samchain/econo-pairs-v1 huggingface dataset:
Per Jansson: Perspectives on the Riksbank’s monetary policy Speech by Mr Per Jansson, Deputy Governor of the Sveriges Riksbank, at the Centre for Business and Policy Studies, Stockholm, 7 June 2013. * * * Nowadays one can hardly open a newspaper without seeing headlines about the Riksbank. Many have opinions about the monetary policy we have conducted in recent years, and the one we are conducting now. The opinions differ in nature. The Riksbank has conducted the monetary policy we consider best balanced to attain the inflation target and create conditions for long-run sustainable growth. However, some analysts have not shared the Riksbank's view of economic prospects and have therefore reached slightly different conclusions as to how monetary policy should have been designed. Of course, this type of difference of opinion is not particularly remarkable in a field such as monetary policy, where decisions necessarily have to be based on assessments. But there are also other objections that are more a matter of principle and aimed at the very way the Riksbank conducts its policy. Although it is not always stated explicitly, the message is that the Riksbank is conducting a policy other than the one it is intended to conduct – that, to put it drastically, the Riksbank has misunderstood its task and is "playing by its own rules". It has been claimed, for instance, that the Riksbank has a tendency to be over-zealous in combating inflation and to care too little about unemployment.

It is also precisely these questions that have been discussed in the general debate on the role of monetary policy in this context. I therefore intend to discuss these questions one by one and in relative detail. Can the repo rate affect housing prices and lending? It is probably true that the effect of a typical change in the policy rate on housing prices and lending to households is on average not very large. In addition, the policy rate is a blunt instrument when it comes to influencing housing prices and lending, as it is an interest rate that applies to the whole economy. This is why more specific tools, what are known as macroprudential tools, are generally perceived as more appropriate than the policy rate for counteracting this type of specific imbalances. But the effect of the policy rate most likely varies quite substantially depending on the circumstances prevailing at a specific time. In some situations it may be enough to make fairly limited increases to subdue an overly rapid upswing in the housing market, for instance, if the central bank combines these increases with communication emphasising that current developments are perceived as cause for concern.13 Small interest rate increases then function more as a concrete "reminder" that the central bank is concerned over  10  King (2012), p. 12. 11  IMF (2013), p. 3. 12  See, for example Svensson (2012).
Krzysztof Rybiński: Global imbalances and implications for emerging markets Address by Mr Krzysztof Rybiński, Deputy President of the National Bank of Poland, at the Panel Discussion on Scenarios for Emerging Markets at the OKB Roundtable, Vienna, 14-15 December 2006. Views presented here are my own and they do not represent the official position of the National Bank of Poland. Here I only sketch the key arguments, extensive discussion of issues related to global imbalances is presented on my blog www.rybinski.eu. *  *  *  ‘Hard’ and ‘soft’ landing are aeronautical terms. Many decades ago plane crashes were so alarmingly frequent, that some believed that every flying plane was an accident waiting to happen. Today, the advance of technology makes the past concerns look ridiculous; plane crashes are rare and require exceptionally adverse weather conditions, human failure or a terrorist attack. Likewise, large current account deficit in the United States and large current account surpluses in China and oil-exporting countries, jointly labeled as global imbalances are considered as unstable just as planes used to be several decades ago. Similar aeronautical vocabulary – hard landing, soft landing, crash etc. – is also used to describe the range of possible outcomes for the global economy, which embarked on a global imbalances journey about ten years ago 1 .

