samchain/econo-pairs-v1 huggingface dataset:
Our ambition will then be to make it clear that we have done so. By raising and lowering the steering interest rate - the repo rate - the Riksbank attempts to influence inflation. As it is so difficult to steer inflation in the short term, the Riksbank makes an assessment of developments for the coming 1-2 years. This is the period of time usually assumed necessary for an interest rate adjustment to work its way through the economy and have a full impact on the rate of price increase, i.e. inflation. The Riksbank uses a simple rule-of-thumb when shaping its monetary policy. If the total picture of inflation shows that it is expected to be above or below the target level, the steering interest rate is adjusted accordingly. There are four main factors in the analysis of future inflation that stand out as central to the shaping of monetary policy: the development of total resource utilisation, international price trends, the exchange rate and the general public’s inflation expectations. Inflationary pressure varies according to the demand situation and to changes in resource utilisation. The stronger the upturn in demand in relation to potential production, the greater the risk that prices and wages will rise rapidly and vice versa. This is why we who work in central banks around the world  BIS Review 12/2003  1  must analyse the picture of economic activity as a whole, despite the fact that inflation is our target variable.

At the same time, households’ savings were at a high level in 2002, which means that there may be some scope to increase consumption despite the restraining effects. Altogether, I believe there is also reason for a downward revision of the estimate of the Swedish growth rate over the coming years. The expected upturn is assessed to be somewhat superficial. This also assumes that the Iraq conflict does not develop in a way that will seriously deteriorate future prospects. The shaping of monetary policy A decisive factor in the shaping of monetary policy in future is the total picture of inflation prospects. A slightly more subdued growth in demand both in Sweden and abroad is expected to lead to capacity utilisation being slightly less strained. At the same time, energy prices have pushed up inflation. However, the Riksbank’s assessment is that the upturn in inflation is temporary and that there is  reason to expect lower inflation as early as the late spring and summer. Although, as I said earlier, this assumes that those setting prices and wages do not attempt to compensate themselves for the temporary price rise. All in all, it is a question of balancing the risks of, for instance, a weaker growth in the economy, against the risk that the upturn in inflation will have contagion effects. This is what the Executive Board must do at its monetary policy meeting on 17 March.
Such an outcome may not be what we expect to happen or what is likely to happen but rather the worst possible case. The risk has not been generated by the financial sector. But, if it occurred, it would almost certainly lead to a correction in UK asset prices and losses for UK banks. The task of the FPC has been to ensure that such a correction, were it to occur, would not lead to a UK financial crisis. We have tested the banking system to equal and greater stresses to give us the confidence that while losses would occur, unlike 10 years ago, the system would have the capital to absorb them. We have required the banks to hold liquidity, in the currencies that they would need, to withstand a liquidity stress greater than that experienced in the financial crisis. And the Bank stands ready to provide liquidity in all major currencies. And, with other UK authorities, we have ensured that regardless of the Brexit outcome there should not be disruption to the provision of financial services in the UK by EU firms. The Financial Stability Reports of the FPC over the past 18 months have set out the actions that have been taken. The Record of the Financial Policy Committee’s February meeting, published earlier this week, makes clear the Committee’s assessment that the core of the UK financial system is resilient to, and prepared for, the wide range of risks it could face, including a worst case disorderly Brexit.

In economic terms, the early debt systems and the debts themselves, painstakingly recorded in the ledger systems of the temples of bronze age Mesopotamia, appear to be primarily about what we would now call working capital and overdraft facilities in agrarian societies that produced little economic surplus – credit to tide farmers over until the harvest or through bad harvests with the debt repaid in standardised units of agricultural produce.2 1  See chapter 4 of Hudson (2018) See Graeber (2011). An interesting example is Mesopotamian alehouses which seem to have been run on a seasonal credit system that would put to shame the average pub’s willingness the run a tab. See also, Item 15, ‘clay writing tablet’ in MacGregor (2010). 2  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  This stock of debt periodically got beyond society’s willingness or ability to repay.3 We know this because of the practice of Mesopotamian rulers declaring debt amnesties to wipe the debt slate clean.4 Much has been written on the debt amnesties and Jubilee mechanisms of ancient near eastern societies. That such reset mechanisms existed and were used is clear. The motivation may have been a moral one. It may have been a way of rulers preventing large numbers of the population falling into destitution and debt bondage and as result being unable to fulfil other necessary societal functions. Or simply a way to reset the balance of economic power in society before it was reset in a more violent way.
BIS Review 7/2009  9  TED-spreads Difference between interbank rates and government bond rates (TED-spread) 500  500 Euro area  450  USA  400  Sweden  BNP Paribas  Lehman Brothers  Secure liquidity prior to the year-end  350  450 400  Bear Sterns  350  300  300  250  250  200  200  150  150  100  100  50  50  0 Jan-07 Apr-07 Jul-07  0 Oct-07 Jan-08 Apr-08 Jul-08  Oct-08 Jan-09  Sources: Reuters Ecowin and the Riksbank  Outcome up to 16 January. Exports as a proportion of the total balance of resources Per cent 50  40  30  20  10  0 90  10  92  94  96  98  00  02  04  06  BIS Review 7/2009  5-year rates Per cent 6.00  6.00  5.00  5.00  4.00  4.00  3.00  3.00  2.00  2.00  1.00  1.00  0.00 01 January 2008  0.00 01 April 2008  01 July 2008 Sweden  01 O ctober 2008  Euro area (Germany)  01 January 2009  US  Note: Refers to government bonds with approx.

