samchain/econo-pairs-v1 huggingface dataset:
Having learned by experience, however, economic agents will not believe this kind of promise unless the authorities commit themselves to delivering what they promise. In order to function, policy must therefore be timeconsistent and credible. In Norway, the devaluation decade from 1976 to 1986 may be an example of economic policy that did not fully recognise the role of expectations and the significance of credible policy rules. During this period, the krone was devalued ten times if we also include “technical adjustments”, which also implied devaluation. The many exchange rate adjustments in this period were in part aimed at remedying the deterioration of Norway’s relative cost level, which in turn was related to the government’s attempt to take responsibility for employment also when the social partners failed to do so. Gradually, expectations of a continued exchange rate policy that would maintain manufacturing’s cost competitiveness became widespread. This weakened the incentives for the social partners to keep wage and cost inflation at a reasonable level. The devaluations contributed to high inflation. When it finally became clear that this could not continue, it took many years before inflation was brought under control and interest rates in Norway could be reduced to the level of interest rates in other countries. The other lesson drawn from economic theory and economic policy in the 1960s, 1970s and 1980s was that in the medium and long term it is not possible to reduce employment by accepting somewhat higher inflation.

The general improvement in the availability of foreign exchange necessitated the Bank of Zambia’s participation in the market. In this regard, the Bank recorded a net purchase of US $ million compared with net purchase or sale of US $ million in the third quarter. Balance of payments 35. Preliminary data show that Zambia recorded an overall balance of payments (BoP) deficit of US $ million during the fourth quarter of 2010, compared to the surplus of US $ million recorded in the third quarter of the year. This was largely due to the unfavourable performance in both the current account balance and the capital and financial account. 36. During the period under review, the current account surplus declined to US $ million from US $ million recorded the previous quarter, largely on account of a decline in the merchandise trade surplus and widening of the net income deficit. 37. The merchandise trade surplus declined by 9.2% to US $ million in the fourth quarter of 2010, from US $ million recorded in the third quarter, following an increase in imports, which outweighed the rise in exports. Merchandise export earnings, rose by 5.2% to US $ million from US $ million recorded in the previous quarter. This was due to an increase in metal exports earnings by 7.3% to US $ million from US $ million in the previous quarter. 38.
With regard to prices, import prices are basically on a rising trend reflecting the increase in international commodity prices such as crude oil prices. Domestic wholesale prices, notwithstanding the fall in prices of electric machinery, are flat mainly due to the rise in prices of petroleum and chemical products reflecting an increase in crude oil prices. Meanwhile, consumer prices continue to be somewhat weak due to the decline in prices of imported products reflecting the past appreciation of the yen, despite the slight increase in the prices of private-sector services. Corporate service prices are still falling slowly. 1  This report was written based on data and information available when the Bank of Japan Monetary Policy Meeting was held on 10 April 2000. 2  The Bank’s view on recent economic and financial developments, determined by the Policy Board at the Monetary Policy Meeting held on 10 April as the basis of monetary policy decisions. 5  BIS Review 33/2000  As for the outlook, upward pressure on prices is likely to arise from the gradual improvement in domestic supply-demand balance and from the rise in crude oil prices. On the other hand, downward pressure is expected from the long-term declining trend of machinery prices due to technological innovations and from the fall in prices of imported products reflecting the past appreciation of the yen. On balance, overall prices are likely to remain unchanged.

