samchain/econo-pairs-v1 huggingface dataset:
At the Riksbank, we consider there to be a risk of overconfidence in the market taking its responsibility for cash supply, both now and in the future. In our consultation response, we therefore propose that the market’s responsibility for giving customers access to a payment account and related cash services be regulated more clearly; or that the law include an option for the state to intervene if the market fails, regarding both cash and electronic payments. Despite everything, there is still a long time to go before Sweden becomes a cashless society. There is still SEK 73 billion in circulation in the form of 317 million banknotes and 1.9 billion coins – a significant sum of money. The Swedish payment system RIX will change But the Riksbank’s role as regards payments is not just limited to ensuring the availability of cash. The Riksbank’s system for payments between banks and a number of other financial institutions – the RIX system – is the hub of the Swedish payment system. All payment transactions between banks, clearing organisations and the National Debt Office pass through RIX. 4 This makes it an important part of the Swedish financial infrastructure with a daily turnover of about SEK 450 billion divided among over 15,000 payments. The development of payment services makes adjustments of the RIX system necessary. An example is the development of payments in real time using, for example, the Swish mobile phone app.

This conference series seeks to bring together top  1/2  BIS - Central bankers' speeches  researchers to present their recent work on topics of critical importance for the Spanish economy, and also distinguished policy-makers to discuss their views on these topics. But past successes are simply a good starting point. CEMFI has ambitious plans. It has a plan to implement a strategic vision for the future (underpinned by rigorous external evaluation), it has outstanding leadership (current and incoming) and it has plenty of talent. All these elements have been brought to fruition this year. In fact, the academic year that we are closing today has been full of good news for CEMFI, starting with the successful restructuring of the Master programme, the refurbishing of the new premises in Casado del Alisal 12, and the increase in the size of the faculty from 16 to 19 members, in line with the Board of Trustees' decision to have 25 faculty members by 2025. Even so, we should never forget, that all this – the premises, staff, faculty, strategic plans – are merely instruments. You, the students at CEMFI are the ultimate purpose. Your education and your future. They are at the core of our decisions. Apart from the Master in Economics and Finance, the other major academic programme at CEMFI is the PhD in Economics. In this respect, I would like to mention that 10 students have already defended their PhD theses or will do so in the near future.
BIS central bankers’ speeches  5  England’s regional agents suggest that the supply of loans on offer has increased, but businesses are understandably cautious on the take up. Looking at the broader picture, the post-crisis adjustment of the capital adequacy standard is a welcome and necessary correction of the excessively lax underwriting and pricing of risk which caused the build up of fragility in the banking system and led to the crisis. I do not however accept the view that raising capital standards damages lending. There are few, if any, banks that have been weakened as a result of raising capital. Analysis by the Bank for International Settlements indicates that in the post crisis period banks with higher capital ratios have experienced higher asset and loan growth5. Other work by the BIS also shows a positive relationship between bank capitalisation and lending growth, and that the impact of higher capital levels on lending may be especially significant during a stress period6. IMF analysis indicates that banks with stronger core capital are less likely to reduce certain types of lending when impacted by an adverse funding shock7. And our own analysis indicates that banks with larger capital buffers tend to reduce lending less when faced with an increase in capital requirements. These banks are less likely to cut lending aggressively in response to a shock8. These empirical results are intuitive and accord with our supervisory experience, namely that a weakly capitalised bank is not in a position to expand its lending.

The FPC will shortly be consulting on the scope and form of its application, and that will be a welcome debate. Getting the incentives right for banks in terms of the capital adequacy regime is hugely important. The leverage ratio is simple and that is its appeal, but on its own it could encourage banks to take more risk per unit of assets. In contrast, internal models and stress tests are complicated, and therefore carry the risk of opacity and model error. There is now a growing debate on the use of models and stress tests. In many respects, the debate has common ground, since models are intrinsic to stress tests. My view is that this is not a debate about whether or not supervisors should use models. That question was answered a long time ago in the reasoning for the switch away from Basel I. The design and implementation of Basel II was not done well, and a substantial charge has been required. A major lesson is that to use models and stress tests effectively requires intensive development and maintenance by firms and a highly skilled body of supervisors and a regime where judgement can be used. It also requires the supervisor to have a credible capacity to withdraw the permission given to a firm to use a particular model if the model is considered to be inadequate or the firm has not demonstrated the capacity to use it safely.
At the same time as monetary policy is aimed at attaining the inflation target, it is also supposed to “support the objectives of general economic policy for the purpose of attaining sustainable growth and a high level of employment”. The Riksbank does this by not merely striving to stabilise inflation around the inflation target, but also striving to stabilise the real economy, that is, production and employment. The Riksbank thus conducts what is known as flexible inflation targeting. Flexible here means that the Riksbank does not focus solely on inflation. To be rather more concrete, one might say that every time we make a decision we try to find a forecast path for the repo rate that means monetary will be, as we say, well-balanced. This means that we try to find an appropriate balance between stabilising inflation around the inflation target and stabilising the real economy. One way of illustrating this balance is to say that the deviations arising during the forecast period between, on one hand, inflation and the inflation target, and, on the other, the real economy and a trend, may not become too great. …and in theory It is common in the literature to describe flexible inflation targeting as the central bank minimising a loss function that is a weighted sum of a measure of the variation in inflation and the variation in the real economy.

