samchain/econo-pairs-v1 huggingface dataset:
Apart from preferential trade agreements, a factor of vital importance to the liberalisation of global flows of goods are multilateral agreements within the WTO/GATT forum. Thanks to GATT agreements, there has been a sharp reduction in customs tariff rates from ca. 40% after WWII to 6% in the early 1990s and to 4% at the turn of the century 19 . A gradual reduction of barriers to trade is a slow process; however, it brings permanent benefits to each of the interested parties, as it leads to specialisation in production, which brings notable benefits in the form of maintaining a competitive position on the global market. Proofs of growing links among economies can be found e.g. in the world trade statistics, according to which exports of goods and services have increased fivefold since 1980 20 . In 2005, the value of global exports corresponded to 29% of the global GDP, compared to 20% in 1980. This also indicates that trade develops at a much higher rate than the global domestic manufacturing. In the new EU Member States the export-to-GDP ratio has increased by 15 percentage points only over the past 10 years 21 . Changes in the growth rate have been accompanied by changes in the structure of exports, which have been significantly influenced by the foreign direct investment. Specialisation of production, as a prerequisite for competitiveness, leads companies to seek adequate locations allowing them to gain a competitive edge over rival companies.

An increase in capital flows in the form of foreign direct investments (and especially the establishment of branches of multinational corporations) and international trade liberalisation favour fragmentation of the production process, consisting in its division into parts located in different countries. Fragmentation of production is also enabled by enhanced transport and information transfer as well as their lower costs (i.e. the decrease in transaction costs). The fragmentation of production is grounded in international differences in the endowments of factors of production and - as a result - in prices of these factors. Multinational corporations divide their production among many different countries in order to minimise costs and make use of advantages of local markets, such as inexpensive labour force or a favourable location. Research and development, on the other hand, and the part of the production process that requires the use of the most advanced technologies and with the highest value added, are often located in the home country, also due to poor protection of the proprietary rights in developing countries. Such a conduct allows the company to benefit from comparative advantages related to different production locations. Moreover, it enables the use of international differences in exchange rates, interest rates, and government subsidies supporting selected types of economic activity, as well as of different structures of customs tariff rates and varying features of internal markets in particular countries, for the purpose of maximising profits. Research 22  17  Based on the data of UNCTAD.
A monetary policy stance that is aimed at stabilising inflation will thus also contribute to stabilising aggregate output and employment. The impact of monetary policy occurs with considerable and variable lags. Our analyses indicate that a substantial share of the effects of an interest rate change will occur within two years. Two years is thus a reasonable time horizon for achieving the inflation target. It is nevertheless conceivable that in a situation with a high rate of inflation and weak economic developments, Norges Bank may decide to apply a somewhat longer time horizon than two years to reach the target of 2½ per cent. Nor do we need to be in any hurry to raise the level of inflation in a situation where inflation is very low, while economic activity is high. By influencing inflation over time, monetary policy will not in itself cause unnecessary disturbances to the economy. A precondition for applying a longer time horizon is that financial market participants have strong confidence in low and stable inflation over time, and that wage formation has a nominal anchor. Frequent and marked interest rate changes can keep inflation under tight control, but will lead to wide variations in output and employment. This can be called a strict inflation target. Theoretically, we could also have chosen to stabilise output without taking into account variability in inflation. This can be called a strict output target. In Norway, as in a many other countries, we have chosen an intermediate solution.

At the same time, the fiscal guidelines state that “(in fiscal policy) considerable emphasis must continue to be placed on stabilising fluctuations in the economy with a view to ensuring appropriate capacity utilisation and low unemployment”. We see here that there is an overlap between the tasks that monetary policy and fiscal policy are intended to perform. This naturally raises the issue of whether there is still a need to coordinate fiscal and monetary policy decisions. BIS Review 59/2002  3  A precondition for effective interaction is that decision-making bodies recognise how their decisions will affect decisions of the other body. In the absence of such recognition, a decision will not produce the intended result. The economy may move in a highly unfavourable direction, with high interest rates, sluggish economic growth and a deterioration in the state’s financial position. A situation may, for example, arise in which Norges Bank tightens monetary policy to achieve the inflation target, while at the same time the central government authorities increase the use of petroleum revenues (more than implied in the fiscal policy guideline) in order to increase employment and reduce 1 unemployment. However, even without continuous coordination, a fairly good result may nevertheless be achieved if 2 fiscal policy acts as “leader” and monetary policy as “follower”, to use expressions from game theory. The authorities conduct fiscal policy knowing how monetary policy will react.
On one hand, there is the so-called “convergence” in economic growth. I mean, countries with a higher per-capita income grow less on average than poorer countries, because the richer ones have more capital and are closer to the technological frontier, so they find it harder to sustain high growth rates. Therefore, it is only natural for a country that has achieved the level of development Chile has to grow at a slower pace than it did three decades ago. On the other hand are some more specific elements, like the end of the boom in commodity prices and mining investment. Also that the world is no longer what it was during that boom, and us being a small, open economy are touched by that. All of it affects and is consistent with our vision of lowering our trend growth to 3.5 percent. But, why are we having such trouble in achieving that level of growth? There are two – related – essential elements behind, where we are in debt: investment and productivity. If we cannot ensure stronger growth in investment, our projections of economic recovery will hardly be met and the labor market will deteriorate further. Obviously capital is a major production factor which by itself has significant effects. But not only that, investment is critical for us to be able to achieve productivity growth rates of close to 1 percent in our non-mining sectors, an essential element in our trend growth forecast.

