samchain/econo-pairs-v1 huggingface dataset:
Such an application is not uncomplicated, partly because the Riksbank's independence is somewhat eroded when financing becomes dependent on parliamentary decisions.41 Even if the Riksbank's loss were to be significantly higher this year than market prices now indicate, there is hardly any urgent need for capital injections; the scenarios I have discussed do not arise overnight. According to the new Sveriges Riksbank Act, the Riksbank is to apply for a capital injection when equity falls below a certain (positive) level, but since the new law does not apply until the 2023 financial statements, I see no reason for the Riksbank to apply for a contribution in the near future.42  Many central banks are going to make losses now Following the global financial crisis in 2008, and especially during and after the pandemic, many central banks have purchased assets for similar reasons to the Riksbank. In addition, several of them have purchased considerably larger volumes in relation to the size of their economy than the Riksbank (see Figure 13). They have also often bought assets with a longer maturity – and thus more interest risk – than the Riksbank. We can expect these central banks to also report losses this year. 41 See Nordström and Vredin (2022) for a more detailed discussion of financial independence. 42 The ECB has long argued in its convergence reports that “an NCB should always be sufficiently capitalised.

Limit the build-up of debt despite the need to stimulate the economy I would also like to say something about the interplay between current monetary policy and measures to mitigate the risk factors I have mentioned. Is it really justified to introduce measures that may dampen household consumption or activity on the housing market when the Riksbank is at the same time trying to stimulate the economy in order to increase  3  Several studies based on household data from the financial crisis of recent years show that highly-indebted households reduced their consumption more than households with low debts (see for example Dynan 2012, Mian et al. 2013, and Andersen et al. 2014). Studies that compare developments in different countries also indicate that high or growing indebtedness in the household sector entails higher risks to the real economy, even if the households also have substantial assets (see for example IMF 2012, Jorda et al. 2013, and Flodén 2014). 4  See Riksbank (2014b). 2  BIS central bankers’ speeches  inflation? This question is particularly relevant given that the repo rate is at zero and cannot be cut much more. I think that the question, at least in principle, should nevertheless be answered in the affirmative. It must be possible to meet financial risks with targeted measures even if this makes it more difficult for monetary policy to attain the inflation target.
On the implications of DCP for optimal monetary policy, see Egorov, Konstantin and Dmitry Mukhin, “Optimal Monetary Policy under Dollar Pricing,” March 2019. mimeo Yale University; and Casas, C, Diez, FJ, Gopinath, G and Gourinchas, PO (2017), ‘Dominant Currency Paradigm: A New Model for Small Open Economies’, IMF Working Papers 17/264. 27 For more detail, see ‘Lambda’, speech by Mark Carney, 16 January 2017. 26  10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  The growing risk of a global liquidity trap puts a high premium on getting more than just monetary policy right. Limited space for monetary policy to respond to adverse shocks means more of the burden for supporting jobs and activity will fall to fiscal policy. Though some may be tempted to resort to protectionism, such policies would merely serve to make the problem worse. Those at the core of the IMFS need to incorporate spillovers and spill backs, as the Fed has been doing. More broadly, central banks need to develop a better shared understanding of the scale of global risks and a recognition that concerted, cooperative action may sometimes be necessary. That doesn’t mean that monetary policy makers in advanced economies must internalise fully spillovers from their actions on emerging market economies, given their mandates are to achieve domestic objectives.