While consumption certainly provides a large contribution to the strong growth in GDP in coming years, strong increases in real income also make a contribution. Strong increases in the property and share prices area are also assessed, however, to contribute to the high growth figures for consumption. An important issue is whether the current monetary policy regime per se prevents the major imbalances that we saw during the 1980s being built up? During the years monetary policy could not counteract an altogether too high loan-financed increase in demand as the overheating did not seem to threaten the exchange rate target despite the large deficit in the current account and a continued deterioration in competitiveness. In retrospect, it can be noted that too much confidence was placed in the fixed exchange rate policy. It is difficult to conceive that such a high increase in demand and such a high use of resources today would not be considered to threaten the inflation target and thus be counteracted by a more stringent monetary policy. Accordingly, the debt ratio of businesses and households would not either increase in such an unrestricted way as at the end of the 1980s. The banks have also become considerably better at handling risks in their balance sheets at the same time as supervision and monitoring has been improved and adapted to the deregulated financial markets that we now have. Conclusion I have discussed the effects that rising asset prices can have on the real economy.
By 2007, CEO compensation would have reached $ million. That is precisely in line with their actual payouts. If you believed ROE were a reliable performance metric, US bank CEOs would have had a watertight defence back in 2007. Indeed, it was the L’Oreal defence: because we’re worth it. But experience since suggests this performance was cosmetic. ROE flattered returns, and hence compensation, in the upswing. That is hardly surprising since it puts risk ahead of return and short-term ahead of long-term performance. When the downswing came, the volatility of equity returns sent many banks to the wall. Equity-based incentive contracts helped propel them there. Firm-level evidence could not be clearer. In 2006, the top 5 equity stakes of US bank CEOs ran as follows: Dick Fuld (Lehman Brothers), James Cayne (Bear Stearns), Stan O’Neal (Merrill Lynch), John Mack (Morgan Stanley) and Angelo Mozilo (Countrywide) (Fahlenbrach and Stulz (2011)). We know how these disaster movies ended. So having been divorced for almost two hundred years, ownership and control have been reunited. But they are an odd couple. Their marriage contract encourages both partners to behave in a volatile, short-term fashion. The marriage itself is destined to last less than a year. In the mid-19th century, unlimited liability was said to be deterring investors of “fortune, intelligence and respectability”. For very different reasons, today’s governance arrangements might be suffering the same fate. Banking and public policy The previous sections identified four forces which have shaped risk-taking incentives for over a century.

It will require large investment and the development of new green technologies which are more expensive. Moreover, regulation, including tax measures, implemented by various countries will impact the value of Russian exports. The global transition to the green economy might reduce the export potential of a part of Russian enterprises, while expanding the potential of others. In this regard, it is critical not to miss the moment of a turnaround in the economy and, accordingly, the financial sector as well. Besides challenges to future growth, we now need to consider financial stability risks especially closely as they have intensified during the pandemic. As we know, there are many countries and companies that have accumulated enormous debts. It was not that hard to service them when interest rates were low. However, an increase in interest rates might alter the situation dramatically. A number of countries and the global economy in general might face new financial problems, a wave of bankruptcies, and rising market volatility. We are not able to influence these processes, yet we are capable of mitigating their implications for the Russian economy and can reduce its sensitivity to possible global upheavals. To this end, it is vital to avoid the accumulation of internal mismatches and prevent any bubbles in the market. Currently, we are especially closely monitoring retail and mortgage lending in the banking sector. According to our estimate, growth in mortgage lending might exceed 20% as of the end of the year.
Similarly, the opposite situation may occur, BIS Review 121/1999  10  where a low interest rate is required to keep the exchange rate stable in the short run, creating inflationary pressure in the economy. In both situations, however, a policy aimed at stabilising the exchange rate in the short run will weaken the basis for exchange rate stability over time. Hence, Norges Bank cannot with open eyes set interest rates to levels where monetary policy in itself contributes to a higher inflation or a deflationary recession, which would undermine the confidence of the krone. Chart 11 Preconditions for exchange rate stability  • Inflation at the level of the Euro countries • Monetary policy should not contribute to a deflationary recession  Legg inn filadresse her  If price and cost inflation is in line with the level aimed at by the euro countries, one of the fundamental conditions for exchange rate stability is satisfied. In spite of this, the exchange rate may be perceived as “too strong” or “too weak” in relation to the initial range. This may be due to conditions in the real economy, which could imply a real appreciation or real depreciation of the krone. The background for such changes in the exchange rate may be that the cost competitiveness of Norwegian industry has to be adjusted and that the equilibrium range of the krone exchange rate has changed. In this situation Norges Bank should carefully evaluate the reasons for exchange rate movements.

