samchain/econo-pairs-v1 huggingface dataset:
But the US risk capital market is, of course, considerably more developed and in Sweden the supply of risk capital is associated with specific problems, for instance as regards taxation, that ought to be looked into. The labour market is naturally a major factor, too. Besides being suitably competent, labour must be prepared to transfer rapidly to the sectors and jobs that arise as the new economy takes hold. Even with a good level of education in general and a rising number of university graduates, the supply of people with spearhead competence poses problems both because the output is too small and to some extent because qualified persons move elsewhere. One explanation is the lower return on tertiary education in Sweden compared with, for example, the United States. Compared with their American colleagues, moreover, relatively fewer graduates in Sweden start new businesses and exploit new commercial ideas. Neither does wage formation in Sweden function so well in general that the available job vacancies are filled without friction; in the United States this has played a central part in maintaining high growth and rising employment without strong upward pressure on wages. 3.3 Finally, as regards macroeconomic policy, the Swedish and American economies now have a good deal in common in that in both cases inflation is low. But it is only about five years ago that the sustainability of the Swedish economy was rather uncertain.

The SME Bank, a specialised agency dedicated to the promotion of SME development, will commence operations in October 2005 and is envisaged to better serve the needs of SMEs through the provision of a comprehensive range of financial and non-financial services. In particular, the SME Bank will focus on nurturing the SMEs and promoting entrepreneural development, through the provision of financial and business advisory services, including financial management, business diagnosis and marketing support. Recognising the importance of human resource development as part of the capacity and capability enhancement strategy, several initiatives have also been undertaken to enhance the skills of DFIs, particulary in the provision of advisory services and micro financing. In collaboration with the Japan International Cooperation Agency, Bank Negara Malaysia is currently embarking on a project to enhance the capabilities of DFIs in providing advisory services to the SMEs. It is envisaged that the provision of quality advisory support can be used to supplement the financial services of DFIs, in order to enhance their effectiveness in supporting the development of the SMEs. In addition, Bank Negara Malaysia has developed and distributed a set of micro finance manuals to DFIs engaging in the provision of micro finance, for use as reference to acquire the knowledge of micro finance principles and best practices. This is to ensure a sustainable provision of micro finance by these DFIs. Going forward, the role of DFIs would not diminish, but continue to remain important and relevant, providing greater complementary and developmental role in addressing the nation's development strategies.
Yet, looking back, the crisis also has its silver linings: the painful adjustments that followed prompted governments to strengthen economic fundamentals, enhance banking systems, deepen local bond markets, and build up foreign reserves to cope with potential external shocks. Because of these developments, the region has been able to emerge from the recent global financial crisis relatively unscathed and is now one of the key driving forces supporting the global economic recovery. 5. But we cannot afford to be complacent, as we are now confronted with a new round of challenges in uncharted waters. The unprecedented monetary easing in the advanced economies has led to global excess liquidity. And with the robust recovery of the emerging  BIS central bankers’ speeches  1  markets, there are powerful push and pull factors driving investors to search for yields in developing economies including Asia. From Q3 2009 to Q4 2010, the net capital inflows to emerging Asia1 amounted to $ bn, the largest inflows in recent years. 6. The strong capital inflows and resultant abundant liquidity have led to exchange rate appreciation, fuelled credit growth and driven up asset prices in the region. With output gaps closing, inflationary pressures are accelerating in a number of Asian economies. Capital flows also complicate the macroeconomic policy responses. While exchange rate appreciation and monetary tightening could theoretically cool down the economy, in practice, they may attract even more speculative inflows to profit from interest rate arbitrage and currency appreciation. 7.

