samchain/econo-pairs-v1 huggingface dataset:
Debt and taxes also affect incentives. Set too high, they may dissuade people from working and investing. These effects are often captured in a relationship called the Laffer curve. Higher tax rates may boost tax revenues, but only up to a point. After that point, the tax take could actually fall due to the disincentive effects of higher tax. 2 In that event, both the taxpayer and the tax collector are worse off. The same applies to debt. There is a debt Laffer curve. If a debt overhang is sufficiently severe, the interest burden weakens debtor incentives to repay. In the event borrowers and lenders find themselves on the wrong side of the debt Laffer curve, both are worse off. 3 Non-economists sometimes have a different word for an overhang. Conveniently, this is found by simply transposing the syllables. What we face today may be called a debt overhang, but what it will feel like is a debt hangover. Like a hangover, it will slow activity in the period ahead. If it is severe enough, it may diminish incentives to work and invest. Too wild a financial party risks borrowers finding themselves on the wrong side of the Laffer curve the morning after. The McKinsey Global Institute has recently looked at the debt accumulated by ten developed economies over the past decade, including the UK and US. 4 Since 2000, gross debt in these ten economies has increased by around $ trillion, a rise of 60%.

This is why the recent regulatory changes on capital in Spain are crucial.9 Banking assets are however opaque, which – combined with the high leverage – make recapitalisation in private markets difficult, especially in crisis periods.10 Therefore, to reduce these problems, high transparency is extremely important: the stress tests and Bank of Spain’s publications on key bank variables are thus indispensable. If, after these exercises to promote transparency, some small groups of banks cannot fulfill the capital requirements, restructuring may be the only solution. Banks are still too highly exposed to real estate assets in their balance sheets and so the new haircuts introduced by the Bank of Spain go in the right direction. Geographical diversification (notably the internationalisation of some banks) and better risk management are also crucial factors, I believe, in addressing the current challenges. But also the strengthening of corporate governance is of utmost importance to avoid excessive risk-taking. In other words, transparency and risk management are important, as I said, but incentives as well! In this sense, the restructuring of some groups of banks may be vital.11 Second, looking into the future, with the crisis behind us, higher bank capital requirements will also play a positive role by reducing incentives for excessive bank risk-taking.12 On that  8  See Iyer and Peydró (2011) and Rochet and Vives (2004). 9  See Jiménez, Ongena, Peydró and Saurina (forthcoming). 10  See Morgan (2002). 11  See Cuñat and Garicano (2010). 12  See Freixas and Rochet (1997) and Acharya and Richardson (2009).
This slide shows that our bank tellers, vehicle mechanics, hairdressers, and bus drivers earn a good (median) wage that is quite close to the median. In fact, our bus drivers appear to be paid just below the median in Singapore, comparable to their counterparts in Australia, US, UK. And hairdressers in Singapore are doing amazingly well. They earn much closer to the median wage compared to their counterparts in Australia, the US and the UK. The story of our bus drivers is interesting. Since the introduction of the Bus Contracting Model by the Ministry of Transport and the entrance of foreign bus operators, there has been greater competition in the bus industry, raising the game. Bus driving became more professional. The focus is on driving well, increasing fuel efficiency, and meeting the targets set by the Ministry of Transport on frequency and timeliness. More women have also been drawn into the industry with the introduction of flexible working arrangements and maternity leave. The result is that the dependency on foreign workers has been reduced, and productivity and wages have increased. Now our bus drivers are making close to the median wage in Singapore. 15 / 17  BIS central bankers' speeches  In sum, demographics is not destiny and economic dynamism is not about numbers. Dynamism is about quality – the quality of our workforce, the quality of our enterprises, and the quality of our institutions. It is about high levels of efficiency and productivity.

