samchain/econo-pairs-v1 huggingface dataset:
Mr. Heikenstein discusses the Swedish financial crisis of the early 1990s Speech by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikenstein, at a seminar arranged by the Swedish embassy held in Seoul, Korea on 15/7/98. Let me begin with a thank you to the organisers of this seminar. I am honoured to have the opportunity to share with you some experiences from the Swedish financial crisis in the early 1990s. 1. Introduction An IMF study from 1996 showed that in the past fifteen years, 132 of the Fund’s 182 member countries had experienced macroeconomic and/or financial crises. Today the figure is even higher. Crises are a recurring phenomenon. In spite of every effort to prevent them, I fear that crises will continue to occur. We should therefore use the opportunities to learn from each other, both in order to avoid making the same mistakes and to find the appropriate correctives sooner. Needless to say, there are no single “best solutions”. Crisis situations are always specific in some respects, not least with regard to their structural and political environment. Had they not been specific, they would probably never have occurred because they would have been “spotted” in advance. Having said this, however, there are a number of globally accepted “truths” about what constitutes a good response to crises. Discussions around crisis situations are usually divided into two parts: crisis prevention and crisis management. In this presentation I will be focusing on the latter.

It is important to realise that once the crisis has occurred, the losses cannot be hidden and must be dealt with in one way or another. In this respect Swedish institutions worked well. Party politics were clearly separated from business realities. And the politicians did a good job, realising that bygones were bygones, setting up a fair framework to sort the crisis out. From a political perspective it was important that the banks’ owners were not rescued. People at large had to take substantial cuts in living standards - at least temporarily. Letting the “big guys” go unhurt under these circumstances would have jeopardised the whole operation. 4. The macroeconomic policy mix for crisis management can differ. In our case, there was obviously not much room for fiscal stimulation of the economy. Considering the much lower BIS Review 65/1998  -7-  public debt, there could be more room in some Asian countries but the potential budget effects of the financial losses also need to be taken into account. Monetary policy has a difficult dual role: it has to strike a balance between stimulating the economy so as to ease the burden on the banks and on their borrowers and at the same time ensuring the capital inflows that are needed to rebuild the depleted foreign currency reserves. 5. On top of this - and perhaps the most important factor - there was political consensus. The government sought and received backing from the main opposition party.
BIS Review 20/1999  8  Division of responsibility fails Stabilisation policy is a very demanding task in an economy like Norway, with occasional major exogenous shocks. The question that must now be asked is how our system functions when exposed to pressure. Oil prices were high in 1996, 1997 and into 1998, which resulted in large surpluses on the current account and the government budget. Domestic activity was also rising, with strong growth in employment. Deliveries to the petroleum sector generated a strong and uncontrolled growth impetus to the mainland economy. During the budget deliberations in the Storting (Norwegian parliament), major changes were made. Compared with the large surpluses generated by petroleum revenues, the changes to the budget may have seemed small, but these changes were important for economic developments. I will illustrate this by means of an example. Assume that the oil price temporarily increases by NOK 10 per barrel, or a little less than USD 1.50 per barrel. This is a small change in the oil price, well within normal variations from one year to the next. Government revenues – and thereby the budget surplus – would then increase by about NOK 9 billion in the first year and NOK 11–12 billion the next year. This corresponds to about 1% of Norway’s GDP. The assumption is that all the revenues from such a minor increase in oil prices will be transferred to the Government Petroleum Fund and that fiscal policy will remain firm.

