samchain/econo-pairs-v1 huggingface dataset:
If the consumers’ confidence with regard to the future were to decline, together with rising unemployment and a weak development in the stock markets, there was a great risk that activity in the US economy would be subdued. Companies often react to uncertainty with a “wait and see” policy, which means that they postpone investments. In addition, there was uncertainty as to whether the financial system could cope with the problems arising as a result of the devastation in New York. On top of this, certain sectors in the global economy would be hit directly, for instance, insurance companies, airlines, tourism, etc. All of this risked worsening the economic downturn both in the USA and in other countries. The role of a central bank in this type of situation is to contribute to creating confidence and promoting financial stability. It is then important to act quickly and resolutely. This may be considered to contradict the claim that it is important for the Riksbank to act predictably. However, for those who have observed the central banks’ actions on other occasions when problems in the financial system have arisen and confidence in the future has declined, such as in 1987 and 1998, it should be no surprise that central banks act to support the economy with a lower interest rate and greater supply of liquidity. This is to counteract a downward spiral in the global economy as the result of a decrease in the willingness to take risks.

With regard to prices, inflation increased slightly more than expected in 2001. This can be partly explained by unexpected price increases on, for instance, fruit and vegetables; the price of these product groups will probably continue to increase slightly more than expected in the short term. Imported inflation has increased more than expected in both the producer and consumer areas, which could be due to the exchange rate’s effect on prices being slightly higher than assumed. However, price increases have also been broader and higher than expected for other goods and services. My view of the current situation So how do I assess the situation in which we find ourselves today? Firstly, I feel that confidence in the future and willingness to take risks appear to have recovered from the shock of 11 September. But what will happen to inflation? There are three reasons why inflation should fall this year. The first is that growth in demand and utilisation of resources were both lower than expected last year, which subdues price pressure for the near future. The second is that inflation expectations are disposed towards a decline in inflation, according to recent surveys. And the third is that the krona has appreciated slightly, which means a lower risk of imported inflation. On top of this, the effects of last year’s price rises on certain goods and services, including food and energy, will gradually abate. However, there is also a risk that the price rises will not abate on their own.
This explains why welfare gains have been substantially higher in Norway and other European countries than in the US in the postwar period. BIS Review 14/2000  10  Chart 12  Growth in productivity in mainland Norway was high in the 1960s and 1970s. Since 1980 productivity growth has been more in line with growth in the US. By then we had reached a high level of income. It follows that there was less to gain than earlier from the import of new technology. Chart 13  In spite of the boost provided by Norway’s oil resources, there is a difference in income between Norway and the US. The income differential is probably to a large extent ascribable to differences in  11  BIS Review 14/2000  working hours and employment. Labour participation is slightly higher in Norway than in the US, while the average working time in Norway is almost 30% below the US average. Many people in Norway work part time. But even a full person-year amounts to a good 10% fewer hours than the US average. The income differential primarily reflects that Norwegians have preferred leisure to long working hours. However, the income level in Norway is high compared with other European countries, which is attributable to Norway’s petroleum revenues and high level of employment. The relatively high level of income indicates that we have to a large extent closed the technological gap between Norway and the US.

To contribute to the concerted efforts by the international community, the Hong Kong SAR Government has recently asked the Hong Kong Monetary Authority to establish an Infrastructure Financing Facilitation Office (IFFO). As its name suggests, IFFO aims to provide a platform to bring together key stakeholders, including developing countries, multilateral development banks, potential investors and financiers (e.g. private equity funds, sovereign wealth funds, banks etc), project developers such as corporations capable of developing and operating large-scale infrastructure, and professional service providers. Through information exchange, experience sharing and capacity building, we hope to facilitate more efficient and sustainable infrastructure investment flows to developing Asia. BIS central bankers’ speeches  1  IFFO will seek to collaborate with other development partners in the region and so far we have received support from a number of them including ADB. If everything goes smoothly, IFFO will be formally inaugurated this summer. As an international financial and business center in the region, Hong Kong, China has long been playing an active role in supporting infrastructure financing in Asia. By leveraging on our unique position as an IFC, we hope the IFFO initiative will help mobilise private sector financing and bridge the gap between investors and viable projects. We look forward to working closely with our partners in this process. Thank you. 2  BIS central bankers’ speeches
Getting our core job right, and so maintaining financial stability, is far and away the most important thing we can do to support the fight against climate change. Achieving net zero will not be possible unless our societies make considerable investments in developing and disseminating new technologies, and will require major changes across the economy. A stable financial system can support households and businesses through these changes, and channel investment where it needs to go to support the transition. Transitioning to net zero will be a major challenge for our institutions and societies even in a benign economic environment – doing so without confidence in the basic functioning of the financial system would be near impossible. It is therefore vital that firms can withstand risks to their safety and soundness, including those that arise as a consequence of climate change – both ‘physical’ risks like flooding and extreme weather events, and ‘transition’ risks that arise as the economy moves away from carbon-intensive activities. Firms therefore need to understand, at a granular level, how their balance sheets and business models are exposed to both present and future climate risks, so that they can take the right risk management actions today. This includes investing in their data and modelling capabilities, and  Page 3  carefully scrutinising the data they get from third parties. It means ensuring Boards and senior executives see climate risk as a strategic priority. [3] And ultimately, it means ensuring firms hold sufficient financial resources to absorb losses arising from climate change.

