samchain/econo-pairs-v1 huggingface dataset:
But if severe shocks hit the economy, other areas of economic policy must play a key role. When the pandemic hit Norway, we cut the policy rate to zero. At the same time, fiscal support measures were implemented on a scale unprecedented in modern Norwegian history. The aim was to cushion the downturn and support households’ and firms’ income. Chart 6 Economic downturns are countered by rate cuts Norges Bank policy rate. Percent 1.75  1.75  1.5  1.5  1.25  1.25  1  1  0.75  0.75  0.5  0.5  0.25  0.25  0  0  –0.25  2015  2016  2017  2018  2019  2020  2021  2022  –0.25  Source: Norges Bank  The actions taken could not, however, prevent a situation where a large number of workers were suddenly out of work. The risk that the pandemic would leave lasting scars on the labour market was an important reason why we kept the policy rate at a historically low level for more than a year. Now that we can look at the years 2020 and 2021 in the rear view mirror, we can see that employment in Norway picked up more quickly than expected (Chart 7). Employment exceeded the pre-pandemic level in autumn 2021, and the same degree of monetary policy stimulus was no longer needed. We have now raised the policy rate twice, and we have signalled a further rise.

In the conduct of monetary policy, central banks look through temporary changes in inflation. An increase in individual prices, as we recently experienced with electricity prices, reflects shortages that monetary policy cannot, and should not, attempt to counteract. There is also a tradition in Norway for the social partners to largely look through unexpected fluctuations in prices and costs. Inflation is only likely to accelerate if broad groups, whether price setters or wage earners, demand compensation for higher costs. In that case, the central bank’s task is to tighten monetary policy. The rise in the inflation rate has come after several decades of low global inflation. Increasing international trade and competition is one important reason for the slow rise in prices in that period. High labour force growth, partly owing to labour immigration, has also had a dampening impact on wage growth in many countries. These drivers may be changing direction. We saw signs that globalisation was slowing down even before the pandemic. The pandemic may also have amplified a trend whereby an increasing number of businesses see the need to secure their own supply lines and locate more of their production chain closer to their customers. At the same time, labour supply is growing more slowly in advanced economies as the population ages. The period where some countries struggled with too low inflation appears to be over, and central banks may be facing more demanding trade-offs between meeting the inflation target and supporting employment.
“Financial Integration and Firm Performance: Evidence from Foreign Bank Entry in Emerging Markets.” Review of Finance 13, 181–223. 22  The Giovannini Group, Second Report on EU Clearing and Settlement Arrangements, April 2003. 8  BIS central bankers’ speeches  convergence process is not again disrupted by the financial cycle? One would hope that a better supervised and more diversified financial system will have a smoothing effect on the financial cycle. Yet, some academics argue that such is the force of the financial cycle that it is unavoidable that monetary policy will also have to play a central role in “leaning against the wind”. In the euro area, however, the situation is not quite so clear cut. The ECB’s two-pillar strategy does make financial imbalances an important element of our policy assessment, even when inflation is low. Specifically, the monetary pillar captures the connection between excess credit and liquidity creation and potential risks to future price developments, including disruptive asset price booms. And our medium-term orientation grants us a sufficiently long policy horizon to account for the financial imbalances in our strategy. In this way, it implicitly incorporates elements of a “leaning against the wind” approach. To quote the ECB Monthly Bulletin from April 2005: “[our] approach amounts to a cautious policy of ‘leaning against the wind’ of an incipient bubble. The central bank would adopt a somewhat tighter policy stance in the face of an inflating asset market than it would otherwise allow if confronted with a similar macroeconomic outlook under more normal market conditions.