On the other hand, the pro-cyclicality and highly volatile nature of capital flows poses significant macroeconomic management challenges to policymakers. If not properly managed, the build-up of excesses amid strong capital inflows and the subsequent bursting of the bubbles could be detrimental to financial stability, wreaking havoc on economic growth. 3. Managing capital flows has been a dynamic learning process for policymakers in developing economies. Prior to the Asian financial crisis, Asian economies embraced capital flows with little wariness of the downside risks. The dominant flow pattern at that time was for Asian governments to invest their savings in high-grade government papers of the advanced economies. The funds were then recycled back to Asia in the form of highly volatile shortterm capital flows. These resulted in serious imbalances in the balance of payments accounts, and mismatches in currency and maturity in the balance sheets of banks. The subsequent shifts in market sentiment and expectations led to abrupt reversals of capital flows out of Asia. Currency crashes amplified the adverse effects as capital fled the region in a drove. The Asian Miracle went bust. The capital flows that had once fertilised the impressive growth eventually caused a capsize when the Asian financial crisis hit us in 1997 – a lesson that we all still vividly remember. 4. The Asian financial crisis gave us a much-needed wakeup call at a dear price.
The most important difference is, of course, that SWESTR is entirely transaction-based and therefore does not leave any scope for judgements, as STIBOR does. Another important difference is that SWESTR uses the shortest maturity, overnight, at which most transactions occur. STIBOR, on the other hand, has maturities ranging from tomorrow-next to six months. Considerably fewer transactions take place at these maturities. Moreover, overnight is the maturity commonly used internationally for the reference rate’s shortest maturity. There is also a significant difference in the counterparty group. For STIBOR, the counterparty group is the other panel banks. Since the panel banks rarely borrow from each other in the interbank market, this is a problematic delimitation. Instead, SWESTR is based on the reporting agencies' transactions with a much wider counterparty group. On average, SWESTR and the provisional SWESTR during the test period have been determined based on a transaction volume of SEK 33 billion per day. Another difference is that SWESTR is defined as a deposit rate, while STIBOR is to reflect an estimated lending rate which, when such lending has not taken place, is mainly based on the banks' funding costs. The fact that STIBOR is calculated in this way in two steps – first an estimate of own funding costs and then an estimate of an interest rate mark-up to obtain a lending rate – increases the judgement element and reduces the transparency of the STIBOR methodology. Finally, there is also a difference between which funding currency the rates refer to.

The fact that the bond in this case is linked to STIBOR 3 months is probably due to it being the same frequency as the coupon payments. It would, of course, be impractical to have settlement and coupon payments every day. In this context, backward-looking average rates have roughly the same practical and administrative advantages as forward-looking interbank rates. As the Riksbank is now starting to publish average interest rates and indices for SWESTR, market participants can therefore start using SWESTR instead of STIBOR also at longer maturities. This is, of course, an adjustment for both lenders and borrowers, but the obstacles are hardly insurmountable. In other countries, for example, various adjustments have been introduced which mean that interest payment is delayed for a couple of days. In this way, market participants can see what the final interest was and make the payment a few days later. Market participants need to work together for an orderly transition It is thus clear that there are issues that need to be addressed before a transition to SWESTR can be completed. Since reference rates are used by many participants and in a large number of contracts, it is important that this is done in an orderly manner. It will be a development project running over several years. The Riksbank would like to call on all those concerned to start the transition now. Sweden should not be left behind in the global effort to start using transactionbased reference rates.
When I was at the IMF, we often observed countries running large fiscal deficits in the run up to an election to win votes from key constituencies, only to be followed by a crisis thereafter when budget austerity and monetary tightening would be necessary to restore stability. To dampen this cycle of boom and bust, many countries introduced fiscal councils to provide independent assessments of fiscal plans and performance and produce macroeconomic and budgetary forecasts. A review of international experience found that fiscal councils improve outcomes when they are operationally independent, have strong public engagement and have an explicit role in monitoring compliance with fiscal policy rules. 11  But experts have also gotten things wrong. Such as, not warning about the risks that resulted in the financial crisis of 2008. During a visit by the Queen to the London School of Economics in 2008, she asked why no one had predicted the credit crunch? The answer, in the form of a letter signed by 33 distinguished economists, admitted that “the failure to foresee the timing, extent and severity of the crisis and to head it off…was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”  12  The letter ends by noting the importance  of candor in dissecting the lessons learned and applying them in future. 13  Sometimes expert systems for quality control also fail.

