samchain/econo-pairs-v1 huggingface dataset:
Már Guðmundsson: Challenges for the Icelandic economy Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the 49th Annual General Meeting of the Central Bank of Iceland, Reykjavík, 25 March 2010. *  *  *  Madame Prime Minister, Madame Chairman, honourable Ministers, honourable Ambassadors, ladies and gentlemen: As we gather here for this 49th Annual General Meeting of the Central Bank of Iceland, the Icelandic economy is still recovering from overheating and the shocks of the recent past. The contraction in the economy is a part of this process, but it is rooted in three things. First, it was inevitable that the enormous expansion characterising the Icelandic economy in 2005– 2007 should subside. In line with previous experience in Iceland and other countries, it was highly likely that this would occur through a sharp drop in exchange rate and asset prices, followed by a temporary contraction in business activity and employment. Second, the Icelandic economy sustained severe blows as a result of the worldwide recession in late 2008 and early 2009. The third cause was the collapse of the Icelandic banks in the fall of 2008. When the banks failed, assets were lost, and Iceland’s relations with the international financial system were severely damaged. They remain damaged to this day, as our capital controls bear witness. The question of how to quantify the proportional contribution of these three causes to our current economic hardships is a persistent one.

The academic literature has identified that one of the main problems posed by public investment as a mechanism for providing cyclical momentum is the delay in its implementation, which is greater in the case of large projects. Although this may be of less importance in the long term, it is fundamental in the short term if the fund is to contribute to economic recovery (that is, to closing the output gap caused by the pandemic). Thirdly, the macroeconomic impact of the funds received (that is, the fiscal multiplier, which measures how much economic activity is generated by each euro spent) will also depend both on the overall economic situation and on the nature of the projects approved. Both the theoretical models and the empirical evidence available indicate that public investment expenditure has a larger and more enduring impact on activity than that of spending in other areas, such as government consumption or transfers to households.8 This is so, inter alia, because, in addition to increasing demand for goods in the short term (as occurs in other cases), public investment also helps to expand the economy's productive capital stock and, therefore, to support medium and long-term growth.9 In any event, the timing of the impact of public investment on activity hinges on the nature of the projects receiving the investment. For instance, although the effects of R&D expenditure are higher in the future, they may take longer to materialise than with other public investment projects.
The Central Bank of Iceland responded to the pandemic-induced recession with policy rate reductions totalling 2 percentage points. These rate cuts and other measures adopted by the Bank and the Government made it possible to safeguard purchasing power in Iceland, and we made it through the shock with a 7.2% drop in GDP. The tide turned quickly, however. In May 2021, the Central Bank of Iceland became the first central bank in the West to start ratcheting its policy rate upwards at the start of the recovery. It has now raised the policy rate a dozen times, by a total of 6.75 percentage points, to the current 7.5%. We admit freely that the Central Bank of Iceland underforecast inflation, as did its counterparts abroad. In retrospect, we could have raised interest rates faster. On the other hand, the impact of rate hikes can never be predicted with perfect accuracy, and prudence surely puts limits on how fast interest rates can be increased. Furthermore, policy makers must be careful not to take excessive macroeconomic risk. Nevertheless, appraisals by foreign experts have concluded unanimously that the Central Bank took the right action in a timely manner, both in response to the pandemic and in the effort to maintain price stability in its wake. Among these experts are the International Monetary  4/8  BIS - Central bankers' speeches  Fund and the appraisal committee appointed pursuant to Article 36 of the Central Bank Act.

The potentially large number or companies, SMEs in particular, that may be affected by these solvency problems in the current crisis plus the fact that the public sector can be an important creditor as well, given the generalised use of public guarantees during the crisis, introduce additional difficulties or specificities that should also be taken into account. In sum, withstanding the negative consequences of the COVID-19 crisis on the solvency of viable firms, is currently a major challenge for economic policymakers. Swift policy action taken since the start of the crisis allowed a liquidity crisis to be avoided and has helped translate the medical advances against the disease into more positive macroeconomic scenarios. However, we must now be ready to react to these solvency risks in order to prevent the current crisis from developing a financial component which, as we painfully know from recent experience, would only make the crisis more lasting and socially and economically more costly. Thank you for your attention. 2/2  BIS central bankers' speeches
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.

