samchain/econo-pairs-v1 huggingface dataset:
As I have said before, easily the Committee’s biggest judgment in recent years has been that inflation will gradually fall back to the 2% target – initially as the effects of higher VAT, energy  4  BIS central bankers’ speeches  and import prices diminish; and then as slack in the economy bears down on wages and prices. Though it has fallen significantly over the past six months, from over 5% to 3.5% on yesterday’s reading, it remains uncomfortably above target. The MPC will guide inflation back to target in the medium term, but in the near term there is considerable uncertainty about the path that it will follow. In its February forecasts on the outlook for growth and inflation, the MPC saw a gradual pickup in activity as the headwinds from weakness in the world economy and tight credit conditions receded and as the squeeze on household incomes is ameliorated through lower inflation. Big picture, that view on the growth outlook still looks broadly on track, but it is not always going to seem like that over the next few weeks and months as the ONS data for the first half of the year are published. Two temporary factors look likely to muddy the waters, leaving the headline ONS figures for GDP growth well short of what has been suggested by surveys. First, data for construction output over the turn of the year were extremely weak.

Gent Sejko: Albania’s banking sector progresses but four key challenges remain Address by Mr Gent Sejko, Governor of the Bank of Albania, to the third AAB Conference on Banks for Sustainable Development, Tirana, 14 May 2019. * * *  Your Excellency Madame Minister1, Dear Chairman of the Albanian Association of Banks, Dear representatives of the banking sector, dear guests, Let me first congratulate the Albanian Association of Banks on its 20th anniversary. The Association, which came into being as token of emancipation in the banking sector, has become now a genuine platform of communication and coordination within the banking industry, and a key player in the economic and financial life of the country. I would also like to congratulate the organisers for this event, which helps the banking sector, regulators and policymakers alike, to identify the challenges lying ahead and explore the best alternatives for addressing them. Dear ladies and gentlemen, The banking system in Albania has made considerable progress over the last two decades. To illustrate my point, I would like to bring to your attention some facts and figures. Over the span of two decades, the portfolio of bank credit has expanded significantly, leaping from 5% to 35% of the country’s GDP. Similarly, the volume of deposits – in other words, the volume of savings of the Albanian public administered by the banking sector – has grown from 45% to 70% of the GDP.
Instead it is shifted onto other stakeholders in the company, most obviously creditors. There is, in the words of Jensen and Meckling (1976), an incentive for the management of a limited liability company to engage in “risk shifting” from shareholders to debtors, by increasing company-specific risk. The scale of these incentives will depend importantly on how alert creditors are to this risk. If they are wide-awake and price that risk by charging the firm a higher interest rate in anticipation of risk-shifting, this serves as a disciplining device on management. Risk shifting will then be stymied. However, if creditors lack the information or incentives to monitor risk, risk-shifting will be amplified given the cheap costs of borrowing. The upshot, then, will be companies engaging in a sub-optimally high amount of risk-taking from a stakeholder, if not shareholder, perspective. Banks provide an interesting case study of these incentive dynamics in practice and their adverse implications for creditors and the wider economy. They have a particularly simple way of increasing the volatility of their asset returns – increasing leverage. They may also have stronger incentives to do so if their creditors – largely depositors – are de-sensitised to risk when setting their cost of borrowing (Haldane (2012)). If so, this is a recipe for super-charged risk-shifting – and was in the run-up to the crisis. Leverage among global banks rose at real pace in the pre-crisis period, in a quest for everhigher banking returns on equity (Chart 7).

