samchain/econo-pairs-v1 huggingface dataset:
This seems surprising at first glance but is attributable to the fact that banks tried to offset a further decline in their interest margin with increased income from credit business. Meanwhile, interest rates on mortgage loans are also lower than before the introduction of negative interest. Thus, we can conclude that taking a policy rate into negative territory has a similar effect, in terms of transmission to other interest rates, to cutting a policy rate in positive territory. Although interest rates have fallen, no significant increase in credit growth has been observed over the last two years. The volume of bank loans to businesses and households has risen further, as you can see in chart 10, but credit growth has weakened. This slowdown in growth is particularly evident among loans to private, non-financial corporations. However, the picture is different for companies that are able to finance themselves via the capital market, as chart 11 shows. Domestic non-financial corporations have exploited the low capital market interest rates and issued more bonds since the introduction of the negative interest rate. As a preliminary conclusion, we may state that the negative interest rate in Switzerland principally operates via the exchange rate channel. Together with our willingness to intervene in the foreign exchange markets, it has helped to ensure that the Swiss franc has not strengthened further despite heightened uncertainty, for example in the wake of the British EU referendum.

Negative interest also puts a strain directly on banks, and indirectly on pension funds and life insurance companies, which worry about their profitability and about meeting their obligations. As I have mentioned, the SNB takes these concerns very seriously. Yet the challenges now facing pension funds are not caused first and foremost by monetary policy. Rather, their problems stem from the fact that pension funds have to achieve returns that are nominally fixed and were set when the equilibrium interest rate was higher. For banks, the negative interest rate undoubtedly represents a cost because they have to pay interest on their deposits at the SNB. However, the SNB grants a generous exemption threshold, which reduces the effective interest rate burden for the banking sector. These exemption thresholds give banks the freedom to decide whether – and to what extent – they should pass on negative interest to their customers. From a financial stability perspective, it is not negative interest per se which poses a challenge, but rather the low level of interest rates more generally. It is conceivable that low interest rates will lead investors to take greater risks. This can result in imbalances developing on the real estate and mortgage markets. In Switzerland, a variety of measures have been implemented since 2012 – the countercyclical capital buffer for instance – with the aim of reducing the associated financial stability repercussions. Since then, the pace of growth on the real estate and mortgage markets has slackened somewhat, although mortgages continue to grow faster than GDP.
However, I would like to briefly address an aspect of macroeconomic and institutional framework, which has been an important determinant of the extent and magnitude of the national authorities’ response to the crises: the exchange rate regime. A quick glance at the current developments in the region and broader allows us to draw the conclusion that the countries adopting a fixed exchange rate regime have been affected by the global crisis proportionally higher. Moreover, they have been more constrained in terms of responding to the crisis. By contrast, countries adopting a free floating exchange rate regime have been affected by the crisis more mildly and smoothly, and they have preserved higher independence in their economic policies for the mitigation of crisis effects. Obviously, this is not occasional: the free floating exchange rate regime is an important political, economic and institutional investment of emerging countries. Their sacrifices in terms of building reliable monetary and fiscal policies, enhancing public confidence in the respective currencies and national financial institutions are rewarded with the flexibility this regime provides to macroeconomic policies in coping with the crises. Exchange rate volatility mechanism is precisely a mechanism that allows the economy to absorb various shocks. The free floating exchange rate regime, devotedly adopted by the Bank of Albania, allows the Albanian economy to withstand these shocks at minimum cost. Let us leave this mechanism operate smoothly, without excessive reactions from the market or its agents. Any smooth moves towards the exchange rate equilibrium will be in the Albanian economy’s own interest.

