samchain/econo-pairs-v1 huggingface dataset:
In light of this, claims that the Riksbank is to blame for the loss of tens of thousands of jobs are rather questionable. Neither have our critics, despite requests, presented any convincing estimates to support this view. I think it’s a poor show on the part of government officials, trade union economists and trade union leaders to accuse the Riksbank of bringing unemployment upon tens of thousands of people. An interesting addition in this regard is that the most recent periods when inflation has been below target, at the end of the 1990s and the beginning of this decade, have been marked by unexpectedly high productivity and unexpectedly low imported inflation (which few forecasters had anticipated). So it’s not the case that the low inflation is a result of the Riksbank actively tightening monetary policy and dampening demand. On the contrary, these have been situations in which interest rates have been low. In spite of that, inflation has been weak owing to positive supply shocks. The impact of these shocks on employment differs from the effect produced by excessively tight monetary policy. Too low inflation due to high productivity growth and cheap intermediate goods stimulates growth, demand and employment. Consequently, the price of missing the inflation target has likely been lower in terms of  BIS Review 65/2004  3  growth and employment than if the cause had been a sharp monetary tightening that had caused demand to drop and inflation to fall.

What the Riksbank can do, in a complex world, is to influence resource utilisation and economic activity so that inflationary tendencies are kept fairly well in check, at the same time as a host of other factors affect employment in parallel and interact with the monetary policy effects. In this work we try to avoid unnecessary fluctuations in output and employment, but we are not able to fine-tune the economy exactly. The fact that the Riksbank’s power to influence employment is both short-term and relatively limited is not inconsistent with our ability to keep inflation in check. The latter is normally achieved by affecting inflation expectations. As long as our monetary policy is credible, it is enough to make small interest rate adjustments to keep inflation close to target. In this way, the Riksbank sends out a signal that it is keeping a close eye on inflationary tendencies and everyone knows that stronger measures await if inflation expectations take off in either direction. So, there is no simple relationship between monetary policy and employment. Nevertheless, for the sake of argument, let’s go along with our critics and assume that such a relationship exists. In that case, estimates merely show that even if the repo rate had been a full percentage point too high for a whole year, the effect on today’s employment situation would at most have been a few thousand jobs, and not the tens of thousands claimed by the Riksbank’s critics.
I have, however, for the reasons I mentioned earlier in my speech, been somewhat more pessimistic than the majority of the Executive Board as regards inflation assessments at the forecast horizon. Fluctuations of consumer prices a few tenths of a percent up and down around the target in an economy with a strongly accepted price stability regime are per se less important than the mode of functioning of the economy. I am more concerned about what can happen with inflation and growth after the forecast period if demand increases at the rate we have anticipated. The simple rule that says that monetary policy shall only react if the target for inflation is not met during the forecast period is a good help when conducting monetary policy. However, it is not reasonable to mechanically apply this rule in every situation. The consequences that the economic development can have for macroeconomic stability and inflation beyond the forecast horizon must also be weighed in. The risk for financial imbalances now being built up when indebtedness is increasing and of inflationary pressure accumulating at the same time must in my view therefore be taken into account in the monetary policy decisions. A development that I described earlier can be the consequence if the expansion of demand and credit continue to increase at a high rate. The quantity of money and lending, especially to households, are for instance increasing at present at a rate which is probably not sustainable in the long term.

In the most recently published inflation assessments, it was assumed that the price stability target was not threatened during the forecast period despite the growth of demand being so strong that use of capacity was under strain at the end of the period. The majority view of the Executive Board was therefore that there was no reason to increase the repo rate. This assessment was based on free resources in the initial situation, good productivity growth, low price increases on certain recently deregulated areas, low import prices and finally low inflation expectations. It is not per se strange that GDP can increase as much as 3-4% for a couple of years without inflation sharply accelerating, if the use of resources is low initially. If the pattern from previous cyclical upswings was to be repeated, price pressure should now increase. However, it has proven difficult to identify any exact and very stable correlation. As I mentioned earlier great changes have taken place in the Swedish economy. While there are still considerable deficiencies in competition in many areas, it is nevertheless not probable that inflation will accelerate strongly in the next few years. An important reason for this is that the price stability target has now  BIS Review 48/2000  4  obtained such strong support that inflation expectations are not increasing despite a cyclical upswing that is stronger than for a very long time.
Today there are a number of positive signs: bond market activity is reasonably buoyant, yields of peripheral countries have declined slightly and stock markets have picked up. However, two major weaknesses persist: –  Financial markets are highly fragmented within the euro area and sovereign yield spreads remain substantial;  –  Growth is weak and, here too, there are major disparities within the euro area. In the second quarter, growth stood at -0.2% for the area, after stagnating in the first quarter. Germany posted the highest growth, at 0.3%, and Portugal the weakest, at –1.2%. We are still expecting growth to recover very gradually next year. Before discussing how to address these problems, we have to correctly analyse the causes. In my opinion, three mutually reinforcing causes gave rise to the euro area crisis. 1. The main origin of the crisis lies in the lack of fiscal discipline on the part of most Member States. While these countries had had to make considerable consolidation efforts to fulfil the convergence criteria and to be allowed to join the euro, almost all of them became more lax as soon as they entered. In the first ten years of EMU, they ran up deficits and debts, including during times of growth. As a result in 2008, when the crisis started, these countries had no more fiscal room and their public finances deteriorated substantially.