Let me briefly mention a few of the lessons from our experience in Covid-19. First the capital framework does not in practice support use of bank capital buffers in a stress as we intended7. And that would have mattered a lot in the absence of the substantial government support for the corporate sector. Second, we need to change our approach to stress testing in a stress if we are to avoid those stress tests further amplifying any downturn8. And third, in a shock of roughly half the size of the global financial crisis, it was only large-scale use of central bank balance sheets that calmed dysfunction in the system of market-based finance.9 We are continuing to learn through the Russia-Ukraine crisis too. We are exploring concentrations in, and interconnections across, energy and other commodity markets, the financial system, and the real economy, as well as the potential for feedback loops between them. And we have observed too that commodity markets are relatively opaque. We must now develop the macro-prudential framework to reflect the lessons from these recent stresses. Looking beyond recent events, neither the financial system nor the economy stands still: there are clear structural changes that macro-prudential policy must confront. 1.The rise of market-based finance: vulnerabilities that are as much global as domestic One key challenge is that many vulnerabilities are as much global as they are domestic.10 That includes non-bank, or market-based, finance. Non-bank financial institutions currently represent around 50% of global (and UK) financial sector 4/7  BIS central bankers' speeches  assets.
d. Transparent balance sheets can make it easier to unwind troublesome financial institutions and divest their assets. e. Monetary policy channels in a world with CBDCs may be faster and more powerful. Today monetary policy works by affecting the balance sheets of banks and some financial intermediaries, which do not pass on all the rate changes to final users due to market power and other frictions. If central banks can reach out to more and more agents (businesses, households), then their role will become ever more central and effective. Page 7 of 11  Central Bank of Chile September 2019  Lastly, use of CBDCs could be explored as a more efficient alternative for remittances. In Chile, immigration has had a sharp increase in few years. As in other parts of the world, they face high costs for their remittances when using traditional methods based on a structure of correspondent entities. An alternative option that is being used, although because of its nature is not possible to have detailed information, are remittances based on cryptoassets. While these remittances may be faster and even cheaper, they are outside of the regulatory perimeter and thus their customers are exposed to several risks (counterparty, liquidity, operational). The cross-border use of CBDC would reap the benefits of crypto-based methods, without their risks. Certainly, this would require coordination between the central banks involved.

For retail use, the motivations in emerging economies are mainly to reduce cash in circulation, or promote electronic payments, foster financial inclusion, and reduce informality and tax evasion. On the other hand, the motivations for wholesale use are mainly efficiency and security. We could also mention cross-border payments as a motivation for either of the two categories as well. In terms of the benefits, I can mention the following: a. Some research indicates that DLT may enhance market efficiency. DLT registers based on real user identities can improve competition, price transparency and liquidity. b. Crisis management around the Zero Lower Bound. In a world of low real interest rates, the impact of unconventional monetary policies, such as QE, nominal GDP targeting and forward guidance, appears to be limited (Blanchard, Dell’Ariccia and Mauro, 2013, Gagnon and Sack, 2018). Fixing negative nominal interest rates in a flexible way could improve the Central Banks’ toolkit (Rogoff, 2019). However, there Page 6 of 11  Central Bank of Chile September 2019  are some drawbacks. The general public could interpret negative interest rates as a new tax and probably legislators would restrict it (Rogoff, 2019). Also, price and wage rigidity can persist, due to habitconsumption, market power, organizational inertia, information frictions. Continuing with the benefits: c. In a world with a widely used CBDC, commercial banks could be smaller/less systemic. CBDCs can give central banks more intervention tools and reduce the risk of runs (Kumhof and Noone, 2018).
Suitable arrangements will also be introduced to ensure that relevant or equivalent experience and expertise in the cybersecurity field will be appropriately recognized. Cyber intelligence sharing platform 8. Last but not least, the third pillar of the CFI is to develop a new piece of infrastructure for the purpose of sharing intelligence on cyber attacks. Just like any conventional warfare, intelligence is the key to success. While individual banks can develop their own intelligence network, the coverage of such intelligence and the timeliness of receiving cyber attack alerts may at times be limited. At the same time, the entry barriers for launching cyber attacks, in terms of costs and the hardware and techniques required, have become much lower. The speed in which hackers may launch cyber attacks, which may well be targeting at not just one bank but several banks at the same time, has greatly increased. So it will be of great help if the banks could collaborate by proactively sharing information and intelligence of cyber attacks or the imminent threats of such attacks. The timeliness of receiving alerts or warnings from a commonly shared intelligence platform will be of immense help for banks to prepare for cyber attacks even before they are launched. 9. I am pleased to announce that the HKMA, in collaboration with The Hong Kong Association of Banks (HKAB) and ASTRI, is going to launch a Cyber Intelligence Sharing Platform, with access open to all the licensed banks in Hong Kong.

