samchain/econo-pairs-v1 huggingface dataset:
We have seen an unexpectedly rapid and broad weakening in economic activity and it is clear that this will continue to be weak in the coming period. Despite global and forceful measures to resolve the financial crisis and to alleviate its effects, it is still difficult and expensive to borrow, both for households and companies. The oil price and other commodity prices have continued to fall, which leads to lower cost pressures. Inflation will fall quickly and undershoot the target next year. We considered that a much lower repo rate was necessary to attain the inflation target a couple of years ahead and at the same time contribute to ensuring economic developments are not too weak. Another reason why such a large cut was necessary is that the interest rates paid by the general public recently as a result of the financial crisis have been higher than normal in relation to the level of the repo rate, which in itself has a constraining effect. The financial crisis makes demands on us to be flexible, to act quickly and forcefully. We have tried to work in this way so far, not least by means of new solutions and measures we would not normally use. The fact that we are giving the banks the possibility to borrow in Swedish krona from the Riksbank at longer maturities than normal and that we have supplied loans in US dollars are examples of this.

Irma Rosenberg: My time at the Riksbank – some final reflections on challenges along the way Speech by Ms Irma Rosenberg, First Deputy Governor of the Sveriges Riksbank, at SEB, Stockholm, 8 December 2008. *  *  *  On a chilly day in January 1976 I crossed the threshold of the newly-built Riksbank building for the first time. It was true that all employees were moving into the new building that day, which contributed to the more or less organised chaos of furniture gone adrift and employees trying to find their new offices. But for me it was probably an extra special day. It was my first day at work. And it was my first job outside of the university after taking my PhD. Almost 33 years have passed since that day in January. And as I leave the Riksbank at the end of the year one could say that I have come full circle. It was where I began my career. In 1986 I left the bank, but in January 2003 I once again crossed the threshold at Brunkebergstorg 11, then as one of the six members of the Executive Board. This will now be my final full-time job. The years have been eventful ones, with more than a little drama from time to time.
Small banks are trimming product lines and pulling back from certain customer segments. Emerging market and developing economies (EMDEs) have expressed concerns that global banks have been reducing their activities in these markets as they review their business models in light of the new regulatory environment. The FSB is keeping a close watch on this. We have rightly focused our regulatory efforts to minimise the risk of another financial crisis. But we must continually ensure that we do so without minimising economic growth and opportunity. Fine-tuning regulation We must be careful to avoid “pendulum swings” in regulation that could undermine the gains in financial stability that we have achieved, not to mention prolong and add to the uncertainties facing the financial industry. That regulations have imposed costs on the economy is in itself not sufficient reason to unwind them. 3/9  BIS central bankers' speeches  These costs have to be weighed against the benefits of a more stable financial system to support sustainable economic growth. De-regulation has its own costs. Having said that, some fine-tuning may be necessary to reduce the unintended effects of reforms while preserving their benefits. Regulatory policy must continually seek the fine line between discouraging excessive risktaking and encouraging innovation. We should not be afraid to adjust and fine-tune where necessary. As Dan Tarullo, former governor of the Federal Reserve Board, says with respect to the Dodd-Frank Act and other regulations in the US, “some recalibrations and reconsiderations will be warranted on the basis of experience."

