samchain/econo-pairs-v1 huggingface dataset:
There will inevitably be elements of tough love in such a process, and some disappointed ambitions, but I am confident that out of it will come a robust form of innovation. I hope also that laying out the principles of public interest and how they should be put into practice in the context of new innovation will help to deal with another difficult and perennial challenge of financial regulation. It is in the nature of innovation – and a good thing – that while some ideas succeed, many fall by the wayside. How many people remember Visi On, TopView and GEM? I have to admit I did not until I did some research for today. In the mid-1980s, they were rivals to Windows for the personal computer software market. More precisely, they were briefly rivals, but the rest as they say is history, as were these three rivals. In our world of finance, things can be more complicated, because dealing with failures itself raises public policy issues. There are quite often suggestions that central banks and financial regulators are anti-innovation and lukewarm on competition, because the results will at times be messy as the winners emerge and the losers fall by the wayside. We are not anti-innovation or anti-competition, but we are trying to manage our sphere of influence in order to achieve our public policy objectives, as required by Parliament and serve the public interest continuously. With that in mind, let me apply the framework to the world of payments and digital currency.

Kristina Persson: The property market and the current economic situation Speech by Ms Kristina Persson, Deputy Governor of the Sveriges Riksbank, Uppsala, 11 October 2005. *  *  *  Introduction Thank you for inviting me to take part in this early breakfast meeting. As you presumably know already, the issue of house prices has recently been on the agenda for discussions by the Riksbank’s Executive Board. So I thought I would begin by presenting my view of the role that indebtedness and house prices play in general for our monetary policy. Then I shall discuss whether there is a risk that the strong growth in lending and the rapid price increases in the housing market may accentuate a cyclical slowdown in the future. In conclusion I shall talk about the current economic situation in general in the run-up to our interest-rate decision next Wednesday. We are by no means the only central bank in the world that is discussing house prices. For a number of years now the rapid increase in house prices and the strong growth in credit to households have been on the agenda of monetary policy decision-makers in many countries. While the growth of lending has recently slackened in many countries, the level of household indebtedness is generally high. In Sweden the ratio of debt to disposable income is currently over 125 per cent, which is close to the levels that were reached in the early 1990s.
Mr. Heikensten gives a review of recent developments in the Swedish economy and monetary policy Speech by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikensten, given on Real-Estate Day in Stockholm on 15/5/97. Let me begin with a word of thanks for being invited to talk with you about the Swedish economy and monetary policy. Today I shall be considering three issues. First some words about the construction of monetary policy and why low inflation is a good thing. Then a look at what has happened in the Swedish economy since the crisis culminated in 1993. Finally I shall be saying something about the future outlook for the economy and for monetary policy. 1. Low inflation and economic stability The objective is low inflation The Riksbank conducts monetary policy with a target that is clear and unmistakable: the annual rate of change in the consumer price index is to be kept at 2 per cent, with a tolerance interval of ±1 percentage point. In order to fulfil the target the Riksbank varies its instrumental rate (the repo rate), which influences the level of economic activity and thereby inflation. Experience has taught us that the time lag before an interest rate adjustment has its full effect on inflation ranges from one to two years. This means that the Riksbank has to operate with a forward-looking perspective - the interest rate must be set in the light of forecast inflation one to two years ahead.

