. This is maintained by those who think we should have a higher interest rate and who point to the ECB variant of pragmatism, as well as by those who think the interest rate should be lower and who see the Fed's pragmatism as their ideal. This is a debate which in essence is based on misunderstandings. The constraints within which the Riksbank works, allow a monetary policy which is both flexible and pragmatic. We can certainly extend our target horizon, monitor risks of problems in the financial sector or act early in order to avoid major subsidence in the economy further ahead. But this places requirements on us to motivate our actions clearly and substantially. It is, therefore, in this context – by setting very high standards as regards clarity and openness – that we beg to differ. In essence, I think that demands made on us that we should be more pragmatic in some general way – and not keep to our way of reasoning with a target, with guidelines, etc. – are meaningless.