samchain/econo-pairs-v1 huggingface dataset:
Even though the LOOP is unlikely to hold perfectly, the mechanisms underpinning LOOP might cause a sterling depreciation to lead to an increase in the prices of some domestically produced goods and services. BIS central bankers’ speeches  5  line of argument suggests that the stability of inflation expected 5 or 10 years ahead provides a good metric for judging the credibility of monetary policy. The evidence on medium and long-term measures of inflation expectations is somewhat mixed. The most recent survey conducted for the Bank by NOP suggests that 5-year ahead inflation expectations increased by 0.4% points over the past year. The corresponding survey measures collected by Citigroup/YouGov and Barclays have risen by similar amounts. But both the Citigroup/YouGov and Barclays measures remain below the levels they reached in 2008. And measures of medium-term inflation expectations derived from financial markets are little changed compared to a year ago. But I’m cautious about how much comfort we can take from the relative stability in these measures for two reasons. First, although some economists may like to think otherwise, most companies and households have far better things to do than spend time formulating detailed expectations of the rate of inflation likely to prevail in 5 or 10 years time.

Finally, the Supervisory Board is an internal ECB body responsible for planning and carrying out the ECB’s tasks in relation to the prudential supervision of credit institutions (see Part 2 of this Annex). 1.2 The Executive Board of the ECB The Executive Board of the ECB is the decision-making body responsible for managing the day-to-day business of the ECB and implementing the policies of the Eurosystem. The Executive Board usually meets once a week and more frequently if necessary. Formally, decisions are adopted by simple majority, although in practice, as in the case of the Governing Council, the Executive Board acts as a collegiate body and seeks consensus. Among other tasks it is responsible for: i) preparing the meetings of the Governing Council, presenting the proposed decisions, and ii) implementing the monetary policy in accordance with the guidelines specified and decisions taken by the Governing Council, giving the necessary instructions to the euro area NCBs. It is composed of the President of the ECB, the Vice-President and four other members selected from among persons of recognised standing and professional experience in monetary or banking matters. The members of the Executive Board are appointed, by qualified majority, by the heads of state or government of the euro area countries, on a recommendation from the Council of the European Union, after it has consulted the European Parliament and the Governing Council of the ECB. The term of office of the members of the Executive Board is eight years and cannot be renewed.
It affects the way financial decisions 2  BIS central bankers’ speeches  are made, including decisions relating to savings and spending, borrowing and lending, investment and profit distribution, and it is relevant to all economic agents, be they households, businesses or governments. Soundness of financial governance is a critical prerequisite for the sustainable growth of any economy. Having said that, we also have to recognise that the process of economic growth itself is an outcome of a system that is highly complex and adaptive, and that a country’s economy, polity and society – and the institutions that underpin each of these – are embedded within a complex network of interdependencies. Therefore, there cannot be a one-size-fits-all prescription of what constitutes good financial governance for all economies. Nevertheless, I do believe that we can recognise the presence or absence of good financial governance based on broad characteristics. In this regard, three key inter-related features are typically present when there is good financial governance. Firstly, effective financial governance ensures that financial decisions take into account all externalities arising from the decisions. Financial decisions often have consequences that are not fully borne by the decision maker. Financial decisions that may appear rational at the individual level, may in fact be collectively unsustainable. For instance, corrupt practices may be optimal for the individual perspective, but they are clearly detrimental to the welfare of society and the economy.