More institutions are expected to participate later this year. In this space, there are continuing ample and growing opportunities for Islamic finance to tap on as we ramp up in high value-added sub-sectors such as halal pharmaceutical and cosmetics, as highlighted in HDC’s sectoral development roadmap. Islamic finance also is primed to support initiatives under the National Investment Aspiration (NIA). As the new national investment policy strategy, the NIAs aim to increase Malaysia’s capacity to produce more complex and high-value products and create more high-skilled jobs5. This, in turn, will result in Malaysia producing new lines of goods and services beyond the traditional and upstream products, which will require support including in trade financing in developing businesses across these new product supply chains and penetrating new markets. The different nature of these needs, however calls for more well designed solutions that extend beyond readily available products. Conclusion Before I end my remarks, I would like to touch on the importance of calibrating trade finance processes with digitalisation. The World Bank’s Islamic Trade Finance Report recognises this as a priority area and calls for enhancements to online Islamic trade finance supply chain financing, and the use of blockchain technology. Such technological advancements that leverage distributed ledger technology and API-enabled trade finance platform can address long-standing issues in trade finance operations that mainly arise from the voluminous and manual nature of trade finance processes.
Because those mechanics are governed by national accounting standards, global markets face significant hurdles in exercising discipline across jurisdictions. Business practices differ. Legal systems may be unfamiliar. Deciphering balance sheets prepared under national accounting systems can be an extremely taxing undertaking. Considering those burdens alone, it is easy to agree that market discipline would be more effective under more harmonious - if not completely harmonised - accounting rules. But the task is formidable: a reporter from the Wall Street Journal questioned recently how accounting rules could be harmonised  BIS Review 29/2004  3  when, for example, Europeans and Americans do not even agree on which set of measures should be used in the kitchen. In our efforts to strengthen financial stability, central banks and supervisors have a legitimate interest in the quality of accounting standards and their effective implementation. We believe that in order to contribute to strengthening the banking system, accounting standards should support - or at least be consistent with - sound risk management and control practices in banks. In addition, they should facilitate market discipline by promoting transparent financial reporting of banks’ financial position and performance, risk exposures and risk management activities. Finally, accounting standards should facilitate the effective supervision of banks. This is why, as you know, the Committee has attached great importance to taking an active role in the international debates on accounting and promoting the supervisory perspective on key accounting issues, and we very much support the work towards convergence in international accounting.

Over the last few months we have completed significant changes in a number of important areas: we decided to calibrate regulatory capital to unexpected losses only; we have made significant improvements to the provisions relating to securitisation, credit risk mitigation and operational risk; we have clarified Pillar 2 and the calibration process; we have specified the treatment of revolving retail exposures, and we continue to make progress in preparations for the implementation of the Accord. Having reached consensus on the framework, the Basel II process is entering a new stage. Member authorities will now focus on transforming the text of the framework, which will be published at the end of June, into national rules. This will require national supervisors to conduct rule-making and adoption processes relevant to their jurisdictions, something that is well under way in many countries. In addition, the Committee agreed on the timetable for the implementation of the Accord in member countries. This is the second important development of last week’s meeting in my view. The Committee confirmed that the new framework will be implemented by year-end 2006 for those banks adopting the standardised and foundation approaches to risk. With regard to the most sophisticated approaches to risk measurement and management, the Committee considered the needs of national supervisors and of the industry and decided to provide an additional year.
The variety of interactions and overlaps between climate-related risks, biodiversity-related risks and other nature-related risks is precisely what is being studied at the NGFS taskforce, which I will speak about later. A useful approach on which experts are currently drawing to sum up the different facets of nature-related risk is that of “planetary boundaries”. According to the latest assessment, six out of the nine planetary boundaries have been crossed, increasing the risk of reaching a tipping point, past which our impact on the planet could prove irreversible. These limits include climate change and biodiversity loss, but also freshwater use, deforestation and land use, pollution,  Page 5 sur 13 ozone depletion for example; each of these boundaries interacts significantly with the others. Let us not fool ourselves: these interconnections generate a heated political debate. Many advocate for priority to be given to climate-risks, as we know them better, and as we have the right instruments at our disposal. Some of those who, on the contrary, support a broad approach to environmental risks – like the former American administration – aim in reality at “diluting” the climate priority. Today, I would like to call for extending our scope progressively but with ambition. First, climate change, on which we must proceed as swiftly as possible; second, biodiversity, which is at an intermediary stage; third, other economically material nature-related risks, including air and water pollution, land use, etc. to the extent they are not already covered as we work on climate and biodiversity.

Findings on Important Business Services identification On IBS, our current view is that firms have generally made positive progress against our expectations for identifying these services. This is good to see and reflects well on the sector as a whole. We also know that firms have taken a wide variety of approaches to the granularity with which they have identified their IBS. To illustrate this I will use a couple of examples of different approaches we have seen. These represent only a small subset of the IBS that firms’ submitted but I think illustrate the point. So, taking payment services as one example, we saw that some firms have identified all types of payments as a single business service, whilst others have split out different types of payment (for example payments made via individual systems including BACS, CHAPS and Faster Payments). Others have gone in a different direction, for example differentiating services for credit card payments versus debit card transactions. We have seen similar themes in other areas, such as services to do with lending. Here some firms have taken a granular approach – for example listing services such as “obtaining a loan” and separating different types of loan – while other firms have kept their IBS at a higher level or gone in different directions by identifying different types of products and/or the split between preand post-trade execution.
We have taken this step not because banks are weak but because they are in fact strong. Unlike in 2008, the banks are not the weak link in a crisis which this time is of public health; a crisis which is economic, but, at least in terms of its causes, non-financial in nature. This is notably the result of the regulations that we have implemented and reinforced over the last ten years. And it is what now gives us greater leeway to ease certain capital requirements, such as the counter-cyclical buffer, and to push back the entry into force of the Basel III accords by one year to 2023. All these measures should be considered in light of the – often heated – discussions on the degree of financial solidarity in Europe. Arguably, Europe could perhaps do more, but let’s not forget that it is already doing a great deal, thanks to major efforts from the Eurosystem or the easing – agreed quickly and unanimously – of the Stability and Growth Pact, which gives natural priority to national action. If we consider a possible role for the European Solidarity Mechanism (ESM), the amounts involved – around EUR 410 billion – would certainly be significant. However, the support provided by the ECB alone represents EUR 1,050 billion on the markets and up to EUR 3,000 billion in bank liquidity. Furthermore, the Monetary Union allows Italy and Spain to borrow at a far lower interest rate than before the euro.

