samchain/econo-pairs-v1 huggingface dataset:
The major Swedish banks fund about half of their operations on the capital markets of which a substantial part is in foreign currency. In simple terms this means that more than one of  8  BIS central bankers’ speeches  every two krona that are lent to Swedish households is ultimately governed by conditions that are set by anonymous capital managers in Sweden or elsewhere in the world. Moreover, approximately half of the banks’ funding consists of covered bonds which are partly held by foreign investors and partly by the other major Swedish banks. All in all, this means that developments on the mortgage market in Sweden are not only important to individual banks but also to the banking sector as a whole. If the providers of the banks’ market funding were to lose confidence in the banks, or in the situation on the mortgage market, the price of funding could increase and access to funding decrease. This would entail higher interest rates for households and perhaps also for companies, depending on the ability of the banks to parry such a situation. It is therefore vital that our financial system is resilient and inspires confidence, and that the development of household debt is deemed to be sustainable in the long term. We are in a situation in which the development of debt in Sweden and the Swedish mortgage market are not only matters of importance to us here in Sweden but also to international investors.

This means that the Swedish mortgage market is in fact not only a concern for us here in Sweden but also for many investors around the world. All in all, this means that shocks of various kinds can lead to the high level of indebtedness in the household sector causing problems for both the real economy and financial stability. This may make it more difficult for the Riksbank to perform its tasks. There are therefore good reasons for the Riksbank to care about household indebtedness. The analysis to date has been based on limited data The debate on whether the level of household indebtedness is sustainable or not has to date been based on partly inadequate data. In recent years, the analysis has largely been based on aggregate data on the households’ assets and liabilities from Statistics Sweden’s quarterly data. 5 However, over the last four years it has also been possible to some extent to base the analysis on the annual mortgage survey conducted by Finansinspektionen, in which information on randomly-sampled new borrowers and some aggregate data are gathered from the banks. However, the random samples in the mortgage surveys only cover a limited period and only refer to new loans. The random samples thus only represent only 1.6 per cent of the debts of the household sector. Consequently, they do not provide a comprehensive view of the situation in the loan stock, that is for existing loans.
As you see from Chart 13 – the blue line plots the ratio of broad money to nominal GDP – this trend continued for many years afterwards, including through the first fifteen years of the inflation targeting era[15]. Page 22  Chart 13: Demand for broad money increased from the 1980s as banks started paying interest on deposits  Sources: ONS, Bank of England, Thomas and Dimsdale (2017), Building Societies Association Year Books and Bank calculations. Broad money is defined as M4ex from 1997, projected backwards with official data for M4 to 1963 and estimates from Thomas and Dimsdale’s Millennium of UK data (2017) to 1945, based on Capie and Webber (1985) and Sheppard (1971) , and digitised here . Inverse velocity is defined as the stock of M4ex divided by annual nominal GDP. The rate of interest on broad money is a stock-weighted average of interest rates across the sectoral components of M4. These are based on annual averages of Divisia rates of return back to 1977. Prior to this they are based on data from Thomas and Dimsdale (2017) derived in part from estimates by Billings and Capie (2004)  . It may be that, in the latter part of this period, the very rapid growth of banks’ balance sheets – which was even more marked if you include their overseas balance sheets – was telling us something about the build-up of risks in the banking system.