Finansinspektionen (Swedish FSA) recently announced that the major Swedish banks should prepare for their capital requirements to rise to the levels proposed in Basel III within the next few years, ahead of the international schedule for implementing Basel III. And I think that we should consider going further than Basel III in other ways in order to reflect the specific vulnerabilities and risks that exist in Sweden, for example by introducing liquidity requirements with specific rules for matching maturities per currency. This also seems to be the Swedish Government’s view. According to the Fiscal Spring Policy Bill of 2011, the government’s intention is – while the  2  For a more detailed discussion of the lessons of the Swedish crisis, see Stefan Ingves and Göran Lind (2008), “Stockholm’s solutions”, Finance & Development, IMF, December 2008. 4  BIS central bankers’ speeches  transition rules for Basel II still applies – to try different ways of strengthening the capital adequacy rules for systemically important banks beyond what will be required when Basel III is implemented. In addition, the Swedish government recently established a Financial Crisis Committee to review the current regulatory framework and the handling of the recent crisis. It will also propose changes that would reduce the likelihood of future financial crises, by using preventive measures, and allow them to be resolved in an efficient manner. This will be a wide-ranging review that will consider the issues I have briefly mentioned in this speech, as well as many other issues.
There can certainly be no doubt about the attitude of the European Central Bank. Those who had doubts in the past must have now changed their minds. The second line of action concerns financial markets. On this matter there is now a precise action plan, agreed at international level within the framework of the Financial Stability Forum. Within 100 days a number of regulatory, and self-regulatory, measures need to be approved, aimed at improving transparency and risk management. Among these measures some are particularly relevant: the introduction of standards for disclosing the exposure to off-balance sheet items; asset valuation methods where the underlying asset is illiquid; more generally, a higher degree of transparency for banks’ exposure to structured financial products. Rating agencies are called upon to improve their evaluation and to reduce possible conflicts of interest. As far as regulators are concerned, more international cooperation is required, for example through the creation of a “college of supervisors” for large and global financial groups. The third priority is to tackle the problems related to global imbalances, together with other main players of globalisation in the relevant bilateral and multilateral fora. Globalisation cannot be stopped. Governments must act, within the framework of existing rules. In this regard, Europe has a major responsibility. Concerning international trade, Europe can only gain from the completion of the Doha round, so that WTO rules are respected, particularly regarding intellectual property rights.

During the same period as the volumes of credit derivative have grown most, interest rates have gradually fallen and credits have increased. There have been unusually few bankruptcies. The interest rate differences between high-risk and low-risk bonds have therefore declined, that is, credit spreads have shrunk. The price of credit derivatives has fallen correspondingly. The compensation for risk has thus reached a level far below the historical average. The question is what will happen when economic activity shows a downswing and the number of bankruptcies begins to increase again. If investors have in general underestimated the credit risk, we may see a substantial adjustment in risk premiums. This will also lead to a fall in prices of corporate bonds and credit derivatives. In this situation, individual actors with large net exposures in credit risks may be affected by significant losses. But I would like to emphasise that this is a general line of reasoning. If risk premiums rise, this would have effects on most markets. There is no particular reason to assume that the credit derivatives market would be hit harder than others. My opinion is that each of these risks should be taken seriously. But they are nevertheless not so large that they risk bringing about a serious systemic crisis in the international financial system. I have now discussed the credit derivatives trade in the international market. Here in Sweden trade in credit derivatives is still very limited. But let me nevertheless round off with a few comments on the Swedish market and its potential.
It has long been known, however, that strong growth in credit and money aggregates often signals or accompanies the emergence of bubble-like asset price movements or incipient financial imbalances. We can therefore expect to obtain useful insights, in the future, from this second pillar in the fulfilment of our financial stability mission. Looking ahead, central banks face significant challenges. They are well equipped, however, both in terms of expertise and institutional framework, to take on new responsibilities without in any way compromising their core mandate, their independence or their credibility. Thank you. References T. Adrian and H. Shin (2009), “Financial Intermediaries and Monetary Policy”, contribution to the Handbook of Monetary Economics, forthcoming. C. Borio and I. Shim (2007), “What Can (Macro-)Prudential Policy Do to Support Monetary Policy?”, BIS Working Paper No. 242. C. Borio and P. Lowe (2002), “Asset Prices, Financial and Monetary Stability: Exploring the Nexus”, BIS Working Paper No. 114. BIS Review 147/2009  3  R. Caballero, E. Farhi and P.-O. Gourinchas (2008): “An Equilibrium Model of “Global Imbalances” and Low Interest Rates”, American Economic Review, 98(2) 358-393. S. Dubecq, B. Mojon and X. Ragot (2009), “Fuzzy Capital Requirements, Risk-Shifting and the Risk taking Channel of Monetary Policy”, Banque de France DT 254. European Central Bank (2003), Background Studies for the ECB’s Evaluation of its Monetary Policy Strategy, edited by O. Issing. F. S. Mishkin (2008), “Monetary Policy Flexibility, Risk Management, and Financial Disruptions”, speech at the Federal Reserve Bank of New York, 11 January 2008.

