samchain/econo-pairs-v1 huggingface dataset:
Capital integration has also increased dramatically over recent years, as the share of the new Member States in the previous Members’ total FDI outflows amounts to around 12 %. But both economic theory and empirical records lead us to believe that more is to come. Lower trade costs and an increase in competition associated with the enlargement of the European Single Market can have a significantly positive impact on growth in the European economy as a whole. Some economic studies point to an increase, ceteris paribus, of 0.8 % of the EU GDP over the next ten years. 4  BIS Review 59/2004  But accession has also been a powerful catalyst of domestic change for the countries that have entered the Union. Many of these new Members have made remarkable progress in recent years, especially in terms of macroeconomic stabilisation and structural reforms. There still remain, however, important challenges. The task at hand is to advance real convergence. Safeguarding and, where necessary, enhancing domestic conditions of macroeconomic and financial stability is an important institutional precondition. In particular, locking in inflation at low levels, preserving the soundness of the financial sector and making determined efforts towards fiscal consolidation are all of the utmost importance. Enlargement of the EU will lead to an expansion of the euro area at some time in the future. The main aim of the Eurosystem in this process is to ensure that the monetary integration of the new Member States proceeds in a smooth manner and in line with the Treaty provisions.

These provisions were designed to ensure long-lasting credibility to the euro from its outset, by, in particular, sheltering monetary-policy from external pressure. The credibility of the ECB is reflected in low, medium and long-term inflation expectations. And this credibility was already high at the start of Economic and Monetary Union. I well remember that at that time some observers argued that the quality of the euro as a new currency would converge only towards a sort of an average of the legacy currencies, rather than to the benchmark set by the most credible ones. What happened is that, all along the yield curve, the euro area’s market interest rates became aligned with the lowest market rates prior to the euro. The euro area’s 300 million inhabitants benefited immediately from the best possible financial environment, from the credibility that had been built gradually in certain parts of the euro area over the previous decades, without losing a single basis point. Nominal and real interest rates have remained at those low levels ever since. They have also consistently reflected a high degree of consonance between the ECB’s policy intentions on the one hand and the market understanding as regards the course of policy on the other. In other words, the level of predictability of policy - a highly regarded sign of transparency for a modern central bank - has been elevated by any international standards. Indeed, predictability and transparency go hand-in-hand.
However, the market also has some inherent weaknesses, as it is undeveloped and illiquid, at the same time as many companies lack credit ratings. The weaknesses came up to the surface in March last year, as the pandemic entailed a crisis that directly affected companies. This caused their financiers to review their holdings of commercial paper. Last spring, some funds were forced to stop trading for a period. 27 Yields on corporate bonds soared (see Figure 7). At the same time, there was a risk that the crisis would spread to the covered bonds market, as these were easier to sell when liquidity was needed. We also assessed that there was a risk that the problems on the corporate bonds market would make larger companies reduce their bond borrowing and turn to their banks to  26  See, for instance, Sveriges Riksbank (2017b). 27 See Wollert (2020) for a description of the market for corporate bonds in Sweden during the crisis. 9 [20]  borrow instead. In this way, the banks’ lending to larger companies risked squeezing out lending to smaller companies. The large toolbox has been a decisive factor. As we have seen events, it was a question of retaining the level of stimulation in monetary policy rather than increasing it. This meant that the monetary policy conducted earlier, with a policy rate at zero and purchases of government bonds, needed to be supplemented with new measures to reach companies and households in the desired manner.

