samchain/econo-pairs-v1 huggingface dataset:
Whether such divergences create problems for the performance and functioning of a monetary union depends on their causes, size and persistence. What are the facts about the relative macroeconomic performances of euro area member countries? And what is the diagnosis about the causal factors and the underlying processes that explain them? I would like to point out two interesting facts that are contrary to popular perceptions. The first is that during the first six years since the creation of the euro, the growth and inflation differentials observed between member countries have not been greater than those recorded in the 25 years before the establishment of EMU. On the contrary, according to some measures, the dispersion in growth rates has recently reached a historically low level. The second fact is that both growth and inflation differentials in the euro area since the introduction of the euro have been broadly of the same order of magnitude as the corresponding differentials observed across regions and metropolitan areas in the United States. These facts would seem to suggest that, at least on the basis of size, the heterogeneity  2  BIS Review 46/2005  observed in the macroeconomic performance of euro area member countries is not exceptional and thus need not be a cause of alarm. Nevertheless, there are certain other developments that suggest caution and point to the need for a deeper and more comprehensive analysis. One such development relates to the significant and persistent divergences in measures of competitiveness between member countries.

Correlation analysis suggests that, while short-term fluctuations in nominal as well as index-linked bond yields tend to be quite closely synchronised between the euro area and the US, the relationship between euro area and US break-even inflation rates tends to be very weak (see Chart 8). Only in times when inflation expectations react to common global inflationary shocks, for example to strong increases in oil prices, can a closer synchronisation of movements in break-even inflation rates be observed. How would the European economy have developed had the euro not been introduced? We can only speculate, but past experience can be quite instructive. We must not forget that, as a consequence of the collapse of the Bretton Woods system and the world’s first major oil crisis, the 1970s were a period of monetary disintegration in Europe. Nor should we forget the devaluation of the Italian lira by almost 30% against the Deutsche Mark after the 1992 ERM crises. The exchange rate risk premium, which is  BIS Review 43/2006  7  believed to have been a major determinant of interest rates before the introduction of the euro, would have increased the spreads on government bond yields across Member States with adverse effects on countries with large debt ratios. 14 In all likelihood, therefore, a currency crisis in Europe may well have arisen, with speculative attacks on weaker currencies leading to large devaluations.
28  BIS Review 111/2010  Table 3 A Leaning Against the Wind Policy  Policy Rate (% change from 2003Q1) Base  Real Stock of Credit  Real House Prices  (% change from 2003Q1)  (% change from 2003Q1)  Output (% change from 2003Q1)  LATW Base LATW Base LATW Base LATW scenario scenario scenario scenario  United States 2004Q1  1.0  2.9  5.9  5.3  5.5  4.2  4.1  3.7  2005Q1  2.5  4.9  12.2  10.5  13.8  10.0  7.6  6.3  2006Q1  4.5  6.9  19.3  16.4  21.1  14.0  10.9  8.5  2007Q1  5.3  7.0  28.1  23.9  22.2  12.1  12.5  9.0  2008Q1  3.2  3.0  34.7  30.1  16.2  5.0  14.8  10.8  United Kingdom 2004Q1  3.9  5.6  9.7  9.4  17.5  15.3  3.6  3.4  2005Q1  4.8  7.1  21.1  19.7  26.7  18.3  5.5  4.7  2006Q1  4.5  7.1  38.2  34.3  34.7  15.1  9.1  7.3  2007Q1  5.3  7.4  45.3  39.7  43.0  15.0  11.6  9.0  2008Q1  5.3  6.0  55.4  47.2  41.1  5.8  13.7  10.1  BIS Review 111/2010  29  Chart 1 Deviation of Policy Rates from Taylor Rule  5  Percentage points Euro area  4  UK  3  US 2 1 0 -1 -2 -3 -4  -5 2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  Source: OECD.

Vestin, David (2006). “Price-Level versus Inflation Targeting”, Journal of Monetary Economics, 53(7), 1361–1376. White, William R. (2006). “Is Price Stability Enough?”, Bank for International Settlements Working Paper 205. White, William R. (2009). “Should Monetary Policy ‘Lean or Clean’?”, Federal Reserve Bank of Dallas Globalisation and Monetary Policy Institute Working Paper 34. Williams, John C. (2009). “Heeding Daedalus: Optimal Inflation and the Zero Lower Bound”, Brookings Papers on Economic Activity, 2, 1–50. Woodford, Michael (2003). Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton University Press: Princeton, NJ. BIS Review 111/2010  45
However, the large gap remaining between the repo rate and market rates shows that monetary policy cannot resolve the financial crisis. But I would nevertheless like to emphasise that monetary policy fulfils an important complementary function in alleviating the effects of the financial crisis on the real economy. As I described earlier, the stimulating effect of the Riksbank cutting the repo rate has been weakened as the normal link between the short-term market rates and the repo rate has been broken. This situation should gradually change as conditions in the financial markets normalise. When the inflation rate falls again, there will be good opportunities for monetary policy to dampen the economic downturn without jeopardising the Riksbank’s inflation target. Thank you! 8  BIS Review 149/2008

