samchain/econo-pairs-v1 huggingface dataset:
However, I believe there is a risk of now leaning back and assuming that all of the problems will be automatically resolved, or perhaps are already resolved. This is not a quick fix. Making decisions in the field of macroprudential policy is no easy task and Finansinspektionen has a difficult workload ahead. Many people have questioned the efficiency and expediency of the policy rate in this context. But, of course, there are a number of questions regarding macroprudential policy as well. An obvious complication is that macroprudential policy is a new field. There is rather limited practical experience of the effects of macroprudential policy measures and nor is academic research able to provide any clear guidance as yet. This means that, at least during a transitional period, there will be considerable uncertainty over the effects of the measures taken. The objective of macroprudential policy – to prevent risks to the financial system as a whole – is moreover clearer on paper than in practice. It is of course not easy to know when the system is sufficiently resilient or if some form of imbalance is building up, which the crisis clearly illustrated. There are no numerical targets here, and determining when a certain deviation has begun to be abnormal is rather difficult.10 Finansinspektionen will probably also need to struggle on occasion with the scepticism of general opinion towards the need for macroprudential measures. There are different reasons for this.

The European Commission estimated that if Member States achieve their targets, R&D activities will rise by 50% in 2025, generating an increase of between 2.6% and 4.4% in GDP on the basis of conservative assumptions (see report from European Commission “Implementing the renewed Lisbon strategy for growth and jobs: A year of delivery” (2007)). 6  BIS Review 18/2008  euro area, and are crucial to maintaining and ensuring the competitiveness of the individual European companies over the medium to long run. We should keep in mind that in a context of monetary union, not only fiscal policies, but also price competitiveness and unit labour cost developments across countries should be continuously and closely monitored. III. Conclusions  Ladies and gentlemen, I would like to conclude by stressing a few points. Europe is in the process of reforming its economy so as to adapt to the challenges of globalisation, technological change and an ageing population. Significant progress has already been made as reflected by the notable rise in employment growth over the last decade. Monetary Union has been effective – and hugely successful – in supporting growth through a credible monetary policy that delivers price stability in the medium run, hence contributing to lower financing costs in the euro area through a reduction of risk premia. It has also given a further impetus to resolute European integration, particularly in financial markets. The challenges ahead are a reminder that European integration is a dynamic process and that it will bring about deeper structural transformations.
That was very different a year ago. Financial conditions were actually tightening quite sharply a year ago. And it wasn’t really clear how far that was actually going to run. Maureen O’Hara: There we go, question? Audience Member: Can you talk a little bit about balance sheet normalization, how you think about that in the context of monetary policy? In the September FOMC, you guys talked about thinking about balance sheet normalization in terms of when your rate hikes are well under way. What does “well under way” mean, how are you thinking about that? President Dudley: I’m sure “well under way” means different things with different people. I think the — we made it pretty clear in terms of our statements that we sort of want the active tool of policy to be shortterm interest rates. And the balance sheet to be sort of in the background. We’ve also said that we wanted to get some room off the zero bound before we actually start to normalize the balance sheet, to end the reinvestment. Now I think my own personal view is, how soon you want that process to start depends not just about how much margin you have between the current federal funds rate and zero, but also how confident you are that you’re actually not going to need to reduce the federal funds rate in the near-term.

