samchain/econo-pairs-v1 huggingface dataset:
Lim Hng Kiang: Meeting the challenges of the globalised economy Opening remarks by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of Singapore, at the 36th SEACEN Governors' Conference, Singapore, 31 May 2001. *  *  *  Honourable Governors Distinguished Guests and Delegates Ladies and Gentlemen  Introduction It gives me great pleasure to bid you a warm welcome to the Annual Conference of the Governors of the South-East Asian Central Banks. This is the 36th Conference and reflects the close ties and strong co-operation that central banks and monetary authorities in the region have forged over the last 30 years. SEACEN economy/Recent financial developments This year's Conference is held amid concerns of a global economic slowdown. After expanding by an average rate of 7.3% in the year 2000, prospects for regional economies are set to slow this year. 1 Average real GDP growth for the East Asian economies is projected to fall to around 4.5% for 2001. The slowdown will be due largely to the cyclical downturn in the US economy, as well as the global electronics industry, both of which will hurt regional exports. Due to its very open nature, East Asian economies are susceptible to the current global downturn in external demand. The US is the largest export market for most of the SEACEN economies, with export shares averaging 20%. In terms of goods structure, electronics accounts for over 20% of total exports in all East Asian economies.

Without these measures, the euro area would have been in outright deflation last year and prices would have fallen at an even quicker pace this year. Growth would have been significantly lower. BIS central bankers’ speeches  1  Second, while our measures were deemed effective, they were also judged to be insufficient in view of the deteriorating outlook for price stability. There was a concrete risk that without increasing the quantitative stimulus, the date by which inflation would settle around levels below, but close to, 2% would once more be pushed back beyond any relevant definition of medium term. Therefore we decided to recalibrate our monetary policy stance. We cut the deposit facility rate further to –0.3%, we extended the envisaged end-date for our monthly purchases to the end of March 2017, while maintaining its conditionality on the inflation outlook, and we announced that we will reinvest the principal payments of our purchased assets once they mature, for as long as necessary. We also decided to continue conducting the main refinancing operations and three-month longer-term refinancing operations as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the last reserve maintenance period of 2017. Since our meeting in early December, conditions have once more changed. A moderate recovery of the euro area economy is under way, driven mainly by domestic demand. But downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets, and geopolitical risks.
Given that the relative magnitudes and rates obtained from the surveys, including the unemployment rate, should not change much, this means that in the last three years the Chilean labor market has been able to accommodate between 120 and 190 thousand migrants per year more than what the surveys indicate, without a significant increase in unemployment. Both the revised remunerations figures and the estimated revisions for employment are in line with recent administrative files and clearly above what would be obtained if adjustments to employment growth, remunerations and hours actually worked were not considered. This does not mean that labor market gaps are closed or nonexistent. Full absorption of the increase in labor supply can take longer, so this increase in employment growth does not imply that more unemployment does not exist. In fact, wage indicators—both the revised INE figures and administrative records—show low growth rates, consistent with a labor supply increase, a vision that coincides with the contents of our IPN. This special study on the labor market, however, goes beyond the review of current indicators, as it seeks to understand the characteristics that shape its behavior over the course of the business cycle and at longer terms. In particular, it presents a characterization of the labor market in Chile from an empirical perspective, using diverse sources of information to provide the broadest view possible.

Time and again, we have seen public discussions about the state of the economy that are based on a particular observation, which shortly down the line has a significant reversal that renders lots of pages of study useless. The case of last September offers a good example. The Imacec of that month was strongly influenced by the so-called calendar effect, which is given by the number of working days in a month and its composition (how many Mondays, Tuesdays, and so on). In Box III.1 of this Report we note that in 2018 the month of September had two peculiarities that extended the calendar effect beyond the estimate: two less working days than September of last year and a distribution in national holidays that led many people to take the full week off. This produced a significant drop in manufacturing activity, which also reflected in energy consumption and the hours worked in the month (Figure 2). After some people attributed it to a more permanent economic phenomenon, the October Imacec data, released this morning, shows the transient nature of the September calendar effect on manufacturing. Actually, measured in twelve months, non-mining activity grew 5.1%, where the higher growth is explained by the performance of manufacturing and trade, the two sectors that appeared to have retreated in September. In this way, the strong fluctuations that the calendar effect may cause in particular months underscore the need to carefully analyze the evolution of high-frequency activity indicators.
If financial market participants are driven by crowd psychology, emotion and narratives, as much as by economic fundamentals and rational calculation, then risks are unlikely to be well captured by standard models (Tuckett and Taffler (2008), Tuckett (2011), Shiller (2017), Bailey et al (2016)). These risks are likely to be highly non-linear, heavily state and time-dependent and thus significantly fat-tailed. In a world of such Knightian uncertainty, it may be difficult to estimate risk weights on individual assets with any degree of precision. Indeed, attempts to do so may result in “over-fitting”, increasing the potential fragility of these model estimates out-of-sample. In uncertain settings, simpler weighting schemes have been found, in a variety of different environments, to offer a better defence against “unknown unknowns” (Gigerenzer (2014)). For example, a 1/N or unweighted asset allocation heuristic (Benartzi and Thaler (2001)), which allocates an equal amount of wealth to each of the assets in one’s portfolio, has been found to outperform more complex strategies such as Markowitz’s (1952) mean-variance optimisation in out-of-sample tests, unless the sample size is very large.19 That logic is one rationale for the use - and, in some settings, predictive superiority – of the LR in capturing solvency risks. It is a variation of the Brainard (1967) portfolio argument. In this vein, Aikman et al (2014) conduct simulations which demonstrate how simple methods, akin to a leverage ratio, can sometimes dominate complex, risk-weighted approaches to calculating banks’ capital requirements when guarding against solvency problems out of sample.

