samchain/econo-pairs-v1 huggingface dataset:
And, this doesn’t begin to capture the full human toll— including the impact on workers who have lost confidence in the future and the poorer health outcomes that occur because of increased stress. For too many individuals in the United States, for instance, the American dream has been put at risk, with parents increasingly pessimistic about whether their children will have the opportunity to do better than they did. We should find better ways to help communities that are struggling because of the effects of free trade. In the United States, we have historically experienced a high degree of geographic labor mobility—much higher than in other advanced economies. The ability to move in search of better opportunities, when possible, has helped to mitigate some of the adverse effects of trade. But, mobility has declined in the United States in recent years, implying that the adjustment costs to trade may have increased. Protectionism Is Not the Answer Given these costs of global integration and more liberalized trade, what is the best path forward? Protectionism can have a siren-like appeal. Viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term. Viewed more broadly, it would almost certainly be destructive to the economy overall in the long term. Countries need to compete better, not compete less. Trade barriers are a very expensive way to preserve jobs in less competitive or declining industries. They blunt opportunities in export industries and they reduce the affordability of goods and services to households.

Although evidence on the extent to which jobs have been lost due to global trade is inconclusive, job losses that are attributed to trade tend to be viewed differently. That is, they are seen as having been “lost to foreigners” and are often viewed as a consequence of the policy decision to liberalize trade in the first place. Having said that, the challenge of adjusting to open trade is a serious issue that has not received the degree of attention it fully deserves. This may partly reflect the fact that the burden has been borne unequally and spread out over a long time period. It also may reflect the fact that the winners from trade have often tended to have a stronger voice than those who have been the losers. 3/6  BIS central bankers' speeches  Research has documented that the effects on individuals of job dislocation—including those resulting from trade—can be significant and long lasting. Older workers tend to suffer larger earnings losses, and may face larger transition costs. Displaced workers may not have the appropriate skills to find good jobs in other areas of the economy, including in growing export sectors. When the affected industry represents a large share of the local economy, the damage is often magnified. In this case, the burden is more widespread because wages across the community are likely to be hit as well.
In addition, imbalances in the domestic foreign exchange market have improved while ringgit volatility has also reduced. Given the openness of our market, we will always be exposed to uncertainties in global economic developments and geopolitical tensions. Therefore, we need to take prudent steps in facing these global challenges. Bank Negara Malaysia and the FMC will continue monitoring the activities in the financial market and, if deemed necessary, will introduce appropriate measures to strengthen the policies that are already in place. There are also views among observers and analysts that suggest a certain ringgit level as the equilibrium value. They seem to suggest this value as the target level for us to achieve in order to ensure an economy that is in balance. This is not accurate and unproductive. In my view, it is clear that the current ringgit level does not reflect the fundamentals of our economy. Nevertheless, we should not be too focused on an equilibrium value of the ringgit because this will always change in a global economic environment that is challenging, uncertain and dynamic. I believe that the measures introduced on 2 December 2016 will bring the ringgit value closer to its underlying economic fundamentals. It is important in the current economic environment for us to collectively put in effort, knowledge and expertise and continue to drive the development of the national economy. The strength of an economy relies heavily on the level of productivity of the rakyat.

With the savings rate still high at about 35% of GNP and the rising incomes, Malaysia has the potential to promote a higher level of consumption without undermining the potential for financing of private investment from domestic sources. The higher consumption has also not created risks of increased household indebtedness which has remained within prudential levels at less than 60% of GDP. Ladies and gentlemen, Capital spending continues to gain momentum both in domestic and export oriented activities. Domestic companies are also forging strategic alliances as part of the strategy to expand to new export markets and leverage on new technologies. The on-going capacity expansion and more competitive business environment will keep inflation low thereby allowing domestic interest rates to continue to remain low for sometime to come. Malaysia's trade and investment links with Asia, particularly with the large economies in the region, is also expected to strengthen further. There also continues to be steady inflows of foreign direct investment. In addition to sustained inflows into the manufacturing and oil and gas sectors, these flows have become more broad based with higher shares of new flows shifting towards higher value-added activity in the services sector. This structural change in FDI flows reflect the changing opportunities Malaysia accords with the services sector now gaining significance as an engine of growth. The new inflows have also tended to be low import content and higher value added. The FDI in services sector has also been increasingly broad based.
Page 4 sur 14  As a result households have started shifting towards term deposits, and so further increasing the average cost of funding for banks. Turning now to bank loans to households and firms, let me stress that this credit channel is of primary importance in the euro area - much more so than in the United States - as bank loans remain the dominant source of financing for firms, in particular for smaller firms.1 Overall, the growth rate of loans has slowed due to a combination of higher borrowing rates, lower demand, and - for firms tighter credit standards. (1) The cost of credit has risen significantly from exceptionally accommodative levels. Households in the euro area willing to buy a house at the end of 2021 could borrow at 1.3% in average whereas they have to pay almost 3.5% in March 2023, although significantly less in France (2.6%). Lending rates for firms  1  The average share of bonds in debt financing has increased over time but only makes up 30% of debt financing for firms. See Holm-Hadulla, F., Musso, A., Nicoletti G. and Tujula M. (2022) “Firm debt financing structures and the transmission of shocks in the euro area”, Economic Bulletin, Issue 4, ECB. Page 5 sur 14 have been rising still faster, from 1.3% at end-2021 to 4.2% today. Compared to 2005-2007, the increase in policy rates is much faster today.

