samchain/econo-pairs-v1 huggingface dataset:
Thus, it can be said that slow export growth is as much the cause of the current account deficit as the expansion of domestic demand. Business Profitability and the Labour Market The external conditions of the economy in 1997 were largely unchanged from 1996, and were on the whole favourable. Business profitability seems to have been fairly good, although not as favourable as in 1996, because of the wage increases at the beginning of the year BIS Review 42/1998  -2-  and large depreciation and interest charges related to the high levels of investment in recent years, especially in the fisheries. The labour market situation improved further and unemployment declined to 3.9 percent on average, having come down from a peak of 5 percent in 1995. Real wages grew by 5.7 percent in the course of 1997, and were at year-end at their highest level since 1989. Prices Inflation remained subdued in 1997, or 2.2 percent in the course of the year, and 1.8 percent on average between 1996 and 1997. The Central Bank had, in the wake of the wage settlements, forecast somewhat higher inflation but wage increases did not translate into price increases to the extent shown by past experience. Productivity growth was higher than expected and the rise in import prices lower. In addition, the Central Bank’s measures restrained price increases, as I will discuss in greater detail shortly.

Total turnover on the foreign exchange market was 162 billion kronur in 1997, and had doubled since 1996. In addition, the participation of the Central Bank in foreign exchange market transactions fell from 82 percent of turnover in 1996 to 37 percent in 1997. So far this year turnover has continued to increase and the share of the Central Bank has declined to 13.2 percent. Average daily turnover has been about 2 billion kronur this year. Daily fluctuations in the exchange rate increased as a result of last year’s change, but not much when compared to what is common among other countries. Since mid-1993, or for almost 5 years, the exchange rate of the krona has never deviated more than 2.1 percent from the central rate. Yields on Domestic Markets Money market yields declined in the course of the year until the Central Bank raised its rates in November after which they rose. Yields on 3-month Treasury bills rose to 7.22 percent where they stood at year-end. A low Treasury borrowing requirement at times caused a shortage of Treasury bills. Demand for Treasury bills was also boosted because of increased interest in them for liquidity management. Yields on indexed bonds changed little during the first half of 1997 but during the second half the yield on government bonds and housing bonds fell sharply, albeit unevenly. This decline was partly the result of the low Treasury borrowing requirement. The yield on non-indexed government bonds also declined sharply in 1997, although also unevenly, to 8.3 percent at year-end.
Since the absorbed liquidity is tied up in the form of securities, the banks cannot use it either as a means of payment (like cash or sight deposits) or to satisfy their minimum reserve requirements. To the extent that SNB Bills are purchased by non-banks, customer deposits in the banking system decrease, thereby directly reducing the broader monetary aggregates. The decisive factor in determining the degree of monetary policy restrictiveness remains the level of interest rates on the money market. And we are able to control this level by tailoring the scope and conditions of our liquidity-absorbing operations accordingly. The shift in the liquidity regime has brought about a certain number of changes in SNB central bank operations with banks. For instance, we now normally only conduct operations with banks that need to place excess liquidity. The group of these banks is fairly large, consisting of 80 mainly domestic banks. Something that we no longer offer, by contrast, is regular refinancing. Banks now have to cover their refinancing needs via the money market. Refinancing through the SNB is available only in exceptional circumstances via the liquidityshortage financing facility, at a higher rate of interest. Access to this facility should thus be part of domestic banks’ own liquidity arrangements. A further effect of the regime shift on the money market is that the SNB pays the banks interest for liquidity-absorbing operations, whereas previously it received interest payments for providing liquidity.