Member States’ individual discipline has therefore been too weak, and collective discipline, which was nonetheless provided for in the Stability and Growth Pact, was not applied in practice. I would like to recall the spirit of this Pact. It was designed to be the fiscal pillar of monetary union. It was based on a peer-review mechanism. But, on the one hand, it was deliberately misinterpreted: whereas countries were required to maintain a fiscal balance over the cycle, without  BIS central bankers’ speeches  1  breaching the 3% of GDP reference value for the annual public deficit, they interpreted this to mean: “we can constantly run a 3% deficit”. And, on the other hand, the Pact was not respected, as sanctions were not imposed on Member States that breached these rules (including France and Germany around 2002). 2. The second cause of this crisis lies in the competitiveness gaps that had widened for a long time before the crisis. The economic rationale is easy to understand: when joining a currency area whose goal is to achieve an inflation rate of just below 2%, changes in unit production costs must be in line with this central bank objective, modulo the productivity gains. In all countries that did not abide by this calculation and this discipline, year after year, there was a loss of competitiveness that ultimately proved very significant. As regards these budgetary slippages and competitiveness losses, I hasten to add that markets did not play their role.
Muhammad bin Ibrahim: Towards resilience - are we on the right path? Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Insurance Summit (MIS) 2017 "Towards Resilience: Are We on the Right Path? ", Kuala Lumpur, 30 October 2017. * * * Nearly 30 years ago, the Governor of Bank Negara Malaysia highlighted several challenges facing the insurance industry in Malaysia at the “Malaysian Insurance Industry Seminar” organised by the Malaysian Insurance Institute (MII). He made four observations in his speech: Insurance companies accounted for only 3% of the assets of the Malaysian financial system. Only 1 in 10 Malaysians had a life insurance policy. Foreign insurers were at best, agents for their head offices. There was no urgency to develop local underwriting and management expertise. Due to lack of local technical expertise, the sector was significantly dependent on the international reinsurance market. This in turn curtailed the development of local expertise, perpetuating a vicious cycle. A “Stock-take” on the Insurance and Takaful Industry’s achievements and shortcomings In the decades since, the Bank has implemented major reforms to strengthen market participation, improve transparency and professionalism in sales practices, and encourage the development of domestic underwriting capacity to optimise retention of reinsurance and specialised risks. In 2009, foreign equity participation in the sector was liberalised further. After almost three decades of BNM taking over the task of regulating the insurance industry, it is worth for us to do a brief stock take.

This demographic structure thus not only contributes to enhance the potential of the economy but combined with rising incomes and improved standards of living, has resulted in increases in consumption spending. This resultant  BIS Review 64/2004  1  increase in purchasing power has strengthened domestic demand, making it an important driver of growth in the Asian economies. Indeed, these trends have strengthened the sustainability of consumption-based growth. As part of this process, women have become an important consumer target group with enhanced purchasing power. In fact, in several of the Asian economies, women are emerging as a key target market. This greater capacity for earning, spending, saving and investing requires ability for financial management, and hence the urgency for greater financial literacy. While financial literacy is important, regardless of economic status, it becomes even more important for those that are less privileged. For those that have less to manage, it becomes more vital to manage the finances even more effectively. It is also those that have been under-served by the financial system that need to be more aware of the financial services that they should be able to access, and the benefits that can be drawn from the various options available. They too have the same need for maximising the benefits from their limited resources, and to achieving financial and economic security. Strengthening their financial position becomes even more important for this target group.
12  All speeches are available online at www.bankofengland.co.uk/speeches  12  present because households face double jeopardy – risks to their lives and their livelihoods. Elsewhere, I have called this dread risk.14 At present, dread is double-barrelled. Yet this is not the only path possible for the economy. The willingness of companies to take back furloughed workers will depend importantly on their expectations about future demand for their goods and services. The stronger those expectations, the lower the likelihood of job losses. Firms will not make workers redundant if they need to rehire them, at a cost, soon afterwards. This lowers unemployment risk, raises household incomes, confidence and spending and thereby boosts firm revenues and employment, in a virtuous cycle. Back in the 1950s John Hicks called this dynamic a “super-multiplier” – “super” because the cumulative effects are amplified when emerging from recession.15 There is survey evidence to support this dynamic. The British Chambers of Commerce’s (BCC) weekly survey suggests firms’ demand and employment intentions have moved upwards in lockstep since April (Chart 11). Indeed, employment was close to balance by mid-May. Surveys of employment intentions and vacancies have also recently recovered from low levels. Chart 11: BCC survey Balance 60 Composite output 40 20 0 Reported employment  -20 -40 -60 -80 -100  2007  2009  2011  2013  2015  2017  2019  Sources: BCC and Bank calculations. Notes: Chart shows BCC Quarterly Survey and dashed lines show more recent weekly survey after Covid-19 crisis began.