Most of all, being open in spirit and mindset, staying open to diversity, being comfortable working in multi-cultural settings, thriving in a globalised world. We must also remain a resilient society. Able to ride the ups and downs of business cycles and structural changes. Able to adapt, learn new skills, continually improve. We must become a more innovative society to be dynamic. Willing to experiment and accepting failure as a halfway house to success. Investing in R&D, leveraging on technology. Most of all, having an enterprising spirit – always seeking new and better ways to do things. In the end, we must be an inclusive society. It is probably not a coincidence that IPS has chosen to make the theme of this conference ‘Together’. The two forces that offer the most promise for sustained economic dynamism are globalisation and technology. But how far we can reap the benefits of globalisation and technology will depend on how well we bring all our people together. The path of dynamism is also the path of continuous disruption, even dislocation. To sustain the momentum and consensus in favour of globalisation and technology, we must help those adversely affected by them and equip Singaporeans to succeed. And to maintain cohesion in the face of population ageing and growing healthcare burdens, those who have benefitted from our growth and dynamism must contribute to the larger society – through taxation, philanthropy, community service. We then become not just a dynamic people but also a compassionate one.
Convinced that the Albanian economy would benefit in the medium and long run from lower public debt, we have encouraged and supported all measures taken in this regard. We deem that this philosophy should lay at the foundation of the expected 2011 midyear budget review, as well as other medium and long-term public finances projects. The external sector is another structural weakness of the Albanian economy. Partially also in response to this concern, the Bank of Albania has underlined constantly the need for deepened structural reforms to support a new economic growth and development model for  BIS central bankers’ speeches  1  Albania. This model should inevitably materialise through increased efficiency and competitiveness of our products and services in domestic and international markets. On the other hand, it requires a more rational attitude of the private sector towards the current economic context as well as a more careful financial-risks management. What is more, the Albanian economy needs to become more attractive to foreign investors by continuously improving the business climate, the legal framework and its implementation, as well as by providing educated and cost-attractive labour force. Thirdly, seen in the above-mentioned setting, our policies should remain prudent to guarantee the country’s macroeconomic equilibriums. As the crisis showed, prevention is better than cure. In this regard, political and structural measures that contribute to stability have a positive impact in the long term horizon.

*** During the consultations, I found that we share with the IMF and the Ministry of Finance the same views on the need to maintain and further strengthen macroeconomic stability. Moreover, there is a modern consensus on division of duties between the two central institutions of macroeconomic administration (central bank and Ministry of Finance) as well as a concrete commitment to continue this co-ordination in the future. In conclusion, I would like to reiterate that the Bank of Albania remains fully committed to observe the inflation target of 3%, and continue to orientate its monetary policy exclusively to this function. 2  BIS central bankers’ speeches
The reactions and comments regarding a couple of our speeches in the early summer indicated that some analysts perceived them in a way that was not intended. The speeches were interpreted as though they pointed forwards although we had provided information on changes in our way of signalling and said that we did not intend to make any forward-looking comments that would provide clues regarding the next interest rate decision. Some concluding reflections on communication The fact that our message had not entirely come across is partly due to some market agents not understanding what we actually had communicated. But it is also partly because we have not been sufficiently clear in our communication. I believe this is quite simply a learning process. We at the Riksbank and those we want to communicate with – the general public, journalists and market analysts – must learn to understand one another. In this respect we will try to improve. One step in this direction is the decision to name the Executive Board members in the minutes of the meetings. In this way it is possible to follow how each member has reasoned. A further step that we recently decided on is to also publish forecasts for the repo rate and a small number of key variables at the monetary policy meetings held between the publication of the Monetary Policy Reports. If, for example, we had published a new interest rate path in May, I believe that the market would have been less surprised in June.

