samchain/econo-pairs-v1 huggingface dataset:
(3) In 2004, the foreign reserves stood at Euro 717 million, and in 2011 (April) they climbed to Euro 1 872 million, which is by 2.6 times more, and always ample to respond to the occasional imbalances in the foreign exchange market. (4) The crucial question would be: Was the banking system making enough credits i.e. was the National Bank disabling the “smooth” lending to the private sector, or was it the opposite? The figures speak for themselves! In the seven-year period from 1997 to 2003, the average annual credit growth equaled 11.6% and in the seven-year period from 2004 to 2010, it equaled 23.1%, which is by two times faster. The comparison between the credit growth and the GDP growth shows that in the 2004–2010 period, the nominal credit growth was by 3.12 times faster relative to the nominal GDP growth, while the credit real growth was by 5.7 times higher relative to the real GDP growth. Should this difference be even greater? (5) The banking system also improved substantially. It remained undamaged even during the Great Recession. i. The solvency remained high. The capital adequacy ratio was preserved to a very good level of 16.4%. The liquidity, after the worrying downward trend (2007, 2008 and early 2009), was reestablished, thanks to the undertaken measures, to a very solid level. In March 2009, the liquid assets constituted 20.2% of the total assets, and in December 2010 it made up 30.7%. The household deposit-liquid asset coverage ratio increased from 44.6% to 61.9%.

However, there are notable differences across the region: the Baltic states (especially Latvia and Estonia) and South-East European countries (especially Croatia and Bulgaria) seem to have approached or even reached the equilibrium by 2004 or 2005, whereas in the case of the Visegrad countries (especially the Czech Republic and Poland) the credit-to-GDP ratio seemed to remain below its estimated equilibrium level at that time. Of course, it might well be that some of the CEE economies have overshot the  1  Kiss, G., Nagy, M., Vonnák, B.: Credit Growth in Central and Eastern Europe: Trend, Cycle or Boom?, MNB Working Paper No. 2006/10, November 2006 and Egert, B., Backé, P., Zumer, T.: Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?, ECB Working Paper No. 687, October 2006. BIS Review 137/2007  1  equilibrium only recently, but one has to wait for a while until the relevant data become available before this overshooting can be captured in empirical analyses. The general upshot of these papers is that the rapid credit expansion in CEE economies has mainly been fuelled by demand factors: the buoyant economic growth and the ensuing increases in disposable incomes, rising expectations with regard to future income prospects related to EU accession, remarkable decreases in interest rates, and falling or low and stable inflation rates.
The low demand for consumption and investment, and the banks' conservative lending policies, have slowed the monetary indicators. The increase in the money supply slowed down to about 2.5% in October and November due to private sector's lower demand for funding. Lending to economy continued to contract and in November, it was 2.4% lower than a year ago. The above monetary and economic dynamics has exerted weak inflationary pressures. The low aggregate demand has expanded the negative output gap. The labour market pressures have been subdued against a setting of unchanged unemployment rate, moderate wages, and partially-used capacities. These developments have affected the control on output costs and profit margins, and are reflected in low core inflation rates over this period. Also, imported inflation has been downward due to lower primary commodity prices in the international market and stable exchange rate. Based on the economic outlook and aiming to encourage aggregate demand, the Bank of Albania lowered the key interest rate by 0.5 percentage points, at 3.0% in the fourth quarter. Also, Bank of Albania's monetary policy decisions are associated with ongoing liquidity injections and orientations toward the future monetary policy stance. This policy has  2  BIS central bankers’ speeches  managed to keep liquidity premia and inflation in check, by contributing to lowering the interest rates in the interbank, government debt security, lek loan and deposit markets.

Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 29 January 2014. *  *  *  Today, on 29 January 2014, the Supervisory Council of the Bank of Albania reviewed and approved the Monetary Policy Statement of the Bank of Albania on the second half of 2013. Given Albania's latest monetary and economic developments and discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.0%. The Supervisory Council deems that the inflationary pressures from the real and financial sectors of the economy are weak and will remain so. These circumstances require maintaining a stimulating monetary policy over the period ahead. The monetary stimulus, transmitted through the low key interest rate and ongoing liquidity injection, provides the proper conditions for meeting our inflation target in the medium term. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** Year 2013 was a difficult one for the Albanian economy. Aggregate demand and economic growth remained at low levels; inflation fluctuated around Bank of Albania's lower targeted band, while the budget deficit and public debt increased sharply. The unfavourable economic environment, both at home and abroad, led to this performance. Moreover, Albania’s June parliamentary elections added uncertainties to the economy and financial markets.
One consequence of this and looser market conditions has been that long-term interest rates have remained at or near record lows (figure 8). Monetary policy has taken into account the inflationary effects of the persistence of the exchange rate shock and gaps – particularly in the labor market – , in order for inflation to converge to 3 percent in the policy horizon. In this context, the Board considers that the convergence of inflation to the target still requires a partial withdrawal of the monetary stimulus, albeit at a more measured pace than estimated in December. In particular, the baseline scenario uses as a working assumption that the MPR will follow a trajectory like the one that can be deduced from the various expectations indicators at the statistical closing of this Report (figure 9). Of course, and as usual, the implementation of monetary policy will be contingent on the effects of incoming information over the projected inflation dynamic. Thus, new data pointing in either direction will trigger the necessary monetary policy adjustments. If, for example, new information translates into projected inflation remaining high for longer, then the withdrawal of the monetary stimulus will be sooner and stronger, and vice versa. Under the assumptions shaping our baseline scenario, our monetary policy will continue to boost the economy throughout the projection horizon. Actually, Chile’s monetary policy rate is the lowest in Latin America and, in real terms, one of the lowest in the emerging world (figure 10).

Some of these problems are dealt with by the new capital adequacy rules in Basel II. Nevertheless, it is essential that the authorities play an active role to ensure better insight. And this is also very much in the market’s own interests. The uncertainty remains The outcome of the current information will depend on how subprime loans are valued in the long term. If interest rate payments from the underlying loans are received as calculated, there is no need to write down the value for this reason. However, it looks as though there will be more defaults on payments than originally feared. In addition, it takes several months from the time that a household defaults on payment of a loan until it reaches the minus side of a balance sheet. Although a number of banks have already made major losses when forced to write down the value of their assets, it will be a long time before all the cards are on the table. There are also considerable problems with valuations. Banks and other investors are to write down the value of their assets, but there are rarely any market prices for the structured products containing mortgages. The valuation problems may force the banks to take bigger write downs than what is motivated by the underlying credit quality. An important factor in all of this is US economic activity.
And it is warning signal when banks have to run to securities markets to finance growth faster than deposits alone allow them to do. Systemic risk increases when imbalances build up. Macroprudential policy is designed to address the systematic features of financial crises, strengthen bank resilience and curb the probability of a crisis. Policy rules and transparency are aimed at avoiding complacency in good times. For example, the Basel III framework specifies that the ratio of credit to GDP should be a conditioning variable when setting the level of the countercyclical capital buffer for banks. The authorities must explain and justify their actions, or their inaction. If banking regulation is to be effective, not only must we be able to identify imbalances that are building up, but we must also understand the interaction between banks and other economic agents and how systemic risk arises. Lessons from the 1960s and 1970s showed that detailed regulation was not very effective. If we are to intervene in the markets, we must understand how the market functions and why the market cannot be left to its own devices. This provides a basis for regulating markets and insight into regulatory effects. From the textbooks we are well aware of the ingredients of market failure – or the preconditions for regulating markets. Environmental economics is often used as an example. If a polluter does not bear the costs it inflicts on others, a fee should be imposed on the polluter.

