samchain/econo-pairs-v1 huggingface dataset:
Barbro Wickman-Parak: The IMF’s role – new thinking in the wake of the financial crisis Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at a meeting at Global Challenge, Stockholm, 5 October 2012. *  *  *  I would like to thank Ms Maria Wallin Fredholm and Ms Emelie Mannefred, from the Riksbank’s Financial Stability Department, for their assistance in the writing of this speech. The 188 member countries of the International Monetary Fund (IMF) will gather in Tokyo for the Fund’s annual meeting next week. When I began working with IMF issues at the Riksbank in 2007, my impression was that the IMF was suffering from an identity crisis. The Fund’s lending to countries in crisis appeared to have played out its role and major staff cuts were underway. In short, the mood was rather subdued in the corridors of the IMF. The financial crisis led to an abrupt change. The IMF was forced to quickly provide action programmes and funding for crisis countries. Before the crisis, the IMF’s lending amounted to approximately USD 9 billion, the largest part of which went to Turkey. Today, the IMF’s lending amounts to around USD 112 billion, and the absolute largest part of this sum now goes to countries in Europe. The media spotlight often falls on the Fund when it rides to the rescue with crisis-management measures like this. But the every-day, important and tireless surveillance work of the IMF seldom attracts any headlines.

Companies and importers may have preferred to observe changes in the exchange rate over time before changing their selling prices. After several expensive wage settlements and a short period of a strong krone had weakened profitability in the Norwegian business sector, the depreciation of the krone contributed to curbing the decline in activity and employment. The downturn was short-lived. Together with private consumption and fixed investment in the petroleum sector, traditional exports were an important factor underlying growth in the early stages of the recovery that started in the first half of 2003. Prices for many of our main export goods have risen as a result of strong growth in new markets. However, growth in Norway’s total exports excluding oil and gas is lower than import growth among our trading partners. Mainland fixed investment has gradually become an important driving force in the upturn. Investment has picked up in most industries and growth was stronger than expected towards the end of 2004. Norges Bank’s regional network has registered rising investment in all industries. Petroleum investment in particular appears to be growing at a faster pace than projected. This may continue to boost mainland output. In the last few years, household demand has been underpinned by low interest rates, high real wage growth and higher asset prices. According to preliminary national accounts figures, private consumption expanded by 4.3 per cent last year. House price inflation has slowed somewhat, but remains high. In 2004, housing starts were the highest in several years.
In New Jersey, private-sector job growth was quite robust in the fourth quarter, despite a small dip in December. New York State, in contrast, slowed more in December and has seen only minimal job gains since we last met in August. 2  For more information, see Indexes of Coincident Economic Indicators on the New York Fed website. BIS central bankers’ speeches  3  Job growth in the region no longer appears to be out-performing the nation, and regional unemployment rates remain unacceptably high: at around 9 percent in both New York City and New Jersey, and close to 8 percent across New York State. Turning to New York City, the local job market, which had been quite resilient during and after the recession, has lagged recently – partly reflecting weakness in the city’s securities industry. Still, the Big Apple has recovered over half of the jobs lost during the recession, whereas the nation has recouped only about a third of its job losses thus far. Despite recent weakness in the securities industry, other industries, such as tourism, and professional and business services, have fared reasonably well in the City. Weakness in financial activities industry – and securities in particular – is worrisome because this sector has tended to drive overall local growth and provide a major source of tax revenue for the city and the state. The New York Fed also conducts the Empire State Manufacturing Survey to track conditions for regional manufacturers.