1/5  BIS central bankers' speeches  Indeed, the various measures that were implemented have been instrumental in accelerating the e-payment agenda forward, only because of the cooperation of the industry, sometimes with a bit of nudging. But truth be told, we have been able to achieve so much. Today, the payments industry is no longer the exclusive domain of banks. The advent of FinTech driven by the increasingly inexpensive and pervasive internet and mobile technology has encouraged the entry of more agile non-bank players as potential disruptors or collaborators of the incumbent players. This has set the stage for an exciting new era in payments, an era in which the industry is expected to take on a larger role in delivering a more robust and efficient payments system for Malaysia. The Bank will facilitate this in three key ways: i. First, through policy initiatives to encourage collaborative competition or ‘co-opetition’; ii. Second, by further strengthening industry alignment; and iii. Third, by supporting more inclusive governance arrangements for the development of the payment system. Policies to promote co-opetition as a key enabler for greater efficiency, competition and innovation Network effects are critical to an efficient payment system. The larger the network of a payment system, the more valuable it is to users of the payment system.
But longer-term, the challenge for all organisations is this: to put in place a more system-oriented approach to recruitment and performance management, which weighs diversity explicitly and systematically. We are not close to being there yet. This would be a leap of faith. But it would not be a leap into the unknown given the known benefits such diversity confers. Conclusion We are all Sneetches, some with stars, some without. The sooner we recognise that our minds are biased, the better placed we will be for dealing with its consequences. Diversity is a public good because it corrects our biased minds in ways which benefit society – from greater creativity and innovation to more robust and resilient decision-making, in every social setting from schoolrooms to sports fields, from companies to communities, from eco-systems to economies. This public good, like all public goods, requires an on-going investment. Society has made a real investment in identity-based diversity over the past few years. So too has the Bank. That first diversity wave is reaping significant societal rewards. There has probably never been a better time for making progress on creating that second diversity wave, one which cultivates the subtle, but as important, cognitive and socio-economic dimensions. While leopards can’t change their spots, Sneetches can change their stars.

In such a case, the policy makers are left in a big trade off between monetary policy independence and balance sheet mismatches 7 . Obviously, there is not one single commonly accepted solution for all countries. Nevertheless, country experiences in recent years have shown us that there is a tendency in choosing more flexible exchange rate regimes under the assumption that vulnerabilities regarding mismatch problems are accurately hedged. Subsequently, dollarization affects monetary policy through the increased volatility of money demand. Thus, the traditional transmission of monetary policy would not work properly as central banks have no direct control over foreign currency assets. Accordingly, as Kevin Cowan and his colleague 8 mentioned in their study, dollarization limits the capacity of central banks to conduct stabilizing monetary policy in the short run and to a large extent limits the ability of monetary authority gain credibility in the long run. Distinguished Guests, Having given a brief introduction into the notion of dollarization, now I would like to talk about the Turkish case. As in the evidence of the other countries, the dollarization in Turkey also took its roots from macroeconomic instability with fixed or predictable exchange rate regimes, inefficient market regulations and the lack of credibility of economic policies. In order to comprehend the dollarization in Turkey better, it would be reasonable to look at the macroeconomic instability and examine the evolution of dollarization in a historical perspective.
Uncertainty in theory Our forecasting ability is thus very limited one year ahead and almost non-existent two and three years ahead. The best forecast we can then make is normally to assume that inflation will be 2 per cent in two and three years’ time. But that is not much help when shaping monetary policy. At the same time it is reasonable to assume that monetary policy will actually affect inflation two and three years ahead and that we therefore need forecasts as a basis for monetary policy. So what can we do to manage the uncertainty in monetary policy? In a linear model, where inflation depends on the interest rate and an uncertainty term with a mean value of zero, where the parameters are known and constant, and with a quadratic objective function (loss function), the uncertainty does not matter with regard to which interest rate should be chosen to minimise the loss function.10 It is enough to take into  8  Prior to 2007 we first based the forecasts on a constant repo rate and then on estimated market expectations. It is possible that we could have made better forecasts with a different interest rate assumption. To be able to comment more strongly on forecasting ability, one should actually base the calculations on longer periods of time. One should also compare with the historical series available at the time the forecasts were made. 9  The figure is based on the period 2005–2010. 10  See, for instance, L.E.O.

