samchain/econo-pairs-v1 huggingface dataset:
But the avoidance of default during the crisis does not come without the willingness to use the means available to avoid that outcome, even in very adverse situations, and the ability to endure the temporary hardship that comes with it. In addition, Iceland – like Ireland, probably – was helped by a relatively good fiscal position prior to the crisis. The fiscal consolidation that began in 2010 and has already resulted in a significant primary surplus was subsequently an important factor in restoring external confidence, which fell to what, in retrospect, seems an unjustifiably low level. In Iceland’s case, the overall effort was made easier by the outside assistance of the IMF, the Nordic countries, and Poland. The same consideration applies to the hardest-hit EU countries and should be kept in mind when assessing their probability of default. Finally, let me say a few words about credit ratings and market perceptions in the Icelandic saga, which broadly conforms to more general patterns. Both the sovereign and the private Icelandic banks were assigned triple-A ratings by Moody’s for a period prior to the crisis (the sovereign from October 2002 to May 2008 and Kaupthing Bank from February 2007 to April 2007). In the case of the banks, the stated argument was that the Government would stand behind them in times of difficulty. We now know that this was nonsense, given the size of the banks and the scale of their international activities. In case of the sovereign, this rating was not so bad after all!

In this case, we can expect that in the third and fourth quarters economic activity will be recovering quarter-on-quarter. The economic situation will be returning to normal step-by-step. The direct adverse impact of the restrictions primarily falls on this quarter, while their secondary effects will continue to manifest in the future. According to our surveys, over 80% of the businesses across various industries have been experiencing the influence of the coronavirus pandemic and current 1/3  BIS central bankers' speeches  restrictions. Companies’ business sentiment has materially declined. It will take time to restore business processes, logistics and production chains, offset the reduction in profit and revenue, build up reserves and savings that have been used to a greater or lesser extent over the second quarter. Combined with uncertainty regarding potential changes in the external environment, this will limit production, investment and consumer activity. In these conditions, GDP will shrink yearon-year in the third and fourth quarters, that is the annual rate of economic growth will be negative. According to the Bank of Russia’s forecast, GDP will overall decrease by 4–6% in 2020. The major contributor to this reduction will be a decline in exports that may reach from 10% to 15%. Moreover, fixed capital investment will also substantially decrease (by 6– 10%) compared to the previous year. Companies will be primarily using their financial resources to restore their daily operations. Uncertainty about the prospects of domestic and external demand will be confining investment plans.
From 1995 onwards the average rate of inflation, measured with UND1X, has been fairly close to the 2 per cent target. This has been accompanied by higher GDP growth than before. A part of the higher growth is of course explained by there being plenty of unutilised resources after the crisis in the early 1990s. BIS Review 24/2002  5  Variations in inflation and GDP growth Thirteen industrialized countries  1995-00  6  6  5  5 St. dev. inflation  St. dev. inflation  1970-90  4 USA 3  Sweden  2 Germany  4 3 2  1  1  0  0 0  1  2  3  St. dev. GDP growth  4  Sweden  USA  Germany 0  1  2  3  4  St. dev.GDP growth Source: The Riksbank  It cannot be argued that inflation targeting countries would have done worse if they had followed the same strategy as Germany and Switzerland, or that those two countries would have done equally well if they had targeted inflation. It is also conceivable that similar results would have been achieved with other monetary strategies, such as the pragmatic procedure at the U.S. Federal Reserve or the fixed exchange rate regimes – amounting in practice to a delegation of monetary policy to the Deutsche Bundesbank – that were used at times in, for example, France, Italy and Denmark.