Based on analysis on the location of impairments within the four-digit postcodes analysed. 13. And we know there are gaps. Since this was our and the firms’ first exercise we deliberately chose not to capture all possible sources of risk. 14. But this is something that the Bank will be exploring further, and where we have invited external analysis and research to inform our views. We will be holding a conference later in the year to discuss.
We’re just adding a bit more fruit juice. Before I conclude, let me make a few comments about the Federal Reserve’s balance sheet. As you are undoubtedly aware, the Federal Reserve dramatically expanded the size of its balance sheet during and following the financial crisis to provide accommodation to support the economy when short-term interest rates were constrained by their effective lower bound. Currently, we are reinvesting maturing Treasury securities and agency mortgage-backed securities repayments to keep the size of the balance sheet generally stable. We have said that we plan to continue this policy of reinvestment until we are well along in the process of normalizing the level of the federal funds rate. As the FOMC has raised the federal funds rate three times, this process seems to have proceeded smoothly so far, prompting renewed interest in our balance sheet and reinvestment policy. The anticipation of and actual announcement by the FOMC of changes in reinvestment policy is likely to push up longer-term interest rates and tighten financial conditions somewhat, just as the earlier purchases pushed down long-term interest rates. To what extent is difficult to judge. Presumably, financial conditions would tighten by more if we were to end reinvestments earlier and more abruptly. This suggests a better course may be to taper reinvestments gradually and predictably. 5/6  BIS central bankers' speeches  In addition, because changes in reinvestment policy will likely tighten financial conditions, we will have to take this into account in our interest rate decisions.

All these developments reflect Singapore’s ideal position for asset managers to deepen and broaden their activities in the Asian time-zone. Annual accounts 28. On our financial statements, MAS recorded a net profit of $ billion for the financial year. The profits comprised mainly interest income, as changes in the valuation of foreign assets and the foreign exchange effects of a stronger Singapore dollar largely offset each other. Total assets, including the Currency Fund, grew by $ billion during the year to $ billion at end-March 2008. 4  BIS Review 94/2008  Remaining vigilant 29. We need to remain vigilant in the face of a number of risks in the global economic and financial environment. We will continue to work closely with the industry to identify vulnerabilities and threats to financial stability through macro surveillance and stress testing. MAS’ work in the coming year will continue to be driven by our mission of supporting noninflationary economic growth, and fostering a sound and reputable financial centre. 30. Thank you. BIS Review 94/2008  5
Acharya and P. Schnabl (2010), “Do Global Banks Spread Global Imbalances? The Case of AssetBacked Commercial Paper During the Financial Crisis of 2007–09,” paper presented at the 10th Jacques Polak Annual Research Conference, 5–6 November 2009. 6  BIS Review 83/2010  better managed public finances will pay lower risk premia, and therefore lower interest rates, which, in turn, will help them to keep budget deficits and the stocks of national debt under control. Countries with larger budget deficits and higher stocks of national debt, on the other hand, will face higher risk premia, and therefore higher interest rates, which, in turn, will affect their ability to control the dynamics of their public finances. How will a central bank committed to price stability and endowed with the constitutional guarantees necessary to enforce a price stability-oriented policy pursue its mandate in a high-debt / high-risk environment? Sovereign securities have traditionally been the prime form of collateral for central bank credit. In the future, given the greater importance of this type of debt instrument in the total portfolio of the economy – to which I was referring before – this primary role is unlikely to diminish. So, a central bank will continue to emphasise strongly the maintenance of orderly market conditions for this type of instrument. The ECB’s Securities Markets Programme has demonstrated how critical it is for a central bank to safeguard the functioning of this segment of the market. 1.

