samchain/econo-pairs-v1 huggingface dataset:
There are two elements to this – the technical and the behavioural. The first is easier to fix. By technical I mean the complexity of the language used – the length and complexity of words, sentences and paragraphs. Currently, central banks score poorly technically, in part because they are themselves technicians. This comes at a cost in terms of accessibility. Fortunately, there is a large literature, and a sizable cohort of grammarians, who have considered how to shape language to improve its reach. For example, like many others I suffer from an acute case of hippopotomonstrosesquipeadaliophobia – that is to say, the fear of long words. And if you choked on that last sentence, so now might you. Simple words can make a dramatic difference to readability. “Inflation and employment” leaves the majority of the public cold. “Prices and jobs” warms them up. “Annuity” deep freezes the public, whereas “investment” thaws. 65  In general, the readability of text is improved the larger the number of nouns and verbs and the fewer the adverbs and adjectives. 66  This old mantra remains true in the Facebook age: Facebook posts are more  likely to be shared the more frequent nouns and verbs and the less frequent adverbs and adjectives. The ratio of nouns and verbs to adverbs and adjectives in an Elvis song is 3.3. In my speeches it is 2.7. 65  Smart (2016).

It is particularly important that fiscal policy be conducted in a way that ensures that reserves will be available during economic declines and that institutional conditions are created to facilitate necessary decisions for tighter fiscal policy to be taken on time. Decision-making and communication In the event of participation in monetary union, the Riksbank Governor would become a member of the ECB Governing Council, which is the highest decision-making body of the European Central Bank. I would then, just like all the other members of the Governing Council, have the opportunity to say what interest rate level I believe to be the best taking into account developments in the entire euro area. I would be a member of the Governing Council in a personal capacity, i.e. I would not be permitted to seek or receive instruction from other individuals or institutions. One issue that has been the subject of much discussion is the voting modalities in the Governing Council. Initially, the Riksbank Governor would always have the right to vote on interest rate decisions. This would change in the future, however. Once the number of Member States in the euro area exceeds 15, a new decision-making arrangement will enter into force. The Member States will be divided into groups according to size, and the voting rights will be rotated between the participants in  BIS Review 29/2003  5  the respective groups.
In some instances, individuals rely absolutely for their future lifetime incomes on the continuity of their insurance cover. To achieve an appropriate level of policyholder protection, insurers must be, and be seen to be, safe and sound. I have said this before but I think it is worth reiterating. The PRA believes the UK industry is in a good position, having had the UK risk-based ICAS regime for around ten years. We are therefore not looking to use Solvency II as an opportunity to raise capital requirements across the board. We do, however, recognise and respect that Solvency II is a maximum-harmonising Directive with a key objective of promoting supervisory co-operation. The PRA is committed to upholding this valued objective and will implement the Directive as intended. We can’t and won’t gold plate. Our approach has been, and will continue to be, proportionate in our supervision. As a judgement-led, risk-based regulator, this principle is already part of the PRA approach. It is not the PRA’s role to make sure no insurer fails. However, we are concerned that any failure is orderly and manageable. We seek this in conjunction with appropriate policy holder protection. For example, when business models become challenged we may seek to secure manageable and orderly wind-down, as has been seen in the past in this sector. In fact, roughly one third of insurers authorised by the PRA are in some form of run-off. More than just a capital regime, Solvency II strengthens the linkage between capital and risk management.