This included measures to ensure adequate levels of capital and liquidity for the distressed foreign entities operating in their jurisdictions, or to ensure an orderly unwinding of their local operations in some cases, while maintaining confidence in the overall financial system. And third, while there were significant benefits associated with a closer exchange of information and policy discussion between regulators at the international level and the regional level, the conduct of policy actions that followed was more on a bilateral basis. A case in point was the US dollar swap lines which were available selectively. So, while financial systems in Asia were able to successfully weather the impact of the global crisis, recent experience points to an important gap in the coordination of supervisory policies and crisis resolution, both at the international and the regional levels. BIS Review 105/2010  1  Currently, as we know, efforts to strengthen financial regulation and supervision are being undertaken at all levels. The most important and also the most widely known is the BCBS’s reform, which aims to increase the quality, quantity and international consistency and transparency of bank capital, to strengthen liquidity standards, to discourage excessive risk taking, and to improve the overall risk coverage framework. The proposed new international standards, while important, are complex and will pose a critical adoption and implementation challenge. Another important point at issue is the proper treatment of macroprudential policies in the context of financial regulation and supervision.
Meanwhile, labor productivity has been dwarfed by the lack of capital and lagged behind the regional standard. On the overall picture of employment, Thailand has had very low unemployment but room to increase productivity remains in the area of reducing underemployment. Let me discuss an example of the agricultural sector. This sector has seen a steady decline of its share in GDP from 1980 to 2007. In contrast, its share in the country’s employment remained high, though reducing from 65 to just about 40 percent of total labor force during the same period. Meanwhile, yield of major crops per unit area is significantly lower than yields in other agriculture exporting countries. In fact, Foreign Agricultural Service of USDA, estimated that Thailand produces rice yield about 430 kilos per rai compared with the world average rice yield of 653 kilos per rai. There is thus ample room to increase productivity in this sector through better land and water management as well as a more systematic farming. Going forward, the problem of labor scarcity, though not unique to Thailand, will also become more of our concern as we are moving into aging society, while population growth remains low. Increasing productivity is therefore the solution to sustain potential growth as well as competitiveness. And, to do so, it is crucial that we increase investment, such that there is sufficient capital formation to facilitate productivity growth. On this note, I am pleased to say that collective effort to increase the level of investment has already taken place.

  Various previous studies have found that employment and financial security can have an important effect on people’s happiness, over and above their impact on income and wealth. 36  For example, it  is well-established that having a job improves significantly people’s confidence and self-esteem, over and above any effect on pay. Those conclusions are borne out here. We find there is a statistically significant role for unemployment and arrears in explaining household well-being, over and above the effects from income and wealth.   The effects of unemployment and arrears on well-being are quantitatively large. To gauge that, we can translate them into income-equivalent terms using our welfare regression. The effects of having a job are, in well-being terms, equivalent to around 3 months’ extra income on average, across all households. 37  This is consistent with powerful effects of work and financial security on happiness. 38  Using this framework, our earlier quantitative estimates of the impact of looser monetary policy can be translated into welfare terms. Charts 22 and 23 show these welfare benefits, broken down into their component parts (income, wealth, unemployment), looking across the age and income distribution. A few key points stand out. First, the effects of monetary policy in lowering the probability of unemployment have a very material impact on household well-being. These effects often account for more than half of the total welfare gain for households across all cohorts.
Even at an average price decline of 20% to 30%, we can expect a situation in which a substantial share of  10  Cf. Cuestas, J.C., M. Kukk and N. Levenko (2021), Misalignments in house prices and economic growth in Europe, mimeo; and Muellbauer, J. (2018), Housing, debt and the economy: a tale of two countries, mimeo. The ECB uses a similar model. Cf. ECB, Financial Stability Review, November 2015 and May 2021. 11 Cf. for example Poterba, J. M. (1984), Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach. In the user cost model baseline, the long-term expectations regarding the real mortgage interest rate are set at the historical average of 2.6%. The versions ‘low interest’ and ‘very low interest’ are based on a real mortgage interest rate of 1.5% and 1.0% respectively. Page 9/12  mortgage loans is no longer adequately secured in the event of a default. As a consequence, banks would incur losses should borrowers default on these mortgage loans. These points demonstrate that the banking system is currently highly exposed to the vulnerabilities on the mortgage and real estate markets, and could face considerable losses in the event of an abrupt increase in interest rates. ... but adequate resilience is ensured overall due to capital buffers  At the SNB, we use stress tests to simulate the stress scenario of an unexpected and rapid rise in interest rates, also in quantitative terms.

