samchain/econo-pairs-v1 huggingface dataset:
In fact, the closure of domestic output gaps – i.e., the difference between actual and trend growth – that a year ago we expected to occur over the course of 2011, took place in the first part of the year. The unemployment rate has fallen rapidly and is now below its historic average. Inflation, meanwhile, has concluded a process of convergence to the 3-percent target. Inflation fears resurfaced during the first quarter of this year, but subsided after the Board’s monetary policy decisions and the changes in the external macroeconomic scenario. We have thus arrived at a situation where the monetary policy interest rate (MPR) stands within a range that is considered normal. However, the events of 2008 still cast their shadow over the world economic outlook. Despite the time elapsed and the economic and financial measures adopted by economic policymakers around the world, we are still seeing the aftereffects of this episode. The underlying problems that caused the disaster have not been totally resolved, and continue to hold back the recovery of private demand. Added to this is the erosion of trust in the public finance management in some Eurozone members and in the U.S., which prompted a new episode of financial stress in early August, and still another one a few days ago. The world economy is going through an extremely complex situation. Certainly, Chile has tools to soften the impact of adverse external conditions.

8  Shortcomings in the TBTF regulations before the crisis Ladies and gentlemen, the global financial crisis has clearly demonstrated that, not least for Switzerland, the ‘too big to fail’ issue is real and the costs and risks for society as a whole are too high for this state of affairs to be simply accepted. 5 6 7 8  Cf. Horton et al. (2009). Cf. Swiss National Bank (2008). Cf. Swiss Federal Council (2011). Share of balance sheet total relative to Swiss and US GDP respectively at end-2017: ZKB 25%; Raiffeisen 34%; UBS 138%; Credit Suisse 112%; JPMorgan Chase 13%; Bank of America 12%. Page 5/14  a) ‘Too big to fail’ issue: recognised but insufficiently addressed by regulation ... Looking back today, it is clear that this issue was underestimated before the crisis – both in general and by the regulators. For instance, before the crisis, neither the international recommendations on banking regulation nor the Swiss regulatory provisions contained anything that explicitly addressed the systemic importance of individual banks and the associated risks. And this despite the fact that people were aware of the issue before the crisis – both in Switzerland and elsewhere. 9 The term ‘too big to fail’ itself already featured in political debate during the 1980s in the US, in the context of difficulties experienced at a number of financial institutions.
One explanation for the increase may be that Icelandic companies have been undervalued by the markets, for example relative to comparable businesses in other countries, and another that bold and determined investment ventures have driven up their value. But risk and gain often go hand in hand. Sometimes the stakes may be raised too high. It has long been customary to pay a premium for attractive investment options. Such goodwill used to be depreciated in companies’ accounts over a long period and rarely affected their operations. The situation has changed whereby companies now need to make impairment tests of the goodwill they enter on the asset side of their balance sheets. If their original ventures fall flat, the goodwill must be depreciated accordingly. Thus there is a risk, if conditions deteriorate, that this rule could amplify a company’s negative results at the worst possible time. Goodwill totalling more than 500 b.kr. was entered in the financial statements for 2006 of companies listed on Iceland Stock Exchange, and at certain companies, goodwill and other intangibles account for more than half of the total assets on their books. This is a cause for some deliberation. Although the Central Bank’s main function on occasions such as this is to draw particular attention to causes for concern, it should of course take note, like everyone else, of the factors conducive to strengthening the long-term economic outlook. Iceland’s economy is advanced, transparent and vibrant.