The amplification of spillovers by the IMFS matters less when the global expansions are relatively synchronised or when the US economy is relatively weak. But when US conditions warrant tighter policy there than elsewhere, the strains in the system become evident. These conditions emerged last year. US fiscal policy had boosted growth at a time when the US economy was near full employment. US monetary policy had to tighten consistent with the Fed’s dual mandate. The resulting dollar strength and financial spillovers tightened financial conditions in most other economies by more than was warranted by their domestic conditions (two thirds of the global economy was growing at below potential rates at the start of 2019, and that proportion has since risen to five sixths). More recently, the dramatic increase in trade tensions (Chart 1) has reinforced their effects by increasing risk premia. Today, the combination of heightened economic policy uncertainty (Chart 2), outright protectionism and concerns that further, negative shocks could not be adequately offset because of limited policy space is exacerbating the disinflationary bias in the global economy. What then must be done? In the short term, central bankers must play the cards they have been dealt as best they can. That means using the full flexibility in flexible inflation targeting. To retain the essential credibility of their frameworks, this is best done transparently with central bankers explaining their reasons for targeting specific trade-offs between price stability and output volatility.
The New York Fed also conducts the Empire State Manufacturing Survey to learn about conditions for regional manufacturers. I am pleased to say that November’s report (issued this Tuesday) shows signs of stabilizing after five months of weakening. In November, more manufacturers are adopting an optimistic outlook. Like many other large states, New York has a bifurcated economy. New York’s downstate area differs dramatically from the upstate area in terms of industrial composition, occupations and job growth. While Albany may be geographically midway between the two areas, its industry mix resembles neither the downstate’s heavy concentration in the service sector, nor the upstate focus on the manufacturing sector. What sets Albany apart is that it is home to the state’s capital. About one quarter of employees in the Albany area work for the government – about a third more than the statewide average. The local economy did not fare as poorly as the national economy during this recession, but the impact was still severe and the recovery is not yet well established. During the downturn, the capital region saw a loss of about 20,000 jobs, or roughly 4 percent of total employment, considerably less severe than the 6.5 percent nationwide decline. Over the past year and a half, job losses have slowed. But, in contrast to the rest of the state, we cannot confidently say that a solid recovery is underway. The Albany area is not yet consistently adding jobs. This is not surprising, considering the fiscal difficulties faced by New York State.

Households in the Albany region did not accumulate as much debt as did households in the rest of the state and country during the run-up to the crisis. Recent data indicate that the average adult in Albany has about $ of debt, which is about 20 percent lower than the average across the state and country as a whole. Thus, financial strains on many families in the Albany area were lower than in many other places around the state and nation. However, the number of delinquencies did rise significantly during the recession in the area, so it is clear that some households face strong financial pressures. About 4 percent of debt balances currently are 90+ days past due in Albany, which is twice the 2 percent delinquency rate in 2005. Although this is less than half of the rate in New York State or the nation, this doubling of delinquencies in the Albany area still troubles me as a sign of heightened distress for many families here. Stepping back from the current challenges, the capital region possesses a number of fundamental strengths. These strengths show through in some key ways:   Albany is growing. The recent Census shows that the population in the region expanded by 5.5 percent over the past decade, more than double the statewide average. Saratoga County saw an especially strong gain of nearly 10 percent.   Incomes in the region are high. Albany is the state’s most affluent area outside the New York City metropolitan region.
Sources: Central Bank of Chile and National Bureau of Statistics (INE). 8  BIS Review 65/2009  Durable exports (percentage of total exports)  Figure 5 Share of durable goods in total exports and contribution of exports to GDP quarterly growth in the fourth quarter of 2008 HK  60  SIN  50  COR  HUN FIN  RCH  40  TAI  ALE  30  HOL CAN  BEL  R2 = 0.52 -35  -30  -20  -15  -10  -5  NZL  10  AUS CHL  ARG  -25  20  BRL  NOR  COL  5  10  0  Exports (contribution to GDP, annualized quarterly change, percent) Source: Central Bank of Chile. Figure 6 Lending interest rates (1) (percent) 16  38  14  35  12  32  10  29  8  26  6  23  4  20  2  17  02  03  Commercial (2)  04  05  06  07  08  09  Consumer (2)  Housing (3) (1) Weighted average rates. (2) Nominal rates. (3) Rates in UF. Source: Central Bank of Chile.

Thus, annual CPI variation went from its 9.9 percent peak of October 2008 to 4.5 percent in April. Most measures of inflation expectations show a decline in recent months, particularly for the short term (Figure 9). The baseline scenario of this Report assumes that year-on-year inflation will continue on a downward path in the coming months with large swings between the end of this year and the  4  BIS Review 65/2009  beginning of 2010. This, because of the changes in the basis of comparison that include high figures from May through October 2008 and negative ones that accumulated from last November to February (Figure 10). Therefore, in the baseline scenario, annual CPI inflation will be negative from the end of the third quarter to the beginning of the fourth, to close the year 2009 at 0.6 percent. Then it should pick up gradually, to reach 3 percent at the end of the policy horizon, this time the second quarter of 2011. The rate of annual variation of core indicators has also dropped, a trend that will prevail until the first half of 2010, when they will start growing steadily to also hit 3 percent by the end of the policy horizon (Table 3). The path projected for inflation rests on a number of assumptions. On one hand, import costs will not be a source of additional inflationary pressures. Commodity prices will post small increases in the next two years, in line with the slow recovery foreseen for the world economy.
4) The Norwegian economy at a turning point The Norwegian economy continued to expand at a relatively strong pace in 1998, albeit somewhat more moderately than in previous years. In Norges Bank’s December Inflation Report, the central bank projected a period of slower growth. Several years of robust growth have contributed to high capacity utilisation. Labour shortages and high wage growth will have a dampening impact on growth in the years ahead. Forecasting is a challenging enterprise at a stage when the economy is nearing a turnaround. It is difficult to pinpoint the timing and the amplitude of the turnaround. However, evidence now suggests that Norway is entering a period of slightly weaker growth. The international environment has led to slower growth in demand and lower prices on the world market. This is weakening profitability in the export sector in Norway. In addition, the wage settlements have increased business costs, which will increase the need for enhancing the efficiency of enterprises. Reduced earnings and higher interest rates will have a dampening effect on business investment. The extraordinarily high level of oil investment recorded in recent years has been expected to fall for some time. The drop in oil prices may lead to more pronounced cyclical fluctuations. Restructuring, streamlining and cost cuts in the oil industry will also affect employment. The local government sector, where employment has increased sharply during this cyclical upturn, placed itself in a very difficult situation during the last income settlement.