Jean-Pierre Danthine: Swiss monetary policy and Target2-Securities Introductory remarks by Mr Jean-Pierre Danthine, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 16 December 2010. *  *  *  My remarks today will focus on three topics. I will start by looking at the situation on the international financial markets. I will then speak about the SNB’s own financial market activities in connection with the two core tasks of monetary policy implementation and foreign exchange reserves management. Finally, I would like to briefly discuss the planned panEuropean securities settlement system, Target2-Securities. International financial markets The situation on the international financial markets reflects the gradual global economic recovery. At the same time, these markets continue to be affected by the fallout from the financial crisis and by doubts as to whether the current global economic recovery will be robust enough to reduce the existing financial imbalances. On the stock markets, volatility has trended downwards over the past half-year, but has remained high. Shares and corporate bonds have benefited from investors’ growing risk appetite, the ongoing expansionary monetary conditions and good corporate results. On the bond markets, by contrast, uncertainty has, if anything, grown. With the global economic recovery, yields on long-term government bonds have picked up from their low levels. In Europe risk premia for heavily indebted sovereigns have risen markedly. The imbalance in many government budgets has taken problematic proportions.
This can be seen in chart 5, which shows the example of interest rate differentials between Germany and Switzerland for three-month, two-year, five-year and ten-year maturities. While interest rates on the money and capital markets declined as a result of negative interest, mortgage rates did not decrease to the same extent. Indeed, for mortgages with longer terms, rates are slightly higher than they were at the beginning of the year. The main reason for this divergence is that a major part of bank refinancing costs consists of interest paid on savings deposits, which has not fallen below zero as did interest rates on the money market. Because interest on savings deposits is significantly higher than the money market interest rate, bank interest margins came under pressure after they had hedged the interest rate risk associated with their mortgage business, and some mortgage rates were increased. Fears that negative interest might contribute to a significant decline in mortgage rates and, in turn, to stronger growth in mortgage lending have so far proved unfounded. For investors, by contrast, the current low interest rate environment means that the challenges have increased. It is even more difficult for them to find yield-bearing investments. I should emphasise, however, that this investment predicament is an international phenomenon and not limited to the Swiss franc alone. Conclusion I will now come to my concluding remarks. Initial experience has shown that the interest rate instrument is also effective in negative territory.

This shows that marginal costs – the costs of an additional unit of Swiss franc liquidity – are relevant for transmission on the interbank market. Although trading activity on the money market remains lower than before the financial crisis, it has revived somewhat. For instance, turnover on the  2  BIS central bankers’ speeches  secured money market, in particular on the Swiss franc repo market, has risen since the introduction of negative interest. As intended, negative interest has been transmitted from the money market to the capital market. The lower interest rates for all maturities have widened the traditional interest rate differential against other countries again somewhat. Previously, they had narrowed substantially. On the money and capital markets, the interest rate differential is now greater than it was without negative interest, in particular for short-term interest rates. Chart 4 shows the path of interest rates for three-month loans on the Swiss franc and euro money markets, together with the differential. The greater interest rate differential helps to ensure that Swiss franc investments are less attractive than investments in euros and other currencies. Moreover, the rise in the interest rate differential has increased the cost of hedging foreign currency positions on the forward exchange market, which is an additional factor dampening Swiss franc demand. Although the interest rate differential has risen, it is still considerably below the long-term average, particularly since interest rates abroad decreased more substantially during the financial crisis than those in Switzerland.
But underpinning these is a strong economy, and ultimately that’s what we’re always using monetary policy to support. So, as the year unfolds I’ve got my eyes wide open, looking at the data and listening to experience—whether it’s coming from household surveys, market indicators, or from leaders in my District. The economy is strong, the outlook is healthy, and my number one priority is using monetary policy to keep it that way. In short, I’m watching, listening, and prepared to adjust my views depending on the data. 1 For more information on how the FOMC specifies its goals, see Statement on Longer-Run Goals and Monetary  Policy Strategy, Board of Governors of the Federal Reserve System, amended January 30, 2018. 2 This question on whether jobs are “hard to get” is part of the survey conducted by Nielsen for the Conference  Board that is used to calculate the Conference Board’s consumer confidence index. Information about the survey, including the latest press release of the index, is available at www.conferenceboard.org/data/consumerconfidence.cfm. 3 For example, the minutes of the December FOMC meeting stated that “Participants also reported hearing more  frequent concerns about the global economic outlook from business contacts” (page 8).

