samchain/econo-pairs-v1 huggingface dataset:
Mr Bergström elucidates the economic situation in Sweden  Speech by Mr Villy Bergström, Deputy Governor of the Sveriges Riksbank, at the HSB Finance Day, HSB Bank, held in Stockholm on 18 November 1999. *  *  *  The prospects for the Swedish economy look better than for a very long time. We might have to go back several decades to find a period with such favourable conditions as those we are now experiencing. It is estimated that the Swedish economy will grow by as much as 3.6% this year, and the Riksbank forecasts that growth will be slightly higher next year. Despite the marked fall in production at the beginning of the 1990s, around 13% more is being produced now than at the end of the 1980s when overheating was worst. Part of the income from production has been used to pay off our foreign debt, which grew during the 1980s in a way that was unsustainable in the long term. This has been reflected in Sweden’s financial balance with other countries, i.e. the current account balance, which has been in surplus for a number of years and is expected to total SEK40 billion this year. After a number of years of large deficits, central government finances are now in surplus for the second year running. From having had the second worst central government budget balance in the whole EU at the beginning of the 1990s, Sweden’s public finances are now among the strongest in the union.

This process too can have contributed to a better relationship between inflation and growth although it is difficult to prove that this is the case. However, I am to say the least doubtful about a new economy in the sense of new technology leading to a sustainable increase in productivity. Wage formation - a challenge The strong upswing the Swedish economy is now undergoing is borne up both by domestic and international demand. Private consumption is expanding rapidly, at the same time as export is recovering and the public sector is beginning to demand labour again. In the present situation, it is considered that there are unused resources in the economy, but when growth increases the use of resources and inflationary pressure will naturally also increase. As has been said, the Riksbank must assess how strong growth in demand can be permitted without inflationary pressure compelling interest rate rises. A current theme is the discussion on changes in the relationship between growth and inflation, which I have taken up in general terms. Another very important part in the inflation process is wage formation and I find here that it is justified to give prominence to the risk that evident imbalances between different categories of wage earners can lead to the positive development we are now seeing being prematurely interrupted. The collective agreements that have recently been concluded do not give any particularly great cause for concern. Wage increases have been around 3% per year.
4  Represented by, for example, Bernanke (2005), “The Global Savings Glut and the US Current Account Deficit”. 5  See King (2011), “Global imbalances: the perspective of the Bank of England”. BIS central bankers’ speeches  3  So we need richer stories to make sense of what happened. It is precisely in that spirit that colleagues at the Bank for International Settlements6 have stressed the importance of gross capital flows. As Cecchetti has emphasised, whereas global current account balances (the counterpart of net capital flows) expanded in the twenty years to 2007 from about 1% of world GDP to about 3%, the gross capital outflows of all countries increased from around 3% to over 15% of world GDP (Chart 5). And the aggregate international investment position of all countries7 increased from under 50% to over 150% of annual world GDP. Opening up the possibility that gross capital flows matter transforms the picture. For example, as Borio points out, Europe’s gross capital flows were enormous, accounting for around half of gross inflows into the US in the run up to the crisis. And sufficient of that was invested in US ABS for the US’s mortgage crisis to be transmitted across the Atlantic, including to France and Germany, pretty well instantly in 2007 – and before the solvency of the banking system was in doubt. Even if gross and net flows had been equal, wouldn’t the composition of those flows have made a difference?

