samchain/econo-pairs-v1 huggingface dataset:
But the interest rate should also contribute to equilibrium in the market for real capital in the long run. To achieve this, the real interest rate must not over time deviate too much from the return on real capital. Substantial deviations can give rise to undesirable fluctuations in the markets for real capital that have no basis in economic fundamentals. In Norway, both short- and long-term real interest rates are at the moment at a low level, compared to the past few decades. This is also the case in many other countries. How large the deviations from the neutral and the equilibrium rates are, on the other hand, is less clear. Neither the neutral rate nor the equilibrium rate are variables that can be observed. Economic theory can contribute insight into the factors that determine the equilibrium rate, but attempts to quantify it based on theory yield an uncomfortably broad interval. An alternative is to use historical average interest rates on the basis of an assumption that actual real interest rates will vary around the equilibrium rate. This method also poses problems, however. 2  BIS Review 22/2006  Throughout the period 1870-2005, the average long-term real interest rate in Norway has remained close to the average in the UK and the US: Norway 2.2 per cent, the UK 2.0 per cent and the US 2.8 per cent. In all countries, fluctuations in real interest rates have been substantial in periods. The real interest rate has fallen markedly since the beginning of the 1990s.

There is an ongoing debate about the reasons for the decline in long-term real interest rates over the last few years. I will not elaborate on that debate here; it is a subject worthy of a seminar by itself. One particular possibility, pertaining to the discussion of the roles of the real interest rate, is that the fall in long-term interest rates may partly reflect market participants’ assessment that the neutral real interest rate has fallen. During a business cycle, it is the real interest rate’s deviation from the neutral real interest rate – the real interest rate gap – that indicates whether monetary policy is expansionary or contractionary. The neutral real interest rate is difficult to estimate and may change over time. Nevertheless, we have tried. On an uncertain basis we estimate that the neutral real interest rate for Norway may now be close to 2½ per cent, having come down approximately 1½ percentage points since the mid-1990s. Forecasts in the latest Inflation Report indicate that the short term real interest rate in Norway will be close to its neutral level in about four years. According to this, the real interest rate gap (the difference between the neutral rate and the actual rate) has been negative since 2004. There is evidence that monetary policy has had the desired impact both on the real economy and on inflation. Monetary policy at the present phase of the cycle Growth in the Norwegian economy has been high since summer 2003. The expansion has gradually broadened.
2 The net job creation figure of 6,900 includes FinTech jobs in the overall economy, but excludes jobs in holding  companies. The employment increase of 7,600 for the financial and insurance sector in 2018, published by MOM, includes holding companies. 11 / 11  BIS central bankers' speeches

A credit slowdown stemming from the weakening of the cycle, due to its obvious effects both on the solvent demand for credit and on the riskadjusted supply by institutions, would be another matter entirely. For their part, institutions need to assume fully the new reality in which they will have to operate in the coming years and address it intelligently and decisively. This will require an adjustment of their balance sheets, so that credit flows to the real economy while attention is paid to the greater risk of default which will have to be correctly managed. At the same time, on the liabilities side, it will be necessary to continue strengthening the deposit base as far as possible, since the capacity to finance banking activity through the wholesale markets will be more limited. This adjustment of bank balance sheets must be accompanied by strict cost controls, which are the main mechanism for limiting the impact of the new environment on bank income statements. The economies of scale offered by bank consolidation (widely aired in the media) is one way to tackle this rationalisation of cost structures. In any event, irrespective of the strategy that each institution may decide to adopt, the result should be one of greater efficiency. Finally, if we have to face a period of slower growth in banking activity, with greater uncertainty and lower profits, banks should also endeavour to strengthen their capital base.
References Albagli, E. and K. Schmidt-Hebbel (2004), “By How Much and Why do Inflation Targeters Miss Their Targets?”, Mimeo, Central Bank of Chile. Céspedes, L. and C. Soto (2005), “Credibility and Inflation Targeting in an Emerging Market: Lessons from the Chilean Experience”, International Finance 8 (3): 545-75. Gürkaynak R., A. Levin, A. Marder and E. Swanson (2007), “Inflation Targeting and the Anchoring of Inflation Expectations in the Western Hemisphere,” in Monetary Policy Under Inflation Targeting,  BIS Review 68/2007  5  Series on Central Banking, Analysis, and Economic Policies Vol. XI, edited by K. Schmidt-Hebbel and F. Mishkin, Central Bank of Chile. Institute for Management Development (2006), World Competitiveness Yearbook, several years. International Monetary Fund (2007), International Financial Statistics. Data on CD-ROM, April. Mishkin, Frederic S. and K. Schmidt-Hebbel (2007), “Does Inflation Targeting Make a Difference?” in Monetary Policy Under Inflation Targeting, Series on Central Banking, Analysis, and Economic Policies Vol. XI, edited by K. Schmidt-Hebbel and F. Mishkin, Central Bank of Chile. Moody’s Investors Service (2006), “Monthly Ratings List. Bank Credit Research”. Ramos-Francia, M., D. Chiquiar, and A. Noriega (2007), “A Time Series Approach to Test a Change in Inflation Persistence: The Mexican Experience”, Working Paper N° 2007-01, Banco de México. World Bank (2007), World Development Indicators 2007. April.

