samchain/econo-pairs-v1 huggingface dataset:
After the deregulation of the 1980s, the upswing was so strong, the financial imbalances were so large and the high level of inflation had gained such a firm foothold that a downturn was almost impossible to avoid. 2  For a more detailed description of the Norwegian crises see Gerdrup (2003): Three episodes of financial fragility in Norway since the 1890s, a forthcoming article in BIS Working Papers. BIS Review 25/2003  3  Monetary policy and financial stability Norges Bank’s operational objective for monetary policy is inflation over time of 2½ per cent. This objective can normally be achieved by applying different interest rate paths. The choice of path may have an impact on developments in output and employment in the short term. It may also affect how quickly we achieve the inflation target. Choosing between the different strategies involves balancing fluctuations in output and employment against deviations from the inflation target in the short term. A rapid and pronounced change in the interest rate would be appropriate in cases where there is a risk that inflation may deviate considerably from the target over a longer period, or where heightening turbulence in financial markets or a cost-push shock resulting from wage negotiations indicate that confidence in monetary policy is in jeopardy. Financial market confidence in the inflation target provides Norges Bank with greater opportunities for promoting stability in the real economy, even more so as inflation targeting is incorporated as an anchor for wage determination. The impact of monetary policy occurs with a lag.

The IMF also finds that the probability of bubbles bursting in the housing market is greater than is the case for stock markets. A decline in the housing market also has a greater impact on output and employment. Housing wealth has a greater impact on consumption than other assets. The contagion effects via the banking system are stronger because housing and property loans normally account for a substantial share of banks’ loans. A sharp rise in asset prices and debt build-up may pose a risk to economic stability. To minimise this risk, there may be situations when it is appropriate to apply a somewhat longer horizon than the normal two-year horizon for achieving the inflation target. A precondition for this is that financial market participants are confident that inflation will be low and stable over time. The current situation Today, private sector debt and house prices are at a historically high level. Banks’ loan losses will probably rise. However, our assessment is that the banking sector is reasonably well equipped to cope with the increase. For a long time, household debt in Norway has risen at a far higher rate than income growth. The debt burden has therefore risen rapidly and is high in a historical context. Partly as a result of the reduction in interest rates, interest expenses are moderate. High and growing debt means, however, that households are vulnerable to sharp increases in interest rates or a substantial rise in unemployment. Some groups of households are particularly at risk.
The international debate may now be turning in the opposite direction to that taken by Iceland and others when the banking supervision was separated from the Central Bank in its day. Iceland is a small country with rapidly expanding financial and banking business. It is a cause of some concern that supervisory and regulatory institutions have not grown correspondingly, although they have still performed their functions very well. The Icelandic banks are well aware of and understand the fundamental importance that strong institutions such as the Central Bank and FME have for assessments by ratings agencies and international analysts. The Board of Governors raises this point here for consideration in conceivable reforms of Iceland’s financial institutional framework. But other action is needed as well. In consultation between the Government of Iceland and the Central Bank, it has been decided to increase the Bank’s foreign reserves in coming years and boost its capital position further, probably with foreign borrowing rather than by purchasing foreign currency in the markets. This is of course done on a long-term view and reflects ongoing changes in the external economic environment rather  BIS Review 28/2006  3  than the temporary market unease at present. Also, the Central Bank has recommended to the Ministry of Finance and the Government that special action should be taken to strengthen the foundations of the Icelandic bond market. The Treasury is in an unusually strong position at present and its debts are decreasing from one year to the next.

