samchain/econo-pairs-v1 huggingface dataset:
Compared to the fluctuations in the first part of the period we see here, from 2002 to date, the krone exchange rate has been relatively stable in recent years, but there has been some short-term movements. An appreciation of the krone has in some periods occurred in tandem with higher oil prices and in other periods with lower oil prices. The krone appreciated when the interest rate differential against other countries was high in 2002, but as interest rates in Norway moved down to the level among trading partners, the value of the krone fell back. In recent years, the actual interest rate differential against trading partners has been close to zero. Earlier analyses conducted at Norges Bank have shown that other factors, such as expected volatility among major international currencies and developments in US equity indices, may have been factors behind developments in the krone exchange rate, but the effects vary over time. This reflects among other things shifts in exchange market themes. 1 Shifting themes in exchange markets make it difficult to predict short- and medium-term exchange rate developments. The exchange rate projections in the monetary policy reports are based on the theory of uncovered interest rate parity. According to the theory, the return on financial investments will be the same irrespective of the currency involved. If Norwegian interest rates are higher than external interest rates over a period, the krone exchange rate must depreciate during that period or NOK-denominated investments generate an excess return.

So you may be reassured to hear that we spend most of our time worrying about the risks that could throw the UK economy off course; and arguing about how to respond appropriately. So what are the main risks facing us now? Last year saw the fastest growth in world output in three decades. We expect growth this year to be less spectacular but still robust. But while the US and China are still expanding strongly, growth has showed signs of faltering in Japan and, to a lesser extent, in our major overseas market, the euro area, and especially Germany. We think this weakness is likely to prove temporary, but we could be disappointed. Unbalanced growth creates strains. The US has a large current account deficit, which is mirrored by surpluses in the other major trading blocks. The risk is that a better balance will only come about through sharp adjustments in exchange rates and a marked increase in US savings, which may cause a slowdown in global activity. Closer to home, there is uncertainty about the near term momentum of household spending, by far the largest influence on domestic demand. While it is difficult to be confident about the path of retail sales since the autumn, there is little evidence of much underlying buoyancy. Retail sales are not the whole story, and our central view is that any weakness in consumer spending is likely to be temporary. But we could easily be wrong.
Since the monetary policy meeting in August, the government and its collaboration parties have announced proposals, intended to be presented in more detail in the budget bill, which may entail a more expansionary fiscal stance in the period ahead. These proposals include cutting income tax for households, abolishing inheritance and gift tax, lowering wealth tax and increasing support to local governments. In total, this is estimated to provide a stimulus of just over SEK 20 billion in 2005 and 2006. How large the impact of this will be on economic growth and inflation is not so easy to forecast. This is partly dependent on the extent to which households save their increased incomes. Using traditional rules of thumb it could entail a few tenths of one per cent higher GDP growth in both 2005  BIS Review 51/2004  3  and 2006. As things stand, therefore, there is reason to expect growth to average above 3 per cent in the coming two years. In spite of the fact that the economy has performed fairly well for almost two years, developments in the labour market so far have been weak. Even though the demand for labour is still low, the situation is nonetheless judged to have stabilised somewhat. The historical pattern is for employment to lag behind a change in output somewhat. It is common for economic upswings to begin in manufacturing, which then results in a rise in manufacturing employment.

I have already mentioned the uncertainty surrounding international developments. Another uncertainty factor concerns developments in the labour market, which in turn are related to productivity growth. On the whole it is likely that there will be reason to revise up somewhat the inflation forecast compared with the May Inflation Report. Inflation a couple of years ahead can nevertheless be expected to be roughly in line with the Riksbank’s target. But as economy activity continues to strengthen, which is likely to imply less idle resources in the economy, there is reason to expect gradually rising inflationary pressures. Thank you! 6  BIS Review 51/2004
See also Forbes (2022) for further reasoning. 14 See also Hauser (2021). 6 [19]  celerated. However, this does not necessarily mean that the order of the increases in the policy rate and QT changes. This is also reflected in the way that many central banks around the world are reasoning.15  … which means “reinvestment-rate increase-QT” but at a faster pace The consensus that can be seen internationally is for central banks to manage the tightening phase by following the principle of "reinvestment-rate increase-QT" but at a much faster pace than was seen before. Let me give some examples. The Federal Reserve has now raised its policy rate twice by a total of 0.75 percentage points and plans to start reducing its asset holdings on 1 June, making the 'reinvestment phase', which started in March, very short compared to the period of almost two years preceding the previous QT period prior to the coronavirus crisis.16 The Bank of England specified its plan at the beginning of the autumn.17 This involved QT beginning when the policy rate had reached 0.5 per cent, which it did in February this year. As they concluded the QE phase in December, when they raised their policy rate for the first time after the crisis, it also means in this case that the 'reinvestment phase' has become very short.