Actual and estimated repo rate Estimates with a simple forecast-based rule  it = 1.29 + 0.66it - 1 + 0.50(πFt , 1 – 2) + 0.26(πFt , 2 – 2) + et 10  10  9  9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0 1993  1994  1995  1996  1997  1998  1999  0 2000 2001 Source: The Riksbank  Diagram 1, published in our latest Inflation Report, shows the actual path of the repo rate and estimations obtained with a simple forecast-based rule. It seems that on the whole, our actions can be explained fairly well by applying an equation based on the Riksbank’s own series of forecasts of inflation one to two years ahead plus a term for the repo rate’s “inertia”. Considering the rule’s simplicity, the deviations from it must be said to be small. The diagram accordingly shows that the Riksbank’s actions have been reasonably systematic and based on the Bank’s inflation forecasts. It is, of course, too early for a more thorough evaluation of explicit inflation targeting regimes compared with other monetary policy strategies. It is also the case that Taylor rules, albeit in a somewhat modified form, likewise give comparatively good explanations for a number of central banks that have not explicitly adopted an inflation target, for example Deutsche Bundesbank and the U.S. Federal Reserve.
These principles went missing in the run-up to the present crisis. The costs of that vanishing act are now all too apparent. In rebuilding the financial system, to create one which is both stable  8  BIS Review 108/2009  and better able to meet the needs of the real economy, these principles need to be rediscovered. They offer a tried and tested – indeed, trusted – roadmap for the period ahead. BIS Review 108/2009  9  Charts Chart 1: US mortgage foreclosure inventory rates (a)  Per cent 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 72  76  80  84  88  92  96  00  04  08  *Source: Mortgage Bankers Association of America. (a) Proportion of outstanding mortgages in foreclosure process at end of quarter; not seasonally adjusted. Chart 2: Number of mortgage products advertised  Credit impaired buy-to-let Credit impaired residential Prime buy-to-let Prime residential  T housands 18 16 14 12 10 8 6 4 2 0  Feb Jun 2007  Sep  Jan 08  May  Sep  Jan 09  May  Source: Moneyfacts group. 10  BIS Review 108/2009  Chart 3: Three-month inter-bank spreads (a)  Basis points  Sterling US dollar  400  Euro  350 300 250 200 150 100 50 0  Jan. May. Sep.  Jan. May. Sep.  Jan. May. 08  2007  09  *Sources: Bloomberg and Bank calculations.

Through these successive waves, the world financial system found itself with almost every link in the credit chain – in the chain of trust – having been weakened or broken. That is evident in surveys of the public’s trust in industry: banking and finance are firmly rooted to the foot of the league table of trust, in the UK and internationally (Chart 6). That loss of trust is mirrored in aggregate bank lending in the UK, in particular to companies, where annual growth has fallen from a peak of 23% in March 2008 to around zero now (Chart 7). And this has in turn been reflected in the largest and most synchronous global economic slowdown since the Great Depression. Confidence and credit So how is trust, and thereby credit, to be restored? To date, the answer has been to rely on the one sector whose credit has not been seriously questioned – governments and central banks. There has been large-scale provision of government and central bank credit over the past two years in an attempt to ease pressures and shore up breaks in the private sector credit chain. These interventions have been unprecedented in size during peacetime. The total potentially on the table is in excess of $ trillion.7 That is roughly $ for every man, woman and child on the planet. Half of the world’s 20 largest banks have needed direct government support. Central bank balance sheets in the major financial centres, including in the UK, have more than doubled in size.
If you were to ask any representative grouping of the community, say, the Legislative Council, what the monetary base is, I would be surprised if more than ten per cent of the group could come up with the correct answer. Many would be tempted to relate this to the various definitions of the money supply, because that is the term mostly heard in commentaries on money and finance. But they are quite different things. The crucial part of the monetary base and the money supply, however defined, are in fact on the different sides of the balance sheet of the banking system. Put this question to a group of academics and you would probably, on the contrary, get as many definitions as there are people in that group. 15. This confusion is understandable and, at least partly, in the context of Hong Kong, a reflection of the rather peculiar institutional framework for monetary management of the past that is now, one hopes, history, with the ten years of reforms to our monetary system. You may be surprised to hear this. It was not until the end of 1996 that the monetary base for Hong BIS Review 87/1998  -4-  Kong was properly defined. This was when, on the occasion of the introduction of Real Time Gross Settlement for interbank transactions, all licensed banks were required to operate a clearing account with the HKMA instead of with a commercial bank.

