samchain/econo-pairs-v1 huggingface dataset:
I will also mention the on-going discussion on Libor and Stibor as this has been a major news item during the summer. I have chosen to call this a “springboard” for the monetary policy meeting in September. This is not intended to direct one’s thoughts to sporting achievements, which can easily happen, given that the Olympics are still fresh in our minds. What I mean to indicate is that this is a status report on which to base the start-up of a new process, which for the Riksbank is a process that will lead to a new joint economic assessment. I will not be presenting this type of assessment today. This will be released in connection with the next monetary policy meeting on 5 September. The assessment in the July Monetary Policy Report Great uncertainty over future developments Perhaps the most difficult question we had to deal with at the most recent monetary policy meeting was how an unexpectedly strong outcome in Sweden at the beginning of the year should be viewed in relation to increased concerns over poorer developments in the euro area. When we Executive Board members gathered in July, concerns on the financial markets regarding the crisis in the euro area had increased and the prospects for growth in Sweden had thus deteriorated. There was considerable uncertainty over future developments. Work was underway on resolving the problems in the euro area. But it was also clear that much remained to be done before sustainable solutions could be implemented.

Over that period, the Taylor rule suggested US monetary policy was looser than could be explained by inflation and output alone. Whether by coincidence or causality, what happened next in US credit markets was dramatic. Chart 3 plots the ratio of US credit-to-GDP, relative to its long run trend, over the same period – the “credit gap”. This indicator has a special significance from a regulatory perspective because it will act as a guideline path for the setting of the CCB once Basel III comes into effect. The US credit gap rose steadily from around 2001 up until 2008. Relative to its long-run trend, credit-to-GDP reached a peak of over 10 percentage points. By historical standards, this is a huge credit boom. We can now ask ourselves the counter-factual question, how different might the world have looked had macro-prudential policy been available to assist monetary policy? Answering this question rigorously would require that we re-run the paths of policy, the economy and the financial system over this period – a full counter-factual simulation. That is beyond the scope of this paper. As a shorthand, we can still do something simple but nevertheless informative about the way the world might have looked. This is done by simply redrawing the path of US banks’ capital ratios on the assumption that the CCB had been in place. In particular, we can use the Basel III calibration of the link between the CCB and the credit gap to simulate a hypothetical path for US banks’ capital ratios.
(2001): The essential Buffet, John Wiley & Sons, Inc. New York. 2  Cutler, D., J. Poterba and L. Summers (1991): Speculative dynamics, Review of Economic Studies 58, pp. 520-546. 3  See e.g. Tversky, A. and D. Kahneman (1974): Judgement under uncertainty: heuristics and biases, Science 185, pp. 1124-1131. 4  an analogy with a game of poker. In normal times the market behaves like a game of roulette; the probabilities are known and independent of the investment decisions of the different players. In times of market stress, though, the game becomes poker. The players have to take into consideration the position of others and their likely behaviour. We are also liable to succumb to wishful thinking. An example that confronts me almost daily at present is when supporters of a national football team, for instance, are frequently over-confident about the chances of winning. Learn from history The so-called IT boom, combined with markedly lower transaction costs as a result of new technology, induced many inexperienced people to invest in shares. Moreover, access to the Internet leads to an increased number of share transactions, often with poorer results. Investors have also become younger. The same tendency applies to stockbrokers and analysts, many of whom began their careers in the 1990s. Inexperienced investors did not get the assistance and support they needed. In the period running up to the Nasdaq crash, less than 1 per cent of the analyst’s recommendations had been to sell.