Interventions influence the supply of kroner in the exchange market. A change in interest rates influences both conditions in the exchange market and total demand and production. Monetary policy may thus influence price and cost inflation through both these channels. In Norges Bank’s experience, extensive exchange-market interventions have yielded poor results. If the central bank intervenes heavily to defend the krone, this may evolve into a game situation in which market participants perceive central bank interventions as an interesting opportunity to make a profit. Market agents know that a situation in which the krone is being propped up because Norges Bank is intervening cannot be sustained. It is then tempting to take positions in the foreign exchange market against the central bank. This implies that heavy interventions may intensify the pressure on the krone over time, steadily increasing the necessary volume of interventions. If market participants assume that Norges Bank will use the interest rate to defend specific exchange rate levels, this may lead to a similar game situation. Norges Bank does not intend to behave in a way that will prompt such game situations. However, the Bank may use interventions to a limited extent if the exchange rate moves substantially out of line with what we consider to be reasonable on the basis of fundamentals, or in the event of exceptional short-term volatility in thin markets. In such circumstances, there is less risk of ending up in a game situation against exchange market agents.
The global climate is now more inflationary and it seems unlikely that the margin of spare capacity in the UK economy will prevent current inflationary pressures from becoming embedded, without monetary policy being tightened. We have heard the news today that CPI inflation has risen again – to 4.4% – and it could easily rise above 5% later this year. Once businesses and individuals come to expect higher inflation – and there are increasing signs that they are beginning to do so – these expectations will be much harder to dislodge. In this environment, with inflation running very considerably above its target level and set to rise further, failure to take timely monetary policy action risks a more abrupt and destabilising rise in interest rates in the future. That is surely something which the businesses represented here today would not want to see. And that could be a much bigger threat to future economic growth than the gradual increases in interest rates which I have been arguing for since the middle of last year. 6  See Sentance (2011). 7  This is a point repeatedly made by Orphanides. See his recent comments in Orphanides (2011), for example. 8  BIS central bankers’ speeches  References Orphanides, A. (2011) “The role of central banks – lessons from the crisis” Panel remarks at the VI International Symposium of the Banque de France on 4 March 2011. Sentance, A.

Andrew Sentance: Let it grow – how monetary policy can support sustainable economic growth Speech by Mr Andrew Sentance, External Member of the Monetary Policy Committee of the Bank of England, at the Confederation of British Industry (CBI) East of England Annual Lunch, Horringer, Bury St Edmunds, Suffolk, 22 March 2011. All speeches are available online at www.bankofengland.co.uk/publications/speeches. *  *  *  I would like to thank Tomasz Wieladek and Adrian Chiu for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. Good afternoon, ladies and gentlemen. I am delighted to have the opportunity to address this year’s CBI East of England annual lunch. In my time as a member of the Monetary Policy Committee, I have particularly appreciated the opportunity to talk to businesses and business groups around the UK. As an economist with strong roots in the business world, I place great weight on the input that the MPC receives from the business community, which we get from a wide variety of sources – including business surveys and the reports from the Bank’s Agents. But there is no substitute for visiting individual companies and meeting business groups to gauge economic sentiment at the grass roots level around the country.
First to reduce, but not eliminate, the possibility of failure by making banks resilient not only to known, but also to unknown risks – the events in the tail of the distribution. Second, in a world in which banks can still fail, to give the authorities real, practical options for resolving failures that neither trigger widespread economic disruption nor require huge injections of public funds. And, by making investors in banks ultimately responsible for losses, as is the case for other industries, introducing a market discipline on risk taking that will further reduce the likelihood of failure in the first place. Reducing likelihood of failure I believe regulation can be effective in reducing the probability of failure. We have in Basel 3 a fundamentally reformed international risk weighted capital standard and, in the Liquidity Coverage Ratio (LCR), the first international standard on liquidity. The imposition of quantified capital add-ons for systemically important banks has been agreed. This risk weighted capital and liquidity regime has largely been legislated in the key jurisdictions. And, to complement these revised minimum standards, countries around the world are embedding a regular stress testing process as a key part of micro-prudential and macro-prudential supervision. Banks are now making the transition to the new, higher standards. The amount of capital and liquidity in the system has already been transformed. Globally there is now some $ more equity capital in the banking system than the level before the crisis. The major UK banks hold £ more equity and their leverage has broadly halved.