3  Dooley M., Folkerts-Landau D., Garber P. (2003) “An Essay on the Revived Bretton Woods System“, NBER Working Paper 9971; Dooley M., Folkerts-Landau D., Garber P. (2004) “The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates and Exchange Rates in Center Countries”, NBER Working Paper 10332; Dooley M., Folkerts-Landau D., Garber P. (2004) “Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery“, NBER Working Paper 10626; Dooley M., Folkerts-Landau D., Garber P. (2004) “The US Current Account Deficit and Economic Development: Collateral for a Total Return Equity Swap“, NBER Working Paper 10727; Dooley M., Folkerts-Landau D., Garber P. (2005) “Savings Glut and Interest Rates: the Missing Link to Europe“, NBER Working Paper 11520. 4  Bernanke B. (2005) “The Global Saving Glut and the U.S. Current Account Deficit”, Remarks by Governor Ben S. Bernanke At the Homer Jones Lecture, St. Louis, Missouri Updates speech given on March 10, 2005, at the Sandridge Lecture, Virginia Association of Economists, Richmond, Virginia.
The tendencies that I have described can be problematic in their own right but in no way fatal, as the experience of New Zealand and others attests to. It is when they interact badly with other economic and financial risks that can face small, open and financially integrated economies – such as the global credit cycle, domestic financial vulnerabilities, policy conflicts, and asymmetric shocks – that we can have a lethal cocktail. This was the case in Iceland. To demonstrate this, let me take a stylised example which is, I admit, heavily influenced by the experience of my own country. A small, open, and financially integrated economy develops a positive output gap that is larger than in the rest of the world. The economy is booming and is seen as a good investment by outside investors. This occurs in a situation where the global credit cycle is in a strong upswing. The result is capital inflows and upward pressures on the exchange rate. The country has a floating exchange rate and has adopted a flexible inflation targeting regime. Monetary policy therefore reacts by raising interest rates due to the risks that the booming economy poses for future inflation. This, however, widens the interest rate differential vis-à-vis the rest of the world and sucks in even more capital through carry trade and other channels. The currency therefore appreciates further. This helps to limit inflation, both directly, through lower imported inflation in terms of domestic currency, and indirectly, by directing demand abroad.

But the effect of monetary tightening on domestic demand is limited through the processes I have described, where long rates react weakly to the increase in the policy rate. In addition, firms and households increasingly borrow in foreign currency in order to avoid even those limited increases in domestic borrowing costs that take place. This foreign currency borrowing is intermediated by the domestic banking system, where the financing is more short-term than the lending. Thus the banking system has a growing balance sheet in FX, with a maturity mismatch but limited LOLR facilities to backstop it. In short, financial risks are accumulating, both in the financial sector and among firms and households. At the same time, the economy is increasingly in an unsustainable position, with an overvalued currency and big current account deficit. The  2  BIS central bankers’ speeches  whole thing then comes crashing down when foreign financing comes to a sudden stop, heralding a currency crisis and even a banking crisis as well. Before I go further, let me warn you, though, that this is only part of the explanation of the financial crisis in Iceland. The offshore activities of the banks and old-fashioned macroeconomic mismanagement were equally important, if not more so. On this topic, I refer you to other speeches and publications by myself and others. 2 What can and should be done about the problems I have laid out?
Changes in the Swedish mortgage market Although no large-scale market for lending to the subprime sector has developed in Sweden, there have been a number of other changes in the Swedish housing market – changes that have affected and may continue to affect developments in household indebtedness and property prices. This year new rules were introduced regarding how much capital the banks must hold in relation to the assets linked to risks, which includes lending. These rules are called Basel II. The new capital adequacy rules will take into consideration the actual risk in lending to a better extent than the older version. As lending is considered to have a fairly low risk, it will enable the banks to hold less capital in relation to their lending. This entails a lower cost for the banks. Lower costs will enable the banks to cut their margins on lending rates and compete for loan volumes. The fact that the banks have been aware that this rule would be introduced has probably contributed to the institutions cutting their lending rates in advance. It is probably in turn the increased competition that has led to banks and mortgage institutions now allowing higher loan-to-value ratios. If one can borrow a larger amount with the same collateral, the need for a down payment declines. This makes it easier for households with good incomes but little wealth to enter the housing market. Typically, this often applies to younger households who do not already own their accommodation.

