samchain/econo-pairs-v1 huggingface dataset:
Percent 6  6  5  5  4  4  3  3  2  2  1  1  0  0  2005  2010  2015  ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  2020  1) Weighted average of money market interest rates for seven trading partners. Source: Refinitiv Datastream  A prevailing view over the past decades has been that fiscal policy should follow simple, robust rules and should to a limited extent be used actively to stabilise the economy. Globally, there are now signs that this view is changing. The pandemic may mark a turning point. In the period ahead, we are likely to see a more active fiscal policy among many of Norway’s trading partners. There are several reasons for this. For one thing, there is a recognition that the room for manoeuvre in monetary policy is limited. After the financial crisis, a number of central banks have assumed considerable responsibility for sustaining activity and smoothing economic fluctuations. At the beginning of last year, policy rates were therefore already at very low levels (Chart 7). At the same time, low policy rates reflect long-term trends, such as an ageing population, a high willingness to save, greater inequality and declining productivity growth. The result is that the level of what we refer to as the neutral interest rate is lower than before, even when economic conditions are in balance. The room for policy rate reductions in downturns is therefore smaller.

There will then be a maximum six-month period before the national currencies cease to be legal tender, at which point the transition to the euro will have been completed. Again, during this period in relation to the transition of retail transactions the guiding principle will be no compulsion and no prohibition, although collective efforts will no doubt be made by retailers and banks to shorten the period of dual denomination as far as they can. As far as the UK is concerned, the new Government -- while not definitively ruling it out -- has pointed to formidable difficulties in the way of participating in the euro from the beginning, and promised a referendum before the UK could join. A key consideration for us is likely to be whether -- on the basis of our assessment of the extent to which convergence has indeed been achieved -- the euro-area is a safe club to join in its early stages. If the Government were to decide not to join, at least at that point, it will be crucially important -- in our own national economic interest, and in order to avoid creating unnecessary problems for the euro-member countries -- that we continue to pursue, in parallel with those countries, the consensus policies of monetary and fiscal discipline. If EMU goes ahead, whether or not the UK is a part of it, it is clearly in our interest that it should succeed.
It is the ability of capital markets to efficiently mobilise financial resources that has made possible the large investments needed for the Industrial Revolution of the 18th century, and the risk capital that funded the global Internet Revolution more recently. Like other markets, capital markets are prone to volatility as demand and supply fluctuate. But unlike other markets, turbulence in capital markets can have far wider consequences on the rest of the economy. From the Wall Street Crash of 1929 to the Global Financial Crisis of 2008, we have seen how dislocations in capital markets can have devastating effects on financial stability, economic growth, and the welfare of citizens. Capital markets must therefore be regulated, but in a way that does not unduly undermine their efficiency and effectiveness. This morning, I want to share with you Singapore’s approach to the regulation of capital markets. Why we regulate capital markets We can think of the capital market as an ecosystem comprising four key components:   one, issuers – those who issue securities to raise capital;    two, investors – those who invest in these securities;    three, intermediaries – those who advise issuers or investors and facilitate the trading of securities;    four, infrastructure – the platforms or systems through which securities are traded. Each component of this ecosystem is prone to market failure – hence the need to regulate.

Trades that give a false or misleading appearance of market activity, actions to rig the prices of securities or futures, are all prohibited under our law and severely dealt with. MAS works closely with the Commercial Affairs Department to take enforcement actions ranging from civil penalties to criminal action. Last year saw the fruition of MAS’ first civil penalty court action. We secured civil penalties against a fund manager who was found by the High Court to have window-dressed his portfolio by creating a false appearance relating to the price of one of the component shares. The fund manager and its CEO were ordered to pay a civil penalty of $ each to MAS, as well as costs of the court action. The decision was upheld by the Court of Appeal. The assistance that we sought, and obtained, from our foreign counterparts was vital to our success in this case. Similarly, MAS stands ready to assist our international counterparts in their enforcement efforts. Earlier this year, the Australian authorities successfully prosecuted a former fund manager of an Australian bank for insider trading. MAS had referred this case to the Australian Securities and Investment Commission (ASIC) and provided ongoing assistance during ASIC’s investigations. Infrastructure – sound and stable The final component of the capital market ecosystem is the infrastructure that supports the trading of securities and futures. Capital market participants trade either on a multilateral basis through organised exchanges, or bilaterally with each other over-the-counter or OTC.
The crisis has been a searing experience for banks and regulators, precisely because at times they have both failed to fulfil this central objective of maintaining safety and soundness and hence the continuous supply of critical services to the public. For what is now not far short of three years we have been working to change the approach to financial regulation in the UK. We are still working to do that of course, but the difference is that for the last four and half weeks we have been doing so within the new regulatory framework of regulation – we are doing it now as the Prudential Regulation Authority and the Financial Conduct Authority. The prompt for this change of approach has been the severity of the financial crisis, a crisis that has been through a searing phase of prudential problems – failing banks – and more recently a conduct phase as the misdeeds and unacceptable behaviours of the past have been revealed. On a personal note, recently when my appointment was announced, I was described a number of times as a veteran of the Bank of England. It was for me a moment of home truth; 28 years is quite a long time in one place, even if the term veteran sits uncomfortably. But it reminded me that the UK is on its fourth system of financial regulation during that time.

