samchain/econo-pairs-v1 huggingface dataset:
In the case of solvent institutions, we have known theoretically since Thornton (1802), and probably over a century, as a practical policy, how to deal with that vulnerability in a domestic setting: with central bank LOLR operations, later complemented by deposit insurance. In the current setting, it is far from guaranteed that this process can be replicated at the international level. Of course, in normal times and with developed capital markets, banks can use foreign exchange swap markets to convert domestic liquidity into foreign exchange liquidity speedily and relatively cheaply. However, this process broke down almost completely during the global run on cross-border non-US bank liabilities in the immediate aftermath of the Lehman collapse. In a situation like this, the home central bank’s ability to assist banks to acquire the foreign liquidity denied them on the market and thus avoid a failure of banks to deliver on their foreign currency payments is limited by the size of its reserves or the willingness of the central bank issuing the international currency in question to help. Although the provision of foreign currency liquidity through reserves was clearly important during the crisis, most studies seem to support the conclusion that the dollar swap lines made the crucial difference, especially when they were uncapped vis-à-vis some key central banks. To a significant degree, this was the domestic LOLR process replicated at the international level. Does this mean that we have the solution? At the conceptual level, yes, but at the practical level, maybe not.

On the liabilities side, there are banknotes and coins, deposits from the banks and equity. Image 5: Unconventional monetary policy A stylised balance sheet for a central bank Assets  Liabilities  Foreign assets  Banknotes and coins  Domestic assets  Bank deposits  Lending  Equity  The balance sheet totals of the central banks increased dramatically during the autumn of last year and have remained at approximately these levels since then. A major part of this increase was due to the expansion of lending. BIS Review 41/2009  9  Image 6: Central banks’ balance sheets Percentage of GDP 25  25 ECB BOE  20  20  Federal Reserve Riksbanken  15  15  10  10  5  5  0 jan-07  0 apr-07  jul-07  okt-07  jan-08  apr-08  jul-08  okt-08  jan-09  Sources: Bureau of Economic Analysis, Eurostat, Office for National Statistics, SCB and the respective central banks  As I have mentioned, during the second half of 2008 the Riksbank increased its lending to the banks by more than SEK 450 billion. As a result of the increase in lending, the Riksbank’s balance sheet grew during the second half of 2008 from around SEK 200 billion to around SEK 700 billion, that is it more than tripled. What happened was, put briefly, that when the interbank and securities markets stopped working normally, the demand from the banks for loans and for liquidity reserves at the Riksbank increased.
In the short and medium term, the crisis will have desinflationary effects that are already noticeable, with inflation temporarily falling in August by 0.2% in the euro area, and by 0.1% in Germany. For a year as a whole, we are expecting a slightly positive inflation of 0.3% in 2020 and 1.0% in 2021. As you know, we unfortunately remain well below our inflation target of "less than, but close to 2%". The other aspect of the response to the health crisis are fiscal measures, primarily at the national level. Germany clearly made greater use of the financial leeway it had built up since the 2009 crisis. Its fiscal stimulus package (as a percentage of GDP) is at this stage greater than France’s. The effectiveness of its stimulus package is still difficult to anticipate: in particular, the 2/4  BIS central bankers' speeches  temporary reduction in VAT appears costly. The French government also announced a EUR 100 billion stimulus package last week. I wish to mention three positive features. It focuses on business supply and investment, and not household demand. This is fully justified, since households, protected by short-time working measures, except for the most vulnerable ones, will have saved nearly EUR 100 billion this year. This plan also has a strong focus on transformation, including ecological reconstruction - a third of the funds are allocated to this area.