More than 40 European bank groups have a substantial part of their operations in more than three European countries. Names such as Unicredit, Barclays, Fortis and ING are all examples of banks in the forefront of this development. The internationally-active banks are moreover increasingly offering services to households and smaller companies. The integration process has been particularly evident in our own neighbourhood. Nordea and Danske Bank have substantial market shares outside of their respective home countries. With the exception of Iceland, it is in Nordea’s case a question of market shares of more than 10 per cent in all of the Nordic countries. Swedbank and SEB are dominant actors in the Baltic region. But financial integration is now also increasing rapidly in other parts of Europe. The timing of my speech could hardly be more appropriate. Only in recent weeks the media has reported on farreaching plans for a merger between British Barclays and Dutch ABN Amro, two banks which together would become one of the world's largest players in this sector. Parallel to this cross-border integration process there is also another type of integration within the banks. It is becoming increasingly common for these groups to organise themselves so that they in practice function as one bank instead of a number of independent bank companies. What drives the banks to change their organisation is the efficiency gains obtained through greater centralisation and specialisation.
Output will in some periods lie above and in others below the long-term trend.2 Stabilising output means seeking to maintain actual output near trend. There is one main monetary policy instrument: the interest rate. The interest rate is set with a view to achieving low and stable inflation, while at the same time seeking to avoid substantial variations in output and employment. In recent years, household income has shown solid growth, and household confidence has been high. High growth in labour costs over a number of years, the cyclical downturn in the world economy and a strong krone in periods resulted in deteriorating profitability in many companies. Employment and  1  Berg, Clas and Lars Jonung (1998): “Pioneering Price Level Targeting: the Swedish Experience 1931-37”, Conference on Monetary Policy Rules, Stockholm, 12-13 June 1998. 2  Trend growth has been used as a rough estimate of potential output. Potential output is the level of output that is consistent with stable inflation over time. BIS Review 47/2004  1  investment fell. The level of household borrowing is high, while enterprises have reduced debt. High debt growth increases the vulnerability of households to economic disturbances. Wage growth has slowed now and the krone has depreciated. A turnaround is taking place in corporate earnings and there are also signs of this in investment and credit demand. The interest rate can be used to reduce credit demand.

In retrospect, this should perhaps have flashed more of a warning signal, but with credit card receivables starting from a very low base, it was not surprising that the amount outstanding should expand rapidly. The quality of the card portfolio actually held up well for some time. But the cumulative effects of deflation, rising unemployment and increasing indebtedness were taking an increasing toll. Coupled with the delayed impact of the more permissive bankruptcy regime introduced in 1998, these factors produced an explosion of personal bankruptcies in 2002. Bankruptcy petitions jumped to almost 27,000 in that year and the charge-off ratio for credit cards rose to 13.25%, compared with 5.46% in 2001. In the first quarter of this year, the bankruptcy situation seems to have improved a bit, with the number of petitions falling to 6,119. Credit card charge-offs have also shown signs of slackening off. The average charge-off ratio for the first two months of 2003 was down to about 11.3% - still not good, but an improvement on the final quarter of 2002. The question facing the banks is whether this can be sustained in the current environment. Apart from credit cards, asset quality has generally been benign. In particular, the all-important mortgage portfolio has held up well, with the three-month delinquency ratio standing at just over 1.1 %. This is despite the ominous rise in the number and amount of mortgages in negative equity. At end-2002, we estimated that there were around 78,000 cases of negative equity with a value of $ billion.
10  6  One quarter of the total debts are in the County of Stockholm, one sixth in the County of Västra Götaland, one seventh in the County of Skåne and one third in the rest of the country. BIS central bankers’ speeches  Chart 4. Debt ratios for households with mortgages in different municipalities Per cent 500 450 400 350 300 250 200 150 100 50 0 Stockholm  Gothenburg  Malmö  Others  Source: The Riksbank  Young people are most highly indebted, but older people also have high debt ratios I would also like to take this opportunity to say something about how the debts are distributed per age group. It is sometimes claimed that it is mostly younger people that are highly indebted. This is also confirmed by the Riksbank’s credit data. However, we also note that indebtedness is actually rather high in the older age groups (see Chart 5). In other words it is not only “young yuppies in central Stockholm” that have large debts but also their grandparents living in small towns and villages in other parts of the country. Chart 5.