Moreover, our analysis shows that the cumulative income generated over the period in which the balance sheet has been unusually large is likely to exceed normal levels under a wide range of scenarios. In my view, while the costs are real and need to be carefully evaluated, they pale relative to the costs of not achieving a sustainable economic recovery. A failure in that regard would lead to widespread chronic unemployment. Not only would that be tragic for millions of people, but it also would generate chronic shortfalls in the nation’s potential output and fiscal capacity. Relative to the costs outlined above, the benefits from avoiding such an outcome seem overwhelming. Cyclical and structural policy Although I favor an aggressive monetary policy in the current situation, I also recognize that monetary policy is not a panacea. We all know that in the long run money is neutral – that is, that while monetary policy can help the economy return to full employment following a shock, the full employment level of output, employment and real income depends on factors outside of monetary policy. Also, we must recognize that the strength of the current cyclical recovery will depend importantly on non-monetary policy choices. Other steps are needed to secure the best available economic outcome.
Were every large bank instead to face the maximum capital surcharge of 2.5%, then expected system-wide losses would fall by around 60% relative to their base level. And to remove 90% of the systemic externality – expected losses of around $ billion – a surcharge of over 7% would be needed. A more plausible experiment would be to assume a non-zero correlation among bank defaults. For example, the failure of a large bank which caused it to fire-sale assets could impose externalities on other large banks holding these same assets (Wagner (2009)). To place an upper bound on expected losses in the face of these fire-sale externalities, assume instead a correlation coefficient of one. Chart 5 illustrates the impact on expected system-wide losses of a high degree of default correlation among the big banks. The expected system-wide loss increases to around $ billion per year – similar in size to the implicit subsidy at its peak. A 2.5% surcharge now only reduces expected system-wide losses to around $ billion per year. To lower expected system-wide losses to be around $ billion per year would require a surcharge of around 15% – six times its current upper limit. If anything, these thought-experiments probably produce conservative estimates of systemwide losses and the necessary systemic surcharge. For example, bank asset returns are in practice much fatter-tailed than the log-normal distribution. And in practice, banks are likely to default well before their capital is fully exhausted.