It is now feeling the full force of a severe shock that is impacting both supply and demand. Our monthly business survey of 8,500 businesses carried out between 27 March and 3 April illustrates the effect of the lockdown measures that have been in force since 17 March. The measures have had a major impact on business activity, which was down by 32% in March, and consequently on our quarterly GDP growth estimate which was down by around 6% in the first quarter. In all sectors, activity is dropping, and in most cases, dramatically. This decline is not solely the result of the context in France. Orders from abroad have also been badly hit, as the epidemic is affecting the majority of French businesses’ major trading partners. In industry, the automobile, metallurgy, and machinery and equipment manufacturing sectors were the worst affected by the decline in activity. For  Page 2 of 8 industry as a whole, the capacity utilisation rate fell from 78% in February to 56% in March, which is the lowest rate ever recorded in the survey. In services, the greatest slump was seen in accommodation and catering. Construction sector activity also deteriorated significantly, as a number of construction projects were put on hold at the beginning of the lockdown period (Slide 3). In short, at the end of March, the economy was running at two-thirds of its normal pace.
While much has been made of the special relationship between the US and UK, it is not so special that the possibility of a reduction in the pace of additional stimulus in the US warrants a current reduction in the degree of monetary stimulus in the UK. 4  We are not alone in that belief – other major independent forecasters such as the OBR and NIESR share our view that unemployment will be above 7% in 3 years’ time. The MPC’s assessment of the outlook for unemployment and likelihood of hitting the threshold is described in the August Inflation Report, available on the Bank’s website at http://www.bankofengland.co.uk/publications/Pages/inflationreport/2013/ir1303.aspx. 4  BIS central bankers’ speeches  Movements in longer-term market interest rates are certainly relevant, but what matters most to you is what actually happens to Bank Rate, now and in the future. That is because the interest rates on 70% of loans to households and more than 50% of loans to businesses are linked to Bank Rate.5 And it is the Bank of England that controls that rate. We do not intend even to consider raising it before unemployment falls to 7%. When it does reach that point, we will control whether a rise is warranted, taking into account the strength of the recovery and the outlook for inflation. The upward move in market expectations of where Bank Rate will head in future could, at the margin, feed into the effective financial conditions facing the real economy. The MPC will be watching those conditions closely.

Low interest rates are leading to unusually rapid growth in lending and to a rise in asset prices. Companies have ample liquidity and thereby good scope for investment. Nevertheless, employment is responding very slowly – instead of employing more staff, employers are using their existing labour more intensively and efficiently. There are parallels here to what we have seen in the labour market during previous years in the similarly IT-intensive United States, where employment has increased with a lag relative to the cyclical upswing. This is because employers have initially pushed their organisations to the limit and got the most out of their earlier heavy IT investment before resorting to new recruitment. Given the intensive global competition and considerable scope for outsourcing operations, the labour market is constantly undergoing change with new opportunities for rationalising organisations. Many people are moving from an increasingly labour-scarce manufacturing sector to a service sector that is also rationalising. Data show that few of the sectors cutting staff in an economic downswing begin re-employing when economic activity improves again. The redundant employees are instead forced to move on to other occupations. The Swedish labour market appears to find it difficult to meet these structural changes. The major differences in unemployment between regions and between professions indicate that there is less mobility in the labour market than there could be and that few people are finding new job opportunities in new sectors or new locations.
This double play strategy, backed by massive prefunding offshore (which protected the speculators against the interest rate volatility in Hong Kong) occurred with increasing intensity and formed the BIS Review 2/1999  –5–  background to our controversial operations in the equity markets in late August. We used official reserves to purchase stocks to ensure that the speculators did not profit: in other words, we did the unexpected in order to prevent our predictable and transparent system from falling prey to manipulation. We had absolutely no intention of defending a given level of equity prices. Nor do we have any intention of playing a role in corporate decision making in Hong Kong. The substantial stock portfolio that we acquired during the operation has since been turned over to an independent body with wide representation, to be managed in a neutral and transparent manner. We further followed the market operation with a package of technical measures designed to strengthen the currency board system and make it less susceptible to manipulation. At the same time, stock exchange trading rules have been tightened. We were roundly condemned at the time for what many saw as a criminal breach of free market principles. Milton Friedman, for example, called our operation in the markets “insane”, and suggested that it was part of a plan to socialize Hong Kong. Less dramatic critics feared that it marked the beginning of the end of Hong Kong’s fabled philosophy of positive noninterventionism.

