samchain/econo-pairs-v1 huggingface dataset:
This came as a surprise because realized GDP growth rates in 2013 and 2014 were about 0.5 percentage points lower than forecasts made in 2012.3 Our analysis suggests that this economic slack contributed substantially to low inflation. For example, in the fourth quarter of 2014, if we assume no economic slack, HICP inflation would have been higher by around 0.8 percentage points. Such a counterfactual exercise is however surrounded by a large uncertainty. First, potential output is hard to estimate. That said, if potential output and domestic slack were lower than assumed, the weakness of inflation would be all the more puzzling. Second, some observers argue that the Phillips curve of the euro area is steeper than before,4 partly explaining the low level of inflation. Although we do not share this diagnosis for the recent past,5 a stronger sensitivity of prices to slack might be observed in the future as a result of labor market reforms and lower unemployment in several countries. Third, downward nominal wage rigidity may blur the relationship between inflation and domestic slack. Nominal wage inflation, which remained persistent during the crisis, is likely to stay subdued during the recovery, thus leading to a lower inflation. One caveat specific to the euro area is the asymmetric adjustment process currently at work among jurisdictions. Member countries that experienced large capital inflows in the years preceding the financial crisis experienced significant reductions in price competitiveness.

In this context, an expanded asset purchase programme was then launched. On March 9th, the Eurosystem began purchasing public sector securities in the secondary market along the curve from 2 to 30 years, being mindful of being market neutral. Purchases of securities at negative yield are permissible, as long as the yield is above the deposit facility rate. Marketable securities purchased under this program will be made available for securities lending. This programme is intended to stimulate the economy through different channels. The first one is the portfolio rebalancing channel, in which the fall in yields on safe government bonds induces investors to buy riskier assets, thereby stimulating the economy. Since the launch of the programme yields have dropped not only for the assets purchased but also for bank and corporate bonds and equity prices have continued to rise. A second channel works through lowering and flattening the yield curve. The purchase programme will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation. This reinforces the guidance that interest rates will remain low for an extended period of time. A third channel is related to increasing credit supply. If the Euro-system buys assets from non-banks or institutions, then these funds will reappear as deposits in the banking system. 6  Andrade and Le Bihan, 2013, Inattentive professional forecasters, Journal of Monetary Economics, volume 60, p. 967–982.
How activist central banks can be is an issue where there seems to be quite a bit of disagreement so let me be more explicit by using the euro area as an example. Let us take the first ten years of the euro area and look at real-time estimates of the output gap as published by the IMF and by the European Commission (EC). (The information can conveniently be found on their websites.) Both organisations have suggested, virtually every spring since 1999, that the output gap for the year reported would be negative. If we compare these to recent retrospective estimates we observe a significant bias. The bias is mainly due to the fact that the experts are now more pessimistic about what potential output was in the euro area than they were in the past. This is not the experts’ fault. We simply cannot know in real time. And this applies not only to the size of the output gap, but even to its sign. In comparing what the experts tell us now and what they were telling us then, in real time, the sign of the output gap is revealed to be incorrect in more than half of the years in the first decade of the euro area. Consider the year 2006, the year before the financial turmoil began. According to the IMF and the EC, the euro area operated below its potential that year with the gap being around minus 1 percent (see Figure 1).

Suhaimi Ali: Leading change through Value-based Impact Opening remarks by Mr Suhaimi Ali, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Sustainability Leadership Programme for Financial Institutions, Kuala Lumpur, 24 May 2022. *** While domestic economy is expected to improve further this year, risks to Malaysia's growth momentum remain. Beyond economic factors, adverse developments surrounding COVID-19 as well as environmental and social risks continue to heighten volatility. The December 2021 flood event for example, hailed as the worst since 1971, demonstrated specific vulnerabilities and intricacies in how risks are to be managed: 1. Structural reforms are needed to improve Malaysia's flood risk mitigation infrastructures; 2. Large-scale relief efforts need strong coordination to be effective; and 3. Finance solutions must be expedient and impactful to help those affected. This recent flood episode goes to show that sustainability-related risks are inherently volatile, uncertain and complex, and would require a change in how finance is structured and consumed. Allow me to offer some perspectives on leadership imperatives for financial institutions to catalyse and support a more orderly transition to a sustainable economy. Firstly, the financial sector must actively respond to critical needs through innovation-led growth. Demographic shifts, rapid technological change and climate change will continue to place new and evolving demands on the financial industry. In navigating the challenges ahead, agility in finance response is key.
That all shows how important it is for the economy to have flexible price- and wagesetting mechanisms. And there is a general need to reinforce the capacity of the productive system to compete, through improvements in specialisation, efficiency and higher productivity gains. As earlier indicated, the growing mismatch between household and corporate expenditure and income last year has been accompanied by fresh increases in these sectors' debt. What has proven conducive to this has been the maintenance of financial conditions which have continued to be markedly loose for the situation of strong demand pressure in the economy. This growth in household and corporate liabilities is naturally bearing on the financial position and burden of both sectors. The financial pressure borne by households has, however, been alleviated by the increase in their net wealth, sustained by the growth of stock market prices and, above all, of house prices. In the case of companies, the notable increase in profits has strengthened the sector's capacity to withstand the increase in their financial commitments. Accordingly, the financial position of both sectors, considered overall, remains sound and does not therefore pose a serious obstacle to the continuity of the economic upturn currently in train. The foregoing should not, however, conceal the evident fact that the expansion of domestic spending, particularly in the case of households, will not be able to base itself for much longer on growth in debt at rates such as those currently seen.