The same may undoubtedly be said about the Central Bank. After all, useful and supportive as these institutions may be, they neither can nor should play a leading role. That role can only be performed by the financial companies themselves. Because they rely so heavily on open access to credit markets, it is crucial for them to enjoy the confidence of their creditors. In this respect like many others, credibility is a fragile thing and a very high price can be paid for losing it. Turbulence in global markets is sure to continue. Naturally people try to read the signs and foresee the most important parameters, in order to adapt to them in good time or respond sensibly. Important as it is to keep a close watch on developments and changes in global markets, what matters most of all is to be strong and well-positioned enough to withstand the most unexpected shocks. Global liquidity has been exceptionally abundant in recent years, and has been widely tapped on good terms. The benefits of resourcefulness and bold, quick action can be realised to the full in such circumstances. It is impossible to rule out that such a climate will persist for a long while, but this is by no means certain. And when a change does take place, it may be caused by unexpected circumstances and strike quickly. It is then that caution and prudence prove most effective.
He instructed bank regulators  1  These remarks were given at the Institute of Chartered Accountants in England and Wales Information for Better Markets conference on 19 December 2011, in response to a paper by Christian Laux. Both the paper and remarks are forthcoming in Accounting and Business Research (July 2012). 2  Simonson and Hempel (1993), Plantin, Sapra and Shin (2008), Haldane (2010). BIS central bankers’ speeches  1  to revert instead to what today would be called amortised cost. This was regulatory forbearance on a system-wide scale. And a suspension of fair value accounting rules lay at its heart. Fast forward half a century. During the 1970s, fair value principles began again to extend their reach. The United States Savings and Loans crisis in the mid-1980s provided further impetus. One of the major contributors to the downfall of the thrifts was amortised cost valuation conventions, which hindered the recognition of interest rate risk. This allowed systematic over-reporting of the health of the thrifts. In response, the United States developed and introduced a prompt corrective action regime, the Federal Deposit Insurance Corporation Improvement Act (FDICIA), with fair values at its core. But the wind was again about to shift direction in response to financial pressures. From the early 1990s, the United States was facing severe financial headwinds. A real estate crash placed US bank balance sheets under acute stress.3 Falling asset prices, marked to market, added to these financial pressures. Questions about fair values resumed.

Second, one would also like to ascertain whether the presence of an implicit subsidy does lead to higher risk taking, and the quantitative importance of this effect. The third question has to do with regulation, i.e. : “what can be done to address this issue?” It seems that there are three main approaches: •  Some regulatory measures try to eliminate possible symptoms of the implicit subsidy. For instance, proposals on restrictions on bank market activities have been justified by the objective of limiting the implicit subsidy to non-traditional banking activities. •  Another approach is to directly target the underlying cause of the problem, for instance by making easier the resolution of problems at large banks without resorting to taxpayer money. Some progress has been achieved in the US (through the Orderly Liquidation Authority), and in Europe (through the Recovery and Resolution Directive). •  A third approach, illustrated by the G-SIBs framework, is to offset the implicit subsidy with additional capital and bailinable debt requirements the so called TLAC or other regulatory measures. Concluding remarks To conclude, I would offer two remarks which you may want to keep in mind. The first remark has to do with the comparative advantage of too-systemic-to-fail institutions, and in particular of global systemically important banks. In reaction to the crisis, many regulatory reforms have been put in place on capital and liquidity, credit exposure to counterparties, supervision, and trading activities.
In the light of long-term considerations, it is also important to reverse the sharp rise in government spending during the crisis. In 2020, NOK 300 billion was transferred from the Government Pension Fund Global (GPFG) to cover the central government budget deficit. The decision to tap the GPFG has been the right one. An economic shock of the scale that we have witnessed requires potent medicine. The GPFG is intended to act as a buffer when the economy is exposed to shocks. At the same time, it is an intergenerational investment fund to be distributed across current and future generations. The pandemic is the third large economic shock to hit the Norwegian economy in the space of a few years. Each time, transfers from the GPFG to the central government budget have increased, but without being substantially reduced afterward. Chart 10 Before the crisis: One krone in six transferred from the GPFG Transfers from the GPFG as a share of public spending. Percent 30  30  25  25  20  20  15  15  10  10  5  5  0 2001  0 2006  2011  2016  2020  Sources: Ministry of Finance, Statistics Norway and Norges Bank  12  In 2020, one krone in four of all central government budget spending came from the GPFG. But even in more normal years, transfers have been considerable.