39  Power, M. (1997), The Audit Society, Oxford: Oxford University Press 12  All speeches are available online at www.bankofengland.co.uk/speeches  12
Indeed in subsequent work (Cúrdia and Woodford, 2010), Woodford himself explores some of the ways that asset purchases might have traction, while Andrés, LópezSalido and Nelson (2004) provide a particular model that embeds imperfect substitutability arising from limited participation within a DSGE framework. Both the Federal Reserve and the Bank of England have bought longer-dated government and private assets, though with different emphases. 6 The Federal Reserve has purchased $ trillion (10 per cent of GDP) worth of Government Sponsored Enterprise debt and mortgage-backed securities guaranteed by them. In addition, the Federal Reserve has purchased $ billion (2 per cent of GDP) worth of US Treasuries. The Bank of England has bought nearly £ billion (14 per cent of GDP) of UK government bonds, together with a small quantity of corporate bonds. The Bank of Japan has also bought around ¥ trillion (3 per cent of GDP) of Japanese government bonds since the crisis deepened in late 2008; that is to be compared with ¥ trillion of purchases during their 2001–6 quantitative easing period. It is worth stressing that neither the Federal Reserve nor the Bank of England has assigned a key role to the expansion of central bank liabilities in the transmission mechanism associated with these asset purchases. In current circumstances, it is plausible to believe that commercial banks would be willing to hold the extra claims on the central bank as liquid assets at, or near, the existing vector of interest rates, rather than lending them on and driving down loan rates.

As households are unable to finance investment directly but most borrow the funds from a bank, the value of the stock of physical capital, qtKt, is equal to the level of bank loans, which, because banks are assumed to hold no other assets, is also equal to bank capital plus deposits 9)  . But bankers must exert (unobservable) effort (λt) per unit of loans each period to ensure that borrowers invest in productive physical capital rather than unproductive status symbols with private benefit and no recovery value for the bank. So in order for monitoring to be incentive compatible, the cost of monitoring must be less than or equal to the gross return on lending, 10) where Rkt and Rt are gross returns on loans and deposits, respectively. Putting these banking sector equations together and recalling that bankers do not consume but pass on their wealth when they die, we have two additional equilibrium conditions, a no-shirking condition for bankers : 11)  where  BIS Review 111/2010  and  ; and a law of motion for bank capital:  25  12)  ,  where τt is a bank levy/subsidy. Equation (11) shows that the leverage ratio is an increasing function of the spread between the return on capital but decreasing in the monitoring cost (λt). Equation (12) shows that bank capital accumulates according to the profits of surviving bankers.
Mr. McDonough considers the challenge presented by the Year 2000 problem Remarks by the President of the Federal Reserve Bank of New York, Mr. William J. McDonough before the Annual Membership Meeting of the Institute of International Finance in Hong Kong on 21/9/97. I am pleased to be able to share my thoughts with you today on an issue that is sure to challenge every one of our organizations for the next several years -- the Year 2000 and how the century date change poses a very significant risk for financial markets. As I look at the membership of the Institute of International Finance gathered here in Hong Kong, I cannot help but be impressed as to how truly global financial markets have become. Realizing that this meeting is being hosted here in Hong Kong, with the People’s Republic of China as the host country, further underscores how rapidly the world is changing and how interdependent we are. As a central banker, I worry a lot about events that could disrupt financial markets. Many of the events that I worry about are hypothetical. In those cases, a large part of my job is to convince others that the hypothetical event in question is sufficiently possible that it is in the industry’s best interest to work together to try to avoid the event and related problems. Today, I am sure that I do not have to convince you about the inevitability of the approaching century date change. It is a certainty.

What remains for me to do is to help put the dimension of the Year 2000 issue in perspective and suggest some of the actions that are necessary now if we are to avoid potentially serious problems down the road. As recently as the early 1990s, few banks and other financial institutions paid much attention to the Year 2000 problems. After all, using two digits in programs to represent the year made sense for decades. Many institutions didn’t recognize the problem at all; others speculated that changes in technology would somehow appear and solve the problem. Now, however, delays have come back to haunt those institutions that acted passively, or not at all, in marshalling the resources needed to manage the problem. Financial institutions depend on the proper sequencing of events and calculations based on dates, but the logic built into applications to sequence events and perform calculations will not work properly when we hit 2000. As a result, Year 2000 issues pervade every business area of all financial and non-financial institutions. As if that were not enough, the problem is not just limited to the business lines and the applications upon which businesses rely. Operating systems and the equipment on which business applications run also are reliant on microchip-embedded logic affected by two-digit year representations. Unlike business applications where the dates usually are visible, potential problems in operating systems and equipment usually are invisible or embedded in programs.
For these reasons alone,  BIS Review 21/2005  3  the use of petroleum revenues may in periods deviate from the 4 per cent rule. Spending was also increased in response to the economic downturn. We can therefore safely affirm that the fiscal rule has been normative for fiscal policy. At the time of the introduction of the fiscal rule in 2001 projections pointed to a continued increase in the use of petroleum revenues. We had to expect this growth in spending to lead to weaker competitiveness in Norwegian manufacturing, either through higher wages or an appreciation of the krone. With wage growth in Norway higher than abroad, the competitive position of Norway’s manufacturing industry has weakened by about 15 per cent since the mid-1990s. Competitiveness is about 4 per cent weaker than the average for the past 30 years. The krone has been influenced by high oil and gas prices and prices for other Norwegian export goods. Monetary policy has also influenced the path for Norway’s relative costs, but the nominal value of the krone is about the same as 10 years ago. Strong growth in public spending and expectations of moderately higher growth in the use of petroleum revenues now seem to have been factored into the cost level. Over the past 30 years manufacturing has been scaled back in waves. The last wave occurred around the turn of the millennium, but a substantial decline also occurred in the period 1977 to 1984 and from 1987 to 1992.