Considering the dramatic price increases on the Swedish housing market in recent years, this is a completely reasonable claim. The higher housing prices are, the greater the loan required to finance the purchase of a house or flat. Finansinspektionen’s mortgage survey shows that the debt ratio for new mortgage borrowers averages 370 per cent, which is a higher debt ratio than for existing mortgage holders. On the other hand, I do not think that the difference between new mortgage borrowers and those who have owned their homes for some time is as big as I had perhaps expected. This is because people who have owned their homes for a while have had the opportunity to reduce their debts. The fact that the difference is not bigger could indicate that the households reduce their debts at a relatively slow rate. Let me return to this a little later. The debt ratio is highest among low and middle-income earners One conclusion of the government’s inquiry “Over-indebtedness in a credit society” is that the highest debt ratios are to be found among those with the highest incomes. This is the picture you get if you look at the population as a whole, that is if you also include individuals who have an income but no debts. This means that the inquiry really shows that low-income earners do not take loans to the same extent as high-income earners. If we instead look at debts in relation to incomes only for those individuals who have debts we get a different picture.
It is likely that more information will have come in by then and we will have to update our forecasts. Monetary policy Monetary policy is expansionary Since the financial crisis worsened last autumn, monetary policy has been aimed at moderating the depth of the economic recession following in the wake of the crisis. The repo rate was cut from 4.75 per cent in September 2008 to an all-time low of 0.25 per cent in July 2009. The Riksbank has also supplied the banks with liquidity to counteract the negative effects of the financial crisis. In this section I shall discuss in slightly greater detail our reasoning at the most recent monetary policy meeting, and the risks I see of developments being better or worse than we forecast. In July we cut the repo rate from 0.50 to 0.25 per cent. The economic recession appeared likely to be deeper than the Riksbank had earlier forecast and we were expecting GDP growth to be slow over the coming years. Resource utilisation would therefore remain low throughout the entire forecast period. At the same time, the forecasts for underlying inflation were close to the inflation target of 2 per cent. We therefore considered that the repo rate probably needed to remain at this low level until autumn 2010 (see Figure 22). We also decided to grant loans to the banks of SEK 100 billion, with a twelve-month maturity and at a fixed interest rate.

BIS Review 98/2009  1  The financial crisis has so far been less serious in Sweden than in many other countries. The Swedish banks are well capitalised. But they are also to a large degree dependent on the securities markets for their funding and they have expanded substantially in the Baltic countries. The greatest risk for Sweden therefore lies with the banks’ credit exposure to the Baltic countries. International developments Slow global recovery Over the past year, the global economy has been hit by the most rapid economic downturn since the Second World War. Economic developments abroad are very weak this year and much weaker than we had previously anticipated. Since September last year, the Riksbank has gradually revised down its forecasts for global GDP growth in 2009 from approximately 4 per cent to around -1 per cent (see Figure 3). The forecasts in the most recent Monetary Policy Report are no exception, but for the first time they only involve a minor downward adjustment. There are numerous indications that the severe economic downturn has now touched bottom. During the spring there were increasing signs pointing to a slowdown in the heavy fall in world GDP. At the same time the financial markets have begun to function more efficiently, which is an important condition for ensuring that the economic recovery will begin. World trade has also begun to show signs of stabilisation during the spring, after the earlier heavy fall in exports.
In addition, capital might also flow in the opposite direction, as non-European firms and governments tap the euro-denominated capital market as an efficient source of funds, in the same way as European businesses and governments have chosen to borrow dollars in recent decades. While the potential benefits of a more integrated European capital market in the long run are apparent, a number of observers have suggested that the economics of EMU -- as well as its plain mechanics -- may have unwelcome consequences for the dollar and world trade. More specifically, some have argued, EMU may cause a short-run glut of dollars in the international capital markets, leading the dollar to depreciate and the euro to appreciate, with resulting undesirable effects on trade flows. The reason there could be a dollar glut, these observers maintain, is that EMU would eliminate the need for intra-European intervention, reduce the importance of exchange rate management, and allow national central banks to pool reserves for external intervention, thus generally reducing the European central banks’ need for dollar reserves. Moreover, if the euro were BIS Review 109/1997  -4-  to become an attractive reserve currency for non-European central banks, the dollar glut could become even more severe.

On the contrary, to the extent that the birth of the euro fosters deeper trade and financial markets globally and a more efficient international monetary system, all countries stand to benefit, particularly an active participant such as the United States. Let me be more specific. In my view, for the United States and the international monetary system, the implication of a growing international role for the euro over the foreseeable future will be most significant with respect to financial rather than trade transactions. It is quite true that the euro may quickly become the currency of choice in the invoicing of trade between companies in the European Union and their foreign counterparts. Companies in regions with strong links to the European Union, such as those in eastern and central Europe, North Africa, and the CFA French franc zone, may also choose to invoice trade in euros. BIS Review 109/1997  -2-  More generally, the euro may well expand its importance in world trade beyond the relative trade weight of the European Union countries, following a path similar to that taken by the U.S. dollar and -- before that -- by the pound sterling. Nevertheless, I would argue that the economic effects of these potential changes in invoicing practices are likely to be limited. Why do I say this? First, to a large extent, the re-denomination of a significant share of world trade into euros will mainly represent a shift in invoicing practices from the use of former European currencies to euros.
But even so, the fall should be seen above all as a consequence of the unprecedented rise and the high valuations at the beginning of 2000. An orderly adjustment I repeat that the course of events today differs in many respects from what happened in the world economy in the late 1920s and early 1930s. At that time, economic policy was tightened, free trade was restricted and banks collapsed. Global economic activity went into a downward spiral of deflation, falling output and decreased employment. Thus, the drop in share prices was only one of several ingredients in the mixture of events at that time. Although world economic demand has been subdued and the recovery in activity is now rather sluggish, the fact remains that the adjustment after the latest upward phase and the high share values has been comparatively orderly. Overall economic policy is expansionary - not restrictive - in many parts of the world. With some minor exceptions, there have been no extensive political interventions that impede international trade. Moreover, the financial system has proved to be highly robust. The maintenance of an efficient payments system and the supply of credit from central parts of the financial system are, of course, important conditions for a further successive economic recovery. In the past it is disturbances in precisely these two functions that have caused real economic developments to follow paths that resulted in falling output and deflation. For an illustration of this we need only go back a decade or so to Sweden’s own bank crisis.