Since the Swedish krona was introduced as currency in 1873, the most common nominal anchor has been a fixed exchange rate for the krona. Let me now rashly jump 100 years forward in time. The background to the monetary policy regime we have now can be found in the developments during the 1970s and 1980s. Following the collapse of the Bretton-Woods regime in 1973, there was a long period of unstable macroeconomic development. Sweden was part of a number of fixed exchange rate systems. But inflation in Sweden was higher than that abroad, and our competitiveness weakened. This was met with devaluations, which only resolved the short-term problems and led to higher inflation in the longer run. Confidence in the nominal anchor was undermined. 1 Questions regarding independence are also on the agenda in the ongoing international discussion among cen-  tral banks; see for instance Haldane (2020), Norges Bank (2021) and Waller (2021). 2 See Ingves (2015) for a description of the aims and means of monetary policy through history. 2 [20]  Strong reasons for greater independence 24 September 1992. Thursday. There was scope for around four hours’ sleep between the final negotiations between the Government and the Social Democrats and the following day's press conference. As press officer at the Ministry of Finance I had a lot to think about. The announcement of the so-called general bank guarantee to be given was very comprehensive.
To be sure, such willingness has not been entirely voluntary. Neither has the pace with which openness is being pursued. For relatively small domestic markets, there is understandably a lack of attraction for the large and sophisticated international financial intermediaries. And so there may be special privileges or incentives offered, at the risk of creating structural distortions in the financial system, as enticement for the esteemed presence of the household names of international finance. More important, individual jurisdictions have been, whether of their own free will or under pressure, pursuing financial openness, not just in respect of the financial system, but also in respect of the international mobility of capital. This they do so, in some cases, perhaps prematurely, by reference to their ability to manage the associated risks to monetary and financial stability on a continuous basis, in keeping with the demands arising from the changing scene, and changing risks, of international finance. As a result, the path towards financial openness has not been a smooth one, and diversions, although of a defensive nature, have been rather frequent lately. This is an aspect to which I shall return later. Let me turn first to how financial openness has been manifested in the dynamics of financial intermediation in Asia: this is the fourth characteristic of Asian finance that I wish to talk about. High public-sector and private-sector savings, less developed financial systems and financial openness have affected financial intermediation in two ways.

BIS Review 66/2004  7  Meanwhile, even with a clear intention to do so, the practice of lending, and the pricing of lending, in accordance with state policy and not the credit worthiness of the borrower takes time to get rid of. Although it does not take long for the credit officer to learn to look at the balance sheet and the profit and loss account of the borrower, the security of the job requires an unspoken recognition of the authority of those in a position of power in the government bureaucracy. A further complication is the fact that commercial bankers are part of the government bureaucracy. In such a system, it is difficult for the bureaucratic position of the individual to be aligned with the commercial interest of the bank, which is to make profit. There is an interesting description of the stance of such an individual: where you stand (on an issue) depends on where you sit (in the bureaucracy). Consequently, it will take some time before the process of credit allocation becomes entirely market-based and the banks subject to the market disciplines that we are familiar with. One implication of this is that the high NPL and low capital adequacy ratios will continue to be a feature, with ebbs and flows, as capital injections get rid of the stock of NPL while the flow of NPL continues, but hopefully at a reduced pace as corporate governance improves. Professionalism cannot be acquired overnight.
As the level of competition in the corporate bond market is much lower, a key priority in the design of these operations was to encourage strong participation from market makers. Accordingly we decided to adopt a uniform pricing method for these auctions, in which the Bank pays the same (highest) price for all the accepted offers to sell us a given bond. Our judgement, was that this approach would help incentivise participation and therefore competition, as participants do not need to make firm judgements about the overall market level, but can instead focus on their own valuations. This effect may be particularly important for increasing the likelihood of smaller or less informed market participants taking part. This increased participation should in turn increase the likelihood of the Bank achieving competitive pricing in its purchases. By contrast our gilt auctions allocate on a receive-your-offer (‘discriminatory pricing’) basis. This works well when broad participation is assured. Third, the relative value of offers is judged in a different manner in our corporate bond operations. For gilts, we allocate relative to representative market yields at the end of our auctions – this enables participants to accurately anticipate the competitiveness of their offers. If a similar approach had been applied to our corporate bond operations, where there is considerably less certainty around the prevailing executable market price , the Bank would have risked allocating against stale market prices, or prices that could easily be influenced by participants in the auction.

