samchain/econo-pairs-v1 huggingface dataset:
One example of this is that during earlier periods we could see directly the effect of a 0.25 percentage points lower repo rate on the inflation forecast. Here it is exemplified by two figures from the Monetary Policy Report published in July 2014, at the end of the period when we only used the repo rate and the repo-rate path as tools (see Figure 12). Based on estimates in a macroeconomic model, we could clearly read the expected effect of the monetary policy alternatives on our target fulfilment. But with the extensive toolbox we have used during the coronavirus pandemic we can in principle agree that the measures give the ‘right sign’ as my colleague, Governor Stefan Ingves has put it. It is much more difficult to evaluate the effect on target fulfilment quantitatively. Although many attempts have been made to estimate the effects of the asset purchases on inflation, they are not as certain as the 29 See Sveriges Riksbank (2020c), Sveriges Riksbank (2021a) and Sveriges Riksbank (2021b) for a more detailed description of the Riksbank's views on the proposal. 11 [20]  effects of the repo rate. 30 The obvious explanation is that the channels have not been as fully investigated, and the number of observations to estimate the effects is so small. Here we have a challenge ahead of us. Our independence with regard to monetary policy presupposes openness and clarity to enable accountability.

Beyond these unexpected headwinds, the key challenges have come from foreseeable sources. I am conscious I have adopted a number of lists today – but bear with me for one final one as I set out four key challenges we will need to overcome if we are to turn aspiration into action that advances the transition. And in the spirit of being solutions focused, not just a naysayer, I will also provide views on how to overcome each of the challenges. Challenges to advancing the transition The first challenge is that filling capability gaps in the transition finance infrastructure takes time, so we need to continue to take urgent steps now. Collectively we need to equip the financial sector with forward-looking information from the real economy to allocate capital effectively and mobilise finance at scale. That means the rapid implementation of ISSB standardsOpens in a new window, finalising the Transition Plan Taskforce's frameworkOpens in a new window for transition plans, and the adoption of innovations that reduce greenwashing such as product labels. The Government's 2023 Green Finance StrategyOpens in a new window sets out further detail on the timeline for Sustainability Disclosure Requirements and commits to reflect developments in international standards. It also commits to consult on the requirements for the UK's largest companies to disclose their transition plans. But, the responsibility for driving forward the transition to net zero is not only for governments and the authorities in building the frameworks. As NEDs, it includes all of your firms in using those frameworks.
Failure to recognize bad debts 9. Having landed themselves with bad debts, banks failed to face up to the problem. In particular, systems for loan classification and provisioning have been inadequate. As a result, capital ratios have been overstated, and insolvent or near-insolvent banks have been allowed to continue in business and to build up further losses. Banks have been allowed to accrue income on non-performing loans, thus overstating revenue and capital. Lack of transparency  1  Paul Krugman, “What happened to Asia?”, January 1998  BIS Review 28/1998  ˝  -3-  10. All this has been made worse by a lack of transparency in regional banking systems. Failure to disclose the true scale of bad debt problems has weakened market discipline on bank management and reduced the need for them to face up to the problems. Public confidence in banking systems has been undermined because, with no credible information, depositors and investors assume the worse in even relatively sound banks and rush to take their money out. Moral hazard 11. The final ingredient has been the perception that many banks in the region are effectively government-guaranteed. This has created a problem of moral hazard whereby bank management can afford to indulge in reckless lending behaviour because they believe that government will bail them out if they fail. Similarly, depositors have less incentive to check the creditworthiness of the banks with which they place funds. Weakness in supervision 12. How did Asian banks get into this state of fragility?