Ardian Fullani: Recent economic and financial developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on monetary policy decision of the Bank of Albania’s Supervisory Council, Tirana, 25 May 2011. *  *  *  Today, on 25 May 2011, the Bank of Albania’s Supervisory Council reviewed and approved the monthly Monetary Policy Report. Based on a thorough analysis of Albania’s latest economic and monetary developments and discussions on their outlook, the Supervisory Council decided to maintain the key interest rate unchanged, at 5.25%. The Supervisory Council judges that the current monetary conditions are appropriate to meet inflation target and continue the economic activity stimulus. Let me proceed with an overview of economic developments and main issues discussed at today’s meeting. *** The Albanian economy continues to maintain a positive development trend. Recovery in domestic demand over the first four months of the year and the positive contribution of external demand, have impacted on positive growth of the Albanian economy. Also, the major macroeconomic balances have remained stable and the financial system indicators appear to have generally improved. Following the shock of February, CPI inflation has followed a downward trajectory, reflecting the subdued inflationary pressures on the economy and Albanian financial markets. Available data on 2011 Q1 show that the economic activity has registered growth; however, the persistence of some spare capacity suggests that this growth remains below potential.
And it was that ‘design feature’, coupled with weak governance, and the huge stock of assets priced off LIBOR, which gave such a strong incentive for manipulation. Though governance arrangements for LIBOR have since been strengthened, the vast majority of term LIBOR rates remain largely or wholly based on judgment, reflecting the absence of any material underlying market (Figure 2). -  Third, despite these two profound drawbacks, the informational and liquidity advantages of using a common established benchmark, coupled with the deep embedding of LIBOR in a range of systems, accounting and regulatory requirements have meant moving away from the use of LIBOR has required determination, forward-thinking and co-ordinated effort – even for those large parts of the market where it is manifestly the wrong rate to use. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  Figure 2: Input sources for current LIBOR tenors 4  What opportunities will a post-LIBOR world offer? Taken together, these three observations show why LIBOR transition is both necessary from a risk perspective and beneficial for the long-term efficiency of the financial markets, whilst also being unpopular in terms of the one-off transition costs involved. Indeed, there is a material risk that those transition costs are obscuring a clear perspective of the commercial benefits to users of moving beyond LIBOR. What are those benefits? It would be brave for me as a public official to attempt anything approaching a complete answer to that question.

The banks in Bulgaria have an important year ahead, which we expect to be overall successful for the sector. Banks’ operations continue to take place in an environment of rather optimistic attitudes of enterprises and households amidst a relatively high growth of the Bulgarian economy. At the same time, the external environment holds risks and insecurity that, due to the openness and international integration of our economy, could potentially affect the economic 1/2  BIS central bankers' speeches  situation in Bulgaria. Some adverse scenarios could exacerbate aspects of the risk profile of the banking sector. Therefore, it is essential that in their behaviour banks continue to take into account the main risks, including profitability risks and asset quality risks. 2/2  BIS central bankers' speeches
In that context of extended need for cooperation and coordination among regulators and supervisors, my last comment is related to the levers at hand to promote trust and reliance on foreign supervisors to prevent the development of a trend towards ring fencing and the risk of market fragmentation. Let me say first that I don’t think that promoting mutual trust and reliance among supervisors can move us to a world free of ring fencing. This is because it has its root and it is the result of the trade-off each regulator and supervisor has to face, in normal time and during crisis, between the need to preserve the stability of financial intermediaries or the financial system as a whole for which it is accountable and the need to preserve their competitiveness through their integration to the global financial system. For instance, for banks with cross-border activities, regulators and supervisors need to balance requirements for pre-positioning of capital and liquidity in their jurisdiction and the need to leave to those banks enough flexibility in the management of those resources at group level. And this without mentioning the development of idiosyncratic financial stability risk which might call for macroprudential approach and specific additional capital requirements at a country level, and might add to the complexity to maintain this delicate balance.

To be more concrete, let us take the example of Open Banking. The regulatory framework set out by the second Payment Services Directive (PSD2) has lifted the technical and legal barriers to accessing payment account data. The immediate consequence has been the development of a new ecosystem offering consumers a wealth of new services. However, we have also imposed high data protection requirements at the European level, in particular in the rules governing access to this information. Second principle: in order not to be mere spectators of change or react to it too late, we must fully take on the prospective observation, experimentation, and operational commitment. In the area of payments, the recent BigTech initiatives with a global impact have once again brought the current inefficiency of cross border payment solutions to the forefront. However, the issues of financial stability, monetary policy and sovereignty raised by these projects should encourage us to operationalise our efforts to promote more efficient payment systems where appropriate by considering an operational involvement of central banks, based on the consistent and coordinated use of new technologies. As regards infrastructures, we have taken an interest in blockchain technology since its early stages. We were the first central bank to develop, regarding the specific use of SEPA creditor credentials, a decentralised register system based on a blockchain protocol, the “MADRE” register. Of course, this is only a first step, which does not exhaust an extremely vast and diversified field of experimentation.
Although the choice of currency and exchange rate policies are in many respects technical issues, decisions regarding the monetary framework can never be severed from their political context. Countries take a position on this issue based on their own experience and their relationship with other countries. Full participation in the euro area cannot come to pass without formal negotiations and EU membership. Such a decision reaches far beyond the boundaries of economic analysis and cannot be taken except through a political process wherein the population itself has the last word. It is not the role of the Central Bank to take a stand on such a major issue. Whichever decision is taken, it will have a decisive impact on Iceland’s monetary and exchange rate policy options. The Central Bank has a role to play in explaining what the options are. That is the function of this report. The Bank hopes that this publication will be useful in promoting informed, substantive discussion of currency and exchange rate policy. In closing, I wish to thank the Central Bank of Iceland staff members who devoted innumerable hours to the preparation of this report. Special thanks are due the Chief Economist, Thórarinn G. Pétursson, who has steered this project for the past two years. 12  BIS central bankers’ speeches

