samchain/econo-pairs-v1 huggingface dataset:
This shock and the negative effects that it brought upon the economy and the central bank policies have been beyond comprehension. The authorities are feeling the difficulty of performing their task in the zero lower bound or very close to it. In this respect central banks have lost the traditional instruments of monetary policy and are reverting to money as the instrument of monetary policy. The shift has been significant not only in size but also in concept. The leading central banks in developed economies, the ones which set the trends, are under process of reviewing their objectives and monetary policy. Using support of research analysis and conclusions they are eventually rewriting monetary economics by giving central banks new instrument in the form of permanent use of the central bank balance sheet as a tool of monetary expansion. However, while implementation of balance-sheet strategies is easy to implement and deal with for developed countries central banks, same policies might not be easily adaptable and applicable by developing economies. Narrow and shallow capital markets, problems of financial inclusion and financial education, stressed private, public and fiscal balance-sheets and history, remind us of several potential risks that such policies can have for the highly dollarized/euroized economies of South-East Europe. Yet in the presence of current constrains faced by monetary policy we have to react and to find new ways to support the economy.

It is to set short-term interest rates with the consistent aim of hitting the Government's symmetrical 2½% inflation target (on a precisely defined measure of retail price inflation - RPIX). Now the reason we've been set that task is not - as some people imagine - because either we or the Government think that consistently low inflation is the be all and end all of economic life. It is because we've learned from long experience that consistently low inflation is a necessary  BIS Review 19/2002  1  (though not in itself sufficient) condition for the sustained growth of output of the economy as a whole, for high levels of employment, and for rising living standards, which are, of course, more fundamentally the things that we are all seeking to achieve. Carrying out our task is not as straightforward as it sounds because there is no simple, direct, link between short-term interest rates - the only instrument we have - and the rate of inflation. Interest rates essentially affect the demand side of the economy. They don't directly influence the supply side, which depends upon a whole host of structural characteristics which are largely beyond the direct reach of monetary policy. What we have to do in managing short-term interest rates is to keep overall demand growing broadly in line with the underlying - sustainable - supply-side capacity of the economy as a whole to meet that demand.
In particular, the intensity of the expansionary effects of the sizable decline in interest rates and the rise in property values will foreseeably diminish, both these factors, along with employment, having been underpinned by the buoyancy of household expenditure. Moreover, the fact that in the past households expanded their spending and reduced their saving (simultaneously increasing their debt, as I shall discuss later) means more moderate behaviour is to be expected -and desirable- in the future, geared to a restructuring of their saving ratio. Indeed, this began to be seen already in 2002. As regards gross capital formation, investment in infrastructure has had a key part in enlarging the economy’s productive capital stock. But it cannot play this leading role indefinitely. Consequently, it is particularly important that the flatness of business investment and, especially, of spending on capital goods in recent years, which has hampered productivity gains and the incorporation of technological innovations, should be put behind. In principle, the current high ordinary returns accruing to companies coupled with low financial costs are propitious to investment regaining buoyancy, as expectations progressively clear. On the prices front, certain temporary factors, such as the physical introduction of the euro and dearer oil, fuelled increases in domestic prices, against the background of relatively sustained growth in consumer demand. This prompted a rise in the inflation rate, which stood at end-2002 at 4%. This increase in inflation has been partly reversed, thanks to the improvement in recent months which has seen this rate cut by around one percentage point.

Changes in the population pyramid, increased immigration, the growth of the demand for second homes by residents and nonresidents and, above all, the continuous growth of income and the pronounced fall in interest rates are factors that help explain the trend growth of the relative price of housing in Spain. In addition, the unfavourable course of stock market prices in the last three years has enhanced the attractiveness of alternative investment opportunities, such as those offered by real estate. Yet in a market such as that for property which, by its very nature, sees supply adjust relatively slowly, demand pressures such as those arising from the aforementioned factors may cause excessive price reactions that tend to be corrected subsequently. This appears to be the situation currently in our country where, even with a significant rise in the rate at which houses are built, property values may have exceeded the levels consistent with the trajectory of their determinants. In such a situation, it is likely -and desirable- that house-price growth rates will be brought back progressively and in an orderly fashion to levels more in line with their fundamentals. This process, which should run parallel to gradual moderation in the resort to credit financing by the households and companies most directly involved in the real estate business, would prevent house prices from moving too far away from their equilibrium value.
As Elizabeth Corley highlighted, there is a disconnect between how we in finance – and I include the public sector here – see the sector and how the general public sees the sector. Interestingly, that disconnect is much less prompted by questions over the health of our banks. Alex Brummer made this same point in terms of a sense of optimism around institutions. That is a good thing because a tremendous amount has been done over the past seven years in order to make banks much stronger. I will not go into all the details, but banks are indeed now beginning to adjust their business models. I’ll add a very clear message on behalf of those of us on the regulatory side to the bankers in the room and those watching from outside: there is no Basel IV. There is no other big wave of capital regulation coming. With the agreement on Total Loss Absorbency Capacity, the last pieces of the puzzle have been put in place. It is true that we do have to make some adjustments to risk weights; and there will always be things to iron out, but I repeat there is no big other prudential regulatory wave for the banking sector. As Andrew Bailey made clear in one of the break-out sessions I attended, the focus now is about greater certainty and adjusting business models to these new realities.

