samchain/econo-pairs-v1 huggingface dataset:
In NOK - purchasing power parity  US Norway Switzerland Ireland Denmark Iceland Canada Netherlands Austria Australia Germany Finland Sweden 0  100000  Sources: OECD and Norges Bank  200000  300000  The large cash flows from petroleum activities are reflected in official income figures. Measured by GDP per capita, Norway ranks high in the statistics. These figures do not, however, provide an accurate picture of value added. When calculating GDP and national income, the cash flow from petroleum activities is measured in the same way as all other income. Extracting oil and gas from the seabed is measured in the same way as all other production. This means that Norway’s income is overestimated. Oil and gas represent wealth under the seabed. When oil and gas are sold, this wealth is invested abroad. This transaction does not in itself generate income, even though it is posted as income in the national accounts. The income is not equivalent to the entire cash flow, only to the return on this wealth. Chart 14. Adjusted GDP per capita in 2000 In NOK - purchasing power parity  US Switzerland Ireland Denmark Iceland Canada Netherlands Austria Australia Norway Germany Finland Sweden 0  100000  200000  300000  Sources: OECD, Ministry of Finance and Norges Bank  A more accurate picture of Norway’s income is obtained when GDP is adjusted for the transfer of petroleum wealth to financial investments abroad.

However, towards the end of the upturn the economy was facing labour shortages, higher wage growth and a sharp increase in household consumption and debt. Interest rates had to be kept at a high level in Norway. Chart 9. Cyclical divergence Short-term interest rates in the US and Norway 10  10 8  Norway  8 6  6  4  4  US 2  2  0  0 1995  1996  1997  1998  1999  2000  2001  2002  2003  Source: EcoWin  The turnaround abroad took place two years ago, but the Norwegian economy continued to show a high level of activity. This led to a widening of the interest rate differential against other countries. The main explanation for the wide interest rate differential is not that interest rates are high in Norway, but that interest rates are at a historic low abroad. Interest rates in the US have not been at such a low level since the 1960s. 1  Measured by the monthly average of the import-weighted exchange rate against 44 countries, the krone was at its weakest level in May 2000 since May 1994. Measured by the monthly average of the trade-weighted exchange rate index, the krone was at its weakest level in May 2002 since the series was started in January 1971. Measured by both indices, there were a few days in autumn and winter 1998 when the krone was weaker than in May 2000.
Memorandums of Understandings or information-sharing protocols would then be used to ensure the free sharing of information between agencies. The analytical skills and tools required for macroprudential policy are likely to draw on those used for macroeconomic analysis and, to a lesser degree, microprudential analysis. But the  7  This argument is developed by Martin Cihák in a speech “Price stability, financial stability and central bank independence”, 38th Economics Conference of the Oesterreichische Nationalbank, 2010. A number of case studies illustrating how inadequate independence arrangements for financial sector regulators and supervisors have contributed to the emergence and scale of financial crises are presented by Marc Quinton and Michael W. Taylor in “Regulatory and supervisory independence and financial stability” IMF Working Paper, WP/0246, 2002. 6  BIS central bankers’ speeches  macroprudential agency will need to build new analytical techniques. Before the crisis, many central banks had already begun to develop the type of system analysis that will be required for macroprudential supervision (for example, in the assessment of interdependencies and systemic risks included in financial stability reports) – but the analytical techniques remain in their infancy. Control over a sufficient set of tools As well as the information and knowledge necessary for effective analysis, the macroprudential agency must have access to suitable instruments in order to achieve its mandate. Otherwise there will be unreasonable expectations of what the macroprudential agency can achieve, as it may be unable to address the system-wide risks that it identifies.