Figure 4: WW2 U-Boat Campaigns  Figure 5: War Games  Source: IWM Collections (public domain). Torpedo fired on a merchant ship (image available here). Source: GSC Game World (GNU FDL) (Image from ‘Cosacks: European Wars’ (image available here). The US Air Force has an agent-based model known as Systems Effectiveness Analysis Simulation (SEAS). The SEAS package models the entire surface of the earth and its satellites. Each agent has a specific longitude and latitude to a resolution of one millimetre. In order to allow interaction, SEAS agents are equipped with sensors, communications, and weapons allowing co-operative or competitive behaviour (Brooks et al (2004)). Most recently, the work on ABMs in a military context has taken on a new direction. As autonomous vehicles such as drones are used in war, they add a new dimension to ABM simulations. In a world of human agents, ABMs could only approximate agent behaviours. In a world of military automata, these simulations come closer to replicating real-world warfare (Sanchez and Lucas (2002)). A more benign military application of ABMs has been in the context of war games. Military ABMs were a forerunner of many of today’s computer war games: Eve Online, World of Warcraft and Command and Conquer are all popular, sophisticated ABM-based games which mix computer and human controlled agents. (c) Physical Sciences  As the Large Hadron Collider illustrates, modern physics is heavily computational in certain fields. This arises in part because even simple systems can quickly exhibit complex behaviours.
Within the scope of this platform, the CBT became one of the fifteen members of the National Strategy on Financial Education subgroup, which was established in 2009. Similarly, the CBT applied to join the studies of the Financial Inclusion subgroup under this platform (established in February 2011) and also for membership in the Task Force on Financial Consumer Protection that was established at the OECD. The Central Bank of Turkey also contributes, via data collection and surveys, to international studies on financial access. Within this framework, the CBT supports studies carried out by the Consultative Group to Assist the Poor (CGAP) conducted in collaboration with the World Bank. Moreover, the CBT – along with other related public institutions – contributes to the efforts of the Global Partnership for Financial Inclusion (GPFI) initiated by the G-20 to enhance the exchange of information and cooperation regarding financial access. Having said these, I believe that the CBT study entitled “Access to Financial Services and Financial Education in Turkey and Around the World” will become an important reference regarding this issue. The booklet is now accessible on the CBT website as well as in the Conference CD and is will be in print soon. In the last part of my speech, I would like to mention some specific points regarding financial education within the framework of this Conference. In the first session, we will discuss the relationship between financial education and financial stability and contribution of financial education to the functioning of the financial system.

In addition, much of our region was spared the worst effects of the non-prime mortgage boom and bust. There was generally lower penetration of nonprime loans into our housing markets, and in general, our region shows better performance, with fewer delinquencies and foreclosures. This pattern was particularly true across Upstate New York. However, as can be seen on the New York Fed’s U.S. Credit Conditions maps, there are significant pockets of housing distress around the greater New York City metro area, especially in communities in the Bronx, Dutchess County and Long Island. Indeed, we recently documented the severity of problems on Long Island in our Facts and Trends publication. Moreover, New Jersey had non-prime mortgage activity closer to the national average and now has more delinquencies and foreclosures than is the case for much of the region. As the uneven pattern of nonprime lending suggests, the region is hardly uniform. The housing section fared better in Upstate New York than it did in much of the region during the  4  BIS Review 137/2010  recession. In fact, the housing boom and bust largely bypassed Upstate New York, where construction activity is a relatively small part of the overall economy. Relative to Upstate New York, most areas in downstate New York and northern New Jersey more closely tracked the national cycle. Sales activity and home prices ramped up during the housing boom, but then dropped sharply. More recently – over the past year – home sales and prices in the region have followed different paths.
The ability to undertake transactions at – or close to – prices that reflect economic fundamentals facilitates the proper allocation of capital, as well as the management and transfer of risk. It also gives borrowers the confidence to plan, and savers to finance, productive investment. Efficient markets also allow for the transmission of monetary policy by allowing changes in policy interest rates to be reflected quickly across financial markets and assets. The rise in automated high-frequency trading has, however, also increased the incentive for market participants to protect information that could signal their trading intentions. This is to reduce the risk of being disadvantaged by trading with other – faster-moving – market participants, and thus receiving a worse price (a phenomenon sometimes referred to as ‘slippage’). 6  This strategic interaction has manifested itself in two observable trends. First, there has been a partial reversal in the trend toward greater price transparency I highlighted earlier. Market participants have embraced other forms of trading, which differ to traditional exchanges either by offering less price transparency and/or a narrower range of counterparties. 4  This effect has been explicitly modelled by Jovanovic, B and Menkveld, A (2011) and empirically documented in a number of instances and trading venues – e.g. by Hendershott, T, Jones, C and Menkveld, A (2011) for the NYSE, Riordan, R and Storkenmaier, A (2011) for the Deutsche Börse, and Hasbrouck, J and Saar, G (2013) for the Nasdaq.