High prices for oil and gas and other export goods also contributed to an appreciation of the krone last year. Partly due to very high growth in demand for oil, the average oil price rose to almost 40 US dollars per barrel in 2004. Lately, the price has risen to more than 50 US dollars. Oil futures prices have also risen. Strong demand growth, particularly in the US and China, has resulted in high energy consumption. As a result of strong demand growth in 2004, excess global production capacity, which is largely controlled by OPEC, has now fallen to a low level. Consequently, small disturbances in supply or demand could have a relatively strong impact on oil prices. The Norwegian economy experienced a moderate recession in 2002 and the beginning of 2003. Since the first half of 2003, growth has again been high. It may appear that growth in the Norwegian economy has become more self-driven. In the early phase of the recovery, private consumption, traditional exports and fixed investment in the petroleum sector were the most important driving forces. In the last few years, household demand has been underpinned by low interest rates, high real wage growth and higher asset prices. Real wage growth was relatively high in 2004, although nominal wage growth was lower than it has been in several years. Higher imports from low-cost countries and intensified competition in a number of industries have kept inflation at a low level. These factors have led to brisk growth in household purchasing power.
For many other countries with less economic policy discipline, traditional fixed exchange rate regimes have proved fatal. Internationally, there is a tendency of a shift away from the traditional fixed exchange rate regime. Countries that place overriding emphasis on exchange rate stability must bind themselves more firmly to the mast either by establishing a currency board or by abandoning their national currency. Other countries allow their currency to float and establish a nominal anchor such as an inflation target. 4. The growing importance of securities markets  Let me now turn to an important structural development in the financial sector: the growing importance of securities markets. 1  Japan in the late 1980s has been mentioned as one example. Cf. Bernanke, Ben and Mark Gertler: Monetary policy and asset price volatility, and Yamaguchi, Yutaka: Asset price and monetary policy: Japan’s experience, in New challenges for monetary policy, Federal Reserve Bank of Kansas City (1999). 5  BIS Review 78/2000  Chart 5 Swedish households’ gross financial assets by instrument. Per cent  In most developed countries, securities markets are growing at the expense of financial intermediation. In the Nordic countries, this trend is most obvious in the savings market. Sweden is an example. Deposit savings have been reduced, whereas savings directly or indirectly in securities markets have increased. This affects banks’ earnings and funding structure. The trend is similar in Norway. In the euro area, there has been a sharp growth in issues of private securities after the introduction of the single currency.

I want to try to cast more light on the issues here. But, I would note that, in the history of monetary policy, regime changes have had to deal with the challenge of crafting communication that avoids creating more uncertainty. We have two, hierarchical, objectives: simply put, the resilience of the financial system, and the objective of encouraging growth (the counter-cyclical objective). These two can point in opposite directions, for instance in terms of banks’ ratios of capital to assets. The FPC has recommended that banks should strengthen their buffers of capital. What is meant by this? Let me tell you what we have concluded, and what we have not yet concluded. We are in a quite extended transitional phase, whereby the capital buffers of the banks are being increased to the Basel III levels. This process has around six years to run on the transition timetable. The FPC has recently said that it thinks banks should take steps to build up those buffers more rapidly than most firms have done recently under the Basel transition policy. (I say “most” because some firms have already made the transition.) But, we are not defining this objective as requiring banks to reach a level such as a 10% Core Tier One ratio in the next year or so on the new Basel III measure. Why not?