These are: whether the UK economy has achieved sustainable convergence with the economies of the single currency; whether there is sufficient flexibility in the UK economy to adapt to change and other unexpected economic events; whether joining the single currency would create better conditions for businesses to make long-term decisions to invest in the UK; the impact membership would have on the UK financial services industry; and ultimately whether joining the single currency would be good for employment. It would then submit a favourable decision to Parliament, and the British people in a referendum. The Chancellor recognised that it was unrealistic to think that a decision could be reached during the lifetime of the present Parliament, which runs to May 2002 at the latest. But he stressed that in the meantime the UK should nevertheless prepare - not only for introduction of the euro on the Continent on 1 January 1999 - which we of course did very effectively - but also for our own eventual participation. The Chancellor’s statement was the first by a British Government to accept the principle of monetary union. It recognised that the single currency will affect us whether we are in fact in or out - and that it is clearly in our own national interest to do all that we can to ensure that the euro is successful.
This should, in time, ultimately lead to a situation where it is simple and cost effective for any eligible participant to become a direct participant in CHAPS. Improved governance In bringing CHAPS in-house it has been important to develop a strong and robust governance framework and retain the strong ‘user voice’ that CHAPS Co facilitated. At the heart of this was the establishment of the RTGS/CHAPS Board (the Board) chaired by the Bank’s Deputy Governor for Markets & Banking and comprising four non-executive members selected for their experience and expertise, together with a number of the executive, myself included.9 The Board provides a strategic focus with particular attention to the Bank’s role as a systemic risk manager to the CHAPS system, broader financial stability remit and other public interests. The Bank’s operation of CHAPS is subject to the Bank’s full ‘three lines of defence’ risk management model and close engagement and oversight on relevant matters from the Governors, the Bank’s Court of Directors and the Financial Policy Committee. In its capacity as Payment System Operator, the Bank’s delivery of CHAPS is supervised by the Bank’s Financial Market Infrastructure Directorate10 to the same standards as other systemically important payment systems. It is also essential to understand the views of industry, and we have established forums to facilitate an open dialogue with a variety of key stakeholders. This includes the CHAPS Strategic Advisory Forum (SAF) and the RTGS Renewal Programme’s External Advisory Body (EAB).

It is important that we as a central bank understand these changes. At the same time, the financial crisis has made us aware that there are matters to do with trading, clearance and settlement which need to be improved. 2  Multilateral Trading Facilities, which are not required to be a traditional exchange in order to organise trading. 3  One example is EMCF (European Multilateral Trading Facility N.V.), central counterparty for the clearance of Swedish shares that are traded on Chi-X and NASDAQ OMX Europe. Another is EuroCCP, central counterparty for the clearance of shares traded on Turquoise. 2  BIS Review 153/2008  In the United States, two problems have stood out in connection with trading in American credit derivatives. They concern the credit derivatives that are traded on the over-the-counter market. 4 One problem is the counterparty risks. The parties in a credit derivative trade have a credit risk towards each other – the risk of a party losing the whole of the underlying value in a transaction. The counterparty risks have been difficult to understand, which makes them difficult to value. The other problem is the lack of market transparency, which has caused pricing problems and poor liquidity in credit derivative markets. The question of how to reduce counterparty risks in over-the-counter derivatives trading has been raised by the US Federal Reserve and the European Central Bank. One way would be to clear credit derivatives with a central counterparty. How would a central counterparty improve matters?
It is at the heart of what we do. And I can say from experience that, despite the masses of data and our complex mathematical models, it is not an easy task. The future, as the last few years of pandemic and war have shown us, rarely behaves as it should. However, forecasting the direction and pace of technological innovation - and, crucially, the way it will interact with social and economic trends - is an even more hazardous enterprise. Much lauded innovations prove to be dead ends or fail to be adopted. Unheralded ones emerge at speed. And often it is the unforeseen combination of a number of technological advances that generates radical change. Against that background, public authorities, like the Bank of England, that are charged with maintaining financial stability and with the regulation of the financial system need to be forward looking, for two key reasons. The first is that while we cannot be certain how new technologies and social and economic trends will play out, we need to have thought through in advance how the risks might need to be managed and, where the likelihood of major change is high, have the regulatory frameworks and powers in place. Playing regulatory catch up with new technologies once they become established and adopted at scale can be very difficult – as some of the experience in recent years with social platforms and other big techs has demonstrated. And it generates uncertainty for innovators.