The shift may be in the order of one-half of a percentage point. This is the change that lies behind the common, but not entirely certain, estimate that nowadays the Swedish economy can maintain an annual growth rate between 2% and 2.5%. But Swedish data do not yet provide any definite evidence of an improvement in productivity, and hence in potential growth, that corresponds to what has happened in America. It does seem likely, however, that the rapid advances in information technology will also have a major impact on future production and distribution processes in Sweden. Sweden is well to the fore in Internet applications. Still, when and to what extent these factors will affect growth in general is not yet clear. But even though appreciable general economic consequences cannot be discerned at present, the tendencies are worth considering. Some parallels can perhaps be drawn with the situation over a century ago, when Sweden was being transformed fairly rapidly from a poor European country into a dynamic and strongly expanding industrialised economy. There are also lessons to be learned from developments in recent decades. Monetary policy’s task well defined The current monetary policy conclusion is unequivocal and there seems to be broad agreement about the task that monetary policy faces. So today I should like to discuss developments in the Swedish economy in a wider perspective that is not an immediate concern for monetary policy but may have to be considered some time after the turn of the millennium.
A persistently high rate of increase in house prices can in isolation engender expectations of a further rise and can thus prove to be self-reinforcing for a period and push up credit demand. At the same time, the switch to a flexible inflation targeting regime reduces the possibility of exposing households to a double shock in the form of higher unemployment and higher interest rates, as was the case prior to the banking crisis in the beginning of the 1990s. If the economy is exposed to disturbances that may lead to higher unemployment, inflation will normally decline and interest rates will be lowered. High debt growth increases the vulnerability of households to economic disturbances. As a result of low interest rates, the household interest burden will remain fairly low in spite of high debt growth. It may prove to be particularly challenging for borrowers to assess their debt-servicing  4  BIS Review 53/2004  capacity over time in a period when the interest rate is abnormally low. Such a low interest rate also places particular demands on banks in assessing the creditworthiness of borrowers. The interest rate can be used to reduce credit demand. At present - with low interest rates abroad and a close link between domestic interest rates and the krone - a tighter monetary policy would restrain credit demand primarily because job security would be reduced as a result of a stronger krone. Summary of the situation in the Norwegian economy A turnaround in the Norwegian economy has occurred.

The economy has experienced a soft landing after the long period of high cost inflation in Norway and sluggish external activity. •  Output has returned to trend and is now showing a marked rise. •  Employment has returned to trend and is rising. •  Unemployment is at the 1996-level, and is at the average for the 1990s. •  Wage growth is broadly in line with a level that is consistent with the inflation target given nomal productivity growth. •  Overall credit growth is balanced. Credit is expanding broadly in line with trend growth in nominal GDP. •  Labour costs in Norway relative to our trading partners are now broadly in line with a long-term average. •  The nominal krone exchange rate is in line with the average for the 1990s. •  The interest rate level is near the level prevailing among our trading partners. •  Inflation expectations are approximately consistent with the target. In that respect, there is equilibrium in the Norwegian economy. But the current inflation rate is low, and external and domestic interest rates are low. Lagged effects of the strong krone in 2002 are exerting downward pressure on inflation. At the same time, a change in trade patterns and external economic conditions are pushing down import prices, even when measured in terms of what Norwegian importers pay in foreign currency. In Norway, intensified competition appears to be resulting in high productivity growth, which is probably contributing to low inflation.
When high rates of inflation are anticipated, people wisely avoid holding paper money. As I said in my Ely lecture in 2004, “the demand for money today depends upon expectations of our collective decisions about the supply of money tomorrow.” In the twentieth century Germans saw their savings wiped out by hyperinflation. And as recently as 1990, Argentina experienced hyperinflation. I have been told that when people gave up using paper money in Argentina, they resorted to IOUs which were taken to the local Catholic priest for endorsement. Those IOUs were trusted because to renege on a promise endorsed by the priest would have very serious consequences, whether in this life or the next. It is sometimes tempting – as the examples of the Jacobins, Germany and Argentina show – for issuers of money to issue too much of it: cheap money and plenty of it, as the saying goes. 18 A public monopoly of paper money raises the question of how can we prevent the institution managing that money from abusing its issuing power. We cannot commit future generations – or even ourselves – to a particular policy. So how can we design an institution to create the reasonable expectation that money will retain its value? In 1997 a new institution – the Monetary Policy Committee of an independent Bank of England – was set up. And for the past decade inflation has been low and stable and economic growth more stable than at any time in living memory.

