samchain/econo-pairs-v1 huggingface dataset:
These surpluses have declined in the past few years. Oil and gas production passed its peak more than a decade ago. We may find once again that these resources have been underestimated. But the oil price collapse and developments in the Norwegian economy in the past few years have reminded us of an inescapable fact; we must drive forward a larger non-oil tradable sector. We need more legs to stand on. The needed structural adjustments in the Norwegian economy will have to be dealt with against the backdrop of more global challenges. Demographic changes and sagging productivity growth may point towards persistently low growth in advanced economies. Protectionist tendencies and reduced trade in goods and services could put an additional drag on growth. We must also make changes to consumption and production methods in order to reduce greenhouse gas emissions. This evening I will take a closer look at these challenges. Is low growth here to stay in advanced economies? In the long term, there are two factors that determine how quickly an economy can grow: the 2/9  BIS central bankers' speeches  supply of labour and labour productivity. Chart: Working age population The decline in the working age population is weighing on the growth outlook for many countries. The large post-war cohorts are leaving the labour force, and the consequences of a long period of low fertility rates are becoming increasingly clear. At the same time, the proportion of the population who are employed remains low in many countries.

High unemployment and low labour force participation among women may make room for further growth in employment even if the population stops growing. The demographic situation in Norway is more favourable, but the labour force in Norway is also likely to grow at a slower pace. Labour immigration, which has made an important contribution to the labour market since the turn of the millennium, has fallen sharply in recent years. The unemployment rate is relatively low in Norway, but many have dropped out of the workforce. One in six aged between 25 and 54 was without paid work in 2016. If we are able to mobilise more people to join the workforce, labour supply growth may hold steady, but the most likely scenario is slower growth in the labour force. Chart: Productivity growth The other factor, productivity, has contributed less and less to economic growth, which is a tendency we have seen for several decades both in Norway and other advanced economies. The question then arises whether the underlying growth potential of mature economies has diminished. Chart: Growth in technology leading countries and in Norway If we broaden our perspective to span several centuries, it is the rapid rise in productivity in modern times that stands out. For a long time, there were only marginal changes in living standards from one generation to the next. In economic terms, the Middle Ages was something of an ice age. The industrial revolution that began in England in the late 18th century put an end to this inertia.
The ethnicity pay gap then began increasing steadily between 2006 and 2014 (red dots), averaging 6% over the period. Recently, it has begun to fall (green dots), reaching just under 4% in 2018. Chart 11 shows that higher ethnic minority participation in the workplace has only been associated with lower pay gaps very recently. This, and the relatively volatile pattern in the ethnicity pay gap over time, presents something of a puzzle. We might instead expect pay disparities to decline as ethnic minorities become better represented in the labour market through higher participation. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  Chart 11: Ethnic minority participation and unconditional pay gaps Ethnicity pay gap (per cent) 12  2006 ‐ 2014  10  2015 ‐ 2019 8 6  1997 ‐ 2005  4 2 0 ‐2 ‐4 55  56  57  58  59  60  61  62  63  64  65  Ethnicity participation (per cent) Source: ONS Labour Force Survey and Bank of England calculations. Note: A positive ethnicity pay gap in this chart indicates that ethnic minorities earn less than their white counterparts, whereas a negative ethnicity pay gap indicates that ethnic minorities earn more than their white counterparts. Looked at by qualification, white workers earn more than ethnic minorities for most levels of qualifications. The exception are those with “other” or no qualifications living outside London.

