samchain/econo-pairs-v1 huggingface dataset:
On the domestic front, several years of subdued growth may have caused some underlying erosion that could compromise the economy’s ability to grow in the medium term. Deterioration of the labor market is particularly risky because it could weaken household consumption, which, by growing 2%-2.5% annually over the last three years has provided support for domestic demand and, ultimately, inflation. On the other hand, private investment may recover faster if export demand and expectations improve faster than expected. Longer-term perspectives 7  18. In 2012-2013 the Chilean economy was exposed to a substantial external shock given by the end of the commodities super cycle. However, contrary to past episodes, the economy did not fall into a recession. In fact, despite a substantial slow down, the signs of an economic contraction are not visible. Salaried employment slowed down but no massive layoffs have taken place. Companies saw their margins compressed by rising input costs and weak demand, but bankruptcies have not picked up. The demand for loans has weakened, but NPLs have remained stable. 19. The former is due to two major reasons. First, the macroeconomic policy framework has provided countercyclical support while allowing relative prices to adjust to the new circumstances via the exchange rate. Between mid-2013 and early 2016 the Chilean peso depreciated some 55%, putting some pressure on inflation, but the Central Bank kept monetary policy on a steady course until inflation decelerated from nearly 5% to less than 2% in less than a year. 20.

In the long run, the industry as a whole has a clear interest in informed, responsible and  2  BIS Review 24/2007  capable consumers. As past experience, whether in Malaysia or abroad, has invariably shown, the irresponsible and unfair treatment of consumers is damaging to the consumer, damaging to the firm, and damaging to the reputation of the industry. The Bank is encouraged by the high level of commitment shown by some insurers towards significantly improving their market conduct practices. Nevertheless, much more can be achieved across the industry to address overly aggressive sales practices that result in unsuitable products being sold to consumers. Bank Negara is investing significantly in raising the level of financial capability among consumers through initiatives under the Consumer Education Programme. Additional focus has been given to this task with the setting up of the Consumer and Market Conduct Department. But this is an extensive task, for which a significant improvement in the level of financial literacy among across a widereaching spectrum of consumers may only be seen in the next generation of consumers. It is, therefore, important now that insurers take their responsibility for the fair treatment of consumers seriously. In particular, we would like to see a far greater interest by the Board and senior management in improving selling practices, as well as the quality of disclosures and advice provided to consumers.
The figure we watch most closely is Core Inflation, which excludes the costs of accommodation and private road transport. We were concerned when Core Inflation came in at 3.1% in the first quarter of this year. This reflected high commodity prices and the pass-through of strong wage growth in 2011. In the second quarter, Core Inflation moderated to 2.7%. It is likely to ease further and approach 2% by the end of the year. This is not far from the historical average of 1.7%. There are several factors driving moderation in Core Inflation during the course of the year. First, oil prices. Global oil prices were at $ per barrel in the first quarter of the year. They are now around $ For the rest of the year, they should remain in the $ range on average, barring deterioration in the geo-political situation in Middle East. The easing of global oil prices is already passing through to prices of domestic oil-related items. Let me give a couple of examples. Electricity tariffs for households came down by 2.5% in July, the first reduction this year. Likewise, petrol pump prices have fallen for three consecutive months, by a cumulative 9% from March. Going into the second half of the year, domestic oil-related prices are expected to keep largely stable. Second, food prices. Global food commodity prices, as measured by the UN FAO Food Price Index, were 5.4% lower in June compared to beginning of the year.

