samchain/econo-pairs-v1 huggingface dataset:
Given  4  BIS Review 96/2006  the analysis and forecasting tools we use today, it is difficult to say whether a sudden correction in house prices will occur, or whether we can count on a calmer and more prolonged adjustment. At the same time, the Riksbank must take into account the risks when conducting its monetary policy. If house prices and household indebtedness increase rapidly over a long period of time, there is a risk of imbalances building up. These imbalances may force an adjustment further ahead and in the worst case may have severe consequences for the real economy and inflation. If house prices rebound, this could lead to subdued demand further ahead through both a decline in household consumption and reduced investment in construction. This type of development could in the longer term lead to both inflation being below target and to weaker growth in the economy. It is difficult to manage this type of risk. One possibility is to make changes in the interest rate slightly sooner or later than would otherwise be justified on the sole basis of the forecasts for inflation and the real economy. It is hoped that such a policy will contribute to a smoother adjustment process and help to avoid a more abrupt correction. A two-year horizon is a good decision rule, but it cannot always work in all situations. There are now signs of some slowdown in the housing market.

The Euro-Summit on 15th December 2017 resulted in a renewed political commitment to foster further progress on EMU´s architecture during the first semester of the present year. The aim was to trigger the necessary discussions and achieve material progress in the 3/5  months preceding the closure, in spring 2019, of the current legislature of the European Parliament. Our political leaders assigned priority to the completion of the Banking Union, with the establishment of a common fiscal backstop for the Single Resolution Fund, and the introduction of a common European Deposit Insurance Scheme (EDIS) with eventual full risk mutualisation. Both are essential elements to severe the links between banks and sovereigns and to bolster the ability of the area to deal with large macroeconomic shocks. The development of the Capital Markets Union is surely another key project that deserves to be mentioned at the top of the political agenda. Leaders also agree on the need to reduce risks in banks’ balance sheets, including –but not only- the stock of non-performing loans, which is still too large in some jurisdictions. Current proposals to create Sovereign Bond-Backed Securities (SBBS) could contribute to reduce current home-bias in bank´s sovereign holdings if accompanied by regulatory reforms that ensure acceptance by investors. But these reforms should be carefully calibrated to avoid hindering liquidity and price formation in sovereign bond markets. But there are other issues that will require more time to agree and to put in motion.
However, it should be noted that the slowdown in inflation was aided significantly by one-off factors such as the strengthening of the ruble thanks to higher oil prices and last year’s good harvests. Through the concerted efforts of OPEC and other oil producers, the oil market has become more stable in recent months and oil prices have increased. Oil prices have gained a firm foothold over a relatively broad range. This provides more stability in understanding long-term trends. Nevertheless, the range of scenarios that could evolve in the near future remains quite wide. As you will doubtless be aware, the baseline scenario adopted by the Bank of Russia assumes that oil prices will adjust to a level of $ per barrel in the short or medium term. However, the alternative scenario we have forecasted assumes a gradual increase in the price of oil, and this too seems entirely possible. Under highly volatile conditions in the terms of trade it is very important to have a budget that is not susceptible to external fluctuations, including those arising from the commodity supercycle. Last year we adopted a programme of fiscal consolidation to aid in the stabilisation of budget 1/6  BIS central bankers' speeches  expenditures. Beginning this year an interim fiscal rule has taken effect, under which oil and gas revenues resulting from the higher than expected cost of base-level oil are directed to the Reserve Fund.

