samchain/econo-pairs-v1 huggingface dataset:
The arrangement will be phased out in the course of autumn. Norges Bank eased its collateral requirements to facilitate banks’ borrowing access in the central bank. That will be reversed. Moreover, we have earlier announced that Norges Bank will reduce the share of banks’ access to loans from the central bank backed by bank bond collateral. The interest rate is now extraordinarily low. The Executive Board considered raising the key policy rate at the monetary policy meeting on 23 September, but decided to leave it unchanged. Norges Bank has previously noted that if developments continue as expected, it may be appropriate to increase the key policy rate earlier than projected in the June Monetary Policy Report. 3. The financial crisis and economic policy – lessons  In Norway, there is a division of roles in economic policy. Wage formation, the tax system and economic regulation should contribute to well functioning markets and promote the efficient use of labour and other real economic resources. The government budget – growth in public spending – influences the real exchange rate and the size of the internationally exposed business sector in the long term. The fiscal rule enhances the predictability of petroleum revenue spending in the Norwegian economy even when the budget is actively used from one year to the next to stabilise economic developments and even when the automatic stabilisers are allowed to operate. A smooth phasing in of petroleum revenues dampen krone fluctuations and reduce the risk of abrupt and major shifts between internationally exposed and sheltered industries.

When wage formation is decentralised, monetary policy will instead influence wage growth via market mechanisms, by stabilising aggregate demand. The existing monetary policy guidelines will function effectively whether wage bargaining is at a centralised, local or individual level. There is a fine balance in the division of roles between fiscal policy, wage formation and monetary policy. This balance will be disturbed if the objective of monetary policy is changed or broadened. Should monetary policy give particular weight to asset prices? House prices in Norway have risen sharply and probably excessively. The level of house prices in Trondheim in central Norway was an eye-opener for the American Nobel Laureate Georg Akerlof, who happens to be of Swedish ancestry. At a family gathering, he was told that a distant relative had bought a house in Trondheim at a price equivalent to more than USD 1 million, providing a source of inspiration for his and Robert Schiller’s book “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”. 5  4  OECD Interim Economic Outlook, (March) 2009. 5  Georg Akerlof and Robert Shiller (2009): “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”, Princeton University Press. BIS Review 119/2009  5  Self-reinforcing mechanisms in financial markets, which lead to slower credit flows and falling asset prices in downturns and the inverse in upturns, pose a challenge to monetary policy.
When financial markets collapsed in autumn 2008, the authorities had to intervene. Bail-out packages for banks shifted debt from private to public hands. Governments increased spending to curb the fall in activity. But Keynesian policy – increased spending in order to stimulate demand during a downturn – requires a willingness to exercise fiscal restraint during an upturn. Many countries already had large budget deficits and high debt before the crisis, despite many years of prosperity. 2  BIS central bankers’ speeches  Limited growth capacity in the private sector also came into evidence when some countries could no longer stay afloat on borrowed funds. Good times turned into bad, with the need for crisis-related measures. The burden became heavy to bear. Many countries are now struggling to rein in large deficits and rising government debt. Structural reforms are being implemented in Europe. Pension rules are being tightened and tax systems are under review. The cost of such reforms would have been lower in good times. Chart 3  A lack of fiscal discipline is not the only factor behind the relatively high interest burdens facing Greece, Portugal, Spain and Italy. Public deficits rose in tandem with a fall in private saving. Countries lived beyond their means and accumulated current account deficits and substantial debt while their debt-servicing capacity weakened. The result is a deterioration in their creditworthiness.