BIS central bankers’ speeches  3  decisively in the event of an excessive appreciation of the Swiss franc. This policy was maintained throughout the first half of 2010. In spring 2010, the news on the state of the Swiss economy turned increasingly positive although the forecast remained fraught with major uncertainties. It was not clear, for instance, that partial unemployment (short-time work) could be reabsorbed without a significant additional increase in the rate of unemployment. The recovery appeared to be on the way but was presumed to remain very fragile. At the same time, the sovereign debt crisis in Europe was causing major tensions in financial markets. In general, markets were commonly afraid that the euro could face long term structural problems, the flight to safe investments was universal and the pressures on the Swiss franc were substantial. The SNB considered that, at that time, the Swiss economy was unlikely to have gained enough strength to be able to withstand a further violent appreciation of the franc. Such a development would have placed the Swiss economy under such severe strains that the threat of a deflationary trend would have again come to the fore. The SNB was not prepared to take this risk; it resisted an excessive appreciation of the franc and in so doing was led to acquire large quantities of foreign exchange.
Naturally, a European safe asset would facilitate the development and integration of capital and financial markets in the euro area, as flight-to-quality movements would no longer imply flight-to-core-countries movements. The existence of a common euro-based safe asset would be particularly important in times of stress, as it could mitigate the possibility of monetary policy transmission being hampered in a context of fragmented bond markets. The effectiveness of monetary policy should be independent of the existence of country risk in the euro area. Similarly, a sufficient supply of safe assets would also facilitate the transmission of non-conventional monetary policy, by expanding the assets available in the event of a large asset purchase programme. It would allow monetary policy to expand the ECB’s balance sheet without squeezing liquidity in national sovereign markets. More generally, the literature has shown that a shortage of safe assets leads to a lower economic growth environment when monetary policy is constrained by the effective lower bound on interest rates. This is so because the scarcity of safe assets pushes the natural rate downwards. If central banks are constrained in their ability to lower nominal rates, a disequilibrium emerges in asset markets, giving rise to a “safety trap”. In this case, households, faced with deflationary pressures and (relatively) high real rates, have an incentive to save and postpone consumption, and firms, faced with low demand and high risk premia, to postpone investment.

[...] The fundamental impulse that sets and keeps […] (it) in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization […] (as a) process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” When confronted with this state of affairs – a state of affairs that is admittedly disquieting and unsettling – the worst possible reaction is to retreat into nostalgic denial, and to pretend that we are living in temporary blips of disequilibrium, in exceptional situations, that will at some unspecified point in time revert to a blissful state of economic, social, cultural, political and institutional equilibria. The only reasonable approach is to endeavour tirelessly and to the best of our technical ability to navigate a reality that is complex, characterised by change and prone to crises. If there is no going back, then going forward we can only go forward. Navigating this reality requires us to be constantly vigilant to the risks involved, a task that requires us to understand reality and to deal with it to best of our technical competences. Change brings with it challenges and opportunities, which challenges and opportunities easily morph into each other, and generate further challenges and opportunities. Page | 10  Of course, the financial system, like any other, cannot reduce risk to zero.
We'll do it with the necessary patience – looking at the 2025 horizon for full transmission, with persistence – maintaining restrictive interest rates for long enough, and pragmatism – monitoring actual economic data. But once more, monetary policy cannot be the only game in town. Fiscal policies should adjust and consolidate, first and foremost scrapping energy subsidies as the European Commission rightly advocated yesterday ; wage negotiations and mark-up decisions by firms should incorporate the expected decrease in inflation; and still more, structural reforms are needed more than ever to increase the supply-side capacity and flexibility in Europe and in France.3 And  2/3  BIS - Central bankers' speeches  this is where Capital Markets Union would greatly help to finance investment and innovation, and hence reduce inflation. Let us acknowledge it: if we are lagging behind today in Europe, it's in this domain of supply transformations, and not in monetary policy. 1 Smets and Wouters (2005); see also ECB NAWM model presented in P. Lane's  lecture on 16/02/2023, "The euro area hiking cycle: an interim assessment". 2 Badinger and Schiman (2023), Measuring Monetary Policy in the Euro Area Using  SVARs with Residual Restrictions American Economic Journal: Macroeconomics 2023, 15(2): 279–305, or; see also ECB-BASE model. 3 François Villeroy de Galhau, Letter to the President of the Republic, « How France  and Europe will defeat inflation », April 2023. 3/3  BIS - Central bankers' speeches

