samchain/econo-pairs-v1 huggingface dataset:
In these circumstances, had we allowed the exchange rate to adjust to market pressures within the 15 per cent band, the currency would have appreciated. 5. You seem to be playing down the efficacy of the fiscal deficit and of exchange rate adjustment as a means of jump starting the economy. What would you suggest instead? As I have already pointed out, the domestic factors which are contributing to the economy’s anaemic growth record are largely microeconomic in nature. I have also explained why deficit financing and changes in the nominal exchange rate cannot correct these weaknesses, still less produce sustainable growth. Policy orientation must eschew short-term palliatives. Like our competitors we must learn to come to terms with globalization. Reflecting on one simple fact should help in understanding what this means: the hourly cost of labour of an electronics operative in Malta is around $ compared with $ in Singapore and $ in China. Neither more government spending nor a devaluation can narrow that gap. Against this background, maintaining external competitiveness in the long run depends on continued moderation in wage growth, faster increases in labour productivity and sustainable budget positions. I make no claim to originality in proposing this prescription; it is shared by the EU Commission, the ECB and the IMF. I shall first address the last objective. Given that taxation levels are already high, fiscal consolidation should be achieved by cutting recurrent spending.

So far this year, it has bought currency for 30 b.kr., as opposed to 21 b.kr. over the same period in 2014. If it maintains that pace, it will buy more currency in 2015 than in 2014. As a result, the reserves exceed the outstanding foreign-denominated loans taken to finance them – by 65 b.kr. as of the end of February. But we mustn’t rest on our laurels; we need sizeable reserves as we prepare to lift the capital controls. I mentioned uncertainty surrounding the estimation of potential FX outflows once the controls are lifted. But one thing is certain: if the failed banks’ estates were given a green light tomorrow and could convert all of their krónur to foreign currency, and the same happened with the offshore overhang, there is no way we could safeguard stability, let alone bolster confidence, except perhaps after a long time has elapsed. The Central Bank of Iceland has designed a model intended to assess the impact of various developments in the balance of payments over a long horizon, including capital account liberalisation measures. When applied to this instance, the model reveals that our entire foreign exchange reserves would be wiped out – and more besides – if they were used to shore up the exchange rate. This would never be done, of course, and therefore the currency would depreciate sharply.
Such discipline is not possible without meaningful public disclosure of a bank’s financial condition. I think we would all agree that there is no greater enemy to a stable financial marketplace than a lack of confidence, and surely nothing undermines confidence more than a lack of reliable information. Discipline by the market is not always pleasant – a lesson many companies have re-learned recently. Yet better quality information, or what we often call transparency, can boost the confidence of depositors, investors, and creditors, and it can contribute to stability by encouraging banks to adopt a more proactive approach to managing their risks. In this regard, just last month the Basel Committee published the results of a two-year study on public disclosure practices of internationally active banks as a guide to the industry and accounting standards setters on areas where disclosure can be improved. BIS Review 35/2001  3  While many countries have made great progress over recent years to improve the quality and level of disclosure, disclosure practices have not kept up with the changes in how banks manage their businesses and in how they measure and mitigate their risks. To improve this situation, I believe that the notions of what is public versus proprietary information must change. It is critical to approach the question of disclosure as users of financial statements. Shareholders, creditors, and counterparties cannot understand the risks of their own exposures to a bank until they first understand that bank’s appetite for risk and its approach to, and methodologies for, managing risk.