However, the Riksbank’s assessment is that the weakening of the krona is temporary and primarily a result of the financial crisis. In times of financial turbulence investors tend to turn to the larger currencies, which are regarded as "safer”. The result of this flight to quality is that smaller currencies like the Swedish krona weaken. The Norwegian krona has also depreciated substantially. But there is a risk that this weakening will be more prolonged. This would normally lead to exports strengthening and imports slowing down, and at the same time provide an inflationary impulse. During a normal economic downturn it may be an advantage that the currency depreciates in this way and thus dampens the downturn. In the current circumstances, with a serious global financial crisis that may result in financing problems for entire countries, the situation may become more problematic. Several countries in Europe, in addition to Iceland, have seen their currencies depreciate substantially. In December the forecast was that GDP will decline by 0.5 per cent during 2009, but that growth will recover in 2010. The information received since then indicates that GDP growth in the fourth quarter of last year was weaker than we had been expecting, which will also push down the average for the year 2009. Industrial production, production of services and the activity index all fell in November. The National Institute of Economic Research’s Economic  8  BIS Review 7/2009  Tendency Survey and the purchasing managers’ index continued to fall in December, reaching all-time lows.
Extending that point, the literature may too easily dismiss the possible effects on prices of the demand and supply of financial assets more generally. But we need testable theories as to why, and the circumstances in which, they might matter. Finally, looking beyond the ex ante compensation for risk, we also need to have better models for exploring what can happen – in the financial system and in the macroeconomy – when nasty forms of risk do actually crystallise. Default comes to mind. 24 Bank default is a special case, given the special role of banks in a monetary economy. And, guess what? Banks don’t really feature in modern macro models. Of course, incorporating those features of the real world is incredibly hard, involving heterogeneous agents, incomplete contracts and markets, and uncertainty. Uncertainty needs to be underlined. It isn’t clear whether existing models could explain the swings we have been experiencing in some asset prices. Is that something to do with market participants having become radically uncertain about the nature of the underlying distributions? And do asset prices become actors in those circumstances? Over many decades now, 25 elegant models have been developed for studying financial market distress in the abstract – whether affecting banks or asset markets. This, of course, involves strategic interaction amongst agents.

Andres Sutt: Are ROEs peaking? Luncheon speech by Mr Andres Sutt, Deputy Governor of the Bank of Estonia, at the 9th Annual Nordic Financial Services Conference, Stockholm, 31 August 2006. Background slides (PPT) for the speech can be found on the Bank of Estonia’s website. *  *  *  Ladies and Gentlemen, It is my honor to address you at this conference. You represent financial institutions that control the flow of money, the lifeblood of the economy. I as a central banker can contribute the experience of someone who stands in the middle. Central banks, as you know, have a double task: to safeguard the price stability on the one hand and the wellbeing of the financial system on the other. It is with this balance in mind that I would like to address three topics today. •  Firstly, what are the characteristics of a Nordic-Baltic region as a closely integrated economic and financial market;  •  Secondly, the challenges posed by recent economic and credit growth;  •  Thirdly, some financial sector policy and supervisory challenges in this highly integrated regional market. Not surprisingly, the focus of my examples will mostly be on Estonia. Some special characteristics of the Nordic-Baltic region The economic situation in the Nordic-Baltic region is outstanding, especially in comparison with other regions of the EU. Output growth in the Nordic countries is up to two and in the Baltic countries even 4 to 5 times higher than the EU average.
Let me stress a few recent and important steps forward in Europe and in France. The Eurosystem is now incorporating climate change into the ECB's monetary policy operations, as announced by President Christine Lagarde in early July. When it comes to its non-monetary policy portfolios, after achieving the 2°C objective, the Banque de France will now align them with the 1.5°C objective, starting with European equities by end-2023, and completely by end-2025. As supervisors, the French ACPR conducted the first pilot stress tests dedicated to climate risks in 2021, followed by the ECB in 2022. Many jurisdictions (36 at this stage, including Japan) have followed, or are following the same road. The release last summer of six updated NGFS(v) macrofinancial scenarios will allow for enhanced assessments. This network, based in the Banque de France with an Asian chair, Ravi Menon of MAS, now has more than 120 members. We are very happy to count the Bank of Japan and the Japanese FSA among them. C. Raising stakes for standard setting and supervisory requirements Appropriate disclosure is obviously of the essence to foster sound and trustworthy green finance. Europe has been a pioneer in drafting standards. Since then, the newly born ISSB(vi) has published two draft standards on general disclosure requirements and climate-related disclosures, and the US SEC(vii) has published a proposal on climaterelated requirements, which would – if adopted – gradually come into force between 2024 and 2026. These initiatives are obviously welcome: climate change is a global topic.