In particular, the very favorable world economic conditions that have resulted in important terms of trade gains have been associated this time to fiscal prudence, complementing monetary and exchange-rate policies aimed at achieving and maintaining price stability. Four areas of macroeconomic adjustment: Fiscal, monetary and exchange rate policies, and the financial system The main changes that have taken place are in four key areas: (i) adoption of sustainable and responsible fiscal policies, reflected in declining fiscal deficits in most emerging economies (figure 1); (ii) adoption of floating regimes or hard pegs, moving away from intermediate exchange-rate (ER) regimes; (iii) shift of monetary policy (MP) anchors from ERs or monetary aggregates to an inflationtargeting (IT) anchor, particularly in Latin America; and (iv) these changes have been accompanied by the strengthening of regulation and supervision of financial systems, supporting strong financial development. Shift toward more flexible ER regimes The world shift toward more flexible ER regimes has been pronounced. The evidence shows a significant shift away from intermediate regimes. In 1990, nearly 70% of all countries were pursuing some variant of intermediate ER regimes, a share that dropped to 41% by the end of the 1990s, and further to 30% in 2004 (figure 2)1. Exits from intermediate regimes were more frequently towards floats rather than to hard pegs. The share of floaters increased from 15% in 1990 to 45% in 2004 while, on the other extreme, the share of hard pegs rose from 15% to 26% during the same time span.
A prolonged surplus on the current account will sooner or later strengthen the nominal exchange rate so that a balance is achieved. However, this can evidently take longer than expected. BIS Review 79/2001  3  Although the long-term value of the krona is determined by flows of goods and other items in the current account, its price is governed in the short term by supply and demand on the foreign exchange market, and here other factors can prevail. Developments on the financial markets have led to rapid and substantial portfolio transfers when, for instance, Swedish investors have bought shares abroad or foreign investors have sold Swedish shares. Changed expectations of earnings on various shares and changes in the willingness to take risks appear to have increasingly governed the developments on the foreign exchange markets in a way that is not captured by traditional exchange rate models. Portfolio transfers as a result of deregulation or changes in investment regulations may also have had significance. In the long term, however, it is difficult to believe that anything other than the development of the fundamental economy shall determine how the exchange rate develops. Regardless of which model we apply to explain the krona rate, it will show that the krona is undervalued and has been so for a long time. Despite the difficulties connected with forecasting exchange rates, we have to make assumptions regarding the development of the krona in our assessments of inflation.

Instead, it can issue warnings and recommendations to national authorities and to EU institutions. These warnings and recommendations can be either public or private. The effectiveness of its recommendations will depend on the attitude of the addressees to the “comply or explain” principle. This principle simply says that either you do as recommended or you explain why you have chosen not to comply. To work, it requires respect for the institution issuing the recommendations. BIS central bankers’ speeches  3  Figure 6 The structure of the ESRB  Secretariat (about 20 people)  ECB  General Board (65 members, 37 voting members)  Steering Committee (14 members)  Advisory Technical Committee (62 members)  Advisory Scientific Committee (16 members)  The ESRB is unique in that it brings together representatives from central banks and financial supervisory authorities from all 27 Member States, as well as representatives from the three European supervisory authorities and from the European Commission. However, this also makes the General Board a large body consisting of 65 members – 37 voting and 28 non-voting. Decisions are taken by simple majority, but a majority of two thirds is needed to adopt recommendations or to make a warning or recommendation public. The fact that ESRB decide by voting rather than by consensus is important, since blocking minorities can be avoided. The majority of voting rights are held by the national central banks (27 voting rights) while the national financial supervisory authorities have one non-voting representative per Member State in the General Board.
The only possible disadvantage I see would result from the imposition of onerous regulatory or financial burdens -- for example onerous minimum reserve requirements -- which might act to distort activity within the financial sector and/or drive it outside the euro-area altogether. So what then are the prospects for the City if the UK is, initially, out? The current strengths of the City -- as a uniquely international, rather than simply a national or regional European financial centre -- will be familiar to you. They include a vast, critical mass of markets and financial services in commercial and investment banking, securities and derivatives activity, investment and fund management, insurance and commodities and so on, involving an extraordinary concentration of the strongest financial businesses from all around the world. To give just one example, uniquely among the major countries we have more banks which are incorporated abroad operating in the City than domestic banks, and over half of the total deposits of the UK banking system is denominated in foreign currencies, worth over £ trillion -- that’s a one and twelve noughts -- notwithstanding the current strength of sterling. The particular strengths that have contributed to this massive concentration of international business are many and various. They include: the English language; the convenient time zone; the ready availability of the relevant trading and other financial skills as well as professional support services -- in law, accountancy, tax, property, communications and so on. They include effective infrastructure.