The strategy is now published as soon as it is adopted and prior to the relevant strategy period. The interest rate affects the economy with a lag The objective of monetary policy is low and stable inflation. The instrument is the interest rate. The interest rates influences inflation with a lag and with varying intensity. As interest rates fall, household and local government consumption and investment will tend to accelerate. Higher demand leads to higher output and employment. Wage growth may pick up. Higher wage growth combined with higher profit margins will result in higher inflation. Lower interest rates will normally lead to a depreciation of the krone. Imported goods will then become more expensive and inflation will accelerate. Expectations play a key role in price and wage formation, and they are influenced by the interest rate. Expectations concerning future inflation and economic stability have considerable impact, not least in the foreign exchange market. More stable inflation Current inflation is low, but our recent history shows that without a nominal anchor inflation becomes high and variable with substantial effects on output and employment. In the 1970s and 1980s, average annual inflation in Norway was over eight per cent. The fixed exchange rate regime, which was introduced in 1986, reinstated monetary policy as an instrument of economic policy in Norway and laid the foundation for lower inflation and more stable economic developments. Like other small, open commodity economies, Norway also experienced that it was not possible to maintain a stable exchange rate as a nominal anchor.
This traditional cost / benefit analysis seems less and less able, however, to account for the true behavior of reserve holders. During the crisis, foreign exchange reserves were used as a tool for internal – as well as external – financial stability. National Central Banks, especially in Latin America, acted as dollar lenders of last resort to their domestic banks. (Obstfeld et al. 2009). This function will develop in the future. Financial openness and integration means that domestic banks will engage more and more into foreign currency operations. In turn, the expansion of their international balance sheets will increase the potential demand for liquidity support in case of shocks. This trend should be accepted as a normal consequence of open  4  BIS Review 120/2010  capital markets and international banking, together with the predominance of a very limited number of currencies in international finance. It is bound to impact the demand for reserves and increase the need for self insurance. One characteristic of liquidity shocks is that the net demand for liquidity may become almost infinite. Ex ante, no buffer is ever big enough. No amount of reserves will fully protect a financially open economy against a systemic shock. It is noticeable that countries, such as Korea, which possessed very important amounts of reserves prior to the crisis and has a flexible exchange rate regime, nevertheless felt the need to enter into currency swaps with the Federal Reserve. In a sense, countries face the same dilemma as private institutions.

Under the strategy plan for 2020-2022, the Executive Board will continue to use external managers in markets and market segments where local knowledge is particularly relevant. After the Storting had discussed the white paper on the GPFG in 2019, the Ministry gave Norges Bank permission to invest in unlisted infrastructure for renewable energy. This is reflected in the strategy for the next three years adopted by the Executive Board. The Bank will assess each investment in relation to risk and return. The management of the GPFG is required to be cost-effective. Norges Bank aims to keep total 1/2  BIS central bankers' speeches  internal management costs in the period 2020-2022 below 0.05 percent of assets under management. In recent years, the number of Norges Bank Investment Management (NBIM) employees has been reduced and administrative support functions across the Bank are being streamlined. The Executive Board will continue to monitor costs closely. In the course of 2020, the Executive Board has strengthened the Bank's work as advisor to the Ministry, in accordance with our new mandate. In this year's white paper, the Ministry proposes changes in the composition of the equity benchmark index. The equity allocation to Europe will be reduced somewhat over time, and the allocation to North America will be correspondingly increased. This is in line with Norges Bank's advice. Norges Bank works systematically to set principles, exercise ownership rights and invest responsibly. Our work on responsible investment underpins the objective of the highest possible return.
Several reasons may lead to the interplay between monetary and fiscal policy failing to function. Interplay functions well when the decision-making bodies are conscious of how one body’s decisions influence the decisions of the others. Unless this fact is recognised, a decision will not produce the result that was planned. The economy may move in a very undesirable direction, with high interest rates, sluggish economic growth and a deterioration in the state’s financial position. Without coordination, a good result may still be achieved if fiscal policy acts as “leader” and monetary policy as “follower”, to use expressions taken from game theory. The fiscal policy authorities can internalise the monetary policy response pattern. The central bank’s response pattern must of course be known so that the fiscal authorities can take this into account. The social partners can similarly take any monetary policy response into account when wages are being determined. The “leader” in this interplay - the social partners - can take the “follower’s” - Norges Bank’s - response into account. This view is most relevant in centralised wage formation. In decentralised wage formation, monetary policy will instead affect wage growth via market mechanisms by stabilising aggregate demand. A precondition for interplay that functions well is that monetary policy is known and remains firm. The outcome of this year’s wage settlement indicates that the social partners have not internalised the monetary policy response pattern.