François Villeroy de Galhau: Overcoming the energy crisis - a European perspective (and beyond) Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Paris EUROPLACE Tokyo International Financial Forum 2022, Tokyo, 15 November 2022. *** Ladies and Gentlemen, It is a great pleasure for me to be with you again –physically with you – in Tokyo for this International Financial Forum organised by Paris Europlace. I am honoured to share the closure of this event with my colleague and friend Governor Kuroda. We face together the awful Russian war in Ukraine, and its consequences on energy and economy. I will start with a brief description of the macroeconomic outlook in the euro area, and with our monetary policy normalisation (l). I will then focus on sustainable finance in France, Europe and Japan: it has a key role to play in our ecological transformation, more needed than ever (II). I. Macroeconomic outlook in the euro area  A. Despite recent shocks, growth outlook has shown overall resilience so far Let me start with the macroeconomic situation in the euro area, which has so far shown resilience. In 2021 our economy had strongly recovered from the Covid crisis: growth had reached 5.2 %, and even 6.8 % in France. We Europeans have remarkably overcome the Covid crisis, which hit us early and strongly. We achieved this through enhanced European unity, for instance in purchasing vaccines, and in implementing common budgetary measures to support our recovery (SURE(i) and Next Generation EU programmes).
The Riksdag’s possibility of sanction is to replace a member of the executive board each year, as the members of the executive board have varying periods of office. The Chairman and Vice-Chairman of the Governing Council of the Riksbank follow the executive board’s work by having the right to attend and speak at board meetings. This is how it must be in a democracy. Delegation of power must be accompanied by a possibility of holding to account. By the Riksbank being open about its objectives, its forecasts and the assessments that have been made by the executive board, confidence can be established in the Riksbank’s policy among politicians, investors and the general public. I consider that Sweden has a found a reasonable and balanced approach to implementation of the EU directive. 5. Are there alternatives? We have thus noted that Sweden has undertaken a fundamental change of policy. From having directed stabilisation policy at full employment as the highest priority, policy has been realigned to create stability. Low inflation is to constitute the economic environment in which full employment shall be restored. 7  BIS Review 59/1999  The objective of “price stability” is delegated to an autonomous Riksbank instead of – as previously – fiscal and monetary policy being co-ordinated by the Government to achieve both full employment and price stability. Full employment is aimed at by long-term economic growth. I have given a fairly detailed account of the failures of stabilisation policy that have led to this change of course.