Today we will summarise our intermediate results and progress we have made so far. From the beginning of 2016 to March of this year, outstanding foreign currency loans went down by almost $ billion. This was partly offset by an increase in outstanding ruble loans, which grew to 514 billion rubles. We can also see a decrease in foreign currency lending, mainly in those industries where companies lack so-called natural hedging. Once again this refers to businesses in the construction and real estate industries, as well as wholesale and retail trade. For exporter companies the situation remains unchanged, and banks continue to make foreign currency loans to them. In 2014–2015, exporters’ external debt presented a significant potential risk to financial stability. The high number of maturing loans was a cause for concern, and we were carefully monitoring the schedule for upcoming repayments. This spike in external debt repayments has since passed. In the first quarter of 2017, the 27 largest companies repaid a combined total of $ 3/6  BIS central bankers' speeches  billion in external debt. They will repay a further $ billion by the end of 2017 (April – December), which is 22% less than the payments made in the same period of the previous year $ billion). Now, given the recovery in economic activity in the world and in Russia, as well as the increase in attractiveness of Russian borrowers, there is the potential risk that these borrowers will accumulate excess foreign currency debt.
The alternative to a fund would have been to directly regulate production by putting a conservative upper limit on annual extraction. This was attempted in the 1970s and -80s. At that time, we had a production ceiling of 90 million standard cubic metres per year. This approach was abandoned in the 1980s. Today, the government steers exploration activities  BIS Review 81/2008  1  and awards production licenses, but has no explicit production target. Since the mid-1990s, total petroleum production has been around 250 million standard cubic metres per year. The Fund mechanism The Fund is by law fully integrated with the government budget, and the same priorities are imposed on spending from the Fund as on any other government spending. This means that the entire petroleum revenues are transferred to the Fund. An amount equal to the non-oil budget deficit is then transferred to the fiscal budget. The mechanism ensures that the accumulation of capital in the Fund is equal to government net financial savings. There is no corresponding increase in liabilities. Furthermore, legislation prohibits use of Fund money for purposes not prioritised in the regular budget processes. There is no hidden use of oil money, or any use for special purposes. The Fund is strictly and effectively “out of bounds” to special interests.

Norges Bank manages parts of the funds internally, while parts are managed by external managers appointed by the Bank on a commercial basis. Active management has become an important part of our investment operations. We believe that the search for excess return has had a strong disciplinary effect on the organisation. Transparency and disclosure of information is a key feature of the Fund. All investment principles and guidelines as well as strategic advice and second opinion reports are made public. We publish quarterly reports on Fund performance, which are presented at press conferences. The Fund’s annual report discloses a list of every single investment held at the end of the year, and also provides an overview of corporate governance work, including voting at general meetings. Initially, transparency was aimed at building confidence among Norwegians, but we have also seen that our policy of transparency is highly appreciated internationally. The challenges for the Norwegian economy The risk of “Dutch disease” 1 is often cited when discussing the impact of natural resource windfalls. 2 Dutch disease occurs when the basis for internationally exposed industries is eroded and fluctuations in economic activity are amplified. In our case, we can say “so far so good”. The economy has been fairly stable and oil price fluctuations have only had a moderate impact on our currency. Furthermore, while it is difficult to know how the economy would have developed without oil, we have a sort of “control group”.
In addition, inflation figures have increased further in several countries, but, the same as in Chile, the widespread concerns we saw early this year over the future of the inflation scenario have eased. In the external scenario, unlike previous Monetary Policy Reports, this time projections match market consensus, because the latter were revised downward. On aggregate, world growth forecasts for the next two years are unchanged from March. However, there are significant changes in its breakdown. World GDP will grow slightly more than 4% in the two-year period 2011–2012, with a milder expansion of the United States and Japan, which will be offset by somewhat faster growth in emerging economies (table 2). Perceived weakness in the developed world has affected commodity prices, which stopped increasing as fast as they had since mid 2010, and there have been some revisions in the margin. They are still in record highs, however, mainly obeying to strong demand in emerging economies and some supply-side problems (figure 3). The WTI oil barrel hit a high of $ in late April, then it fell, and at the closing of this Report it is somewhat below $ Food prices, according to the FAO aggregate index, peaked in February, and have  2  BIS central bankers’ speeches  fluctuated around that level since. The baseline scenario assumes that commodity prices will remain fairly constant over the next two years. The interest rate differential between developed and emerging economies has continued to widen at all maturities (figure 4).

