Chart: Output and employment  3  The gaps express deviations from estimated trends in seasonally adjusted figures for mainland GDP and CPI adjusted for tax changes and excluding energy products (CPI-ATE), respectively. The trends are estimated using a Hodrick Prescott (HP) filter on quarterly data with λ=40000. The output gap is a technical estimate and does not fully correspond with the output gap in Norges Bank’s Monetary Policy Report. 4  The correlation between these two data series is highest when the output gap is deferred 4–5 quarters into the future. BIS central bankers’ speeches  3  The path from changes in output to inflation passes through the labour market, among others. We have seen that when economic growth has picked up, unemployment5 has declined one to two quarters thereafter. The relationship between the “output gap” and the “unemployment gap” is fairly strong. This is a useful observation because GDP figures are published with a considerable lag and often subject to revision, while unemployment data are published at the end of each month and are not revised. If there is uncertainty about the GDP figures – which there often may be – falling unemployment can be an indication of a recovery in economic growth. Chart: Unemployment and wage growth Labour market developments, in turn, affect wage growth, as illustrated by the blue line in the chart. High unemployment results in low wage growth, and vice versa. The chart shows that in periods of falling unemployment, wage growth6 moves up fairly rapidly.
Bandid Nijathaworn: Macroprudential policies and capital flows – managing under the new globalization Remarks by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Conference on Macroprudential Policies, organised by the People’s Bank of China (PBC) and the International Monetary Fond (IMF), Shanghai, 18 October 2010. *  *  *  Thank you Chair, First, let me thank the PBC and the IMF for the invitation. It is an honour to be here, and to be given the opportunity to share my view on this panel. Given time limitations, and the fact that capital flows are important developments in the region at this time, I want to use this opportunity to discuss three issues. The first is the context of the current capital flows to Asia. The second is managing capital inflows and the role of macroprudential policies, where I will draw on Thailand’s recent experience. And the third is my view on what we need to do to deal more effectively with the capital flows challenge. At this time, capital inflows to Asian emerging markets have been large and persistent, posing challenges for policy. The first challenge involves a macroeconomic dilemma that centres around the tension between appreciation pressures, inflation development, and growth prospect. The second stems from financial stability concerns associated with potential build-ups of macroeconomic imbalance, risk of asset price bubbles, and the possibility of an abrupt reversal of inflows.