But in principle, the reasoning with regard to the market for single-family dwellings also applies to the market for collectively owned  1  According to estate agents statistics (maklarstatistik.se) the price per square metre for a tenant-owned apartment has risen by 300 per cent in ten years. 2  BIS Review 56/2007  dwellings. The substantial increase in house prices has gone hand in hand with the increase in household indebtedness. Of all the loans granted to households, 85 per cent have property as collateral. A sharp fall in property prices combined with households experiencing difficulty in paying their loans could therefore cause problems for the banks. A central issue here is whether house prices have been pushed up by exaggerated optimism or by speculation. Despite the rapid upturn in prices, I do not believe that we are currently seeing any general overvaluation of the property market. This is because there are a number of factors that can largely justify the rise in prices 2 . Firstly, interest rates have been historically low in recent years. Since the Riksbank introduced its inflation target, in the mid-1990s, the inflation rate has become lower and has stabilised. A more stable development in inflation also means that the real interest rates – interest rates excluding inflation – have fallen. At the end of 1996, after the crisis years, the real variable mortgage rate was around 7 per cent. Today it is around 2 per cent.
With this, it has undone a considerable part of its excessive rise of the second half of 2021. Meanwhile, the consumption of non-durable goods also continues to fall, while the consumption of services is still growing steadily, consistent with the elimination of supply constraints after the lifting of sanitary restrictions (figure 7). Consumption has been adjusting in a context in which liquidity has been normalizing, job creation is slow and real wages have been declining over the last year. In the labor market, total employment and the labor force have shown low dynamism during 2022. In the most recent period, the decrease in formal employment stands out, offset by increased participation of informal salaried employment and self-employment. In addition, some labor market indicators point to a further deterioration. For example, job vacancies have declined and the employment outlook for businesses and consumers remains weak (figure 8). 3  The current account deficit rose to 9.9% of GDP in the last moving year. This is high, and is associated with both reduced private savings and higher investment. In a context in which consumption has been adjusting, the lower private savings can be explained largely by the negative effect of the worsened terms of trade on national income. The higher investment, as already mentioned, is mainly related to the dynamism of the machinery and equipment component. The still high transportation costs have also contributed to this increase.

Low growth in total factor productivity continues to be expected, which is supported by its consolidation of a downward trend (figure 12). Our neutral MPR estimate puts it at 3.75%, within a range between 3.5% and 4%, equivalent to a 25 basis points increase from our previous estimate. This hike is consistent with the recent reversal of neutral rates in other economies, which reversed the downward trend of global rates. 5  Our projections In the central scenario, headline inflation is projected to keep declining in the coming quarters, converging to the 3% target in the second half of 2024. Core inflation will decline somewhat more slowly, reaching 3% by the end of 2024. The trajectory we are forecasting for inflation is somewhat above our estimate in the last MP Report. By the end of this year, with the information available on 30 November, we projected annual inflation of 12.3% (12% in September). For 2023, we project headline inflation to average 6.6%, ending the year at 3.6% (6.1% and 3.3%, respectively, in September) (figure 13). This revision considers the surprise accumulated in recent months and a slower decline in the real exchange rate over the projection horizon. The real exchange rate will hover around its current levels for a few quarters, contributing to the adjustment of macro imbalances, and then will begin to decline, in line with the evolution of the economy and its fundamentals towards long-term stability. The convergence of inflation continues to rely on the economy continuing to adjust.
We are monitoring developments closely in order to evaluate any potential impact on the housing market, financial institutions and the overall economy. The key role that housing has played during this recession and recovery makes it a timely topic for our regional economic briefing. Regional economic conditions (update since the July regional press briefing) Now, let me turn to regional economic conditions. Overall, the recession seems to have been less severe in much of our region than in many other parts of the country, though unemployment remains unacceptably high. As attendees at previous Regional Press Briefings may recall, the New York Fed produces Coincident Economic Indicators to help track the performance of the regional economy. Since July, these indicators point to recovery in New York State, and particularly in New York City. Although New York City and New York State are recovering, elsewhere in the region, the story is different. In New Jersey, although activity is no longer declining, there has yet to be a sustained recovery. New Jersey’s economy remains essentially flat. An index produced in Puerto Rico by the Government Development Bank shows that the pickup in economic  BIS Review 137/2010  3  activity there in late spring and early summer has retreated and activity in the past few months has again turned down. Now, let’s look at jobs, which are the key for people to truly feel the recovery in their lives.