Recent examples include the volatility of technology stocks, the growing size of telecom debt or the problems of the Japanese insurance industry. Much of the work is published in the Bank’s Financial Stability Review which is intended to promote public understanding of financial stability. The most important part of the FSR is an assessment of the global conjuncture and potential risks to the UK financial system. Emerging market economies have attracted particular attention in recent years. Not only were these countries the source of the most recent shock to the international financial system in 1998 but, since that time, they have been a major focus in international groups such as the FSF. The work to strengthen the financial system has centred as much on crisis prevention as crisis resolution. Under crisis prevention, the accent has been on improved disclosure, establishing new international standards for transparency for governments and private sector firms in the publication of economic and financial data. In terms of crisis resolution, discussion has turned to the role of the official sector, and the IMF and World Bank more particularly, in helping countries that get into difficulty. Many of the crises in emerging market economies have been marked by a sudden withdrawal of private sector capital, including outflows to private sector creditors of official funds intended to stabilise the position and reverse this capital flight.
In light of recent developments, I am optimistic about the economic prospects for the Bronx and local small businesses. I also believe that community banks and community development organizations have an important role to play in paving the way forward. As always, my comments today reflect my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. 1 The economic outlook for the Bronx To appreciate where we are, we need to remember where we’ve been. Those of you who are long-time Bronxites know that starting in the 1950s, but especially during the 1970s, the Bronx endured a massive economic slump. In that one decade, the 1970s, the borough’s population fell by 20 percent – and by even more in many well-established neighborhoods. As people moved out in droves, buildings were abandoned, crime increased and jobs vanished – all in a vicious cycle, creating an atmosphere of despair. Yet, the borough persevered and conditions began to stabilize and then to even improve a bit in the 1980s. Today, while there is still much progress to be made, the Bronx is in dramatically better shape on many dimensions: its economy has been growing at a brisk pace, its population is on the rise, its housing stock is being rejuvenated and many businesses are thriving, creating strong job and income growth. This is particularly evident in neighborhoods like Hunts Point and the area around Yankee Stadium, down to the Bronx Terminal Market and beyond.

The studies further cited successful community banks as having a strong and localized customer service focus – that is, avoiding the temptation to expand into new, less familiar areas and markets – and high community visibility, with staff members heavily involved in community activities, which in turn, created customer relationships built on trust. 5 So what did we learn from the experience of community banks with the financial crisis? A foundation built on good risk management practices and intimate local knowledge helped the successful banks to thrive during one of this country’s most difficult financial periods. The banks that prosper in the future will likely have characteristics similar to those that outperformed during the financial crisis. It bears repeating that community banks are critical in keeping local economies vibrant and growing. Strong community banks are essential to the provision of credit to small businesses in their localities. 4  See United States Government Accountability Office, Financial Institutions: Causes and Consequences of Recent Community Bank Failures, Statement of Lawrance L. Evans, Jr., Director Financial Markets and Community Investment, June 13, 2013. Also see Gilbert et al. (2013). 5  St. Louis Federal Reserve Study Shows Community Bank Model Can Thrive in Good Times and in Bad. BIS central bankers’ speeches  3  Importance of small business lending It is often noted that small businesses contribute disproportionately to employment growth in their communities. When you dig a little deeper into this stylized fact, you discover that it is new small businesses that are responsible for this growth.
That group is being chaired by Stuart Siddall, Chief Executive of the ACT, and is due to issue a report in the next few months. Syndicated loans and asset backed securities A substantial part of lending to larger UK corporates is normally undertaken via syndicated loans. The Bank investigated whether there was a market failure or illiquidity premium in this market which could be addressed by making APF purchases. After a thorough investigation, the Bank concluded that what was needed was more large-scale bank funding, particularly to replace the foreign bank lenders who had been withdrawing from the UK market. But the appropriate way to address that was through the various schemes in place to support the banks. Similarly, the Bank investigated the state of securitisation markets. Here, there were two problems. First, many investors were extremely wary of buying mortgage-backed securities and similar products, because the crisis had raised uncertainty over their underlying risk characteristics. At the same time there was a huge outstanding stock of such assets already issued, which would swamp any operation aimed at improving liquidity. In the United States the authorities have undertaken substantial purchases of mortgage-backed securities, and funded the purchase of other securitised assets. It is not clear yet whether those markets will be self-sustainable once official intervention comes to an end. In the United Kingdom, we have made a range of ABS, including mortgage backed securities, eligible collateral in the Bank’s permanent liquidity insurance facilities as well as in the SLS.