Institutions are admittedly not accustomed to drawing attention to their forecasts if they do not come completely true. But what are the explanations? It has transpired now that GDP grew last year by more than was forecast, and new national accounts data also show that the figure for 2004 was hugely underestimated. GDP growth then was 8.2%, the highest figure in Iceland since 1987, which was effectively a tax-free year [when Iceland moved onto a PAYE tax system]. Last year was eventful on the economic front. Private consumption grew at its fastest rate since 1987 and gross fixed capital formation faster than any year since 1971. Import growth has not been as brisk in any year since 1953 and the current account deficit broke previous records – although it should be added that as a result of income from soaring foreign asset holdings, Iceland’s net external position only deteriorated slightly. Real wages were at a peak, unemployment at a minimum and direct foreign inward investment ran at a massive level. This inflated picture must be seen in the light of the very robust economic growth in the previous year, 2004, and strong growth in 2003 as well. Besides these large movements, a structural change in the domestic credit market made much more capital available to mortgage borrowers. Higher disposable income and net wealth also contributed to making this a unique period in Icelandic economic history.
This choice to carry out on-site inspections of internal risk measurement systems and approaches and the importance attached by the Commission bancaire to such checks is mainly due to the fact that, in 2008, 17 institutions (accounting for almost 95% of the total assets in the French banking system) are set to use an IRB approach to measure their credit risk and 5 institutions (accounting for almost 60% of the total assets in the French banking system) are expected to adopt an advanced operational risk measurement approach. As institutions have the possibility under Basel II of using their IRB approaches to calculate regulatory capital requirements, supervisors must ensure that these approaches are reliable. Following these on-site inspections and the examination by the Commission bancaire of the corresponding inspection reports, 26 Memoranda of Understanding (MoU) were signed  2  BIS Review 11/2008  with the institutions concerned. Improvements were requested mainly in the following areas i) the different classes of risk held by the institutions, sometimes also ii) the definition of default used by them, iii) the estimate of certain parameters such as Loss Given Default (LGD), iv) the operational integration of the approaches implemented in the daily management of risks and v) the governance principles applicable to these approaches. Until the end of 2007, the Commission bancaire will monitor the implementation of the corrective measures requested of the institutions.

Lastly, it introduces a requirement for regulatory capital to be tailored for certain off-balance sheet exposures, particularly liquidity facilities associated with these transactions, which under Basel I were generally exempted of any capital charge. Second, by reinforcing the link between the capital base and the risks actually incurred, Basel II encourages banks to improve their systems for managing these risks as well as their due diligence procedures. Beyond reminding banks of the basic caution required when extending credit, this encouragement is all the more useful in that banks now often play a role in securitisation transactions for which the underlying assets, for example housing loans, may be initiated by unregulated entities, that are not always  BIS Review 11/2008  3  accountable for their risk analysis and pricing. In other words, the weaker the discipline surrounding the granting of a loan the stronger banks’ diligence procedures needs to be. Thirdly, Basel II gives banks and supervisors a vital tool, Pillar 2, with which to assess the risk profile of institutions and in particular to take account of certain risks that are sometimes difficult to quantify but whose impact can be great. By way of example, I shall merely mention refinancing risk and reputational risk. Pillar 2 thus enables banks, through the determination of the level of economic capital and supervisors, via for example an increase in capital requirements, to ensure that all of the risks incurred are appropriately covered.
In 2007, Malaysia accounted for about two third of the global sukuk outstanding amounting to about USD47 billion. In 2002, the Government of Malaysia issued the first global sovereign sukuk. With this issuance, it became an international benchmark for the issuance of global sukuk. There have since been several further sovereign issues in the global capital market. The sukuk market has been an important source of financing for productive investment activities, while for investors, it provides greater potential for diversification into new asset classes. The development of the Malaysian sukuk market has involved wide ranging initiatives to facilitate an efficient issuance process, the price discovery process, the broadening of the investor base, the establishment of a benchmark yield promoting the liquidity in the secondary market and strengthening of the regulatory framework. These initiatives have been reinforced by the legal and Shariah framework and the supporting financial infrastructure including the settlement system and the bond information system. BIS Review 94/2007  3  The international prudential standards for Islamic finance is set by the Islamic Financial Services Board (IFSB), is located in Malaysia . The IFSB thus formulates the international regulatory and supervisory standards for Islamic financial institutions aimed at achieving best practices in order to secure soundness and stability of the Islamic financial system.