This would help foster value-added characteristics of the Thai economy and increase opportunities for our people, businesses, and everything else that will bring about a better standard of living for all. The two mega-trends I have outlined, when combined with the flood crisis at the end of last year, mean that Thailand needs to quickly upgrade infrastructure to improve competitiveness. In particular, public investment in effective natural resources management system and improved governance of public administration will serve as an important driving force for sustainable economic growth. Evolution of economic activities in line with the changing environment While the immediate obstacles may have changed, the overall challenges that have remained require all parties to formulate a strategic framework and policy space, to enable the Thai economy to stride pass the transitional gateway smoothly. For the public sector, the implementation of policy that promotes investment and enhances competitiveness effectively relating to infrastructure, education, and governance such as reducing corruption and improving political resiliency would be an important impetus to boost Thailand’s position in the competitiveness race. This is because public investment attracts further investment from both private investors and foreign investors, the so-called crowdingin effect. For the private sector, the search for new markets, improvements of production efficiencies, creation of value-added goods and services, and effective risk management are things that the private sector can do to prepare for new challenges.
Jan F Qvigstad: What is a useful central bank? Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at Norges Bank’s Symposium “What is a useful central bank?”, Oslo, 18 November 2010. *  *  *  It is a great pleasure for me to welcome you to this symposium. I would like to extend a special welcome to those of you who have travelled a long distance to be here today. November probably does not do justice to Oslo. To do that, we would have held the symposium in February or March, to show you the winter landscape, or in June or July, so that you might experience light summer nights. But November it is, and not without reason. You all know that the Governor of Norges Bank, Svein Gjedrem, will soon have served his two terms. The governor will step down at the end of the year. The Governor has always believed that too much attention is paid to persons and there is too little focus on the position that the person holds. By organising this symposium on a theme of keen interest to the Governor, we have tried to combine the strictly academic with respect for the way the Governor has filled his role.

For that reason, Norges Bank’s initial activity was to enter this market. Norges Bank provided loans secured by real property. At its birth, the Bank was, to use current terminology again, “market maker of last resort”. A private banking system gradually took shape. The first savings bank was founded in 1822 and the first commercial bank in 1848. In 1852 the first state mortgage bank was established. These developments allowed Norges Bank to withdraw from the mortgage market and concentrate instead on providing liquidity to the short-term money market. However, it was not until the 1860s that the Bank’s predominant task was supplying short-term liquidity. Much digging and research remains to answer the question of how Norges Bank dealt with the challenges during the 19th century. So far, scholars have not found that the Bank took emergency action when a financial crisis affected Norway in 1847. But when the crisis hit again ten years later, the Bank sent silver abroad to Hamburg, which was the financial centre of the Norwegian merchants. This support was important to enable Norwegian industry to carry out international payments and have their bills of exchange discounted. In 1892 a new Act was passed whereby Norges Bank became the bankers’ bank. As the Governor mentioned in his speech yesterday, this made Norges Bank a modern central bank in a legal sense. In 1899, Kristiania (as Oslo was called at the time) experienced dramatic fall in house prices.
Developments in debt in the 1990s may partly be interpreted as a delayed adaptation to the deregulation of the housing and credit markets in the 1980s after many households experienced financial difficulties following the relaxation. Household assets and debt and housing wealth have risen at a markedly faster pace than disposable income, and housing wealth has grown more than net debt from 1994 up to the present. The Norwegian economy has experienced both upturns and downturns since 1994, and activity is now approximately on a par with the level prevailing in 1994. These changes must therefore be regarded as structural changes. 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  BIS Review 16/2004  5  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 will restrain credit demand primarily because job security would be reduced. Household credit demand is closely linked to developments in the housing market. Home-owners who have seen the value of their dwellings rise have the possibility of taking up new mortgage-secured loans. They free up a portion of their home equity value to finance consumption and other investments.

In the past 12-18 months, developments in the interest rate differential between Norway and other countries appear to have had a particularly marked impact on our currency. Norwegian interest rates have been pushed down towards the level prevailing abroad. In 2003, the interest rate differential narrowed as a result of monetary policy easing. The interest rate has been reduced by 5¼ percentage points and is now approximately the same as among our trading partners. The krone has depreciated by about 6 per cent over the past year and the krone exchange rate, measured by the import-weighted index I-44, is now at the level prevailing in March 2002. This is approximately on a par with the average for the 1990s. In the past few days, the krone has appreciated again somewhat. In February, inflation stood at –0.1 per cent. Apart from some temporary, technical factors that together account for 3-4 tenths of a percentage point, three main factors have contributed to the substantial deviation from the inflation target: •  First, the global downturn had considerable implications for the impact of interest-rate setting in Norway, via the exchange rate for instance. •  Second, low external inflation and rapid shifts in the international division of labour has resulted in a fall in prices for imported goods and services. This also applies when these prices are measured in terms of what Norwegian importers pay in foreign currency.