This is why we should rely on a suite of models, and on actual data as much as on models. - the restrictive effects on activity, while being in mean reversed in 2025, are quicker than the dampening effects on inflation: hence we should be patient and consistent, including in our explanations to the broad public. The estimated transmission lags of monetary policy in the literature vary from one year5 to more than two years6. But interpreting these lags is more art than science. Overall transmission lags of monetary policy to inflation can vary over time and across jurisdictions, depending on factors such as the level of interest rates, the phase of the cycle and the sectoral structure of the economy (e.g. share of manufacturing, services, or housing). In the current tightening cycle, several factors suggest that the lag in transmission of policy to the real economy may be at the upper end of the two-year range. First, the current tightening cycle started from exceptionally low levels of real interest rates – as measured by nominal OIS rate deflated by market inflation expectations. 5  5. Smets and Wouters (2005); see also ECB NAWM model presented in P. Lane’s lecture on 16/02/2023, “The euro area hiking cycle: an interim assessment”. 6 Badinger and Schiman (2023), Measuring Monetary Policy in the Euro Area Using SVARs with Residual Restrictions. American Economic Journal: Macroeconomics 2023, 15(2): 279–305, or; see also ECB-BASE model.
But the more promptly and flexibly we can adjust our policies, the less traumatic and disruptive the remaking will be. Leadership Second, strong and far-sighted leadership plays a key role in countries making the successful transformation. Such leadership can come from one or two key individuals, like Deng Xiaoping in China or Margaret Thatcher in Britain. Or it can be a group, as in the Meiji Restoration, where the young samurais who led the reforms remained in key leadership positions for a whole generation. In the current crisis too, the different responses of the NIEs partly reflect the different nature of their political leaderships. Singapore being so small and open, able, committed leadership is doubly important to us. We do not enjoy the advantages of the other NIEs - the larger critical masses of South Korea or Taiwan, or the proximity of Hong Kong to Southern China. To make up for this, we need the highest quality leadership that we can muster. Our size makes us more vulnerable, but also gives us a nimbleness that other countries cannot match. However, this demands responsive, forward looking leadership, and not blind flying on autopilot. Indeed, we must place our hopes not in a few key leaders, but in a broad leadership group at many levels across all segments of society - in government, in the business sector, in the labour movement, and in academic and civic groups.