Perhaps one of the stumbling blocks has been the choice of wage settlements at industry level and the large wage increases for employees outside the two largest employer/employee organisations (NHO and LO). The high wage growth awarded to groups whose wages are determined through individual agreements indicates that the labour market has been tight. The rise in salaries for white-collar workers and managers may also reflect weak cost control in enterprises and organisations following a long period of expansion. For a long time, a stable exchange rate and labour costs among our trading partners formed an anchor for wage determination. Since 1998, however, the rise in labour costs in Norway has been around 2 percentage points higher than that of our trading partners. High wage growth, combined with the global downturn and a strong krone, is having a severe impact on manufacturing. It is the combined wage growth for all groups that influences the inflation outlook. However, substantial wage increases for some groups can trigger wage spirals. Wages for salaried staff in the business sector have exhibited sharp growth. This year, it appears that wage increases will particularly be high in the public sector and in parts of the private service sector. Over time, growth in real wages must be consistent with growth in labour productivity. With an inflation target of 2½ per cent and trend growth in the economy of 2 per cent, there will be scope for annual nominal wage growth of about 4½ per cent.
As a result, I suspect it would be difficult to get all the relevant regulators on board in a timely way to implement macroprudential tools successfully. In principle, the Financial Stability Oversight Council (FSOC) might be well placed to coordinate a response across different regulatory jurisdictions. But, I believe this is likely to prove difficult to do in practice. Each of the regulatory agencies guards its own authority and prerogatives, and may not always be responsive to pressure from other regulators or the U.S. Treasury. There is also the problem of responding to an emerging financial stability risk in a timely manner. First, the emerging problem needs to be identified. Then alternative policy responses need to be analyzed and debated. And, there is an understandable bias to start small and to escalate only as needed given the lack of understanding about how big an impact a particular tool may have on the economy. So, even if the FSOC could be effective in developing a consensus among the regulators, I wonder whether it could do this in a timely way. The housing boom in the U.S. that culminated in the financial crisis began in 2002 and 2003. By the time that it was broadly identified as an issue in 2005 and 2006, it might have been too late to do much to temper its effects, even with a sound macroprudential response by the regulatory community. In the remainder of my time, I will discuss two topics in more detail.

In general, I see some advantages with having rules that are hardwired in place so that adjustment of the parameters of the tool – say, limits on the loan-to-value ratio – happen automatically in response to sectoral developments. Automatic rules that are always in place have several advantages over discretionary measures that are implemented, ex post, only after some potential source of financial stability risk has been identified. First, they are transparent and will work more quickly. Second, they avoid some of the problems associated with announcing that a new measure is going to be put in place. When implementing a new measure there will always be some reluctance to overcome in terms of deciding whether it is necessary. Also, there may be political opposition to imposing a new measure. For example, during the housing boom, limits on subprime lending would undoubtedly have provoked the objection that the regulators’ actions would limit home ownership for low-and moderate-income families. Imposing automatic, countercyclical standards also has this difficulty to some degree. But I think it is much less severe because at the time such standards are put in place, they generally will not be binding and it will be unclear whether they will necessarily become either more stringent or more binding in the future. In other words, the rule’s potential impact will be highly speculative and uncertain at the time of implementation. This may lessen the political opposition to putting such a rule in place.
Thus, we noted in our latest Financial Stability Review that many LCBGs from the euro area have returned to a modest profitability in the course of 2009, and that their financial performance has strengthened further in the first quarter of 2010. At the same time, deleveraging has continued, while banks have further reduced their reliance on wholesale funding in favour of an increased share of more stable funding sources, such as retail customer deposits and equity. Notwithstanding this slightly positive note, over the next few years the euro area banking sector will face large funding needs, as most of you are aware of. In particular, the 20 largest euro area banking groups have about EUR 800 billion of long-term debt outstanding that will need to be refinanced between May 2010 and end-2012. This figure represents almost half of their outstanding debt with a maturity of over one year. In addition, the need for banks to issue medium to long-term debt is likely to increase as a result of new regulatory requirements on stable funding ratios that would come into force at the end of 2012.

To make things worse, the “originate-to-repo” transactions that took off when the turmoil started in July 2007 have often little in common with the “originate-to-distribute” assets that  2  BIS Review 84/2010  were marketed before mid-2007. Thus, the “originate-to-repo” securities do not aim at being attractive to investors, but serve a different purpose, namely to generate collateral buffers with the central bank. So, the significantly large volumes of retained issuance are effective indicators of the scale of the continuing dislocation of the ABS market and the vanishing of private markets. However, it should be obvious to everyone that the issuance of ABS only to serve as collateral with central banks cannot be a sustainable strategy for the ABS market. In normal times central bank operations are intrinsically of a short-term nature and of a limited size, and are designed to implement the stance of monetary policy. By contrast, ABS transactions backed by residential and commercial property loans have much longer maturities and must cover a very sizeable market. In other words, in normal times central banks tend to have a very limited involvement in financial intermediation and only private investors have the capacity and the need to offer long-term funding to originators. What are the more recent trends? Some developments in the last few months may be interpreted as showing tentative signs of a recovery as new ABS issues were distributed and placed with private investors .
The new legislation also strengthens the protection of policyholders against disproportionate actions by providers to void contracts in cases where misrepresentation by consumer was unintentional. In this regard, greater responsibility will be placed on insurers to pose specific questions for consumer insurance contracts, to obtain information for underwriting purposes. Against this backdrop, the Bank has recently issued a Concept Paper on Prohibited Business Conduct outlining practices that are assessed as providing misleading or deceptive information, exerting undue pressure when marketing products and collusive business practices that may result in unfavourable outcomes to consumers. The Bank is also developing standards of fair and responsible business conduct that will require the board and senior management to ensure high standards of fair dealing and professional conduct. While regulations governing business conduct is applicable to all areas of an insurer’s business, new distribution channels will likely require a heightened vigilance in view of the potential for new types and sources of risks. In addition to strengthening business conduct practices, securing public confidence in a market with diverse distribution channels will also require building the financial capability of consumers. While this applies to all consumer segments, particular emphasis will need to be placed on empowering lower income households and other groups that are currently uninsured so that they are able to make informed decisions on the products and services they need.