The majority of countries with relatively strong GDP growth rates prior to the crisis also experienced a relatively strong downward adjustment, in some cases undoing much of the welfare gains that were achieved since the launch of the euro. Some might see this as evidence that the assumptions of the neoclassical growth model need to be qualified – that absent credit-driven growth, there is no reason to believe that euro area economies should converge towards similar levels of productivity, or even rates of productivity growth.12 Indeed, endogenous growth models allow for persistent divergences as some forms of capital exhibit non-diminishing returns. Yet, I think it is too early to draw such a conclusion. The neo-classical assumptions have not yet been properly tested, simply because capital did not flow where the marginal return would have been highest. What the euro area needs, in my view, is to “re-run” the convergence process, but with the appropriate conditions in place to ensure efficient allocation of resources, and the right framework to make convergence sustainable. Let me explain in more detail what that might entail. To begin with, catching-up economies have to address the immediate after-effects of the previous misallocation of capital. The pre-crisis inflows into the non-tradable/services sector were associated with real exchange rate appreciation, rising unit labour costs (ULC) and increasing dependence on external financing. When the financial cycle turned, however, capital flows quickly reversed.
This trend must continue as we restructure our economy towards higher value-added activities, seek deeper skills, and undertake more pervasive digitalisation. Third, there is scope to increase productivity and efficiency in many domestic services jobs. Consider wages in four occupations (Plasterer, Childcare Worker, Baker, and Security Guard) across four countries (Singapore, Australia, US, UK). The slide shows the median wage in these occupations relative to the overall median wage in that country. In Singapore, the typical pay in these occupations range from 30-60% of the local median wage. In Australia, these occupations have wages much closer to the median wage. Wages in these occupations are also higher in the US and UK, though the pattern is slightly different across countries. There is scope to further professionalise these jobs in Singapore. In particular, to increase the skills content, leverage on technology, improve business processes, and raise the quality of output. This will enhance productivity and help to support higher wages in these occupations. 14 / 17  BIS central bankers' speeches  In fact, the professionalization of more of such so-called “rank-and-file” jobs in Singapore will help to strengthen and broaden the middle class, and make for a more equitable society. And Singapore can do this. We have good examples of jobs that have historically been perceived to be less skilled that have now been successfully upgraded. These jobs now command much relatively good wages, close to that seen in Australia, US, and UK, controlling for median incomes.

In total, the euro area generated a trade surplus of more than 1% of its GDP in 2012 compared with around zero in previous years. We expect this surplus to continue growing in the coming years. The speed and depth of the reforms underway in euro area economies is unprecedented. They have undertaken reforms in the areas most important for competitiveness, growth and the sustainability of public finances such as labour markets, products markets, social security, pension systems, etc. These reforms are a prerequisite for dynamic and sustainable growth in the future and they must be vigorously pursued. In addition to this very clear determination at the different national levels to reduce deficits and introduce the necessary reforms, Europe has equipped itself with a new disciplinary framework. The Heads of State signed a new fiscal compact over a year ago that fixes very strict rules and gives very extensive powers to the European Commission to assess the  2  BIS central bankers’ speeches  compliance of Member States. This new compact goes hand in hand with the introduction of rules for monitoring macroeconomic imbalances. It is important to understand what these institutional advances represent: in effect, they represent a new Treaty creating very strong commitments for the States via rules that are far better calibrated and far more binding than those in place when European monetary union began. 3. Monetary Union is to be enhanced with a banking union.
Thomas Jordan: SNB monetary and investment policy and the impact of the strong Swiss franc Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Volkswirtschaftliche Gesellschaft des Kantons Bern, Berne, 28 November 2012. *  *  *  The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). As part of measures to combat the financial and economic crisis, balance sheets of central banks around the world have expanded substantially. In 2009 and 2010, the Swiss National Bank (SNB) intervened in the foreign exchange market in order to combat an excessive appreciation of the Swiss franc. On 6 September 2011, it set a minimum exchange rate of CHF 1.20 per euro, in order to avert major damage to the Swiss economy. Since then, the SNB has enforced this minimum rate with determination and is prepared to buy foreign currency in unlimited quantities. This monetary policy is reflected in a very substantial expansion in its balance sheet. It has also altered the importance of the currency reserves and had an impact on the SNB’s investment policy. In view of its mandate, monetary policy has priority at the SNB. Investment policy must be subordinated to the requirements of monetary policy. It is at the service of monetary policy and may not limit its room for manoeuvre. At present, enforcement of the minimum exchange rate has the greatest influence in the management of the currency reserves.