Those challenges include the prevailing low interest rate environment; the consequent influx of alternative capital, especially into reinsurance markets; the transformation to the “at retirement” taxation system in the UK; competition in general insurance from overseas locations, possibly linked to regulatory arbitrage; as well as the new Solvency II regime. I plan to focus my time mostly on Solvency II; but will also touch on the “at retirement” taxation changes. Before that, I would first like to reflect upon the role insurance plays in the wider economy: •  Insurance is a critical cog in a financial services sector which facilitates trade and commerce and the efficient allocation of resources. Without a fully functioning financial services sector, the economy would stagnate. That importance of financial services to growth should be one of the big lessons of the Great Financial Crisis for anyone who did not appreciate the fact previously. More specifically, the insurance sector provides a critical risk-transfer role and is a vital long-term investor in the economy. •  The UK insurance industry is also an end-contributor to UK output and employment – being the largest insurance industry in Europe and third in the world. The UK insurance industry is known for its innovation and entrepreneurialism, typified through the modest beginnings of Edward Lloyd’s coffee house. The role played by the insurance sector in future will be contingent upon maintaining that tradition of competition and innovation and the PRA is committed to support that, not least through our secondary objective in respect of competition.
BIS Review 67/2004  1  As a representative of the Riksbank, I have reason to be positive about the increasing competition since it improves efficiency in the market. Perhaps there is cause to hope that the competition in the future will also give rise to new instruments with which households can manage their interest rate risk. Here I think that the developments have much to offer. The factors discussed above, which affect supply and demand in the housing market and mortgage market, go a long way towards explaining the developments in both housing prices and household borrowing. This is not the case in all countries. In the markets where prices have risen sharpest, for example in Australia, the UK, Spain and Ireland, it is also very common to see housing as a financial asset, as opposed to somewhere the buyer intends to live. These countries have so-called buy-to-let markets, which involves buying a second house or apartment with a view to letting it. Buyers hope that the property will rise in value in much the same way as a share, yielding a return in the process. In Dublin the situation has got to the stage where rents have dropped in recent years, which should have resulted in falling house prices. But prices have continued to climb.

It is likely that a number of markets contain elements of a speculative bubble, where price developments bear no relation to the fundamental factors that normally affect supply and demand and instead are driven by expectations of future price increases. Commercial property prices in Sweden at the beginning of the 1990s gave us a clear example of how such a market works. In Sweden we don’t see any indications that speculation is of any great significance for the formation of housing prices. I think there’s reason to wonder whether such imbalances really can arise in the Swedish market. Swedish people live in their houses or apartments. Perhaps the Swedish tax system, both as regards property tax and tax on rental income, has made it unprofitable for households to buy to let. Australia, for example, has considerably more favourable tax rules. So, to sum up, it seems that both housing prices and household borrowing in Sweden are fairly well explained by the fundamental factors that usually govern supply and demand. This doesn’t mean of course that prices cannot fall; far from it. Uncertainty about income developments and rising interest rates could, for example, curb demand at the same time as the supply increases when the construction of new homes picks up. In that case we should expect weaker price increases or even a drop in prices. But the prices shouldn’t fall as much or as fast as when demand contains obvious elements of speculation.
The average ownership share in a listed European company is now around 2.5 percent, which is twice the ownership share on other continents. Almost 2 percent of the fund is invested in Italy. The share invested in emerging markets is growing, as these markets develop. Over the past couple of years, we have started investing in Slovenia, Ghana and Mauritius, to provide three examples. At the end of 2014, 10 percent of the fund was invested in emerging markets. Still, close to 80 percent of the fund is invested in North America and Europe, where markets are largest and the most advanced. 4  BIS central bankers’ speeches  Through the fund’s investments in equities and bonds, we seek to ensure broad exposure to global equity and bond markets. In the management mandate, the Ministry of Finance has defined public stock and bond indices, which are used to benchmark our performance. These benchmarks are based on the FTSE and Barclays indices. These indices are constructed to meet the needs of a typical investor. As pointed out earlier, the oil fund is not a typical or average investor. Rather, the fund has certain distinguishing characteristics. The investment strategy seeks to exploit these characteristics to improve the overall balance between risk and return. Our portfolio will therefore deviate from the index along a number of different dimensions: •  First, the index providers adjust for so-called free float. The free float of a company represents the portion of a company’s shares that are readily available for trading.

