samchain/econo-pairs-v1 huggingface dataset:
Their validity in ensuring the convergence of transition economies is an issue that is hotly contested by several economists (see Buiter et al., 2002). 3  See Buiter and Grafe (2002) and Begg et al. (2002). 2  BIS Review 1/2007  (IV)  The Bank of Albania approach to EU accession  The monetary policy of the Bank of Albania focuses on maintaining price stability through the control of monetary aggregates which are used as intermediate target. Indirect instruments are used to transmit interest rate and liquidity signals to the market. Repo rate is the leading indicator for short term interest rates while repo and reverse-repo operations are used to manage liquidity. Over the last five years the Bank of Albania stability oriented monetary policy has generated low and stable inflation; it has also ensured that medium and long run inflation expectations have been well contained. The economic growth has been robust at around 5-6 percent of GDP, while enjoying a high degree of financial stability. (In other words, it seems like we are already close to the ERM II standards.) Such results reflect the opinion that economic convergence should not be held back by the political one. Political processes dictate that ERM II and EMU should be preceded by entry into the EU. The Bank of Albania has a clear view of the EU accession process. The design of the current and future monetary policy strategies is in line with the ultimate objective of EU accession.

Ardian Fullani: Concerns of the prospective ERM II members Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the conference “The Mission of Contemporary Central Bank” organized by the National Bank of Poland, Warsaw, 15 December 2006. *  *  *  Your Honor Mr. Balcerowicz, Honorable Governors, Dear Colleagues, Ladies and Gentlemen, I would like to take this opportunity to thank Mr. Balcerowicz and the National Bank of Poland for the invitation. It is an honor for me to take part in this discussion and to share my thoughts concerning the challenges facing prospective ERM II members. The central theme of this conference – the mission of the contemporary central bank with the focus on euro adoption – is of crucial importance for countries aspiring to become members of the big EU family in the not-too-distant future. Drawing from the experience of current and prospective members, accession to this family is a complex and challenging process. As a test of the nominal convergence of a country, the ERM II mechanism has attracted a lot of academic interest and criticism. Conceptually speaking, the ERM II directly precedes the full integration in the EMU. (I)  ERM II as a step towards EMU  To put the ERM II in a proper context, we need to be clear on the fact that it is an early necessary step before Euro adoption. Therefore, entry into ERMII is conditional on the economic and political readiness for entering the EMU.
The times when I have seen risks of this happening and therefore advocated a policy of “leaning against the wind” it was for monetary policy reasons. But it is not necessarily the interest rate lever that needs to be used to prevent this type of credit-driven bubble. The regulation lever is probably at least as effective in most cases. But what is worth noting in particular is that in this case one would use the regulation lever, not to maintain financial stability but for monetary policy reasons. This is a further example of the  12  See, for instance, Mishkin, F. S., “Monetary Policy Strategy: Lessons from the Crisis”, paper presented at the ECB Central Banking Conference, “Monetary Policy Revisited: Lessons from the Crisis”, Frankfurt, 18–19 November, 2010. 6  BIS Review 164/2010  close links between the two policy areas and their tools, and also of how regulation can actively support monetary policy. Greater focus on systemic risks... Another lesson from the crisis is that as we now try to improve the regulatory framework and supervision, we should focus much more than before on the risks at the systemic level, for the financial system as a whole. The type of measure that is discussed in this context is often referred to as macroprudential policy. The actual toolbox for macroprudential policy is gradually being developed.