The task is to diversify a large foreign currency portfolio according to the criteria of liquidity, security and return. Even in these extreme circumstances, the SNB’s investment policy and process have proved resilient. The investment skills we have developed over the past 15 years, together with our flexibility regarding investment categories allow for the smooth absorption even of large inflows from foreign exchange purchases. The principles upon which our investment policy is based have proved their worth. The idea of a sovereign wealth fund for better management of the SNB’s currency reserves has attracted some public interest. However, a sovereign wealth fund would not facilitate monetary policy with regard to the enforcement of the minimum exchange rate. Moreover, advocates of a sovereign wealth fund often have unrealistically high expectations, not least as regards returns. But the most important point is that the current size and composition of the central bank balance sheet are a direct reflection of monetary policy. The SNB’s investment requirements are derived directly from money creation and not from other revenue sources. If limitations were placed on the SNB balance sheet, its room for manoeuvre in the monetary policy domain would be restricted. Due to the accumulation of currency reserves that have resulted from monetary policy measures, there are substantial risks weighing on the SNB balance sheet. Consequently, fluctuations in value may be much greater in future than they have been in the past. In addition, the relationship between equity and currency reserves has worsened.
In response, some economists have proposed corner solutions to the systemic risk problem – in effect, radical structural redesign. Starting with Irving Fisher in the 1930s, some have proposed narrow banks with a 100% liquid asset ratio to protect the liquidity services banks provide. 26 Others have proposed mutual fund banks with a 100% equity ratio to safeguard banks’ solvency. 27 These limiting solutions are proof to risk incentives. The one guaranteed safe hiding place for the risk-fearing policymaker is the corner. One criticism of these proposals is that they might raise materially the cost of capital to banks and hence to the real economy. For example, 100% capital ratios could cause the economywide cost of capital to sky-rocket given the premium charged for equity over debt finance. This same argument is frequently heard in debates about more modest rises in banks’ capital ratios. But there are good counter-arguments that need also to be weighed. By lowering risk, higher levels of equity ought to lower banks’ cost of debt finance. Indeed, in a frictionless world Modigliani and Miller famously showed that this effect would fully offset the higher cost of equity, thereby leaving the total cost of capital for banks unchanged. 28 In other words, the cost of capital for a bank may be unaffected by its capital structure, at least when distortions in the economy are small. Even when they large, some offset in debt costs is likely.

Each of these intangible assets has value, but this value can be lost in a heartbeat. While it is true that a tangible asset such as a factory can burn to the ground overnight, intangibles, unlike a factory, usually cannot be insured. A challenge to current accounting - and disclosure - rules, therefore, is how to reflect accurately not only the value of intangible assets, but also their vulnerabilities to sharp downward revaluations. BIS Review 57/2002  5  In terms of complex financial transactions, this past year's events have made clear that accounting and disclosure rules have failed to keep pace with financial innovation. Complex financial arrangements, such as those funded offshore or through special-purpose entities, are not effectively addressed in today's accounting and disclosure rules. We also saw telecom equipment manufacturers run up billions of dollars’ worth of customer guarantees, which under current accounting and disclosure guidelines did not have to be recognized in financial accounts or disclosed to investors until their customers defaulted or were near default. In these cases, it seems clear, one of the basic tenets of accounting and disclosure rules - that there should be no “hidden” liabilities - seems to have been violated. I would like to see much more done to address these deficiencies without unduly burdening the readers of accounting statements. 4. Disclosure  Disclosure is most useful as a complement to accounting statements.
If we look at developments during the 1990s, growth since 1992 has shown an average rate of 3 per cent a year, despite the fact that inflation was under the target level for several years. At the same time, unemployment has fallen from 9 per cent to approximately 4 per cent. This can be compared with the 1970s and 1980s, when inflation was at around 8 per cent and growth an average of 2 per cent. Price stability and the importance of achieving it are also well established among the general public in Sweden. This is important, as understanding and acceptance of monetary policy is important for inflation expectations and thereby for behaviour on the labour and goods markets. It is you particularly those of you with your own businesses - who set the prices and who must be able to trust that it will turn out as we say; that inflation will not rise above or fall below the target of 2 per cent for a longer period. This is also the reason why we members of the Executive Board often travel around holding speeches. Communication with the Swedish public and the operators on the various markets is important for monetary policy. As monetary policy operates impact with a certain time lag, the instrumental rate is adjusted so that the total assessment of future inflation, taking into account the risk scenarios, 1 to 2 years ahead is in line with the target. Interest rate decisions are based on forecasts of future prices.