Additional challenge #2: trying new and nontraditional policy responses when the economic stakes are enormous The second critical challenge is to take actions that respect both the feasibility of what monetary policy can accomplish and the enormous risks to the future prospects of the U.S. economy. For me, these risks are clear. It is painfully obvious that the large quantities of unused resources in the U.S. are an enormous waste. And it’s not just the current loss – over substantial periods of time, the skills of long-term unemployed workers decline, their reemployment prospects for similar jobs fade, and these reductions in skills have a lasting effect on the future growth potential of the economy. As I noted in the introduction, some argue that there currently are severe limits to what further accommodative monetary policies can do to address these risks. It is essential to delineate clear alternative scenarios in which this additional accommodation would be futile. Such scenarios clearly exist, but they are very dark and pessimistic interpretations of our current situation. I am personally much more optimistic and I don’t subscribe to this pessimistic view; but let me describe it as I understand it. Essentially, the hypothesis that limits aggressive policy actions assumes that the productive capabilities of the U.S. have declined markedly in recent years and that many workers who were productively employed just a few years ago are now essentially obsolete.
Given the subdued inflationary pressures, we have lowered the policy rate to the record level of 3.5%. The path of the credit interest rate has followed this trend, although at a slower pace. Given the weakness of the credit channel in the monetary transmission mechanism, we have tried to strengthen our impact by adopting some countercyclical measures to promote credit growth. In this regard, we have temporarily increased capital requirements for placements of banks abroad and have reduced those for credit in the domestic economy. In addition, we are promoting credit restructuring at an early phase by reducing provisioning requirements if that is the case. Several legal and regulatory measures have been taken in cooperation with other authorities and the banking industry, to improve collateral execution process and facilitate loan write-offs. The results of such measures have been mixed so far, but in the coming months we expect their impact to be noticeable. This is also linked with the commitment of the Government to pay its arrears to the private sector in the next year. Nonetheless, it is important that the banking industry continues to support sound business propositions of borrowers. Banking activity may be driven by profits but is based on relationship with its customers. Now is the time when such relationship is being tested, and good bank management must look beyond the current challenges to keep and strengthen such relationship.

While the long-term objective should be to create conditions for achieving a more balanced and diverse financial system, the shorter times objectives should focus one having a stable financial system that provides adequate financial services to its customers, both savers and borrowers, thus maintaining its fair share of contribution to the economic developments of a particular country. The banking sector in Albania has felt the impact of the international financial crisis, as the weaker credit standards before the crisis and the weaker economic growth afterwards, have been translated into lower asset quality and difficulties to consistently maintain positive financial results. In front of higher credit risk, credit terms have been tightened and credit growth has been sluggish. In September 2013, credit growth turned negative driven by credit in foreign currency and to businesses. However, the banking sector remains well capitalized and liquid. Banks have been able to raise new capital and financial support from their mother banks. Especially, Greek banks operating in Albania have enjoyed strong support from their mother banks so far, and we expect this to continue in the future too, if needed. Overall, in September 2013 the risk  BIS central bankers’ speeches  1  weighted capital of the banking sector stood at 17.8%, while the ratio of liquid assets to short term liabilities was 36.5%. The sector has shown strong preference for investments in Albanian government debt securities and placements abroad. Bank of Albania has been taking a number of measures to support credit growth and address the loan quality problems.
According to these theories there is some scope for monetary policy to take account of the output gap without necessarily threatening price stability in the slightly longer term. An important condition for this, however, is that there is considerable confidence in the central bank’s aim to focus on long-term price stability. In the long run, monetary policy cannot determine the real interest rate but in the short term the real interest rate can be influenced and deviate from its long-term equilibrium position. An increasing number of central banks have adopted inflation targets during the 1990s. The introduction of statutory price-stability objectives, independent central banks, transparency and - not least - regulations that give long-term sustainability in the public finances have also been important means for increasing credibility for the ability of economic policy to maintain price stability. 1  2  E.g. Woodford, Claridas  BIS Review 40/2004  In Sweden, the Riksbank adopted an inflation target as early as 1993. According to this target, inflation measured in terms of the change in consumer prices should be 2 per cent per year, with a tolerance for deviations of +/- 1 percentage point. As monetary policy does not have an immediate impact, interest rate decisions are normally governed by forecasts of inflation one to two years ahead. To avoid the economic costs of excessively sharp fluctuations in economic activity, the Riksbank many decide not to take account of price effects that are judged to be temporary.

