samchain/econo-pairs-v1 huggingface dataset:
Higher resource utilisation in the Norwegian economy will lead to somewhat higher wage growth and will also make it possible for enterprises to increase their operating margins. However, inflation will still be restrained by low external price impulses. The positive contributions from the exchange rate depreciation in 2003 will unwind in the course of spring 2005. The contribution from the exchange rate to inflation will then gradually become slightly negative. There are prospects that inflation will reach the inflation target towards the end of the projection period. There is uncertainty surrounding the projections. The projections are partly based on our analysis of relationships in the economy, the exchange rate assumption and the forward interest rate assumption. We can give some indication of the uncertainty surrounding the projections on the basis of historical deviations between projected and actual price developments. Based on these calculations, inflation at end-2007 is projected with a probability of 50 per cent to be between 1.75 and 3.25 per cent. Consumer prices may show erratic variations from one month to the next. These fluctuations may be due to temporary conditions. At other times, they may reflect more lasting changes. When the figures deviate from our projections, more observations are therefore needed before an assessment can be made of whether inflation is in line with the projections. The projections in the Inflation Report are based on the assumption that the interest rate moves in line with financial market expectations.

There are still expectations of an increase in international interest rates, but market participants have lowered their growth and interest rate expectations as a result of high oil prices. Growth in the Norwegian economy picked up during the second half of 2003. The low interest rate has contributed to strong growth in private consumption and housing investment. Activity has picked up in service industries and the construction sector. High petroleum investment, the global economic recovery and a weaker krone through 2003 have improved conditions for manufacturing. Profitability is improving for mainland enterprises. There are signs of renewed growth in investment in a number of industries. Imports have expanded markedly. Potential growth in the Norwegian economy is estimated to increase somewhat more than normal this year as a result of increased competition and rationalisation in many sectors. This will contribute to fairly high growth in the Norwegian economy without the emergence of constraints on the supply of labour or productive capital. The high rate of growth in output nevertheless implies that the output gap will approach zero towards the end of 2004. The output gap is a measure of the difference between the actual level of output and potential output. Developments in the output gap provide a basis for assessing cyclical developments and can thus shed light on domestic price and cost pressures in the economy. It is difficult to know how high capacity utilisation is at any given time.
40 The number of relationships humans are felt able to maintain is believed to lie below 150 – so-called Dunbar’s Law. 41 For most of us, it is singledigits. That number has been roughly the same since the dawn of time, despite the extraordinary recent advance of technology and social networks. As Nicholas Christakis has observed, Facebook “friends” are not really your friends. With hindsight, this crisis has provided many examples of failures rooted in an exaggerated sense of knowledge and control. Risks and counterparty relationships outstripped banks’ ability to manage them. Servers outpaced synapses. Large banks grew to comprise several thousand distinct legal entities. When Lehman Brothers failed, it had almost one million open derivatives contracts – the financial equivalent of Facebook friends. Whatever the technology budget, it is questionable whether any man’s mind or memory could cope with such complexity. To sum up, the maximum efficient scale of banking could be relatively modest. Perhaps it lies below $ billion. Experience suggests there is at least a possibility of diseconomies of scale lying in wait beyond that point. Conglomerate banking, while good on paper, appears to be more mixed in practice. If these are not inconvenient truths, they are at least sobering conjectures. They also sit awkwardly with the current configuration of banking. In 2008, 145 banks globally had assets above $ billion, most of them universal banks combining multiple business activities. Together, these institutions account for 85% of the assets of the world’s top 1000 banks ranked by Tier 1 capital.