Thirachai Phuvanatnaranubala: The strengthening and development of regional bond markets Speech by Mr Thirachai Phuvanatnaranubala, Deputy Governor of the Bank of Thailand, at the APEC Business Advisory Council Meeting, Tokyo, 16 May 2003. *  *  *  Lessons from the Asian crisis – a local perspective Thailand’s experience The crisis of 1997 brought to light weaknesses in the country’s financial sector development and the sequencing of liberalization policies. Prior to 1997, the function of financial intermediation fell almost entirely on commercial banks. They mobilized funds mainly through deposits, which accounted for roughly 80 percent of domestic banking liabilities. At the same time, they held almost 70 percent of total financial sector assets, most of which were in the form of credits to the household and corporate sectors. Direct financing through the domestic bond market – through both public and corporate bonds – was relatively small and not well developed. Nine consecutive years of fiscal surplus between 1988 and 1996 provided no incentive for the government to issue regular and substantial amount of government bonds. The resultant limited supply of government bonds inhibited the development of a risk-free benchmark against which to price corporate issues and mark to market daily trading. The crisis brought to the fore an imbalance in the structure and operation of the Thai financial markets. With financing channels limited to bank loans, Thai businesses faced severe liquidity crunch as the banking sector sharply curtailed their credit operations amidst high non-performing loans and massive recapitalization needs.
If this has boosted loan demand, the successful policy of inflation targeting has been partly responsible. But so far this is just a hypothesis. It is important, however, for households to feel certain about how large their future payments will be. An international comparison suggests that household demand for home loans depends on how the market is structured and particularly on the availability of instruments for households to manage their interest rate risk. Demand mounts in line with the opportunity to manage risk. In the United States and Denmark, households can fix the interest rates on their mortgages for long periods and also refinance these fixed-rate loans at a reasonable cost should interest rates fall. In Denmark, households’ debt ratio is more than 180 per cent, compared with 120 per cent for Swedish households. This is despite the fact that the country has roughly the same proportion of homeowners as Sweden. The supply of mortgages has increased, too. According to the new capital adequacy rules, Basel II, mortgages will be given a lower risk-weighting than today, which means that banks’ capital requirements will be lower if they hold a large proportion of mortgages. The adjustment to this has started already, thus toughening the competition and depressing lending rates. Households have also become an increasingly important borrower group for the major Swedish banks. Lending to households now comprises a little more than 40 per cent of the banks’ total lending.