Consider, for example, the lines of funding aimed at bank lending to the real economy, known by the acronym TLTROs. They supported bank lending to the real economy. Banks that borrowed from the ECB and lent to the economy more than a pre-specified lending benchmark also benefited from a negative interest rate on their funding. What role did the negative interest rates play? They were important for enhancing the asset purchase programme and for forward guidance. They are an essential instrument in our toolbox that supports very favourable financial conditions, and therefore the economy. This led to improvements in the credit portfolio of banks. It also stimulated the demand for loans of households and firms. Was the impact on savers one of the reasons for the negative reaction? For those savers that do not want to take risks and therefore keep their assets in savings accounts, it is an issue. But it is important to look at the overall situation, and to take into account the impact of our measures on growth and jobs. Young people who need to borrow have benefited and, in general, the important thing for them is to find jobs. Our measures have supported economic activity and job creation. Has the policy of monetary tightening of the Federal Reserve System (Fed) put pressure on the decisions of the ECB? There is no pressure. We are in a different situation. The Fed and the ECB are at two different stages of their monetary policy cycles.
This figure is still far from the medium-term structural budgetary balance, convergence to which is required by the so-called “preventive arm” of the Stability and Growth Pact (SGP) applicable in Spain since July. It is therefore a priority to make headway in cleaning up the public finances so as to reduce this source of vulnerability of the economy and to be able to make full use of national fiscal policy as an effective macroeconomic stabilisation instrument in the event of a sharper economic slowdown in the future. In addition, this improvement in the budgetary situation must be compatible with other challenges which the public finances will have to face in coming years, including most notably the consequences of population ageing, which I will discuss later. A third and final area of vulnerability of the economy to which I would like to refer is the external debt. Despite the correction achieved to date in the form of current-account surpluses, much work still remains to be done, as shown by the negative net international 9/18  investment position and the gross debt, which stood, respectively, at around 80% and 170% of GDP in the second quarter of 2019. To continue correcting these two magnitudes, the external surpluses will have to be sustained over time, which in turn will require further headway in the gains in competitiveness achieved in the last few years.

2/18  … and high geopolitical uncertainty  The contraction in world trade, meanwhile, appears to have intensified, against a background of persistent uncertainty surrounding US and Chinese trade policy and intensifying geopolitical risks. Although the deterioration in activity has been particularly intense in manufacturing, the slowdown in recent months in the global services output PMI, which remains in expansionary territory, is indicative of an increased risk of a steeper slowdown in global activity. Given its degree of openness, and the confluence of certain idiosyncratic elements, the euro area economy has been affected more than most by these international trade developments. Specifically, the euro area slowed significantly from the beginning of 2018, mainly due to the sharp moderation in exports. As a result, GDP grew at an average rate of 1.9% last year, down 0.7 pp from 2017, and year-on-year growth since end-2018 has fallen to around 1%. On the latest information available, euro area GDP growth was only 0.2% quarter-on-quarter in Q2, down from 0.4% in Q1, weighed down by weak exports and slack investment. By contrast, private consumption continued to grow, driven by the relative relatively robust labour market. On the supply side, industrial activity contracted in this period, while services behaved more positively. By country, the decline in activity in the German economy and the stagnation in Italy were notable. Moreover, the indicators available suggest that euro area economic activity remained weak in Q3. Thus, the trade and industrial activity indicators signalled continuation of the deterioration.
2  As used in the Norwegian debate, “parity policy” refers to the monetary policy of the 1920s, when the Norwegian krone was forced back to its former gold parity by means of highly deflationary policies. (Footnote not included in Norwegian text.) 3  See Ecklund (2008), p.43-44. 2  BIS Review 111/2008  The crisis in the 1930s, which severely affected the Norwegian economy, led to changes in views regarding economic policy. The parity policy experience was probably an important reason for this change. As a result, there were few objections when after liberation in 1945, the government with the Storting’s support made decisions that under the law were the responsibilities of the central bank. This was the start of a new era of reduced independence for the central bank. The discount rate, for example, was reduced to 2.5 per cent on the recommendation of the government in January 1946. The Bank's task was to implement the government's decisions. Norges Bank nonetheless played an important role in shaping monetary policy, for example serving as an interface with international financial community and acting as adviser and facilitator. 4 In the first decades after the Second World War, it was firmly believed that the economy could be fine-tuned in the desired direction by coordinating instruments established by the central authorities.