In the scenario we consider to be the most likely given present-day and expected conditions, the larger part of the adjustment to the MPR we began in June 2010, and which has amounted to an increase of 475 basis points, has already been completed. In this scenario, we use as a working assumption that the MPR will be within the range of values that have historically been considered neutral. However, we must keep in mind that the behavior of both the domestic and the external economy in the past several years may have changed those ranges, introducing a high degree of uncertainty about the true short-term level of the neutral MPR. All in all, exactly how far and when we will take the MPR in the current cycle is something the Board will be analyzing with incoming information on the evolution of the Chilean economy and the international scenario. It is worth pausing for a few moments to take a look at the evolution of the world economy. In our most likely scenario, we estimate that the world will continue to add momentum to Chile’s GDP growth, although gradually declining in the coming quarters. However, as I already mentioned, there are important risks. Developed economies may enter a stage where output fails to pick up and new economic policy efforts are needed to boost growth. The big problem they are facing is the exhaustion of their traditional policy tools.
It is hoped that Swedish banks will not have to make use of the opportunity for government guarantees or capital injections, since the terms will probably be rather tough. However, we do not know the details of the proposal at this time. However, what we do know is that the Government has decided to expand the deposit guarantee. This is an important measure to strengthen confidence in the Swedish banking system. At the same time it is important to add that measures of this type must be complemented in the long term with mechanisms that facilitate a sustainable financing of the system; in other words, those institutions that are covered by the guarantee must also carry its costs. In the somewhat longer term In a longer perspective there is reason to consider which structural changes are needed to prevent similar situations from arising again. An intense discussion is currently underway about the need for changed regulations and stricter supervision of the financial markets and institutions. The Riksbank has discussed these issues in various contexts for some time. For example, the rules for management and supervision of liquidity risks need to be developed and improved. The financial sector needs greater transparency so that customers and investors can gain a better overview of the companies' commitments. For Sweden it is also important to create a functioning regulatory framework to handle banks in insolvency.

During the spring the turmoil reaped its most startling victim so far. Bear Stearns, the fifth largest investment bank in the US, was forced to suspend payments after being unable to arrange short-term financing. It hardly needs to be said that Bear Stearns was heavily exposed to the subprime market. Conditions on the credit markets temporarily eased after Bear Stearns. Although tensions continued, the market began to slowly return to more normal conditions and credit risk  BIS Review 125/2008  1  premiums decreased sharply for a while. Confidence seemed to be returning to the financial markets. However, the turmoil gained renewed strength during the late summer when Lehman Brothers was forced to apply for bankruptcy protection. Since then a number of banks in Europe and the United States have experienced severe problems. Banks and financial institutions that were forced into being sold or nationalised include heavyweights such as Fortis in Belgium, Merrill Lynch and AIG in the United States, and Hypo Real Estate in Germany. The financial crisis had progressed from being a subprime crisis in the United States into a global confidence and liquidity crisis. Where can we find the explanations? In light of current events, the obvious question is how do we explain the situation? What we see is largely the result of an extended period of vast expansion of credit and growth of the financial industry's assets, which with hindsight has proven to be unsustainable.
Employment rate Percentage of population aged 16–64 85  85  80  80  75  75  Employment rate  70  70  Mean, 2000-2008  65  65  60  60 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  12  Source: Statistics Sweden  14  BIS central bankers’ speeches  13. RU indicator and GDP gap Standard deviation and percentage 6  6  GDP gap (PF) RU indicator  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6  -8  -8 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14  Note. The RU indicator has been normalised so that the mean value is 0 and the standard deviation is 1. The reference period is 1996–2008. GDP gap according to production function (PF) approach. Sources: Statistics Sweden and the Riksbank  14. Actual and long-term unemployment Per cent of labour force aged 16–64 12  12  10  10  8  8  6  6  4  4  Unemployment Unemployment, forecast  2  2  Mean, 2000-2008 Long-term unemployment  0  0 80  85  90  95  00  05  10  15  20  Note.

Øystein Olsen: Promoting high-quality research in financial economics Closing remarks by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Norwegian Finance Initiative (NFI) conference 2012, Oslo, 20 June 2012. *  *  *  In 2011 Norges Bank established the Norwegian Finance Initiative – NFI. Through the NFI we aim to promote excellence. Excellence in research, in curiosity and in criticism. One objective of NFI is to contribute to a qualified debate in Norway on the fund, its strategy and its management. Top-quality research at academic institutions in Norway is a necessary condition for this. The fundamental idea of the NFI is to provide incentive programs that will lead to long-run structural improvements in research and teaching in financial economics. Over the past year, we have introduced seven programs, directed at both students and faculty of financial economics at academic institutions in Norway. One important program involves co-sponsoring positions and hiring of outstanding academics. In this way the Norwegian Finance Initiative can help academic institutions in Norway build the infrastructure needed to sustain a lively research culture. Another NFI program is the publication bonus. The publication bonus has been established by the Norwegian Finance Initiative to provide incentives for existing faculty to go the extra mile to produce high-quality, high-impact research. The program also signals to young scholars the value their institutions place on this level of achievement.
The second issue relates to derivatives activities and a concept called future potential exposure, which is a measure of the likely price movements based on recent years experience. With respect to derivatives, the current market value is captured by financial statements prepared in accordance with generally accepted accounting principles, but not the potential future exposure. To fully understand the degree and effect of leverage in Long-Term Capital’s derivatives-related strategies, it would have been necessary to measure the potential future exposure in a rigorous and conservative manner. Whether sufficient information was made BIS Review 78/1998  -6-  available to Long-Term Capital’s counterparties, including its banks, and adequately analyzed by those counterparties, remains to be seen. A third question concerns stress testing in the credit analysis of hedge funds and the structuring of margin agreements. Stress testing simulates the effects on a portfolio if many asset relationships simultaneously move adversely far beyond historical observation. We recognize that stress testing is a developing discipline, but it is clear that adequate testing was not done with respect to the financial conditions that precipitated Long-Term Capital’s problems. In a recent supervisory letter on credit underwriting generally, we emphasized the importance of stress testing. Effective risk management in a financial institution requires not only modelling, but models that can test the full range of financial transactions across all kinds of adverse market developments. Whether such models existed and, if so, whether they were effective, are issues that we need to address.