the costs resulting from interest payable, amortisation and maintenance – do not exceed one-third of the borrower’s gross income. In the case of residential investment property, these costs should not exceed the rental return. The term ‘residential investment property’ comprises apartment buildings as well as privately owned apartments and single-family houses that are rented out. Slide 3 shows the share of new mortgage loans at various imputed interest rates that do not meet the conditions of this standard metric, i.e. where the loan-to-income (LTI) ratio is too high. The data illustrate that affordability risks have risen in all segments since 2014 and are currently at historically high levels. The sharpest increase has occurred in the residential investment property segment. Between 20% and 30% of newly granted mortgage loans for residential investment property would be deemed unaffordable if the mortgage interest were to rise to 3%. Should the interest rate climb to 4%, this proportion would amount to around 40%. In the owner-occupied residential property sector, these shares would come to roughly 20% and 30% respectively. These figures on affordability risk do not mean that, in the event of an interest rate rise, mortgage loan defaults of this magnitude would actually occur. After all, the calculation used here considers only borrowers’ income and not, for example, their general financial situation. Moreover, the figures are based solely on newly granted loans, not outstanding loans. Overall, however, the figures do show that the debt level of mortgage borrowers compared to their income has increased sharply in recent years.
Yet, even when the Hong Kong dollar and the financial markets were under great pressure, and the economic and monetary conditions were extremely difficult, all the measures to address the financial crisis, including the market operation undertaken last August for the purpose of preserving order in our financial markets, were entirely formulated by the government of the HKSAR on its own. During this period of financial turmoil, the Central Government has strictly adhered to the provisions of the Basic Law. The Central Government has shown confidence in the ability of the HKSAR government and has not interfered in Hong Kong’s monetary affairs. Furthermore, the success of the HKSAR government in addressing the financial turmoil has fully demonstrated the effectiveness of “Hong Kong people ruling Hong Kong”. The confidence of the international financial community and the Central Government in the ability of Hong Kong to maintain monetary stability and to continue the development of Hong Kong as an international financial centre have also been enhanced. The Monetary relationship between Hong Kong and the Mainland 8. An issue related to monetary autonomy is the handling of the monetary relationship between Hong Kong and the Mainland under the “one country, two systems” principle, especially given that the economic relationship between the two places has become increasingly close. A precise and clear approach to the monetary relationship between both places is one of the key factors in maintaining Hong Kong’s status as a financial centre.

Härle et al (2010), “Basel III and European banking: Its impact, how banks might respond, and the challenges of implementation” McKinsey & Company. Richardson, G (2006), “Determinants of tax evasion: A cross-country investigation”, Journal of International Accounting, Auditing and Taxation 15 (2006) 150–169. BIS central bankers’ speeches  3
*** The successful introduction of the euro represents one of the greatest achievements in modern European economic history and, in order to understand how it came to be that 11 European countries decided to relinquish their monetary sovereignty and adopt a common currency, one must first look back, at least briefly, over 50 years of European integration. The first concrete step towards achieving this goal was taken when the continent lay in ruin following the Second World War and six countries signed the Treaty of Paris in 1951 establishing the European Coal and Steel Community (ECSC). This Treaty not only led to the removal of barriers to trade and the creation of a “common market” in coal and steel products, but also transferred powers previously exercised by the Member States in the coal and steel sectors to a newly established and independent High Authority. This showed how economic integration could serve not only as a means of fostering increased trade and improving economic welfare, but also how it could act as a driving force behind greater political integration by increasing the interdependencies between the participating Member States. When, six years later, the same six countries signed the Treaty of Rome establishing the European Economic Community (EEC), the same approach was extended to virtually all sectors of the economy with the explicit aim of creating an ever closer union among the peoples of Europe and a common market within which goods, capital and labour would circulate freely.

In the past, the Swiss franc was overreacting to the dollar’s fluctuations, so that the pain of an appreciation of our currency relative to the greenback was exacerbated by a simultaneous appreciation of the Swiss franc relative to the German mark. This double whammy effect, attributed to the narrowness of the Swiss franc market, was highly penalizing for our export sector. Since the introduction of the euro however, this pattern is no longer observed. Thus, the evolution of the Swiss franc sticks closer to our economic fundamentals. I will address this issue more extensively later on and argue that this trend can be generalized to apply to other currencies as well. (b)  The euro as a means of payment  Those who thought that the euro would make the Swiss franc obsolete as a means of payment were also mistaken. True, our ATM machines have been adapted to provide euro banknotes, so that it is now possible to pay in euro almost everywhere in Switzerland. Yet, despite these efforts, the demand for euro notes is still weak and those notes do not circulate any more extensively than French francs, Italian lira and German marks used to. In truth, it may well be that the expenses incurred to transform all those ATM machines ended up being a misallocation of resources. In stores and restaurants, prices denominated in euros are usually not very attractive. Obviously, small shop and cafe owners are not thrilled by the idea of accepting cash payments in euros.