Although the structural balance policy was launched in this decade, fiscal efforts to smooth the copper price fluctuations began in the 1980s, with the copper stabilization fund. In fact, throughout most of the 1990s, the structural balance was near 1%. This countercyclical fiscal policy makes the effective fiscal balance highly correlated with the price of copper. Thus, our fiscal policy has been contributing for more than 20 years to stabilizing the Chilean economic cycle. As a result of the application of the rule, a large amount of resources has been saved in sovereign funds when the price of copper has been high. 4 In the period 2007-2008, 22 billion US dollars were placed in these funds, of which 20 billion – the equivalent to 12% of GDP – came from the accumulation of new funds, and the difference was the funds’ net financial gain. This has had significant implications in the current economic scenario. Since last year, particularly as from September, the world has been enduring the worst recession in the last 60 years and our country, despite being in an excellent position to address these shocks, has not been spared its consequences. But today, our fiscal policy has been able to make an important reactivation effort, thanks to the prudence with which the years of high copper prices were managed. The other critical elements in our macroeconomic policies that favor stabilization are monetary and foreign exchange policies. Although they play a somewhat more subtle role than fiscal policy, they are no less important.
12 Having said this, it may be worth adding that monetary policy and a policy for financial stability usually go hand in hand, more or less automatically. Moreover, problems with financial stability only arise under certain limited periods. On the other hand, one may claim that the crisis and its effects show that we actually should worry about it slightly more often than we have done. If we are successful in formulating and using regulations and supervision, the central bank can receive assistance with both of the monetary policy problems I mentioned earlier. The central bank can hold the policy rate low when the economic outlook calls for this, without being afraid of risks building up through a monetary policy risk-taking channel. And if regulation and supervision can be used to prevent credit-driven bubbles arising, the central bank need not fear a balance sheet recession where monetary policy has little effect. Regulation with monetary policy motives With regard to coordinating the interest rate lever and the regulation level, I would like to return to a question I raised when I talked about balance sheet recessions. As I noted then, a fall on the property market could lead to a weak performance in the economy if households become uncertain about the future and feel they must consolidate their balance sheets. I also noted that this does not mean that the banks will experience problems that could threaten financial stability.

But at the same time, this may be a strength compared with the regulations, simply because it is difficult to “circumvent” an interest rate increase. BIS Review 164/2010  7  Another reason why monetary policy may in some cases be needed as a complement is that there will probably be quite considerable resistance to using regulation to prevent a creditdriven bubble. Banks and other financial market participants may perceive regulation to be a larger intervention than an interest rate increase, and consider it to be aimed only at them. In addition, things often look very good just as a bubble is inflating, so resistance would probably be particularly strong when measures are needed the most. The political and psychological pressure on those pulling on the regulation lever could thus be substantial. Important with a good allocation of responsibility I thereby come to an issue that is just as important as how regulations should be designed; namely, who should pull on the regulation lever and when. Lessons can be learned from monetary policy when it comes to responsibility and mandate. If an authority has a sufficient degree of independence it can more easily withstand external pressure. And if it also has clear and specific objectives, it has greater opportunity to do a good job, while at the same time it is easier for society to evaluate it.
But as long as monetary conditions in the advanced economies remain easy, the risk of disruptive capital flows and surges in inflation, especially in asset prices, remains real. 27. The challenge facing Asian policymakers is this: how to adjust policy settings to cope with slower economic growth while inflation has not been entirely tamed? While there has been some normalisation in policy rates over the past two years, real interest rates remain generally low to negative in the region. Credit growth is strong and bears watching. Persistent low real interest rates can distort savings-investment decisions and lead to a misallocation of resources. Risks may build up in specific sectors, like real estate for instance. 28. Asian economies have mostly coped with these pressures by complementing standard macroeconomic responses – such as raising interest rates and allowing some currency appreciation – with a variety of so-called macroprudential tools, such as tightening credit standards and lowering loan-to-value ratios for property purchases. These unconventional measures have been fairly effective to-date in easing asset price inflation. But like unconventional monetary policy in the advanced economies, these measures are also not without risk. 4  BIS central bankers’ speeches  Shift in investment portfolios to Asia 29. What do these driving forces mean for the asset management industry? One clear trend will be the shift of investment portfolios to Asia, as the driving forces accentuate the underlying shift in the world’s centre of economic gravity towards Asia. 30.