A better allocation of European private savings, however, requires more effective cross-border financing channels. We therefore need to combine a more efficient Banking Union and an at last completed Capital Markets Union (CMU) to make a genuine “Financing Union for Investment and Innovation”. Jens Weidmann, the President of the Bundesbank, and I had made a strong case for it in a joint op-ed published in April 2019. Reviving the single market, our essential asset There is an essential asset that Europe does not talk about enough: it is its single market. Yet, 3/4  BIS central bankers' speeches  this is its great economic success, together with the euro. But it is vital to remain vigilant as to the dangers of fragmentation with the Covid crisis. National governments acted appropriately during the critical phase, adopting emergency measures in particular to provide liquidity support to their businesses. But the single market means common rules for businesses: if this were not the case, the divergence between our economies could regrettably increase further. It is therefore necessary to quickly restore the Commission's control over state aid and fair competition Furthermore, we must revive the single market, above all because we can optimise its power by combining its various components much better: free movement of goods, naturally; but also the cross-border financing capacity with the financing Union; and last but not least, regulatory power. There are still too many implicit borders and too much fragmentation.
AFA can also play an important role in driving higher standards of professionalism in the industry through the development and implementation of industry codes of conduct and ethics that are focused on the interests of clients. Well informed financial consumers The Bank is mindful that while great emphasis has been placed on the responsibility of financial service providers and intermediaries to ensure that the products recommended to consumers are appropriate to their needs, consumers are ultimately accountable for their own financial decisions. Our best efforts to improve the quality of and accessibility to financial advice would be incomplete without at the same time, equipping consumers with the knowledge, skills and tools to make informed financial decisions. These capabilities not only allow individuals to build, manage and preserve wealth, they are essential to help consumers protect themselves against poor market practices and to take appropriate actions when treated unfairly. Therefore, enhancing financial capability among Malaysians has been and will continue to be an important agenda of the Bank. Financial advisers have an important role in this effort given your unique vantage point as an objective adviser, and through the close relationships that are cultivated with your clients. We look to the industry to provide input and support to the Bank’s ongoing work to develop financial capability programmes that are tailored to the different key life stages of individuals from their days as a student, when they enter the workforce, when they start and raise a family, and in retirement.

While there are current requirements for potential conflicts to be clearly disclosed to consumers, the effect of such disclosure in alerting consumers to consider how such conflicts may affect any advice received, and to temper their decisions appropriately, may not be adequate to resolve the inherent conflicts that are created when a financial adviser is compensated by product providers. At the same  BIS central bankers’ speeches  3  time, the vast majority of Malaysian consumers are not currently accustomed to paying directly for advice. In moving towards a better alignment of interests, there is an opportunity for fee-based business models to gain more traction, with financial advisers doing more – individually and collectively as an association – to explain how they add value through the advice that they give. The fourth priority is to intensify our review of the quality of advice provided by financial advisers to consumers through our supervisory work programme. This will contribute towards ensuring that financial advisers stay at the “top of their game” in terms of quality of advice, and that this is sustained through effective oversight arrangements within financial advisory firms to check that the interests of clients are being well-served at all times. At the industry level, the AFA will have a key role in elevating the stature of the industry by coordinating initiatives to create greater awareness on the role of financial advisers, educate consumers on the importance of financial advice and to promote financial advisory services.
Consumer prices show monthly variations. After a period of very low inflation in 2004, inflation was on the rise through 2005. Thereafter, domestic inflation showed an unexpected drop in 2006 and is still low. So far in 2007, it has edged up, but is still fairly low. Lower electricity prices have contributed to a fall in total CPI inflation in recent months. Underlying inflation, i.e. inflation adjusted for tax changes and excluding energy products, was fairly stable for a long period and has been estimated at between 1 and 1½ per cent. The latest inflation figure indicates that underlying inflation is now in the upper end of the interval. The Norwegian economy is booming after a strong upturn since summer 2003. The upturn followed a period of slow growth from 1998 and a mild slowdown in 2002 and into 2003. Growth has been stronger than in the cyclical upturn in the mid-1990s. The growth period of recent years has been the longest unbroken growth period recorded in quarterly national accounts, which include figures back to 1978. Despite cyclical fluctuations, growth has been very high for the past 15 years. So far in the cyclical upturn, the mainland economy has grown by an average of just over 4 per cent annually. Utilisation of production capacity, labour and real capital has increased markedly since summer 2003, and capacity utilisation is now very high in most industries. There are reports of limited capacity in most industries and regions and labour shortages in almost every occupational category.

