samchain/econo-pairs-v1 huggingface dataset:
Recommendations can be addressed to the EU as a whole, to one or more individual Member States, European Supervisory Authorities, national supervisory authorities, and to the Commission. As I  |2  mentioned, the General Board makes decisions by voting. And several of the votes that have taken place these almost six years have concerned issuing ESRB recommendations. The ESRB recommendations have contributed to reducing risks in different fields The very first ESRB recommendation targeted risks generated by lending to EU households in foreign currency, proposing measures to mitigate those risks. Although it is always hard to assess something against a counterfactual, I think it is fair to say that the recommendation in question is likely to have been both timely and important. Mitigating policy actions undertaken by national authorities reduced the risks at hand. If this had not happened, events such as the sharp appreciation of the Swiss franc in 2015 – the Swiss franc being one of the currencies in which the relevant loans were denominated – could have generated severe problems for many EU households. This would in turn have affected other financial and economic developments negatively, with the potential to spread beyond the countries directly affected. Other recommendations have, much in line with the ESRB’s macroprudential mandate, targeted a wide range of issues in different areas such as money market funds; funding of credit institutions; national macroprudential mandates; intermediate objectives and instruments of macroprudential policy; and the assessment of cross-border effects of, and voluntary reciprocity for macroprudential policy measures.

I should mention that the ASC, with its composition of distinguished academics with different expertise, and in a sense more independent views, has been a catalyst in some of the work I  |3  just mentioned. Some of the topics on which the ESRB has produced and published valuable contributions include, for instance, the regulatory treatment of sovereign exposures; macroprudential assessments of various issues related to shadow banks, an area where there is still a lot of new ground to cover; the insurance sector; and commercial and residential real estate markets in the EU, to name just a few. I am also thinking of the work on structural issues regarding the banking sector, for instance in a report called “Is Europe overbanked?” by the ASC. This is a very relevant question in my view, and one that we will most likely get back to in the first panel today, where the ECB Vice President will lead the panel discussion addressing the effects of the low interest rate environment. The latter is another topic which benefits from being assessed from a macroprudential viewpoint, and which is naturally also on the ESRB’s agenda. The regular identification and monitoring of potential systemic risks also benefits from the ESRB’s broad composition I would like to mention another core task for the ESRB, namely identifying potential risks to the EU financial system at an early stage and, as mentioned, issuing warnings or recommendations about policy actions to mitigate such risks when deemed appropriate.
That conclusion is underscored by a look at existing attempts to build early-warning systems for various types of crisis. Either these systems miss out on crises that actually occur or they sound the alarm for crises that do not occur. Nevertheless, given the costs and the difficulties of managing the successive crises over the past decade, we must continue to devote considerable efforts to avoiding future crises and try hard to understand the kinds of vulnerability that lie behind them. The crises during the 1990s have revealed serious flaws not only in macroeconomic management but also, just as important, in the structure and regulation of the financial system in both debtor and creditor countries. The work now being carried out in various international fora is thorough and can be summarised under three headings: •  Crisis prevention, including the development of good practice standards and transparency codes, and incentives for both borrowers and lenders to act prudently. •  Crisis containment, including the establishment of official contingent lines and possible forms of private sector finance which may reduce the severity of any crisis. •  Crisis resolution, where the emphasis is on possible ways of creating a more orderly environment for restructuring external debt, on principles to guide the restructuring of banking systems in the wake of a crisis, and on handling corporate insolvency.