But one thing is clear: everyone, in or out, has an unambiguous interest, if EMU does go ahead, in doing everything we can to make it a success. And it is equally clear that those countries that participate in Monetary Union have a similar unambiguous interest in the economic prosperity of countries remaining, at least for the time being, on the outside. Larry Summers, the Deputy Secretary of the US Treasury, writing about EMU in the Financial Times on Wednesday, said: “The US is well served when Europe is vibrant economically and working to open its markets and strengthen its ties with the global economy.” He might have been speaking for all of us here in Europe, in or out, recognising that we have a mutual, and reciprocal, self-interest in each other’s economic well-being. So my general point is this. Whatever the outcome on EMU, it is vitally important that we continue to maintain, and strengthen, positive and constructive relationships throughout the European Union area -- and indeed beyond -- in our national and collective interests. For the UK, in particular, if we were to opt out of the first wave, that certainly means that during our EU Presidency, over the critical first half of next year, we must -- as I am quite confident we will -- do everything we possibly can to ensure that the procedures leading up to the historic decisions run smoothly and that the decisions themselves are timely and, hopefully, harmonious.
As we look back over the past 18 months or so, the pandemic has posed unprecedented challenges to the global economy. At the height of the pandemic, many economies implemented varying degrees of lockdown and social distancing to mitigate cross-infection risks. 6. The impact of such measures, however, has been uneven across different sectors. Since many face-to-face activities stuttered to a halt, the service sector – particularly retail, restaurants, and hospitality – was among the hardest hit. Many people in the service sector have lost their jobs and family income. 7. Likewise, SMEs were hit especially hard by the pandemic. As compared with big businesses with large financial war chests, SMEs generally are more vulnerable to cash flow crunches and shrinking business flows. In the face of frozen economic activity, many SME businesses have struggled to survive through the pandemic. If the situation was not handled promptly, one could easily find that the less defensive customer segments would be locked out of their access to financial services such as loans. 8. That is exactly why governments around the world have launched extraordinary fiscal measures to support those having a tough time. Hong Kong is no exception. The Government has launched the Special 100% SME Financing Guarantee Scheme and 100% Personal Loan Guarantee Scheme to alleviate the cash flow pressures of distressed SMEs and unemployed individuals. 9. But, apart from fiscal policy, is there any role that the financial system can play? In my view, the financial system can play three key roles. 10.