William J McDonough: The role of financial stability An address by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Basel Committee on Banking Supervision, at the XIII International Frankfurt Banking Evening, Frankfurt, Germany, 3 May 2001. *  *  *  Mayor Roth, President Duisenberg, and distinguished guests… It is an honor to address the thirteenth International Frankfurt Banking Evening in a setting so rich in history and tradition. I have been told that this stately building is more than just the busy town hall for a major European city, it is also an ever-present witness to culture and history, having hosted banquets and celebrations for almost six hundred years honoring coronations and the visits of Presidents and Prime Ministers. Indeed, it seems highly appropriate that our dinner this evening, which recognizes the importance of banking and finance to this distinguished city’s heritage, is being held here, so close to one of Europe’s most historic marketplaces. Since medieval times, merchants have traveled great distances to participate in Frankfurt’s many fairs and markets. The wealth that those markets produced no doubt assisted in the development of increasingly sophisticated financial institutions and a stock market as early as the 16th century, plus several of the most storied banking houses in history. Those institutions, in turn, contributed to Frankfurt’s ascent to prominence by financing additional trade and commerce here and abroad.
At present, we base our forecasts on the development of the repo rate expected by the financial markets. Professors Giavazzi and Mishkin give several reasons why they advocate that the Riksbank should present its own interest rate forecasts. Perhaps the most important reason is that this would show most clearly what the Riksbank’s own expectations of future monetary policy are. This would make it easier for companies and households to plan for the future. This point of view is easy to agree with, and I have expressed similar thoughts myself in various speeches. We are currently considering and working on how this might be achieved. Compensating for earlier deviations from target As I mentioned to begin with, there are a couple of points where I do not agree entirely with the authors’ conclusions. One such point is how the Riksbank should act if inflation has been below, or above, target for a long period of time. Professors Giavazzi and Mishkin suggest that if inflation has been below target for a long period of time, monetary policy should partly compensate for this by being extra expansionary in the future. As I understand it, the background to this is the developments in recent years, when inflation has been below the target. Here it is worth pointing out that when inflation has been below target level for a long period of time, there have been good explanations for this. The most recent episode has mainly been due to the fact that productivity growth has been surprisingly high.

Bandid Nijathaworn: Where is global finance heading? Speech by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Conference entitled, “Where is Global Finance Heading? The Stake of Emerging Economies in the International Financial System”, organised by Central Bank of Peru and Reinventing Bretton Woods Committee, Cusco, Peru, July 13-14, 2009. *  *  *  Thank you Chair First, let me thank the Central Bank of Peru and Reinventing Bretton Woods Committee for the invitation. It is an honour to be speaking to you today. The topic of this first session is “Time of upheaval: Where global finance is heading?”. This is definitely an important question given the current crisis is now almost two years old and is still evolving. Judging from the implications that the crisis has had so far on the world economy and financial markets, this is truly the first crisis of globalization. The crisis shows that financial upheaval can happen in any country, regardless of whether it is large or small, emerging or developed, and once happens, it can impart huge externalities on the rest of the world given the globalized nature of the world’s trade and payment systems. But more importantly, the crisis points to the weakness in the configuration of policies and financial regulation in the period leading up to the crisis that led to excessive risk-taking in the intermediation of global savings and investment across economies.
Competition also facilitates the work on holding back inflation. The EMU has particular importance for the scope of the trade. Many economists have tried to estimate this gain by looking at the way fixed and floating exchanges respectively affect trade, and they have found very little difference. However, a single currency is not the same as a fixed exchange rate. There are considerable practical and psychological differences. Professor Andrew K. Rose at Berkeley in the USA, together with some other economists, has instead compared trade within monetary unions with trade between countries outside of the monetary union, and made adjustments for facts such as monetary unions often sharing the same language, culture and other regulatory frameworks. When Professor Rose presented such a study for Sweden some time ago, he claimed that EMU could increase trade and integration by as much as 30-50 per cent over the course of a few decades. This could lead to an increase in Swedish welfare of over ten per cent in the long term. Rose himself admits that the figures are uncertain and other economists believe in much lower figures for trade gains. So what about the disadvantages? Giving up one’s own currency entails also giving up some of the right to self-determination in economic policy. The instrumental rate would no longer be set in Stockholm, but in Frankfurt and would reflect the economic situation in a large monetary area.

It can typically run into hundreds of pages, with detailed descriptions about the company’s business operations, its competitive environment, governance practices, and risk exposures, not to mention a full set of financial statements. Most retail investors cannot easily digest all this information. But the scrutiny of the prospectus by analysts and institutional investors helps to bring to light any significant weakness in the company. Having said that, I must acknowledge that greater disclosure does not always improve our understanding of investment products. While all material and relevant information must be disclosed, there is a tendency for disclosure to be voluminous and legalistic – often made for the purpose of limiting legal liability rather than facilitating understanding by retail investors. MAS therefore seeks to ensure that information disclosed is not only adequate but also transparent. Transparency MAS has sharpened the focus on providing investors information in a clear and concise manner to aid understanding. Earlier this year, we introduced a new regulatory requirement for a Product Highlights Sheet to accompany offers of investment products that come with prospectuses. Its purpose is to convey key risks and product information in plain language and in a simple question-and-answer format. Let me give an example. In one recent prospectus, the right of the investors to cancel their subscription within seven days was spelled out in two rather technical paragraphs using a total of 170 words. In the Product Highlights Sheet, the same point was made in two simple sentences.
Lessons learned That brings me to my second broad topic, which is the lessons we have learned over the years as we have developed Basel II. I am not looking back simply for the sake of nostalgia. Rather, in looking to the past, I would like to share some thoughts on how the things we have learned and reflected in the process of developing Basel II will help to make Basel II successful in the future, to stand the test of time and to have the impact that we intended. Focus on risk management First, Basel II is fundamentally about establishing incentive-based approaches to risk and capital within the three-pillar framework. We should never lose sight of the fact that Basel II is built around both qualitative and quantitative risk management elements. Why is this so important? As a bank supervisor and central banker, what most concerns me is financial stability. When I review the various reports on this subject that cross my desk, one thing they almost always have in common is an emphasis on the link between sound risk management and financial stability. It is my hope—indeed, it is my belief—that the incentives for risk management in Basel II will therefore promote greater financial stability in the future. Improved and more formalised risk management, as fostered by Basel II, will bring more awareness of risks and better quantification of these risks. To the extent that risk assessment and control methods become more formalised and rigorous, this will lessen the likelihood of making bad decisions.