It may also be difficult to predict financial market reactions to very low and negative real interest rates. As early as 1967, US economist William Brainard discussed how central banks should respond to economic shocks when there is uncertainty about the impact of the policy rate on the economy. He concluded that the policy rate should be used with greater caution when uncertainty about its effect increases (Brainard (1967)). This involves a trade-off that can be illustrated graphically. Chart: Monetary policy and uncertainty This chart describes a situation where the policy rate is used to counteract the effect of a negative shock to the real economy. Two different interest rate paths are shown. The uncertainty is illustrated using bands around the expected paths for the policy rate, inflation and the output gap. In the scenario denoted by the blue line, the central bank does not take the uncertainty associated with the interest rate into consideration. In contrast, the yellow line represents a scenario based on a more cautious monetary policy response to the perceived uncertainty involved. The expected real economic costs of a more cautious response – as measured by the output gap – are somewhat higher, and inflation moves further from the target. In that respect, this is a less appropriate path for the policy rate. But there is also a benefit: uncertainty about the future path is substantially reduced. As you can see in the chart, the uncertainty bands around inflation and output have narrowed.
To date, 109 approved projects have received financing worth RM1.5 billion by 22 banks, of which 17 projects are receiving financing worth RM300 million from six Islamic banks . For the first 9 months of 2013, 33 companies received approved financing facilities totaling RM416 million. The  2  BIS central bankers’ speeches  approval rate for the financing has also improved from 54% in December 2012 to 59% in September 2013, reflective of the positive reception of financial institutions towards green technology financing. The recipients of the financing facilities operate in a broad range of green technology sub-sectors that covers energy, buildings, transportation and water and waste management. This financing initiative has also contributed to increasing employment, with the generation of nearly 1,400 jobs. The additional allocation of RM2.0 billion of the GTFS therefore presents an opportunity for financial institutions, including Islamic banks to further expand financing into this new and exciting area of growth. Strong potential for Islamic finance to support green technology This brings me to my next point – the role of Islamic finance in contributing towards a diverse and robust financing ecosystem for green ventures. In the Quran, verses 11 to 14 of Al-Fajr emphasise the need to care for the environment and the forms of life that Allah has created on this earth that includes proper usage of natural resources.

Although history never repeats itself exactly, some key features recur: one recurring feature is that boom periods are confused with an increase in the economy’s growth capacity. Good times are mistakenly interpreted as perfectly normal.15 When times are good, it is difficult to gain acceptance for setting aside funds. There are always unsolved tasks in a society, and these tasks attract attention. In the 1930s, Ragnar Frisch understood that it is difficult for politicians to recognise good times at the time. He believed that it was the task of economists to ascertain the cyclical situation.16 When the crisis arrived in 2007, government finances were in disorder. Deficits and debt rose to such high levels that it was difficult for many countries to borrow money. When credibility is lost and lenders draw the line, Keynesian policy has reached its limit. These countries now have no other choice than to cut welfare schemes and public spending. The political fury we are now witnessing in Athens, Madrid and Rome is being directed at today’s political leaders. Perhaps their rage should be directed at those who were in positions of responsibility in the good times, instead of at those who are now left with the washing-up. We have furthered our understanding of economics over the many decades since Keynes, Frisch and others laid the basis of modern economics after the 1930s crisis. Theories have become more advanced, and methods and calculations far more complex. We have reams of regulations.
I would like to discuss the changes in the financial environment and how they affect our different areas of operation, but before I do so I shall talk about the Riksbank's main role in the financial system, namely to provide the Swedish economy with safe money that is easy and efficient to use. The Riksbank provides the economy with money that safe and simple to use Money is needed so that we can buy and sell goods and services. If we are to have confidence in money, and want to use it, it needs to be both safe and easy to use. This requires in turn financial stability, price stability and smoothly-functioning payment systems. Let me describe how the Riksbank tries to create the right conditions. If we start with money being safe, this means that one can rely on money representing a particular value in goods and services, and that it will retain this value until the day one wants to redeem it for goods and services. The pieces of paper that we issue have no value in themselves, but function as a form of evidence that someone has produced something of value. 2 In the academic literature there is, for instance, a branch known as ‘monetary economics’ or in its modern form, ‘new monetarist economics’ 3, which looks into why money arises and under what conditions it retains its value.