With the setting up of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), appropriate accounting standards have also been put in place to reflect the true and fair value of banking operations to ensure greater accountability and responsibility of the financial institutions. With the increased maturity of our domestic bond market, further steps have been taken by Malaysia to allow foreign corporation, multinational corporations and multilateral agencies to raise funds in the Malaysian bond market with no restrictions for the utilisation of these funds. These funds maybe used to finance foreign investment activities outside the country. Following this liberalisation, the inaugural ringgit denominated sukuk issue was in 2004 by the International Finance Corporation (the investment arm of the IBRD World Bank), followed by the issue by the IBRD World Bank in 2005. In November of 2006, our market was further liberalised to allow for the raising of foreign currency sukuks from our domestic market. More recently, a landmark issuance the 750 million dollars exchangeable sukuk Musyarakah by Khazanah Nasional, the Government's investment arm, marked the world's first issue of its kind, incorporating full convertibility features common to conventional equity-linked transactions. These issues have attracted investors from outside of Malaysia, thereby strengthening our interlinkages with other international financial markets. I am pleased to mention that a memorandum of understanding between the Central Bank of Malaysia and the Japan Bank for International Corporation (JBIC) has been signed this year for us to advance relations in this area between JBIC and the central Bank of Malaysia.
In France, credit to the private sector continued to advance at a sustained pace, posting a year-on-year increase of 9.3% in October. The annual growth rate of total domestic debt was 5.7% in October. In the course of the year, the various components of the second pillar signalled upside risks to price stability. This was true for the indicators for supply and labour markets, the continuing rise in oil prices and the protracted depreciation in the euro’s exchange rate, which have exerted or continue to exert upward pressure on import, production and consumer prices. As regards the exchange rate of the euro, which is an important monetary policy indicator, both the Monetary Policy Council and the ECB Governing Council are convinced that the external value of the euro does not reflect the euro area’s favourable situation and future prospects. This sentiment is shared by the Eurogroup, which agreed with the European Central Bank in Versailles that "a strong euro is in the interests of Europe". This phrase is the most concise and clear statement of Europe’s position with respect to the external value of the euro. Moreover, the G7 also concurs with the Eurosystem’s analysis. On 23 September, following the concerted intervention on foreign exchange markets on 22 September, the G7 expressed "the shared concern of the Finance Ministers and the Governors about the potential implications of recent movements in the euro for the world economy". Financial stability In Europe, price stability is the statutory responsibility of the central banks, that is, the Eurosystem.

We are also considering what a layer of the framework for ‘mid-tier’ firms might look like, and are currently undertaking some engagement with relevant firms to understand where they see scope for simplification of the prudential regime. Other Priorities Before I close, I did want to note our ongoing focus on Diversity & Inclusion in the sector. This is an important area which helps enhance governance, decision-making and risk management in firms, as well as the services you provide your members. We plan a consultation paper later this year, building upon the joint 2021 PRA/FCA discussion paper18, setting out proposals to introduce a new regulatory framework on diversity, equity and inclusion in the financial sector. I strongly encourage you to engage with those proposals once they are published. In Conclusion Let me briefly sum up. I’ve stressed today the important role that mutuals play in providing your services to a diverse range of households and business right across the UK. It’s vital those services are 16 CP4/23 - The Strong and Simple Framework: Liquidity and Disclosure requirements for Simpler-  regime Firms | Bank of England 17 FS1/21 – ‘Responses to DP1/21 ‘A strong and simple prudential framework for non-systemic banks and building societies’ | Bank of England 18 DP2/21 – Diversity and inclusion in the financial sector – working together to drive change | Bank of England  Bank of England  Page 9  underpinned by resilient firms.
Next year we are expecting largely zero growth and after that a fairly weak increase. Domestic demand in particular is expected to be weak for a long time to come in the euro area. The weak domestic demand means that the euro area is dependent on a boost from abroad – in particular the United States and other important trading partners – to be able to make a recovery. Since the Monetary Policy Report was published statistics received from Eurostat have reinforced the picture of production in the euro area beginning to stabilise at a lower level following the heavy fall at the beginning of the year. GDP fell by only 0.1 per cent between the first and second quarters of the year, which was much better than we had estimated. In addition, it can be noted that the purchasing managers’ index for the euro area rose in July for the fifth month in a row (see Figure 9). Both the manufacturing and service sectors show an improvement in July. However, the index is still below 50, which is the level indicating growth. Employment is continuing to be weak and unemployment rose to 9.4 per cent in June. Inflation measured in terms of the EU harmonised index, the HICP, was -0.7 per cent in July. The HICP is not affected by interest rate cuts in the same way as the Swedish CPI, but it is affected by energy prices.