But we cannot know for certain the extent and the speed at which payment stablecoins might be adopted and we may well need limits, at least initially, to ensure we avoid disruptive change that could threaten financial stability. Another important question will be whether the requirement to be redeemable in fiat money, on demand and at par and the backing asset model will be sufficient to ensure uniformity of sterling stablecoins with each other and with other forms of sterling money. This will depend to some extent on whether there are frictions in the redemption and interchange process. It has been suggested that ensuring the uniformity (or ‘singleness’ of money) requires that all transactions between different monies settle ultimately in central bank money across the books of the central bank. While it is not clear to me that this should be the case, it is clearly an issue that should be considered carefully in the design of the regulatory regime. Finally, on stablecoins, it is important to emphasise that powers in the Bill and the Bank’s regime will be for stablecoins used for payments. A digital representation of an asset with a generally stable value could be used for other purposes. It could offer a return as an investment product akin to a money market fund. Or it could be part of the credit creation process, with the loans issued in the form of stablecoins.
The second group of challenges, with which 2014 will undoubtedly be remembered, includes those events that put the very resilience of the banking system to the test. A point was even reached where questions were raised in the public space about the BNB effectiveness, in particular the banking supervision thus far exercised. The events in question started with the severe liquidity attack against several banks in the middle of the year. 2014 will go down in history also with the huge misappropriations of depositors’ money, malpractices of governance and breach of regulations revealed in the second half of the year in the fourth largest bank in the country – “Corporate Commercial Bank” AD (KTB). BIS central bankers’ speeches  1  The KTB case was finally resolved with the effective application of the statutory guarantee on deposits. By coincidence, exactly today, 4 of December 2014, the long-awaited payment of guaranteed deposits with KTB has started. The depositors in this bank had no access to their deposits for a very long time. The central bank truly wished to see the KTB issues resolved in the shortest time possible. Unfortunately, as it is well known, with a large part of the documentation missing and the absence of legal means for quick restructuring of KTB, voluminous actions were needed to restore the credit files in KTB. Gathering this information was a necessary condition for the independent auditors to perform a complete analysis and assessment of KTB assets.

We have proved how our country, business and society have a strong institution they can rely on as a pillar of stability and for protecting the long-term public interest, an institution that does not give in to pressure and opportunistic interests. On a day like this, when we normally weigh up past events, our thoughts could go further back in time, long before the worries of this passing year. Some events can often be more wisely judged when looked at from a longer historical perspective. If we take such a look back into the 135-year history of the BNB, we would see many examples demonstrating the strength of our central bank and its insusceptibility to coteries’ intrigues and shallow trivial debates (which only absorb energy from the public creative resource, before vanishing in time). But our history has witnessed obscurantist episodes too, when the BNB was suppressed to obey political or other temporary interests. The implications of such interventions have always been tragic for the country. Here is one brief example. On the famed date of 9 September 1944 the BNB Governing Council set a “buying” rate for the Soviet rouble (15 levs for 1 rouble) after being instructed on the telephone by the then Minister of Finance. Two days later, on 11 September 1944, the government ordered the BNB to stop buying the  2  Basel Core Principles for Effective Banking Supervision of 14 September 2012.
Consequently, our dialogue did not end with the publication of the Basel II text this past June. Indeed, it cannot cease, because, as I mentioned, one of the Committee’s underlying goals is to develop a framework that can adapt to future advances in risk management practices. Supervisors are committed to monitoring and discussing these developments with the industry. The Committee will make adjustments to the framework to reflect the state of risk measurement and management when necessary. I am pleased to say that the Committee is already honouring this promise. One topic that we are studying carefully concerns the treatment of “double default.” Some representatives of the industry believe that Basel II takes an overly conservative approach to the risk of loss associated with exposures covered by guarantees: they suggest that the risk of both a borrower and a guarantor both defaulting on the same exposure is lower than the risk of just one party defaulting. The Committee believes that the new framework should recognise double default effects, and a working group is currently considering all of the implications, including those associated with measuring the effects, before we agree on a solution. We remain dedicated to finding a sound treatment of double default prior to the implementation of the new framework. Other groups are discussing potential improvements to Basel II’s treatment of certain trading-related exposures.