This relationship is not affected by whether or not there is an interest-bearing e-krona, as we would not introduce an e-krona to replace cash. A non-interest-bearing e-krona, on the other hand, would raise the lower bound for the policy rate to zero. This is because the e-krona would then function as cash with regard to alternative investment, but without the costs for storage, for instance, that large amounts of cash incur. Zero would therefore be a sharp boundary for the policy rate if there was unlimited access to a non-interest-bearing ekrona. But it is of course possible to implement other measures that counteract such a sharp boundary, such as limits as to how many e-krona one can hold or who is allowed to hold them. The potential impact of the e-krona on financial stability is a more complex question. A couple of years ago, it was fairly common to hear concern expressed over the risk that bank runs would increase when there was stress on the market and an attractive, risk-free alternative such as a digital central bank currency was available. However, there is research that shows why this need not be the case. 19 In general, I would say that within the central bank world this is no longer seen as a particularly large risk. On the other hand, there is still potential cause for concern if the e-krona were to become so large that in normal times it takes over large shares of the banks’ deposits from the general public.
Már Guðmundsson: To what extent do international and EU reform proposals address the fault lines in cross-border banking? Keynote address by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the Eighth High-Level Meeting for the Middle East & North Africa Region “Recent policy developments for strengthening the resilience of the financial sector”, Abu Dhabi, 28 November 2012. *  *  *  Governor, chairmen and participants, Let me begin by thanking the organisers for inviting me to address this impressive gathering and thus enabling me to visit this fascinating place. In my speech I will discuss the risks in cross-border banking that manifested themselves in the crisis and what has been done since to address them. The bottom line is that, at the global level, we had developed significant cross-border banking operations that were only very partly covered by the safety net of lender of last resort (LOLR), deposit insurance and adequate resolution powers, and the associated regulation and supervision. I use the metaphor of a fault line to describe this. But first I want to tell you a little more about the origin of my perspective on these issues. It comes first from my tenure at the Bank for International Settlements (BIS) from 2004–2009, where I was involved in work on these issues, with the BIS International Banking Statistics providing a constant point of reference.

This is why the sovereign has been able to tap international capital markets twice so far since the crisis struck, and why its five-year CDS spread is currently below 180 points. Why did the Government give a verbal blanket guarantee for domestic deposits only and not for deposits in the banks’ foreign branches? After all, this distinction probably added fuel to the fire of the so-called Icesave dispute about the settlement of deposit guarantees in Landsbanki’s Dutch and British branches. The short answer is that such a guarantee would never have been credible. As a result, it would not have stopped the run on these deposits and, if attempted, might have bankrupted the Government. At the time, the Central Bank of Iceland’s FX reserves amounted to 2½ billion euros, while the foreign currency deposits in Landsbanki’s Dutch and British branches totalled 11½ billion euros and payment of the EU minimum deposit insurance would have required 4½ billion euros. The sovereign was completely closed off from foreign capital markets at that point. Furthermore, in economic terms, given that these deposits were used to a significant degree to finance illiquid assets in these same countries, such a payment, if possible, would have amounted to a net transfer of resources from Iceland to these countries at a time when Iceland was going through its deepest financial and economic crisis in the post-war period! That made no sense.
Finally, addressing impediments to investment, increasing productivity and further improving the business environment remain key for strengthening potential growth. To conclude, my assessment is that significant progress has been made, but that ensuring prosperity on a lasting basis requires continuing the implementation of an ambitious reform agenda going forward. BANKING It is essential to complete the banking union. In this respect, the European summit on 28 and 29 June is very important. The European banking landscape is still characterised by one important feature: a strong exposure of banks to their national economy, including a high exposure to domestic public debt. The completion of the banking union will, over time, lead to a lower exposure to national economies. Regarding the situation of the banking sector, there is still a sizeable legacy of non-performing loans in some banks. An impressive effort has been made to reduce the level, but the situation has not yet been fully rectified. The banks are now much more capitalised. Their liquidity is much stronger. But, on the other hand, we have to be clear: for the large banks, the new regime under the Bank Recovery and Resolution Directive – BRRD, to use its English acronym – has still not been tested in the event of a crisis – luckily. The banks still have a strong national orientation: they have exposures to the public debt of their country and a strong focus on the domestic economy.