They inevitably reduce real national income  Chart 16: Monetary policy cannot offset the fall in real incomes caused by a terms of trade shock  Page 27 Sources: ONS, Bank of England, Bloomberg Finance L.P. and Bank calculations. Nominal wages in the chart are private sector regular pay. It’s interesting too to ask what the world might now look like had this very steep path for interest rates been taken – but without any subsequent rise in import prices. The outcome of this experiment is the ‘alternative variant’ line in Chart 17. The predicted result – this despite the prior growth in household deposits – is a steep fall in inflation, well into negative territory. All this makes it a challenge, I think, to argue that the rise in broad money in 2020 is the main (or even an important) contributor to the inflation that’s followed. Chart 17: In the absence of big rises in import prices tighter policy would have pushed inflation into negative territory  Sources: ONS, Bank of England, Bloomberg Finance L.P. and Bank calculations. The ‘alternative variant’ reflects the same monetary tightening imparted in the ‘scenario’ but no increase in the contribution of import prices (energy and other goods) to CPI inflation relative to its pre-Covid average.
In such an environment, where domestic demand is no longer restricted within the amount of the current national income, the current account deficits are not always an indicator of fundamental imbalances. As has been emphasized by an increasing number of scientists, central bankers, and finance ministers, the imbalanced external accounts of individual countries have become rather the rule than an exception (A. Greenspan, M. King). In addition, empirical research, as well as the European institutions (European Central Bank, European Commission) point out that the process of convergence is inevitably accompanied by current account deficits. Secondly, the decrease in the long-term interest rates in the developed economies, and the accompanying reduction in the risk premiums in the developing economies, resulted in investors’ pursuit of higher yield in the developing markets. There are multiple factors determining these developments, on which I would not focus today. What should be underscored is that these global trends channel significant in amount capital flows to the developing economies. Irrespective of the monetary policy regime (fixed or floating exchange rate), the absorption of larger capital inflows inevitably puts the monetary authorities to trial. To illustrate the large scale of this process, I will give Bulgaria as an example, where the capital inflow (in the form of direct investment and debt) was 1.5% of GDP in 1998, and in the recent two years it approximates 15% of GDP.

As the change in indirect taxes and administered prices has a direct effect on domestic inflation, their catching-up adjustment should be effected before the years during which they will be used as basis for evaluation of compliance with the Maastricht criteria – i.e. before 2008. From this perspective, earlier timing of harmonization of some excise taxes is a step to facilitate significantly the performance on the inflation criterion, as it would eliminate the proinflationary impact of an increase in these taxes in the years in which such evaluation will be made. In conclusion, I would like to sum up that, in the light of the rapid change in the structure of our economy, the stable macroeconomic policy pursued by the Government and the BNB, and the prospects for EU membership, the concerns, expressed in the leaflet for this Conference, of possible overheating of the economy and the risks this entails for its stability, seem rather exaggerated. The country’s external imbalance financed by capital inflows is more of a signal of stability, credibility and potential for development of our economy. Of course, the economic policy makers are not and may not be complaisant. The challenges Bulgarian economy is facing are well recognized, and there is the will to take all the necessary measures to preserve the stability and growth in the economy. Ladies and gentlemen, thank you for your attention. BIS Review 22/2006  3
For commercial banks, their ability to market additional value-added services, such as savings products, loans or other types of credit to remittance recipients, will require the achievement of a critical mass of customer acquisition, as well as a higher technology delivery mechanism, to bring down the average cost of the investment required to serve that client. Micro credit programs and qualitative improvements of banking infrastructure, concerted with introduction of new financial instruments will also help to attract more remittances. Promoting microfinance organizations as participants in remittances market, could offer certain advantages to the microfinance sector, to the government and to remittance recipients. The costs of this expansion would primarily fall to the regulatory and supervisory authorities. We already took an important step in bringing these institutions under the Bank of Albania supervision which we expect to improve their status in the market by enhancing the confidence of operating with them. Microfinance institutions are already providing small amount loans to the low income class. Their existing programs allow them to leverage their network and geographic reach to assist remittance senders and receivers in gaining access to low cost financial services, as well as access micro-saving and investment products. The third area of our efforts is to channel the workers’ remittances toward country’s development needs. The formalization is a necessary step but does not ensure the role of remittances as a developing instrument.