SPEECH DATE:  6 May 2022  SPEAKER:  Cecilia Skingsley  VENUE:  Handelsbanken  High inflation and a rising repo rate – what happens to the Riksbank's balance sheet?1 As you know, inflation in Sweden is now at the highest levels in several decades. We have entered a period in which the repo rate needs to be raised – and much more than we expected earlier. ‘The inflation map has been redrawn’, and this is a situation we share with many other central banks worldwide (see Figure 1). However, as you also know, the Riksbank implemented strong monetary policy measures during the coronavirus crisis, where an important element was asset purchases. The question then arises: Now that we are starting to raise interest rates – what happens to the assets on our balance sheet? When I answer that question, I would first like to go back in time a little and explain how the assets originally got there. Background – why we purchased debt securities for SEK 700 billion.
With pressures on their capital and new capital expensive where it is available, banks are likely to attempt to increase their margins and to slow down new lending, thereby reducing their capital requirements, for example by tightening non-price terms and conditions on new loans. One factor which regulators are watching carefully at present is the impact of the shift this month to the Basle II system of capital requirements for European banks. While Basle II improves on its predecessor and removes many undesirable incentives, it retains some procyclical features and any transition needs to be managed carefully. 8 The impact on expectations and confidence The other channel by which the financial market turbulence is likely to have macroeconomic effects is by prompting more cautious behaviour by households and firms. This might simply reflect uncertainty about the future. Firms may temporarily postpone investment because of greater uncertainty about the future path of demand. We saw an effect like this after 9/11 for example. But it might also reflect a revision by households and firms about the sustainable path of income and wealth in the coming years. The change in expectations may reflect the higher costs of borrowing and a higher risk of unemployment. Again a reduction in confidence about future growth may lead directly to lower consumption and investment. It is also likely to affect equity and property markets. Potential buyers may decide to wait before purchasing if they sense that there is a chance that prices may fall. Such behaviour can be self-fulfilling.

The market capitalization of digital assets reached $ trillion in November 2021.1 The rapid growth of digital assets presents opportunities to both reinforce the role of central banks and regulatory bodies in stewardship of the global financial system and be positioned at the technological frontier. However, this growth is not without risks: in May, the crash of Terra, an unbacked algorithmic stablecoin, and the subsequent wave of insolvencies, wiped out over $ billion of investor and consumer funds.2,3 Currently, the total cryptoasset market capitalization rests around $ trillion, a 66 percent decline from its November 2021 peak. When I consider the ways in which digital assets impact the mission of the Federal Reserve, I see several channels – including monetary policy and the provision of an elastic currency, the preservation of financial stability, and the smooth operation of the payments system. Regarding monetary policy and currency, in January, the Federal Reserve released a discussion paper that considers a future where digital assets may play a large role in our financial system, and in particular, establishes some broad principles and outlines some of the pros and cons of a central bank digital currency, or CBDC.4 While at present the Federal Reserve has neither issued a CBDC nor plans to do so imminently, ongoing research improves our understanding of the risks and opportunities inherent to a CBDC. Central bank money – a liability of the Federal Reserve – is the bedrock of the U.S. financial system.
The currency reserve should thus be seen as an insurance policy that not only reduces the risk of crises, but also ensures good protection when they nevertheless occur. The cost of borrowing the currency reserve should therefore be funded by the banks that create liquidity risks in foreign currency. The possibility of transferring this cost to the banking sector should be investigated as soon as possible. 21 See Bryant et al. (2012), who discuss the background for why coordination can increase social benefit, and  Jonsson and Moran (2014), who illustrate this in a number of example calculations. See also Spencer (2014) for an interesting discussion. 22 See IMF (2016). 23 See the Riksbank’s financial independence and balance sheet (draft proposal) from the Ministry of Finance. 19 [23]  The currency reserve’s share of the banking system’s foreign funding in 2016 was on the same level as in 2002, but would – if the Government’s proposal were to be implemented – fall dramatically (see Figure 7(a)). This is also a very low level from an international perspective (see Figure 7(b)). The countries with lower currency reserves are the euro countries (with the exception of Bulgaria) which, similarly to the United States and United Kingdom, enjoy the benefit of possessing a reserve currency. Furthermore, as members of the euro area, they also have greater chances of receiving liquidity in euros from the ECB. Figure 7.