Peter Praet: Interview in Expresso Interview with Mr Peter Praet, Member of the Executive Board of the European Central Bank, in Expresso, conducted by Mr João Silvestre on 18 June 2018 and published on 23 June 2018. * * *  Is the asset purchase programme (APP) really going to conclude at the end of this year? What we did last week was to express an anticipation that net asset purchases would end at the end of the year. We didn’t say we were now deciding to stop the programme in December. We still have six months to go. We translated the increased confidence we expressed about developments in the economy and inflation into an anticipation about the APP. And, at the same time, we also enhanced the forward guidance on interest rates. But, in any event, to anticipate the end of the programme is to give a strong signal. What exactly do you mean by giving a strong signal? We undertook a careful review of the progress made towards a sustained adjustment in the path of inflation to levels below, but close to, 2%. It was a strong signal because, in spite of a recent moderation in euro area economic growth, we concluded that progress towards our aim has been substantial so far, and actually sufficiently substantial for us to be in a position to express this anticipation of an end to net asset purchases at the end of the year.
François Villeroy de Galhau: Insurance and pensions – institutional innovation, economic innovation, technological innovation Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the7th annual EIOPA Conference, Frankfurt am Main, 22 November 2017. * * * Ladies and Gentlemen, It is a pleasure to be in Frankfurt today for this 7th Annual EIOPA Conference and I wish to warmly thank EIOPA’s Chairman Gabriel Bernardino for his kind invitation. I must say that I feel at home, since we are not far away from the ECB building where I take part in the meetings of the Governing Council at least every two weeks. But today I will speak in my capacity as President of the French supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which belongs to the board of supervisors of EIOPA, and which is in charge of the supervision of both insurance companies and banks in France. This is an important responsibility as the French insurance market is the second largest in the European Union, just behind the United Kingdom, with an aggregated balance sheet of approximately EUR 2,600 bn. Given that I am speaking before the panel dedicated to innovation, I will take this opportunity to focus on three kinds of innovation, which in my view can lead us to rethink insurance and pensions: institutional innovation, economic innovation and technological innovation. 1. Institutional innovation Let me start with institutional innovation.

In particular, consumption and housing activity continue to expand at a moderate pace. Consumer spending has been supported by solid real disposable income growth, which has been underpinned, in turn, by sturdy job gains and falling energy prices. Residential investment has been slowly increasing for several years and that trend seems likely to continue in 2016. Housing starts are still well below the rate consistent with the nation’s population growth rate, and the fundamentals of housing demand remain positive. Rising employment is likely to boost the household formation rate and low mortgage interest rates should keep housing relatively affordable, despite the ongoing recovery in home prices. Last month’s passage of a fiscal 2016 budget package should also provide support to economic activity. Not only does this budget package reduce uncertainty about the budgetary outlook, but its extension of a number of tax breaks and easing of the caps on domestic and military spending means that fiscal policy in 2016 will likely turn somewhat stimulative. On the weaker side, the collapse in energy prices continues to pull down domestic investment in oil and gas drilling projects. Although this adjustment is now well-advanced, I suspect that there remains a further leg down given the sector’s diminished cash flows and the reduced access to credit. In addition, manufacturing remains very soft – hurt by the drop in energyrelated investment, an ongoing inventory adjustment and the loss of competitiveness caused by the persistent strength of the U.S. dollar.
From what I have said it follows that there should be a repo rate that is commensurate with stable inflation and a demand growth that matches the expansion of capacity while the economy is also balanced in other respects. It is around this level of interest rates that the actual repo rate ought to be varied as activity moves up and down. So what is the Swedish economy’s sustainable growth rate and what is the commensurate repo rate? The Swedish economy’s sustainable growth rate A simple way of estimating the potential growth rate is to add the figure for the trend rate of increase in labour supply to the growth rate for labour productivity. 1  BIS Review 13/2000  The latest figures, based among other things on demographic changes and labour force participation, point to an annual increase in labour supply up to 2008 of 0.5%.1 As regards labour productivity, most of the evidence suggests that the trend in the 1990s was higher than in the 1970s and 1980s. In the period 1974-93, for example, the annual increase in labour productivity averaged approximately 1.4%, while the average since 1994 is about 1.9%.

Mr Bäckström reports on the Swedish economy and monetary policy  Speech given by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, to the FöreningsSparbanken, in Malmö on 16 February 2000. *  *  *  The repo rate increases In order to understand why the Riksbank has raised the repo rate in two steps from 2.90% last November to 3.75% less than a fortnight ago, it is necessary to consider the situation in 1998. The mood at that time, in the global economy as well as in Sweden, was coloured by the Asian crisis, the suspension of Russian payments, the problems with the hedge fund Long Term Capital Management and falling stock-market prices. It was considered that in addition to direct problems, the financial crisis in the autumn of 1998 would have negative effects on real economic activity. Forecasters altered their assessments and the prospects for global output and inflation were revised downwards. Central banks around the world did likewise and the Riksbank was no exception. Instrumental rates were reduced in many countries. Between the early summer of 1998 and the spring of 1999 the Riksbank cut the repo rate by a total of 150 basis points, bringing it down from 4.40 to 2.90%. The actions of central banks probably mitigated effects of the various shocks.