Confidence in the Swedish financial system could have been seriously damaged if a failure like the one at Lehman Brothers had been allowed to occur. The Riksbank’s assessment was that the two banks were experiencing temporary liquidity problems, but that their solvency was not threatened. Finansinspektionen later revoked Carnegie’s licence to conduct banking activities owing to serious deficiencies in the company’s risk management and violation of the law concerning asset management. The decision to revoke the licence thus had nothing to do with Carnegie’s liquidity problems or with the Riksbank’s loan. Carnegie is now owned by the Swedish National Debt Office and the Riksbank’s liquidity assistance has been repaid. The Riksdag (the Swedish parliament) has also introduced a new act concerning support to credit institutions, which will give the government the opportunity to take the necessary measures to strengthen stability in the financial system. For instance, a government guarantee programme has been presented to support the banks’ and mortgage institutions’ medium-term funding, and a stability fund has been established to manage potential future solvency problems in Swedish institutions. The current situation Despite the crisis in the global financial markets and the increasingly gloomy economic prospects, the assessment is that the Swedish banks still have good resilience to facing the situation that has arisen and future developments. 1 The losses arising from the international crisis have so far been limited, not least in an international perspective, and the Swedish banks have good financial strength.
You are well aware that we at the ECB’s Governing Council will decide this autumn on the re-calibration of our policy instruments beyond the end of the year – and, to quote Mario Draghi, “probably the bulk of these decisions will be taken in October”. We are now faced with a simple requirement, in line with our mandate to maintain price stability, and the progress towards our inflation  Page 4 sur 8 target: we have to reduce the intensity of our net asset purchases, while maintaining overall a substantially accommodative monetary policy. As regards our asset purchases, we have to reduce their intensity in a pragmatic manner, as we already decided successfully in December 2016. “Pragmatic” because, while keeping the current rules – we shouldn’t change any of the parameters, including the issuer and issue limits –, we can on the one hand exploit the margins of flexibility of the programme and we must on the other hand hold in reserve an additional purchasing capacity – if needed. So, there is no reason to be worried by the prospect of an adequate reduction of our net purchases, which would be perfectly compatible with maintaining a substantial degree of monetary accommodation. Indeed, QE is not limited to net asset purchases, and monetary policy is not limited to QE. Our monetary policy is based on a set of instruments [slide]: it is not a solo, but a quartet.

Average prices (weighted by transaction)  2001 NOK 8 7 6 5 4 3 2 1 0  Weighted average price giro transactions  Weighted average price all transactions  94  95  96  97  98  99  00  8 7 6 5 4 3 2 1 0  01  For most services, customer prices are lower than banks’ unit costs. The exception is giro services at the counter. The unit cost for EFTPOS has declined so that transaction prices nearly covered costs in 2001. Prices have fallen because the transaction volume has increased and costs related to developing and introducing the system have been repaid. The price for using a card in a POS terminal has not risen appreciably in recent years. The unit cost for paying bills over the Internet is still high. This is probably because development and introduction costs are still not repaid and because there is excess capacity in the banks' solutions. Customer prices cover less than one-fourth of the costs reported by banks in connection with this service. It appears that banks are pricing this service on the basis of a long-term strategy that low prices during the introduction phase will encourage customers to use new, more efficient payment instruments earlier. If the pricing strategy actually increases use, it may contribute to increasing efficiency in the payment system in the long term because economies of scale will be exploited at an early stage.
One can argue that exchange rate certainty is not an essential complement to the European single market - any more than exchange rate fixity is essential to achieving benefits from free trade more generally. But there is no doubt that intra-European exchange rate certainty would - through the increased competition resulting from greater transparency of prices and lower transactions costs, through broader and deeper capital markets, and through the associated improvement in economic resource allocation - enhance the benefits derived from the single market. Whether or not it is essential, therefore, most people would, I think, agree that, other things equal, exchange rate certainty would be very desirable in this context. The potential disadvantage of monetary union can equally be simply stated, though it is perhaps more difficult to assess. Essentially there is a risk that the single monetary policy - the single, one-size-fits-all, short-term interest rate - within the euro area, which is a necessary corollary of the single currency, will not in the event prove to be appropriate to the domestic needs of each of the euro-member countries. There is no doubt that such risk exists. It may result from cyclical divergence where for example would we be in the UK now, confronted as we are with relatively strong domestic demand growth, if we were obliged to have German- level interest rates? Or where would Germany and France be as they struggle to sustain domestic demand if they were constrained to have interest rates at the UK level?