1  Haldane (1928). Haldane is, regrettably, no relative. BIS central bankers’ speeches  1  2. Evolution of the financial system  The past fifty years have seen seismic shifts in the structure, size and composition of the global financial system. These changes gave birth to the too-big-to-fail problem. Chart 1 plots the ratio of banking sector assets-to-GDP, and its cross-country dispersion, for a set of 14 advanced countries over the past 140 years.2 For the better part of a century, between 1870 and 1970, financial deepening in these countries followed a modestly upward trend. Over this period, the average bank assets-toGDP ratio rose from 16% to over 70%, or less than 6 percentage points per decade. Since 1970, this trend has changed trajectory. The ratio of bank assets-to-GDP has more than doubled over the past 40 years, rising from around 70% to over 200%, or over 30 percentage points per decade. In other words, since 1970 financial deepening has occurred five times faster than in the preceding century. For some individual countries, the rise has been more dramatic still – in the UK, the ratio has risen five-fold. In cross-country studies, financial deepening of this type has generally been found to have a positive effect on medium-term growth (Beck and Levine (2004)). Taken literally, this would suggest that the rise in banking scale over recent decades has provided a significant tailwind to medium-term growth in advanced countries. So it seemed in the pre-crisis period. But that conventional wisdom has recently been called into question.
Since the near collapse of the UK banking system, bold steps have since been taken to shore up its resilience. £ billion of new bank capital has  4  Term premia, which measure investors’ compensation for holding long- rather than short-maturity claims, are also estimated to have declined since last summer, perhaps reflecting growing expectations for central bank asset purchases. 5  For the UK, December 2008; and for the euro area, June 2012. 6  The non-financial corporate sector was a net saver in Germany, Ireland, Spain, Greece and the UK at end 2013, based on Eurostat data (ESA 95 basis). 7  The “equilibrium” rate of interest is that which equates demand with potential output, thereby delivering inflation at target in the absence of “cost-push” shocks. 8  As my colleague Ben Broadbent recently said, central banks aren’t the cause of low interest rates, but rather are actors reading a script written by others, Broadbent, B (2014), “Monetary policy, asset prices, and distribution”, speech at the Society of Business Economists Annual Conference. BIS central bankers’ speeches  3  been raised in recent years, and banks’ performance in the recent UK stress test suggest growing confidence in the resilience of the system is merited. 9 Second, the UK’s fiscal policy framework helps insure against severe systemic shocks. The UK had the space to allow its automatic stabilisers to cushion the impact of the recession.

Our strong reaction in 2006 have contained inflation expectations and we predict that inflation expectations will continue to move towards the medium term target of 4 percent as the headline inflation comes down in the next couple of months. However, it should be noted that there are also other important factors in determining the inflation expectations, such as incomes policy and the course of fiscal policy, or political aspects, etc. Apart from short-term interest rates, communication skills are also critical tools in guiding the expectations towards the target. What we do is important, but equally important is how we convey this to our target audience. That is not only what we communicate but also to whom we communicate. Of course the target audience of central banks are financial markets in particular and the public in general. When communicating we try to make our messages simple and straightforward. However this is easy said than done. Again this is the art side of monetary policy. Ladies and gentlemen, before concluding, I would like to note that the existence of independent and autonomous institutions along with the practice of good governance principles is vital for Turkey. An independent central bank has constituted and will continue to constitute a cornerstone for structural transformation towards good governance and good institutions in Turkey.
This may be due to an interest rate adjustment affecting their disposable income to a greater extent, as I just described. But it may also be due to highly indebted households reacting more to a given change in income than other households. You would expect this to be the case if households with high debt do not have the same opportunity as others to maintain their consumption by borrowing more. 5 See Sveriges Riksbank (2011), The Riksbank’s inquiry into risks on the Swedish housing market, and Hansen, S.  (2013), Explanations of the development of household indebtedness since the mid-1990s, Memorandum 1. Finansinspektionen. 6 See the article “How are households affected by rising interest rates?” in the December 2017 Monetary Policy Report, and Gustafsson, P. et al (2017), How are household cashflows and consumption affected by higher interest rates? Staff memo, Sveriges Riksbank. 7 See, for instance, Flodén, M. et al (2017), “Household Debt and Monetary Policy: Revealing the Cash-Flow Channel”. Sveriges Riksbank Working Paper Series 342. Sveriges Riksbank. 6 [13]  Greater interest-rate sensitivity creates uncertainty about the impact of monetary policy How total consumption will be affected when interest rates are gradually raised towards more normal levels is difficult to know. Interest expenditure will increase, and for some households by a relatively large extent. But the total effect will also depend on what happens in the economy otherwise as regards income from employment, housing prices, expectations, etc.

