samchain/econo-pairs-v1 huggingface dataset:
Changes in the instrumental rate have an effect through the "exchange rate channel" partly by changes in the nominal exchange rate for the krona affecting the relative prices for net export. Higher interest rates should thereby strengthen the domestic currency and make domestic goods more expensive relative to other goods and vice versa. Higher interest rates thereby dampen export at the same time as import becomes cheaper and increases. Lower demand for domestic goods contributes to reducing the use of resources and subduing inflation. A stronger nominal exchange rate dampens consumer prices at the same time since part of consumption is directed towards imports when prices are dampened. However, lower import prices also increase the real purchasing power which per se contributes to increasing purchasing power. In economies with diversified industry an increase in the interest rate thus also leads via the exchange rate channel to lower inflation. The strength of the effect depends inter alia on income and price elasticities and on the composition and size of foreign trade. In certain cases the positive effect on incomes from stronger currency can even predominate and vice versa. Changes in the nominal exchange rate probably have less impact on import and export prices if the changes are not considered to be lasting. In a floating exchange rate regime, it is therefore probable that changes in the nominal exchange rate will not have such a great effect as in the case of a devaluation or revaluation in a fixed exchange rate regime.

The emphasis here is not on the effect of the interest rate changes on demand for money, for instance, to be able to make payments for investments and consumption, but directly on the effect that the interest rate has on the real demand. The channels that enable the steering interest rate to have an effect on the output gap can be categorised in different ways: The most important channel is probably the interest rate channel. A change in the steering interest rate directly affects the shortest market rate. The banks can normally finance a deficit and invest a surplus at that rate. The shortest market rate and market expectations on future changes in the instrumental rate therefore constitute the alternative cost of the banks' financing or the alternative 1  The quantity theory: ,m*=y+p-v shows a demand function for money in the logarithmic form of M/P=1 (Y,i) where M is the volume of money, Y is the real GDP, i is the interest rate and V=Y(M/P) is the rate of circulation, i.e. the velocity. 2  BIS Review 40/2001  return on the bank's loans and holdings of securities. The banks' lending rate and the interest rate on securities are therefore affected by the actual and expected instrumental rate. Monetary policy thus also has a direct effect on the interest rates encountered by the general public. i. Investment and consumption decisions are affected directly by the interest channel.
Oil is back to $ a barrel (see Chart 2), while the Economist food index has fallen by over 30% (in dollar terms). Last week, we published our latest Inflation Report, laying out our current assessment of the outlook. It does not make for pleasant reading. Global demand fell sharply in the fourth quarter of 2008 and most forecasters expect a contraction in the advanced economies this year and negligible overall growth (see Chart 3). Here in the United Kingdom, GDP is estimated to have fallen by 1.5% in 2008 Q4. Business surveys point to a similar contraction in the first quarter of 2009. Household spending is declining. Investment intentions have fallen sharply. Credit availability has continued to worsen. And the four-quarter rate of growth of overall money spending in the economy has fallen to its lowest since 1959 (Chart 4). A sharp contraction in activity, both here and abroad, is already baked into the cake for the first half of this year. But there are grounds for thinking that conditions may start to improve later in the year, as there is a substantial economic stimulus already in the pipeline. First, since October, the MPC has cut Bank Rate by four percentage points to 1%, the lowest level in the Bank’s 315-year history. The dysfunctional credit markets mean that a given reduction in Bank Rate has less impact on the economy than in normal times. Even so, it still represents a powerful stimulus, which will take much of this year to work through.