Since the vast majority of household debt is related to housing, it is not surprising that debtto-income ratios were highest and rose most in places that experienced rapid rises in home prices. So, for example, debt-to-income ratios are among the highest in the nation in those places most associated with the housing bubble, such as California, Florida, Nevada and Arizona. This relationship can also be seen within our region. For example, household debt grew more slowly than nationally and has remained relatively low in upstate New York, which was largely bypassed by the housing boom. The key exception is New York City, where a large share of residents rent their homes. Overall, city residents still have relatively low levels of mortgage debt, even though these debt levels rose during the run-up to the recession. Elsewhere in the region, debt levels tended to rise most in places where housing prices increased the most, such as Long Island and parts of New Jersey. During the crisis, in most parts of our region, households reduced their debts. But, because they had not accumulated as much during the run-up, the decline was well below the national average. In general, households in our region – with some exceptions that I will mention in a moment – have not been under as much pressure to deleverage. It’s particularly notable that in upstate New York, where debt levels are well below the national level, households have actually continued to very slowly add to their debt.
In these rapidly changing times, innovation has to be far from static and to continuously keep ahead of time. Just as the needs of the economy and society change, Islamic finance also needs to evolve to keep pace in being part of the solutions. To achieve quality growth, innovation has to focus on amplifying the positive value and impact of Islamic finance to the economy and society. This necessitates Islamic finance moving beyond being perceived as mere imitations of conventional finance. A step up is to have distinct modifications made to the products, services, business practice and operations of Islamic finance. The desired level of innovation is however – to significantly improve the offerings of Islamic finance and to build a sustainable business model to meet the unfulfilled ‘real’ needs of the economy and customers. The delivery of products and services to SMEs for example, can be remodelled to reflect deep understanding of their needs and circumstances. This paves the way for tailor made financial services solutions that can better assist aspiring entrepreneurs. To illustrate, the financing model of Islamic banks for SMEs can be more holistic – to include provision of entrepreneurship training and consulting services, as well as infrastructure support. This model not only leads to greater sustainability, but also provides more 2/5  BIS central bankers' speeches  meaningful customer experience. Within the Islamic capital market, we already see good examples of innovation in the form of green sukuk, an innovative financing vehicle to combat climate change.

The El Niño phenomenon for example, affected many developing countries that are dependent upon agriculture and fishing, particularly those bordering the Pacific Ocean. Last year, it left millions of people hungry and in need of food aid; water shortages across Southeast Asia; and higher food prices globally. Closer to home, thousands have been displaced after the northern state of Penang was hit by the worst flood in more than 20 years. These are indications that despite progress made in regulating global emissions of greenhouse gases over the past decades, we need to do more to mitigate the adverse effects of climate change. Moving on to the second challenge – growing inequality. Globally, the benefits of economic growth have been uneven. In reality, not all members of society have fully benefitted from the growth. While some have gained, many have been dislocated – feeling that they have been left behind. Today, global inequality is at its highest since the 19th century. Recent studies show that the richest 1% now owns half of the world’s wealth combined. In stark comparison, 70% of the 1/5  BIS central bankers' speeches  world’s adult population holds only 3% of the global wealth. Globally, continued widening of the inequality gap would be detrimental to economic growth and social progress in the long-run. Inequality is a threat to growth if it leads to those in the low income segment suffering poor health and low productivity; and to struggle in obtaining quality education.
It is not a risk that can be addressed by simply having a strong IT team in place. It is not a risk that just affects a firm’s technology – it affects the business itself, in every aspect – the bottom line, reputation, processes, and so much more. However, information technology and cybersecurity are intrinsically linked. I’d like to cover both of these issues in my remaining remarks and focus on several of the underlying issues that need to be addressed. Information technology and legacy issues The first dimension is legacy: there is still a great deal of “clean-up” to do to fix longstanding technology and data issues that have built up over the years. The investments necessary are long-term and the fixes, in many cases, will take multiple years to execute. The range of issues include: systems or processes that are manual or not fully automated; asset management tools that are drastically insufficient; and business processes and models built without security requirements, to name but a few. As firms address these challenges, they must also be flexible and agile enough to keep up with the changing environment and incorporate new developments as they arise. While a number of firms have sound programs in place to address these longstanding issues, strong  2  BIS central bankers’ speeches  project management and tenacity will be crucial to see them through. In addition, continued prioritization and commitment of resources, as well as support from the firm’s senior management and board of directors, are critical.