Urban Bäckström: The importance of a well-functioning stock market Remarks by Mr Urban Bäckström, Governor of Sveriges Riksbank, at the World Federation of Investors 20th World Congress, Stockholm, 7 June 2002. *  *  *  First I want to express my gratitude for the invitation to attend your congress and briefly discuss with you the importance of a well-functioning stock market. Let me start by saying that just as it is important that networks for transport, electricity and telecommunications function properly, so is it essential that, for example, payments can be transacted, capital can be saved and channelled to the most profitable investment projects and that both households and firms get help in handling financial uncertainty and risk as well as possibilities of spreading consumption over time. Financial markets constitute an important part of the total infrastructure for every economy that has passed the stage of domestic production. The financial system performs three main tasks: firstly, it handles payments; secondly, it channels savings to investments with a good return for future consumption; and thirdly, it spreads and reduces economic risks in relation to the players’ required returns. A smooth functioning of all these activities facilitates economic growth in that lower costs and risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. The stock market is one of the most important sources for companies to raise money.
Allow me to venture to select three lessons on the basis of what I have said so far. First: the simplest solution is often the best. Simple rules, whether for fiscal policy or banking regulation, will often prevent the worst errors. And when the yellow warning light starts flashing, action must be taken. Second: confidence is essential, also for economic policy. Confidence is easily eroded and difficult – and costly – to restore. Confidence must be earned. The resolution of today’s crisis will also follow a smoother path if there is confidence in institutions – banks, central banks and governments. Borrowing costs will then decrease more quickly, the need for government cuts will diminish accordingly, and the good times will return sooner. Third: we have no magic wand. If a country has real economic problems, real adjustments must be made to solve them.25 Central banks cannot solve the problems, but what they can do is lend money when there is none available elsewhere, giving countries more time to implement necessary reforms. Deficits must be reduced. Unrestrained printing of money has led to problems on many occasions through history. If printing money is not followed up by action – in euro area countries, in the UK and in the US – Mario Draghi, Mervyn King and Ben Bernanke run the risk of being recorded in history in the same chapter as the Scotsman John Law. The full title of my speech today is “Learning from history: truths and eternal truths”.

As we have witnessed in some cases in the recent past, the holding of these securities by individuals entails problems in a context of crisis, turning them even into an obstacle for the institution’s “resolvability”. And that is exactly the opposite of what the rule originally sought. The Banco de España is determined to prevent this type of past situation from recurring. We should not make the same mistakes again. For these reasons, the challenge of covering these issues is greater for smaller-sized banks, which have a scant presence on the markets and are more geared to the retail segment. I think it is important that banks, in particular those with less access to the markets, should take advantage of those windows in which investors’ appetite for this type of asset increases, so as to bring forward as far as possible the issuance calendar. One final aspect I wish to mention is the cost of these issues and of liabilities in general. The latest Banco de España Financial Stability Report offers the findings of a study on European banks which conclude that the higher the level of the CET1 capital ratio, the lower debt issuance costs are. 9/15  This effect increases as debt instruments become more akin to capital instruments. As can be seen in the chart, if the CET1 ratio increases by 1 pp, a 0.3% reduction may be expected in the cost of issuing instruments eligible as Tier 1.
We seek to take account of these indirect effects in interest-rate setting. A sharp rise in asset prices and debt accumulation may pose a risk to economic stability. With a view to mitigating this risk, it will be appropriate in some situations to apply a somewhat longer-than-normal time horizon than two years to attain the inflation target. However, at present debt accumulation is high only in the household sector. Enterprises are accumulating little debt. House prices are rising, but non-residential property prices are stable. The debt to income ratio is now in line with the level recorded at the beginning of the 1990s. We have limited scope for restraining structural changes that occur when households increase their debt over several years to invest in housing and other property and assets. An interest rate that would effectively restrain these structural adjustments would also have an adverse impact on output and employment. The interest rate can be used to reduce credit demand. At present - with low interest rates abroad and a close link between domestic interest rates and the krone - a tighter monetary policy would restrain credit demand primarily because job security would be reduced. A flexible inflation targeting regime reduces the possibility of exposing households to a double shock in the form of higher unemployment and higher interest rates, as was the case prior to the banking crisis in the beginning of the 1990s. If the economy is exposed to disturbances that lead to higher unemployment, inflation will normally decline and interest rates be lowered.