Much of this borrowing was short-term, giving rise to a maturity as well as a foreign currency mismatch, either on the part of the banks or the companies to which they on lent. When the initial pressure on currencies emerged, domestic borrowers that had previously never had to think about hedging their foreign currency liabilities rushed to do so, turning a slide in the currency into an avalanche. Those who were too late were left with liabilities to the banks that were vastly inflated in terms of their domestic currency - and the banks were left with the resultant bad debts and a crippled ability to finance the routine needs of their customers. Captive banks 7. Why were banks not more discriminating in their credit choices and decisions? Part of the explanation is that in a number of economies banks were ordered or persuaded by the government to lend heavily to particular industries and companies. In other words, they were “captive banks”. This allowed the companies concerned to become over-leveraged (and thus vulnerable to economic downturn) and directed resources into unprofitable investments. The banks concerned had little incentive to develop proper lending skills. Concentration risks and connected lending 8. Moreover, banks in some economies were over-exposed to single borrowers, often those connected with the lending institution. Such lending is usually of poor quality, not having been made at arm’s length, and means that the shareholders have no real capital at stake in the bank (because it has effectively been lent back to them).
As the safety net can in various ways make the bank's funders immune to certain risks, it may be tempting to allow the bank to take greater risks than is optimal from the point of view of the economy as a whole. Simply put, the safety net reduces the private costs of applying strategies associated with a higher level of risk; the bank’s financiers gets the upside but not the downside of the increase in the level of risk. This phenomenon is usually called moral hazard. The design of public supervision and regulation is important in the effort to reduce the problems relating to moral hazard. Not least, the conditions concerning aspects such as guarantees and liquidity assistance have a major impact on the possibility to counteract problems and reduce the costs they give rise to. If the state is forced to intervene and save a bank, it is important that the shareholders and other funders do not come out of the process unscathed. Designing a public safety net for financial operations thus entails a number of difficult considerations. Crises change the role of the authorities During the bank crisis of the 1870s, however, there was no real safety net to speak of. The Riksbank sat on the sidelines and had no role to play in the practical management of the crisis.

In addition, it has become far too difficult to monitor the financial sector with its large, complex institutions that have operations and commitments all over the world. And even if monitoring had been simpler and better, there are still no effective mechanisms for counteracting bubbles. The regulation and supervision that has existed has proved inadequate to prevent either exaggerated risk taking in upturns or destructive herd behaviour in downturns. The global extent of the current crisis points to the need to further develop inter-national cooperation regarding financial regulation, supervision and crisis management. A number of proposals are accordingly being put forward at the international level concerning how regulation and supervision can be developed to reduce the risk of similar crises occurring in the future. 6  BIS Review 135/2009  The measures that are now being discussed by authorities around the world largely stem from the fact that in many areas supervision has focused far too much on the state of health of individual institutions and far too little on broader development trends, for example the expansion of credit in the economy, and on the links between institutions in the financial system. Above all, financial supervision has not sufficiently taken into account the risk of financial problems becoming highly contagious. It is, after all, the contagion effects that may have the most serious repercussions for the financial system and, ultimately, the real economy.
BIS Review 18/2005  1  It takes time for an interest rate reduction to have an impact on inflation. We are now seeing the effects of monetary policy decisions some of which were taken two years ago. The interest rate has affected inflation via the krone exchange rate and via demand for goods and services. In particular, the rise in prices for domestically produced goods and services has picked up. In addition, the reduction in the interest rate has probably contributed to holding up expectations of future inflation even when inflation is low. If there is confidence in monetary policy, economic agents will expect inflation to be close to target over time. This will provide a basis for company budgets. This will then contribute to stabilising inflation. Many companies change their prices only once or twice a year. When they change prices, they probably take into account the expected rise in other prices. It has been important to prevent inflation expectations from falling and becoming entrenched at a low level. Surveys of inflation expectations indicate that expectations are well anchored around the inflation target in the long term. The first signs of the effects of the interest rate cuts appeared in the foreign exchange market. The interest rate differential against other countries narrowed. It became more attractive to borrow and less profitable to invest in the Norwegian krone. The movement in the krone exchange rate was reversed and it depreciated through 2003 and into 2004.

As the interest rate gradually increases to a more normal level, growth in private demand will probably ease, and capacity utilisation may be brought down and stabilise. There is uncertainty associated with developments in demand and output in the near term, partly because the interest rate has been low for a long period. Higher growth may rapidly trigger stronger pressures in the economy. Output growth in Norway is high, and capacity utilisation is rising. It may appear that growth has become more self-driven. The low interest rate will probably contribute to an increase in the output gap and inflation ahead. The operational objective of monetary policy is inflation of close to 2.5 per cent over time. In the conduct of monetary policy, emphasis is also placed on curbing fluctuations in output and employment. The objective of stabilising developments in output and employment implies, in isolation, a higher interest rate. This will reduce the risk that capacity utilisation in the Norwegian economy will become too high. High capacity utilisation could give rise to bottlenecks in some sectors of the economy and lead to a higher rise in property prices and household borrowing. This could be a source of instability in demand and output in the somewhat longer run. The objective of bringing inflation back to target and anchoring inflation expectations nevertheless implies a continued expansionary monetary policy. International interest rates are rising, albeit slowly and from a low level. There are prospects of continued low inflation for a period ahead.
We will aim for close cooperation with the FSOC and other authorities for macro-prudential oversight. The case for macro-prudential oversight So what exactly is macro-prudential oversight? In many respects, it is the missing link between the different approaches of a central bank – which has such an important stake in stability at a macro level – and a financial supervisor – concerned with the financial soundness of individual market participants. The de Larosière report argued pointedly that before the crisis, supervisory arrangements, whilst concentrating on the supervision of individual firms, were placing too little emphasis on the stability of the financial system as whole. Indeed, until the late 1990s, the dominant view  2  BIS Review 156/2010  in policy circles was that if individual institutions were financially sound, the financial system as a whole would also be necessarily sound. We now know that relying only on micro-prudential supervision to ensure financial stability suffers from the fallacy of composition. What is true for a part, or even for all parts, is not necessarily true for the whole. Amongst other elements of systemic risk, inter-linkages between institutions, correlated and concentrated exposures to risk, as well as herding behaviour may contribute to a destructive dynamic between institutions, markets and infrastructures. This would ultimately threaten the stability of the whole system. Putting macro-prudential oversight into practice Putting macro-prudential oversight into practice raises two questions: who should be charged with macro-prudential oversight and how it should be performed? Let me start with the question of “who”.