Banking produces a particular form of social pollution – financial crises. We have had many hundreds of years of experience of such crises. The global financial crisis will, however, almost certainly require a re-think of their costs. The cumulative GDP costs of the crisis so far in the US, UK and the euro-area are well in excess of 25% of GDP (Chart 8). In net present value terms, they could easily end up equating to a year’s GDP or more. This suggests, pre-crisis, the misalignment between private and social incentives in banking was larger than perhaps at any time in the recent past. In the language of Jensen and Meckling, risk had been shifted by management and shareholders onto a much wider set of societal stakeholders, with significantly adverse macro-economic implications. (b)  Moral hazard  That brings me to the final of the incentive frictions. When the social costs of an activity are high, as during financial crises, there are strong incentives to cushion the effects on wider society. The global financial crisis provides no better example of those incentives, with extraordinary levels of government support to the global banking system in the form of recapitalisation, liquidity support and guarantees. BIS central bankers’ speeches  11  While these levels of support were arguably necessary to limit the costs of the crisis, they came with their own longer-term costs.
Howard Lee: Central bank innovations - payments, data and capabilities Speech by Mr Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority, at the BIS Innovation Summit 2021, 23 March 2021. * * *  Introduction 1. Fellow central bankers, distinguished speakers, ladies and gentlemen. It’s my pleasure to speak to you in this important event. While participants of this event generally embrace technology and innovation, I guess that two years ago not many of us could have expected that virtual meetings would become a norm for international conferences. So while technological advances would often drive work process or behavioral changes, there are also times when societal changes spur technological developments or adoption. 2. Of course the COVID-19 pandemic has had a lot more impacts than countless virtual meetings. The unprecedented disruptions and contractions in global trade have literally brought many economies to a standstill. Small and medium sized enterprises (SMEs) are especially hard-hit given the smaller buffers they have. On the other hand, many ecommerce and other online activities are thriving. We are experiencing a much accelerated process of digitalization on many fronts. 3. These new developments call for central banks’ innovations and digital solutions too. In the digital age, central banks will have to become innovators and commit ourselves to digital transformation for the benefit of our economies. In fact, the launch of the BIS Innovation Hub (BISIH) in 2019 is a testament to this commitment.

We will seek feedback on these with the industry. 33 I will now turn to the topic of financial scams, a concern of some retail investors. MoneySense runs regular campaigns to remind investors of the need to be on guard against investment scams. I have highlighted here a web page capture of an earlier campaign where MAS had put out an advertisement to resemble a typical online investment scam. The advertisement showed an island property investment. When a consumer navigated to the scam website and indicated interest to invest, he would be told that the island property investment was a scam and he would have lost money if he had invested. He could then learn about how to spot red flags and protect himself when investing. You may be surprised that quite a few people had actually “clicked” to invest into this. Thankfully, there were others who contacted us to alert on this suspicious investment scheme. 34 Some fraudulent websites have also attempted to solicit investments using fabricated information attributed to well-known personalities. Both MAS and the police have issued 4/5  BIS central bankers' speeches  advisories on these scams. 35 To safeguard your monies, you should approach all investment propositions with a healthy scepticism and challenge exaggerated claims. As it is often said, if it sounds too good to be true, it is probably not true. 36 Financial education and advisories issued by the authorities will not stop those who are out to cheat investors.
Pound sterling appreciated by more than 20 per cent between 1996 and 1998, reflecting solid growth in the UK economy from the mid-1990s. A currency that has exhibited wider swings than most is the New Zealand dollar. A sharp appreciation up to the mid-1990s was subsequently reversed. Over the past two years, this currency has moved in tandem with the Norwegian krone. The krone exchange rate is the price of our currency measured in terms of a foreign currency. Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. BIS Review 9/2003  1  Chart 2. Equity prices and long-term interest rates in the US Index  Per cent  1600  12  1200  9  800  6  10-year rates 3 (right-hand scale)  400  Standard & Poor's 500 (left-hand scale)  0  0 1990  1992  1994  1996  1998  2000  2002  Source: EcoWin  Currency swings are driven by cross-border capital movements. Capital flows were heavily influenced by investor focus on stock market returns until the downturn began. In the US, equity prices almost trebled between 1995 and 2000. Stock markets in other countries followed suit. Capital inflows into the stock market resulted in a strong dollar. However, expectations concerning corporate earnings were higher than later proved to be warranted.