It also started to become clear for old Taraldsen; but immediately afterwards, he became very confused again; because he understood the entire scope of this; he had the entire town's bills of exchange in his head; and of course he had seen a lot of this kind of thing during his long life but all of those were trifles compared to what would happen now. His voice shook as he almost ceremoniously asked: "Will Carsten Løvdahl's papers be protested?" "Yes," replied Marcussen without looking up. Old Taraldsen trotted out of the offices; but on the steps he met the messenger from Aktiebanken: "Is it true? – Taraldsen!" "Now the entire town is going to collapse," answered the old man, throwing up his arms in despair. Kielland’s description of a financial crisis and its consequences was realistic. There was speculation then and there is speculation today, but in other kinds of financial instruments than at that time. We might find employees at Lehman Brothers today who have expressed themselves in the same way as old Taraldsen. It seems to be an inherent property in financial markets that financial bubbles and crises occur from time to time. A monetary policy that is oriented towards stabilising inflation and inflation expectations will reduce the impact. We have seen that when the interest rate is raised to restrain the rise in prices for goods and services, it also has the effect of stabilising house and property prices. In some areas, however, regulations and frameworks – cf.
Yet, the SNB has no information advantage over banks, which make this decision today in a competitive environment, taking into account the local circumstances and needs of various industries. The new division of roles would therefore be inefficient and would turn the SNB into a central authority steering industrial policy. Just imagine companies in a particular industry, be it automotive suppliers, the textile industry or the hotel trade, struggling to obtain loans. How should the task to ensure credit supply be interpreted? Would the SNB have to step in where, under the current system, no loans would be granted? A centralised, statecontrolled credit supply does not befit our federalist, business-friendly country and would jeopardise the Swiss success model. The ‘debt-free’ payments to the Confederation, the cantons or the people are also fraught with problems from an economic order perspective because the SNB would then be directly involved in the debate on distribution issues. Who should get how much? Such decisions are a matter of fiscal not monetary policy. ‘Debt-free’ payments would politicise the SNB and would detract from our ability to perform our real task of ensuring price stability. Conclusion Ladies and gentlemen, the financial system has evolved steadily over the years since the Institute of Banking and Finance at the University of St. Gallen was established. The authors of the Swiss sovereign money initiative want to convince voters that a transition to sovereign Page 7/8  money would just be another minor change to the system. This is misleading.

Equally, savers would be adversely affected. Their sight deposits in so-called sovereign money accounts would not earn interest and services would be more expensive, so they too would lose out. Sovereign money would be like throwing grit in the gears of our credit system. Banks would not be able to react as flexibly to the demand for credit, and this would reduce consumption, investment and ultimately prosperity in our country. Monetary policy  A sovereign money system would also complicate the implementation of our monetary policy. The ‘debt-free’ issuance of money is based on an outdated idea of managing money supply and fails to recognise the advantages of the modern implementation of monetary policy. The issuance of ‘debt-free’ money would technically correspond to monetary targeting and would therefore be like turning the clock back to the last century. The fact that all major central banks today practise interest rate targeting is no coincidence but is built on the pertinent experience of the last decades. Interest rate targeting is superior to monetary targeting and guarantees a flexible supply of liquidity to the economy, particularly during times of crisis. 2 Furthermore, it is fundamentally unclear how the SNB could absorb liquidity in a sovereign money system if the money supply had previously needed to be significantly expanded. How can you reclaim money you have just given away?
One of the roles of the Parliamentary Special Investigative Commission is to compile information on these topics and present an analysis of them. The Central Bank neither has the capacity nor the will to front-run that analysis. The Bank will probably need to revise its operational practices in these areas in view of experience and the Commission’s findings, as will other supervisory institutions. In addition, the Bank will soon review its precautionary rules, such as those pertaining to financial institutions’ liquidity and foreign exchange balance, in light of recent events. Various elements of payment intermediation and settlement will also be reviewed in the near future, with the aim of promoting financial stability more effectively. Because of the uncertainty still surrounding assets, capitalisation, and ownership of Icelandic financial undertakings, it is difficult to assess the main risks in Iceland’s financial system at this time. However, those risks are clearly related to asset quality, on the one hand, and foreign exchange and indexation mismatches, on the other. For this reason, among others, it is important that financial institutions maintain capital adequacy ratios well above the statutory minimum in the near future. At present, deposits form the backbone of the banks’ funding, as foreign investment in Iceland and access to global credit markets are limited. Lifting the capital controls entails a certain risk, partly because it involves liberalising capital flows while the ownership structure of the banks is still being clarified.