Looking ahead, one of the benefits of this transparent process is that it has set the tone for discussions between banks and supervisors as industry practices evolve going forward. We have also greatly benefited from the dialogue we have maintained with our supervisory colleagues outside of the Basel Committee. I believe that it is in many countries’ best interest to adopt the new Framework when they are ready, so it is critical that supervisors in these countries be part of the Basel II conversations. The Basel Committee has established several mechanisms for heightened dialogue with our fellow supervisors, and we are fully committed to further enhancing this dialogue. Principles versus rules A third lesson I have learned is that it is important to strike the right balance between principles and rules. Of course, we want to ensure that banks apply principles in the same manner and that supervisors interpret them in the same way even in different jurisdictions. 4  BIS Review 46/2006  But while the temptation is to do this through ever more detailed rules, I am reminded of the words of the famous Surrealist painter Salvador Dalí, who said: “Have no fear of perfection—you’ll never reach it.” We have learned from the Basel II process that adding detail to the rules does not guarantee a level playing field or equal application. The marginal utility of adding detail falls rapidly as you move ahead in a process such as Basel II, so we need more than detail and prescriptiveness.
[2] Given the economic and social hardship associated with this year’s reduction, such a drop is hardly feasible by simply reducing economic activity. The pandemic is therefore a stark reminder that preventing climate change from inflicting permanent harm on the global economy requires a fundamental structural change to our economy, inducing systematic changes in the way energy is generated and consumed. With brutal clarity, the current crisis has exposed two major risks to the global economy: first, the farreaching damages imposed on our society by a lack of prevention and early action, fostered by disbelief in science, in the face of a global shock that threatens not only the economy but our lives. And, second, the repercussions of a failure to act collectively in a globalised world where inaction in one part of the globe can lead to highly disruptive and long-lasting spillover effects in other parts, hitting the poorest and most vulnerable in our societies most severely. In this sense, the pandemic has been a warning shot with regard to the much greater challenge arising from climate change. In his famous speech, Mark Carney, then Governor of the Bank of England, has argued that “the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix”.

In any case, as a policy, the Central Bank at the moment of making a decision and defining scenarios takes as given what happens in other spheres of national life. There is no clear rule, but there are some principles. First, the Central Bank must be rigorous in referring to all matters that have macroeconomic impact and consequently condition its actions. Secondly, when the connection is not so straightforward, we must be particularly cautious, especially when politically controversial subjects are involved. The Central Bank is a technical and autonomous institution and must take great care that the messages it puts out are not used politically. There are some very important subjects requiring discussion in our country, such as the educational reform, but it would not be prudent for the Bank to be affected by approaching any matter in an inadequate or inopportune way. Even more complex would be to discuss a tax reform that changes the composition of taxes or a labor reform that alters the dynamics of the business cycle. Subjects like these have enormous implications for economic efficiency, but they also evoke tremendous political passion. Since there are no clear rules, and I have no defined position on this matter, I can offer two popular recommendations that I tend to follow: “nothing can be rejected out of hand” which allows an ample degree of flexibility and “when in doubt, refrain,” which is the best advice to prudence.
This is important not least for the subsequent discussions with the other EU countries. I have devoted a good deal of my time here to the question of an appropriate central rate and how this question can be addressed in principle. There are two points I want to underscore: •  Calculations of the real exchange rate, which provide a starting point for discussions about reasonable central rates, are highly uncertain. Different economic models yield different results but can still be used to arrive at an approximate interval. Our calculations consistently suggest that an appreciation from the present rate is motivated. However, as relative GDP, terms of trade and other explanatory factors vary over time, calculations today may give a somewhat different picture from the calculations that were made some years ago. •  When setting a rate it is also natural to consider the level that is appropriate in the medium term. In this context it is primarily a matter of ensuring a stable adaptation to ERM2 and EMU, which calls for an exchange rate that markets find credible. The conditions for achieving this are naturally better if economic development in Sweden is balanced, with stable prices, etc. An unduly weak rate implies a stimulus to the Swedish economy that soon has to be met with a tightening of fiscal policy. An unduly strong rate, on the other hand, may be too restrictive, with negative consequences for growth and employment in Sweden.