The so-called “permanent income” from petroleum activities can be used to calculate the return both on today’s Petroleum Fund and on future investments. The value of labour input in the petroleum sector comes in addition. With this more accurate picture, the income level in Norway is not particularly high. Norway’s income is approximately on a level with other Western countries such as Australia and Germany, while the level in, for example, Canada and Denmark is considerably higher. Chart 15. Productivity in the private service sector Annual growth. Per cent 5  5  4  4  3  3  2  2  1  1 0  0 1980  1984  1988  1992  1996  2000  Source: Statistics Norway  Norway’s income is generated through labour. Income growth in the 1990s was unusually strong as a result of substantial productivity gains and a sharp increase in employment. Major technological advances were achieved in the petroleum industry, and productivity growth in private services was especially high - particularly in retail trade, financial services and telecommunications and postal  services. In retail trade, nationwide chains boosted efficiency. New technology and improved services provided new impetus to the financial industry. The telecommunications and postal services started operating on normal commercial terms. A number of conditions were conducive to favourable developments in the 1990s. Wage growth was moderate for a long period and interest rates were low. Banks regained their strength after the banking crisis.
See chart “Real exchange rate against Norway’s trading partners” at the end of the speech. Substantial oil revenues are now being ploughed into the Norwegian economy. Since the turn of the millennium, annual petroleum revenue spending has increased by a good NOK 100 billion. According to uncertain forecasts in government documents 5, another NOK 40 billion or so will be phased in over the next ten years. The cost level in Norway is a thermometer indicating how much the Norwegian economy can sustain without developing a serious case of Dutch disease. The temperature is now high. 4  Measured in international currency at the exchange rate prevailing on 31 December 2008. 5  See Table 3.6 in Report No. 2 (2009–2010) to the Storting: Revised National Budget 2010. BIS Review 78/2010  3  Measured against Norway’s trading partners, the cost level is now almost 20 per cent higher than the average for the oil age. Norwegian labour has never been as costly as today. Norwegian businesses will often lose contracts given the current high level of spare capacity in other countries. And it has never been more profitable to relocate activities abroad. The economic geography of Norway will change over the next 10–15 years. Norway’s cost level and low growth in Europe will bring pressure to bear on jobs and businesses in manufacturing communities. Job losses will have the most severe effects in areas where manufacturing is the most important industry. Entire manufacturing sectors may be lost.

International capital markets play an important role for Norway. We drew on borrowing opportunities abroad when the petroleum industry was under development. We did the same in order to expand welfare schemes and to finance the countercyclical policy of the mid-1970s and the early 1990s. In the past 15 years, international financial markets have enabled us to convert national oil and gas resources into foreign equities and bonds. See chart “Real return on the fund” at the end of the speech. Since its establishment in 1998, the fund’s average annual real return after costs has been 2.9 per cent, or somewhat lower than the expected long-term return. This figure is marked by the challenging character of the financial crisis. The fund lost NOK 633 billion 4 in 2008, but a market reversal in 2009 has resulted in a positive return of NOK 716 billion over the past five quarters. So far, the fund seems to have fared relatively well through the most severe financial crisis for many decades. We still consider a real return of 4 per cent as realistic over time. This is based on the assumption that investment in sound government securities in the market can provide a reliable real return of about 2½ per cent. At the same time, the fund can reap a return of 2 to 2½ per cent in the long term from the three-fifths equity portion, some gains on corporate bonds and returns from active management.
In light of the current global and domestic developments, a common concern is that we may see a large and abrupt surge in risk premia, triggered or amplified by uncertainty about political actions or a shift in risk perception. At the same time, we are worried about the possible amplification of stress in financial markets through deleveraging and forced asset selling in a situation where asset prices are falling. Now that the banking sector is shrinking and becoming more resilient, our radar is shifting to the non-bank financial sector, which is more lightly regulated. In particular, we need a better understanding of the role of asset managers and of the broader vulnerabilities inherent to investment funds. The asset management sector now plays a much larger role in financial markets than it did ten years ago. It may harbour leverage and liquidity risks that could amplify any potential shock from a reassessment of risks in financial markets. I will now look in more detail at some longer-term developments and potential risks in the asset management sector. Risks associated with liquidity, leverage and interconnectedness in the investment fund sector One of the most notable developments since the financial crisis has been the rapid growth of asset management in the euro area and at global level. In the euro area, investment funds have been growing steadily, with total assets expanding by roughly 170% between 2008 and 2017 1, reflecting both continued net cash inflows and rising asset valuations.