Eva Srejber: What role do asset prices and credit play in monetary policy Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at The Adam Smith Seminars, Thun, Switzerland, 30 June 2004. The references for the speech can be found on the Sveriges Riksbank’s website. *  *  *  I would like to begin by thanking you for inviting me for the third consecutive year to speak at the Adam Smith Seminars. Today I shall discuss the significance of asset prices and credit for economic stability. For several years now there has been a dramatic rise in many countries in the prices of owner-occupied housing as well as in household debt. In Australia, Spain and England, house prices have more than doubled since 1997. In Sweden, house prices have risen more than 70 per cent over the same period. Before the turn of the millennium it was mainly the sharply rising equity prices and highly indebted firms that were in focus. What has been driving these developments, what role has been played by monetary policy, and what are the possible future effects on the economy? These are questions I shall be discussing today. A strong expansion in credit and increasing asset prices have preceded almost all banking crises and the majority of deep recessions in countries around the world over the past one hundred years or so. In many cases inflation has at the same time been low and stable before the crisis.
They needed temporarily to look beyond their traditional markets for funding, and unquestionably these conditions put their resources and management under strain. It can definitely be said that those involved passed this difficult test. The funding problem that loomed around this time a year ago is a thing of the past, terms in the secondary market have been normalised and market confidence has been restored. This is to be welcomed. What remains, however, is of course that people are now more aware of the  BIS Review 42/2007  1  widespread risks that the future may hold in store. Global market conditions can change suddenly. Credit access, which in recent times has been exceptionally favourable for Icelandic and other banks, may change suddenly if unexpected conditions arise. It is important to be prepared for such a contingency. At the height of this furore, I would venture to say that the Central Bank made a strong contribution with its Financial Stability report, which was deemed to be professional, candid and in line with international best practice. The Bank’s next Financial Stability report will be published towards the end of April. Although these were not enviable times for financial companies, they definitely learned a lesson from this ordeal and are both more cautious and more aware of external influences than before. Rapid and sweeping changes in the financial sector put a great strain on regulatory agencies, which may face an uphill struggle to keep up with the swift pace of developments.

The exchange rate has been relatively stable after the adjustment that took place in the first half of last year, and the króna is currently somewhat stronger than historical measures would warrant, although it should be admitted that determinism is probably not the most suitable approach for assessing currency developments. One reason for uncertainty about the exchange rate is the large current account deficit, as well as the fact that it can easily be driven by factors over which we have no control, given how closely Iceland’s financial sector is now integrated with global financial markets. A central bank with a legislative and regulatory remit to target inflation is of course pleased with such inflation developments, but would prefer them to be built on a more solid foundation. Domestic demand growth has declined, but rather more slowly than the Bank had hoped. The current account deficit is large and will also contract more slowly than the Bank would have desired. Demand remains buoyant in the housing market and there are indications that the rate of credit growth may be on the increase again. For these and other reasons, the Bank will remain on the alert and not ease its monetary stance until even clearer signs emerge that a lasting change has been established. Equity prices have soared in Iceland in recent years.
Currently, with five members of the Board of Governors and five votes among the Reserve Banks, the balance is split equally. BIS central bankers’ speeches  3  Reserve responded to the financial crisis in two ways. First, it intervened to prevent the failure of several systemically important institutions, including firms that it did not supervise – namely Bear Stearns and AIG. 9 Second, it established a number of special liquidity facilities to ensure that domestic banks, securities dealers, commercial paper issuers, money market mutual funds and foreign banks had sufficient access to dollar liquidity so they could sustain their lending and investment activities, and thereby continue to supply credit to households and businesses. I strongly believe that these interventions were necessary to prevent a systemic collapse of the global financial system. If such a collapse had occurred, I am convinced that the consequences would have been a global depression. If the Federal Reserve hadn’t done everything in its authority to prevent a collapse, we would have been derelict in our duty to the country. Let me be clear: The interventions by the Federal Reserve during the crisis were designed to safeguard the economy, for the benefit of all Americans, while protecting the taxpayer. I am proud of our record on both accounts. In the end, the Federal Reserve’s extraordinary interventions achieved their intended purposes to support economic activity and, incidentally, taxpayers were compensated for the risks undertaken in these interventions. Total profits from these interventions were more than $ billion.

But this is mainly because more monetary policy stimulus has been required during the current economic cycle in order to push the U.S. economy towards the Fed’s dual mandate objectives. I believe that if we had not responded as forcefully, the recovery would have been slower, the unemployment rate would have been higher and there would have been a greater risk of deflation. While it is much too soon to claim success, the U.S. economy today is in a relatively good place compared to most other countries. The economic expansion is in its seventh year and we have made considerable progress relative to our employment and inflation objectives. Also, the tools that we designed to control monetary policy even with a very large balance sheet have been shown to be effective. In December, when we raised our target range for the federal funds rate to 25 to 50 basis points, we also raised the interest rate we pay on bank reserves to 50 basis points and the rate we pay on our overnight reverse repo facility to 25 basis points. Not only have these new tools been effective in moving the federal funds rate up into the middle of its new target range, but the entire complex of money market rates has moved up as well. Also, the fears expressed by some that the Federal Reserve’s very large balance sheet would lead to runaway inflation have proven to be unwarranted.