As Chart 2 shows, long-dated corporate borrowing rates have followed much of the downward move in government bond yields over recent years. Whether you believe this is reflective of the prospect of gloomy days to come or the result of some other factors will determine whether you – as corporate treasurers – view very long low yields as a warning or an opportunity. In the rest of my remarks I will cover four possible explanations for the current level of long yields: (i)  lower inflation expectations;  (ii)  the balance of savings and investment intentions;  (iii)  diminished potential output growth; and  1  Bernanke (2005). BIS central bankers’ speeches  1  (iv)  reduced term premia  I will argue that it would be overly pessimistic to believe that the headwinds currently affecting the nominal and real economy will persist for decades to come. But I will also argue that there are other influences on long yields affecting saving and investment decisions (including the persistent-but-not-permanent effects of a balance sheet recession, and greater weight being attached to downside risks) and on term premia (including the impact of central bank asset purchases). 2. Inflation expectations  Let me start with inflation expectations. Because some of the decline in nominal yields over recent years coincided with a marked and unexpected decline in headline inflation in the UK, a natural question to ask is whether or not this was caused by a shift lower in inflation expectations.
Developments in recent years, with strong production growth and falling or only slightly rising employment are examples of how contradictory the signals can be. One weakness in this context is that production data is revised regularly. This makes it particularly difficult to estimate the amount of spare capacity there is in the economy at present. The picture of how high capacity utilisation was at a particular point in time can look different when new data are received and earlier outcomes are revised. One example worth mentioning is that the first data regarding GDP growth in Sweden during the first quarter of 2005 was 1.4 per cent, while the most recent calculations indicate that the figure was actually 2.1 per cent. The fact that there is considerable uncertainty regarding such a central variable as capacity utilisation is, of course, a problem. Everything would be much simpler if it were possible to quantify capacity utilisation in the same way as inflation can be measured. However, as it is not possible, I believe it is wise not to pretend to have this knowledge. For similar reasons, precise money supply measures have also been abandoned. Our forecasts of growth and inflation must nevertheless essentially be based on a view of the position of the economy with regard to a situation with normal capacity utilisation. In practice, a large amount of information from different sources must be weighed together to make an overall assessment.

The purpose of this interval is to explain that deviations from the target are unavoidable, but also that overly large deviations cannot be easily accepted if the inflation target is to remain credible. To make this clearer, monetary policy is guided by the principle that when there are deviations from the target, our aim is usually to bring inflation back to target level within two years. The tolerance interval together with this principle creates flexibility for monetary policy. This is necessary, as it is not possible for the Riksbank to control inflation with any precision in the short term. It is quite simply not within our power to maintain inflation at exactly 2 per cent all of the time. The flexibility also creates an opportunity for us to take into account real economic considerations as long as price stability is not jeopardised. Temporary deviations may thus be justified by taking into consideration growth and employment, for instance. The statutory objective of price stability must not be disregarded so it is important that the flexibility is not used in a way that would undermine confidence in the inflation target. One can say that the two-year horizon sets a limit as to how much consideration we can normally give to other aspects than price stability. The clarification of monetary policy published in 1999 also made it clear that under some circumstances it might be necessary to have an even greater degree of flexibility and allow inflation to take longer to reach the target than the usual two years.
The education and training sector will play a critical role both in developing entrepreneurial mindsets and in equipping future entrepreneurs with the skills necessary to successfully position new enterprises and manage their development and growth. Ladies and Gentlemen, it is a fact that a thriving entrepreneurial culture has the potential to make a substantial contribution to our economic and social development and to achieving a balanced economic growth. The key therefore, is for businesses to be innovative and competitive at all times. To achieve this we need to develop outstanding young men and women who can be leaders in their fields and who are ambitious with a mindset to be successful and to compete at the highest level. Mr Chairman, I have no doubt that awards like yours can be hugely influential in fuelling the entrepreneurial urge and in inspiring youths to emulate the achievements of those whose enterprising dreams will be rewarded this evening. The award will also be key in raising public awareness on the need for continuous innovation among our youths. As you are aware, the engine of the fast growing economies such as China and India is the innovation and creativity of the young entrepreneurs in those economies. It is incumbent upon us therefore to also encourage our youths to take up their rightful place and contribute to the country’s development.