In doing so, I will focus on two prime channels underlying the second stage of transmission: the exchange rate channel and the real interest rate channel. My remarks will therefore be neither exhaustive nor complete, given that monetary policy can affect the economy through many other channels as well, such as its impact on the valuation of equities and, hence, on firms’ cost of capital and investment decisions, Tobin’s q in short.3 Another channel of relevance is the bank lending channel as formalised by Bernanke and Gertler (1995). But by focusing on the exchange rate and interest rate channels, we can get a good understanding of how effective recent policy measures have been. In particular, I will show that monetary policy-induced exchange rate movements may have considerable impact on consumer prices, but that this relationship depends on the state of the economy and the shocks driving it, much in line with the recent literature in this field. And I will show that the New Keynesian Investment and Savings (IS) curve is alive and well in the euro area – that is, aggregate demand responds to changes in real ex ante interest rates, and can also be shown to have done so in recent times, provided it is measured properly. A state-dependent exchange rate pass-through Let me start with the exchange rate channel – a channel that has been heavily debated in recent months in the light of the large movements that we have observed in the foreign exchange market.
BIS central bankers’ speeches  5  Second, during the financial crisis, especially during the fall of 2008, financial market conditions tightened dramatically even as the FOMC was cutting its federal funds rate target to zero. Monetary accommodation turned out to be insufficient to produce an easing of financial market conditions, and the economy fell into a deep recession. Over time, financial market conditions have become a much more important factor in evaluating the appropriate setting of monetary policy and the level of short-term interest rates. This reflects several factors. First, over the past few decades, as the U.S. capital markets have grown in size and scope, the U.S. financial system has become much less bank-centric. This has loosened the linkage between the federal funds rate and financial market conditions. Second, the U.S. economy and financial markets have become more interconnected globally. Thus, the impact of U.S. monetary policy has become more diffused, and financial market conditions have come to depend increasingly not only on developments in the U.S., but also on developments elsewhere. As an example, the low level of U.S. 10-year Treasury yields presumably is due, in part, to the fact that long-term interest rates in Europe and Japan are much lower. So, if the effect of short-term rate changes on financial market conditions has become less predictable and more variable over time, what implications does this have for U.S. monetary policy? From my perspective, there are three major implications that deserve attention.

This will cause major oil exporters to run either smaller budget surpluses or bigger budget deficits. In the aggregate, the swing from oil producers to consumers is quite large. For example, a $ per barrel decline in global oil prices results in an income transfer of about $ billion per year from producers to consumers.2 This understates the total effect because it does not include any knock-on reductions in other energy prices – such as for natural gas – that, outside the U.S., often are linked to oil prices. Obviously, if the oil price declines were to both intensify and persist, this would have negative implications for oil and gas investment in the U.S. At a minimum, as cash flows fall, some producers will cut back on their drilling activity rather than plug the shortfall with outside financing. Nevertheless, there are several reasons why I don’t think this risk should be overstated, especially if oil prices stabilize around current levels. First, even after the large gains in recent years, oil and gas investment remains a small fraction of GDP. Second, domestic natural gas investment should be relatively unaffected because U.S. natural gas prices are largely insensitive to global energy price developments. This reflects the high costs associated with exporting natural gas and the fact that most of our oil production is used for transportation purposes. Thus, the ability to substitute lower cost natural gas for oil is limited. Third, extraction costs vary appreciably across the different major oil fields.
One thing becomes clear from the profusion of explanations and theories that continue to appear in the newspapers and journals: we are unlikely to be able to produce a definitive and comprehensive explanation of the causes of the recent financial turmoil in the very near future. The turmoil and its effects on our region are still being played out: indeed, although encouraging signs of recovery continue to appear, the word “recent” in the title of our symposium may well be wishful thinking. We are still on shifting ground when it comes to finding adequate explanations and it will be some time before we can stand back and take a cool and dispassionate look at what has happened. Economic historians, after all, are still debating the causes and consequences of the 1929 Wall Street Crash. BIS Review 2/1999  –2–  The much more complex causality of present turmoil is enough to bewilder even the most talented economist, more especially since it includes a fair measure of irrational behaviour that falls more strictly within the province of the psychologist. The diverse effects of the turmoil are equally perplexing: they present an interesting reflection of the great variety of economic regimes that we have in the region and of their different stages in the economic cycle. The Philippines, for example, though not entirely unaffected, has passed through the turmoil with considerably less damage than many other economies in the region. In contrast, its immediate neighbour, Indonesia, has been set back years, if not decades.