The current inflationary wave will undoubtedly give a new impetus to this debate. How did one rather narrow and quite technical approach come to dominate macroeconomics? It's hard to say. Personally I think it mainly reflects psychological factors. From my experience of more than 30 years in both the academic and financial sectors, I see a rather strong conflict between the exact scientific thinking in the ideal of the natural sciences and the excessive uncertainty associated with the unpredictable behaviour of social systems. I have met many very smart people, including winners of what is inaccurately referred to as the Nobel Prize in Economics, and I have observed that even extremely intelligent people tend to simplify situations dramatically in the face  2/5  BIS - Central bankers' speeches  of high levels of uncertainty. They simply cling to a highly stylised economic model, abstract from many theoretical and practical inconveniences, and then offer a clear answer that can be claimed to be "scientifically" derived. Without this, they would probably have to say, "I don't know, it depends on this, that and the other". Trying to simplify things through highly stylised models would not matter in itself if their users were fully aware of this and understood that they were dealing with a partial presentation of the economy that needs to be complemented by other modelling or analytical approaches. But my experience is that even top economists tend to be timeinconsistent.
When the Riksbank decided to lend almost SEK 300 billion at a fixed interest rate last year, it was also decided that the banks would pay back the loans on 30 June, 25 August and 6 October this year. In addition, some variable-rate loans will mature. Despite the phasing out of the fixed-rate loans being known in advance, it could affect money market rate, pushing them up until the final loans mature. This is when the interbank market will really have to begin functioning as normal. The effective policy rate is also expected to return to being in line with the repo rate instead of the fine-tuning rate, which is 10 basis points lower than the repo rate. When the first fixed-rate loans totalling SEK 100 billion reached maturity on 30 June, the Riksbank’s total lending to the banks declined by SEK 91 billion. At the same time, other loans also matured, while new variable-rate loans with a one-month maturity increased by SEK 20 billion. The whole process was carried out without any disruptions to the markets. The outstanding loans have since declined further and now amount to SEK 222 billion. (Figure: the Riksbank’s outstanding loans). Summary I have now described the Riksbank’s views and my own personal views of economic developments and monetary policy in Sweden as at the most recent monetary policy meeting. The Swedish economy is currently developing strongly, after suffering a deep recession. Inflationary pressures are low, but are expected to rise as resource utilisation increases.

Broken lines represent the Riksbank’s forecasts. Repo rate and expected repo rate Per cent, all agents 5  5 Repo rate Repo rate expectations 5 year ahead  4  4  3  3  2  2  1  1  0 Jan-07  0 Jul-07  Jan-08  Jul-08  Jan-09  Jul-09  Jan-10  Jul-10  Sources: TNS SIFO Prospera and the Riksbank  M onetary policy expectations Per cent, money market participants 5  5 Repo rate Forward rate 2010-06-23 Forward rate 2010-08-18  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  13  Sources: TNS SIFO Prospera, Reuters EcoWin and the Riksbank  16  BIS Review 109/2010  The Riksbank’s outstanding loans SEK billion 400  400 SEK, commercial paper SEK, variable rate SEK, fixed rate  300  300  200  200  100  100  0  0 Jul-08  Jan-09  Jul-09  Jan-10  Jul-10  Source: the Riksbank  BIS Review 109/2010  17
Thus, for instance, fiscal policy coordination mechanisms have been the focus of particular attention, with monitoring and surveillance procedures to avoid excessive budget deficits (of over 3% of GDP) and high public debt proportions (over 60% of GDP) coming into play. Indeed, these thresholds, along with the procedures for their prevention and ultimate correction, took the form in 1997 of an agreement known as the Stability and Growth Pact. In contrast, the rules for coordinating “structural” policy (e.g. those governing the workings of the labour market or the markets for goods and services) were fairly lightweight as a result of their broader scope for application and of the difficulties involved in setting common objectives. Also, in the area of financial regulation and supervision policies, countries continued to enjoy a high degree of independence. The limitations of the monetary union’s adjustment mechanisms As events have shown, the constraints imposed by the institutional framework were not powerful enough to ensure the appropriate response by national authorities in the face of potential slippage from the stability levels required. It was hoped that the very fact of monetary union membership would activate sufficient response mechanisms.