There is a view that the euro should in some sense ‘belong’ to the participating countries and to them alone. If that view were to prevail it would point in the direction of one form of bureaucratic regulation or another - no doubt with a nod in the direction of monetary policy considerations as justification - which would damage the euro at least as much as it would harm the financial markets of the City. At the same time some of these same people argue for a successful, strong and widely-used euro that will take its proper place alongside the dollar and the yen as an international BIS Review 23/1998  -4trading and portfolio currency, and in that context they positively welcome the active participation of London. In the end I do not think there is very much choice. In a world of increasingly integrated capital markets and liberalised capital movements it is inconceivable that the international use of the euro could be unnaturally constrained. There will be active euro markets in the major financial centres of the world, including in London, which will be ready to trade in the whole range of euro wholesale financial products from day one. And that will be in the interest of financial activity right across Europe. Like trade in goods, trade in financial services is a positive sum game, so that London’s success is not a threat to other European financial centres.
The centralised income settlements in Norway have been an arena of coordination, where macroeconomic considerations have at times received considerable emphasis. This has contributed to low unemployment levels in our country. But we have also seen that the income settlements may be a source of economic disturbances. The income settlements in 1974/75 and 1986 have had the strongest negative impact. The settlements in 1998 and 2000 also fuelled higher cost inflation. In 1998, high wage growth, combined with the fall in the krone exchange rate, contributed to a 4 ½ percentage point rise in interest rates during the spring and summer months. The retail and service industry almost acted as a spearhead in this wage negotiation. During and after the wage settlement in 2000, short-term interest rates rose by 1½ percentage points. We have also seen that income formation is affected by labour market conditions and profit trends in the business sector. This is also true of wage and income developments among managers, salaried employees and the liberal professions. The structural changes that now seem to have occurred in the income formation for these groups has probably also been important for the outcome of the ordinary wage settlements. Distributive trades  BIS Review 47/2001  9  Growth in wages and labour costs in distributive trades has also been high the last five years, with an average wage growth per normal person-year of 5 per cent, the same as for mainland Norway. National accounts figures for service industries are more uncertain than figures for manufacturing industry.

Growth in private consumption has been moderate the last year following many years of high consumption growth in the 1990s. House prices have increased markedly the last decade. Inflation-adjusted house prices are now more than 10 per cent higher than at the highest level in the 1980s. Growth in lending to the household and enterprise sectors remains high. Since 1997, price inflation has been higher in Norway than among our trading partners. Price inflation has accelerated the last year, also when we disregard the increase in petrol prices and indirect taxes since the beginning of this year. The year-on-year rise in overall consumer prices was 3.8 per cent in April 2001. Excluding indirect taxes, electricity and petrol prices, the year-on-year rise in prices was about 2 ½ per cent in April of this year. 8  BIS Review 47/2001  Higher price inflation in Norway is primarily due to a tight labour market that has persisted over many years, fuelling strong growth in wages and labour costs. In the light of higher price and cost inflation in Norway than in other countries, it has been appropriate to maintain higher interest rates in Norway than in most comparable countries. A special feature of wage formation in Norway has been that conditions for exposed industries, including those that do not face international competition, have received considerable emphasis in the negotiations. The last few years, the sheltered sector has had a greater influence on overall wage developments.
This can be achieved by requiring bonus payouts to be deferred for a period (“deferral”) and subsequently not paid out if performance is poor (“malus”) or clawed back after payment. If deferral periods broadly match the duration of a typical risk cycle, incentives to risk-shift through time are likely to be significantly reduced. Incentives to act in a shorttermist fashion should also be reduced. These proposals have an element of back to the future about them too. Deferral and clawback in some respects mimic 19th century company practices, when shareholders and managers remained liable for losses that occurred on their watch, even after they had sold their stake. Recently, these ideas have been resurrected in some countries, at least for banking firms. For example, CRD IV in Europe requires that the variable portion of senior bank executives’ pay be deferred for 3–5 years. Last July, the Bank of England consulted on a minimum deferral and clawback period of 7 years for Senior Managers and earlier this year these proposals were finalised. These rules now allow for clawback of up to ten years from award, providing a material incentive to reduce excessive risk taking by executives. 24 In finance, you generally reap the risks you sow over that horizon. This new policy aligns risks and horizons. 22  Bennett, Güntay, and Unal (2012). 23  See Bailey (2014) for further details. 24  The PRA and FCA published their Policy Statement, ‘Strengthening the alignment of risk and reward: new remuneration rules’ in June 2015, available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps1215.pdf.