If we want central bank control over leverage to be stronger in the future, shadow banks need to be part of what we consider “banks” tout court. In fact, by 2007 the size of the official and shadow banking systems, measured by the total amount of assets, had become essentially the same. 3 But there is also an issue of quality – or, if you prefer, of composition – of finance. Due to the increased risk aversion resulting from the financial crisis, collateralised lending is bound to increase in the future, even in markets where traditionally unsecured lending was the most important source of finance (e.g., the euro area interbank market). As a consequence, the demand for securitised assets – of the type that shadow banks have learned to create in the past – is set to increase further in the future, as institutions demand such types of debt to use as collateral. To put it in a nutshell, we will continue to need the functions, the financial products and the expertise that the shadow banks have been offering. But, we need to make sure that these activities are performed in a non-disruptive way. The new financial landscape can also reinforce the effectiveness of monetary policy. I already mentioned that most of the funding of financial institutions – whether banks, brokerdealers, hedge funds or shadow banks – is short-term. In other words, a key function of the financial system is maturity transformation.
In my view, a consideration of the costs and benefits, and the opportunities and risks of a broad purchase programme of government bonds does not give a positive outcome at the current time. Concluding remarks Owing to my position, I have limited myself today to talking about innovations in monetary policy. At this point we should look first at the effect of our recent measures and of the asset quality review and the stress test on bank lending. Innovations in other political areas are also necessary, if not even more so. The reasons for weak growth and funding shortfalls primarily lie elsewhere, not in a lack of central bank liquidity, to say nothing of capital markets. Innovative political approaches are called for when it comes to increasing growth potential in the euro area, strengthening economic adjustment efforts and making budget consolidation compatible with growth and employment. But let me conclude by returning to the original question: how innovative may the ECB’s monetary policy be? As innovative as necessary and as effective as possible. This requires careful consideration. The risks and side effects must always be taken into account. For me, given the current situation, the hurdles for further measures are very high, especially for broad purchase programmes. The interest and spreads for many debt instruments are already very low: the risk of market distortions cannot be dismissed.

Short-term developments are not key, especially when they are largely determined by energy and food prices. The underlying trend and the firm anchoring of inflation expectations are decisive, as well as the orientation of the euro area as a whole. Low inflation rates in some Member States – even when negative – are not in themselves a breach of the target. They can be necessary to restore lost competitiveness. One could also argue about whether it is really necessary to consider further measures given that the measures already taken have not yet been able to have an effect. Monetary policy does not take effect immediately, but only with a certain time lag. As a rule we should take this time and wait and see. Which measures are we talking about here? The large-scale purchase of securities, including government bonds, is often seen as a panacea. As I said, even for innovative or unconventional measures, the costs and benefits, and the opportunities and risks must be carefully considered. Some central banks have used quantitative easing to quickly and decisively provide monetary policy impetus, adjusted to the specificities of their environment. It is these particular central banks and their measures to which we are compared. For me, these are idle comparisons. The following saying applies here: those who constantly compare themselves with others might become more like them, but they won’t necessarily become any better.
Fiscal policy is then best handled by the government, not by the central bank. The Riksbank's monetary policy is already expansionary and contributing to supporting demand in the Swedish economy. But there are limited possibilities to make monetary policy even more expansionary, in my opinion. There are, however, good possibilities to make fiscal policy more expansionary. I therefore believe that fiscal policy will play a larger role in stabilisation policy if economic activity weakens further in the coming years. Climate change entails new economic and financial risks Climate change is one of the structural changes I have talked about today. I have noted that Örebro was one of the first municipalities in Sweden that issued a green bond. Here at Kommuninvest, in Örebro, I think that it may be appropriate to conclude by elaborating on what I see as the Riksbank's role in the work to achieve greener financial markets. Climate change affects the way the economy functions. Its impact is most clear in the insurance sector, as a direct consequence of the risks of climate-related damage. The risks may also increase on the financial markets when various branches are forced into major changeovers as a result of demand, taxation or regulations being changed. 7 Monetary policy can also be affected more directly, for instance if economic data becomes more difficult to interpret when the effects of the weather lead to larger fluctuations in prices and production.