Inflation is higher in the euro area than in the US and approximately in line with the objective defined by the European Central Bank. In the euro area, however, capacity utilisation is very low, unemployment high and the outlook for growth is weaker. Against this background, it will probably also take time before interest rates rise markedly in the euro area. Chart 14. USD/EUR and the US current account balance as a percentage of GDP 0.8  0 USD/EUR (left-hand scale)  1  -2  1.2  -4 Current account balance (right-hand scale)  1.4 1999  2000  2001  2002  2003  -6 2004  Sources: OECD and Norges Bank  The imbalances in world trade represent a particular risk. The US is running a substantial trade deficit, which was financed for a number of years by private capital flows to the US business sector. The flows have subsided and led to a sharp fall in the US dollar at the same time as the euro has appreciated. Through purchases of US government securities, Asian countries have thus far kept their currencies stable against the US dollar. The US federal budget deficit is an important source of the imbalances in world trade. It appears that it will take time before the deficit is reduced to a considerable extent. This entails a risk that the dollar will depreciate further and that US long-term government bond yields will move up.
10.04.2023  Latest monetary policy developments in the euro area The Brookings Institution The Hutchins Center on Fiscal and Monetary Policy Washington, DC. Pablo Hernández de Cos Governor  Good morning, it is a pleasure to visit the Hutchins Center on Fiscal and Monetary Policy and share with you my reflections on euro area monetary policy at a still very challenging time for central banks globally. I will start by briefly describing the decisions that we adopted at our European Central Bank (ECB) Governing Council meeting in March. Then, I will lay out a number of factors that will determine our future decisions and will require close monitoring going forward. Our March meeting took place in the context of the financial tensions related to the banking sector in the US and in Switzerland. These tensions increased investor risk aversion and financial market volatility and led to a global drop in bank share prices. While the European banking sector is resilient, with strong capital and liquidity positions, the main message from our meeting was that we are closely monitoring these financial tensions and we stand ready to respond as and when necessary to maintain price and financial stability in the euro area.

Between 2012 and 2022, the share of households’ bank debt with an interest rate fixation period of up to one year fell from 35% to 25%, while for non-financial firms the proportion of bank debt either maturing within a while a year or with an interest rate fixation period of up to one year declined from 70% to 59%.18 A second factor could be related to a slower pass-through of market rates to retail deposit rates than in previous episodes, which could weaken the standard intertemporal channel through which rising interest rates discourage savers from spending.19 This slower pass-through could come from the fact that, during the period with negative rates, the 18  These results, however, mask a significant degree of heterogeneity across countries: the share of household debt with interest rates that reset within a year stands at 63% in Spain and 59% in Italy, but just 6% in France and Germany. In the case of firms, the share of bank debt either maturing or with interest rates that reset within a year stands at 93% in Italy, 70% in Spain, 48% in France and 41% in Germany. 19  It should be noted, however, that a slower pass-through to deposit rates may also have dampening effects on household spending, by slowing down the increase in savers’ financial income. 7  remuneration of retail deposits was above market interest rates, as banks were unwilling to reduce it below zero.
It is a rulebased organisation that ensures the influence and equal treatment of the member countries. It is against this background that I believe the IMF is the organisation that is best suited to being responsible for overseeing, identifying and analysing risks in the global financial system. Greater focus on financial surveillance My view is that the IMF has taken several steps in the right direction in its work with financial surveillance during the years that I have followed its activities. For example, the IMF has begun to integrate the analysis of financial stability with the traditional macroeconomic analysis of the member countries. Now, for instance, the financial economists of the IMF also take part in some of the annual country reviews (the Article IV consultations). The Baltic countries, among others, are able to testify to how effective this is. When Latvia experienced problems, the IMF was quickly able to put together a reform and support package thanks to its sound knowledge of the country. This shows that it is important to have knowledge of both the macroeconomic and financial developments, and seen in retrospect the Latvian programme is a good example of this. A further major step forward is that the Financial Sector Assessment Programmes (FSAPs), which was previously voluntary, was made compulsory by a decision in 2010 for the 25 most systemically-important countries – including of course the United States, the United Kingdom, Japan and the Euro Area, but also Sweden.

Barbro Wickman-Parak: The IMF’s role – new thinking in the wake of the financial crisis Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at a meeting at Global Challenge, Stockholm, 5 October 2012. *  *  *  I would like to thank Ms Maria Wallin Fredholm and Ms Emelie Mannefred, from the Riksbank’s Financial Stability Department, for their assistance in the writing of this speech. The 188 member countries of the International Monetary Fund (IMF) will gather in Tokyo for the Fund’s annual meeting next week. When I began working with IMF issues at the Riksbank in 2007, my impression was that the IMF was suffering from an identity crisis. The Fund’s lending to countries in crisis appeared to have played out its role and major staff cuts were underway. In short, the mood was rather subdued in the corridors of the IMF. The financial crisis led to an abrupt change. The IMF was forced to quickly provide action programmes and funding for crisis countries. Before the crisis, the IMF’s lending amounted to approximately USD 9 billion, the largest part of which went to Turkey. Today, the IMF’s lending amounts to around USD 112 billion, and the absolute largest part of this sum now goes to countries in Europe. The media spotlight often falls on the Fund when it rides to the rescue with crisis-management measures like this. But the every-day, important and tireless surveillance work of the IMF seldom attracts any headlines.
So property rights, and courts to enforce contracts and adjudicate competing claims are examples of some of the social institutions required to support a market economy. But there are other, and for my purposes more interesting, social institutions which constrain our collective actions, both now and in the future. In particular, it is on the need to constrain our future collective decisions on which I shall focus this evening. Such constraints are necessary to support the willingness to make transactions. For example, if people believe that there is a high probability that investment made today will be confiscated by the government in the future, they are not likely to make that investment. It would be beneficial if we could constrain ourselves not to confiscate in future. Constitutions can be rewritten, property rights revoked, and revolutions have been known to occur, illustrating the point that, as a society, we can never commit future generations – or even our future selves – to collective decisions. There is no way of enforcing that commitment. But we can try to find ways of making it more or less credible that we will, collectively, act in a way that is conducive to our long-run prosperity. So one of the most important ingredients of a successful market economy is the set of institutions that constrain our future collective behaviour. Such institutions have cultural and political roots, but they have economic effects.