BIS central bankers’ speeches  3  And that is a good challenge for us at the Bank as well as the broader official community when explaining what’s happening and how the system works. Lack of understanding leads to disengagement, which in turn leads to mistrust. Let me conclude by thanking the huge range of people across the country who really did engage, who did spend the time here with us today. The long-term reward of course, is a more resilient financial system that better serves the needs of society. In the short-term, I hope you will join us for a quick drink in the Crypt of this fantastic building. For those of you in Edinburgh, Alex Brummer would be happy to stump up. And for those of you at home, I hope you will join us in spirit with a drink at your local pub – put it on the Bank of England as a form of quantitative easing. 4  BIS central bankers’ speeches
And if it were possible there would be no real reason to let the monetary policy decisions be made by a Board with six members. It would be enough to have a single wise decision-maker. In recent decades, however, the trend has been in the opposite direction. All over the world, it has become more and more common to let monetary policy decisions be made by a group of individuals – a committee or board – rather than by a central bank governor alone. Probably the most important explanation for this is that many central banks have become more independent in this period. This has made it seem more natural to delegate the right to make decisions to a group of people rather than to one individual. This development has meant that research on monetary policy decision-making in groups has accelerated. 1 One result that has emerged is that groups tend to make better decisions than individuals. 2 This may be because the members of the group have different backgrounds, knowledge and experience that they can bring to the monetary policy discussion. These differences mark the decisions that the group makes in different ways so that these decisions tend to be better than the decisions that an individual would have made alone – the whole becomes greater than the parts. This applies irrespective of how the decision is made – by voting, as at the Riksbank, or in some other way.

In our latest assessment this was based on the belief that inflation was somewhat higher than now proves to be the case. But monetary policy does not have such a degree of precision that it can control inflation to a tenth of a degree. And, moreover, inflation in July was high and far above the inflation target even after the downward revision of the figure. In the discussion ahead of the interest rate decision, I and other members of the Executive Board highlighted the weak labour market indicators which uniformly pointed to a weaker development of employment, which is also in line with the Riksbank's forecast. After the decision, the Labour Force Survey for August has been presented. This shows that employment increased by a moderate 0.5 per cent on a 12-month basis, which is marginally lower than the Riksbank's forecast. At our September meeting, we had access to the initial version of the National Accounts for the second quarter. These showed that GDP did not increase at all compared to the previous quarter and increased by only 0.7 per cent on a calendar-adjusted12-month basis. Now that the revised version of the National Accounts has been published, we can see that growth in the first two quarters has been marginally adjusted downwards in both cases. This means that growth in the first quarter was 2 per cent on a 12-month basis and with calendar effects taken into account. The corresponding figure for the second quarter was 0.6 per cent.
If the real interest rate is low, even bad investments appear to be profitable and the banks' credit assessment process will not function properly. A large number of borrowers will then experience unsatisfactory profitability, particularly if the interest rate then increases slightly, and will be unable to pay their loans. The bad experiences from the time before and during the crisis led to the Riksbank later being given a very independent role to determine the key interest rate within the framework for monetary policy. Parliament set the objective for what should be achieved, namely price stability. The Riksbank then specified this as an inflation target, whereby the inflation rate would normally be within an interval of 1 to 3 per cent a year. Interest rate decisions are made by the Executive Board of the Riksbank, which is intended to ensure that there can be no external influence. The predictable and independent interest rate policy means that the banks and other financial agents have been given a firm foundation on which to base their risk assessments, which reduces their risks of suffering unexpected losses. Avoiding being wise after the event It is dangerous to use regulations to limit competition in the banking sector. Almost forty years of regulations had led our banks to almost entirely lose one field of competence they must have to accomplish their task to society – to assess credit risks and allocate credit where it can have the most positive effect on economic developments.