Those with long memories know we have achieved low inflation and steady growth before - though never for so long - only to see them slip away. They ask: what’s to prevent that happening again? A lot has changed in the past fifteen years. We now have an approach to setting interest rates which provides much better incentives for policy makers to take the right decisions. This - and the strong track record built up over the past decade - has stabilised expectations, with the result that it takes more to throw inflation off course. This is crucial insurance against the risks of a more turbulent decade ahead. A trickier issue - and one on which I want to spend some time tonight - is the vexed question of information. Statisticians get an even worse press than economists. But they are indispensable. Just as well run businesses need good management information, so successful monetary policy depends on having good information about the economy. The statistical fog surrounding the true state of the economy has proved a particularly potent breeding ground for policy errors in the past. Are we yet in sight of a clearer view? The policy framework But let me start first with the policy framework: what grounds are there for being confident that it provides the right incentives for policy makers to take good decisions?
But, from what I gather as an observer from afar, there are a number of other factors, less tangible, which also contribute to that scepticism. I shall go through some of them with you, noting once again that perception from many miles away may indeed be quite different from reality. The first factor concerns structural rigidities, which appear to observers from my side of the world to be more serious in Euroland than in many other economies, big and small. The severity of these structural rigidities is seen to be undermining the ability and the efficiency with which Euroland can respond to change. Of course, we recognise that some loss of adaptability may be the price that has to be paid for a relatively stable society and a comfortable social safety net, and that the trade-off has effectively been arrived at through a democratic process. But it is hard to believe, as an outsider, that the trade-off is an optimal one. I cannot imagine, for example, what goal of social stability could justify labour market and social security arrangements that deliver an unemployment rate of double digits; or contribute to delaying, if not preventing, the arrival of the “new economy” in Euroland. I understand that some still do not believe that there can be a new economy, in which the technological revolution enables productivity gains that are capable of sustaining a much higher rate of non-inflationary growth. Of course, we should always question and critically examine any unusual phenomena, rather than embrace them blindly.

But, meanwhile, investors are putting their money where this unusual phenomenon is allowed, by structural flexibility, to be manifested in full force, notably in the United States. This is seen to be a factor contributing to the strengthening of the dollar and the weakening of the euro, and reinforcing the scepticism about the euro. One thing that we have learned from the Asian financial turmoil is that global financial markets, made highly efficient by financial liberalisation and the advance of information technology, have become rather intolerant about policy mistakes. Strengths as well as weaknesses are magnified in financial market behaviour to a disproportionate degree as a result of the explosion of international finance. What until recently were considered to be small aberrations in policy can now be brutally punished by the market. Even those who have been particularly prudent can be tossed around rudely, as market sentiment sways and, occasionally, succumbs to manipulative forces. So far, the emerging markets have been the ones affected, overwhelmed by international finance, perhaps to an unjustifiable degree relative to their economic fundamentals. Although they found the situation difficult to cope with at the time, most of them pulled through and are now recovering strongly. The one common quality that they possess, which is responsible for this rapid turn-around, is structural flexibility. The explosion of international finance is poised to continue, after the current lull, and will be made even more potent by further advances in information technology.
It provides a clearly defined framework for guiding monetary policy decisions and for explaining these decisions to the public. Let me briefly recall the principal features of our strategy. First of all, the ECB has given itself a forward-looking, medium term-oriented strategy aimed at fulfilling its primary objective: price stability. The first element of the strategy is the quantification of what the Governing Council understands by price stability. This is defined as an annual increase of below 2% in the Harmonised Index of Consumer Prices (HICP) for the euro area. This definition serves to anchor inflation expectations and provides a framework against which the Eurosystem can be held accountable. It clearly emphasises the euro area-wide focus of monetary policy. Short-term fluctuations in the inflation rate are not under the control of central banks. Therefore, it was also announced that price stability is to be maintained over the medium term, imparting a medium-term orientation to the strategy as a whole. In order to fulfil its primary objective, the ECB's monetary strategy relies on two pillars. The first pillar assigns a prominent role to money. A central bank has a natural interest, but also a comparative advantage in analysing monetary developments, because money is - if I may say so - the central bank's "output". There is broad empirical evidence of a long-term stable relationship between money and prices and good leading indicator properties of money in the euro area.