This is faster than we expected at the outset, perhaps because the auctions have acted to boost secondary market liquidity by more than we had allowed for. So far our approach to setting reserve spreads has also successfully driven the Bank’s holdings towards our ‘sector key’ (Chart 9), and I am confident it will continue to enable us to make our purchases in a neutral manner across economic sectors. So while our purchase pace will continue to depend on the nature of the offers we receive, and portfolio matching constraints are likely to become more binding as we near the purchase target, it seems probable that the Bank will be able to complete the purchase programme faster than we thought possible to begin with. Conclusion  In concluding, I hope my remarks have helped demonstrate that a detailed understanding of market structure is a core part of effective central banking. From the experience of 2016 I’d draw two specific lessons. First, so long as central banks design their operations carefully, drawing on study of the relevant market structures, they retain the capability to broaden the range of policy tools at their disposal. The early success of the corporate bond scheme – both in effectively purchasing the bonds and in terms of initial evidence about the transmission to wider economy of those purchases – underscores the continued scope for central banks to innovate when circumstances dictate that need.
That will call for a detailed review of the risk models used by banks and the adoption of corrective measures should unjustifiable deviations be detected. Macroprudential policy Macroprudential policy, insofar as it seeks to identify systemic risks, prevent them and increase the industry’s resilience, has an important role to play. The very nature of these risks is global in dimension, meaning that coordination between the various authorities with responsibilities in this field is needed. At the same time, it should be borne in mind that while the risks may be considered common to the euro area as a whole, their impact and intensity vary from country to country. This heterogeneity not only depends on the characteristics of each country, but also on the particular juncture of the financial cycle. For example, at present certain euro area countries evidence risks associated with excessive real estate market prices, while in others this risk is not discernible. Macroprudential policy thus requires a coordinated approach by the various institutions, and at the same time attention must be paid to considerations of a national nature. In a monetary  BIS central bankers’ speeches  3  union like the euro area, the heterogeneity of the member countries’ financial cycles may be an important issue when it comes to designing these policies. The European Systemic Risk Board was set up in late 2010 as the authority responsible for macroprudential oversight in the European Union, empowered to issue warnings and recommendations in this connection under the “act or explain” principle.

The FSB has set in train two courses of action to prevent an excessive concentration of banking risk off the balance sheets of banks: first, it monitors their size, activities and risk characteristics; and second, it is working on the introduction of measures both for institutions (particularly closed-end money market funds) and for activities (particularly certain forms of alternative funding, such as securitisation or the funds obtained through the repo market or securities lending). Lastly, increasing emphasis will be placed on monitoring the implementation of reforms. One of the lessons learned during the crisis was that international standards must not only be appropriate, but also effectively and uniformly implemented across jurisdictions to avoid situations of lack of competitiveness, regulatory arbitrage or creation of systemic risk. I am sure that, as in previous years, your Meeting will be extremely interesting and informative. There is no shortage of issues and problems. Thank you. BIS central bankers’ speeches  5
Since summer 2005, the key policy rate has gradually – and ahead of the rise in inflation – been raised by 3.5 percentage points to 5.25 per cent. This will contribute to more stable developments in inflation and in output and employment. The real interest rate has increased. The various factors that influence interest rate prospects are pointing in different directions. On the one hand, inflation has picked up markedly over the past few months. Growth has remained firm, capacity utilisation is high, the labour market is tight, and wage growth is picking up. In order to guard against inflation rising further and becoming too high, it may thus be appropriate to continue raising the interest rate. On the other hand, in order to guard against an economic setback in Norway as a result of weaker external growth, it may be appropriate to leave the key policy rate unchanged for a period or lower the key rate. Weaker growth in the world economy may influence activity and profitability in the Norwegian business sectors. As a result of the financial market turbulence, we have also seen an increase in the financing costs for Norwegian banks and companies. Furthermore, the turmoil and the setback in the US may increase uncertainty among Norwegian households and businesses. BIS Review 37/2008  11  If there are prospects that the interest rate in Norway will be held considerably higher than the interest rate level among our trading partners, the krone may appreciate.