A country normally seeks to achieve balanced public sector budgets over the business cycle. Norway is in a special situation, however, because of its petroleum activities. Revenues fluctuate sharply in pace with the oil price and domestic business cycles. Oil and gas production will peak a few years into the next century. It is therefore important to achieve a substantial surplus now, and accumulate financial wealth that can be used to finance the welfare system when oil revenues taper off. Otherwise, welfare schemes may have to be scaled back considerably when these revenues fall. The Petroleum Fund consists of the accumulated surpluses of government finances. Capital was first allocated to the Fund in 1995. At the end of 1998 the market value of the Fund’s capital was approximately NOK 170 billion. National insurance scheme expenditure will increase in the future. In 1999 expenditure on retirement and disability pensions is expected to amount to NOK 91 billion. This corresponds to about 8% of Norway’s GDP. The percentage will probably double over the next 30 years, and this will happen after Norwegian oil production has peaked. The challenge to the real economy is that the working population will decline sharply, while the proportion receiving income from the public sector will rise. Projections for government oil revenues have been based on an oil price in the order of NOK 100 to NOK 120 per barrel. This will generate substantial government surpluses in the years ahead, and a seemingly steady accumulation of capital in the Petroleum Fund.
Regionally, we now have a number of financing arrangements, including the Chiang Mai initiative in Asia (established in 2000), the European Stability Mechanism (established in 2012), the Latin American Reserve Fund (established in 1991), the Arab Monetary Fund (established in 1976) and, most recently, the BRICS development bank (established in 2014)). Regional facilities now total around $ trillion. In addition, during the course of the crisis, bilateral foreign currency swap lines were agreed between around 14 central banks, in both advanced and emerging market countries. Although these swap lines were temporary, in October 2013 they were replaced by a set of permanent, and potentially unlimited, swap lines among a group of advanced economy central banks: the US, Canada, the UK, the euro-area, Switzerland and Japan. These four developments, in combination, are likely to have increased significantly the potential pool of liquidity insurance available to the global financial system in dealing with external financing shocks. The question is whether this degree of insurance has kept pace with the accompanying rising tide of global capital market integration. One metric for that is found by scaling countries’ foreign exchange reserves by a measure of financial globalisation – for example, total external assets (Chart 15). Despite the rapid rise in reserves, its ratio to external asset stocks has actually fallen since 1980, from 10% to around 8%. Second, official reserves have risen unevenly across countries: the degree of concentration in reserves has increased threefold since 2000.

Table 2 suggests, furthermore, that these flows have become increasingly correlated over the past decade. But it is not just cross-border claims which are cyclical and correlated across countries. Chart 20 plots the cycle in total credit across countries, while Table 3 looks at the degree of crosscountry correlation in total credit provision. They suggest total credit also follows a global cycle which has strengthened over time. On this evidence, the credit cycle is as much international as domestic. If credit cycles are global in nature, there may in future be a case for national macroprudential policies leaning explicitly against these global factors. This would help curb the global credit cycle at source. It would take international macro-prudential policy co-ordination to the next level. While not without operational problems, this is much more likely to be a practical policy option than co-ordinating national monetary policies. A second macro-prudential policy avenue for the future concerns the non-bank sector. For example, the pattern of correlations in Chart 18 is consistent with asset managers playing an increasingly important role in driving financial markets. Yet macro-prudential policies have, to date, focussed on banking sector-specific measures operating at a national level. The next phase of macro-prudential policy may see its focus shift in two important ways: towards measures targeted at the non-bank, as well as banking, sector and towards measures targeted at particular markets, as well as particular countries.
Just how difficult that would be – and how far sovereign money would complicate our work – can be illustrated by taking the example of our monetary policy during the last financial crisis. Over a very short space of time, we created a vast amount of money; initially to ensure liquidity in the banking system, and thereafter to counter the massive upward pressure on the Swiss franc. This led to a significant expansion of our balance sheet. How would we have proceeded in a sovereign money system? We would probably not have reacted so decisively given the difficulty of reducing liquidity once it has been created in a sovereign money system, which can therefore lead to higher inflation further down the line. A weaker monetary policy reaction would have exacerbated the negative consequences of the crisis for the real economy. Quite apart from that, it is doubtful whether we would even have been able, in a sovereign money system, to react as we did because the initiative limits the number of tools we would 2  As regards the SNB’s shift from monetary targeting to interest rate targeting, cf. Meyer, Hans, On monetary policy in the new year, speech held at the University of St. Gallen, St. Gallen, 20 January 2000. Page 6/8  have available. Interventions in the foreign exchange market, which have played a central role in combating the overvaluation of the Swiss franc, would not actually be allowed under a sovereign money system.