In contrast to the nominal exchange rate, which is the relative price of different currencies, the real exchange rate is the relative price of groups of goods. More specifically, the real exchange rate is defined as the amount of domestic goods that has to be provided in exchange for a given amount of goods from abroad. The value of the real exchange rate is calculated in practice as a quotient, the denominator being the product of the nominal exchange rate and an appropriate price index for foreign goods and the numerator the corresponding domestic price index. The real exchange rate is commonly regarded as a measure of a country's international competitiveness. The weaker the real exchange rate - the more domestic goods that are needed to balance a given amount of foreign goods - the cheaper it is for firms and consumers abroad to buy Swedish products: our competitiveness is stronger. It follows that the real exchange rate is a measure of purchasing power; the weaker the real exchange rate, the smaller the amount of foreign goods that can be bought for a given amount of domestic goods. This needs to be kept in mind when discussing what are appropriate central and conversion rates. A weak rate can admittedly confer competitive advantages but it also means that people in Sweden are poorer. Sweden's full participation in the monetary union locks only one of the components of the real exchange rate - the nominal exchange rate.
When the economy is in steady state, it is in a long-run equilibrium where the effects of all shocks to which the economy has been exposed have worn off, and the expectations of inflation and other variables are fulfilled. It is often called the (long-run) natural rate of unemployment.16 It can be seen as the forecast for unemployment in the very long run (under the assumption that inflation expectations are realised). Long-run sustainable unemployment, unlike long-run average inflation, is independent of monetary policy. It is determined by structural conditions in the economy, such as how the labour market and wage-setting function, what the replacement ratio of unemployment insurance is, by the systems for sick pay and income tax and by the demographic  12  An estimate using the Riksbank’s model, Ramses, in accordance with the effects of various repo-rate paths as described in Svensson (2010), leads to roughly the same estimate of 1.3 percentage points. 13  A 95-per cent confidence interval for the point estimate 1.3(=1/0.75) percentage points gives an interval between 1/1.1= 0.9 percentage points and 1/0.4=2.5 percentage points, corresponding to a confidence interval for the estimate 65,000 unemployed between 45,000 and 125,000. 14  2.6 per cent of 170 per cent is about 4 per cent. 15  Moreover, according to one of Qvigstad’s (2005) criteria for a good policy rate path – applied to unemployment – inflation should normally overshoot the target when unemployment exceeds its long-run sustainable rate.

We can thus say that the cost in terms of unemployment of the fact that the average rate of inflation has fallen below the target is approximately 38,000 unemployed.11 As explained in my paper (Svensson 2012d) the sloping long-run Phillips curve is arguably relevant only when the average rate of inflation deviates moderately from inflation expectations and the target (for example deviations less than plus/minus one percentage point). In the case of larger average deviations it is likely that inflation expectations will eventually adjust. Inflation closer to the target would mean 65,000 fewer unemployed An increase in unemployment of about 38,000 people is the average cost for the tight monetary policy conducted during the period from 1997 to the end of 2011. So what is the cost of the tight policy being conducted now? How much lower would unemployment be now if a more expansionary monetary policy had been conducted during the past two years, as consistently advocated by my Executive Board colleague Karolina Ekholm and myself since summer 2010? Let us assume that inflation would have been one percentage point higher and thus been closer to the target now. According to my working paper (2012d), the slope of the long-run Phillips curve, 0.75, is not only relevant in the long run, but also a year or so ahead. A rate of  10  See Svensson (2012d). A 95 per cent confidence interval for the slope is given by 0.75 ± 0.35, that is an interval between 0.4 and 1.1.