41 Whether there are diminishing marginal returns on additional purchases or actual limits on capacity for using  this tool—implying a size of the balance sheet beyond which further asset purchases become difficult or less effective—is a question for further research. Nevertheless, policymakers may weigh the relative merits and risks associated with asset purchases differently based on the balance sheet’s starting size. 42 The FOMC’s Policy Normalization Principles and Plans note that the Committee does not anticipate selling  agency MBS as part of the normalization process, but says that “limited sales might be warranted in the longer run to reduce or eliminate residual holdings.” 43 Changing the composition of assets within the portfolio, as was done during the MEP, can similarly influence  financial conditions without changing the portfolio’s size or increasing the supply of reserve balances. In this case, capacity to reallocate the portfolio is constrained by existing holdings. 44 Previously, agency MBS operations were conducted on a commercial dealer-to-customer trading platform. The  switch to FedTrade minimized operational risk, improved efficiency and competitiveness, and increased transparency around the Fed’s mortgage operations. 13 / 13  BIS central bankers' speeches
The independent Banque de France has over the last six years shown great determination in helping to ensure that the euro inherited as much confidence as possible at its birth. This legacy of confidence is in good hands. Fiscal policy In the field of European fiscal policy, the Monetary Policy Council draws attention to the following three points. –  First, it remains essential that the mutual surveillance by euro area governments of national fiscal policies, within the framework of strict compliance with the Stability and Growth Pact, function smoothly. The European Union does not have a significant federal budget for economic policy— the European budget only represents 1.27% of Union GDP. Therefore, all the national budgets of the Member States combined function as the Union’ s budget. The preservation of confidence in the euro, and consequently the prosperity, growth and creation of jobs in the euro area, will depend on the quality of fiscal surveillance throughout the area. –  Second, by adopting the Stability and Growth Pact each individual European country, and not just the European Union, set itself the medium-term objective of achieving public finances “close to balance or in surplus”. The Monetary Policy Council emphasizes this point, which is essential for the stability of the single currency and is necessary to favour growth, job creation and the fight against unemployment. One of the difficulties encountered by Europe, as by France, is that public opinion is not yet entirely convinced.

They cut back spending 16  more sharply as incomes and house prices fall, amplifying any downturn ; 17  Distressed sales of homes drive house prices down ; 18  Reliance on foreign capital inflows can expose the economy to global risks ; 19  And credit booms overseas can translate to crises at home . All of this economic analysis would still not have told us what would happen in 2007. It would not have allowed us to predict the roll of the economic dice. But it would have revealed that a bad roll would have very serious consequences. The financial system could have been stress tested against that. Its resilience could have been reinforced. It could have been prepared. What became a disaster could have been contained to a downturn. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Now, with my second principle ringing in our ears, the toughness of our stress scenarios reacts not to whether a downturn is likely to unfold but to how deep it could be if it did. So when all appears bright – as real estate prices rise, credit flows, foreign capital inflows increase, and the last thing on people’s minds is a downturn – our stress scenarios get tougher. And my first call to arms for academia this evening is for further research into indicators that can help to guide us in asking how bad it could be.
As supervisory authority, Norges Bank will follow up efforts in the area of cyber security, in collaboration with Finanstilsynet (Financial Supervisory Authority of Norway). Here, the interests of the authorities and the financial industry coincide. Let me once again encourage the industry to work out satisfactory solutions. A great deal has already been done and collaborative bodies have been established at a national level. However, initiatives in this area are still rather fragmented. There is a need for an even more coordinated and targeted effort to obtain overall control and reduce risks. The system owners must ensure that critical IT providers have established robust contingency solutions and that these are tested regularly. If this is not done, the system owners are obliged to assess alternative solutions, also if they are costly. The responsibility of the system owners is the same, irrespective of whether the entire technical operation or just parts of it are outsourced. Offshoring is increasing. More flexibility, lower costs and a larger pool of persons with requisite skills are good arguments. At the same time, offshoring entails other forms of risk. Norwegian control is reduced. We become dependent on infrastructure and authorities outside of Norway. It would help if, in a crisis, operations can be moved back to Norway at short notice. It is still possible that in the future, critical systems will be required to be permanently operated from Norway. Electronic central bank money Making payments electronically involves the use of deposit money (money deposited in banks).

Fast payment solutions The general public increasingly expects to be able to transfer funds on any day of the week and outside traditional opening hours. They also expect that payees will be credited quickly. In the future, there will have to be a good reason not to credit payees immediately, rather than with a delay, as is the case currently. This means that the payment system must meet new requirements. In Norway, there is a provisional instant payments solution, which an increasing number of banks are adopting. It is positive that the solution is becoming more widely used, but it has its drawbacks. For even though participating banks have entered into a loss-sharing agreement, banks still incur credit risk before payments are settled and the solution cannot be used for certain types of payments. Bits and Norges Bank are therefore jointly developing a better solution, called BRO in Norwegian “Betalinger med raskere oppgjør” (payments with faster settlement). BRO will be an efficient underlying infrastructure that is intended for all types of payments. The solution will be in place by the end of 2019. Norges Bank has initiated an in-house project to make the necessary adjustments to the settlement system. The Bank will do its share to enable banks to settle payments to each other without incurring credit risk. Customers will also be able to make instant payments in larger amounts. Customer services will also have to be modified.