There is a negative correlation, suggesting it might be difficult for the sectors which absorbed most workers pre-Covid to repeat this feat post-Covid. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Chart 14: Falls in output by sector against post-GFC employment growth Covid-19 sectoral output hits, % 40 20  Contribution to post-GFC employment growth, pp  0 -20 -40 -60 Accommodation & food  -80 -100 -1  0  1  2  3  Sources: ONS and Bank calculations. Notes: Sectoral output hits on y-axis are from Chart 2. Numbers on x-axis are the percentage point contribution of each sector to total growth in UK employment from its post-global financial crisis trough to end-2019. Other, structural, factors may further complicate the labour market picture. The Covid crisis has shifted relative prices in ways which could encourage companies to invest in machines rather than people during the recovery. The price of capital goods has fallen while the price of labour has increased because of the need for Covid-secure premises and practices. This shift in the relative price of capital versus labour will provide a headwind to the re-absorption of workers. A second structural headwind concerns the skills mix of those losing their jobs. Research suggests this is likely to be skewed towards those with fewest skills and least experience, especially the young. The Resolution Foundation estimates that high unemployment will result in a 13% lower probability of a new graduate being in employment three years after completing education.
In particular, the systemic risk concentration in a small number of global financial institutions is further increased and an increasing number of foreign jurisdictions are exposed to risks arising from the potential default of those banks. This aggravates the risk that these financial institutions may act as contagion channels for financial disturbances and may become or be perceived to be “too big to fail”. In addition, as several countries outside the European Union and the United States have observed, an unfair cross-border distribution of the costs for central clearing could arise. Finally, corporate governance arrangements of central counterparties may not be sufficiently reflective of the interests of all stakeholders, particularly as regards indirect clearing members. I am aware that several measures to control these risks are underway. Rules for central counterparties have been strengthened to ensure that they limit access restrictions to what is really necessary in order to manage the incurred risks and to ensure the central counterparties’ orderly default management processes. Similar governance rules now explicitly require central counterparties to adequately take into account the interests of clients and not only those of their direct members. Similarly, arrangements for the segregation and portability of client positions and collateral are being made. However, we will need to monitor very closely how these new requirements will work in practice, given the strong interest of global dealers in preserving their dominant position in the market.

In the area of clearing we need to monitor the impact of mandatory clearing not only on central counterparties, in terms of capacity and risk management, but the focus should also be on whether an increase in indirect clearing changes the risk profile of the direct clearing members. 6  BIS central bankers’ speeches  The reform will also have an impact on collateral needs, and we will hear more on this in tomorrow’s academic session on the topic. However, authorities should monitor the availability of high quality collateral and related collateral management services. New risks that appear as a result of innovation, such as those relating to collateral transformation, need to be analysed and addressed. We should not wait for the next crisis to happen but need to be constantly vigilant. Though substantial progress has been made, it is also true that only just over half of the FSB jurisdictions have implemented the reform agenda so far. Although these include the jurisdictions of the most important OTC derivatives markets, we need to be vigilant in order to avoid regulatory arbitrage – that is to say, business moving from jurisdictions that stick to the agreed agenda to others that lag behind. Little over two weeks ago, the BIS published its macroeconomic impact assessment of OTC derivatives regulatory reforms. The results are promising.
Elsewhere, the new framework for the prevention and correction of domestic and external macroeconomic imbalances has also been designed. This so-called Excessive Imbalance Procedure uses an early-warning mechanism based on a broad set of indicators which, together with timely economic analysis, should help detect sufficiently in advance those situations of vulnerability that may endanger financial stability in the euro area and give form to the measures needed to correct them. Progress in designing a permanent crisis-management mechanism has been considerable but clearly insufficient. First, temporarily, the European Financial Stability Facility was introduced, and later, now on a permanent basis, the European Stability Mechanism was set up, which it is assumed should start operating next July. The complexities involved in the design of these devices are evident, since they must combine strength and flexibility to provide financial assistance to ailing countries, while ensuring that incentives are maintained to pursue the ambitious fiscal consolidation and structural reform programmes needed for laying the foundations for sustained growth in the medium term. 4  BIS central bankers’ speeches  But exiting the crisis will not be possible unless a stronger European governance framework is accompanied by a far-reaching revision of national economic policies, enabling them to be fully adapted to the conditions under which a monetary union can operate. It is imperative that the authorities and economic agents should fully assume the consequences derived from sharing a single monetary policy. The soundness of public finances and the flexibility of economic structures are vital requirements in this framework.