Philipp Hildebrand: The Swiss National Bank’s view of international financial markets against the background of trends in the United States Introductory remarks by Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 12 December 2003. *  *  *  The past year was a turbulent one for the international financial markets, which were essentially influenced by trends in the US. During the first half of 2003, market developments were shaped by economic and deflation fears as well as by the war in Iraq. In this environment, equity markets reached an annual low in March. In June, bond market yields fell to their lowest level. The second half of the year saw an economic recovery in the US, which is now spreading to other economic regions as well. Capital markets Long-term yields on Swiss paper rose by approximately 60 basis points from their low in June to roughly 2.7%, approximately tracking yields in the euro area. In both cases, yields followed the US market very closely, albeit with modest fluctuations (see graph 1). Under the present economic conditions, the interest rate environment in Switzerland is still viewed as attractive by consumers. The high level of new fixed-rate mortgages is an indication of this sentiment. The higher Swiss yields reflect the improved economic outlook and not inflation expectations, which are modest given that there is still pronounced underutilisation of capacities. In contrast to capital market yields, money market yields were decidedly stable.
India has acceded to the Treaty of Amity and Co-operation in Southeast Asia (TAC) and adopted the Joint Declaration for Cooperation to Combat International Terrorism, signalling its strong commitment to ensure peace and security in the region. India is now a dialogue partner with ASEAN at the Summit level. Last year, the leaders adopted the suggestion of Indian Prime Minister Vajpayee and signed the ASEAN-India Framework Agreement on Comprehensive Economic Cooperation, an interim step towards an eventual ASEAN-India FTA. Both sides have agreed to start negotiations on trade in goods this year, including an ?early harvest programme? to boost trade in selected sectors. Singapore supports this far-sighted initiative and will work actively with India and other ASEAN members to fulfil this vision. The India-Singapore CECA Bilaterally, India and Singapore are already negotiating a Comprehensive Economic Co-operation Agreement (CECA), which will be a firm basis for expanding the India-ASEAN relationship. The rewards are not only economic, but also strategic. Singapore naturally hopes to gain freer access to the Indian market. But the benefits extend well beyond this. Singapore wants to strengthen its economic ties with many different centres of prosperity and growth, and not be overly dependent on one or two major trading partners. A strong relationship with India will complement our rapidly growing links with China, and help us to realise the strategy of growing two external wings in the region, with the two emerging economic giants.

This designation will be the Gold Standard in banking  2  BIS central bankers’ speeches  qualification and recognition. It will be jointly awarded with the Chartered Institute of Bankers. This award, I am confident, will be the catalyst that significantly elevates professionalism in the banking industry. I am most inspired by the theme of this year’s conference. It is pragmatic, realistic and aptly sums up the importance of talent management as we steer through the evolving financial landscape. Topics such as “Asia 2.0: Leading the Next Wave of Growth” and “Global Workforce Strategies CEOs Deploy to Achieve Leading Business Result” would be significant especially for HR practitioners managing multinational companies in Asia. Besides, topics such as “Are Our Graduates Employable?” will also be an interesting meeting point for HR practitioners and educators. I wish you an insightful and productive discussion. I trust that today’s conference is merely another step in the journey of intellectual quest that will continue long after this conference has ended. BIS central bankers’ speeches  3
Nor Shamsiah Mohd Yunus: Keynote address - Global Islamic Finance Forum 2022 Keynote address by Ms Nor Shamsiah Mohd Yunus, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Islamic Finance Forum 2022, Kuala Lumpur, 5 October 2022. *** It is a pleasure to be here at the seventh Global Islamic Finance Forum today. At GIFF 2018, I made a call for us to "rethink value, risk and human capital" in charting a new path of Islamic finance beyond profits. And so, I thought that it would be fitting for my remarks today to reflect on the progress made, and how Islamic finance has measured to its promise, especially in the context of developments globally since 2018. Indeed, a lot has happened in these four years. The world also continues to face various challenges as we speak. We weathered an unprecedented pandemic, transitioned into the endemic phase and are now on the path to recovery. But the road continues to be rocky. Next year, global growth is expected to moderate. This challenging environment is further complicated by inflationary pressures which is leading major central banks to tighten monetary policy aggressively. We have also entered a period of strong US dollar, leading to almost all major and regional currencies – the ringgit included – depreciating. In addition, the heightened geopolitical tensions have also fuelled global food and energy security concerns. All these challenges are also complicating the green and climate transition.