Or: With expanded markets and choice available for high net worth customers, will it make it harder for domestic financial institutions to continue supporting inclusion outcomes that are partly cross-subsidised by high net worth business today? Correspondingly, to what extent will this impact the cost of financial services for the poor, potentially making them even more unaffordable than before? Or: Are there opportunities to bring new technologies and emerging practice into domestic markets and simultaneously create an environment for them to take root and spawn original domestic applications that will create additional multiplier effects? Or: How might easier cross-border access encourage new business partnerships that would enable financial institutions to penetrate untapped customer segments more efficiently and reduce associated information asymmetries? Answers to such questions can be important in how we think about and approach financial integration. Ultimately, behaviour matters, and therefore needs to be explicitly addressed in financial integration strategies. Unless we also turn our attention to the behavioural responses of financial actors in a more financially integrated region, we may find that our best efforts to strengthen the pillars for greater financial inclusion ultimately does not deliver as expected. Financial inclusion and financial integration strategies therefore need to come together through deliberate approaches that are mutually reinforcing.
5  See Zamarro, G., C. Hitt and I. Mendez (2016) “When Students Don't Care: Reexamining International Differences in Achievement and Non-Cognitive Skills” EDRE Working Paper No. 2016-18. 14/18  The first papers to have evaluated this experience in Spain do not offer conclusive findings. And that underscores the challenge of adapting another country’s successful model to our circumstances.6 It is therefore important to conduct pilot programmes enabling us to determine which design is most suitable for us. Also, in addition to improving employee training, it is important that such training should be in an innovative environment. In this respect, investment in R+D activities in Spain is still very low in the public and private domains alike (0.8% and 1.4% of GDP, respectively, in 2016), which places Spain at levels 25% and 50% below the European average. As a result, the technological capital gap with the EU has continued to widen. Here several measures, among others, would be advisable: to evaluate the possibility of increasing the public funds allocated to the area of innovation; to change research promotion and career arrangements to facilitate the entry and development of new highpotential researchers; to restructure in their entirety public organisations that pursue innovation in order to harness synergies where they may be found; and to promote a sound evaluation system to determine the allocation of resources across centres.7 Business financing  6  See Bentolila, S., A. Cabrales and M. Jansen (2018): “Market insertion of youth: Evidence from Madrid”, Working Paper, forthcoming.

6/18  Meeting the guidelines of the preventative arm of the European Stability and Growth Pact should show the temporary fiscal consolidation path to follow in the future after having managed last year to cut the budget deficit to below 3%. At the same time, a review of the composition of public spending and revenue might also contribute decisively to improving the economy’s potential growth. There is room both to increase the efficiency of public spending and steer its composition towards those items exerting greater influence on the accumulation of physical, technological and human capital, and to re-define the structure of the tax basket in order to make it more conducive to growth. The presence of high tax benefits in our tax system, arising from numerous exemptions, allowances and special low rates, which generate substantial revenue-related losses and distort the efficiency and fairness of the tax system, are a good example of the headroom existing here. Secondly, despite the notable correction to date, the negative net international investment position is still at 77.1% of GDP. And the nation’s gross debt amounts to 166.7% of GDP, only slightly below the peak seen during the crisis. To bring down the debt vis-à-vis the rest of the world, Spain will have to run external surpluses over an extended period of time. And that, in turn, requires maintaining the gains in competitiveness, which throughout the recovery have been based on the moderation of labour and financial costs, and which, hereafter, should rest to a greater extent on increases in productivity.
The numerous instruments developed since the crisis should now be put to work in preserving financial stability. This is what is being done in France, for example, with the gradual activation of countercyclical capital buffers or measures limiting the exposures of the main banks to large, highly indebted corporations. 2.2.2. Adapt the framework to new risks In addition to applying the regulatory standards, the supervisor is also, of course, paying close attention to how business models evolve, in order to identify emerging risks, monitor them and 5/7  BIS central bankers' speeches  devise possible solutions. Several new areas of risk are coming under particular scrutiny: With regard to cyber risk, the planned solutions, especially to increase cyber resilience, need to be harmonised and coordinated at the international level to maintain a clear and coherent regulatory framework for all financial sector participants. The Banque de France made the rationalisation and harmonisation of current regulatory efforts a key theme of its G7 presidency this year. As part of this, 23 global authorities (finance ministries, central banks, bank supervisors and markets) took part in a cyber resilience exercise in June 2019, with the aim of strengthening their operational resilience to a major cyber incident impacting the global financial system. The exercise, which was by nature highly complex and the first of its kind in the world, marked a huge step forward in terms of global cooperation. Thanks to its success, G7 countries agreed to draw up a programme of exercises for the coming years.