Coase understood the existence of firms to be a manifestation of how market based exchange between employers and employees was not efficient (see his 1991 Nobel lecture, for example). More recently, economists like Kiyotaki and Moore (an example is their 2002 paper) and many others have built models in which debt markets are incomplete because it is costly to enforce contracts, and which constrain the amount individuals can credibly borrow and pay back. These models can also be used to explain how money comes to exist, as I discuss below. Another body of work that seeks to study the institutions that underpin market exchange is the subject that has come to be known as 'law and economics'. Scholars in this field study the economic origins and consequences of the legal system. See, for example, many works by Gary Becker, Ronald Coase and Richard Posner. BIS Review 102/2006  3  laws, and to abolish the unhelpful ones. And it is that challenge of institutional design to which I now want to turn. As Governor of the Bank of England, you will not be surprised to learn that money is a social institution close to my heart. It is crucial in facilitating exchange and therefore, in allowing the division of labour.
Making sure the financial system is robust and resilient is probably the most important thing the central bank can do in this respect. I would like to turn now to the issue of how the initial step in normalization is going. The U.S. bond market response to lift-off has been very mild. There has been no bond market “taper tantrum” such as what occurred in 2013 when Chairman Bernanke discussed the possibility of tapering Federal Reserve asset purchases. Normalization is also going very well in the sense that, even with an extraordinarily large balance sheet, the tools we have developed to raise the federal funds rate (and other money market rates) have so far worked well. The federal funds rate is trading close to the middle of the new target range of 25 to 50 basis points and other money market rates have moved up in tandem. Why is this noteworthy? To explain, I’ll first have to provide some background on how monetary policy used to work before the crisis and then compare that regime with how it works now. 4  BIS central bankers’ speeches  Before the financial crisis, banks valued reserves – even though the Federal Reserve paid no interest on them – because the Federal Reserve kept their supply scarce.

Second, the first tightening move might itself provoke another taper tantrum characterized by higher bond yields and tighter financial market conditions that could be sufficiently strong to impede the economic recovery. My judgment was that these risks were manageable. First, downside forecast errors are certainly possible, but the U.S. economy appears to be on sufficiently sound footing to withstand downside shocks better than was the case a few years ago. Second, I felt that the likelihood of a substantial tightening in financial market conditions due to lift-off was relatively low, in part, because the rate hike was widely anticipated. Market conditions had adjusted quite smoothly – except for some strains observed in the high-yield debt market – as market participants placed higher odds of tightening in the weeks preceding the December FOMC meeting. This reinforced that conclusion. A large market reaction would have been a surprise given that this was one of the most anticipated monetary policy events in history. Also, the policy action needs to be viewed in context. While this decision was the first upward adjustment BIS central bankers’ speeches  3  to short-term rates in nearly 10 years, the actual move was small – only 25 basis points – which, by itself, should have only a very mild impact on the overall trajectory of the economy. As we noted in the FOMC statement and as Chair Yellen pointed out in her December press conference, even after this rate hike, the stance of monetary policy remains accommodative.
•  Thailand is therefore poised to assume the role of a connector – by acting as a link or point of reference for the entry of global banks into the subregion. This is underpinned by our established financial platform, familiarity with the local business practices, as well as close cultural ties among our people. •  Of equal importance is our own inherent understanding of the challenges of developments faced by GMS, through our own experience. This is particularly important in two aspects. •  First, Thai financial institutions are still focused on core financial intermediary functions such as payments services, deposit, and loans which serve the basic needs of the real sector. Thai banks are inclined to serve the needs of the real economy rather than in speculative types of businesses such as proprietary trading. For these reasons, Thai banks are also less complex, with good risk management  2  BIS central bankers’ speeches  and strong capital base. Regulators in Thailand and GMS neighbours can understand fairly well the business model of our banks and their risk. We believe that given the lesson of the current global crisis, this type of bank model makes good sense for home and host regulators. •  Secondly, both regulator and the banks in Thailand could well remember the bitter experience of our own economic and financial crisis in 1997. We understand that financial liberalization needs to be properly sequenced.

Such discipline would bring about credibility which is crucial to maintaining the attraction of the region and continued foreign investment. So far, much progress has been made and vast opportunities can be seen going forward. We are well aware that greater benefits are achieved from synergies and coordination rather than autonomous actions. Further efforts to Connect, to collectively enhance Competitiveness and to promote a sense of Community – the 3C’s, must be pursued – both in trade and in finance, and within the public as well as the private sector. Ultimately, strengthening the Greater Mekong Subregion would be our best contribution to reaching the goal of our ASEAN Economic Community. On this note, let me thank you for your attention and for your interest in our region. BIS central bankers’ speeches  3