The shift to a new policy took place between 1993 and 1995. 3  BIS Review 59/1999  However, it should be added with regard to the failed defence of the krona, that experiences of free capital movements were not especially extensive. The Government and the Riksbank and political analysts in Sweden did not have any experience of the conditions for economic policy in a globalised world. The new stabilisation policy regime The Government formulated the goal for monetary policy itself in January 1993. Inflation was to be maintained at two per cent per year with a tolerance interval of +/- 1 per cent. The goal is symmetric. It is as important to bring inflation up to two per cent when actual inflation is under two per cent as it is to bring down inflation when it is higher than the target. This can be said but a lot of practical issues remained to be resolved and the answers are not at all obvious: 1. How is inflation to be measured: by CPI, the GDP deflator, or some other measure of price movements? 2. Shall the Riksbank have other objectives besides price stability? 3. Shall policies be directed at controlling the money supply or inflation directly? 4. How is confidence to be established in the Riksbank’s policy and expectations about low inflation? 1. The inflation target The Riksbank’s objectives has been expressed in the following way in legislation: “The objective of the Riksbank’s operations shall be to maintain price stability.
The transformation from an institution that used to publish virtually nothing to an institution that publishes virtually everything took place in a very short period of time. We like to believe that our influence in this policy change was not negligible, not least with our unilateral decision in 1994 to publish the Fund report of the first Swiss Article IV consultation against all the then-existing rules. This was a precursory move that, although it earned our executive director a few moments of severe and formal reproof from the Board, had the merit to de-dramatize the publication debate by showing that the world would not come to an end if more information was disseminated about national policies. Subsequent developments have proved that much more could be done without jeopardizing the fine trade-off between openness and maintaining the Fund’s role as a confidential advisor to its members. Transparency is important not only for legitimacy reasons. In the new information-technology world, it has become a crucial element of stability. Transparency, together with more reliable information, facilitates a smoother functioning of markets and helps them in assessing risks more accurately, thereby strengthening market discipline. Stronger market discipline through transparency must be the new rule. Globalisation forces us to change. This means, for instance, that the range of action has considerably shrunk for those countries - rich or poor - that are active on financial markets.

This must include not only the member’s adjustment plans, but also its institutional and political capacity to deliver this adjustment. This also means that the cooperation between authorities and the Fund must be good and capable of generating constructive team-work. It has been easier to define this framework than to implement it. To some extent, this is not surprising, as one cannot avoid that a strong element of judgment will influence the assessment of the three above-mentioned conditions. And when there is room for judgment, there is always room for political interference. Moreover, if we add the fact that the alternative to large financing very often is the prospect of a full-blown crisis, with unpredictable but certainly high - and possibly systemic costs - it is not difficult to understand why the international community has often condoned sub-optimal decisions. One way to improve the situation and to eliminate this decision bias towards excessive Fund financing would be to find ways to involve more consistently the private sector in the resolution of crises and thereby in burden sharing. Once again, this is easier said than done. Progress in this respect has been disappointingly slow to emerge. Should we conclude that it is too difficult for the IMF to say no? I would definitely not go that far. While recognizing that capital crisis decisions may be too important to leave only to experts, bending the rules too often can also have serious consequences.
In April, the Chairman of the Financial Stability Forum (FSF), Governor Mario Draghi, summarised the view of the FSF when he said: “Our conviction is that […] institutions have accumulated a level of leverage that was both misperceived and excessive.” 2 Gerald Corrigan argues that “leverage, in its many forms clearly was a driving force in creating the market conditions that would trigger the crisis, just as the inevitable de-leveraging on the downside of the cycle would severely amplify the magnitude of the crisis.” 3 In a similar vein, the International Monetary Fund (IMF) stresses that the dramatic deleveraging of financial institutions is exacerbating the downward spiral so  1  See every issue of the Swiss National Bank’s Financial Stability Reports since 2003. 2  Mario Draghi, chairman of the Financial Stability Forum, in his address to the G7 ministers and governors, April 2008. 3  E. Gerald Corrigan, The Credit Crisis. The Quest for Stability and Reform, The William Taylor Memorial Lecture, Group of Thirty, Washington DC, 2008, p. 8. BIS Review 158/2008  1  prevalent in the current crisis. 4 Hence, by implication, the high starting levels of leverage are a major source of the severe and ongoing adjustment problems. Finally, the leaders of the G20 declared only last month that “excessive leverage” was a root cause of “vulnerabilities in the system”. 5 Moreover, the problem of excessive leverage is not limited to the current crisis. It has been a pivotal feature of most previous financial crises.

The risk here is that when the current external disinflationary pressures subside, domestic cost growth pressures will have built up and will push inflation above target before monetary policy can restrain it. I would not discount this risk. The labour market has clearly become much tighter. And if pay is being held down by cyclical or scarring effects, these could change quickly. And there has been a substantial depreciation in sterling in the past three months which will push up on inflation, possibly more quickly than the usual prolonged lag between changes in the exchange rate and inflation. But with interest rates near the effective lower bound, with powerful disinflationary forces from abroad likely to persist for the next year, with low growth in unit labour costs and with an economy growing at around 2%, I think this is the lesser risk. Second, there is the concern that continued low interest rates lead to the build-up of financial stability risks through an acceleration of credit growth, increase in bank leverage and household indebtedness. The financial system has only recently come back to life with economy-wide credit now growing in the UK at around the rate of GDP. While there are some elements of credit that are growing more strongly, such as buy to let mortgages and unsecured debt, I think we are now emerging from the post-crisis phase and in a more standard stage of the credit cycle and we now have macroprudential tools to manage risks as they build up.