The NGFS aims to share best practices and make recommendations to central banks and supervisors on how to better integrate climate6/7  BIS central bankers' speeches  related risks into their financial stability monitoring and microprudential supervision. Within the framework of the NGFS, the ACPR and Banque de France have begun looking at ways to conduct climate-related stress-tests. In parallel, and in line with the energy transition law, the ACPR has published two reports on the climate risks facing the French banking and insurance industries, and has set up a Climate and Sustainable Finance Commission tasked with monitoring financial institutions’ commitments and publishing its findings in an annual report prepared jointly with the AMF. **** My conclusion, therefore, is that we should not just assume that the significant strengthening of the financial system over the past decade is enough. Now more than ever, it is vital that we remain vigilant, to face up to the risks threatening to undermine our financial stability. This means rigorous supervision, and the adoption of a multilateral and coordinated approach in order to implement and complete the reforms to our financial regulation. Safeguarding financial stability, to make the financial system more secure over the long term, is a global challenge and one that requires a global response. 7/7  BIS central bankers' speeches
From this perspective the euro has proved to be an interesting financing alternative to the other large currencies - the dollar and the yen - for large Swedish corporations. Small and medium-sized companies, on the other hand, still turn mainly to the krona market. Development on the money market are largely the same. It is quite clearly the larger corporations that are active in euro, for instance through certificate programmes, while the smaller companies issue their certificates on the krona market. At the same time, it should be said that the total Swedish activity on the euro money market is very limited. Swedish firms' euro activity on the stock markets is not particularly widespread, either. According to the Stockholm Stock Exchange statistics, only six Swedish companies have chosen to be listed on exchanges in the euro area. Swedish companies' interest in becoming listed abroad is mainly aimed towards London and New York. Nor have many companies taken up the Stockholm Stock Exchange's offer to list shares in euro, either exclusively or parallel, on the OM Stockholm Exchange. Three companies took up this offer in 1999; Electrolux, Nordea and Stora Enso. Since then no other companies have shown an interest. There has also been very limited trading in these shares. It can be concluded that the role played by the euro in Sweden is a small one, even in other contexts. This is not really surprising, as the krona is the only legal means of payment that everyone is obliged to accept in Sweden.

According to the price information act, goods sold to individual consumers in Sweden must be priced in the currency relevant to the customer. The act does not state which currency prices should be stated in, but as long as most wages are paid in krona, the retail trade is obliged to price goods in krona. The role of the krona as a means of payment and unit of account is thus protected. Although there is great freedom to choose other currencies, the krona thus has a special position in the Swedish economy. There are also strong economic reasons for Swedish companies and households wanting predictability in their real income to use the krona as contract currency; this applies as long as the value of the krona is upheld, i.e. that there is a low inflation rate, as the real value of the income is determined by price developments on the goods and services consumed by the household/company. In the long term, the development in real purchasing power of the income is determined by productivity developments. Then real purchasing power parity also prevails, i.e. the price of an article is the same in the long term, regardless of the country in which it is sold and the currency in which it is priced. This means that a country with goods and services that cost a lot in foreign currency will sooner or later have to depreciate its currency and/or lower its domestic prices.
Reporting this data is complex and costly for the institutions. But they receive useful feedback in return. As contributors to the register, they are entitled to have access to aggregate information on the credit extended by other lenders to potential and actual borrowers. This can be helpful to them in making their own credit decisions and evaluating their credit risk situation. Let me also mention another international initiative that I think will give something useful back to reporting institutions. This is the initiative to promote increased supervisory transparency, or “supervisory disclosure” as part of the EU implementation of the Basel II framework. CEBS has developed a framework for supervisory disclosure, with information to be published on CEBS’ website, via a set of common templates. While much of the information to be published under the framework relates to supervisory rules and processes, it will also include aggregate national information on the banking sector, on credit risk, operational risk, market risk, and on supervisory actions and measures. Given that this information will be published in a single location for all EU countries, and in a format that facilitates country-by-country comparisons, institutions will be able to use it see where they stand in certain key respects against other banks, both on a national and international basis. This will be valuable to them in making evaluations and decisions about their position. In sum, I think that the general move towards greater transparency by regulators is positive and should be encouraged.

It is not mumbo jumbo that a productivity level of around 1.5 per cent and an inflation target of 2 per cent are incompatible with wage rises of 4 per cent. The scope for wage rises is a maximum of 3.5 per cent at normal profit levels. Our assessment of wage developments in the coming two years is around 4 per cent, i.e. a level that is not compatible with the inflation target, unless productivity develops better than expected. Higher wage increases than expected were one of the causes behind the Riksbank’s two interest rate hikes in March and April. However, wage increases differ between the different sectors and different professional categories. Particularly high wage rises can be noted in the service industries. In some parts of these industries the wages for white-collar workers have increased more rapidly than those for blue-collar workers. This, together with considerable problems in attracting qualified personnel to certain parts of the public sector, entails a risk of a greater wage drift, particularly in a situation where economic activity has improved. Relative wage changes are a normal element in a dynamic economy, but the Swedish labour market has previously shown that large relative changes often lead to a compensatory wage drift. Some large groups have had wage rises of around 5 per cent - this applies to the service industries, the construction sector and white-collar workers in industry - but no large group has received less than the 3.5 per cent that would be necessary to achieve the inflation target.