They are attracted not just by work opportunities but also by our cosmopolitan lifestyle, by our thriving cultural – and culinary – scene, and by the spectacular country trails and fine beaches that are so close to the bustle of city life. Crowning all of this is Hong Kong’s geographical and historical role as the gateway that connects China and the rest of the world, and the enormous opportunities that this brings. This is, I think, 1/4  BIS central bankers' speeches  the defining feature that firmly positions Hong Kong as the leading IFC in the Asia time zone. Resilience Resilience is the bedrock of an IFC. In the past quarter-century, Hong Kong has been exposed to a series of crises that have severely tested our financial system — the Asian financial crisis, SARS, the global financial crisis, and more recently the triple whammy of social unrest, geopolitical tensions, and COVID-19 pandemic. Through all of these crises our financial system has emerged stronger. Take the monetary system. The Linked Exchange Rate system has remained rock solid throughout these testing times. Indeed, market confidence in the system has only strengthened over time. At the height of the triple whammy that I just mentioned, we saw continued inflows into the Hong Kong dollar, pushing our exchange rate to the strong side of the conversion zone. Speculators betting against the Hong Kong dollar learned a hard lesson.
Saudi Arabia has always been cognizant of risks inherent in the leveraged and leniently regulated model. A sustainable model is one which supports resiliency of the financial system in a crisis. In particular, the crisis made clear that regulators need to have a macroprudential framework for the system as a whole, as well as focusing on the microprudential risk management of each individual bank. 6. Regulatory challenges  Recent efforts by the G20 and other global entities (Basel Committee, FSB, G20 & IMF) in addressing system pitfalls and weaknesses show the seriousness of the problem as well as the need for remedial action. It is well-known that crises are a recurring phenomenon, warranting appropriate countermeasures to contain systemic risks of the scale seen in 2007/2008. Some big challenges in reforming the world’s financial system still remain, however. Allow me to say a few words on this point. In the past two years or so, the G20 has issued calls for coordinating financial regulations and their reforms across multiple issues, such as capital and liquidity requirements, derivative instruments, and orderly resolution of failing banks. However, the G20 process is facing increasing resistance within some member countries on these measures for reasons of domestic politics and practicality of the proposed reforms in some G20 economies. For example, it is agreed that a sound macroprudential framework needs to be in place. The regulators will be expected to decide when the pace of credit expansion is unhealthy. Similarly, SIFI’s definition has proven to be contentious.

Finally, emerging/developing economies have been subject to wide swings in financing from abrupt withdrawal of funds in 2008 to significant inflows recently, and as a result they are starting to implement capital controls. The risk is that these may spread unless financial flows become less erratic and more long-term and stable. 7. Concern about commodity bubble and high-yielding products  Over the past several decades, the world financial system has produced a seemingly endless series of bubbles (e.g. the dotcom bubble, the housing bubble and the Yen carry trade). Each bubble had its apologists before it burst, who argued that it was rational and that “this time is different.” Historically, commodities (apart from oil) were in a downward trend for over 100 years until 2002. Since then the entire decline has been reversed and commentators are talking about a “Paradigm Shift.” Compared to historical trends, commodities are as over-priced as the US stock market during the “tech bubble” of 2000. The parabolic rise in commodity prices has serious consequences and it is open to question whether the world economy is strong enough to support their continued gains. It is particularly damaging to inflation and growth in emerging market economies which are relatively heavy users of commodities. With interest rates at current low levels, investors are looking for high-yield products; but high yield brings high risks as well.
It is a call grounded in the experience of the past quarter of a century, as embodied in wage equations estimated over that period.6 On that basis, in our forecast the easing of domestic inflationary pressures is achieved without the UK falling into recession. But, by nature, it is also a call surrounded by uncertainty. The structure of the UK labour and product markets may be changing, rendering the experience of the past twenty years less relevant for the outlook of wages over the forecast period. The pandemic has lowered labour force participation rates, while Brexit may have changed the structure of both labour and goods markets, reducing the discipline of competitive pressures on the evolution of domestic margins and costs. The environment created by higher international energy and goods prices may also have implications. To the extent that any implied deterioration in the terms of trade is permanent, there will be a real hit to UK income that must be absorbed by some domestic actor. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  So, in the end, someone will have to bear that cost. The important question for monetary policy is how that happens; in particular, how pragmatic and realistic UK firms and households are in accepting the macroeconomic implications of the higher imported energy and goods prices.