The banks are still operating under capital controls, and they have limited access to foreign funding. At this point, when the First Review of the economic programme of the Government and the IMF appears imminent, it is timely to begin lifting the capital controls. As the economy and financial system are rebuilt and conditions improve on the global markets, we expect that the Republic of Iceland will have access to foreign credit markets once again, and that the banks will follow in its wake. At that point, it will be more important than it is now to decide to what extent Icelandic financial institutions will be allowed to engage in international banking operations. In a sense, the financial crisis represented a run on such operations. The crisis revealed clearly the contradiction between the internationalisation of finance, on the one hand, and national supervision and safety nets, on the other. The problem was particularly prominent in the case of the EEA regulatory framework, which had gone farther in lifting restrictions on crossborder banking activities than was the case in many other parts of the world. In this context and others, it is important to bear in mind that international or pan-European regulatory provisions represent minimum requirements. Iceland and other nations may need to adapt those provisions to the specific risks that they face. In some areas, this may imply more stringent capital adequacy and liquidity requirements, or special restrictions on financial undertakings’ activities.
You may remember that inflation at the time was below target: about 2.3% at the start of the pandemic. As the economic situation evolved and a downturn in multiple sectors sent inflation down, we were able to lower the key rate as much as the economy needed. Incidentally, it was precisely the sustainably low inflation of pre-pandemic years that enabled the focus of monetary policy on support of growth and recovery. Imagine what would have happened if we had needed to deal with the dual problem of a pandemic and high inflation. In addition to temporary financial losses of consumers and businesses and shrinking economic growth, we would have had to counter inflation that would be eating up whatever money people still had. Our policy would have been far less successful. It would have been more difficult for the economy to recover, and a recovery would have taken longer. The monetary policy we had conducted in pre-pandemic years gave us room for manoeuvre and helped set the economy on a recovery path. This year, the economy has returned to the pre-pandemic growth trajectory. The immediate task is to stage a switch from recovery to sustainable growth. In order to do this, it is necessary to overcome the negative effects of the pandemic, and above all, to deal with soaring inflation. This is the focus of our current policy, and this is why we are raising the key rate. What happened? Why did price growth accelerate in Russia and across the globe?

It is fairly understandable that certain EU member states support the current, rather non-transparent way of modifying the institutional set-up: it is the only way for them to maintain or even strengthen the draconian mix I just described. 2  BIS Review 165/2009  Given that European integration is taking place in this “European” way (in the bad sense of the word), it is no wonder that standard democratic politics has not left the national level: all formally EU-wide ideas are always translated in each individual member state into the local political context; there are no true EU-wide political parties, no true EU-wide politicians, no true EU-wide media. The debate in EU institutions rarely follows the lines that we are used to in standard political debates, such as whether we want more freedom or more redistribution. Instead, most time is spent, as I said, on procedures and institutions. The official efforts at gradual political integration thus give the impression of squaring the circle. These awkward traits in politics at the EU level then lead to some perverse implications. On the one hand, measures which would help Europe to retain a strong economic position – and here I mean especially liberalisation of markets and trade – take years or even decades to implement: the single market for services still does not exist and even the single market for labour still has fundamental exemptions.
Mr. Bäckström’s opening remarks at the Conference on Monetary Policy Rules Opening remarks by the Governor of the Bank of Sweden, Mr. Urban Bäckström, at the Conference on Monetary Policy Rules, in Stockholm, on 12-13/6/98. It gives me great pleasure to open this conference, which is a joint arrangement by Sveriges Riksbank and the Institute for International Economic Studies. First of all I want to extend a warm welcome both to the authors of the seven interesting papers and to all the discussants who will be participating in our proceedings. All those who are attending the conference are likewise heartily welcome and we hope they will take an active part in the series of discussions. For us at the Riksbank, as well as for me personally, the opportunity of welcoming such a large assembly of leading international experts and central bank representatives is a notable landmark in the practical task of restoring price stability in Sweden. Monetary policy has attracted a great deal of research in recent years. Much of this research work has concerned major practical issues that are highly relevant for those of us who are engaged in monetary policy’s daily round. I should like to take this opportunity of thanking all of you here who have made contributions in this field. My thoughts go, not least, to Torsten Persson and Lars Svensson, who also as advisors have provided valuable assistance to us practitioners to the Riksbank.

The example of Japan in the 1980s suggests that consumer price stability may not be a sufficient condition for precluding bubbles in asset prices and financial instability. With trend inflation averaging two per cent a year, the situation in Japan in the 1980s was very close to what we now commonly mean by price stability. Yet the Japanese economy still moved towards a period of grave financial instability. Thus, the question practitioners have to consider is how to deal with a situation where asset price effects are taken into account with reference to consumer price inflation but where there may still be a risk of asset price bubbles that may lead to financial instability, a destabilisation of the real economy and a severe downward effect on consumer price inflation later on. One could argue that the effects of a large rise in asset prices on aggregate demand may be smaller than the effects of a large fall if such a fall increases general uncertainty and leads to more cautious spending behaviour. If the collapse of a bubble in asset prices has a much stronger effect than the preceding boom, it may be optimal to increase interest rates to raise the probability of bursting a bubble even though such a policy action may temporarily lead to lower consumer price inflation in the short term than otherwise would have been desired.