It is quite simply impossible to make any reliable forecasts for two and three years ahead. My opinion is that it is normally fairly meaningless to have a firm opinion of what will happen in two and three years’ time. But there are exceptions, particularly in situations where resource utilisation is very low. During 2008–2009 we assessed that the repo rate would be at an exceptionally low level for one year and we backed this up by lending around SEK 300 billion to the banks at this low interest rate for one year. We should continue to report a main scenario for economic developments and the repo rate over the coming three years, a scenario where inflation approaches 2 per cent and resource utilisation approaches a normal level. But we should regard this merely as a potential scenario. It is important that monetary policy follows a predictable pattern. We endeavour to avoid surprising the market. This means that we normally change the repo rate and the reporate path in gradual small steps, where the steps are due to new information received since the most recent monetary policy meeting, and that we react in roughly the same way to the same type of changes in the new information. Such stability means that we can avoid causing problems on the financial markets, and that we can have a greater impact on the markets when an unexpected event occurs. We should also continue to analyse the consequences of various sequences of events.
Macro-prudential policy needs to be operational soon, but some difficult hurdles remain to be overcome. 2  BIS central bankers’ speeches  An important challenge for the design of a new regulatory framework will lie in finding an appropriate balance: on the one hand, the regulations will need to be sufficient to effectively reduce the risk of financial crisis; on the other hand they should not be so stringent as to impose unnecessary costs on the financial sector. It is a matter of finding just the right level of regulation. Handling the interactions between monetary policy and macro-prudential policy poses further challenges. During the recent financial crisis, we observed the difficulties of conducting monetary policy in a non-stable financial environment. Interest rate signals from the central banks were sometimes dwarfed by contradictory events in the markets. Conversely, financial stability is dependent on smooth and predictable monetary policy. Thus, policy makers must always keep in mind that the increased use of regulatory tools will inevitably affect monetary policy in different ways. Regulations will affect the interest rates that firms and households meet and this is something that the central bank needs to take into consideration when setting the policy rate – in much the same way as monetary policy has to take into account changes in interest-rate spreads due to changes in financial conditions. A key element in handling the interactions between monetary policy and macro-prudential policy will be putting an appropriate governance structure in place.

•  Thirdly there are a number of different potential policy instruments that can affect the financial environment in various, sometimes conflicting, ways. And by no means are all in the hands of central banks  •  Fourthly national financial stability responsibilities are often shared. In the UK we work with Her Majesty’s Treasury (HMT) and the Financial Services Authority (FSA). For cross-border activities we operate alongside overseas central banks and supervisors. •  Fifthly although the roles of the UK authorities are outlined and published in a Memorandum of Understanding (MoU), this gives little guidance as to what financial stability is or a clearly identifiable target. •  And lastly it is harder to get motivational feedback – unless in unwelcome form should a crisis occur. 3. Defining Our Role in Financial Stability Oversight  These factors pose a number of challenges in defining our role in financial stability oversight – what activities should we as a central bank undertake? To make these decisions, firstly we should identify the main functions that need to be performed in each jurisdiction to promote financial stability. Then we can look at the Bank’s own institutional mandate. And finally we can determine the most appropriate way to fulfil it. i)  The Three Essential Functions for Public Authorities  There seem to me to be three essential functions to be carried out in securing financial stability: I think this is the case in most jurisdictions.
In spite of the objective of a fixed exchange rate, several adjustments of the international value of kroner were made in the 1970s and 1980s to compensate for the loss of cost competitiveness due to price and wage inflation. From the mid-1980s the focus of monetary policy was increasingly shifted to the role of a stable exchange rate as a nominal anchor – against the backdrop of very high price and wage inflation and relatively high domestic interest rates following the devaluation in 1986. The EU countries’ lowinflation track record was used as an argument for pegging the krone rate to the ECU in 1990. The currency turmoil in Europe in 1992-93 prompted Norway to abandon the fixed rate against the ECU in favour of a sort of “managed float”, now aiming at keeping the exchange rate “stable” against European currencies, but with no fluctuation margins. This regime is still in force. In this context it is important to note that the small and very open Norwegian economy is highly vulnerable to fluctuations in the international economy. Furthermore, the petroleum sector is of substantial importance to our economy, and mainland industries are largely commodity-based. Whatever the choice of exchange rate or monetary policy regime may be, there will be considerable challenges associated with stabilising an economy which is that heavily exposed to cyclical fluctuations. This has been amply illustrated by recent events.