Second, a well integrated financial system helps to make the euro area economy more efficient through the reduction of financing costs and an improved allocation of financial resources. This is likely to be conducive to higher and more sustainable non-inflationary growth. A study sponsored by the European Commission concluded in 2002 that further integration in the European Union might generate additional gains of 1% in the overall level of real GDP over a decade or so. Third, European financial integration is a priority that has been reiterated by the European Council on several occasions. The ECB’s support for European financial integration is therefore in accordance with Article 105 of the Treaty, which states that “the ESCB [– European System of Central Banks –] shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community”. Finally, there is the interconnection between financial integration and financial stability. As deeper financial integration may, to some extent, change the interplay of vulnerabilities, the potential impact of these on financial stability – which is of natural interest to central banks – has to be taken into account. The ECB uses all available channels in its efforts to foster European financial integration. We try to raise awareness of the need for integration and the means of achieving it. We also advise on the shaping of the legal framework. Furthermore, the ECB can act as a catalyst for collective initiatives from the private sector.
Of course – as I have explored in previous talks (Pill, 2022) – assessing how supportive any particular stance of monetary policy will prove is difficult, since it relies on conceptually and empirically uncertain measures of neutral benchmarks for policy, such as the natural rate of interest or R-star. 9. On Tuesday, the ONS published an unemployment rate for March 2022 of 3.5% (single month basis) (‘Labour market overview’, Office for National Statistics  ). 10. Private sector regular average weekly earnings (AWE) growth increased to 4.8% in Q1, while annual whole economy AWE growth was 7.0% (‘Labour market overview’, Office for National Statistics ). In part, the difference between these two indicators reflects the strength of bonuses in the data, which – despite adding to household income – are not ongoing costs to firms. 11. Of course, that means the assumption of stable energy prices has not proved very accurate in the recent past. But commodity prices are hard to forecast, and the random walk forecast has performed as well as alternatives over most periods. In particular, there is scant evidence that the path of commodity prices embodied in market futures pricing has outperformed the random walk assumption. 12. See Broadbent (2022). 13. See the discussion of a Brexit ‘doppelganger’ model reflected in Chart 1 of my MPC colleague Catherine Mann’s recent speech (Mann, 2022). 14. See Nickell (2005). 15. See the discussion of labour market trends and long Covid reflected in Figure 6 of my MPC colleague Michael Saunders’ recent speech (Saunders, 2022).

Are we finding the right balance in our controls between specificity of rules and the adaptability of principles? These and other questions will continue to focus us on improving and enhancing our policies and practices with the goal of supporting the Bank’s ability to manage risk within its risk tolerance. Thank you. 4  BIS central bankers’ speeches
Stefan Ingves: Introduction on monetary policy Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, to the Riksdag Committee on Finance, Stockholm, 10 November 2011. *  *  *  Clouds have gathered recently in the form of the financial unease and the debt crisis in Europe. As Sweden is a small, open economy we are affected in many ways by developments abroad. Nevertheless, we must of course do what we can to ensure stable economic development in Sweden. In the face of turbulence abroad we must make sure that we maintain order in the Swedish economy. The economic-policy framework in Sweden has worked well. We have learned from the mistakes we made in the past and are now in a much more favourable position than many other countries. This is something that we must build on, and monetary policy is trying to play its part in this. Today I will begin with an international tour before returning to Sweden. When the tour is complete, I hope that I will have shed some light on the following questions:   What is happening abroad and how is it affecting us?   How can we ourselves facilitate developments in Sweden – particularly with the help of monetary policy? What is happening abroad? Drama on the financial markets of the world There have been dramatic developments on the financial markets since the summer. Stock markets have plummeted (see Figure 1).