That is, the Central Bank neither intends to use exchange rates to support exports, nor does it intend to harm Turkey’s long-term trade competitiveness. The implication of the Central Bank’s stable real exchange rate policy is that the economy’s current account balance is determined by real sector developments. Here the decline in domestic demand in recent months has made its mark. As imports decreased, the foreign trade balances improved significantly. As a result of this, Turkey ended 1998 with a current account surplus of $ million. In 1999, a small current account deficit is expected, mainly due to an expected rise in domestic demand in the second half of the year. The coordination of fiscal and monetary policies has succeeded in reducing the inflation rate from 91% in 1997 to 54% in 1998. As of August 1999, the WPI-based inflation rate stood at 54% despite an unexpected change in the price of oil and a relative loosening of the fiscal stance in the first half of the year. Since Turkey has a long history of inflation, inertia has played an important role in determining inflation. Breaking down this “inflation resistance” of the economy requires a high level of commitment on the part of the political authorities. One sign of this commitment may be their performance in the area of structural reforms. There is no doubt that the more successful the realization of the reforms, the stronger will be the credibility of the program. Now let me turn to these reform issues.
The correction reflects the pace of housing construction, which has risen to a high level, at the same time as population growth has shown a marked fall. In addition, the requirements in the residential mortgage regulation were tightened on 1 January 2017. Nevertheless, so far the correction seems to be limited, and house prices have edged back up in recent months. Chart: Key policy rate The key policy rate has now been 0.5 percent for a good two years. The very low level of global interest rates has contributed to the low interest rate level in Norway. At the same time, the Executive Board’s assessment through 2017 and into 2018 has been that there is a continued need for an expansionary monetary policy. The projections for the key policy rate have gradually been revised up as the outlook for the Norwegian economy has improved. Economic activity is now approaching a normal level, and inflation is projected to move up in the period ahead. Our latest analyses, presented in March 2018, suggest that the key policy rate will most likely be raised after summer 2018. At the same time, the Executive Board has given weight to the consideration that uncertainty as to the effects of a higher interest rate suggests a cautious approach to interest rate setting. Chart: Consumer prices Looking at the wider picture, we can, 17 years after inflation targeting was formally introduced in Norway, draw the conclusion that the system has functioned well.

Øystein Olsen: The conduct of monetary policy Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 14 May 2018. * * *  Accompanying slides Thank you for this opportunity to report on the conduct of monetary policy. My introduction here today is based on Norges Bank’s Annual Report for 2017 and our monetary policy assessments up to the monetary policy meeting at the beginning of May. The various components of economic policy must interact to achieve sound and stable economic developments over time – with high employment and low unemployment. The primary objective of monetary policy is to maintain monetary stability. Since 2001, the operational target of monetary policy has been low and stable inflation. This has been retained in the new regulation on monetary policy issued by the Government on 2 March this year. The regulation clarifies the monetary policy mandate and will not result in significant changes in the conduct of monetary policy. I will return to this topic later, but first of all I would like to go back to just over a year ago. At the beginning of 2017, the level of spare capacity in the Norwegian economy was still fairly high and there were prospects that inflation could remain below the inflation target in the coming years. International interest rates were very low.
See Minoiu and Reyes (2013) for more information  BIS central bankers’ speeches  9  correlations is, in their own way, a rather imperfect metric of cross-system interaction. Nonetheless, they suggest these interactions are, in general, both important and strong. A final, indirect and reduced-form, piece of evidence on the complexity of the macro-financial system comes from looking at the statistical distribution of behaviour in these systems. For other complex systems, physical, natural, biological and social systems, this statistical distribution is known to be highly non-normal (Newman (2005)). Indeed, many of these systems are found to be Power-law distributed, with much fatter tails than would be expected from a normal distribution. To what extent are these statistical properties evident in macro-economic and financial timeseries data? Chart 14 looks at the statistical distribution of GDP growth, credit growth, equity prices and rice prices, using a long time-series covering several hundreds of year. These densities have been transformed such that, if the underlying distribution is normal, the dots trace a straight line. Any deviation at the extremities is evidence of a fat-tailed distribution. It is clear from Chart 14 that all four series exhibit a significant degree of fat-tailedness, considerably more so than a normal distribution. This is consistent with economic and financial systems, locally and globally, exhibiting complex system of systems properties. For example, a four-standard deviation event – a true catastrophe – would under a normal distribution be expected to occur roughly every 15,000 years.