These facts oblige us to realize that challenging the status quo means in the end challenging mentalities, both those of policymakers and of citizens. It is a very complex process, but we see it as an opportunity as well. We can transform education and awareness in very effective policy tools, to everybody’s benefit. We can surpass the objective limits of our policy actions, by making people more aware of these very objective limits. Bridging the knowledge gap can lead to more financial inclusion, to more access to finance, which is good news for banks, companies, citizens and public authorities alike. Ladies and gentlemen, My conclusion and my message for you, distinguished participants to this conference, and I do not want to sound old fashioned, is that we need research and economic analysis that is practical and can fill the real deficits of our society. And if you really want to challenge the status quo, my advice is to have in mind also the way your research will be disseminated and materialized in real life. On the other hand, let’s not forget to preserve what is valuable in the current establishment. As an old word of wisdom is saying, we need courage to change the things which should be changed, serenity to accept the things that cannot be changed, and the wisdom to distinguish the one from the other. I wish you success with the debates! 2/2  BIS central bankers' speeches
14, No 5; and Arora, C. and Cerisola, M. (2001), “How Does U.S. Monetary Policy Influence Sovereign Spreads in Emerging Markets?”, IMF Staff Papers, Vol. 48, No 3, pp. 474-498. 25. Gilchrist et al. (2019), “U.S. Monetary Policy and International Bond Markets”, Journal of Money, Credit and Banking, Vol. 51, No S1, pp. 1-200; Motto, R. and Özen, K., op. cit. ; Andrade, S. C. et al. (2023), “Sovereign risk premia and global macroeconomic conditions”, Journal of Financial Economics, Vol. 147, No 1, pp. 172-197; and Eichengreen, B. and Mody, A. (1998), “What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?” NBER Working Paper, No 6408. 26. See, for example, Miranda-Agrippino, S. and Rey, H. (2020), “U.S. monetary policy and the global financial cycle”, The Review of Economic Studies, Vol 87, No 6, pp. 2754-2776; and Gilchrist, S. et al. (2022), “Sovereign risk and financial risk”, Journal of International Economics, Vol. 136. 27. Gilchrist, S. and Zakrajšek, E. (2012), “Credit spreads and business cycle fluctuations”, American Economic Review, 102, No 4, pp. 1692-1720. The excess bond premium has also been shown to be a powerful driver of economic activity. See Gilchrist, S. and Mojon, B. (2016), “Credit risk in the euro area”, The Economic Journal, 128, No 608, pp. 118-158; and Bleaney, M. et al. (2016), “Bond spreads and economic activity in eight European economies”, The Economic Journal, Vol. 126, No 598, pp. 2257-2291. 28. Anderson, G. and Cesa-Bianchi, A.

Øystein Olsen: Management of the Government Pension Fund Global (GPFG) Introductory statement by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), before the Storting’s Standing Committee on Finance and Economic Affairs, Oslo, 30 April 2013. *  *  *  Please note that the text below may differ from the actual presentation. Charts in pdf I would like to thank the Chairman and thank you for giving Norges Bank the opportunity again this year to report on the management of the Government Pension Fund Global (GPFG). Chart: Changing the regional allocation The investment strategy of the GPFG builds on its specific features, purpose and our perception of the functioning of financial markets. The GPFG is a large fund and features a long investment horizon. The objective of investment management is to preserve the longterm international purchasing power of the GPFG. In 2012, the investment strategy was changed. As a result, investments in emerging markets have increased. Just over 10 percent of the overall portfolio is now invested in these markets. Chart: Increasing investments in real assets The allocation to equities was increased to 60 percent between 2007 and 2009. When the allocation to real estate reaches 5 percent further ahead, the GPFG's allocation to real assets will make up two-thirds of the overall portfolio. The long-term expected return on real assets is higher than on nominal bonds. The risk is also higher, but the long-term investment horizon puts us in a solid position to carry that risk.
Moreover, the pace of internationalisation of the euro area economy has been further spurred by the euro. Allow me to give just one example: the level of accumulated foreign direct investment abroad by French residents since 1999 amounted to EUR 380 billion (i.e. four times its pre-1999 level). Indeed, capital flows between the Euro area and the rest of the world mirror a high degree of attractiveness: over the years 1999-2001, the Euro area has registered total inward direct investments worth 719.8 billion Euros. At this point, one may wonder which conditions are required to ensure the success of the euro and EMU in the medium term. I believe that we have to tackle three main challenges: structural reforms, financial stability and the accession to the EU of new Member States. ***  BIS Review 11/2003  5  Challenges ahead Structural reforms The first challenge is, beyond dispute, to implement structural reforms in the euro area’s economies. Structural reforms were crystallised at the European level in what is called the Lisbon strategy. The first objective of this strategy is to substantially raise our potential output growth. The second is to make our economies more competitive. Implementing the reforms: the Lisbon strategy The European Council meeting held in Luxembourg in December 1997 explicitly mentioned structural policies among the items selected to achieve enhanced co-ordination. The Lisbon European Council, held in March 2000, further enhanced the medium-term strategy to introduce structural reforms in the Union.