This mix of exaggerated confidence and low real interest rates encouraged investors into riskier assets and banks into riskier lending, epitomised by the US sub-prime housing market. That was compounded by a lack of incentive for care in extending loans, if they were then packaged up and sold on to others. In August 2007, the economic weather turned distinctly autumnal. Falling US house prices and rising sub-prime defaults led to nervousness about the value of assets backed by those mortgages. Moreover, losses associated with sub-prime loans began appearing in places noone had anticipated, revealing how opaque many financial instruments were. The markets for these assets closed and their prices plummeted, putting pressure on the balance sheets of the financial institutions holding them, while wholesale funding dried up. And the wide dispersal of the suspect assets meant these balance sheet pressures were quickly transmitted internationally. In the United Kingdom, banks became increasingly cautious in lending, adding to downward pressure on housing and commercial property prices, and slowing growth. But at that stage, it was still possible to envisage a relatively modest slowdown, with financial intermediaries making the necessary balance sheet adjustments in an orderly fashion. However, the turmoil in credit markets was not the only factor the Bank’s Monetary Policy Committee had to contend with. Oil prices, already high at the start of 2008, hit $ a barrel in July, while a broad range of other commodity prices rose sharply.
Bravo-Ortega and De Gregorio (2005) state that, whenever natural resources draw the scarce human capital away from growth favoring activities, the development of natural resources might reduce growth. Thus, countries with high endowment of human capital can more than offset the negative effect of natural resource abundance on growth. Still, while growth can be slower, abundant natural resources do result in higher income, which is what ultimately matters from the standpoint of the welfare of the population. Finally, it is worth to make the distinction between the abundance of and the dependence on natural resources. This issue has been analyzed in Cerný and Filer (2006), who find that natural resource dependent countries are the ones associated with low economic growth, not natural resource abundant ones. 2 When studying the case of Chile, it can be argued that there is no evidence of the problems that associate natural resource abundance with bad economic performance. On the one hand, we can observe that our country is more and more open to international trade (figure 2). This integration not only brings benefits because of the traditional gains from trade based  1  Another closely related work is Boschini et al. (2003). These authors claim that the natural resource curse depends not only on the quality of institutions but also on the characteristics of the resources. Specifically, whether it is easy to obtain large earnings in a short period of time from having control over the resource.

Figure 3  Mining exports  (percentage) 50  0,7  Billions of USD FOB  0,5  30  0,4  20  0,3 0,2  10 0  % Goods exports  0,6  40  0,1 0  1984  1987  1990  Mining exports  1993  1996  1999  2002  2005  2008  Mining Exports/ Goods exports  Source: Central Bank of Chile. 6  BIS Review 106/2009  Figure 4  Earnings from nitrates-iodine and from copper  (percentage of total fiscal income) 70% 60% 50% 40% 30% 20% 10% 0% t  t+6  1880  t+11  t+16  t+21  t+26  t+31  Nitrates and iodine earnings  1959  t+36  t+41  Copper earnings  t+46  T 1930 2008  Sources: Jeftánovic, Jofré, and Lüders (2000); Central Bank of Chile. Figure 5  Government spending, exports and GDP  (index, 1880=100) 500  1,200  400  1,000 800  300  600  200  400  100  200  0  0  1880  1890 1900 Government spending Exports  1910  1920  1930 GDP  1940  Source: Braun, Braun, Briones, and Díaz (2000).
Owing to the aforementioned reasons, many countries, including Turkey, has been able to be resilient beyond expectations, in the face of the crisis. However, it was undoubtedly impossible to fully avoid the adverse effects of the crisis. In fact, an analysis of quarterly growth rates of world economies suggests that almost half of the economies contracted in the final quarter of 2008, and more than 90 percent in the first half of 2009. The first half of 2008 became a period where problems driven by the crisis were ignored by the markets. Nevertheless, despite certain monetary policy measures that were taken, the global crisis entered the second stage, where the feeling of “denial and rejection” was replaced by “disappointment” and “anger” due to the growing frequency of problems emerging across financial markets. In this period, money markets were almost at a standstill due to the deterioration of risk perceptions, banks were faced with liquidity problems, asset prices experienced slumps, non-performing loans increased, balance sheets incurred losses that led to serious damage to the health of banking system, numerous banks and investment agencies came under strain and even went bankrupt – all of which describe the main characteristics of the second stage. Especially the rescue packages that were inevitably implemented by governments to prevent the collapse of the financial system in developed countries gave way to serious public anger directed towards banks and investment agencies.

First, we must give credit where credit is due: the capital provided by global markets has been a key factor in Southeast Asia’s exceptional growth rates and its ability to lift so many out of poverty. Certainly, there are risks in tapping global markets to which no country is immune. At times, markets can be slow to react to changes in economic conditions and then react sharply; and in some instances, herd instinct seems to prevail. But let us not forget that markets also provide tremendous opportunities to accelerate growth and development, as Southeast Asia itself so vividly shows. Thus, the lesson to be drawn from recent developments is not about the risks of global markets, but rather about the importance of approaching markets in a responsible manner -- with strong macroeconomic fundamentals and sound structural policies that give markets confidence and therefore encourage long-term investment; with respect for the signals that markets provide; and with transparent and market-friendly policies that allow markets to allocate resources efficiently. IV. Perspectives for stronger regional cooperation Spillover and contagion effects can be so rapid, so costly, to countries with basically sound policies, that every country has an obligation to keep its own house in order. No country should run the risk of becoming the tinder for a wider conflagration. At the same time, there is also much that can be done on a regional and multilateral basis to bolster the efforts of individual countries seeking to manage their economies well.
This implies that in the future, behaviour may no longer be sufficient indicators of risk, and motor insurance may well shift to become liability insurance bought by car manufacturers. Third, dynamic products. The global insurance industry today, has shrunk in terms of its percentage of global economic activity insured; some estimates put the figure at as little as 10% of global corporate risks covered by insurance. Clearly, risks landscapes are rapidly changing and insurers must look beyond traditional products, and innovate to address new and emerging risks. Yet, innovation eschews the traditional, and thus one of the most significant challenges of established insurers in this area comes from small challengers with big ideas: start-ups. Start-ups are nimble, hungry, and more often than not, represent the very consumers they seek to solve problems for. In the insurance space, these players are moving to directly address the consumer’s problem, which at its core, is one of managing risk, and not simply monetary coverage. We already see this happening in health insurance, where start-up insurers are creating new tools such as doctor and drug research, fitness tracking, and telemedicine5 tools6 that can interface with each other. In return, policyholders are rewarded with an effective, convenient and holistic healthcare package alongside their health insurance policy. Seizing opportunities using technology and innovation With the digital revolution rapidly underway, insurers must adapt quickly to transform their mind-sets and business models.