I strongly believe that Europe is in a unique position to lead the way in the cross-border implementation of Basel II and to make faster and more tangible progress than is currently possible on  BIS Review 66/2004  5  a wider international basis. We need to seize this opportunity with both hands, because it will not just benefit us in the EU but, I believe, also have a positive impact beyond our borders. We have two major advantages in this respect. Firstly, within the European Union, we have a set of single market legislation in the banking field, founded on harmonisation and mutual recognition. Furthermore, the division of supervisory responsibilities between our countries is embedded in this common legal framework and has been in place for some time. Secondly, from a practical perspective, we also now have the Committee of European Banking Supervisors - CEBS. This committee is directly charged with promoting convergence of supervisory practices and co-operation between supervisory authorities, and has a key role to play in the implementation of Basel II in Europe. For these reasons, I believe that we can - and must - be more ambitious and go further than others may be able to go in our efforts to ensure consistent implementation of Basel II and effective supervision on a cross-border basis. We should not only move faster, but also go deeper in our search for convergence.
Let me begin by discussing different types of measure more generally, and then I will say a few words on the quantitative effects of household indebtedness. Put simply, we can say that there are two different ways to manage the problems on the housing market: either attempt to increase the housing supply in order to dampen housing prices, or dampen demand for housing and mortgages by making it more expensive to borrow, or simply limit how much households can borrow. In terms of measures which subdue demand, it is important to differentiate between measures which affect all loans, or the whole stock of credit, and measures which only affect new loans, or the flow of credit. But let us begin with measures which affect the supply of housing. An increased supply of housing could dampen price increases – but it would take time! Structural problems on the Swedish housing market are the main reason why housing construction has been unable to meet rising demand. An increased supply of housing is a central piece of the puzzle, as it can subdue the increase in housing prices, which would also help to limit household indebtedness. However, the quantity of housing is not the only significant factor in terms of household indebtedness. It is also necessary to review how we can exploit the current housing stock more effectively. The distribution between purchased and rented housing is significant.

Figure 12 The effect of an amortisation requirement on household indebtedness according to current proposals Per cent 220  220 Scenario without measures Amortisation requirements  210  210  200  200  190  190  180  180  170  170  160  160  150  150  140  140  130  130 05  10  15  20  25  Note. Broken red line shows an estimate of developments over the next 10 years without further measures. Shaded area indicates a feasible lower limit for when the risks are elevated in the economy. Broken yellow line shows an estimate of the effect of an amortisation requirement according to current proposals. Sources: Statistics Sweden and the Riksbank. A change to tax relief on mortgage interest could lead to a faster and more direct effect on household indebtedness, as it affects all borrowers. However, as a reduction in tax relief initially raises mortgage costs, it is likely that existing mortgage borrowers do not pay down their loans immediately. The effect on the total debt-to-income ratio therefore occurs gradually, even in the case of changes to tax relief. According to these calculations, it is only  19  A borrower with medium indebtedness in Sweden taking out a new mortgage, or increasing existing loans, only amortises at a rate which leads to the new loan being repaid in 56 years.
There were prospects that the interest rate would rise further at about the same pace. The key rate was raised by a further 0.25 percentage point at the meeting of the Executive Board on 16 August. At its meeting on 27 September, Norges Bank’s Executive Board decided to leave the key rate unchanged at 3.00 per cent. The background for the decision was described as follows: "There is little slack in the Norwegian economy. A steadily rising share of enterprises lacks the capacity to accommodate increased demand, largely because of labour shortages. The labour market has grown considerably tighter, and there are several signs that wage growth is picking up. Developments in aggregate demand, output and employment suggest a higher interest rate. At the same time, the rise in consumer prices is slowing, and the rise in prices excluding energy products is unexpectedly low. This suggests a continued low interest rate." The Executive Board’s overall assessment was that the strategy published in the Inflation Report, coupled with new information, warranted that the interest rate should be left unchanged at this meeting. Projections are uncertain. The uncertainty surrounding the interest rate forecasts is illustrated in the fan chart and indicates that monetary policy reacts to disturbances to the economy. This contributes to increasing the uncertainty surrounding future interest rates, but at the same time contributes to stabilising economic developments. Monetary policy cannot fine-tune economic developments, but it can prevent the largest effects from occurring when the economy is exposed to disturbances.

Consumer price inflation among a number of our trading partners is high as a result of rising energy prices, but the increase in prices for other goods and services remains moderate. Continued solid growth among our trading partners is in prospect. As global capacity utilisation increases to a more normal level, demand for Norwegian exports might remain buoyant. More export enterprises are facing capacity constraints. Export growth in the years ahead will probably occur in industries such as the engineering and shipbuilding industries. Production growth is now high in these sectors, and employment is rising after declining for several years. High growth in the global economy has also pushed up prices for non-oil commodities. Rising commodity prices and buoyant activity in markets that are important for Norway have generated growth impulses to the Norwegian economy. Since May this year, commodity prices have varied widely, but on the whole edged up since end-June. International equity markets have stabilised since the turbulence in May, and have edged up since the previous monetary policy meeting. The benchmark index on the Oslo Stock Exchange is now at a good 12 per cent higher than at the beginning of the year. Interest rates are still low among many of our trading partners, in spite of the increases in several countries as a result of rising energy prices and higher consumer price inflation.