Niklaus Blattner: System stability and monetary policy Summary of a speech by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the University of Berne, Berne, 31 January 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  For a number of years the Swiss National Bank (SNB) has been devoting considerable attention to the interaction between system stability and monetary policy. The aim is to arrive at an assessment of the current situation. The results obtained so far have been very useful, but there is still work to be done in implementing them and developing them further. Our point of departure is an analysis comparable to that presented in the 2005 Annual Report of the Bank for International Settlements (BIS). From basic research papers published by the BIS we can conclude that, where financial systems are liberalised, a monetary policy that responds exclusively to short-term risks to price stability will promote the elasticity of economic systems. Only if monetary policy also responds to cumulative disequilibria in financial markets can this elasticity be limited. A monetary policy response of this kind can be achieved through coordination with macroprudential and microprudential instruments. With this in mind, we turn to the activities of the SNB. The primary objective of the National Bank’s monetary policy and its contribution to the stability of the financial system is to supply the economy with liquidity.
Protecting the cycle from the banks In my view there is a case for taking this further and adopting the more ambitious goal to use regulatory requirements to smooth out the credit cycle. In other words, preventing the imbalances within financial markets destabilising the real economy. This would involve varying the regulatory requirements to stabilise the supply of credit and the terms on which it was granted – for example by requiring banks to hold more capital when they would otherwise be loosening credit conditions, and allowing banks to run down capital when they would otherwise by restricting access to credit. This approach could offset  BIS Review 21/2009  11  to some degree not just a domestic credit cycle but the impact of developments elsewhere in the global economy which affect the terms on which banks are able to raise funds in financial markets or the he value of their assets. To a limited degree this would allow the authorities to make the banking system a shock absorber. Policymakers would be raising capital requirements to preventing shocks that occur outside the banking system from destabilising the real economy. But I would limit the goal to smoothing the credit cycle and would not be inclined to go further and use it as a general stabiliser of the economy. Weapons in the arsenal So what is the choice of instruments? I see great attractions in “dynamic provisioning”, in other words amending the accounting system to recognise likely future losses.

It is crucial in a period of economic hardship – with companies going to the wall and people losing their jobs – that people do not think the Bank is focused on a narrow inflation target for its own sake. If they feel that we are not accepting responsibility for what happens to growth and jobs, they will look for someone else to do so. If we want to preserve the framework we have a job on our hands – now more than ever – to explain our strategy to the general public. The Bank and MPC need to convince them that the policy we are pursuing is the best way of restoring growth and full employment without reawakening inflation. Indeed it is by bringing output back to potential that we will bring inflation back to target. Secondly, I share the view that setting a target for a measure of consumer price inflation which excludes the costs of home ownership has done us no favours. It is widely recognised as a flaw in the harmonised CPI across Europe but it is of particular significance in the UK given the critical role that home ownership plays here in household budgets and wealth. Something needs to be done to remedy that situation, and if progress can’t be achieved at a European level I think we ought to consider going it alone. More fundamentally, if inflation targeting by an independent central bank is an essential foundation of policy, it is pretty clearly not sufficient on its own.
Moreover, the attempt to examine and illustrate these relationships on the basis of the performance and the available empirical evidence for the European economy – in comparison with that of the US but also with the benefit of the different practices and experiences in European countries – did require some time for exposition; but, I believe, it has provided us with some useful conclusions of policy relevance. Let me end on an optimistic note. The European economy is currently experiencing robust economic growth which is expected to continue, benefiting from the ongoing strength of global economic activity, despite the slowdown of the US economy, but primarily relying on internal sources of growth, with domestic demand projected to expand at a solid pace. There are, of course, uncertainties and several risks surrounding this central and likely scenario. But, at the same time, there are encouraging signs that the supply-side of the European economy is responding positively to the reforms in markets and institutions implemented over the past few years. Productivity growth is picking up, employment is rising and the unemployment rate is projected to further decline. If future developments and further analysis confirm the indications of supply-side improvements, we can look forward to a gradual increase in the European economy’s potential for higher sustainable growth.

In fact, it has been estimated that one half of the dramatic increase in European unemployment from the golden days of full employment in the 1960s to the high and persistent unemployment levels of the mid-1990s can be explained by institutional factors (Nickell et al., 2002). Which “institutions” are particularly relevant? Let me mention three of them: first and foremost, employment protection legislation. Second, tax-benefit-systems, which determine the so-called tax wedge between workers’ gross and net incomes, the transfers to the unemployed, and the tax burden on the employed. Third, wage bargaining structures and procedures and the role of trade unions. Let us consider employment protection legislation. Workers can be protected against unemployment in various ways: either by strict regulations against layoffs, or through unemployment benefits, or a combination of both. The two are interrelated: in theory, employment protection legislation need not be very restrictive if an unemployed worker can rely on generous benefits, and vice versa. What does the empirical evidence tell us? Generous protection of “insiders”, i.e. those who have a job, seems to have a negative impact on overall employment, since it affects the probability of employment of the “outsiders”, especially women, the young and the long-term unemployed.3 The validity of this proposition is illustrated in Chart 6 on the basis of the evidence from European countries. The lower job turnover and hiring also increases both the duration of unemployment and the proportion of long-term unemployed.