The first school, usually identified with Professor Paul Krugman of MIT, is best summarized by the two fashionable phrases “crony capitalism” and “Asian values.” The emphasis here is on inept domestic policies, inefficient resource allocation to politically connected individuals, unrealistic speculation - particularly in real estate - and imprudent public spending, all fuelled by over-borrowing, poor bank supervision, extreme moral hazard, and a hubristic attitude generated by several years of fast growth. The trends were unsustainable, and the Nemesis came with a loud and very messy bursting of bubbles throughout the region. Asia’s downfall, says Professor Krugman, “was a punishment for Asian sins, even if the punishment was disproportionate to the crimes.” The second school, led by Professor Jeffrey Sachs of Harvard, sees the crisis in less moralistic terms. The turmoil, he says, was a classic financial panic: a run on the banks and mass capital flight exacerbated by the maturity mismatch of many Asian banks and the currency mismatch of many Asian borrowers. This was accompanied by speculative attacks on currencies and the collapse of asset values. While this approach stresses the fragility of many of the banking systems in the region, it maintains that the Asian economies were in relatively healthy shape according to the usual indicators, and that the magnitude of the crisis far exceeded the faults and errors of individual jurisdictions. Both the Sachs and the Krugman schools have much in common. But their logic points in different directions.
Given that such a shift in resources cannot occur instantaneously, it should not be surprising if the US economy experienced a period of temporary higher unemployment. In that case, trying to stimulate growth and reduce unemployment to achieve the pre-crisis equilibrium through macroeconomic policies, as some are suggesting, might only delay the adjustment and lead again to an unbalanced path. On the other hand, some surplus countries, such as Germany, might be able to achieve higher growth than in the past decade, because of the increased potential resulting from their better positioning in international trade specialisation achieved over the years and if they are able to employ resources more efficiently in the non-tradable sector. The second issue that I would like to raise relates to the endogenous factors that induce rebalancing of growth between deficit and surplus countries. Theory suggests that if external demand falls, owing to the lower levels of growth in deficit countries, surplus countries will be able to export less and thus also experience lower growth. This would free up resources in the latter countries which should then be allocated to the non-tradable sector. Furthermore, the interest rate in surplus countries should fall, inducing residents to save less and consume more. However, these adjustment mechanisms may take time and may lead to temporary sub-optimal growth. It is necessary to investigate whether the adjustment process is indeed slow, especially after a crisis such as the one we have experienced.

At the latest Economic Policy Symposium held in Jackson Hole a couple of weeks ago, in a very stimulating paper, Eric Leeper set out a long list of questions that he felt should be addressed by researchers in order to fill the large knowledge gap in the field of fiscal policy and guide it closer to scientific analysis and away from its current state of alchemy. 1 Tonight I would like to add a couple of issues to that list, which are partly related to the international dimension of fiscal policy (often ignored by US academics). I will try to inspire our academic colleagues to give more thought to some issues which are key to the functioning of the global financial system and about which policy-makers often do not have sufficient understanding to inform their actions. The legacy of the financial crisis One feature of the financial crisis that has become apparent only at a relatively late stage has been the dramatic and widespread increase in public debt, especially in advanced economies. I will focus on this legacy and its implications for both the global financial system and the global economy as a whole. First, regarding the global financial system, high levels of public debt in major advanced economies are likely to have a non-negligible impact on financial market conditions over the next few years. We have seen in some cases how financial markets react to delayed fiscal consolidation, at times in a rather non-linear fashion.