Slow growth, lack of economic mobility and erosion of trust in public and private institutions are among the factors that are likely to have contributed to this. Like undercurrents before a storm, these trends have far reaching implications for political, economic and social systems. Last but not least, the fifth shift is the advancement of technology. This has and will continue to 1/5  BIS central bankers' speeches  dramatically alter the way we behave, interact and transact. Much has been said about the benefits, but an increasing reliance on technology presents risks that we cannot ignore. This includes issues of data privacy, discrimination or biases and also displacement of certain segments within society. In the digital age, higher order risks of cyber-attacks and operational disruptions are magnified in ways that we have yet to fully comprehend. Calling for a financial system that is relevant, safe and socially responsible These five megatrends and finance are deeply intertwined. While undoubtedly finance has helped to power the economic rise of ASEAN, its role in contributing to an increase in climate risk and inequality cannot be denied. Therefore, as we consider the future of finance, we need to contemplate not only how these megatrends may impact finance, but how finance itself can respond to and shape these trends in more positive ways moving forward. In my mind, this calls for a financial system that is relevant, safe and socially responsible. Finance must be relevant to the needs of the economy.
The collapse of Banco Ambrosiano in 1982 and the difficulties at Johnson Matthey Bankers in 1984 brought the risks inherent in the system into sharp relief once more, and there was a renewed push to establish consolidated supervision across 26  borders . Through its participation in international fora, the Bank sought “to promote close supervisory co-operation, to influence supervisory developments and to enhance the effectiveness of its own supervisory effort through obtaining clearer pictures of the nature of the business operations engaged in by the institutions it supervises 27  and of the methods and operations of its international counterparts” . The idea of a level playing field began to emerge in the international setting as well as the importance of supervisory convergence in an increasingly globalised sector; this, alongside crises, motivated the evolution of regulation and supervision to a large extent during the latter decades of the twentieth century. In addition, the increasing size (including in the present day) of the financial sector and its contribution to UK GDP underscored the importance of maintaining stability in the financial system, and a more active type of supervision began to emerge.

It is also a popular success; it inspires trust which is the core value of a currency. The latest standard Eurobarometer poll conducted in spring 2021 reported that 79% of the population in the 19 countries using the euro believe that having the currency is good for the EU. That’s up from 66 percent a decade ago. Even wellknown nationalist politicians, including in my own country, have dropped or backed-off their anti-euro stances because they have concluded that the policy is an electoral dead-end. Obviously as Governor of the Banque de France and a committed European, I enjoy reading out those numbers. Yet I do not wish to be simplistic or Panglossian. The euro area has had problems over the years, most notably resulting in the sovereign debt crisis in the early 2010s. That crisis was a  Page 4 sur 9 reminder that by forging a currency union before a political union existed, we were doing something unprecedented. Yet European political leaders have ultimately proved themselves to be pragmatic, backing the European Central Bank in its defence of the euro. Lessons were learned and when the Covid crisis hit in 2020, the EU gave the region’s economy appropriate fiscal support. The combined stimulus provided by the EU and national governments was comparable to that of the U.S. and the U.K. Meanwhile the ECB did its part in supplying monetary stimulus also on par with that of other developed countries.
There have been claims that Iceland allowed its banking system to collapse, with what now seem reasonable results, and that others should consider doing the same. The fact is that Iceland kept the domestic part of its banking system running throughout; otherwise, the consequences would have been dire. Some have claimed that the banks were nationalised. They were not. The old banks are private companies. They are in winding-up proceedings governed by law; they are not under the control of the Government. The Government has a majority stake in only one of the new banks. Others have claimed that Iceland defaulted and got away with it. The opposite is true. The credit of the sovereign was preserved, and all debt obligations have been paid on time. Moreover, the investment-grade credit ratings from Moody’s and S&P were preserved throughout the crisis. This is why the sovereign has been able to tap international capital markets twice so far since the crisis struck. So the bottom line is that a sovereign default was avoided in spite of an almost unprecedented financial collapse and the worst economic recession since the interwar years. A key to that result was the ring-fencing of the sovereign from the collapse of the private banks. All debt service payments on sovereign debt, in both domestic and foreign currencies, have been made in full and on time.