Underlying measures of inflation have been running just below 2 percent over the past 12 months, and I expect them to be right at 2 percent this year. And I don’t see any worrying signs of inflationary pressures building. So, from the perspective of the Fed’s dual mandate as a whole, things are looking very good. Of course, for this healthy jobs market and low and stable inflation to persist, we need solid growth in the economy. While GDP growth in 2018 looks to have been a robust 3 percent, we’re hearing anxiety both in the markets and the commentary, about what’s to come in 2019. 1/4  BIS central bankers' speeches  I wish I could now tell you with certainty what will happen to the economy, but anyone who promises they can see into the future is a charlatan. However, what I can do is provide you with some insight into how I assess the health of the economy and what that means for my view on the monetary policy decisions before us. Data Dependent I often say I’m data dependent, and I’ve talked about the major economic indicators, GDP growth, inflation, and employment. But these headline numbers aren’t the only things that inform my view on monetary policy, or the economy more broadly. I’m looking at a whole raft of information about what’s going on and where risks may be lurking. Employment and unemployment numbers provide a useful summary measure of what’s happening in the labor market. But “data” doesn’t stop there.
The search for yield that prompted excessive risk-taking was the result of low long-term interest rates around the world, not simply rates in the UK. So what would have happened had we adopted the counter-factual policy of higher levels of Bank rate? Of course, it is impossible to know with certainty. And much depends on what would have happened to the exchange rate. On the MPC, two views were discussed. One was that by setting interest rates at a much higher level, so dampening domestic demand and output growth, expectations of the long-run exchange rate consistent with a sustainable path of domestic demand might be dislodged and “jolted” down to a lower equilibrium level – from A to B in Chart 8. Certainly, there seemed good reason at the time to imagine that slower growth at home might mean that hot money would return to countries experiencing stronger growth. As a result, the current exchange rate would have fallen from O to P in Chart 8 and then been expected to follow the path PB consistent with uncovered interest rate parity. The result would have been higher external demand to offset weaker domestic demand. After a time, we might have attained “one-speed” growth, so avoiding the unpalatable choice between “two-speed” and no growth.

At the same time, the rule made fiscal policy more robust: By decoupling spending from current petroleum revenues, the fiscal rule provides for a gradual and sustainable phasing-in of petroleum revenue spending. The guidelines ensure the necessary flexibility to allow automatic stabilisers to work, and they allow for careful countercyclical policy. The savings plan has remained intact and the Fund has now reached a size of nearly NOK 4 trillion, or 130 percent of GDP. When the fiscal rule was introduced in 2001, Norges Bank was charged with the task of keeping inflation low and stable. Thus, our traditional fixed exchange rate policy was abandoned. A clear division of responsibilities between monetary and fiscal policy was now established. Norges Bank’s conduct of monetary policy is geared towards low and stable inflation. The operational target of monetary policy is consumer price inflation of close to 2.5 per cent over time. When setting the key policy rate, we also take into account the impact of the interest rate on output and employment. In addition we give weight to the risk that a prolonged period of low interest rates can lead to elevated risk-taking and excessive debt accumulation in the household and business sectors. Inflation targeting has become more flexible. The present economic situation in much of the rest of Europe stands in contrast to ours. In Norway, domestic activity is high, and particularly so in the oil industry and the construction sector. Unemployment remains low and stable. But the Norwegian economy is not unaffected by the turbulence abroad.
The second caveat is that central banks have been buying government bonds, which stimulate the economy by pushing down term premia and so longer-term real rates. But while QE has contributed to lower term premia and bond yields, much of the decline in the trend real rate pre-dates QE, and the crisis more generally, as both real expected policy rates and term premia fell. And it’s worth noting that the decline in long rates has also been seen in countries where there hasn’t been QE, such as Canada and Australia, although this in part probably reflects international financial market flows following falls in yields elsewhere. Finally, this analysis of the trend real rate does not consider the possibility that trend real rates can be moved around by long financial cycles and the impact of the associated leveraging and deleveraging on interest rates. These effects could well have acted to push up on trend real rates in the long buildup of leverage before the financial crisis and to have pushed down on rates during the protracted deleveraging that followed the bust. Some of these effects will be shorter lived and are best thought of as part of the natural rate cycle to which I will return in a moment. But to the extent that these effects are longer lived they may well have pushed down the trend real rate. And of course there is a broader caveat here.

Page 1  Competitiveness and productive investment: What parts do they play in the reform of insurance regulation? – speech by Charlotte Gerken Given at JP Morgan European Insurance Conference  Page 2  Published on 14 June 2022  Charlotte Gerken talks about the goals of competitiveness and productive investment, and the impact these are having on the Review of Solvency II. She says that changes to regulations for UK insurers could help to achieve these goals. Then she focuses on: investment flexibility the valuation of liabilities process improvements  Speech Thank you for your introduction and for inviting me to this conference. Since the Government announced the Solvency II review, there has been much emphasis on the desirability of reform to enhance the insurance sector’s competitiveness and its capacity to make productive investment. Today I would like to outline how competitiveness and productive investment relate to the Prudential Regulation Authority’s (PRA) approach to the review by focussing on three areas: 1. Investment flexibility 2. The valuation of liabilities 3. Process improvements To put the review in context, though: the core framework underlying the Solvency II regime and its principles are broadly fit for purpose, and are in line with existing and emerging international standards. The review does not involve tearing it up and starting again – not least because of the substantial sums invested by industry in the last decade in adopting it. Industry responses to HM Treasury’s Call for Evidence[1] were largely in agreement with this approach.
If we slice the mark-up data for non-financial companies on a sectoral basis, this suggests this rise has been reasonably broad-based (Chart 5). All but two of the ten sectors have seen mark-ups rise since 1987, although some are volatile. Six of the ten have seen them rise by more than 30 percentage points. Among the largest rises have been in manufacturing (70 percentage points), professional, scientific and technical (62 percentage points) and transport and storage (57 percentage points). This broadly mirrors the international evidence. 12  One apparent exception is the banking sector. Chart 6 plots a measure of banks’ net interest margins (NIMs), as a proxy for mark-ups, in the UK, US and euro area since 1996. NIMs appear to have been broadly flat in these countries over recent decades. If anything, they may have fallen over the past decade. The latter is potentially the result of the low levels of official interest rates, constraining the ability of banks to lower their deposit rates in order to protect margins (for example, Claessens, Coleman and Donnelly (2017)). Another way of slicing the data is to ask how much of the rise in mark-ups is due to a compositional shift over time towards sectors whose mark-ups are already high and how much reflects a generalised rise in mark-ups within each sector. Chart 7 shows this decomposition for UK-listed firms.