So far as foreign banks operating in Hong Kong are concerned, Hong Kong political risk largely seems to have disappeared as an issue. We have seen no exodus of banks from Hong Kong; rather, we have seen an increased appetite among the foreign banks to take on long-term HK dollar assets, including residential mortgage loans and syndicated credits. Although the margin on these have come down significantly over the last year, they are still attractive compared with the margins available to foreign banks in their home countries. The importance of international regulatory standards We do not anticipate any radical changes in Hong Kong’s system of banking supervision after 1997, nor in its attitude to the entry of foreign banks. No doubt, however, these will evolve in line with trends in global regulation. This reflects the guiding principle of our supervision in Hong Kong which is to follow international standards. There are a number of practical reasons for wanting to do so. First, it is in keeping with Hong Kong’s role as an international financial centre. Reputable foreign banks will only want to do business in a market where the rules of the game are familiar and credible. Their home supervisors will certainly feel the same way. There is thus absolutely no advantage for centres such as Hong Kong to compete on laxity or to market themselves as places where dubious transactions can be conducted and concealed.
The benefits of such a transformation would result in: (i) significant and sustainable reduction in total cost of IT systems; (ii) consistent customer information across core channels; (iii) dramatic shortening of time to market new and innovative products without new coding; (iv) straight-through processing capability with improved service standards and a reduction of risks due to greater automation; (v) increased scalability and cost reductions due to speedy and more efficient systems being freed for additional capacity; (vi) integration due to open communication standards with new applications; and (vii) ability for expansion as and when needed. A product-centric strategy, however, is vulnerable due to changing tastes of customers and the types of commodity, whereas a customer-centric strategy would allow the bank to differentiate itself on dimensions that are harder to replicate. In other words, customer-centric IT enhancement will enable superior customer service and understanding to meet specific needs. Customer layers as well as preferences too can change, but there will always be a new set of customers to replace each layer. 9.4  Shared or common IT platforms and close coordination  9.4.1 Banks cannot engage in a significant IT transformation by themselves or in a very short time. They need partners with long experience and proven track records who can help set businesses and IT targets and lay out roadmaps. Banks can phase this type of industrialization in several ways by streamlining existing systems through unification. For example, 3 or 4 core collection systems can be integrated into one and rolled out to other areas.

During the same period, the Electronic Transactions Act and the Payment Devices Frauds Act have been passed by the Government to authorize electronic transactions and to penalize fraudulent activities relating to card operations. These laws are intended to provide an enabling regulatory framework for banks and financial institutions to use IT facilities for their operations and mitigate risks that could arise from the abuse of systems and instruments. 7. Product-centered IT development and limited customer benefits  7.1 IT developments in the Banks have positively impacted their customers, but regrettably in a limited way. For example, although the RTGS system intended to facilitate third party customer transactions, many have not been able to use the system for speedy settlements. The RTGS and SSS systems were entirely funded by the Central Bank through grants made available by the Ministry of Finance. While banks in Sri Lanka enjoy these highly subsidized clearing and settlement facilities with enormous benefits, very little effort has been made to offer part of the benefits to their customers. Until recently, some banks charged their customers more than three times the charge the Central Bank levy on banks for RTGS transactions. Moreover, customers are not even encouraged to use the system due to rigid time lines imposed on third party transactions. 7.2 In the case of retail transactions too, the benefits are not always passed on to the customers.
As such, inflation was expected to fall back to around the 2% target by the end of 2015. But the Committee was also explicit that its willingness to tolerate this period of above-target inflation was driven by the weakness in our economy and by the concern that attempting to bring inflation back to target more quickly would risk derailing the recovery. Indeed, this desire to support growth as well as to control inflation has been characteristic of the MPC’s behaviour since the onset of the financial crisis. CPI inflation has been above its 2% target for much of the past 5 years, but during that period we have cut Bank Rate from over 5% to 0.5%, we have conducted an asset purchase programme – QE – on a scale equivalent to almost 25% of nominal GDP, and we have launched the Funding for Lending Scheme to boost credit growth to the real economy. I accept that for much of this period the Committee expected inflation to fall back to target more quickly that it actually did. Even so, it remains the case that monetary policy was loosened very aggressively at a time when inflation was persistently above target in the near certain knowledge that not doing so would lead to a deeper and potentially much more painful recession.