Whether improved prudential regulations, supervisory practices and risk management techniques will suffice to avoid financial cycles in the future remains to be seen. Our experience so far does, however, leave some doubts about this. This brings us to a possible third line of defense that could at least in principle be used to prevent large financial cycles. I am of course thinking about monetary policy The argument is that since we live in a fiat money system, there is no exogenous constraint on the supply of credit except through monetary authorities. If those reactions are geared exclusively to controlling inflation, then the monetary anchor may not counter a build-up of credit that does not immediately lead to inflation in the price of current output. Hence, there is little to prevent the emergence of cycles in the prices of real and financial assets that are not included in the measure of inflation. In addition, experience has taught us that price stability is not, by itself, sufficient to ensure financial stability. So why don’t central banks simply change the way they conduct monetary policy and also try to prevent financial cycles? Well, the conventional view is that they should not. There are some very powerful arguments against a central bank trying to respond to credit expansion and “misalignments” in asset prices that do not lead to inflation in goods and services. First, how do we know that a bubble is a bubble and not a reflection of fundamental values?
Today, the IFSB has 78 members from all over the world. This will contribute towards the standardisation of the prudential rules and more importantly contribute to the soundness and stability of the Islamic financial system. The International Islamic Financial Market, or the IIFM, which is another leading international initiative, will also contribute towards promoting the development of both the primary and secondary international Islamic financial market. IIFM provides the environment to link all the financial centres around the world that participate in Islamic finance, thereby encouraging active participation by both Islamic and non-Islamic financial institutions in the secondary market for Islamic financial instruments. As the volume increases, it would strengthen the inter-linkages and integration amongst the Islamic financial centres. 3/5  In the area of Shariah, Bank Negara Malaysia is currently promoting intellectual discourse on Shariah issues. Our own Shariah scholars have contributed towards the rapid growth of the Islamic financial products. Earlier this year in conjunction with the IDB Annual General Meeting that was held in Putrajaya, the opportunity was taken to bring the international Shariah scholars together to deliberate the issues and to foster greater understanding and convergence of the practices of Shariah. Bank Negara Malaysia has established a RM200 million dedicated endowment fund to facilitate regular dialogues among the Shariah scholars, to finance research and scholarships, and to facilitate enhanced interaction between the Shariah scholars and the industry practitioners.

On the then profile of market interest rates, the Committee as a whole 1 judged that, most likely, output growth would slow quite sharply during the current year and would be anaemic for a period thereafter. Crucially, the balance of risks to that most likely (or modal) outlook was judged to be on the downside. In other words, the mean forecast for output was somewhat weaker still. For inflation, meanwhile, the most likely outlook was that, after an uncomfortably high and protracted spike, it would fall back to a little below the 2% target by the end of two years, and would continue to drift down thereafter. In other words, the crucial judgment was that the accumulation and persistence of slack in the economy would most likely be enough to avoid inflation getting out of control. That was the part of the August projections that captured the attention of the markets and commentators. But, collectively, we also concluded that the balance of risks to the inflation outlook was to the upside, so that the mean for inflation was actually above the 2% target at around two years or so. That’s not without significance given that most analytical models suggest that policymakers should set policy in the light of the mean, not the mode – although a better description of the MPC’s approach would be to say that we take account of the nature of the entire distribution of risks.
Chart 7, summarising the results, is a version of a graph we published in the last two Inflation Reports. Note that, over time, the effects have tended to be positive. The average age and experience of the workforce has grown; more people have gone into higher education and higher-paid occupations. But on top of that underlying trend, we’ve seen sharp movements, in both directions, during the recent cycle. Both the drop in job creation during the Great Recession, and the corresponding pick-up during the recovery, were skewed towards the less skilled, less well paid end of the jobs market. Chart 8, which plots the differences in job creation across three classes of occupational characteristics, depicts one aspect of that pattern5. You can see similar differences in rates of job creation between young and old, less and more educated. And as I outlined in the introduction, the effect of these swings was to add materially to the growth of average earnings during the downturn and to subtract from it in 2013 and 2014. Unskilled employment generally more cyclical Before asking why this has happened let me make a few points about the estimates. First, there are some approximations involved. One involves the mix of surveys: we’re estimating the impact of compositional changes on LFS pay data and assuming the effect simply carries over to the AWE. That’s the most reasonable assumption, but it’s an assumption nonetheless.

Ben Broadbent: Compositional shifts in the labour market Speech by Mr Ben Broadbent, Deputy Governor for Monetary Policy of the Bank of England, at the “Understanding the Great Recession: from micro to macro” Conference, Bank of England, London, 23 September 2015. *  *  *  Accompanying charts and table can be found at the end of the speech. I would like to thank Will Abel and Rebecca Burnham for research assistance and I am grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. I want to begin by thanking the organisers for putting together this excellent conference and for asking me to come along. I’m honoured to be in such distinguished company. Up front, I also want to thank Bank economists – especially Matt Corder and Alina Barnett – for their help. If this were a working paper it would have multiple authors. Today’s tagline – “from micro to macro” – is a sobering one for macroeconomists. We’re used to describing the economy in broad, sweeping terms, using numbers on aggregate output, total employment, average wages. Yet, in practice, the modern economy is hugely diverse and, underneath the surface, highly dynamic. New ideas replace old, businesses fail and are formed and, even when the net change in employment is small, and the labour market in aggregate looks stable, the gross flows in the labour market can be huge.