It would destroy the financial infrastructure and, through it, the entire social and economic infrastructure. Rebuilding a nation after this massive destruction would be a very painful and tedious challenge for everyone. What is meant by inflation tax? Modern governments have been given monopoly power by their respective societies to produce and supply currency with a single objective: maintaining its value to facilitate its use for transactions, use as a store of value and a unit of account. Governments are required to attain this objective by responsibly regulating its supply. Governments, when performing this task and as a cost-effective measure, have resorted to the habit of issuing paper currency notes and debased metallic coins thereby gaining a unique advantage. That advantage is the ability to produce it at a cost which is simply a fraction of its face value. For instance, a currency note may have a face value of 1000 units of money, but a government does not spend 1000 units of money to produce that note. The total printing cost of that note may be just a fraction, say, 5 units of money. So, in this case, by issuing a note to a value of 1000, the government makes a profit of 995 units of money. Such profits accrued to the government are known as “seigniorage”. Now suppose that the government uses this 1000 note to pay salaries to a teacher. The teacher is required to sacrifice eight hours of her time a day to get that 1000 note as her salary.
When turnover in a competitive market falls, prices normally decline, too, but in some respects the opposite now seems to apply. Local authorities, for instance, are trying to make up for a loss of tax revenue by raising prices for water, public transport and the like. From the media it looks as though there is a similar tendency in civil aviation authorities and some air transport, for example. 3. CPI and administratively priced services Percentage annual change 5 4  5 Administrated prices on services CPI  4 3  2  2  1  1  0  0  -1  -1  Ja  n95 Ju l-9 Ja 5 n96 Ju l-9 Ja 6 n97 Ju l-9 Ja 7 n98 Ju l-9 Ja 8 n99 Ju l-9 Ja 9 n00 Ju l-0 Ja 0 n01 Ju l-0 1  3  Source: The Riksbank  The Riksbank has no direct cause to regard administratively determined price increases differently from market increases: both contribute to inflation. But when the former accompany declining resource utilisation, it obviously complicates matters for monetary policy. In addition, these observations naturally raise other questions that have to be dealt with, not by the Riksbank but by parliament and the local authorities and have to do with competitive conditions in the Swedish economy. BIS Review 89/2001  3  The exchange rate Recently the exchange rate has also been the subject of a lively discussion.

To begin with this was perceived as just a temporary dip - a blip in the stocks cycle, a minor adjustment in the IT sector or something else. But stock markets seemed to be clearly over-valued and it would have been odd, particularly after such a long upward phase, if this had not led to a certain amount of overinvestment. There were also clear signs of insufficient saving, particularly in the United States. Consequently there were grounds for believing that once a slowdown had started, it could prove to be both relatively deep and long. Against this background, in the March Inflation Report we talked not so much about a V-shaped path as a U-shaped one or a “banana”. Since then the outlook has become darker but more of that later. For monetary policy, turns in the business cycle are not inherently a major problem, apart from the difficulty of foreseeing them. Falling resource utilisation, for example, should normally led to lower inflation in the future. That in turn can pave the way for interest rate cuts. In the past year, however, things have not been quite as simple as that. Two partly interrelated factors have contributed to this. One is inflation, which has been higher than expected and also above our target. The other is the exchange rate, which has been weaker than anticipated and also weaker than the real economy warrants. During a period in the late spring, moreover, the krona fell rather uncontrollably in the absence of similar movements in other currencies.