In fact, the disconnection between the physical receipt of funds and the location of the financial institution may have a great impact on disintermediation among recipients. Assuming that receivers can exercise some control over the mode and location of receipt, the geographic proximity of a branch or the ability to pick up a remittance in an  2  BIS Review 16/2006  office (as required by Western Union) can determine an institution’s ability to compete in the remittance market of the Albania, not to mention the possibility of mobilizing savings from these new potential clients. Remittances can be a point entry for many remitters and their families to the formal financial system. Many emigrant families are either not familiarized with banks or have limited access with financial institutions. The Bank of Albania through its public communication strategy is aiming to bring the public closer to banking products and services, including transfers. No matter the small size of remittance amounts. Even those small shares left by recipient families in bank accounts could assist economic development as more funds will be available in banks to provide loan products to private sector. The same concern was initially expressed about public administration salaries. Now, this service is provided by the banking system, and we see the power of pooling small amounts.
The Swiss franc remains significantly overvalued. The financial sector has also suffered from the effects of the recent crisis on Switzerland and its currency. For instance, the current account shows that exports of banking commissions have diminished markedly since the financial crisis. Indeed, the entire Swiss economy has had to adapt to new international monetary conditions. At the SNB we have geared monetary policy towards this new and difficult situation. 6  Swiss Bankers Association, Banking Barometer, September 2015. 7  BIS Triennial Central Bank Survey 2013. 8  Full-time equivalents. 9  Cf. Final report of the group of experts for the further development of the financial market strategy, dated 1.12.2014; Annex to the Review of the Swiss TBTF regime by international standards – Basis for an evaluation in accordance with Article 52 of the Banking Act, p. 55. 4  BIS central bankers’ speeches  Monetary policy during the financial and European debt crises The Swiss economy is currently being hit by external shocks. In such a context, the SNB aims to dampen short-term costs without jeopardising the long-term goals of monetary policy. The challenge for monetary policy in recent years has been to react to sudden developments in international markets and geopolitical risks that have endangered Switzerland’s real economy and price stability in the medium term. The goal has been to steer policy responses in a way that reduces short-term costs while preserving the stability achieved over the past four decades of independent monetary policy.

The link to the dollar has meant China adopting the same monetary policy as the United States, a policy which is undoubtedly too expansionary for the domestic conditions of an emerging economy. But it has also meant that large amounts of international reserves were invested back into the US financial market, in particular in government bonds, thus affecting that market. The same phenomenon occurred among oilexporting countries, which accumulated substantial dollar reserves over this period. Looking ahead, if we want to avoid a renewed accumulation of global imbalances, systemically important countries such as China must equip themselves with their own monetary policy and must allow the exchange rate of their currency to fluctuate on the basis of relative competitiveness, avoiding the systematic accumulation of international reserves. This requires coordination at the international level. Since 2003, the G7 has exerted pressure, in particular on China, to reduce the accumulation of international reserves and to adopt a more flexible exchange rate system. Since mid-2005, China has announced the progressive decoupling of the yuan from the dollar. In the first two years, the yuan appreciated by 21.5% vis-à-vis the dollar. But the appreciation came to a halt in July 2008. The accumulation of international reserves continued, reaching around USD 2,000 billion in March this year. Now that the dollar has depreciated slightly, the problem of pegging the Chinese currency to that of the United States returns with force.
I would like to ask you what do you need to see for core inflation actually coming down so it may give you the possibility to pause or to skip – or whatever you want to call it – in September? So, what needs to happen? Then I have a question on the financial conditions. You are saying that they are forcefully tighter. What would you make rethink that it's enough when it comes to tight financial conditions? I wish I could give you the very simple answer where I say when we are there and when financing conditions are such, and the tightening has reached that level for corporates, for mortgages. But unfortunately, it doesn't work like that because what we know is the target that we have – which is price stability as defined by the 2% medium term – added to which we want to be confident that it stays at that target of 2%, which is why duration matters as well. But it is going to be a factor of those three elements that we will be looking at. So, it's the inflation outlook, which is every month, and every three months in particular, informed by all the new financial and economic data that we receive. It's the underlying inflation and the dynamics of it. I can assure you that we look at multiple cuts and subsets of inflation to arrive at what is the corest of the core. We don't limit our review at core; we go further than that.