However, last spring Norges Bank also reviewed the merits of a change in anchor currencies. Norges Bank found the potential benefits of changing the exchange rate target to a trade-weighted basket to be relatively marginal and fairly uncertain, and recommended that the Government refrain from modifying the Exchange Rate Regulation. In the Revised National Budget for 1998, the Government affirmed this view and decided that the Exchange Rate Regulation would continue to apply without any changes, with the euro replacing the ECU as the indicator of the krone’s value against European currencies. Thus, the consequences of the introduction of the euro for the orientation of Norwegian monetary policy might not appear particularly great at the outset. The launching of EMU nevertheless entails changes in the environment for our monetary policy, for the following reasons among others: First, the European Central Bank formulates its monetary policy with the aim of maintaining low inflation for the euro area as a whole. Euroland will be a more closed economy than the individual member countries used to be, and thus exchange-rate changes less important. This can result in larger exchange rate fluctuations between the major countries than in the past. If so, keeping the krone stable against the euro might become more challenging. Second, the launch of the euro will reinforce global financial integration and contribute to higher capital mobility, and the establishment of an efficient payment and settlement system in euros reduces the cost of moving capital.
Indeed, one of the key benefits of globalisation over the past several decades is that the freer flow of goods and services, people and capital, ideas and information, has served as a vehicle for the transmission and diffusion of new technologies across borders. Other things equal, this should have accelerated catch-up between countries operating at and inside the technological frontier. 65  Other things, however, have not been equal. Penetration rates of new technologies, once adopted, tell a different tale. They suggest that, over time, there has been a divergence between frontier and non-frontier countries. In other words, the intensity with which new technologies have been used has expanded more rapidly in frontier (especially Western) economies than in non-frontier (non-Western) ones. This will have retarded catch-up between the two blocs. It is a less encouraging story about the diffusion of innovation. With the intensive and extensive margins of diffusion pushing in opposite directions, which has won out? It seems to have been the forces of divergence: slower rates of penetration of new technologies have more than counter-balanced faster rates of adoption across countries. This has shown up in levels of productivity between frontier and non-frontier which, since around 1980, have if anything diverged. Chart 7 illustrates that. It compares levels of productivity across 44 countries since 1950 relative to the frontier country (the US). Convergence prior to 1980 has given way to divergence subsequently.

It was mainly rising energy prices, higher interest rates, falling stock markets and a sudden downturn in corporate investment that resulted in the almost simultaneous and abrupt slowing of global economic activity in the latter part of last year. Weaker demand led in turn to stock adjustments and thereby to a further downward effect on orders and production. At the same time, the falling share prices muted private consumption. On top of this, the terrorist attacks will entail a short-term loss of production and probably also postpone an upturn. The cyclical downturn is following the normal pattern in many respects and is therefore not particularly surprising. Its course has been accelerated, however, by the collapse of the excessive optimism which had accompanied the technological breakthroughs that gave rise to the notion of a new economy. For a time there was no end to the hyperbole about the blessings that the new facilities for information and telecommunication had in store. Expectations of rapidly rising profits and incomes pervaded households and businesses in many parts of the world, perhaps above all in the United States. Investment and consumption rose. So did share prices. Production plans were revised upwards. In time, imbalances arose in the American economy between investment and saving, as well as between current and more fundamental stock market valuations.
In a situation where business confidence - and therefore investment - was weak, that essentially meant stimulating consumer demand. It was not without risk - in terms of the build-up of household debt and of a possible house price bubble - but without it we, too, would have faced recession. Looking forward, there is a reasonable prospect that global demand will pick up gradually, and we may see a more sustainable pattern of exchange rates beginning to emerge with the albeit hesitant strengthening of the euro. There are in fact already signs that manufacturing output has started to recover. But there are downside risks to that prospect associated with the renewed volatility of international financial markets over the summer, which we are monitoring very closely. But abstracting from these recent global and largely cyclical, effects, the more fundamentally important point, looking further ahead, is the likelihood that we - alongside other countries - will continue to operate within a framework of overall macro-economic stability - as a necessary condition for the effective functioning of the market economy. Those presumptions may well mean that manufacturing continues its gradual, long-term, relative decline - as a share of total output, and in terms of the number of people employed - in all developed industrial countries, including the UK.

I have no doubt that the effort will prove to be worthwhile. 4  BIS Review 48/2001