These countries are included in order to help the West to overcome the recapitalization problems. The British Prime Minister Gordon Brown strongly supports new "Bretton Woods" Agreement for the international monetary system. The freedom that the New York institutions for residential sector financing enjoy currently, will vanish. It seems that the Arabian countries and Russia are not ready to discuss in this direction, or it just seems like that. But Putin, during his visit to China, suggested the Chinese leaders to initiate trade in their national currencies, showing explicit non-confidence in the US Dollar. The Persian Gulf countries are planning a monetary union. Will they take this step? According to all this, dear Ladies and Gentlemen, we are living in an exciting historical period. Yes, it is crisis. But, probably, it is not by chance that the wise Chinese have two signs for the crisis. The one denotes the danger, and the other one, possibilities. This crisis is a real possibility to learn a lot, in this case from the mistakes of the developed ones, in order to build a financial system and an economy which will be less vulnerable to any future shocks. Thank you! 6  BIS Review 18/2009
In general, foreign borrowing is a source of diversification and thus risk reduction, but it can also spread unrest. By international standards, Norwegian savings banks are small. It can be costly to change a source of funding if one source should dry up. In the event of considerable financial unrest in international financial and capital markets, savings banks may be affected. Today, the shocks are often global. If the current high credit growth continues, financial stability in Norway will be threatened. We will become more vulnerable to all kinds of shocks. I have already touched upon the weak outlook for the global economy. There is also reason to expect considerable structural changes in the business 8  8  Income here is defined as household disposable income before deduction of gross interest expenses. BIS Review 86/2001  sector, for example, when economic resources have to be transferred to the public sector and other sheltered sectors. Restructuring may take place within established companies, but may also take place in a far less controlled manner and result in losses for banks and other lenders. Policy challenges Like banks and other market participants, the authorities also learn from crises. I will discuss three areas in which we have learned important lessons. First, economic policy must be oriented towards stable economic development. An inappropriate economic policy has been a contributing cause of crises both in Norway and abroad.

Svein Gjedrem: Is the financial system stable? Speech by Mr Svein Gjedrem, Governor of Norges Bank, at the 2001 Annual Meeting of the Norwegian Savings Banks Association, Haugesund, 18 October 2001. Please note that the text may differ slightly from the actual presentation  *  *  *  Introduction The role of the financial industry in the economy has become increasingly important over the last decades. Deregulation and technological advances have increased the industry’s opportunities and scope to channel savings to various projects. Strong competition has induced the industry to make use of these new opportunities. The range of saving and financial instruments is becoming ever wider. Systems and financial instruments for managing and controlling risk are becoming more advanced. As a result, it has become easier for households and enterprises to decouple consumption and investment from current income. In the second half of the 1990s, in particular, international capital 1 markets have become more integrated. It has been easier for growing economies to finance investments through a balance-of-payment deficit and foreign capital. At the same time, countries with high savings can increasingly diversify their investments. Globalisation places increasing demands on the business sector’s ability to adapt. New products and technology squeeze out old solutions. This creative destruction, as Schumpeter called it, may foster a more efficient distribution of resources and higher economic growth in the long run. A rapidly changing environment places considerable demands on the financial industry. The financial prospects for a project must be assessed in relation to risk.
Time will tell whether this turns out to be the case. No One Right Answer Let me conclude by sharing something I learned from Thomas and hold dear. It's actually hidden in the last line of the abstract from our first published paper. It says: "Estimates of the natural rate of interest, however, are very imprecise and subject to realtime measurement error. "14 To some, that may sound like a negative statement. But it's also what makes empirical research so exciting and challenging. There is no one right answer and no single way to view the world. Empirical research is a process of continuous learning and adaptation —fueled by perseverance. People come up with different approaches, and we learn from all of them. So, while we started with the problem of how to estimate r-star, it didn't end with that first Board memo. Rather, it opened the door to new questions, which led to further challenges and even more research. This is the legacy of Thomas Laubach, and it's what brings us all together today. Figures  1 John H. Williams. "The Monetary Doctrines of J. M. Keynes," The Quarterly Journal of Economics 45, no. 4 (August 1931): 547 – 587. 2 John B. Taylor. "Discretion versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy, Vol. 39 (December 1993), pp. 195 – 214. 3 Athanasios Orphanides discovered that quote after we were already working on r-star. 4 Thomas Laubach and John C. Williams. Estimates of a Time-varying Equilibrium Real Federal Funds Rate.