Simpler financial eco-systems offer the promise of greater robustness, at some cost in richness. In the light of a costly financial crisis, both eco-systems should be explored in seeking answers to the $ billion question. 42  Washington Mutual, with assets of around $ was resolved by FDIC, but was perceived by many to have caused systemic spillovers. 43  For example, Tucker (2010). BIS Review 40/2010  13  References Aikman, D, Barrett, P, Kapadia, S, King, M, Proudman, J, Taylor, T, de Weymarn, I, and T Yates (2010), Uncertainty in Macroeconomic Policy Making: Art or Science?, available at http://www.bankofengland.co.uk/publications/speeches/2010/speech432.pdf Amel, D, Barnes, C, Panetta, F and C Salleo (2004), “Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence”, Journal of Banking & Finance, vol. 28(10). Baker, D and T McArthur (2009), “The Value of the ‘Too Big to Fail’ Big bank Subsidy”, Centre for Economic and Policy Research. Barro, R J (2006), “Rare Disasters and Asset Markets in the Twentieth Century”, Quarterly Journal of Economics, vol. 121(3), p.823–866. Barth, J R, Caprio Jr., and R Levine (2004), “Bank Supervision and Regulation: What Works Best?”, Journal of Financial Intermediation, vol. 13(2), p.205–248. Basel Committee on Banking Supervision (2009), Consultative Document: Strengthening the Resilience of the Banking Sector. Beale, N, Rand, D, Arinaminpathy, N and R M May (2009), Conflicts Between Individual and Systemic Risk in Banking and Other Systems, forthcoming.
One can argue endlessly about the precise composition of the Committee, their term of appointment and so on. The key consideration for me is that all nine members need to be genuinely independent, technical experts in the field of monetary policy or a closely related field, not representatives of any particular social or industrial grouping. The objective of policy is appropriately determined by a democratic process; the Committee’s job is, as I say, a technical one, which requires relevant technical expertise. BIS Review 66/2000  4  The transparency of the Committee’s decision-making process is assured by continuation of the requirements that we should produce our quarterly Inflation Report and publish minutes of our monthly meetings, which we have now chosen to do with just a two week delay. Transparency is further enhanced by a requirement that the minutes should record how each individual member of the Committee voted on the interest rate decision. As before, it is vital for public confidence in these new arrangements that their intention is not subverted by the evolution of informal conventions - that the integrity of the procedures is respected. In this context we take great pains to ensure that the true nature of the policy debate is reflected in the minutes and that the range of views around our inflation forecast is properly reflected in the Inflation Report.

Finally, there was an emerging recognition of the potential for conflict between the central bank’s necessary concern with systemic financial stability (you cannot hope to deliver monetary stability if the financial system is crashing about your ears, while monetary stability is itself a primary condition for financial stability) and consumer or depositor protection, which if carried too far can itself undermine the strength of the financial system. These profound changes in underlying philosophy - which, as I say, spread across much of the political spectrum - were in our case fundamentally important in opening the way to a more clearly defined and distinctive role for the Bank of England and a necessary condition, in my view, for the delegation by the Government to the Bank of greater independent, technical, responsibility. Even so, although those changes were a necessary condition, they were not in themselves sufficient, and greater independence did not come all at once. As often happens, sadly, a big step forward came after a major setback. In 1992 after we had been driven unceremoniously out of the European Exchange Rate Mechanism (following the boom and bust of the late 1980s / early 1990s), the Government of the day adopted an explicit inflation target as the nominal anchor for monetary policy. Interest rate decisions in pursuit of that target remained with the Chancellor of the Exchequer after consultation with myself as Governor and my senior monetary policy experts at the Bank. But the really novel feature of the new arrangements was their transparency.
He made this point clear in his Report as follows: “The danger that a government will make use of the power of a central bank to overexpand credit is a real one and might appear a strong argument against having a central bank at all. But, as already indicated, if a government wishes to engage in the irresponsible creation of money, it can do so without a central bank. Paper money has come to stay. The only real safeguard against its abuse is responsible government”. So the blame should not go to Exter. It is the absence of responsible governments that would erode the value of money through excessive creation of central bank credit. An example for such irresponsibility could be found in a reported statement by Robert Mugabe, President of Zimbabwe that, if money is not found for projects, he would print the same, at a time when inflation was rising at more than 4500 % in his country. (Time, 13 Aug 2007) Elimination of the seigniorage from the books of accounts The issue of paper based fiat money at a fractional cost of the face value has enabled sovereigns to earn a substantial profit known as the seigniorage. Since there is no requirement for the issuer to back such money with an equivalent reserve, there is no limit to the issue of money by a sovereign.