Figure 7 A time-varying capital requirement Tier 1 Capital  Countercyclical capital requirements  M inimum requirements  Upturn  10  Downturn  time  BIS Review 68/2010  When economic activity is strong, the capital requirement is high, and vice versa. This timevarying capital requirement has two functions. The first is to build up the bank’s capital buffer when times are good and then let this buffer decrease during less favourable periods. The second function is to dampen credit growth when times are good by increasing the capital requirement and thereby the bank’s lending costs. This increase in the bank’s lending costs in turn implies an increase in the interest rate margin – and thus the lending rate. In light of the discussion of “just the right level of regulation”, a time-varying capital requirement and other regulations varying across time may have certain advantages. Their more apparent connection with risk build-up may make them less costly than the alternative of introducing a constant higher “minimum requirement”. One objective of varying regulations across time is to affect credit growth through the interest rate margin. This creates an additional source of variation in the interest rate margin, which can be illustrated in the lending rate equation by adding an additional time index for the regulations:  itlending  it   t ( zt ) . An interest rate margin with time-varying regulations also implies another dynamic for the transmission mechanism and is more complicated than a one-off shift.
Independent central bank, inflation target and openness This time inconsistency problem which affects economic policy was first noted by Finn Kydland and Edward Prescott in the late 1970s. 3 One proposal that was put forward to address this problem was to introduce independent central banks which build up credibility by succeeding in maintaining low inflation and having realistic ambitions with regard to stabilising resource utilisation. To do this, the central banks must be able to take quick and sometimes unpopular decisions. If a central bank succeeds in attaining credibility so that inflation expectations are stable, there is some scope for also taking into account developments in the real economy. 4 It is thus also important from a stability perspective to find a means of attaining credibility and stable inflation expectations. As one of the steps to achieving this many central banks, including the Riksbank, introduced explicit inflation targets in the 1990s. In practice, most central banks now conduct flexible inflation targeting to attain the inflation target and also stabilise resource utilisation. This means that the central bank is not prepared to attain the inflation target in the short run at any cost. The Riksbank’s aim is that if inflation deviates from target it shall normally be brought back on target within a couple of years. In the case of large deviations it may take longer before the target is attained so that the effects on the real economy are not excessive. Because monetary policy works with a lag, the decisions must be based on forecasts.

The challenge is to ensure that each component that supports the risk mitigation requirements, comprising the framework and institutional infrastructures, legal, regulatory, supervisory as well as the Shariah infrastructures are in place. My remarks this morning will focus on the challenges of risk management in Islamic financial institutions, and the roles of effective regulation and supervision in this context as part of the efforts to promote the development of a robust and sound Islamic financial system. In Islamic banking, the management of risks becomes more challenging due to its peculiar risk characteristics and the requirement for compliance to Shariah principles. While the Basel II initiatives on the identification of credit, market and operational risks can be assimilated into Islamic banking, the initiatives have to be complemented with consideration of the other dimensions of risks that are inherent in the Islamic financial transactions. The risk management infrastructure in Islamic financial institutions needs to identify, unbundle, measure, control and monitor all the specific risks in the Islamic financial transactions and instruments. This is to ensure that the systems and controls will be effective in the quantification and management of the risks arising from the operations. New innovations in technology would be particularly important to enhance the potential to manage risks.
On a number of occasions in recent years I have expressed the view that although there were many factors leading to the Global Financial Crisis and the European Debt Crisis, the root cause of our present predicament is the excessive leverage and indebtedness built up over the past two to three decades in the household, corporate and government sectors in the advanced economies. During this period, the indebtedness of many industrial economies, such as the US, the UK, France and Germany increased steadily from 160% or 1.6 times of GDP to over 320% of GDP. Japan, of course, ranked the highest in this “league table” with over 450% of GDP. This is alarming not just because the stock of debt was rising, but the speed of the increase outpaced the economic or income growth of these economies by 100% over this period. What is even more depressing is that the aggregate public and  BIS central bankers’ speeches  1  private sector indebtedness ratios actually increased even further after the financial crisis in most advanced economies except for Germany. 6. The increases were mostly due to a sharp pick up in public debt in most advanced economies after the Global Financial Crisis, as substantial amounts of public funds were deployed by the crisis-hit countries to salvage their financial systems, while the real economies were suffering from falling fiscal revenues with slow growth and rising public spending.

The breakdown in the collateral and credit supply chain can lead to the failure of not only illiquid or poorly managed firms, but also otherwise sound and healthy firms. However, central banks, playing the role of lender of last resort, can and should step in to inject the necessary liquidity to allow the financial system to continue to function. If not, illiquidity can quickly turn into insolvency on a systemic scale. Given the ability of central banks to create money by expanding their balance sheets, the Fed and the world’s central banks did exactly that during the latest Global Financial Crisis. This action helped prevent a global financial system meltdown. Therefore, we can say central banks can and do save the world during a financial crisis. 11. Nevertheless, the ability of central banks to reflate the economy or boost employment during the post crisis recovery is not as clear cut. After the 2008 Global Financial Crisis, the US, followed by Europe and Japan, reduced interest rates to a very low level. And, when they hit the near zero lower bound, the major central banks embarked on unconventional monetary policies of quantitative or credit easing. So far, the US has created and injected $ trillion into the banking system and is currently pursuing a monthly $ billion asset purchase programme.