That reduces the cost of borrowing across the board, from mortgages, to business loans, to corporate debt. Our securities purchases are an important reason why longer-term interest rates are at or near post-World War II lows. In addition, we’ve publicly announced that we expect to keep the federal funds rate exceptionally low at least through late 2014. This guidance tells investors that short-term interest rates are likely to stay low for a long time, which then gets passed through to longerterm rates. Of course, our statements are not an absolute commitment to keep rates near zero. It’s simply the FOMC’s current judgment about the best future course of policy. If the economic outlook changes, then the guidance could change too. Let me emphasize that the unusually stimulatory monetary policy now in place won’t last forever. Eventually we will cut back the size of our securities holdings and raise our unusually low interest rate target. We’ve thought hard and communicated frequently about how to exit from these special conditions.6 The key point is that the economy currently needs an  5  See Williams (2012) for a discussion of the Fed’s mandate and the implications for the conduct of monetary policy. 6  See the discussion of exit strategy in the minutes for the June 2011 FOMC meeting (Board of Governors 2011). 4  BIS central bankers’ speeches  extraordinarily supportive policy. But we’ll reverse course when the time comes to remove this support.
There could be further supply side impacts from the structural economic change or repurposing that could be needed if the behavioural changes that we have seen in response to the pandemic persist, as seems highly likely, although the sign of these impacts is perhaps more ambiguous. The letter is available on the Bank’s website at https://www.bankofengland.co.uk/-/media/boe/files/prudentialregulation/letter/2020/info-request-operational-readiness-policyrates.pdf?la=en&hash=E973B09B00A6EC1D2B5AB9B845BF20EB5EF7BBB6. 14  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  The November MPC decision isn’t for another two weeks and we have a full round of forecast and policy meetings to come between now and then. In these uncertain times, and with an array of risks to contend with, from Covid, from Brexit and from wider geopolitical developments, the MPC is clear that the range of actions that could be taken remains under review, consistent with our remit. I head into our upcoming meetings in the belief that we are equipped with an effective set of tools in our toolbox which we will be able to use to meet our remit, however the economy might evolve from here. Figure 10: Uncertainty around those projections was higher than usual and the risks were to the downside.

Alongside this, since 2019, the PRA and FCA have co-chaired the Climate Financial Risk Forum (CFRF) which has delivered a series of guides incorporating good practice ‘for industry, by industry’ which should enable firms to progress in response to the expectations in SS3/19. Where a proportionate approach is a firm’s preferred option due to lack of resources, the CFRF outputs should help to mitigate this issue. Update on regulatory reform It is worth noting that when carrying out its general functions (as opposed to taking individual supervisory decisions),5 the Financial Services and Markets Act requires the PRA to have regard to differences in the nature and objectives of different kinds of business organisation, including Mutuals. When making rules the PRA is required to consider and explain whether the rules would have a significantly different impact on Mutuals compared to non-Mutuals. This consideration is covered in our policy-making communications, including Consultation Papers and Policy Statements. The most significant package of policy consultation coming up – in 2022 – will be in relation to Solvency II. HM Treasury announced a review of Solvency II last year and the government has set three objectives for it: to protect policyholders and ensure the safety and soundness of firms, to support insurance firms to provide long-term capital to underpin growth, and to spur a vibrant, innovative and internationally competitive insurance sector. The package of policy changes will be designed to deliver on all three objectives.