There is a deep hunger internationally for Chinese consumers, Chinese exports, Chinese assets and of course, the Chinese currency. While the USD was at one time supported by its gold backing, the RMB today is backed by China’s huge foreign exchange reserves. Confidence in the currency is further enhanced by expectations of conditions in China remaining supportive of a strong currency. The main precondition on which China does not do well is in the stage of development and readiness of its financial system and policy frameworks. These challenges are not insurmountable but they are big enough to make Chinese policymakers adopt a gradual and sequenced approach to RMB internationalisation. They are big enough that premature liberalisation could create significant risks to macroeconomic and financial stability. The challenge for Chinese policymakers is to develop the domestic financial system to a level where integration with the global financial system would not lead to significant vulnerabilities. Therefore, the state of the financial system will be a key determinant of the extent to which policymakers are willing to liberalise and open their system, and consequently, will also be a key determinant of the extent and pace of RMB  2  BIS central bankers’ speeches  internationalisation. The global status of the RMB is closely linked to the global status of the Chinese financial system. Ambitious reforms could expedite RMB internationalisation. On the issue of being a global exporter of capital, China is certainly that.
This mechanism is often described in terms of three different channels: the interest rate channel, the credit channel and the exchange rate channel. These channels are intertwined with each other and the division is mostly for explanatory reasons. The interest rate channel can be used to influence the cost of saving and borrowing. A lower interest rate means that it becomes less expensive for companies to finance investments and for households to borrow for consumption. Lower interest rates normally also make saving less attractive. 6  BIS Review 41/2009  Interest rate changes also affect the economy through the credit channel. Lower interest rates generally increase the net present value, that is the value today, of the cash flows that financial assets are expected to generate in the future. Lower interest rates also increase the demand for real assets, for example housing. In this way, the prices of both real and financial assets increase. As these assets are used as collateral for loans, the creditworthiness of households and companies also increases. This leads banks and other financial institutions to be less restrictive in their lending and means that they can lend more. This in turn stimulates investment and consumption and thus increases inflationary pressures in the economy. Through the exchange rate channel, monetary policy can influence the value of the currency. Normally, a reduction of the repo rate leads to a weakening of the krona. This is partly because Swedish assets appear less attractive than investments in other currencies.

Financial institutions have been asked to review their customer accounts for tax-illicit funds. One of the practical difficulties faced by financial institutions is how to determine whether a given pool of funds is fully tax compliant, when even a tax lawyer may be hesitant to make a call, unless he has full visibility of the customer’s other transactions beyond the bank. International guidance on this area is still evolving, and the process to become more proficient in detecting tax-illicit monies will understandably be an iterative one. 18 Nonetheless, we have found the quality of the recent tax risk reviews to be satisfactory, and I like to commend you all for the efforts put in. More importantly, this exercise has raised general awareness among financial institutions, which are now better prepared to manage risks arising from the laundering of proceeds from tax crimes. Arising from the review, a handful of customers may have chosen to close their accounts or even have had their accounts terminated – if they chose not to be subject to the heightened scrutiny. Suspicious Transaction Reports have also been filed in a few cases. Overall, the message is clear and consistent – tax-illicit funds are not welcome here. BIS central bankers’ speeches  3  Partnership with the industry 19 We need to work together to tackle financial crime. At the government level, law enforcement agencies meet regularly with the financial and non-financial sector supervisors to coordinate policy, so that we effectively deter illicit funds as a country.
Let me quickly go over some of the most important changes to the primary market: •  Following the liberalization of interest rates in 1992 the auction system for Treasury bills was introduced to create a more transparent and market-based system of price determination that would encourage broader investor participation. •  Alongside the introduction of the auction system, the maturity structure was extended from the only existing term of 91 days to include 28 and 182 days in order to meet the various liquidity needs of investors. •  In 1995, Government bonds with a maturity term of 12 month and 18 months were added to the list of securities. •  Following the increased depth of the market, the structure of Government securities was streamlined with the termination of the 28 day Treasury bill issuance and the subsequent introduction of the 273 days maturity term. •  In 2005, reforms of the Government securities market continued with the cessation of the 12 months and 18 months Government bonds. In their place, a 364 day Treasury bill was introduced alongside the 3 and 5 years bonds. •  More recently, in August 2007, a portfolio of Government bond maturity terms was further increased to include the 7, 10, and 15 years. Since that period, the size of the outstanding issues has grown from 7% of GDP in 1994 to 17% by the end of 2007. With regard to secondary market, policy efforts have been initiated at different stages in the development of our market.