As a result, they have been, and probably still are, able to increase production to a fairly large extent without any substantial increase in real capital and employment. There are prospects of solid growth in productivity in 2004. Nevertheless, our regional network reports that companies in a number of industries are now considering an increase in employment. After rising sharply for several quarters, economic growth in the US slowed in the second quarter and employment growth appears to have stalled this summer. Economic growth has picked up from a low level in the euro area. Economic growth has also gained momentum in Sweden and the UK. Strong growth in the US and China exerted upward pressure on commodity prices in 2003 and the beginning of 2004. Since then, price inflation has been dampened. Oil prices have risen considerably during the summer. Interest rate expectations indicate interest rate increases in a number of countries. The effects of oil price developments on the Norwegian economy are mixed. Persistently higher oil prices may eventually contribute to higher petroleum investment and increased activity in sectors affected by petroleum activities. A sharp rise in oil prices, however, restrains global economic growth and affects demand for our other export products. The analyses in Norges Bank’s last Inflation Report in July 2004 are based on the technical assumption that interest rates will move in line with forward interest rates.
Important areas of the working world, such as unemployment insurance and the protection against unfair dismissal, are regulated in such a way that companies are willing to create new jobs, and the unemployed are anxious to find work again quickly. In addition, Switzerland still has a very competitive export sector, which is well able to hold its own in today’s global environment. It comprises both large international companies as well as a great deal of small and medium-sized enterprises. These are able to maintain their leading position in the world, thanks to high productivity and innovative products. A greater cause for concern, however, is our domestic economy. It includes a number of different sectors, such as agriculture, tourism, and trade and industry, as well as public and semi-private areas, such as telecommunications, post and electricity. In many sectors, the domestic industry is not productive enough and too costly. Many prices are kept high by state regulations, cartels and other anti-competitive agreements. The enforcement of the Domestic Market Act, which was introduced in the nineties with the purpose of standardising the Swiss market, failed at a cantonal level. As a result, price levels in Switzerland are significantly higher than they are abroad. The affected sectors put forward the argument that like hadn’t been compared with like and that the differences in quality hadn’t been taken into consideration. There is undoubtedly some truth in what they say. Furthermore, the desire to mitigate competitive pressure may reflect a Switzerland that wants to avoid conflict.

As I have already mentioned, this enabled us to conduct a monetary policy in the heart of the euro area that is suited to the needs of Switzerland. And that brings me to my concluding remarks. 5. Conclusion  Switzerland is a small, open country, with few natural resources, which in many ways has become global. The export industry and the financial sector have adjusted well to the new structures and have become global players. The domestic economy and the political structures, however, are straining to make the equivalent adjustments because changes in those areas would often affect vested interests and future claims on the social security system. Nor has there been sufficient pressure to act. However, in order for Switzerland to stand the test in a dynamic global environment, it must ensure that the reform process currently under way will be continued and accelerated. By now, some observers have come to question Switzerland’s ability to make comprehensive reforms altogether and assert that the country has become a problem case because of its inability to make changes. I do not share this pessimistic view. On the contrary, I am convinced that the understanding for the necessity of reforms, and with it the willingness to temporarily accept disadvantages, will grow. What ultimately gives me cause for optimism are Switzerland’s sense of realism and its wealth of experience. We are aware that neither the European environment nor globalisation will take our national feelings into account.
We heard a lot of talk in the foreign exchange markets in 1996 about the “end of volatility.” As the market performance of the last few weeks has demonstrated, such commentary was a bit exaggerated. However, even with the spike in volatility we’ve seen in recent weeks, there is no question that we have witnessed a remarkable period of relative stability in foreign exchange rates over the past six quarters or so. What accounts for this relative stability in the foreign exchange markets since late 1995? Economic fundamentals are certainly one factor -- we have had a period of relative price stability in the major world economies, and a general absence of severe market shocks. However, I would argue that what we’ve been observing is also, in part, a by-product of continuously greater transparency that has characterized the foreign exchange market over the past several years. Moreover, I am convinced that the increased transparency in the foreign exchange markets is beneficial: for the foreign exchange community, for financial markets in general, and for the global economy as a whole. Before explaining what I mean by greater transparency and why I believe it is so beneficial, I would like to take a quick look at the record itself. Is the talk about declining volatility reflected in hard evidence? Yes, it largely is.

Although I hope that the analysis will eventually develop to the extent that it is possible in a reasonably reliable way to take account of this type of risk in our forecasts we are not there yet. My view is that it may sometimes be justified to consider this kind of unforecastable risk  8  According to the theory of uncovered interest rate parity, the market expects the krona to weaken against the euro in the period ahead if Swedish interest rates are higher than those in the euro area. Uncovered interest rate parity also explains why the krona strengthened at the same time (and not afterwards) as Swedish interest rates increased relative to those in the euro area in 2010. However, the empirical support for uncovered interest rate parity is weak and there are many examples of deviations from the theory. For example, the krona strengthened more against the euro in 2010 than implied by uncovered interest rate parity. I refer to my speech “Many dimensions to well-balanced monetary policy”, dated 26 January 2011, for a more detailed discussion of the development of interest rates and the krona exchange rate in 2010. 8  BIS central bankers’ speeches  in our monetary policy decision-making. Ignoring such risks completely is, in my view, the same as saying that they do not exist, and that is a position that I would not want to defend.