So the bank has to have enough debt that can be bailed in to restore its capital so it can continue to operate as an authorised firm while it is being resolved. Smaller banks can be more easily separated into the parts that provide critical economic services and that can be sold and those that do not and can go into insolvency. Only the critical parts would be recapitalised in resolution. They need less bail-in debt. The very smallest institutions do not need to be kept in operation. Their abrupt cessation of activity should not generate contagion or damage the economy. Insolvency rather than resolution is the proportionate strategy here. They do not need bail in debt. Gradualism The second key principle is gradualism. The Bank is proposing to allow the full four-year transition period for banks to meet their MREL requirements. This will allow the market for MREL-eligible debt to develop and allow banks to smooth out their debt issuance, minimising issuance and interest costs. Clarity The third is clarity. Banks and their creditors need to have clarity – clarity in relation to the requirements of the new regime and clarity as to their liability if things go wrong. So we need to avoid uncertainty and get on and implement the EU requirements that came into force at the beginning of this year. Bank creditors need to know where they stand if things go wrong.
Svein Gjedrem: Monetary policy in Norway  Opening remarks by Mr Svein Gjedrem, Governor of the Norges Bank, to Norges Bank workshop on “The Conduct of Monetary Policy in Open Economies”, held in Oslo, on 26-27 October 2000. *  *  *  Introduction I am happy to welcome you to this workshop on “The conduct of monetary policy in open economies”. The workshop brings together researchers and practitioners of monetary policy from a wide variety of countries. The aim is to stimulate exchanges both across countries and between researchers and monetary policymakers on a topic of common interest. Research on monetary policy is an international field. We thus find it tremendously useful to be a part of an international network of researchers and practitioners concerned with monetary policymaking. Contact across central banks does represent an important source of inspiration to the policy discussions in Norges Bank. Norwegian monetary policy The papers presented at this workshop address topics that are highly relevant to monetary policy in general and Norwegian monetary policy in particular. Some of you may be familiar with the Norwegian system. For others it may be unknown that Norway has a monetary policy regime that is unique in an international context: it is a system of neither a fixed exchange rate nor an inflation target. Let me explain in more detail: The political authorities formulate Norges Bank’s mandate for the conduct of monetary policy.

The financial crisis showed that the entry of foreign banking groups into a domestic market, besides advantages, it is also associated with elements of risk, which must be addressed duly and timely. Third, the countries in our region have different needs for investments, highlighting those in road infrastructure, energy and health care. Also, demographic developments, including migration, and slowing population growth trend, have brought about increased costs of public pension schemes and other elements of social protection. Therefore, despite fiscal consolidation efforts, budget deficits have been present and steady all the time. During the financial crisis period, public authorities were committed to overcoming the situation. Almost all governments of the countries in the region were committed to implementing fiscal stimulus policies, aimed at increasing the support to the real economy and the financial system. Monetary policy followed an easing trend, cutting the interest rates and satisfying the interbank market needs for liquidity. Back to Albania’s case, I would like to emphasize that our experience in absorbing the impacts of the crisis proved successful. Albania, I think, is one of the countries that:   Did not experience any bank failure or capital injection by the state;    Courageously withstood the crisis of confidence in the banking system, where financial intermediation was never interrupted;    The economy continued to grow in positive terms, albeit at a slower pace;    Inflationary expectations remained anchored throughout all time.
BIS Review 9/2010  13  Figure 13 Nominal exchange rate and NDF position 700  10  650  9  600  8  550  7  500  6  450  5  400  4  Jan.09  Mar.09  May 09  Jul.09  Sep.09  Nov.09  NDF position (billions of $  NER $ Source: Central Bank of Chile. Table 3 Inflation (annual change, percent) 2008  2009 (f)  2010 (f)  2011 (f) 2.7  Average CPI inflation December CPI inflation CPI inflation in around 2 years (*)  8.7 7.1  1.6 -1.4  1.0 2.5  Average CPIX inflation December CPIX inflation CPIX inflation in around 2 years (*)  8.4 8.6  2.8 -1.5  0.3 1.9  2.5  Average CPIX1 inflation December CPIX1 inflation CPIX1 inflation in around 2 years (*)  7.8 7.7  2.8 -0.6  0.8 2.1  2.6  3.0  3.0  3.0  (f) Forecast. (*) Inflation forecast to the fourth quarter of 2011. Source: Central Bank of Chile.