In the wording of the Treaty, the ECB is requested to contribute to the smooth conduct of policies pursued by the competent authorities with respect to the prudential supervision of credit institutions and the stability of the financial system. Furthermore, the ECB’s financial stability function is also related to its responsibility for overseeing financial market infrastructures. The legal framework under which the ECB collects statistical data has in fact recently been extended to expressly recognise its powers to collect data for this purpose. BIS central bankers’ speeches  1  In 2011 the EU institutional framework was revised to explicitly address both macro and micro-prudential supervision. This led to the establishment of the European System of Financial Supervision, the three new European Supervisory Authorities (ESAs) and the European Systemic Risk Board (ESRB). The ECB is in charge of providing analytical and statistical support to the ESRB, notably by collecting and processing information that feeds into discussions within the ESRB. 1 3. What has been achieved so far? In recognition of an increasingly interconnected financial system, considerable progress is being made in the enhancement and development of new statistics at the euro area, EU and global level. At the euro area level, improvements in ECB statistics are notable with regard to, in particular, the development of enhanced statistics relating to monetary financial institutions (MFIs) and to shadow banking (e.g. securitisation vehicles).
Currently, the cross-country comparison of financial information is difficult, since the set of rules under which such information is compiled varies from country to country. Moreover, the interpretation of such rules is not always uniform. This is cost-inefficient for those companies having to comply with different accounting regulations because they operate in more than one geographical region. Likewise, the lack of comparability may hamper cross-border activity and decision-making by investors. There have been some encouraging developments in this area. First, is the memorandum of understanding between the IASB and the Financial Accounting Standards Board (FASB) formalising a commitment to convergence towards common principle based accounting standards. Admittedly, this will not be an easy task, but it seems vital to move in this direction. Second, the European Union has taken a significant step forward. It has resolutely considered need to promote the comparability of different countries’ financial information as an unavoidable prerequisite for achieving the single financial market. 2  BIS Review 31/2003  Accordingly, a Regulation was approved last year adopting the International Accounting Standards (IAS). Specifically, in 2005 companies listed on regulated financial markets will have to prepare their consolidated financial statements in accordance with these standards. The thrust of this Regulation is to achieve clear pan-European rules for comparable, transparent financial reporting throughout the European Union. Rules which will make companies provide relevant and reliable information for investors and other stakeholders so that they can make meaningful cross-border and cross-sector comparisons. But accounting regulation also poses significant difficulties.

Jaime Caruana: The impact of geopolitical events on the world economy Speech by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of The Basel Committee on Banking Supervision, at the International Securities Market Association Annual General Meeting, Madrid, 27 June 2003. *  *  *  It is a great pleasure for me to participate today in this International Securities Market Association Annual General Meeting. I would like to thank the organisers for their kind invitation to open this meeting and also to welcome you all to Madrid. The matters to be addressed in the Conference are not only highly topical, but are of crucial importance for all of us. Given the prestige of those who will be offering their opinions, I believe it will be a great opportunity to draw conclusions of enormous interest. The broad theme for this conference is the impact of geopolitical events on the world economy. By way of introduction, let me briefly share with you some thoughts on this topic. The world economy has been through a complicated period in recent years. The expected recovery has been slow, hesitant and disappointing. Several factors have come into play in this connection. On one hand, the persistent impact of the bursting of the IT and stock exchange bubbles has had a negative effect on business and consumer confidence as well as on investment.
Depending on the circumstances, the SNB would have to accept credit risks onto its balance sheet and, in return, would have a more direct influence on lending. Such centralisation is not desirable. The smooth functioning of the economy would be hampered by political interference, false incentives and a lack of competition in banking. Second, sovereign money limits liquidity and maturity transformation as banks would no longer be able to create deposits through lending. Sovereign money thus restricts the supply of liquidity and credit to households and companies. The financing of investment in equipment and housing would likely become more expensive. Those sectors which have no access to the capital market and rely on bank loans to raise funds – notably, small and medium-sized companies as well as households – would be the most affected. Third, it would be naive to hold out too much hope on the financial stability front. Investors and borrowers will always make misjudgements. A switch to sovereign money would thus not prevent harmful excesses in lending or in the valuation of stocks, bonds or real estate. Also, while the sovereign money initiative targets traditional commercial banks, let us not forget the Page 8/12  role played by ‘shadow banks’ in the global financial crisis of 2008/2009. More importantly, when governments and central banks were rescuing systemically important financial institutions, they had not only the protection of sight deposits and thus payment transactions in mind, but also borrower-lender relationships.

This pushes up the financing costs for banks beyond the general rise in interest rates. With all other conditions being equal, banks will, as a result, curtail their credit supply. The SNB’s monetary policy thus influences developments in lending both via demand for credit on the part of companies and households and via the banks’ credit supply. This keeps the creation of money by the banking system in check. 7  For a more comprehensive list of a banks’ activities, cf. for example X. Freixas and J.-Ch. Rochet (2008), Microeconomics of Banking, 2nd edition, MIT Press, pp. 1–13. Page 6/12  Why the image of ‘creating money out of thin air’ is misleading  Ladies and gentlemen, I have tried to somewhat demystify the subject of money creation by the commercial banks. The topic has repeatedly become a focus of attention, especially among bank critics, and the language used is often provocative. Featuring prominently is the image of ‘privileged banks’ that can ‘create money out of thin air’. The image has a long history, yet is often misunderstood. Some erroneously assume that banks are in a position to raise funds via the creation of deposits and so ultimately pull themselves out of trouble by their own bootstraps, as it were. This is, of course, nonsense. If it were true, there would be no financial crises. Illiquid banks would always be able to create the money they need to meet their obligations themselves. Reality is not like that.