Yet we have been, somehow, controlling, or we claimed to have been controlling, the monetary base ever since the linked exchange rate system was established in October 1983. 16. Even assuming that the definition of the monetary base is well understood, there is then the important question of how it should be controlled. Herein lies one of the most interesting subjects in monetary management and that is the choice between discretionary control with people making decisions, and automatic rule-based control with no discretionary decisions involved. Associated with this are considerations concerning, and possibly another choice between, flexibility in management and the credibility of the monetary system. Even the most professionally competent central banker can be wrong. A system that involves discretionary decisions is therefore subject to human errors of judgement that may undermine the credibility of the system, and some would go as far as to argue that this would eventually lead to failure of the system. On the other hand, an entirely rule-based system without any discretion is inflexible and may not serve the best interest of the community, even though short-term interests may sometimes be involved - witness the many calls for lowering interest rates even when the exchange rate is under pressure. 17. Another related conceptual issue that needs to be put across clearly is that the classical currency board system, as structured in the old colonial era, whilst still theoretically sound, has long become impracticable in coping with the complexities of modern finance.
The Commission itself points out that the Ministry may hand over more decision-making responsibility regarding investment strategy and asset composition to the manager, as is the case with many other sovereign wealth funds. It is also possible that the investment strategy may be broadened to include more unlisted asset classes, such as infrastructure and private equity. These sorts of investments will place heavier demands on executive management and the governance structure and require a larger and more complex organisation. Moreover, demands and expectations concerning the fund’s exercise of ownership rights may increase further. The Commission raises the question of placing the Council on Ethics within the management organisation. This would mean that the organisation given the responsibility of managing the fund will also be given greater responsibility for making ethical assessments. If there are prospects that investment management evolves as I have indicated above, it may be appropriate to organise the management of the fund outside the central bank. The fund must not be compromised The chair of the Central Bank Law Commission has underscored that “the fund must not be compromised” in the event of a new governance model. This was also a concern echoed in the public debate, reflecting fears that changes in the organisation of the fund may give special interests influence over investment management. I would like to highlight four areas that could have serious pitfalls: the primary objective of investment management, the division of responsibility in the governance model, board composition and cost-effectiveness.

Egil Matsen: Government Pension Fund Global - experiences and organisation Speech by Mr Egil Matsen, Deputy Governor of Norges Bank (Central Bank of Norway), Oslo, 27 October 2017. * * * Accompanying slides  Introduction At a press conference in February 2017, Prime Minister Erna Solberg summarised Norway’s management of its oil and gas revenues as follows: “We have been fortunate, but we have also managed our resources well.”1 Many will probably agree with the Prime Minister’s assessment. In 1990, the Storting (Norwegian parliament) passed the Act relating to the Government Petroleum Fund, an important milestone for the management of Norway’s petroleum revenues. The Act draws a distinction between current oil and gas revenues and the spending of these revenues over the central government budget. This distinction has allowed the accumulation of the savings in what is now called the Government Pension Fund Global (GPFG). Under the Act, all of the government petroleum revenues are to be placed in the GPFG, which can only be used via the central government budget. Under the fiscal rule, the transfers are to follow the long-term expected annual real return of the GPFG. Chart: A large fund – NOK 8 000 billion The first deposit in the fund was NOK 2 billion and was made in May 1996 by Sigbjørn Johnsen, the Minister of Finance at the time. Today, the value of the GPFG is around NOK 8 000 billon, or almost three times annual mainland GDP.
Empirical research shows that compared with other developing countries the transition countries are characterized by a relatively higher current account deficit. Certain research of the IMF 1 shows that for the period 1995-2004 the average current account deficit for the countries from Central and Eastern Europe amounted to 5.5 percent of GDP 2 , compared to the deficit of 2.2 percent of GDP in the countries from Latin America and to the current account surplus of 3 percent of GDP in the Asian countries. Simultaneously with the larger current account deficit, the first two groups of countries also registered a significant increase in their external indebtedness, i.e. a fast growth of their net foreign liabilities. Ladies and Gentlemen, It is a fact that the current account deficit is a variable of great importance for the monetary policy conduct. Nevertheless, it is also a fact that the control over the current account balance could not, neither it is done only through the monetary policy measures, which without any doubt puts the central bank in a delicate position when the external position is deteriorated, since the current account is a function of the interactions between the private sector entities' decisions and the decisions of the economic policy decision-makers. Therefore, the identification of the factors that cause these movements and the implications for the monetary policy conduct are essential. The analyses of the main features of the balance of payments in transition countries indicate that the key and dominant factor for the external disequilibrium is high trade deficit.