This led to the third exacerbating factor: Instead of helping the situation, off-balance sheet investment vehicles established by the banks made it far worse. Suddenly, these investment companies could no longer refinance themselves in the market and the banks were therefore forced to inject their own liquidity. Initially, the liquidity bottleneck manifested itself in the US dollar money market, above all. On the one hand, this was due to the fact that sub-prime losses and refinancing needs mainly affected US dollar positions. On the other, it was because liquidity hoarding also occurred chiefly in US dollars. US dollar liquidity was particularly tight for European banks. Thus  BIS Review 150/2007  1  tensions spread rapidly from the dollar money market to the euro money market, but also to the Swiss franc money market. The extent of the upheaval on these three money markets can be seen in graph 1 which shows the path of risk premiums, using three-month funds as an example. Before the crisis, these risk premiums were almost negligible. They now amount to between 50 and 100 basis points, depending on the currency. The graph also shows that, so far, the crisis has moved forward in two waves. After normalising to some extent in October, the situation became increasingly tense from mid-November onwards, after more bank losses had been reported. Stabilisation by central banks The turbulence on the money market is challenging central banks.
Those data and risks have, in my view, altered materially over the past nine months or so, for a number of reasons. First, the world outlook is materially brighter than it has been for some time, perhaps at any time since the global financial crisis. This year’s Spring Meetings of the IMF saw the first upgrade of world growth forecasts for six years. As forecast errors tend to be serially correlated – forecasters’ models tend to smooth out the bumps and miss turning points - it is possible further upgrades to world growth could lie ahead. One reason to believe stronger world growth may prove resilient is that it appears to have a broader base than in the recent past, both compositionally and regionally. At a compositional level, there are early-stage signs that global growth may be rebalancing away from consumption and towards investment. Since the crisis, global business investment has been structurally weak, growing around 2 percentage points below its pre-crisis average. Meanwhile, growth in world trade has undershot world growth for the past 2 years, after a 5-year period in which the opposite was true. There are now signs those patterns are reversing. Investment in the US, the euro area and China appears to be picking up. So too is world trade. Global supply chains appear to be widening and deepening, with global trade and capital goods orders rising (Chart 13). It is possible greater optimism about world demand may be encouraging businesses to put their fortress balance sheets to work.

If we take trends in self-employment, temporary and zero-hours contract workers since 2000, we would expect these to have collectively directly subtracted from wages by around 0.6 per cent, or around 4 basis points from annual wage growth. 18  Again, although these estimates are modest they  probably understate the true effect, given they ignore any behavioural effects of these trends. Wages are not the only way in which these shifts in the nature of work may have affected labour market behaviour. As with unionisation, these shifts may also have widened the dispersion of wage rates within a given sector or occupation, with less collective-bargaining and more localised rates of pay. Vacancies data lend some support to this hypothesis. Charts 9 and 10 plot the distribution of offered wage rates in different occupations, comparing job vacancies containing the terms “self-employment” and “flexible hours” with those that do not. These vacancies data probably capture a particular segment of the self-employed and flexible working population, who differentiate their pay by more than the typical self-employed worker. Indeed, the ‘self-employed’ vacancies here are advertised by firms who invite applicants to become self-employed before hiring them. Nonetheless, these “violin” plots of offered wage distributions play an interesting tune. The distribution of offered wage rates is far wider for vacancies associated with self-employment and flexible hours than those without, within a given occupation. There is far less evidence of a “going-rate” for jobs associated with the self-employed and flexible working. This sounds intuitively plausible.