Finally, as I noted earlier, we followed up in our last FOMC meeting with the release of an addendum to our Policy Normalization Principles and Plans that outlined how our balance sheet normalization plan will work when it is implemented. We also said clearly in the FOMC statement that if the economy evolves in line with our expectations, we expect to begin this process this year. In response, market participants have progressively increased the probability assigned to a change in reinvestment policy this year. Yet, Treasury and agency MBS markets have responded little at the time of these announcements—including those undertaken most recently. To me, this suggests that these communications have generally been effective in fostering an orderly adjustment in expectations about how we are likely to normalize our balance sheet. I also agree with Hélène about the important role of financial conditions in influencing economic activity. As I see it, financial conditions are a key transmission channel of monetary policy because they affect households’ and firms’ saving and investment plans and thus influence economic activity and the economic outlook. If the response of financial conditions to changes in short-term interest rates were rigid and predictable, then there would be no need to pay such close attention to financial conditions. But, as we all know, the linkage is in fact quite loose and variable. For example, during the mid-2000s, financial conditions failed to tighten even as the Federal Reserve pushed its federal funds rate target up from 1 percent to 5¼ percent.
Benoît Cœuré: Interview with Cinco Días Interview by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, with Cinco Días, conducted by Mr Bernardo de Miguel, published on 10 September 2014. *  *  *  Q: The ECB’s projections envisage less growth and lower inflation. Is there anything else in the pipeline if the measures adopted so far fail? A: New measures were adopted on Thursday and I cannot speculate on what can be done in the future. The ECB staff projections for 2014 and 2015 have been revised downwards, both in respect of growth and inflation, and the Governing Council is also seeing risks to growth being on the downside. Growth lost momentum in the second quarter and we want to prevent this weakness feeding into a fall in investment and creating a vicious circle. Furthermore, we have recently seen a change in inflation expectations, which have moved further away from 2%. Q: Isn’t it a little late to realise that, after a year of inflation below 1%? A: We have to decide on the basis of the data. And until the summer, growth in the euro area was expected to accelerate. Then came other, more worrying data showing that it was at risk of losing momentum. Q: However, the measures were not adopted unanimously by the 24 members of the Council. Who voted against? A: We don’t comment on that. You know that from January onwards we will begin to publish accounts of our meetings.

Q: Would you be in favour of the binding agreements proposed by Angela Merkel? A: Binding agreements are one way of achieving this. However, in my view, it is better to stay within the Community framework. It should be a multilateral discussion and not a bilateral one between the Commission and each Member State. There should be shared sovereignty as far as structural reforms are concerned, because there is a common interest. Q: The stress tests are nearing completion. Can we expect many failures and are there likely to be any surprises? A: We are checking the results, which will be available in the second half of October, so I cannot make any comments on them at present. Q: Will the tests be credible after what happened with Portugal’s Banco Espirito Santo (BES)? It collapsed despite the fact that the ECB and the rest of the Troika had been supervising Lisbon for the past three years. A: In the BES case, it appears that information was being kept from the supervisor, which was the Banco de Portugal and not the ECB. The ECB, the European Commission and the IMF were in Lisbon to analyse financial stability and macroeconomic outcomes. The ECB had neither the instruments nor the mandate to supervise banks, as this was the role of the national supervisor.
Once Malta is an EMU member, the foreign currency and local currency rating will be equalised but at what level will depend mostly on the fiscal account.”  BIS Review 61/2004  3  ECB; and that even if the degree of business cycle synchronisation with the euro area is already significant, national economic and financial structures might respond to the ECB’s monetary policy stimuli differently from the average euro area Member State. While this might not matter much when other tools of adjustment such as the exchange rate are available, the argument continues, the use of these tools is thwarted in a single currency area such as EMU. On the one hand, exchange rate flexibility is conditioned by the maximum allowable bands in ERM II, and is given up altogether upon the irrevocable fixing of the exchange rate at the point of euro adoption. Additionally, the Stability and Growth Pact constrains the use of fiscal policy for fine tuning the economy. Consequently, any underlying imbalances in the economy are bound to persist. While based on sound theoretical principles, this argument is largely not applicable to Malta. In particular, the business cycle is already fairly synchronised with that of the euro area, and the degree of trade integration is also quite significant. At the same time, sectoral GDP and employment data both reveal a strong correspondence with euro area economic structures, after allowance is made for the relatively more dominant role of tourism in Malta.