The four firms met at the Federal Reserve at 7:00 p.m. A draft term sheet was reviewed which provided detail with respect to the consortium approach. The terms and conditions were debated, altered in some places, and ultimately refined so that the four firms could present it to a wider group. Although Federal Reserve officials were present at the meeting, we did not participate in the discussion about terms and conditions. At about 8:30 p.m., a meeting of a wider group involving 13 firms began. Meanwhile, some representatives of the Core Group called Long-Term Capital to discuss the terms and conditions of the consortium approach. Federal Reserve officials did not participate in any conversations with Long-Term Capital regarding the terms and conditions. In the meeting with the wider group, Peter Fisher explained the importance of avoiding a disorderly close-out of Long-Term Capital’s positions. He also underscored the desirability of parallel efforts to resolve the problem. It was agreed that the group would reconvene at 10:00 a.m. the following morning. It was clear to everyone that time was of the essence. I returned to New York from London around midnight. During the early morning hours, I called various foreign central bank officials to inform them of the situation. At about 9:30 a.m. my colleagues and I met with the Core Group to review the status of the situation.
A major challenge ahead is the consistent and timely implementation of the Basel III framework. It is of the essence that we all adhere to the agreed timeline, ensuring that our banks have a strong capital base. Only when implemented in a consistent manner across jurisdictions will the expected significant net social benefits, including reduced volatility of credit and GDP growth as well as the lower probability of occurrence of systemic crises, be achieved. To reap the benefits of the new framework, a consistent implementation of Basel III is essential. In this context, I welcome the European Commission’s proposal on the implementation of Basel III in the EU, issued in July in the form of a fully-fledged capital requirements regulation. With this step, the EU has demonstrated its strong commitment to the rapid implementation of the Basel III agreement. As it was already said earlier in this Eurofi colloquium, great attention is presently given to this very important piece of legislation, to verify and make sure that it is fully in line with the agreements reached at global level through the Basel Committee, the FSB and the G20. I am confident that this work will be satisfactorily concluded. SIFIS Another important step taken to strengthen the resilience of the financial markets is the agreement reached on global systemically important financial institutions. A key lesson from the crisis is that incentives need to be put in place for banks to reduce their “systemic footprint”.

The FSA has also been able to lower micro prudential liquidity requirements because of the extra liquidity backstop being provided by the Bank of England – in particular the ECTR and the Funding for Lending Scheme. This example may be important in a wider sense. One of the challenges facing macroprudential policy is that the instruments may not be symmetric in their impact. Put crudely, we can make firms hold more capital and liquidity when the going is good. We can’t force them to use those buffers when the going is bad, even if the rules are relaxed. Taking away the stick isn’t the same as offering a carrot. Vegetable metaphors are not always welcomed but I think it’s acceptable to suggest that the FLS may be seen as a carrot! And the FPC recommendations are perhaps a first example of macro prudential policy being used in a co-ordinated way (with central bank actions) to support the resilience of the UK financial system, by being counter-cyclical in approach. This ability to co-ordinate may also demonstrate the benefits of some shared membership across the FPC and MPC. 6  BIS central bankers’ speeches  I want to turn now to the Funding for Lending Scheme in the context of our announcements this morning of the first banks and building societies to have signed up and their stock of sterling lending to UK firms and households at end-June 2012 (Table 1) that will be used as a reference point.