The intensification of the process of financial integration and liberalization of the capital transactions as global processes, have set new challenges for the countries in transition, which reflected not only in the balance of payments capital account, but in return in the balance of payments current account, as well as the exchange rate regime. Positive macroeconomic performances of the countries, as well as the fast global growth, low rate of inflation and historically low level of the interest rates in the developed countries are factors that caused high capital inflow in the transition countries and produced significant implications for the conduct of monetary policy in the transition countries. Having in mind that the majority of them are characterized by fixed exchange rate regimes, high capital inflows resulted in appreciation of the real exchange rate and further deepening of the trade deficit, and consequently of the deficit in the balance of payments current account. The process was intensified additionally by the higher productivity growth in the tradable goods through the so-called Balassa Samuelson effect, which according to certain estimates increased the appreciation of the currency on 4 average by 1.5 to 2.5 percentage points . Experiences of more developed transition countries are of special importance for the future challenges of the Republic of Macedonia, as a part of the increasingly intensifying process of EU integration.
They are the natural rate of unemployment and the rate of unemployment consistent with stable inflation, usually known as the NAIRU. The concept of the natural rate of unemployment introduced by Milton Friedman and Edmund Phelps 30 years ago is the level of unemployment that – as Friedman famously described – would be “ground out by the Walrasian system of general equilibrium equations” reflecting the structural characteristics of the labour and product markets. Friedman was the first to recognise that this natural rate of unemployment was neither constant over time nor immune to policy influences. The natural rate hypothesis implies a vertical long-run Phillips curve. In other words, if the monetary authorities attempted to “peg” the level of unemployment below the natural rate, then this in time would cause the inflation rate to rise indefinitely. The work of Friedman and Phelps soon proved highly relevant. The futility of using monetary policy to choose between different combinations of unemployment and inflation became only too apparent in the 1970s. Monetary shocks can – and in the early 1980s and 1990s did – cause unemployment to deviate from its natural rate, but only for a period. As inflation expectations catch up with the consequences of the monetary shock, unemployment returns to the natural rate. BIS Review 103/1998  –3–  But the responses of unemployment and inflation expectations to monetary shocks are far from immediate. Indeed, Friedman speculated that the full adjustment to an unexpected change in inflation might take up to “a couple of decades”.

1 Jaison Abel, Jason Bram, Gerard Dages, Richard Deitz, Suzanne Elio, Jack Gutt, and Andrew Haughwout  assisted in preparing these remarks. 2 See, for example, our Report on the Competitiveness of Puerto Rico’s Economy, June 2012, and An Update on  the Competitiveness of Puerto Rico’s Economy, July 2014. 3/3  BIS central bankers' speeches
IPSs have to obtain the same improvements in organisation, efficiency, economies of scope, diversification and quality and unity of management as traditional mergers. They must do so in the same length of time as a normal merger, and they must strive to ensure that their results are clearly perceived by the markets as lasting. 2  BIS Review 173/2010  In this connection, it is vital that the initiators should be particularly diligent in countering the danger that the “raw novelty” of this legal formula – whose features have had to be rapidly devised – may be used as an excuse for rigidities, procrastination or half-measures. Compared with traditional mergers, where the combining of objectives and efforts to advance in a single direction is more natural, all the participants in IPSs must be on their guard to prevent the essential goal of unity from becoming distorted. They must strive to ensure that the mind-set of directors, managers and staff alike is geared towards a single goal; individual visions are no longer appropriate here, and nor are decisions not aimed at achieving a better future for the single corporate project that has replaced its predecessors. All the participants in institutional protection schemes are assuming a very specific responsibility here, an institutional responsibility and a personal responsibility.

While as a general rule I am against this invasion of jargon, perhaps in this specific case the initials are preferable to the longer version, because IPSs, the focus of this conference, are not merely “institutional protection schemes”, or legal instruments suitable for securing the benefits of consolidation under capital regulations. They are and should be much more than that. IPSs have arisen as an innovative structure in the banking system and, like all new products, they are best evaluated by organising their assessment in steps, or successive degrees of scrutiny, so that at the end of the process their structure can be fully appreciated. The first step in the process of evaluation will be to judge whether they are timely. The second will focus on their design and construction. The third will be a “use test”. And the fourth and final level of assessment will look at how readily they lend themselves to progressive development so as to cover potential future needs. Allow me to cover these successive steps or facets one by one. Let us start with the first, their timeliness. IPSs are a response to an unquestionable substantive need: the downsizing of the Spanish banking sector, following the excesses of the growth period prior to 2007. These factors left many institutions facing the challenge of a future far removed from the comforts that had characterised the previous period, namely: strong economic growth, abundant liquidity on international markets, extensive business margins and healthy assets.