There are several structural challenges facing the global economy. I want to elaborate on two key driving forces that will shape the medium-term outlook in both the advanced and emerging economies: deleveraging and monetary expansion. Deleveraging 8. Let me begin with deleveraging. From around 1990, debt levels began to rise rapidly in most advanced economies. Governments ran persistent fiscal deficits that were financed by borrowing. Total government debt in the OECD economies grew relentlessly, from 58% of GDP in 1990 to 98% in 2010. Households went on a consumption binge, financed by easy borrowings on the back of rising property prices and housing equity. Household debt in the developed economies also climbed, from 62% in 2000, to 76% in 2010. Deleveraging is the process by which this excessive debt is brought down to more sustainable levels. This will be long-drawn, only because the build-up of leverage took place over such a long period of time. Synchronised deleveraging in the US and EU 9. The deleveraging process that is unfolding across the advanced economies is taking place across three fronts:   Governments in the US and EU    Households in the US    Banks in the Eurozone  10. First, deleveraging by governments. The public finances of the US, UK, and the Eurozone, have substantially deteriorated, due to pre-crisis fiscal profligacy and post-crisis discretionary stimulus. These countries have now embarked on fiscal adjustment programmes to varying degrees, primarily through austerity measures.
1  The Scandinavian Journal, 1799, in The travel diaries of Thomas Robert Malthus, edited by Patricia James, Cambridge University Press (1966). 2  See Norges Bank Working Paper 23/2013, Contributions to a history of prices in Norway: Monthly price indices, 1777–1920, by Jan Tore Klovland. BIS central bankers’ speeches  1  The Storting delegated the task of supervising the monetary system to Norges Bank, which was established in 1816. The king would no longer have the authority to print money at will. At its inception, Norges Bank’s head office was located in Trondheim, a twelve-day journey from the government in Christiania, and even farther from Stockholm3, giving the central bank a geographical – and not just formal – distance from the government authorities. The value of money would be guaranteed by a stock of silver and a silver tax was introduced. But establishing confidence would take many years. The banknotes that were printed were not fully redeemable in silver until 1842. Since then, the value of Norway’s currency has been fairly stable for long periods, but we have also experienced periods of deflation, high inflation and waning confidence. The lesson has been the same every time: restoring confidence comes with a cost. Much has happened since 1814. Norway no longer lags behind other western economies. Inflation is low and stable. We have established a clear division of responsibility for economic policy and well developed institutions founded on the Constitution written at Eidsvoll 200 years ago.

The value of the Fund and its investment returns will therefore swing in tandem with equity and bond prices. This may draw a veil over the progression of the Fund’s underlying earnings. In the long run, it is the Fund’s cash flow that makes a permanent contribution to our national income. Put in simple terms: The cash flow is cash in hand, while the prices we measure in market values vary with shifting market sentiments. The cash flow is more stable than the market values as expressed by exchange listed prices. The Fund’s cash flow is therefore a good cross-check for measured capital returns. Chart 12: Cash flow from the GPFG and petroleum revenue spending over the fiscal budget The cash flow is commensurate with the actual level of petroleum revenue spending over the fiscal budget of about 3 percent of the Fund’s capital. This is reassuring because it implies that the Fund’s capital is not being depleted. The fall in yields in recent years has provided one-off price gains in bond and equity markets. Looking ahead, low long-term interest rates will feed through into lower returns. It is doubtful that equity prices will continue to advance at the same pace as seen in the past couple of years. The most likely scenario is still one where the Fund’s real return will approach 3 percent in the longer term. Above all we should recognise that future returns on the Fund are uncertain.