Now I too share the privilege of speaking in the Kirk where Gordon Brown’s father used to preach to the people of Kirkcaldy. Double trouble, you might think. I am particularly mindful of the controversy which Greenspan’s lecture stirred in the world of Smith scholars: “an unseemly battle is being fought over the soul of Adam Smith”, as one remarked. It is a sign of the resurgence of interest in Adam Smith that at almost every point on the political spectrum one can find people who claim Smith as their own. But, in a lecture in 1926 to commemorate the 150th anniversary of the publication of The Wealth of Nations, the economist Jacob Viner wrote, “Traces of every conceivable sort of doctrine are to be found in that most catholic book, and an economist must have peculiar theories indeed who cannot quote from the Wealth of Nations to support his special purposes”. 2 My intention today is certainly not to propose “peculiar theories”, but to examine the importance of social institutions in a market economy. Self-interest explains many economic decisions. But a market economy also requires social institutions. 3 They represent collective agreements about how to constrain our actions. Some social institutions constrain our individual actions. For example, a market economy cannot flourish in a world of anarchy in which we suspect that everyone else will cheat. If I lend you money it is in both our interests that there be some mechanism by which repayment can be enforced.
In addition, there were huge quality improvements in products and services, which also contributed to price rises. Last but not least, as these countries were establishing functional market economies, they had to allow for market rather than administrative determination of prices. As prices were previously kept artificially low, these changes caused additional inflationary pressures. The implementation of structural reforms that are prerequisite for real convergence, also creates pressures on the fiscal policy, i.e. the budget deficit and consequently inflation. Part of the costs for the economic reforms are financed from EU pre-accession funds, whose utilization, although it does not imply direct increase of the budget deficit and jeopardizing one of the nominal Maastricht criteria, still could have a significant liquidity effect, creating inflationary pressures. The combined effect of the of these factors on the supply side and on the demand side, is reflected in the relatively high inflation in these countries, the average annual rate of which in the period 1993-2007 in the countries of Central and Eastern Europe ranged from 6% in the Czech Republic to 38.6% in Lithuania. (By mid-90s, in South Eastern Europe, and in Bulgaria and Romania, there were frequent instances of extremely high inflation. In this group, in the period 1998-2007, the average annual inflation rate ranged from 2.1% in Macedonia to 31.1% in Serbia). 7 Such movements caused appreciation of the real exchange rate, which was especially emphasized in the new member states.

According to research, the productivity rise was mostly due to what we call "total factor productivity", that is improvements that can be attributed neither to capital nor to labor, but to specific organizational, technological and institutional changes that result in productivity rises and GDP growth. In the past few years, the new EU member-states register trends of positive influence also of the labor to the economic growth, while among the SEEU countries this contribution is still mainly negative. 3 Structural and institutional reforms also had key influence on the accelerated productivity growth. Transition indicators of the EBRD that are commonly used for assessment of the reforms indicate that the new member-states have already reached the level of the developed countries in the fields of privatization, price liberalization, trade and foreign exchange systems (although they are still lagging behind with respect to the enterprises restructuring, competition protection, banking reform and liberalization of the interest rates and financial markets and institutions, as well as the overall infrastructure). 4 On the other hand, these indicators clearly point to the fact that the SEEU countries, are significantly lagging behind with the reforms in all these areas, except price liberalization and to a certain extent trade and foreign exchange systems. The process of accelerated income increases, that is the process of real convergence, also initiated the process of nominal convergence.