Furthermore, banks and Financial Institutions in Zambia have in the past lamented the low levels of banking and economic knowledge among graduates from tertiary institutions as well as the borrowing public in general. It is therefore gratifying to note that this evening, we celebrate and showcase the depth of the entrepreneurial talent that is flourishing in our schools of higher learning. It is also heartening to see these young men and women putting up high quality business proposals of a diverse range of projects. This speaks well for the inventiveness of our learning institutions and is a very welcome development indeed. Ladies and Gentlemen, this initiative represents a major milestone in developing linkages between the industry and tertiary institutions which is key in bridging the gap between expectations of employers and those of the labour force. It is also testimony that we have financial institutions and business entities that are willing and committed to promoting private entrepreneurship among young people in our country at the level of start-up businesses. Once again, I commend the sponsors and their partners for this important initiative. I am certain that your efforts will go a long way in contributing to the building of an entrepreneurial society in Zambia. This is a task not only for you but for everybody. I wish to urge in particular, the education system in Zambia to enhance their efforts in promoting positive attitudes towards entrepreneurship in the institutions of higher learning.
I will return to banks' capital adequacy later but  BIS Review 4/2001  1  first I want to say a few words about our perception of the US economy and the implications for the UK. US Economy: Soft or Hard Landing? The dramatic improvement in US economic performance through the 1990s, in terms of growth and productivity, gave rise to a sharp increase in expected returns to investment and, as a result, increased domestic and foreign demand for US assets. Investment has been particularly concentrated in ICT (information, computers and telecommunications), much of it financed by borrowing on the strength of projected future profits. However, growing uncertainty over the size and permanence of these productivity gains, and about the long run growth of GDP and profits, has fuelled the recent increase in market volatility. In addition, there have been more immediate worries about the impact of a cyclical downturn in productivity and earnings. Another area for debate has been the implications of any reversal in capital flows. As I have noted, buoyant earnings expectations drove up equity prices and encouraged high rates of investment. But alongside the rapid rise in the market value of US household wealth in relation to income came a sharp fall in domestic savings. The gap between savings and investment - manifested in an external current account deficit which has risen to an unprecedented rate of 4½% of GDP - has been filled by large capital inflows.

The fact that the US has enjoyed an unparalleled period of strong and continuous growth during the nineties owes a great deal, of course, to the policies of the US authorities. They have had to steer a difficult path between maintaining conditions conducive to growth while not being seen to underwrite the risks of "irrational exuberance" in security markets or lax lending standards by banks. This balance became especially difficult to strike towards the end of last year in the face of sharply lower corporate earnings projections and widening spreads on higher risk borrowings. As some lower-rated companies found access to the capital markets increasingly difficult, and as banks tightened credit standards, liquidity fears for some borrowers intensified. These factors, together with a sharp downturn in business optimism and mixed economic data, added to growing fears of a recession this year. Such a climate of uncertainty calls for clear signals from the authorities and over the past two months the Fed has responded in a decisive fashion. The adjustment in the policy bias and recent cut in rates have increased the probability of a soft landing and will, from an international perspective, reduce the risk of a sharp reversal of capital flows into US markets. The combination of a slower growing - but still expanding - US economy and a weaker dollar should provide a more sustainable pattern of current accounts and capital flows, reducing the risk of instability in financial markets in both the US and abroad.
I was trying to bring a bit flavor of my country across centuries. Being a crossroad, the main gate from east to west, today Albania represents an important actor whose solely role is to provide peace and stability in the region. 2. Albania through transition  For many decades Albania was cut off from other European countries, including the Central and Eastern European ones because of its extreme economic centralization and adherence with the principle of self-support. Transition brought about a structural change in the principles of economic philosophy. The market forces took over the distribution of economic resources and the reduction of existing economic imbalances. This process resulted in increased unemployment, reduced output and consumption, while prices of consumption goods increased over 100 percent. Foreign reserves disappeared almost instantly under the pressure of reduced output and drastic devaluation of domestic currency. Meanwhile a relatively large and growing stock of foreign did not stop the declining trends. Public confidence dived and many Albanians emigrated mostly in neighboring countries. Financial situation deteriorated at a fast pace as well. Monetary policy as we know it was inexistent for Albania did not have a modern central bank. Early structural reforms focused on cutting the subsidies for insolvent state owned enterprises; massive price liberalization; privatization process; land reform; and provided the necessary incentives for the rapid macroeconomic consolidation of 1993-1995. During ‘90s Albania’s path has been quite disordered scoring one of the most unique transitory experiences. It was an experiment a trail and error by everybody.