Conclusion •  the Eurosystem is not only helping to create a more integrated financial market but is also contributing to greater financial stability by ensuring a strong and efficient European market infrastructure;  BIS central bankers’ speeches  3  •  Looking to the future, the Eurosystem remains committed to these objectives and will seek to exploit technological advances and innovation while maintaining safety, reliability and, ultimately, confidence and stability. 4  BIS central bankers’ speeches
It is important, in seeking to restore returns, that banks and investors do not think in terms of “back to the future”. With less leverage and more liquidity in banks, required returns ought generally to be lower than prior to the crisis. Trying to offset that by taking excessive risk or evading regulation will not, I think, be tolerated in the new world. 6  BIS central bankers’ speeches

We are going to put grants to work – grants for any financial innovation in Singapore – on a competitive basis. Very importantly, we are going to develop the skills and capabilities required to make this a new wave, not just a passing trend. It requires many new skills, as well as some of the old instincts that help ensure sustainability across the cycles. And which preserve trust in finance. We have a major national program in Singapore called SkillsFuture which we are putting a lot of effort into. Finance will be an important vertical in SkillsFuture: investing in the skills of the future. Finally, we will ensure that the overall environment is supportive of start-ups and innovation. Not many of the new players will succeed, not many will last. But they will always leave an idea behind, to be modified, taken over or improved. Thank you very much. BIS central bankers’ speeches  3
The strong increases in prices in the Swedish stock market indicate that there are expectations among those who handle risk capital that profits will increase sharply particularly in Swedish IT-related companies. In order for such a development to be realised, it is reasonable to assume that investment must increase on a broad front. A risk with a strong increase in share prices before any visible signs of potential growth accelerating is if consumption is strongly stimulated by households who own shares increasing their wealth. An increase in demand that is not corresponded to by an increase in potential growth increases inflationary pressure that the Riksbank must counteract by increasing interest rates. However, increased interest rates also subdue increased investment, which is unfortunate, as it would brake the growth of capacity. It has been difficult during earlier periods of large increases in share prices to prove that Swedish households have really increased their consumption as a result of increased wealth. During recent years, however, the proportion of households owning shares has increased. When property prices increased sharply at the end of the 1980s, many households raised loans on their homes and used the money for consumption. A low housing production combined with growth that is strongly concentrated to the big city areas has contributed to housing prices again rapidly increasing in recent years. This development can also stimulate consumption with the risks that I have just mentioned.