And finally, the further measures that need to be implemented by the banking institutions and the SMEs in a more challenging environment of rising costs. Economic and financial developments Going forward, the international economic and financial environment is expected to remain challenging with slower global growth and continued uncertainties in the international financial markets. The moderation in global growth is also occurring in an environment of increasing inflation arising from the higher energy and commodity prices. The Malaysian economy has been on a steady growth path averaging about 6% in the recent three years. In 2007, the economy expanded by 6.3% and has continued to register a strong growth in the first half of 2008. This stronger growth has been achieved despite the more challenging external environment and increased uncertainties in the international financial markets. One of the important contributing factors has been the successful transformation of the Malaysian economy in this recent decade which has resulted in a more balanced and diversified growth, in which the services and agriculture sectors have become increasingly more important drivers of growth. In addition, domestic demand has a more significant role in driving the growth. The stronger domestic demand and growth in the services and agriculture sectors have benefited the SME sector since the majority of the SMEs are operating in these sectors. However, the rising international prices of energy and commodities have confronted economies globally with rising costs and intensifying inflationary pressures.
But it is also clear that if this episode continues much longer, its effects on the Spanish economy may be significant, as is to be expected in the case of an economy in which external financing is one of the fundamental elements underpinning growth. When the ability of the international financial system to perform its role of allocating resources efficiently is seriously curtailed, as at present, the financial soundness of borrowers is not sufficient to attract the financing they need. Thus, if the strains currently affecting the main wholesale markets for medium and long-term financing are prolonged excessively, we cannot ultimately rule out greater constraints on the raising of external financing by the economy. The poor functioning of these wholesale markets has a global dimension and there is relatively little that the Spanish authorities can do to help mitigate it. However, the Banco de España can and will proceed to ensure that Spanish banks continue managing their risks prudently and have appropriate risk provisioning policies that guarantee their financial soundness. This is undoubtedly the best way of ensuring that, once uncertainties have been dispelled and normal market functioning restored, financial institutions can continue to efficiently perform their role of channelling financial flows between our country and the rest of the world. In addition, the Banco de España will continue encouraging banks and savings banks to start issuing medium-term bonds again and to place them on the international  BIS Review 44/2008  5  markets.

However, in the 2010 survey, the largest share of volume reported by dealer respondents was for transactions with “other financial institutions” – a category that includes nonreporting banks; 5 other financial institutions such as institutional investors, hedge funds, and proprietary trading firms; and official sector institutions. This shift continued through the 2013 survey, when “other financial institutions” accounted for just over half of reported volume, reinforcing evidence of a broadening in foreign exchange trading, with nondealers playing a greater role in the market. The 2013 survey broke out the “other financial institutions” category for the first time. The data showed that nonreporting banks accounted for about 45 percent of the category’s trading volume while institutional investors and hedge funds/proprietary trading firms each accounted for about 20 percent. In a market where daily trading volume exceeds $ trillion, this represents significant activity and is consistent with a general theme of increased participation by nondealers in the FX market. Execution in the FX market One factor contributing to the expansion in participation by nondealers in the foreign exchange market has been the increased ease of entry into the market, attributable to an expansion in the number of execution platforms and services. In part, this has been supported by technological advancements, which, in some cases, have reduced trading costs, increased the speed with which transactions take place, and improved transparency.
Indeed, it  is evidence of the lower tail of companies with flat-lining productivity having lengthened during the crisis and by more in the UK than in competitor countries, consistent with the long tail hypothesis. Why might the UK’s long tail, and hence technological diffusion, problem be more acute than elsewhere? Several reasons have been posited and probed. 73  One interesting window on this issue is provided by  looking at the intensive and extensive diffusion margins, to see if these provide clues. Looking at a range of ICT technologies, the data suggests that high and relatively consistent levels of technological adoption, but low and variable rates of technological penetration, mimicking the international evidence. Take internet access. Almost all UK businesses – in excess of 90% – now have internet access. But the UK 74  ranks poorly compared to other OECD countries in terms of broadband penetration (Chart 9). That is true  not only for standard broadband connectivity, but also for more advanced infrastructure such as optical fibre connections. Those low rates of penetration largely reflect large/small firms differences. As with other OECD countries, broadband usage by large firms is almost 100%. But for smaller firms that falls to 93%. Similarly, the share of UK businesses with a website is above the OECD average, at around 83%. But that masks sizable large/small firm differences. Almost 100% of UK large firms use websites, which has been the case for a decade. Only two-thirds of small firms had a website in 2007.

Immediately prior to the Industrial Revolution and running chronologically, these included the th  th  th  windmill in the 12 century, the mechanical clock in the 13 , the cannon in the 14 , the printing press in the th  th  th 17  15 , the postal service in the 16 and the telescope and microscope in the 17 . It will surprise no-one that waves of innovation, big and small, have been lapping the shores of society for the entirety of human civilisation. In other words, while ideas and innovation may well be a necessary condition  14  Van Reenen et al (2010), for example, document the economic impact of ICT. See Bughin et al (2017) and Haldane (2018), for example. Flohr (2016), for example, discusses innovation in Roman society. 17 Clark (2009). 15 16  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  for economic growth, the historical record suggests they may not themselves have been sufficient. Other forces appear to have been at play, translating these ideas into sustained growth in living standards. What might those forces be? I want to provide two different, but complementary, lenses on the growth story. The first focusses on a rather broader set of “capitals” – not just physical capital (plant and machines) but human (skills and expertise), intellectual (ideas and technologies), infrastructural (transport and legal systems), social (co-operation and trust) and institutional (national and civic, private and public) capital.