Furthermore, as suggested by these projections and private expectations, in the fourth quarter the GDP will post a positive annual growth rate. Annual inflation, in turn, is expected to begin rising and become positive during the first half of 2010. Our financial system has been able to weather the external turmoil and the Central Bank has taken actions to avoid inconveniences in the provision of liquidity and implemented a highly expansionary monetary policy, not just reducing the policy rate to its lowest possible. However many risks are still there and we must be extremely careful in our decisions. The economy is beginning a recovery process that is yet to be well grounded. Output gaps are significant and will close gradually; probably taking more than the next two years. Inflationary pressures are generally low. We have said in our communications that we will hold the policy rate at its lowest at least until the second quarter of 2010. However, it is not a mechanical commitment in the sense that after that time we will begin to withdraw the monetary impulse. Experience has taught us the importance of moderation, and a hasty withdrawal could severely hinder economic recovery and jeopardize convergence to the inflation target. As in earlier occasions, our inflation-targeting regime and the credibility it has earned allow us to handle monetary policy very flexibly. Accordingly, we reiterate that the Board will use all the policy tools at hand so that projected inflation stands at 3% over the policy horizon.
I consider there is large space for this partnership to expand, also based on new challenges from the European agenda. As always, this event centers around the EIB’s Investment Survey, an excellent country analysis conducted by EIB experts. The conclusions of this survey represent a welcome addition to those of our central bank’s own survey on the access to finance of non-financial corporations in Romania. Our survey captures the opinions of the real sector on: (i) the most pressing problems that firms are facing in their activity; (ii) the perception on the financing cost; (iii) the perception on the implications of a possible appreciation/depreciation of the local currency; (iv) the perception on the impact of climate change. Coming back to the EIB, its Investment Report analyzes the state of investments in the EU in the pandemic, climate change and digitalization context. The EIB’s survey shows that Romanian firms have become more optimistic, with more of them expecting to increase investment rather than the other way around. It’s good to hear this, yet we are also aware that Romania has more work in several aspects. This is the case for areas like innovation activity and access to finance. However, we see that a large percentage of Romanian firms have already invested or plan to invest to tackle the impact of climate change, putting Romania ahead of the EU average. We concur with the EIB Investment Report that the COVID 19 represented a massive shock mitigated by a bold policy response.

The loss in housing-related wealth from cycle peak to trough is staggering, something of the order of USD 7 trillion. 1 Part of these losses are paper losses, since not everyone entered the market at its peak and a portion of these losses have been absorbed by households themselves; the rest must be borne by financial intermediaries. To this day the worldwide write-downs by the financial sector, including, but not limited to recognised losses from the housing sector, are estimated at USD 1.7 trillion. 2 However, we are still counting, as the latest results published by some of the world’s major financial institutes reveal. There have been many examples of real estate crises in the recent past, including one in Switzerland in the early nineties. What distinguishes the current crisis is its breadth and international character. These two characteristics are intimately related: the rapid expansion of subprime mortgages and the internationalisation of the mortgage-based financial instruments brought international capital to the US real estate sector. This capital helped inflate the property bubble in the first place; it also explains why the subsequent crisis turned into an international financial market event and then into a global economic crisis! A quick back-of-the-envelope calculation comes up with a figure for lost flow income of at least 10% of world GDP. We have escaped a new Great Depression, but in the end worldwide income losses have probably exceeded the income losses associated with the Great Depression.
In the U.S. financial crisis of 2007–09, there were no widespread bank runs: in general depositors did not line up at their bank and request their deposits, even for banks that were widely reported to be in poor financial condition. This is likely the case because of the widespread understanding of U.S. federally insured deposit insurance, which protects depositors’ funds up to the current limit of $ and the presence of the discount window, by which banks can increase their cash holdings to meet withdrawal demands without having to sell assets at panic prices.12 However, the financial crisis of 2007–09 manifested another type of run on banks as well as non-banks, a run on the short-term, non-deposit debt issued by the intermediaries. This is a point made clearly by Gary Gorton (2012). These runs weren’t clearly and easily visible to the public, and this fact impeded the quick understanding of the severity and potential consequences of the run that was underway. I’ve outlined two strains of thought that provide models for us to understand the mechanisms that amplify what might initially be small shocks into large and dangerous events for the economy: the procyclical leverage of financial intermediaries and their sensitivity to measures of financial risk, such as volatility, and the potential for private intermediaries to issue moneylike instruments.

The clearest outcome of a financial crisis is a loss of output – in other words, a severe and long-lasting recession. Using the same dataset they used to identify crises, Laeven and Valencia found that in advanced-economy nations, the median cumulative decline in output accompanying a financial crisis was 33 percent of annual gross domestic product, or one-third of an economy’s output for a year. In addition, the median growth in government debt was 21 percent of GDP, and the median fiscal cost of the crisis-related spending was 3.8 percent of GDP. Other studies confirm these grim statistics. Reinhart and Rogoff (2009) point out that recoveries from financial crises are weaker and slower than recoveries from recessions that don’t accompany a financial crisis. Employment growth is slower during recoveries from financial crises, and the associated higher unemployment can have long-lasting effects on a whole generation of young workers who sustain long spells of joblessness. There are many other maladies that come along with financial crises. Ingredients Several economic researchers agree that one crucial ingredient in creating the vulnerabilities that can foster a financial crisis is a buildup of debt.5 In particular, a “credit boom,” that is, a high and fast-growing ratio of credit to GDP, is one of the precursors to a financial crisis. Other, somewhat less reliable precursors include a prior financial liberalization or deregulation, housing price booms, and external imbalances (in practice, large inflows of capital from outside the country).
The question then arises of what sorts of safeguards and rules should apply to that trade? I mentioned earlier that one of the offspring of Bretton Woods was the GATT, subsequently the W TO. The focus of activity was for some considerable time on trade in goods not trade in services. Both goods and services trade depend on robust standards and the regulation of those standards, but trade in services is almost entirely about such standards. This trade has been substantially supported by the global standards to which I referred earlier, and which has allowed countries to defer to each other in terms of the prevailing rules and regulations. This means deferring to the rules of others to protect our citizens or firms when they choose to do business there. There is no doubt in my mind that the work done on global standards since the financial crisis has made this process easier to support and safer and improved the level of trust we have in each other. The European Union has pursued the approach of so-called equivalence, which on the face of it allows for deferring to other authorities where appropriate. The EU’s framework of equivalence in financial services is a patchwork across many different pieces of financial services legislation, taking different forms in different sub-sectors, and in some not present at all. Nor do the equivalence measures prescribe how the judgement should be made. As is well known, the post-Brexit equivalence process between the UK and EU has not been straightforward.