He cared deeply for his staff’s welfare and, like any parent, was stern to those under him so that they may grow into the best versions of themselves. He treasured friendship and spoke of his close relationship with fellow central bankers as one of the “most satisfying things for a Governor”. This underpinned his unwavering commitment to harness the spirit of trust and cooperation amongst the regional and international central banking community amidst the rising crescendo of challenges confronting the global economy and financial system. He sowed the seeds for collaboration, such as through the establishment of the South East Asian Central Banks Centre (SEACEN). Governor Ismail Ali strove for perfection, yet he understood that neither economic assumption, ceteris paribus, nor econometric models can accurately predict this world. He said that “the central bank works in an uncertain world, with policy tools that are often not easily understood, and seeking to meet objectives of policy that are always broadly defined. With these uncertainties in an imperfect world, the central banker needs to have the serenity to accept what cannot be changed, the courage to change what cannot be accepted, and the wisdom to distinguish one from the other". As we sifted through the mementoes of Governor Ismail Ali for the book, we noticed that rarely were there pictures of him at the centre of attention; in most, he was at the side of a dignitary dispensing advice. I believe this aptly encapsulates his deep understanding of the role of a central bank.
In the same year, BNM was also the first Asian central bank to become a QFII investor and among the first wave of foreign investors in CIBM. In 2010, the Malaysian ringgit became the first emerging currency to be directly traded with the renminbi in the China Foreign Exchange Trading System (CFETS). In 2013, BNM signed a CrossBorder Collateral Arrangement (CBCA) with PBC to enable the use of home currency collateral to obtain domestic liquidity in the host country. In November 2014, BNM signed an MOU on a renminbi clearing bank arrangement. The Bank of China Malaysia was appointed as the renminbi clearing bank in January 2015. Going forward, BNM will work towards further enhancing financial co-operation with PBC in the area of Renminbi Qualified Foreign Institutional Investor (RQFII) to provide an alternative avenue for Malaysian investors to invest in onshore Chinese financial markets. BNM has also worked to integrate the renminbi into the domestic financial system by incorporating the renminbi in Malaysia’s Real Time Gross Settlement System (RENTAS). In November 2013, BNM introduced the Renminbi Liquidity Facility (RLF) to licensed onshore banks to facilitate more effective renminbi liquidity management in Malaysia. Today, the usage of renminbi in Malaysia has grown rapidly, with the daily size of renminbi foreign exchange volume at RMB6.7 billion. Malaysian institutions and corporations such as Khazanah, Cagamas, Axiata and Maybank have issued renminbi bonds.

We have not stopped to catch our breath after the euro change-overs, and we will not pause for a moment after the enlargement. In fact, the historical process of European integration that was initiated in Rome in 1957 is keeping momentum and will keep us occupied - I am sure - for long. The birth of the euro Sceptics were unconvinced as to whether it was possible to make the euro a stable currency and to successfully formulate a monetary policy for a supposedly diverse currency area. Where do we stand almost six years later? The euro has been firmly and credibly established as a stable currency. The euro area has brought with itself a period of currency stability, low rates of inflation and low levels of medium and long term market interest rates that generations in many countries had never seen before. The introduction of the euro, first, in book-entry form, and, second, in the form of banknotes and coins went extremely well under the presidency of my predecessor Wim Duisenberg to whom I would like to pay homage. The euro has become part of people’s daily lives. In January 1999, the transition to the euro in book-entry form was virtually free of implementation problems, although many people had predicted that such a big project would inevitably be delayed or affected by technical glitches or organisational failures.
On 2 May, agreement was reached between Greece, the IMF and the other euro area countries on a three-year loan package with a maximum limit of EUR 110 billion. The agreement included a comprehensive IMF adjustment program. Greece has borrowed approximately EUR 30 billion from the IMF and the euro area countries since May. Other European countries with weak public finances were also being scrutinised and there was a risk of contagion to the banking system in Europe, which was behind many of the loans. On 10 May the EU and the European Central Bank announced extensive support measures for EU countries, including the European Financial Stability Facility, which can provide loans to countries in difficulty up to a total limit of EUR 500 billion, with additional loans of up to EUR 250 billion made available by the IMF through its program facilities. Countries may draw on these loan facilities provided that taxes are increased and expenditure cut so as to enable the country to gradually become self-supporting. At the same time, the European Central Bank began to buy government bonds, which had become difficult to trade on the market, enabling markets and monetary policy to function more effectively. Economic history shows that periods of surging corporate and household debt and sharply rising property prices often precede banking crises. The fates of banks and states are inextricably linked. Banking crises usually lead to fiscal crises. Similarly, weak government finances will undermine banks’ financial position. 1 Crises are costly.