The operation was an extraordinary strategy to deal with extraordinary circumstances. And, we delivered on our pledge to exit promptly and effectively. Over the years, we have drawn on this experience to further refine the Linked Exchange Rate System, enhance risk management and strengthen the resilience of our financial system. 8. Recently, our country has also been faced with the need of taking some extraordinary steps to stabilise the stock markets and guard against systemic risk. Any further measures by the Central Government and their effectiveness will be closely watched. In my view, if the Central Government can devise a robust exit mechanism as soon as market stability returns and continue to push through financial reforms, including liberalising the capital account and internationalising the renminbi – in other words demonstrating its staunch commitment to reform and liberalisation – it will be able to regain and reinforce confidence within the country and around the world in the market development and investment environment in China. 9. Thank you. BIS central bankers’ speeches  3
While lacking a term structure on its own, this reference rate is robust and based purely on transaction data. 17. In early May, TMA completed a consultation with the industry on several technical refinements to HONIA. This is part of its ongoing initiative to further enhance the robustness of its benchmarks. It is now reviewing the feedbacks received, and will consider how best to put in place the relevant enhancements. 18. When these enhancements are done, TMA will work with the industry to promote development and trading of HONIA-based financial products. Later on, it will also try to promote trading in the OIS market, and hopefully develop an OIS curve from HONIA. But this would have to depend on market conditions. 19. While HONIA serves as an alternative to HIBOR, there is currently no plan to discontinue HIBOR. HIBOR has been in place for many years and is still widely recognised by market participants as a credible and reliable benchmark. Similar to a few other jurisdictions in the region, Hong Kong will adopt a multiple-rate approach. In other words, HONIA and HIBOR will co-exist in the market and market participants are free to choose between them. Meanwhile, TMA will continue to strengthen HIBOR to ensure that it remains in compliance with international standards. 20. Of course, we are facing the irony that if HIBOR remains, market players may see little incentive to develop and trade HONIA-based products. However, I encourage all market participants to start exploring how to incorporate HONIA into their business.

The Commission has set up a working group with EU authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other EU currencies to EU CCPs. From a supervisory perspective, UK CCPs have been recognised as third-country CCPs by the European Securities and Markets Authority (ESMA).3 And two UK CCPs have been recognised as being systemically important for the EU (Tier 2 CCPs). In line with the provisions of the European Market Infrastructure Regulation, this means that they are subject to ESMA’s supervision. This set-up helps to ensure that Tier 2 CCPs comply with EU regulatory standards. During this 18-month period of equivalence, ESMA will assess whether this set-up is sufficient to address risks to EU financial stability emanating from these two systemically important UK CCPs. As part of its responsibility for issuing the euro, the Eurosystem – which comprises the ECB and national central banks of the euro area – will develop its own stance on the matter and will contribute to ESMA’s assessment. At the end of this process, ESMA may recommend that the Commission deny the UK CCPs recognition to provide certain clearing services or activities in the EU if they pose excessive risks to financial stability. If this recommendation were to affect eurodenominated clearing services, the Eurosystem’s agreement would also be required.
Taking into consideration innovations in central bank legislation in other countries, this Act consolidated the new inflation targeting policy. The most significant change from the earlier legislation was to set a single, principal objective for the Central Bank, i.e. to promote price stability. The Bank was also granted the independence to apply its instruments in order to achieve this objective. Furthermore, it was assigned the task of maintaining Iceland’s foreign exchange reserve and fostering an efficient and reliable financial system, i.e. financial stability. The Act also stipulated that the treasury may not borrow from the Central Bank. Specific requirements were set out concerning transparency and accountability towards both the government and the public. For example, the Bank is now obliged to publicly account for its monetary policy and for monetary and exchange rate developments and its actions in these areas at least quarterly. The principal objective of current Central Bank monetary policy, as stated in the joint declaration issued by the Bank and the government in March 2001, is to keep inflation as close as possible to 2½%. Should inflation deviate from this target by more than 1½ percentage points in either direction, the Bank is to provide the government with a written public account explaining what has caused this deviation, how the Bank intends to respond and how long it expects that it will take for inflation to once again return to within the targeted inflation limits. The Central Bank has only one instrument at its disposal to achieve this objective: interest rates.

Income and wage determination is fairly centralised, and the social partners evaluate the effects of wage outcomes on employment. 2. In a number of countries that have switched to a monetary policy regime based on inflation targeting, fiscal policy is oriented towards reducing government debt and deficits. In Norway, fiscal policy has traditionally played an important role in demand management. This task is facilitated by the fact that the Norwegian government has greater financial leeway than most other countries, due to its oil revenues. Norwegian government authorities receive substantial revenues from the extraction of oil in the North Sea. Norway is the world’s second largest exporter of oil, and the budget surplus is currently approximately 11% of GDP. Oil revenues increase consumption possibilities. However, it is a challenge to manage these resources in a way that increases welfare for both current and future generations. A rapid expansion of the sheltered sector based on uncertain and perhaps temporary increases in petroleum revenues may lead to the situation called Dutch disease. To manage its resources, Norway has created the Government Petroleum Fund, which receives revenues from the petroleum sector, transfers the amount necessary to produce a balanced government budget and invests the surplus abroad. As long as the increase in petroleum income is kept outside the domestic economy, there will be less need for structural change and thus less need for exchange rates to change.