Christian Noyer: Banking regulation and the financing of the economy Introductory speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, to the Paris-Europlace Forum, New York, 26 April 2010. *  *  *  It is a great pleasure for me to be here in New York and address the audience of this ParisEuroplace Forum. As always, the forum is an opportunity for sharing experiences and perspectives. As we make progress in our efforts to strengthen financial regulation, such discussions are very valuable for confronting views and making sure that we are on the right track. To some extent, the ultimate aim of financial regulation has to do with financing the real economy. Sound regulation should enable the stable provision of financial services to economic agents as they strive to finance their activities. This is why I would like to discuss with you a few aspects of the current reforms of financial regulation that are critical in terms of the financing of the economy. More precisely, in the few minutes I have, I would like to share with you some thoughts on three important policy challenges. How can we make our financial systems more resilient and therefore capable of financing the economy on a long term basis? How can we reduce the procyclicality of financial systems? How can we address systemic risk?
The four Directors-General of the ECB responsible for supervision have already been designated, one of whom is the current Director-General of Banking Supervision of the Banco de España, which is a cause of satisfaction for our institution. The selection processes for the remaining management positions will continue over the coming months. Thanks to the work by several groups of experts, two essential pieces of the future mechanism are at an advanced stage. These are, namely: the Framework Regulation that will define the supervisory function, its internal organisation and the assignment of responsibilities among the various authorities making up the mechanism; and the supervisory manual, which will precisely set out the procedures to be followed by all the members of the mechanism, including naturally the supervisory personnel of the national authorities. The ECB and the national authorities are also working on developing the comprehensive assessment of credit institutions in the participating countries, which began last November and will be completed before the ECB assumes supervisory powers. This assessment will include an asset quality review, performed with the help of auditors or external consultants, and subsequent stress tests, which will be conducted in collaboration with the European Banking Authority (EBA).

In particular, the acceptance of the principle of transnational mutualisation of financial risk in Europe, although implemented very gradually and limited to funds contributed by the industry, is essential to ensure the homogeneous treatment of banking risk throughout the EU. Above all, from a broader standpoint, the agreement means that a significant political obstacle to extending the risk-sharing framework has been overcome. This will very likely pave the way for more significant progress in European integration in the future. Let me finish by noting that in recent economic history it is difficult to find bouts of regulatory reform as intense as at present. Globally, the unprecedented costs of the banking crisis for citizens as a whole have spurred major regulatory changes designed, firstly, to tighten up prudential regulation so as to reduce the likelihood of fresh crises in the future; and, secondly, to develop new resolution regulations to lower and allocate more fairly the cost of maintaining financial stability. In Europe the application of the regulatory reform coincides in time with a far-reaching institutional change which has to lead to the creation of a banking union. And, in Spain, all these important regulatory and institutional changes are taking place against a background of deep reform of our financial sector which has involved the clean-up of balance sheets, the recapitalisation of vulnerable banks, progress towards greater consolidation of the industry and enhancement of regulations, particularly those governing savings banks.