It became increasingly difficult for these countries to raise loans in domestic currency, particularly loans with long maturities. Attempts were made to keep inflation and the magnitude of foreign debt in check by pegging the domestic currency to the US dollar. But fiscal mismanagement often triggered currency crises, a fall in the value of domestic currency and a surge in foreign debt. This is when the government gave up and stopped servicing debt. The degree of losses incurred by creditors in connection with sovereign default has varied. The most recent default episodes have left creditors with losses ranging between an estimated 30 and 75 per cent. 7 These experiences will probably influence interest rates on sovereign loans when a country’s debt-servicing capacity is in question. 5  Carmen M. Reinhart and Kenneth S. Rogoff (2009): This Time is Different. Eight centuries of Financial Folly. 6  Sverre Steen (1954): “Krise og avspenning”, Det Frie Norge Vol 3. 7  Panizza et al (2009): “The Economics and Law of Sovereign Debt and Default”, Journal of Economic Literature 47. 4  BIS Review 123/2010  A forum was established, the Paris Club, which meets regularly to find solutions to bilateral debt problems. The Paris Club consists of 19 creditor governments, including Norway. A solution is contingent on the implementation of reforms in the debtor country as part of an adjustment program supported by the International Monetary Fund (IMF). Since 1956, the Paris Club has negotiated 417 debt reduction agreements with 87 countries.
Chart 9A: Word cloud for “recession” topic in  Chart 9B: Fraction of speaking time devoted to  FOMC transcripts  “recession” topic in FOMC meeting, by speaker Recessions Median  Minimum Maximum  Proportion of speaker's time 0.3 0.25 0.2 0.15 0.1 0.05  2008  2006  2004  2002  2000  1998  1996  1994  1992  1990  1988  0  Source: Hansen, McMahon and Prat (2014). Source: Hansen, McMahon and Prat (2014). Notes: Each word cloud represents the probability distribution of  Notes: The procedure estimates the allocation of each  words within a given topic; the size of the word indicates its  speaker’s time in the FOMC transcripts to a topic which we label  probability of occurring within that topic. “recession”. The chart shows a three-month moving average of the results for the first day of each FOMC meeting. The three lines show the proportion for the median FOMC member and the range around it. Shaded areas are NBER-dated recessions.

Uncertainties regarding the lagged effects of the strong monetary stimulus pose upside risks on both domestic and global economic activity. Given that the recovery in domestic demand has been relatively robust, a faster than envisaged recovery in external demand could lead to a rapid narrowing in the idle capacity, which, coupled with cost push pressures, may delay the attainment of the medium-term inflation targets. In this respect, should the recovery in economic activity turn out to be faster than expected, the monetary tightening implied in the baseline scenario may be implemented sooner than envisaged. Prospects regarding the pace of growth in developing economies, especially in China and India, have been posing upside risks regarding oil and other commodity prices. The increasing share of these economies in world demand has been creating additional pressures on commodity prices. I would like to emphasize that if commodity prices rise faster than expected in the forthcoming period and delay the disinflation, then we, as the Central Bank, may implement the monetary tightening described in the baseline scenario sooner than envisaged in order to eliminate the risks of deteriorating price setting behavior. The Central Bank will continue to monitor fiscal policy developments closely while formulating monetary policy strategy. Since the second half of 2009, economic activity has been stronger than envisaged in the Medium Term Program, leading to a better than expected performance in budget revenues.