In the summer of 2014, the persistence of disinflationary forces could be clearly identified: first, measures of underlying inflation had been drifting down in synch with headline inflation for more than a year, and had reached historical lows.7 Second, for the first time since the inception of Monetary Union, longerterm inflation expectations had started to fall as well. Such fundamental risks to price stability required a forceful monetary policy response. Accordingly, the ECB deployed a series of unconventional monetary policy measures to ensure price stability. The comprehensive package of June 2014 comprised targeted long-term refinancing operations (TLTROs) and a cut of the deposit facility rate, moving it into negative territory. This package was combined with a, to start with, small asset purchase programme initially involving only private sector securities, which was later expanded to include public sector securities (becoming known as the public sector purchase programme – PSPP) and then scaled up over time. These measures were accompanied by further cuts in the deposit facility rate and further TLTROs; moreover, they have been complemented by our forward guidance.
On the other hand, it is hard to imagine that this scenario could have played out as it did without the worldwide glut of cheap credit in the years before the global financial crisis and Iceland’s position as a party to the EEA Agreement, which provides for a legal and regulatory framework based on European Union Directives, including free movement of capital and provision of financial services. The underlying principles are those of home licensing for operation throughout the EEA and a level playing field for competition, where size and location are not supposed to matter. This European “Passport” enabled the Icelandic banks to operate throughout the EEA, including through branches in other EEA countries. We know now that there were and are deep flaws in this framework: flaws that are important elements in the current eurozone crisis. A key issue here is the dichotomy between  BIS central bankers’ speeches  1  European passport rights, on the one hand, and national supervision, national deposit insurance, and national crisis management and resolution regimes, on the other. This is what recent proposals of a banking union are supposed to deal with. But then, for EEA countries outside the euro area, this framework entails potentially enormous foreign currency liquidity risk in the banking system that is not covered by a lender-of-last-resort (LOLR). This was a key element in the Icelandic banking crisis and must be addressed in future reforms of the system. Let me now say a few words about Iceland’s crisis and recovery.

Under the CRF, the SNB can also conduct additional refinancing transactions in order to supply the banking system with further liquidity if required. As I mentioned, the SNB’s new refinancing facility operates in conjunction with the federal government’s guarantees for corporate loans. So how does this approach work? Page 1/2  Berne, 25 March 2020 Thomas Jordan  News conference  In a stressed situation like the one we are facing, the risk of companies defaulting on loans increases. At the same time, the banks are seeking to hold higher levels of liquidity. These two factors can lead to a credit shortage, even though demand for credit is rising sharply. The Confederation’s loan guarantees and the SNB’s refinancing facility can unblock the system and get credit flowing again. As the banks have all the necessary client relationships, the loans will find their way to the companies that need them. The approach is simple, effective and makes use of existing structures. Bank lending will play a crucial role in Switzerland’s economic development, especially in the coming weeks and months. The new CRF is intended to support banks in these efforts, as is the raising of the exemption threshold for the negative interest rate announced by the SNB last week. Furthermore, after consulting with FINMA, the SNB has submitted a proposal to the Federal Council requesting that the countercyclical capital buffer for mortgage loans on residential real estate be deactivated. This integrated package of measures gives banks maximum latitude for lending.
While the optimal level of real convergence for a successful euro area entry is still a hotly debated issue,  the consistency and sustainability of real convergence are, in my opinion, at least as important as its level. And in order to remain on track, economic convergence – both real and nominal – must advance in step with the economy’s fundamentals lest progress be jeopardised by abrupt setbacks. At the end of the day, forcing convergence is as harmful as postponing it. Looking at nominal convergence, between July 2015 and November 2017 Romania had been 1/3  BIS central bankers' speeches  fulfilling all Maastricht convergence criteria (yet without being part of the exchange rate mechanism). The fact that currently the reference values for the long-term interest rate and inflation are no longer being met is a warning that efforts should be made to achieve nominal convergence in a lasting, rather than coincidental or transitory manner. This is possible only when the two types of convergence reinforce each other. On the way towards sustainable and smooth convergence, a first guiding principle is to avoid divergence. Not only across countries; reducing development gaps within countries is also essential to mitigate the trade-offs challenging the policies confronted with asymmetric shocks. In Romania, for instance, one can find areas that are comparable, in terms of development and living standards, to Western economies, but also regions that trail well behind.