With few exceptions, all the advanced economies were already in a net debt position and many are now facing funding problems related to an aging population. If the global economy is to recover from the crisis, government debt must be stabilised fairly soon in order to prevent a string of crises in state finances. Norway is in a unique position due to government petroleum revenues. Monetary and fiscal policy have stimulated domestic demand and output. Growth in mainland GDP was higher in the second quarter than projected in the June Monetary Policy Report. Household consumption seems to be picking up again. Petroleum industry activity has also had a stabilising effect on the Norwegian economy. There are plans to develop a number of oil fields on the Norwegian continental shelf in the years ahead, but it is likely that these investments will require an oil price of more than USD 60–70 per barrel to be profitable. BIS Review 115/2009  3  The events of September 2009 spread rapidly to the firms in Norges Bank’s regional network. In August 2009, manufacturing enterprises reported that growth would hold up. In November, the turnaround was described as a “heart attack”. Norges Bank established its regional network in 2002. Regular interviews provide information about enterprises’ assessment of the economic outlook before other official statistics are available. This information is therefore an important part of the decision-making basis in the formulation of monetary policy. Statistics Norway’s quarterly national accounts are available about 50 days after the end of the quarter.
The advantages of simple rules for decision-making are that they are easy to explain which can be especially important when establishing credibility for a low-inflation regime. With simple rules for action, it becomes clear what has guided monetary policy decisions. However, as I have shown, this does not necessarily result in optimal policy in every situation in the sense that macroeconomic stability and longer-term price stability are achieved. The difficulties in assessing when demand and the increase in lending are too strong are certainly considerable although this applies by and large to all the assessments we have to make. 5  BIS Review 48/2000

1 Indeed, international difference in living standards has declined over the latter half of the  1  Parente and Prescott (1999) documents the evolution of international income and growth differences and gives a list of growth facts before and after the industrial revolution. BIS Review 99/2007  1  twentieth century as a result of emerging markets’ fast-pace and sustained growth. During the past 20 years, the world’s income gap has narrowed even faster. It cannot be by sheer coincidence that this period has also witnessed growing international trade and financial integration and the entrance of China, and subsequently India, into the comity of trading nations. Along these high growth trajectories, emerging markets’ aggregate real income and consumption are an order of magnitude more volatile than advanced economies (both in terms of levels and growth rates). Not only is consumption more volatile in emerging markets, but it is also more volatile in relation to income. In fact, over the business cycle, consumption is around 40 percent more volatile than income for emerging markets, while it is less volatile than income for advanced economies. The unique volatility outcomes can be attributed to a distinct set of macroeconomic shocks which are specific to emerging markets or their propagation mechanism, or both. 2 I think that the extraordinary volatility in real aggregate consumption and income can be partially attributed to episodes of financial instability that occur not infrequently in emerging markets.
Among these were exuberant real estate prices, and a flourishing  BIS Review 87/2010  1  securitisation business, which facilitated excessive credit growth. A group of countries – including China, Japan, and oil-exporting economies – were saving too much, while others – such as the US – were heavily borrowing to finance consumption and investment. These developments were unsustainable in the long-run. At the same time, in an environment characterised by low interest rates, a global search for yield may have led investors to take on too much risk. On the micro side, it became apparent that market participants’ incentives were not aligned with the risks they were taking, and that some investors were not fully aware of the extent of their exposures, which contributed to the under-pricing of risk. In the banking sector in particular, deficiencies in the design of the prudential framework for banks, in the supervisory review of banks’ risk management procedures and in the rules for compensation and pay were some of the microeconomic factors leading to important vulnerabilities. III. Regulatory and supervisory initiatives currently under discussion  After witnessing the first global banking crisis since the Great Depression, it became clear that it was absolutely crucial to get the banking sector on a sound footing again. Policy makers responded rather quickly and forcefully to the crisis, which resulted in a wideencompassing reform agenda.

Nor should the Riksbank’s proposals be regarded as set in stone; it must be possible for the retail payments council to develop to remain relevant and thus working methods and participation should be reviewed on a regular basis. The Riksbank intends to have a preliminary constituent meeting at the beginning of February. The way forward involves new and old technology To summarise: Sweden is in the forefront with regard to the development and use of cashless payment methods. This development is positive in many ways, but changes also entail challenges. The Riksbank is taking an active part in the work on managing these challenges to make things easier for the various participants in the economy. Given this, I am convinced that we have a good basis for resolving short-term and long-term problems and frictions. The way forward is to continue refining old technology in new versions and also to create entirely new solutions. There is good scope to ensure our payment services will be even safer, more efficient, easily accessible and cheaper in the future. Thank you! 6  BIS central bankers’ speeches