Adair’s talk therefore provides an excellent opportunity to pause and review some of the ways in which policy and theory have been interacting so far. The literature on myopia and the crisis I want to begin with theory not policy, and the paper by Shleifer et al cited by Adair helps to provide an organising framework. This paper reflects the growing response of the economic profession to the crisis, and should hearten us all that theory is alive and well and productive. Unlike most papers written over the past three to four decades, Shleifer abandons rational expectations (RE) in favour of a world in which agents are seriously myopic about certain low probability, high impact risks. It is worth reminding ourselves of the RE paradigm, which has dominated macroeconomics and finance since the ‘70s. It posits a state of affairs in which agents know the world – know the structure of the model, and so have model-consistent expectations. Bad things can happen – but only in virtue of exogenous shocks. And depending on the structure of the world, those bad states can be relatively small beer, as famously argued by Lucas on the relative unimportance of business cycles. Disagreeing with that, the so-called salt-water economists wanted to show that, upon the crystallisation of those exogenous shocks, really bad things, recessions and persistent unemployment, can happen due to flaws – or, as economists like to say, frictions – in the make up of the world.
Ongoing profitability pressure creates an incentive for banks to step up their exposure to interest rate risk and adopt an imprudent attitude in their affordability assessments. Equally, banks may react to earnings pressure by expanding the volume of credit. Together, such developments would cause prices on the Swiss real estate market to gain momentum again, following a recently slowdown. This is particularly relevant given that real estate remains relatively attractive, not just to households but to investors searching for yield. The net result of this would be a renewed rise in imbalances on the real estate and credit markets. This would make borrowers and banks more vulnerable – to an unexpected future interest rate rise, for instance. In particular, it would increase the magnitude and overall economic impact of a price correction on the real estate market. In the spirit of a cautious, forward-looking approach, it is essential given the current interest rate environment that banks apply conservative principles in their lending activities. This is particularly necessary when it comes to assessing the sustainability of loans. Based on experience from the crisis in the 1990s, banks now typically assume an interest rate of 5% when assessing affordability risk; this is the approximate historical average of long-term mortgage interest rates.

At a time when we are witnessing an increase in corporate nonperforming loans, I reiterate my call for the banks to expand their provisions commensurately with this heightened credit risk. At the same time, dividend policies must be mindful of the need for higher levels of retained earnings in order to further strengthen capital buffers, also in view of the more onerous requirements of Basel III. Finally, I would encourage risk officers to go beyond simple compliance with regulations and proactively espouse prudent risk management practices and good judgement. BIS central bankers’ speeches  3  Before I hand over the floor to Professor Bannister, I would like, on this my last official meeting with the financial community, to express my sincere appreciation to you all for the cooperation and understanding I have benefited from over the past twelve years. Thank you. 4  BIS central bankers’ speeches
Commodity prices USD, Index 2000 = 100 240  240  Food Other agricultural products Metals Total  220 200  220 200  180  180  160  160  140  140  120  120  100  100  80  80  60  60 00  01  02  03  04  05  06  07  08  09  10  Source: The Economist  10  BIS Review 98/2009  7. Consumer prices USA Annual percentage change 6  6 CPI  5  CPI excluding energy and food  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2 -3  -3 00  01  02  03  04  05  06  07  08  09  10  Source: Bureau of Labor Statistics and the OECD  8. Real house prices, USA Index 1950 = 100 200  200  180  180  160  160  140  140  120  120  100  100  80  80  60  60  40  40  20  20 0  0 50  55  60  65  70  75  Note. Outcome up to end of Q1 2009.

Inflation will be negative this year, but underlying inflation will be close to the inflation target of 2 per cent. Monetary policy is aimed at dampening the economic downturn. The repo rate was cut to an all-time low of 0.25 per cent in July and is expected to remain at this low level for the coming year. Thank you for your attention! BIS Review 98/2009  7  1. Financial markets functioning better Difference between 3-month interbank rate and expected policy rate, basis points (Basis spread) 400  400 Sweden Lehman Brothers  350  350  Euro area  300  300  USA Secure liquidity prior to year-end  250  250  200  200 BNP  Bear Sterns  150  150  100  100  50  50  0  0  Jan07  Apr07  Jul07  Oct07  Jan08  Apr08  Jul08  Oct08  Jan09  Apr09  Jul09  Oct09  Sources: Reuters EcoWin and the Riksbank  2.