On the macroeconomic side, the news for the United States is mostly favorable. Labor market conditions have significantly improved over the past few years and unemployment is now around 5 percent. The household sector is much less leveraged, the housing sector is recovering, the banking system is much healthier, and the corporate sector is highly profitable, even as business fixed investment spending remains quite weak. Although inflation has fallen short of our objective, I am confident that inflation will return to our 2 percent objective over the next few years as the labor market tightens further and the transitory factors that have held inflation down dissipate. After years at the effective lower  BIS central bankers’ speeches  1  bound for short-term interest rates, economic conditions have finally warranted the start of U.S. monetary policy normalization. But these monetary policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated. For Europe, the economic outlook has started to improve. The European Union is experiencing a cyclical recovery and the unemployment rate has been steadily declining over the past two years. The end of fiscal tightening appears to be a key factor in this recovery. Risks of low inflation, however, remain a concern for the European Central Bank and have motivated their aggressive use of unconventional monetary policy instruments.
First, a greater degree of self-insurance by banks to lower the probability of central bank resources needing to be drawn. In practice, this means that liquidity regulation needs to be tightened, reversing the secular fall in liquidity ratios (Chart 3). In the language of insurance, the excess on the central bank policy needs to be raised materially. The FSA’s proposed new liquidity regulation provides a good starting point. 21 Second, central bank liquidity insurance frameworks need explicitly to recognise the possibility of drastic times requiring drastic measures. The key is to prevent such drastic action becoming disorderly on the one hand, and permanent on the other. The first can be achieved by having a pre-defined framework which recognises the need for abnormal liquidity provision, whether in size, collateral quality or term. The second can be achieved by setting prices (fees and collateral haircuts) for liquidity provision which discourage abnormalities from becoming regularities. The Bank of England’s new sterling monetary framework, announced last October, seeks to apply those principles in practice. 22  •  Time-consistent deposit insurance: Deposit insurance schemes have been stretched in many countries, to the point of offering blanket coverage of retail deposits. Those actions are already damping the risk senses of depositors, who have rationally reacted by seeking out the highest-yielding accounts. This has contributed to a competitive frenzy in the retail deposit market. In the UK, retail deposit rates have risen over the past year from 100 basis points below base rate to 100 basis points above.

European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank and Mr Lucas Papademos, Vice-President of the European Central Bank, Athens, 8 May 2008. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to today’s press conference here in Athens. I would like to thank Governor Garganas for his kind hospitality and to express our special gratitude to his staff for the excellent organisation of the meeting of the Governing Council. Let me report on the outcome of our meeting, which was also attended by Commissioner Almunia. On the basis of our regular economic and monetary analyses, we decided at today’s meeting to leave the key ECB interest rates unchanged. Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices. As we have said on previous occasions, inflation rates are expected to remain high for a rather protracted period of time, before gradually declining again. The latest information confirms our assessment that upside risks to price stability prevail over the medium term, in a context of continuing very vigorous money and credit growth. At the same time, the economic fundamentals of the euro area are sound, and incoming macroeconomic data continue to point to moderate but ongoing real GDP growth. However, the level of uncertainty resulting from the turmoil in financial markets remains unusually high and tensions still persist.
The dilution of investment yields has reinforced risks for the industry such as a serious lapse risk if interest rates were to rise abruptly, financial losses for insurers who guarantee high technical rates compared to financial returns, or risks related to insufficient cost coverage. Among this quick review of the most salient characteristics of the environment in which insurers have been operating I would like to add that climate change risk has now become a reality and although insurers usually know how to deal with climate risks, including in extreme events, it is more than likely that further adjustments will be needed. Against this backdrop, French insurance companies have reacted in three main ways: lowering of paid interest rates in life insurance, development of alternative investment strategies  and  adaptation  of  their  traditional  business  model  including  an increased business diversification. As a result, for instance, unit-linked liabilities are increasing, and the profit-sharing payments for euro-denominated contracts are decreasing. However, I note that these payments remain significantly higher for mutual undertakings: they amounted to 2.3% last year while the French average is lower, and the reserves for deferred profit sharing have been strongly reinforced and amount to approximately 6% of mathematical reserves at YE 2017, which is 50% higher than the French average.

We have recently conducted a survey of the financial institutions to check their readiness to conform to the credit risk guidelines under the New Accord. I have been reported that many plan to be ready for the standardized approach, while others are working towards the IRB approach, this is a welcome news. More importantly, financial institutions have all started the effort to strengthen risk management in their respective institutions with some notable progress so far, and we look forward to more progress to come. I would like to take this opportunity to commend all of you for such efforts. After all, the BIS capital requirement only serves as a cushion of losses or failure of an institution whereas it is the risk management that reduces the chance of failure. The significant progress you have made in the area of risk management deserves our full support and commendation, particularly so as this is a very difficult time for the financial industries. Ladies and gentlemen, Coming back to the issue of preparation for the New Accord, one can see that significant challenges remain ahead. I will now turn to these challenges. First, the technical and infrastructure aspects. It is important to build up a deep understanding of the technicality of approaches and methodology underlying the New Accord. Moreover, it is critical to achieve in-depth knowledge of risk management and the impact of such developments on business model of the financial institution. Therefore the task ahead is very challenging, far beyond just acquiring software that would crank out numbers.