Hence the balance of financing sources will eventually have to shift. Policy makers have recognised the need for broader private sector participation. Long-term investors such as insurance companies, pension funds and sovereign wealth funds can be alternative sources of financing, as the life cycles of infrastructure assets match their long-term liabilities. However, these investors are not participating actively enough in the infrastructure space, especially in debt financing. I am sure we all recognise that there are many reasons including a lack of familiarity with the asset class and bespoke nature of infrastructure projects. Some see higher perceived political risks in Asia, and a limited range of investment instruments relating to infrastructure. To catalyse broader private sector participation to complement the traditional bank lending space, a few things could be considered. Firstly, we recognise that investors have varying risk appetites, and that the expertise to evaluate and undertake greenfield project risks still resides mainly with banks. Banks should therefore consider bringing in different types of capital at different stages as the risk profile of a project changes over time. For instance, transactions could be structured such that banks finance the construction stage of projects using their balance sheets, and the bank loan is then refinanced in the bond market post-construction. This way, institutional investors gain exposure to a steady stream of cash flows from operating projects, while banks can recycle capital to lend to new greenfield projects. There have been precedents in other parts of the world.
Figure 13 90-day delinquency rate (percent of loans)  6  12  Clearing houses and family subsidies (right axis)  5  10  4  8  3 Banks  6  Retail  2  4  1  2  0  0 11  12  13  14  15  16  17  Source: Central Bank of Chile using SBIF, SUSESO and SVS data. 19  Figure 14  Capital adequacy ratio by country (*) (percent)  30  30 Ireland  Sweden  2017  26  26  Luxembourg New Zealand Norway  22  22  Denmark Germany France Czech Rep. Brazil Colombia Belgium Hungary Japan Switzerland México Peru Turkey Israel Canada Chile  18 14  U.S.  U.K.  18 14  10  10 10  15  2011  20  25  (*) Dotted line marks 45-degree angle. Green diamonds correspond to Latin American countries (red for Chile). Source: Central Bank of Chile using IMF (FSI) data.

On the other hand, neither can we rule out a strengthening of copper supply and demand factors that would allow prices to remain high for longer, according to some market analysts. Regarding domestic activity, we expect GDP to gradually regain faster growth. Several local factors pose risks to this projection. For now, the lack of synchrony between different expenditure components persists, with sectors (especially investment-related) that still lag behind in the recovery process. Lower than expected short-term dynamism could threaten the robustness and sustainability of the recovery of growth in the medium term. In particular, because the improvement in the consumer and business confidence indicators owes more to expectations of better conditions going forward than to the present situation, and because the financial market, within a generally favorable scenario, contains segments of greater vulnerability in consumer and commercial credit. In contrast, borrowing costs remain at record lows and international conditions have been better than we anticipated, which could add momentum to investment and speed up its recovery. In this context, the Board estimates that the risk balance for both activity and inflation is unbiased. However, it reiterates its intention to monitor any possible downward deviations of inflation in the short term that could jeopardize its convergence to the target within the forecast horizon. Accordingly, the Board reaffirms its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.
The Riksbank being able to stand for strength and security is crucial if we are to successfully meet present and future challenges. The Riksbank has a statutory independence to be able to take decisive action in difficult monetary policy situations and to be able to act effectively in the event of a crisis. It is important to safeguard this independence. But being alone is not strong. And this constitutional independence does not prevent us from actively working together with other authorities in Sweden and with international organisations. Cooperation is necessary not least to tackle climate change. Emissions are local but the effects are global. Other policy areas have more effective tools than central banks to reduce carbon emissions and limit further global warming. I believe that the analysis performed indicates that a global price on carbon should be at the top of the list of priorities in global negotiations. However, this does not stop the Riksbank, and other central banks, from using the means within our mandate to help. Today, I have discussed what the Riksbank is doing and will do in the years ahead in this area: we will continue to research and analyse the effects of climate change  34  Green bonds can be government bonds, intergovernmental bonds, municipal bonds and corporate bonds. Globally speaking, the share of green bonds as a proportion of the total stock is negligible. However, Sweden has been a leading country in green bonds.

Policy rates are already low in many countries, and several central banks have already made substantial bond purchases to support economic development. I think it is important to tackle this unease. The Riksbank still has a very good level of preparedness and plenty of scope to take decisive action in the event of financial instability, for instance, by providing liquidity support to financial institutions. In addition, the Riksbank has four main monetary policy tools at its disposal in the event of a sharp decline in the Swedish economy: a lower policy rate, bond purchases, loans to companies via banks and currency interventions. In addition, communication on forward guidance can be used, potentially in combination with other measures. If we were to be affected by a serious economic crisis, an expansion of our balance sheet would, in my view, be closer to hand than the introduction of an even more negative policy rate than the one we have had in recent years. To cut the policy rate below zero again is entirely possible – it is important that zero is not regarded as a lower bound. That said, however, there is a functional lower limit as to how negative the policy rate can be before the transmission mechanism deteriorates.12 I therefore consider that we should exercise caution with regard to reintroducing a negative policy rate, and that the effects of this should be weighed against the advantages and disadvantages of extended bond purchases and other monetary policy tools.