In the aftermath of the crisis, global imbalances were reduced as a consequence of the financial retrenchment and the severe downturn in activity worldwide. However, a large portion of the correction is likely to have been merely cyclical. As a matter of fact, as the global recovery is taking hold, a new widening of imbalances is starting to be perceived this year and is foreseen to continue into 2011. Indeed, the basic structural factors underlying global imbalances remain essentially in place; but the crisis has brought about some potentially important changes in the nature of the imbalances. As trade and capital flows experienced a sudden stop during the crisis, the immediate impact was deeper in those economies more open to trade – which collapsed – and those with higher net external financing needs. When trade recovered, export economies tended to  BIS Review 172/2010  1  rebound strongly, but countries with large external deficits generally lagged behind. In many advanced economies, particularly in those running deficits, private domestic demand remains severely impaired by the adjustment process and the need for the private sector to deleverage. As a result of this process private sector saving rates have increased sharply and public sector balances have rapidly deteriorated. In the end, external deficits do not reflect anymore the large financing needs of the private sector – as they did before the crisis – but those of the public sector.
As I said at the beginning, the annual variation of the Consumer Price Index excluding Food and Energy (CPIEFE)—our measure of core inflation that deletes the prices of food and energy from the CPI—has remained below 2%, with annual inflation still negative for goods and persistently around 3% for services. The CPI has approached 3%, mainly driven by the behavior of the more volatile prices (Figure 9). The peso depreciation has an effect on the revision of the short-term inflation outlook. By the end of this year, the annual variation of the CPIEFE is forecast to be at 2.7% (2.3% in June) and that of the CPI, at 3.1% (2.8% in June). Once both indicators converge to 3% during 2019, they will remain in the neighborhood until the end of the projection horizon (Figure 10). It is very likely that in September the annual CPI inflation rate will be temporarily above 3%, because of the low basis for comparison left by the unusual behavior of some foodstuffs in 2017. Regarding monetary policy, we think that the evolution of macroeconomic conditions makes it less necessary to maintain the current monetary stimulus. Therefore, our working assumption for the MPR is that it will begin to increase in the coming months and by 2020 it will stand near its neutral level—ie. between 4% and 4.5%. This assumption is not essentially different from the forecast a few months ago, as it implies gradual increases in the policy rate associated with the recovery of the domestic economy.

These include, among others, the delivery of new statistical products, improved management of the cash cycle, modernization of the technological platform that supports the investment cycle of the International Reserves and the Sovereign Funds, and the incorporation of computer security measures based on high international standards. Particularly noteworthy is the progress we have made in implementing Basel III regulations, mainly in terms of liquidity standards for the banking system and support for the discussion of the new General Banking Act. The latter will pose additional demands, particularly concerning the implementation of regulatory measures and macroprudential policies, such as the countercyclical capital reserve and the charge to systemic banks, for which the CBC has been preparing in recent months, reviewing international experiences and their applicability to Chile. 11  We intend to continue informing the Senate and the general public about the progress of our Strategic Plan and the operational agenda in the coming years. This is an expression of a broader will to increase the transparency of the operation and performance of the CBC, as an essential ground for the confidence in our institution that we wish to maintain and reinforce. Let me stress here that the CBC’s commitment with transparency involves not only compliance with the obligations mandated us by the Constitution and laws but has expanded further by way of agreements adopted by the Board throughout the years.