The Government has enhanced its efforts in this area by raising the capital of the Fund by Rls 9.0 billion to Rls 92 billion as from 2006. However, the accelerated population growth and the rising demand for housing have urged the creation of other real estate financing mechanisms in addition to the government’s financing mechanism. More finance and contribution by the private sector and reducing reliance on the government will give the private sector an opportunity to play a key role in this area which offers lucrative investment opportunities. Nonetheless, it is fair to say that the private sector in general and the banking sector in particular seek to obtain more guarantees to enter as financers in this vital sector. This demands working effectively by all relevant entities to develop mechanisms for meeting the rising demand in this sector. Dear Brothers, Over the preceding years, the Kingdom of Saudi Arabia has undertaken many economic reform measures, updated and streamlined its laws and regulations, restructured the national economy, approved a number of mega development projects, and joined the World Trade Organization (WTO). It has also made many important decisions aimed at attracting foreign investments and continued opening of the markets which will be reflected on the competitiveness of the national economy. All these positive developments are an incentive for investment in the Kingdom in general and in the housing sector in particular. Dear Brothers, This conference is held at a time when the Kingdom has achieved outstanding development results in all sectors of the economy.
Including new players in stress-testing the system is challenging and requires cooperation and timely transparency. Many of these new players are non-banks. It is therefore important to look at the role of non-banks in payment and settlement systems. Payment, clearing and settlement services have traditionally been offered by banks and non-banks alike. The coexistence of banks and non-banks raises some important regulatory questions. In fact, while there is a trend towards common regulatory standards, banks would typically argue that they are subject to prudential supervision and that there is no need for further regulation. In contrast, non-banks would argue that common regulatory standards should apply to all relevant service providers in order to ensure a competitive level playing-field. In the end, the question is whether the approach to regulation should be based on functions or institutions. Finally, the globalisation of finance has resulted in the expansion of cross-border financial linkages. An implication of globalisation is that financial distress is more likely to have farreaching cross-border effects. This is a natural consequence of the tighter cross-border linkages that have formed. Such effects are almost guaranteed if distress were to involve one of the global players that operate across so many countries and underpin the smooth performance of so many markets. In fact, over 30 years ago, even the failure of a small bank active in FX transactions was sufficient to have significant cross-border ramifications – so significant as to act as a catalyst for the establishment of the Basel Committee on Banking Supervision.

Few doubt that there are challenges to defining and calibrating the indicators used to determine when capital buffers should be triggered, and by how much. However, to quote Borio, “while calibration is  17  Assenmacher-Wesche and Gerlach (2010). 18  Hott and Monnin (2008). 19  For examples of models which illustrate downward spirals, please refer to Markus Brunnermeier and Lasse Pedersen (2009), Stephen Morris and Hyun Song Shin (2004). BIS central bankers’ speeches  5  not straightforward, the difficulties can be overstated”.20 To support his claim, Borio notes that traditional monetary policy also confronts such challenges when interest rates are set on the basis of indicators, such as output gaps or natural interest rates which are unobservable and difficult to measure accurately. It is however commonly accepted that central banks have, to a large extent, surmounted these difficulties. Of course, countercyclical buffers cannot be implemented without inflicting some costs to the economy, but the trade-off involved seems significantly more favourable than is the case with “leaning against the wind” policies. A 2011 study by the Bank of International Settlements estimates that, by reducing the probability of a severe crisis, the benefit of countercyclical buffers is on average 10 times higher than their costs in terms of real output growth per year. V.  The Swiss case  Every central bank in the world faces its versions of the challenges I have mentioned. The Swiss National Bank is no exception.
If private sector economic agents – workers, businesses, investors – thought we would implement a particular policy rule regardless of changes of these kinds, policy would not be effective at stabilizing private sector expectations in ways that promote the dual mandate objectives. This is particularly relevant in the unusual environment that we find ourselves in – the aftermath of a housing bust and a financial crisis. In the current context, there is an additional complication that is extremely important. Simple policy rules implicitly assume that monetary policy is unconstrained and that the Fed can always achieve the federal funds rate policy setting the rule proposes – even if it is negative. By extension, they also assume that it is as easy to ease policy as it is to tighten policy if certain risks materialize. In practice this is not the case. Because our traditional tool, the federal funds rate, is already at its effective zero lower bound, we may want to react differently to a given economic outlook and set of risks than we would if policy were unconstrained. We are certainly not completely constrained: we have additional tools such as the balance sheet and forward policy guidance that we can use to provide additional monetary policy stimulus. But these tools have costs as well as benefits. Moreover, we can only imperfectly translate the impact of these policy instruments into interest rate equivalents for the purposes of evaluation using simple rules.

Eva Srejber: Growth and competition - lessons from the past Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at Sparbanken Gripen, Båstad, 25 August 2003. *  *  *  Thank you for the invitation to come here and speak on the occasion of Sparbanken Gripen’s 150th anniversary. In my speech today, I intend to attempt to draw some conclusions from the experiences of our economic history during this period. One of my conclusions is that Swedish growth has been stimulated during the periods when we have allowed the market economy to operate under clear and fixed game rules, including a stable framework for both fiscal policy and monetary policy. If these conditions have not existed, we have paid a price in the form of weaker economic growth. This speech does not contain any signals regarding current monetary policy. The past 150 years have been an exciting time, in particular the first part of this period. This was when Sweden changed from being a remote, developing country with a high infant mortality rate, widespread poverty and starvation, into a prominent industrial nation. Around 1850 Sweden entered into a dynamic period of rapid development and change. A wave of liberalisation swept across the country and opened up important markets. GDP growth amounted to more than 2 per cent a year, which was twice as high as the growth rate during the first half of the 19th century.