The positive movements in household savings contributed to the growth of the lending activity, so according to the latest available data as of September 2017, loans increased by 4.3% on an annual basis, with a solvency that is almost twice as high as the statutory levels and volume of liquidity that enables optimal day-to-day operation. It is also worth noting that in spite of the political environment, the deposit growth and the trust in banks have been achieved in the environment of historically lowest interest rates, both on the financial markets in the euro area and on the domestic interbank market. Also, allow me to mention that in the forthcoming medium-term period, the deposit market will urge banks to make even greater efforts to modernize and increase their offer. We live in times of global digitalization, great advancements in information technology and its daily use in the financial sector. Innovation and application of modern technologies globally put competitive pressure on the traditional forms of banking, and encourage banks to constantly adapt, be proactive and inventive, and by changing their business models to new phenomena and conditions, ensure their market success. Such processes will inevitably touch the bank operations in the Republic of Macedonia. In perspective, the use of modern technologies will not only affect the market performance of banks, but will probably change radically their relationship with depositors and other clients.
Exogenous changes  0.5  in firms’ pricing power are one example – so-called cost-push shocks. Shocks to the exchange rate, the  0 Source: Bank calculations. economy’s supply capacity, or commodity prices also  10  See Blanchard, O., and J. Galí (2007). "Real Wage Rigidities and the New Keynesian Model". Journal of Money, Credit, and Banking, 39(1), pp. 35-65. 11 See Broadbent, B (2013), “Conditional guidance as a response to supply uncertainty”, speech at the London Business School. 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  6  Chart 2: … whereas after the financial crisis, the economy experienced a challenging monetary policy trade-off  have this flavour. 12  Because monetary policy’s  influence on inflation is predominantly an indirect one, via demand, in such circumstances inflation can only  Financial crisis and after  6  Inflation (%)  be controlled by delivering an opposing movement in aggregate spending. If something pushes up on  5  inflation directly, monetary policy can only bring inflation back down by causing a reduction in  4  spending via higher interest rates. The speed with 3  which this adjustment is delivered is determined by the monetary policy maker guided by their remit.

Because its remit requires it to support strong yet sustainable and balanced growth, in exceptional circumstances, and in consultation with the FPC, the MPC could have to optimise – subject as always to society’s risk preferences – over a longer time horizon in order to avoid inter-temporal disequilibrium, with the 26  E.g. Mian, A and Sufi, A (2014), House of debt, Chicago. See for example, Aikman, D, Haldane, A and Nelson, B, (2015) “Curbing the credit cycle”, Economic Journal, 125(585), June. Though not the only one. Others included the absence of a credible resolution regime for failing institutions, inadequate capital and liquidity standards, excessive complexity and opacity in the financial system, and cultural failings alongside other perverse incentives for excessive risk taking. 29 The full FPC remit can be found here: http://www.bankofengland.co.uk/financialstability/Documents/fpc/letters/chancellorletter160316.pdf 27 28  14  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  14  result that inflation could deviate below target temporarily in order to achieve a more sustainable return to the target and more stable growth beyond the conventional policy horizon. 6. The Current Trade-off How do these factors relate to the recent conduct of monetary policy? In May, the MPC said that the effects of a vote to leave the EU on inflation would depend on the balance of its effects on demand, supply and the exchange rate.
The Swedish banking sector was one of the first in Europe to be consolidated, largely because the banking crisis speeded up the restructuring process. The consolidation enabled Swedish banks at an early stage to rationalise overlapping branch networks and to reduce staff numbers. Even though several EU countries now have caught up with or even passed by us in terms of consolidation, the Swedish banking sector stands out by having the lowest number of both branches and employees per capita in the EU15. That might indicate that the limited improvement potential is due to Swedish banks already being highly efficient. But a low number of branches and employees is not necessarily the same thing as an efficient banking sector if it means that the range of financial services is being rationed. It may be the case that the Swedish banking sector is stingy rather than efficient. The Swedish banking sector is in fact relatively small, in terms of assets in relation to GDP, but this is probably not explained by low lending, which is average, but by the fact that relatively speaking Sweden together with Finland has the lowest level of deposits among all EU15 countries. On the other hand, that is because in comparison with households in many other countries Swedish households make greater use of other forms of saving than bank accounts.