This is partly because about 60% of all investment funds fall under the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and so face tight leverage constraints. On the other hand, many alternative investment funds do not face any binding restrictions on leverage. Among those alternative funds, we find a tail of highly leveraged bond and hedge funds, which sometimes have a leverage multiplier of more than 30. I urge authorities to use the new data which is available to shed more light on this highly leveraged part of the sector. 5 This may help to better understand some of the lightly regulated and less transparent activities where risks may be building up. For instance, private loan funds may potentially erode credit standards and take on higher credit risk in the current market environment, whereas private equity funds may facilitate excessive leverage in the non-financial sector. Some of these activities may be escaping our attention, as statistics on them are scarce and they are often conducted by funds outside the euro area. Leverage may be building up, for instance, by the use of derivatives or in off-shore centres. Therefore, consistent reporting frameworks have to be developed with a view to gaining a system-wide perspective on evolving risks, also at global level.
At the same time, Norwegian importers have been able to shift demand to new markets in central Europe and Asia, which has led to a fall in prices for a number of consumer goods. The terms of trade have improved by about 40 per cent since 2002. A similar situation has not been seen since World War I when earnings in the shipping industry and other export industries were exceptionally high for a period. Second, an ample supply of labour has been an important factor behind output growth. In particular, the supply of foreign labour has increased sharply after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for over 30 per cent of growth in the labour force in Norway. At the same time, this has enabled Norwegian companies to be bolder in accepting new assignments and make investments knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. High inward labour migration and the scope for relocating portions of production abroad have led to increased competition in the labour market and have probably curbed wage growth. Third, the Norwegian business sector has been quick to adopt new technology and to reap the benefits.

When new products are introduced, a price that is lower than the direct costs may, however, have a positive effect on efficiency. Since price affects demand, a low price can contribute to extensive use of the service at an early stage. This ensures that economies of scale and any positive network externalities are exploited at an early stage. By positive network externalities, we mean that the utility for each individual system user increases when additional users join the system. The system where the network externalities are probably strongest is the EFTPOS system (a system for card payments in electronic point-of-sale terminals). Here, increased card use leads to growth in the number of payment terminals which in turn provides the basis for increased card use. When the price is low, the indirect costs may be covered later by not reducing prices correspondingly when use increases and development costs have been repaid. As an alternative, the fixed costs must be covered by crosssubsidisation from other payment services or other types of services offered by banks. 2  BIS Review 66/2002  Both economies of scale and positive network externalities suggest that the number of producers of payment services will be limited and that they will use common standards. A single producer will ensure full exploitation of economies of scale, but at the same time, this producer would be able to charge monopoly prices. A single producer also implies a concentration of risk which may be undesirable.
We have the opportunity through the design of our facilities to help support more diverse forms of finance and more resilient markets – to the benefit of financial stability. There is another important operational complementarity. The Bank can use supervisory information and insight to make quicker, better informed judgements about whether to lend to banks at times of crisis.19 It is clear that there is a strong case for central banks to have a broad role. Monetary and financial stability are core objectives of macroeconomic policy, and central banks are uniquely well positioned to contribute to their achievement. There are significant complementarities between the broad range of the Bank’s policy responsibilities, and that has already translated into significant mutually reinforcing support to the UK economic recovery. Our strategic plan cements our commitment to work as One Bank to exploit those synergies. It breaks down barriers between areas within the Bank through a reorganisation that puts greater emphasis on joint working and moves key senior staff between areas; it aids staff movement between areas by promoting a unified culture; it sweeps away a proliferation of internal committees that held up decision-making; and it gives responsibility to the new Chief Economist and Governors both for a coordinated research agenda spanning all aspects of central banking and focusing in particular on the intersections between policy areas, and for ensuring the Bank makes better use of the data we have across the organisation in tackling all of the policy challenges we face. 16  See Farhi and Tirole (2012).

The increase in sovereign spreads has elevated debt at risk for vulnerable EMDEs, including those in our constituency.  The high food and fuel prices have had a clear disproportionate impact on poorer countries and vulnerable populations in all countries, and the two overlapping crises have worsened poverty significantly in the developing economies since 2020, with food insecurity emerging as a new major challenge in low-income countries. In this regard, strong global initiatives are needed to address food insecurity, reduce poverty worldwide and alleviate the risks of social unrest that is already evident. The IMF would need to do its part as it did during the COVID pandemic. The IMF’s proposed Food Shock Window could play a useful role if the facility is more accessible, and its terms and conditions are less restrictive.  The adverse effects of climate change, to which no country is immune, continue to wreak havoc in all parts of the world. Most recently, the flooding in Pakistan, a member of our constituency, has created an unprecedented humanitarian catastrophe, a major health crisis, with initial damage assessed at 10-15 percent of GDP. We have to recognize and collectively address the existing highly inequitable system, where countries with negligible carbon footprints bear the burden of negative externalities of climate change. I stop here.