The picture is not as bright as last spring At the time of my previous meeting with the Committee, our discussion was coloured by some relief that the effects of the terrorist attacks on 11 September 2001 had not had a particularly marked impact on the world economy. The uncertainty among firms and households had subsided to some extent and there were signs that economic activity abroad was beginning to improve. An optimistic mood was spreading. Order books seemed to have stabilised and in some cases had even taken a turn for the better. Moreover, an expansionary economic policy in many countries was expected to provide an additional stimulus. At the same time, I pointed out that we could not be entirely certain that world economic activity would pick up. Among other things I mentioned that the economic imbalances in the United States were still large and stock market valuations were high. So there were a number of questions as to whether demand would in fact rise on a broad front. Last spring, the moderate economic slowdown in Sweden had meant that inflation here remained high and resource utilisation was still tight. GDP growth seemed to have bottomed out during the summer of 2001. Unemployment had stopped falling. Inflation had been noticeably above the Riksbank’s 2 per cent target for a time. This was partly because so-called supply shocks had raised the price level and led to temporarily higher inflation.
While a weaker dollar would facilitate the necessary adjustment to a smaller current account deficit in the US, it would also be likely to delay economic recovery in Europe. A dramatic depreciation of the dollar cannot be ruled out either. In Europe, the strained budget situations in mainly Germany and France also constitute a source of uncertainty. Savings in the public finances and a weak labour market risk subduing consumption and thereby delaying a revival. The combination of imbalances in the US and the sluggish growth in the euro area risk derailing an economic upswing, and could perhaps even result in a decline. According to the Riksbank's assessment, the risks to Swedish inflation prospects posed by weaker international economic activity are balanced by the risk of higher inflation in Sweden. New collectivewage agreements will be negotiated at the beginning of next year for employees in the private and central government sectors. Wages are the single most important factor for inflation and are therefore always associated with inflation risks. But unlike the last big wage bargaining round, which was initiated during the final stages of an economic boom, these negotiations will be conducted when demand in the labour market is weak. Nevertheless, there are tensions in the labour market that could result in wage rises that increase cost and inflationary pressures. Furthermore, energy prices have not fallen as much as we expected during the summer, which means that the risks of contagion effects have increased somewhat.

One important factor was that many low-productivity firms went bankrupt in connection with the sharp economic slowdown at the beginning of the 1990s, while other firms implemented cutbacks of lowskilled labour that had less qualified tasks. When the economy began to grow again there was plenty of unemployed labour, and it was possible to attain high growth without inflation gathering pace. Another cause was the IT boom towards the end of the 1990s, which also contributed to productivity growth. In the years ahead, we can also expect to have good productivity growth in Sweden. Increases in productivity growth can be a solution for large parts of the corporate sector, but this is less often the case for parts of the public sector. Quality care and education often require a strong presence of human labour. Nevertheless, there is probably much to be gained by organising and financing the public sector in new ways. The contribution made by trade union organisations in this regard could prove to be a decisive success factor. Here, the Nordic countries have an advantage over others through a high degree of organisation and an established cooperation between employers and employees. The education sector also faces considerable challenges. When the current generation of teachers in Sweden retire, a substantial increase in new teachers will be needed. According to the National Labour Market Board, the number of new recruitments required to replace retired teachers is forecast to come to around 100,000 up to and including 2015.