On the contrary, there are several examples to show that Swedish banks’ service range fares relatively well in an international comparison. On the whole, it appears that Swedish banks are organisationally efficient and good at adopting new technologies in their distribution of services, but are less advanced when it comes to developing new products and services. Flexibility and long-term competitiveness In the long run, a company’s competitiveness is determined by its ability to adapt to changed conditions. How well-positioned are the Swedish banks to meet the banking and financial markets of tomorrow? I do not intend here and now to try to predict what the banking market will look like in ten years – that would be doomed to failure. But I would still like to take the chance to reflect on some of the trends that we nonetheless can perceive and what these might entail for Swedish banks. Here, I would like to highlight two such trends that are somewhat related. The first is disintermediation, which entails that banks’ role in the loan market is changing from own lending to only providing loans for which another investor assumes the risk. The other trend is commoditization, which means that certain kinds of financial contract – e.g. loans, funds or insurance – are becoming increasingly standardised and difficult to distinguish from one another. With that, the price should become the crucial factor in the consumer’s choice of product. These kinds of trends should be taken with a pinch of salt, of course.
The typical response from the other side of the Atlantic to such fears was that in a globalised world these imbalances are physiological and do not cause problems so long as they are financed with capital inflows. Moreover, the status of the dollar as sole international reserve currency used to guarantee such financing. In the end, the theory (which in fact is no more than an accounting identity) was put forward according to which America’s deficit was in reality the other side of the coin of an excess of savings in the developing countries, resulting inter alia from the fixed exchange rate policy vis-à-vis the dollar. The adjustment had therefore to start first of all from a modification of the policy of the other countries, rather than from the recovery of the savings capacity of American households. In synthesis, the prevailing theory up to recently was that the US imbalance was physiological and its correction, if any, would have implied no painful adjustment on the US economy. The second imbalance that has built up in recent years relates to the development of financial products that have loosened the ties between lenders and borrowers. Securitisation, which has enabled lenders to spread risk better, restructuring it and selling it to others, has however reduced the incentive to value it correctly, either by those who originated the product or those who acquired it.

From this standpoint, the gravest danger is to index wages to inflation and, in particular, to inflation of external origin. This is a well-known finding in the economic literature and broadly confirmed by experience. The countries with wage indexation mechanisms are those that have least capacity to cope with external shocks like the oil price increase. They tend to feed into a wage-price spiral, with negative effects on purchasing power and employment. This experience is not unique to the 1970s. Even today in the euro area, countries like Spain that still have indexing mechanisms have above-average inflation. Unemployment has started to rise again – the first sign of an economic slowdown; the unemployment rate in Spain is at around 9%, compared with 8% in the middle of last year. In Italy, where there is no automatic indexing, the unemployment rate is below 6%, the lowest level since the early 1980s. It would be especially damaging for employment and inflation if the reform of the Italian wage bargaining system currently under debate, aimed at tying wage levels more strongly to productivity, were to contain inflation indexation clauses. Even worse would be the situation if a possible indexation were to be tied, as some are advocating, to a price index of frequently purchased goods, such as that developed by ISTAT for analytical purposes and reflecting only the frequency of purchases, not their economic value.
Bigtechs already have a material footprint in financial services, and not least in payment services: Amazon Pay operates in 10 countries, Google Pay in 22 countries and Apple Pay in 25 countries. Facebook Messenger allows peer-to-peer payments in 3 countries and a Facebook wallet is reportedly in preparation. Moreover, Bigtechs like the GAFA companies have competitive advantages in terms of expanding their activities further in this area, including massive financial resources, strong brand recognition, a worldwide customer base and privileged access to cutting edge technologies. Therefore, Bigtechs, more than Fintechs, have the potential to fundamentally redefine financial intermediation by integrating the entire landscape of financial services into their own digital ecosystems. This does not mean that banks will be disintermediated; but rather that banks may be interfaced with Bigtechs’ platforms. Such a move is already gaining considerable traction in China. So, digital finance driven by Tech firms may not lead to a more decentralised system as the centripetal forces of network effects may benefit large conglomerates the most.

The average rate of change in the last three years is still negative in countries like Slovenia, Hungary, Latvia, Croatia, Bulgaria, indicating that some structural obstacles, such as high NPLS, new regulatory requirements, deleveraging of the private sector, still act as drag for a stronger credit revival. Also, cleaning up of the balance sheet of the banks may to some extent distort the data on the credit support. In order to make a qualitative dynamic review of the main forces behind the lending behavior of the banks in the region, we do a recap of the main findings of the CESEE Bank Lending Survey from 2013 until present day4. The recap points to several important conclusions. First, credit supply from being tight in the second half of 2013, was gradually eased until the first half of 2015. Afterwards it stabilized, and no major changes were observed. In all of the surveys, including the last one for the first half of 2016, the new regulatory environment and capital constraints, as well as the NPL ratio are pointed as key factors which adversely impact supply conditions. Second, demand for credits was improving throughout the whole period, since the second half of 2014 in particular. Furthermore, since 2015 credit demand for investments purposes is also visible, signaling positive structural shifts. Third, access to funding of the banks, in general was not signaled as problem even at the beginning of the survey, indicating that funding problems that emerged at the beginning of the global crisis were alleviated.