Swedish Ministry of Finance (2019), “Uppdrag till Riksgäldskontoret att genomföra en emission av gröna obligationer”(Swedish National Debt Office tasked with issuing green bonds), Government decision, Fi2019/02708/S. NGFS (2019), “A call for action. Climate change as a source of financial risk”, Network for Greening the Financial System, First comprehensive report, April 2019. Rachel, Łukasz and Laurence H. Summers (2019),”On Falling Neutral Real Rates, Fiscal Policy, and the Risk of Secular Stagnation”, Brookings Papers on Economic Activity, spring 2019. Reichling, Lucrezia, Adair Turner and Michael Woodford (2019), “Helicopter money as a policy option”, VoxEU column. Shirai, Sayuri (2019), “Modern money theory and its implementation and challenges: The case of Japan”, VoxEU column. SOU (2017:115), “Att främja gröna obligationer” (Promoting green bonds), Report from the Inquiry into green bonds, Swedish Government Official Reports. Sveriges Riksbank (2019), Monetary Policy Report, October 2019. 7 [7]
In recent years, non-bank financial institutions are also playing an important role in this regard, by implementing innovative solutions. Public authorities have initiated and developed electronic platforms for the public payment services, such as taxes. The progress is notable – if compared with 10–20 years ago. But, our benchmarks are visionary: alignment with the standards of the countries we aspire to integrate with and the development of a society with a broad base of financial inclusion, where the use of electronic payment instruments are part of everyday life. The Bank of Albania, based on this vision, has placed at its focus the modernisation of retail payments system to bring about a tangible change. In collaboration with all market stakeholders, and with the valuable expertise of the World Bank, funded by SECO, the Bank of Albania finalised a set of analyses and studies on the situation of payments in Albania. I would like to mention here three main reports, published on our website: 1. The so-called PAFI project report on the market analysis on financial inclusion, which is implemented, in many other countries, and aims at reforming the retail payment systems and promoting financial inclusion; 2. Review of the Market for Remittances in Albania, a component of retail payment systems; 3. The study on measuring the costs of payment instruments. This study identified the costs for each element, finding that cash is the most costly means to the Albanian economy. In addition, it sets out scenarios for the replacement with various innovative instruments, which reduce these costs.

The establishment of a national platform for processing card payments - would to provide a direct impact on reducing high costs and improving the current card processing practices, due to the extended cycles and involvement of more actors in the process. Such a platform would also support innovative services, such as mobile payments and e-wallet. The Bank of Albania is analysing the possibility to develop instant payment in our market as well. The implementation of such a project is deemed to have a direct impact on financial inclusion and on providing services at low cost. I invite you to actively participate in  discussions, in order to benefit as much as possible by the experience of other countries, and to analyse the possibilities presented by service providers that are invited to discuss on these topic in the afternoon session. Furthermore, regarding financial inclusion, the strategy pays special attention to the establishment of the concept of “basic” bank accounts with low costs, for the financial inclusion of all levels of population, irrespective of their economic situation. Last but not least, innovation in public services. The initiatives that digitalise and automate public services need coordination and access to various data electronic platforms, such as data of: citizens; addresses; and payments for these services. Any development should be accompanied with financial education of the population, as a precondition for success.
Recently we have extended the model to include financial frictions and also an explicit banking sector and a housing market. As soon as we abandoned an exogenous assumption of future key policy rates, we had to take a stand on how to formulate monetary policy within our core model. Analytically, deriving the monetary policy reaction pattern with a loss function is a useful and practical approach. We have developed an improved apparatus for solution algorithms for DSGE models in order to be able to solve for the endogenous interest rate path in different ways and under different assumptions. The interest rate path that we derive from the model analysis serves as a benchmark for the policy discussions of the Executive Board. The analytical loss function that we use in NEMO to solve for this path reflects our criteria for an appropriate interest rate path. The first criterion is that the interest rate should be set with a view to stabilising inflation at target or bringing it back to target after a deviation has occurred. The second criterion is that  8  For details, see Qvigstad, J. (2005): “When does an interest rate path “look good”? Criteria for an appropriate future interest rate path – A practician’s approach,” Norges Bank Staff Memo 6/2005. 9  The key policy rate is the interest rate on banks’ overnight deposits in Norges Bank. 10  Norges Bank has developed a system, SAM (System for Averaging Models), for averaging short-term forecasts for inflation and mainland GDP provided by different models.

This issue is on our research agenda. We have initiated a three-year research project, where we will seek to review different aspects of our inflation targeting framework, including the question of how to take financial stability into account. Moreover, for a small open economy, large terms of trade shocks may represent a particular challenge, also for monetary policy. In our search for answers and our efforts to steadily improve our implementation of flexible inflation targeting, we look to academia. Therefore, let me again emphasise how much I appreciate the opportunity to be here today. Thank you for your attention. 8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13