Even in the absence of a clear definition and a consensus on a numerical benchmark, it became clear that a high-enough level of real convergence is a prerequisite for minimising the costs associated with losing monetary policy independence after euro adoption. Recent years have shown that the euro area is not a cosy place for economies with lagging competitiveness or rigid markets. We should not forget that euro adoption involves a permanent commitment, as Otmar Issing, the first ECB chief economist, pointed out. Romania made significant progress in terms of real convergence, with growth resuming and gaining momentum after the global economic crisis. This led to a rise in GDP per capita as a percentage of euro area average (based on PPS) from 31.7 percent in 2005 to 58.6 percent in 2017. The advance was the fastest within the group of peer countries which recorded similar trends. Clear prospects for EU entry favoured Romania’s real convergence before 2007. Afterwards, actual membership in the EU “convergence club” has fuelled the catching-up process. The obvious next stage is joining the euro area. A successful adoption of the single currency, however, requires optimal timing. This, as I pointed out before, is mainly conditional upon achieving a high-enough level of real convergence, alongside compliance with the nominal convergence criteria. Unlike the EU, the euro area is not a “convergence club”, as its current members did not necessarily increase their convergence level after adopting the euro.
Those who have operated for decades with a regime of low inflation, interest rates set by a strong independent central bank, and a strong and appreciating currency, may rightly think they have little to fear from the disciplines implied by EMU. Others will find EMU more bracing, particularly those whose inflation record has been poor, whose currency has undergone successive devaluations, and whose fiscal position is less than robust. For those countries, the EMU mission is potentially dangerous. Joining EMU would for them be to embark on a stiff mountain ascent, in weather which might be colder and less forgiving than one is used to. In those circumstances, the Boy Scout ensures that he is well prepared. He equips himself with waterproofs in the event of rain, with thick pullovers for the cold, with stout boots and, probably, a Swiss army knife in case it should prove necessary, at some point on the journey, to extract a stone from a horse’s hoof. He would also, I think, wish to ensure that he was fit, and had undertaken some strenuous rambles BIS Review 1/1997  -2-  in the foothills before making an assault on the mountain range. At this point you may be tired of hearing about Boy Scouts, and be ready to accuse me of the typical British trick of hiding behind down-home metaphors, and reducing topics of high seriousness to wry jokes. So let me be entirely clear about what I mean. We fully appreciate the great potential advantages of EMU for Europe’s economies.

Thomas Jordan: Funding mortgages – securitisation and pfandbriefe in the light of the financial crisis Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the annual general meeting of the Pfandbriefbank Schweizerischer Hypothekarinstitute, Zofingen, 15 May 2008. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The funding of mortgages is the focal point in discussions on the causes of the international financial crisis. The massive credit expansion in the US, particularly in the area of sub-prime mortgages, reinforced and prolongued the US real estate bubble. From mid-2007, the value of financial products backed by sub-prime mortgages declined substantially, leading to heavy losses on the part of banks and investors. The problems encountered with these financial products gave rise to discussions on the future of mortgage funding. The danger of such discussions is that the problems inherent in different instruments could be confused and their economic benefits overlooked. Three different refinancing instruments can be differentiated: pfandbriefe, mortgage-backed securities (MBS) and structured securitized products. Common to all three is that they make it possible to refinance mortgages, and ease the process. However, they differ with respect to risk transfer. While the credit risk remains with the bank when refinancing via pfandbriefe, it is passed on to the investor in the case of MBSs and structured securitized products.
Moreover, if the FPC’s actions are successful in avoiding a subsequent financial crisis, critics may claim this as evidence that action was unnecessary in the first place. A central role for the FPC will therefore be to institutionalise the memory of this and other financial crises. Finally, the FPC’s instruments may sometimes prove relatively ineffective. That is more likely to happen when the problems lie beyond the regulatory boundary in the shadow banking sector. At such times, monetary policy may need to act in a supportive manner, leaning against the wind even though that may mean accepting a temporary deviation of inflation from target. Achieving this will require appropriate co-ordination between the two Committees. That should be facilitated by their considerable overlap in membership. So far I have focussed on how the Bank will be able to dampen a future boom and strengthen resilience in the face of excessive exuberance in financial markets. Let me now turn to what may seem a more timely issue, namely what the central bank can do during and after a financial crisis of the sort we are living through. In the first instance, of course, the focus has to be on crisis management. That has included: acting as lender of last resort to illiquid but solvent financial institutions; providing liquidity support through the market; and acting as a market maker of last resort when a market becomes dysfunctional.