HKMA, as both a banking regulator and market facilitator, has the role of creating a conducive environment for this to happen. Therefore, we have launched a new Fintech 2025 strategy recently and will work hand in hand with the industry along this fintech journey. 18. Of course, we are mindful that technology can be a double-edged sword. If done properly, technology can enhance financial inclusion. But there are always risks. For example, the improper use of artificial intelligence and machine learning may lead to biased outcomes and even exclusion. Ill-constructed “model-based” lending could unfairly discriminate against some SMEs. And from a conduct risk perspective, customers could be advised to invest in products not in their best interests. Therefore, it is necessary to properly manage such risks and ensure fairness in the algorithms through rigorous validation and testing. 19. In other words, building a smarter financial system is not just about how much technology content we inject into it. What is more important is whether the outcome for customers is more inclusive and efficient, and whether banks can better manage the risks involved. 20. If we look at another key development priority pursued by the HKMA – Green and Sustainable 2/4  BIS central bankers' speeches  Finance – similar financial exclusion concerns could also arise. It is important that when we gear towards a greener financial system, we should also have financial inclusion in mind. This is the third role of the financial system that I want to talk about. 21.
If we do so, perhaps others too, could replicate some of those efforts which  BIS Review 133/2008  1  have been proved to be successful. Hence, there is an urgent need for us to create the awareness. We also have to enact the necessary laws. Sri Lanka has already passed the necessary laws for this purpose: so have many other countries. That is very important. Because, without the legal framework and the legal backing, our efforts will not succeed. Then, we have to build our own capacities. We have to have people who are trained and competent to deal with these challenges. Because, unless you have the competence, and the ability to recognize certain disguised transactions, the ability to see through the clever facades, and the ability to anticipate the next move of the terror financiers or money launderers, we would not be able to progress. Therefore, we have to diligently follow rules and detection principles. That is why this kind of conference is very important. My dear friends, we have to realize that money launderers and terrorist financiers are also smart. Your Lordship, they may also be having conferences of this nature, in their own way, to see how best they can be a step ahead of all of us, to ensure that they will be able to perform their own dastardly deeds more successfully. They will take advantage of calamities. On many occasions we have seen how that has worked. Earthquakes, droughts, civil strife, tsunamis, etc.

The UK labour market is flexible and here too there are early signs that the degree of mismatch may be easing a little. But in some cases that may take time and it may take extra costs. As is often the case, therefore, the behaviour of labour costs will for me be important in judging the appropriate stance for monetary policy. This won’t be straightforward. Unfortunately, there’s still a great deal of noise in the earnings data – base effects, shifts in furlough and in the composition of employment are all still distorting official estimates of wage growth – but they are nonetheless a key area of focus. Let me now go through these two broad areas in more detail – first traded goods and then the domestic labour market – before wrapping up with some implications for what matters for policy. The strength of global goods price inflation: shifts in demand and constraints on supply The upside surprises in inflation, here and in other countries, have been concentrated in prices of physical goods. Chart 6 plots the two series in the UK. For the first time in quite a while, goods price inflation is  Put another way, mismatch in the labour market tends to raise the rate of unemployment consistent with stable wage growth – the so-called “NAIRU”. 4  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  higher than that in services. This has happened before – briefly in 2008, 2011 and again in 2017.
Funding in securities markets is too expensive for the smallest enterprises. The securities market plays less of a role in Norway compared with other European countries and the US. The market for equity capital is particularly small in Norway. Norwegian companies often rely on foreign funding for new projects. The thin market for securities capital in Norway may be an obstacle to the development of the business sector. This means that it is essential that the banking system function smoothly. When they function, the strength of financial markets lies in their transparency and adaptability. Capital which is tied up in unprofitable activity can be freed up for other activities. Competition for capital contributes to creative destruction. 13  BIS Review 14/2000  Chart 15  Structural changes also take place within individual companies. One example is NOKIA. Thirty years ago, the forerunners of the world’s leading producer of cellular telephones were primarily producing telephone cables, rubber boots and tyres. At that time, the electronics division accounted for 3% of NOKIA’s turnover and employed 460 persons. However, research and product development led to a wider range of products. In 1988 NOKIA was the third largest producer of television sets in Europe and the largest producer of cellular telephone equipment in the Nordic area. NOKIA experienced a deep crisis in the beginning of the 1990s, as did many Finnish companies. NOKIA decided to concentrate on telecommunications. The split-up of the group was initiated from within the company. Non-core activities were spun off and sold.

After analysing the different alternatives, the SNB decided to use a combination of SNB Bills and reverse repos. These instruments are perfectly in line with our monetary policy strategy. There is, however, still a range of alternative instruments available, should there be a need for them. Let me explain briefly how the method chosen by the SNB works. As I have already mentioned, the SNB aims to keep the three-month Libor within a certain target range. This rate depends on the level of liquidity in the financial markets. If there is excess liquidity, the SNB must withdraw a certain amount to influence the level of the Libor. In so doing, it uses a two-pronged approach: on the one hand, it issues SNB Bills with different terms. Banks or investors who purchase these bills pay the SNB with liquid funds, which are thus drained from the financial system. On the other hand, the SNB also makes use of reverse repos in order to complete the withdrawal of liquidity achieved by the use of SNB Bills. In a reverse repo, the SNB delivers securities to a bank in exchange for liquid funds, thereby absorbing liquidity from the financial system. Reverse repos with a term of, in general, one week are used to manage short-term liquidity. SNB Bills, on the other hand, are used to manage liquidity in the longer term (one month or more).