Jean-Claude Trichet: The European Monetary Union and the euro Speech by Mr Jean-Claude Trichet, Governor of the Bank of France, at the Financial Forum 2003, organised by The Wall Street Journal Europe and The New Economy Forum, Madrid, 25 February 2003. *  *  *  Ladies and gentlemen, it is a great pleasure and an honour to be with you today, on the occasion of the “Financial Forum 2003”, organised by the New Economy Forum and the Wall Street Journal Europe. I would like to present my views on the successful set-up of the euro, on the economic and financial integration of Europe and on the challenges that the euro-zone will confront going forward. The Euro: built on a successful set up Set-up of the Eurosystem The single monetary policy is formulated and implemented within a sound institutional framework, the Eurosystem, comprising the European Central Bank and the twelve national central banks of the euro area. Three principles underpin the Eurosystem: independence, transparency and decentralisation. The independence of both the European Central Bank and national central banks is enshrined in the Treaty. When exercising their powers and carrying out their tasks and duties, neither the central banks of the Eurosystem nor any member of its decision making bodies shall seek or take instructions from Community institutions, from any government of a Member State or from any other body. Independence refers to institutional, operational and financial independence.
If international activity were to move into a recovery, most things suggest that demand in the Swedish economy would start rising more rapidly again from a level of resource utilisation that is already relatively high. The earlier restrictions would then be back on the agenda, with the attendant risk of higher inflation. During the past week, new statistics on prices have been published and show that the rate of inflation has picked up more than expected. Although higher than expected inflation figures should be taken seriously, it is nevertheless important not to overemphasise them. The recent pick-up in inflation is to a large extent a consequence of a few very special factors that could prove to be temporary. The price increases for petrol, electricity, and meat could be examples of this. At the same time, resource utilisation in the Swedish economy is at a high level and there is thus reason to closely monitor the trend rate of inflation (i.e. excluding the mentioned special factors), which has been slowly moving upwards from last year's very low levels. If the storm clouds in the international economic skies were to disperse and growth were to improve, there is a risk of tensions arising that could require a tightening of monetary policy. On the other hand, it cannot be ruled out that the downturn in the U.S. economy will be more pronounced. In such a scenario the Swedish economy could experience a more pronounced slowdown, stemming through various channels from weaker exports, investments and private consumption.

In that case the Swedish repo rate is more likely to be lowered somewhat. My conclusion is that the future path of the U.S. economy is highly important for economic developments in Sweden. The situation is difficult to assess and the appraisals our Executive Board has to make are more difficult than usual. Probably the only way to arrive at a clear assessment of the balance of risks is to wait a while and see in which direction developments appear to be moving. 4  BIS Review 42/2001
As a result of the work I have been talking about today, Norges Bank expects to build up further detailed information on companies’ climate risk and climate plans. We will share this information with the Council on Ethics. Divestment and exclusion are the final link in our chain of tools, but far from the most important. We plan to be a driver for change, pushing companies to make the transition to net zero emissions. Active ownership is our most important tool. Conclusion Before I finish, I should also mention that we invest in companies that can contribute to climate solutions, both through the environment-related mandates and in the rest of our equity management. We are also now building up a portfolio of high-quality wind and solar power assets. The environment-related mandates were originally introduced in December 2009 and have brought positive learning effects in several parts of our organisation. As we wrote in our letter to the Ministry of Finance, we intend to draw more on the expertise of the managers of the environment-related mandates in other areas of our management. To sum up: Our ambition is to be a leader in responsible investment. Together with other large investors, we will contribute to the development of standards and methods for reporting. We will increase both the breadth and the depth of our dialogue with companies on climate issues, and we will use the full toolbox we have as an investor.

In addition, the historic debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and Multilateral Debt Relief Initiative (MDRI), as well as the increased budget support from our cooperating partners, further strengthened the external position. Preliminary information indicates that the country’s external debt position of US $ billion as at end-2004 fell to US $ million at endDecember 2006. The foreign exchange market, in 2006, was characterised by a general depreciation of the Kwacha against major currencies. In order to moderate exchange rate volatility, the Bank implemented a number of measures, including purchasing and selling foreign exchange. What is your assessment of the financial sector? In the banking sector, there have been no bank failures in the recent past, reflecting stability in the financial system. To consolidate this stability, in 2006, Bank of Zambia undertook a number of measures, which included increasing the minimum primary paid-up capital for banks and non-bank financial institutions. What is the economic outlook for the year 2007 and the long-term vision of the Government? The Government, on its part, has shown commitment to continuing the economic reform programme. To this end, measures are being taken to ensure that the macroeconomic gains attained so far will be consolidated in 2007. Accordingly the Government is targeting real GDP growth of 7.0% and inflation of 5.0%. Pursuit of these objectives is within the context of the long-term development objectives, well articulated in the national long term Vision, 2030.