Forward guidance gave households and businesses confidence that Bank Rate would not be raised at least until jobs, incomes and spending were growing at sustainable rates. Guidance encouraged businesses to hire and spend, and helped keep expected interest rates low, even as the economy recovered strongly. In parallel, we encouraged banks to continue repairing their balance sheets. Changes to the Bank’s liquidity policy further supported lending. The core of the financial system is now on a sound footing and making an increasingly important contribution to the recovery. We are now faced with the challenge of turning that recovery, which has steadily gained momentum and breadth over the past year, into a durable expansion. To do so, we need balance. Its absence can have serious consequences. One has only to look back to 1931 when Britain’s economic prospects were strained by high unemployment, a large budget deficit and a deteriorating balance of payments. In the ensuing crisis sterling was forced off the gold standard and the government of the day resigned. BIS central bankers’ speeches  1  And the Governor? With the uncanny foresight of a central banker, Montagu Norman had already left the scene “to get a bit of rest [in Quebec]”, he said, “for I have had a very hard time of it lately and I have not been so well as I would like to be.”1 However tempting, I will lean on Canada not for restoration but for a nautical analogy to describe how we can address the challenges we now face.
47  All speeches are available online at www.bankofengland.co.uk/speeches  47  Chart 14: Long-run UK liquidity ratio (sterling liquid assets relative to total holdings of UK banking sector) Percentage of total assets (all currencies) 35  Broad ratio Reserve ratio Narrow ratio  30 25 20 15 10 5 0  1968 72  76  80  84  88  92  96  00  04  08  12  16  Sources: Bank of England and Bank calculations. Notes: Data for building societies are included from 2010 onwards. Prior to this, data are for UK banks only. Data are end-year except for 2017 where end-July data are used. Broad ratio defined as Cash + Bank of England balances + money at call + eligible bills + UK gilts. Reserve ratio proxied as Bank of England balances + money at call + eligible bills. Narrow ratio defined as Cash + Bank of England balances + eligible bills. Chart 15: Individual banks’ 2006 capital positions and 2006-2016 lending growth Growth in net loans (%), 2006 to 2016  600  400  200  0  -200 5  10 Tier 1 capital ratio in 2006 (%)  15  Sources: S&P Capital IQ and Bank calculations.

The crisis opportunity costs for UK and euro-area citizens have been the highest for at least a century.2  Much the same picture emerges if we look at measures of the fiscal cost of crisis. Again, there are a number of methods for gauging this cost. But one simple metric is to look at the pattern of government debt-to-GDP ratios after the Great Depression and Great Recession, recognising that the larger part of the debt sustainability cost of crisis typically arises from the denominator shrinking than from the numerator rising. Chart 2 plots these debt-to-GDP ratios, again for the US, UK, France and Germany. It suggests that, in the decade after the Great Depression, levels of government debt relative to GDP had increased by around 28 percentage points in the US, 9 percentage points in Germany, but actually declined in the UK. Since the Great Recession, levels of debt relative to GDP have increased by, on average, 1  For example, Hoggarth, Reis and Saporta (2001). 2  Figures in this paragraph calculate a continuation of pre-crisis GDP using the average growth rate of output in the 10 years preceding the crisis. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  28 percentage points for the same set of countries. The fiscal cost of the Great Recession, at least on this metric, is larger than during the Great Depression.
Under the auspices of the IMF and the Bank for International Settlements, work is in progress on drafting rules and principles for the operations of financial institutions. It is dealing with such tangible matters as accounting, increased transparency and, not least, principles for managing risks. It is hoped that more uniform rules and greater transparency in accounting, capital adequacy and credit assessments, will improve financial market conditions and ultimately lower the risk of financial crises. In addition, countries must be alert in the general conduct of economic policy so that lending to them is not considered to be unduly risky. Other important matters include a sound banking system and effective supervision of the financial sector. In Sweden, the events in the early 1990s have led, for instance, to the regular publication of a so-called Stability Report on the situation in the financial sector. This has been followed by many similar reports at the international level; the IMF, for example, now presents regular assessments, so far for more than forty countries. Before leaving the issue of free capital movements, I want to note that compared with the earlier question of trade, the problems here are not primarily political. As I see it, there is a strong will to do something about financial market instability and much work has been done internationally to mitigate the risks. At the same time, it is difficult to see how the risks could be eliminated entirely without this leading to serious disturbances in and high costs for the world economy.

International banks and other creditors could make do with less compensation than if they had had to reckon with taking the losses in full. The support programmes have accordingly accentuated the problems associated with the growing flows of volatile capital. Neither has the corresponding support been provided in practice for more long-term direct investment, which presumably would be at least as valuable for developing countries in that such investments primarily depend on domestic economic development in the longer run. This policy has in fact been questioned all the time. It has been maintained on account of an interest in avoiding failures that would be costly both socially and politically. Moreover, the provision of government funds has been frequently advocated by strong private interests in the major industrialised countries, particularly the United States. It should also be underscored that problems of this kind do not have self-evident solutions. A way out in some cases has been for private creditors, with government encouragement, to agree voluntarily to prolong their loans. One difficulty here is that the discussions with private creditors have to be initiated by the country that is in a crisis. In practice, the countries in question have been reluctant to take measures that might harm their future access to international capital markets. An international bankruptcy procedure, which should have been instituted long ago, is now being officially discussed again in the IMF. Such a system would probably help to make the management of acute financial crises more predictable.