Although uncertainty has increased, and economic activity abroad so far has been slightly weaker, the Swedish economy has developed largely in line with the outline we sketched in July. Moreover, the repo rate is still low. Swedish banks are stable The Riksbank has two main tasks. The first is to conduct monetary policy with the objective that inflation shall be low and stable. The second is to safeguard financial stability. The Riksbank therefore closely monitors developments in the financial markets. During the summer we have extended out monitoring as a result of the international turbulence. Swedish banks are still financially strong. They currently have good access to funding on all of the markets they normally use. The Riksbank’s stress tests also show that they have a good capacity to manage increased loan losses. But as the Swedish banks obtain funding largely through market borrowing in foreign currency, they are of course vulnerable to problems abroad. We currently have daily contacts with the banks and we have access to data on their funding. So far, there is nothing to indicate that it will be necessary for us to lend money to the banks. Next decision is on 6 September We are currently working hard on new analyses and forecasts for the monetary policy meeting on 6 September. I have today attempted to outline events during the summer and the issues I consider we will discuss at our next monetary policy meeting.
This is partly because financial stability is a necessary condition for an effective monetary policy, but also because financial instability risks leading to major fluctuations in both the real economy and inflation. We should also take financial stability into account because part of the Riksbank’s assignment is to promote a safe and efficient payment system. Furthermore, in order to adapt monetary policy to the risk of future crises in the wake of financial imbalances we do not need to know that a crisis will actually occur, or exactly when, but we do need to know through what mechanisms or under what circumstances the probability of a crisis increases. Nor is it a case of a crisis being the most likely outcome but rather that the risk that something major can happen should make us focus our attention in that direction.6 If we learned anything from the financial crisis it was that there is every reason to take even less likely outcomes into account. The financial crisis has also reminded us that cleaning up after a crisis can entail huge costs and take a long time. Five years after the financial crisis began, for example, unemployment is still high in many of the countries that were hit hardest.7 With regard to household indebtedness it is obviously the case that monetary policy cannot do much about a high level of debt that in turn is due to high housing prices if these have structural causes, such as insufficient new construction, tax regulations, building regulations and so on.

With the banking sector in the euro area being an essential source of financing of the real economy, the integration of these markets plays an important role in the pass-through of monetary policy decisions to the lending rates of the banking sector. The financial crisis has challenged the stability and integration of European financial markets in an unprecedented way. It has thrown into reverse the steady integration seen since the inception of the euro. The causes for this were manifold. First, heterogeneous economic developments caused by financial and structural imbalances across euro area Member States led to outflows of funds from the countries that were perceived as more risky – in view of their large cumulated imbalances stemming from ample competitiveness gaps, high current account deficits and high private sector leverage – and led to inflows into countries with a safe-haven status. Second, imbalances in the banking sector arose from undue risk-taking, investment in opaque financial products and excessive leverage. This has caused some financial institutions to be cut off from wholesale funding markets and interbank funding. The seclusion of some financial institutions was also the result of the measures introduced by some Member States to ring-fence the domestic banking industry from foreign contagion. While this was an understandable response from regulators that had a domestic perspective in their institutional mandates, the consequence was a further fragmentation of financial markets. Third, in some countries, fiscal fragilities interacted with banking fragilities.