But the editor cut it, leaving it "for future research." What's Past is Prologue Fast forward a decade, and an entirely new question about r-star arose: Why had estimates of r-star fallen so low? It's a topic Thomas and I explored in our "Redux" paper.8 And in 2017, Kathryn, Thomas, and I expanded the set of economies for which we estimated r-star.9 Indeed, before the pandemic, historically low estimates of r-star characterized advanced economies across the globe. This is illustrated by the Holston-Laubach-Williams (HLW) estimates of r-star for the United States and the Euro Area using data through 2019, shown in Figure 1. Both were around ½ percent before the onset of the pandemic, far lower than estimates from preceding decades. Back to the Future One of the features of the LW and HLW models is that both are designed to be flexible and to "let the data speak" in measuring changes in the natural rate of interest. Even this flexibility, however, has its limits. And the economic turmoil brought on by the COVID-19 pandemic went far beyond what the models were originally designed for. In particular, the pandemic violated two key assumptions about the nature of macroeconomic disturbances underlying the models.10 First, the Kalman filter statistical method that serves as the models' workhorse assumes random disturbances to the economy follow a normal, or bell-shaped, distribution. Relative to historical experience, COVID-19 represented an extremely rare tail event in terms of its effect on the economy.
Natural disasters tend to depress economic activity initially, but once the recovery and reconstruction efforts get underway in earnest, such disasters actually serve to lift economic activity. Looking beyond the storm effects—which will make interpreting near-term economic data releases more difficult—the economy remains on a trajectory of slightly above-trend growth at 1/7  BIS central bankers' speeches  about 2 percent, and the fundamentals supporting continued expansion are generally quite favorable. Low unemployment, sturdy job gains (recognizing the near-term negative impact of the storms), and rising wages (even at a pace below previous expansions) are lifting personal income. Household wealth has been boosted by rising home and equity prices, and household debt has been growing relatively slowly, contributing to a healthy household balance sheet. Thus, consumer spending should continue to advance in coming quarters. Business fixed investment outlays are also likely to continue to rise. With the supply of labor tightening, there are greater incentives for businesses to invest in labor-saving technologies. Investment spending should also benefit from a better international outlook and the improvement in U.S. trade competitiveness caused by the dollar’s recent weakness. The softer dollar and solid growth abroad also suggest that the trade sector will no longer be a significant drag on economic growth. Turning to the outlook for inflation, I have been surprised by the persistence of the shortfall from the FOMC’s 2 percent long-run objective.

Thus, even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate to continue to remove monetary policy accommodation gradually. This judgment is supported by the fact that financial conditions have eased, rather than tightened, even as the FOMC has raised its short-term interest rate target range by 75 basis points since last December. But, the upward trajectory of the policy rate path should continue to be shallow, in part because the level of short-term interest rates consistent with keeping the economy on a sustainable longrun growth path is likely to be considerably lower than it was in prior business cycles. The FOMC recently launched the process of balance sheet normalization—in which an increasing proportion of maturing Treasuries and agency mortgage-backed securities (MBS) repayments are allowed to run off the Federal Reserve’s balance sheet. While this process also should exert some monetary policy restraint over time, I believe the impact will be quite modest. Not only was this shift in policy widely anticipated, but we also have seen that the impact on the level of long-term interest rates has been small as expectations have adjusted. The economy has made great strides in recovering from the Great Recession, as the unemployment rate has fallen from 10 percent to 4.2 percent, aided by accommodative monetary policy. Measures of underemployment have also improved considerably and are near pre-crisis levels.