Perhaps a sharper analysis and discussion could also be a help with the political problems. In this context, an economic council along the lines put forward in the public debate might possibly play a part. 6  BIS Review 6/2002
Switzerland’s neighbours saw an upswing in industrial output and exports, although domestic demand in these countries remained - and still remains - sluggish. In Switzerland, too, the long-awaited but oft-delayed upswing finally began to make itself felt. The first signs of the upturn became apparent in the summer. These were initially in isolated areas but then became increasingly widespread. The confidence indicators began rising, and order books swelled. The turnaround was facilitated by a marked weakening of the Swiss franc, which was itself triggered by a renewed easing of our monetary policy in March. This downward correction in the franc, which continued for the rest of the year, came as a welcome respite for Switzerland’s export industry, which had been buffeted by the weak global economy and the fall-off in international trade. The Swiss franc’s slide against the European currency was gradual, extending over almost a year. Our currency’s exchange rate dropped from CHF 1.46 against the euro in March 2003 to CHF 1.55 today, thus depreciating by about 6%. The franc’s fall is even greater in real terms owing to the higher inflation rate which prevailed - and still prevails - in the euro zone. Also in real terms, the Swiss franc is worth less in euros than when the single currency was launched five years ago. This development shows that, as the new European currency has gained in stature, the markets have taken a different view of the safe-haven role traditionally played by the franc.

While consumer spending has held up well in the past two years, it is expected to gain momentum as the economic environment brightens. Consumption will thus continue to support growth, though it will probably cede pride of place to more cyclical components such as capital expenditure and exports. It will benefit, in particular, from the gradual improvement that will be seen on the labour market. At this stage of the economic cycle, of course, we must first expect gains in productivity, which means that unemployment will only decline slowly. Nevertheless, here too, the medium-term outlook is now good. The scenario for a recovery that I have presented is, needless to say, full of imponderables. The risks are everywhere. They may take the shape of an uptrend or a downtrend. We can thus not rule out the possibility that the international economy will show more robust growth than anticipated. A swift build-up of inventories, for example, would appreciably accelerate the cycle. But the downside risks could also be triggered at any time by new political disorders. Given the significant internal and external imbalances throughout the world, such unrest could fuel greater volatility on the currency and equity markets. The strength of the recovery is also uncertain. In the United States, the economic recovery, which has been driven largely by tax breaks, is not yet firmly in place; households, labouring under a heavy debt burden, may be frightened by the slow pace of job growth.
5  The latest evidence suggests that the strong momentum of growth in Asia and other emerging markets is being maintained. In Asia, there are many indications that domestic demand has been a powerful driver of its recovery and that growth in this region is becoming more autonomous and less dependent on export demand from the western economies. In the US and Europe, the indicators are more mixed. Within the European Union, Germany grew very strongly in the first half of this year, recording the biggest rise in GDP since unification in the second quarter and more recently the lowest rate of unemployment since 1992. German unemployment has been falling since the mid-2000s, with the exception of the recession period, which points to an improvement in the structural performance of its economy, which should help to sustain consumer spending and investment. Some of Germany’s neighbouring economies – including the Benelux countries – are also sharing in this pattern of healthy growth. A strong performance from these “core” European economies should help to offset the dampening effect of financial and fiscal problems in countries on the European periphery, including Ireland. 5  In the decade to 2007, annual GDP growth averaged 3.1% in the United States and 2.3% in the European Union. BIS Review 134/2010  5  Currently, the United States appears to be in a “soft patch” where growth is disappointing. But the most recent indicators – including the widely followed Purchasing Managers’ Indices (PMIs) – still point to continued growth.

Apart from the measures taken by the Riksbank, crisis measures taken by the Ministry of Finance and the National Debt Office of course affect costs (spreads) on the credit market. Fiscal policy stimulation measures also affect the costs of credit risk and thus the price of credit. We should also remember that supervisory and regulatory measures that establish different forms of constraint, for example capital adequacy requirements for the banks, can indirectly affect the price of credit. A question that we are wrestling with just now is how serious the credit crunch is and whether there is a risk that it will hit the non-financial sector so hard that it will have major repercussions on the real economy over and above the credit crunch that normally follows a recession that undermines the creditworthiness of companies and households. On the one hand the supply of credit declines when the banks want to shrink their balance sheets. Many companies in the Riksbank’s company survey state, for instance, that they are finding it difficult to borrow at longer maturities. On the other hand, the demand for credit should also  BIS Review 41/2009  13  decline as a consequence of weak economic activity. What can be done about this and what is the role of the central banks in easing the credit crunch? The Riksbank's view is that it is the financial system that as far as possible should be strengthened in order to ease the credit crunch.