In Switzerland too, vulnerabilities in the residential real estate and mortgage markets have increased since the onset of the pandemic. First of all, numerous indicators point towards increasing overvaluations in the residential real estate market. Slide 3 shows, for apartment prices, the simple price-to-rent indicator, as well as valuations based on different models and underlying assumptions, for example regarding future interest rates. Based on this range of assumptions and models, the SNB currently measures the overvaluation in apartment prices to 12  Cf. ECB, Financial Stability Review, May 2021, p. 35; Board of Governors of the Federal Reserve System, Financial Stability Report, May 2021, p. 20, Reserve Bank of New Zealand, Financial Stability Report, November 2021, p. 14. 13 Cf. ECB, Financial Stability Review, May 2021, p. 35; and Bank of Canada, Financial System Review, May 2021.  be between 10% and 35%. 14 This range of overvaluation has increased since the start of the pandemic. Moreover, we have observed an increase in affordability risks over recent years as measured by the rising LTI ratios of new mortgages (cf. slide 4). To maintain banking sector resilience in the face of these increased vulnerabilities, the Federal Council reactivated the SCCyB in January this year to a level above the pre-pandemic one, following a proposal by the SNB. This has brought the SCCyB to 2.5%, its regulatory maximum. As a complementary measure, the self-regulation guidelines, which were last tightened in 2019, are still in place and should contribute to containing a further increase in vulnerabilities.
In the long run, the result will only be higher inflation, not higher employment. Output and employment will return to their potential level. – The third factor is the special challenges to stabilisation policy posed by petroleum revenues. Norway’s export revenues and government revenues can be expected to be very high as long as production remains high and as long as the global market allows producing countries to extract substantial economic rent. At the same time, we know from experience that revenues may vary sharply from year to year. As a result of the high level of earnings and fluctuations in these revenues, the most important contribution fiscal policy can make to stabilising the Norwegian economy is to provide a sound, long-term strategy for the use of petroleum revenues. Attempts to use the central government budget to fine-tune economic activity may have a destabilising effect if these attempts are perceived as a breach in the long-term strategy for the phasing in of petroleum revenues. It is necessary to show that fiscal policy is applied symmetrically in periods of economic expansion and contraction. From the mid-1980s, during and after the credit bubble, it was recognised that a substantial revision of economic policy would be necessary and that the problems created by inflation had to be taken seriously. The exchange rate was chosen as the nominal anchor. Deteriorating competitiveness due to high wage growth would no longer be remedied by means of devaluations.

The model must be transparent and manageable  Norges Bank’s administration, management and Executive Board must be able to interpret and understand the model. It must not be perceived as a black box. It must have a theoretical structure so that we can easily examine the effects of alternative views of the economy’s functioning. 5. The model must reflect the Bank’s view  As a result of the modelling work, the Bank’s views on relationships in the economy will evolve. At the same time, we are developing a model with relationships that we have confidence in. Models will never provide us with a definitive answer. A model will always represent a simplification of reality. We must be pragmatic and exercise a good measure of judgement in addition. In my view, the most important role of models is to provide a framework and structure for the decision-making process, and to ensure that we do not change our views on the functioning of the economy without thorough reflection. BIS Review 36/2004  7  The use of models must also be seen in connection with the uncertainty associated with the actual state of the economy and the driving forces that dominate at a given point in time. It can be a demanding task in itself to find the balance between incorporating new information on the one hand and making abstraction of pure noise on the other. Allow me to illustrate.