Under the estimated distributions for economic and financial systems, such an event would occur every 10 to 15 years. Implications for policy design So what might this mean for the design of the policy architecture? Let me mention three areas where clear progress has been made since the crisis, but where more may be needed in the period ahead if we are to manage effectively this complex, macro-financial system of systems: data, modelling and policy design. (a)  Data  Monitoring risk in a system of systems requires data on each of the sub-systems, often at a high level of granularity. Often in response to crisis, efforts have been made over time to improve data on economic and financial systems. For example, there have been successive waves of improvement to statistics on international banking flows, starting in the 1970s. In response to the latest crisis, renewed efforts have been made to fill data gaps and to improve the degree of disclosure by banks of their balance sheet positions (FSB (2012)). As one example, data on banks’ cross-border assets and liabilities only distinguish between banks and non-banks. In practice, a richer sectoral decomposition of these data is often desirable to understand interactions between different parts of the financial sector and between it and the wider economy (Hills and Hoggarth (2013), Lane (2014)). For example, the dollar funding crisis which faced European banks in 2011/12 involved a complex string of cross-border financing.
The high debt incurred by Spanish households and firms, encouraged by overly accommodative financial conditions but also by optimistic expectations about future income, is now acting as a drag on their consumption and investment decisions. And further exacerbating this is the dizzying deterioration in confidence which, fuelled by the global climate of uncertainty, is pushing households and firms to postpone their spending plans and to strengthen their saving. Pinpointing which specific mechanisms lie behind a certain type of behaviour of economic agents' confidence is always a complex task. But in the current circumstances, and especially in Spain, it would not be hazardous to link much of the behaviour of confidence to that of employment. The intensity with which employment is shrinking is the most distinctive feature of the recession in Spain. In this respect, it repeats traditional patterns of behaviour and shows the persistent weaknesses in the institutional structure of our labour markets that must be corrected. The best way to restore confidence in these circumstances involves a calm and realistic analysis of the problems, reasoned discussion of potential solutions and the rapid implementation of measures deemed appropriate. When faced with a severe recession, neither an alarmist overstatement of the difficulties nor well-meaning calls for confidence in a prompt recovery that will come about spontaneously, with no need for relevant measures, are of any use.

–  We must review our framework for extending ELA;  –  Our analysis needs to focus more than before on liquidity developments in major cross-border bank groups. Where such groups exist, the home country of the parent bank is vulnerable to threats to financial stability in other countries, both where the funding markets are located and those where the group has subsidiaries or branches. For Sweden, this situation is accentuated since our banking system is four times larger than our GDP, and since our major banking groups depend on  6  BIS central bankers’ speeches  funding in international markets to a high degree. The financial stability analysis will have to expand to identify threats early on and to deal with them. We must be alert to potential contagion between unsustainable monetary and fiscal policies in other countries and their potential repercussions on the stability of our own country’s financial groups. –  The crisis showed the need for clear roles and mandates for the authorities involved in crisis management, in particular for resolving problem banks. The Riksbank, the Financial Supervisory Authority, the National Debt Office and the Ministry of Finance had frequent contacts throughout the crisis and coordinated their actions. That said, the division of responsibilities is not clear in all situations and the Riksbank has asked Parliament to clarify the legislation on this and a number of other crisisrelated issues. Matching goals with tools The Riksbank has a fairly well-developed structure for macro-prudential analysis.
In the national economies of those not yet prepared to allow more flexibility in their effective exchange rates, it creates the risk of growing distortions in the allocation of resources, conflict with domestic monetary policy objectives, and the risk of larger and more abrupt future movements in the exchange rate. These four broad forces will have substantial implications for the macroeconomic performance of the world economy over the medium term. This combination of fiscal sustainability problems, large external imbalances, and the tension in the existing exchange rate system creates the risk of unanticipated shocks to financial prices, even in a context where monetary policy credibility is strong. The probability of these shocks may be low, but it is higher than it has been, and higher than we should be comfortable with. These shocks could be large enough to lower future growth outcomes. The world’s economies have very different capacities to comfortably manage the inevitable adjustments. Without policy action commensurate with the challenges, we face some risk, it may not be high, but it is material, of a world with somewhat lower growth performance and higher volatility. Although the United States has the distinction of presiding over the more awkward combination of imbalances, it is in many ways in a better position than other countries to manage successfully through this period. Our underlying fiscal position is stronger, our debt to GDP burden lower, our demographic cliff more moderate, and our trend growth rate substantially higher than that of the other major economies.

This dynamic will test the ability of governments to sustain commitment to an open multilateral trading system, and the manner in which this plays out will have an important impact on future productivity gains. A fourth challenge involves prospective changes in the global exchange rate regime. The international monetary system now incorporates an uncomfortable disparity in the extent to which real effective exchange rates vary across regions. The monetary authorities of the United States and Europe allow considerable variability in their real exchange rates, though they are not indifferent to movements in exchange rates. Japan has somewhat less enthusiasm for flexibility and runs a regime in which it seeks to avoid large swings in the value of their currency. Emerging market economies run a mix of regimes from those that permit significant flexibility to those that run essentially fixed pegs or regimes that seek to contain variations to relatively small degrees around implicit targets for their currencies against the dollar or a basket of the currencies of their major trading partners. The world has lived with this system for some time. But this is not an ideal mix, either for the monetary system as a whole, or for those countries which permit very little variability in their real effective exchange rates, and it’s probably not sustainable over time. It also is not ideal because it limits the extent to which markets work to facilitate adjustment. It creates the risk of larger moves in the major currencies than might otherwise be the case.