Indeed, since the linkages among cash, securities, and derivatives markets have become so close, a failure - either by a provider itself or by a major participant - is very likely to cause disturbances affecting different markets at the same time. In addition to collateralisation, the appetite for securities has been forcefully stimulated by the changing needs of private and public wealth owners: the ongoing institutionalisation of the savings process, the facilitation of direct market access through internet technology, the disintermediation of the banking system due to credit risk considerations and the relative decline in attractiveness of bank deposits. On the supply side, the corporate sector has been increasingly relying on bond financing rather than on traditional bank borrowing. In the US, private debt securities amount to about USD 7 trillion. The ratio of bank credits to GDP has remained more or less stable at around 10% for the last 50 years, while the ratio of bond financing to GDP has risen sharply from 15% in 1985 to 25% in 2000. Bond financing within the European corporate sector has also caught up, strongly supported by the inception of the euro at the beginning of 1999. In short, the supply of securities is bound to grow further; cyclical ups and downs are likely, but the trend will point upwards. Notwithstanding obvious differences between economies, it is generally true that the corporate sector will make further progress in exploiting the potential advantages offered by open capital markets. The European corporate bond market seems an especially interesting case.
There are some favourable aspects to the new rules, but they raise doubts as to the Pact’s capacity to deliver the budgetary discipline that proper functioning of the Monetary Union requires. Regardless of the fact that a full assessment of the agreement reached can only be made once the related legal texts are known, it is imperative, to dispel the uncertainty the reform process has aroused, that the European authorities should now apply the revised rules unequivocally and strictly. The European Council also revised the so-called Lisbon Agenda, with which it was hoped to reinvigorate the European economy in the first decade of the new millennium. Assessment of the results achieved at the half-way stage makes disappointing reading. The introduction of reforms has been insufficient and the European co-ordination mechanisms have proven too weak to encourage the adoption of the appropriate measures at the national level. The Council has sought to re-launch this strategy, focusing on growth and employment, and altering the co-ordination arrangements between the Council, the Member States and the Commission, so as to ease the way for the adoption and monitoring of reforms at the national level. This new direction is appropriate, although more specific measures giving a more determined political impulse to the process would have been desirable. Such determination will be needed, in particular, to overcome the obstacles hindering completion of the single market. Indeed, these were manifest in the European Council’s request that the Commission revise its draft directive on liberalising the provision of services in the Union.

of active scrutiny of the market, of shareholders and of creditors, which implies a continual strengthening of transparency. It is this latter aspect, relating to Pillar III, which is the least well-known, although it is that with the greatest potential in the medium term for disseminating best practices in risk management. Of course, the completion of Basel II is only the beginning of the implementation process, and not just in credit institutions, but also in their supervisors. In this respect, I believe that our institutions and our supervisory model are in a magnificent position to lead the implementation process insofar as quality is concerned. And this process will yield better managed institutions and more effective supervision. These two key regulatory issues raise other points. First, the development of IAS and Basel II make it necessary to strengthen international co-operation in supervision and regulation. The international expansion of Spanish banking and its presence in a larger number of jurisdictions with differing features raise the need to establish closer bilateral relations with the authorities of other countries, so as better to comply with the respective responsibilities. In addition, the new European legislation on financial conglomerates also addresses in depth the need for greater co-operation. Specifically, the EU has opted for a solution based on co-operation between supervisors as the most appropriate (and essential) approach.