Our assessment is that unemployment will reach approximately 6.5 per cent at the end of the forecast period (see Figure 19). A lasting  BIS central bankers’ speeches  5  reduction in the level of unemployment also demands that wage formation is effective so that costs in the business sector do not increase too rapidly. …and inflation can approach the target A new round of collective bargaining has now begun and the wage demands presented so far are higher than those presented in 2010. The Riksbank’s assessment is that wages will rise by almost 3.5 per cent per year in the years ahead. This is compatible with the inflation target. The assumption behind our forecast is that wage formation will work as well as it has over the last 15 years. Responsibility for this lies with the social partners. The krona is an important factor for inflation in Sweden as it determines how prices abroad are “translated” into import prices in Sweden. Historically the krona has weakened in periods of financial unease as investors often move their money from small currencies like the krona to the dollar and the euro. However, the krona has weakened only moderately this time, despite the financial unease (see Figure 20). We expect the krona to gradually strengthen as the financial unease subsides. The combination of falling commodity prices internationally and a stronger krona means that inflationary pressures from abroad will be rather low in the period ahead.
However, Bank of Albania evaluates that inflation will remain below the target for the most of this period. Its performance will continue to be determined by the degree of recovery in economic growth, supply-side domestic and external shocks, and economic and financial agents’ inflation expectations. The Albanian economy is assessed to have improved in 2014. According to INSTAT data, the economic activity grew by 1.4% during the first nine months of the year. We expect the growth rate to accelerate in the fourth quarter, driven by the strong fiscal stimulus in this period. Due to damages caused by floods in the south of the country, our projections on the performance of the economy during 2015 are revised slightly downwards. However, their effect is expected to be temporary and the economy is projected to remain in an upward trend in the medium term. Economic growth for 2015 is projected to be higher than that in the previous year. The expansion of economic activity will continue to be driven, to a large extent, by private sector growth. Foreign demand is expected to play a small positive role and the speed of fiscal consolidation is expected to be reduced. While upward, our projections suggest that the economic activity at home will remain below its potential in 2015, generating incomplete utilisation of production capacities. Incomplete capacity utilisation is underpinned by a relatively high unemployment rate and is reflected in low pressures on wage increases and production costs.

As a result, at the beginning of the 1990s Sweden and other Scandinavian countries were hit by both a banking and currency crisis. As before the depression in 1930, the crises were preceded by steep rises in asset prices and a very sharp expansion in credit. Reform of a tax system that had fuelled debt and that was changed in such a way that caused a rise in post-tax interest costs, contributed to deepening the crisis. The lack of experience at banks and supervisory authorities of acting in a deregulated environment, in combination with excessively expansionary fiscal policy, were other significant causes of the negative developments. But large financial imbalances had already accumulated before the crisis was triggered. This occurred without the anchor for inflation, that is the nominal exchange rate, giving sufficient indications in time. In spite of the fact that the overheating resulted in a real appreciation of the krona against other currencies due to inflation, confidence in the fixed exchange rate regime appeared to be fairly stable for a long period. This led to substantial, partly short-term, capital inflows increasing demand for the krona at the same time as a growing current account deficit reduced krona demand. The demand for the krona was partly due to Swedish firms demanding loans in foreign currency. Consequently, monetary policy, which targeted the exchange rate, was not tight enough to prevent the build-up of the imbalances.
Chart 4 shows a slight increase in the share of lending to younger customers, aged 65 or younger. Average loan-to-value ratios for these borrowers have also increased a little. We would expect risk functions to be monitoring these trends and keeping boards informed. As well as loosening of lending standards, another concern might be if insurers are making more loans outside those standards. Chart 5 plots loan-to-value ratios against age for equity release mortgages sold by life insurers in 2017. The pink swathe shows insurers’ risk limits. The great majority of mortgages are within risk appetites, but some loans exceed the limits. This may or may not be a problem. For example, it could be explained by medical underwriting of the mortgage that justifies a higher loan-to-value ratio for a younger customer if their life expectancy is impaired. Again this an area that risk functions should be watching. The most important risk factor, however, is the long-term path of UK house prices. Plausibly the risk of a long-term correction in UK house prices has increased as houses have become less affordable and rental yields have fallen. In England and Wales the ratio of median house prices to median individual annual  3  Equity release rebooted: the future of housing equity as retirement income, Rob Thomas and Dr Louise Overton, April 2017  4  All speeches are available online at www.bankofengland.co.uk/speeches  4  4  earnings has increased from 3.6 times in 1997 to 7.6 times in 2016 .

Scenarios however, are not projections, predictions or preferences but rather it provides a way of making sense of uncertainties and in addition it challenges our assumptions about what the future holds. Scenario building today is synonymous with thinking broadly and more freely about a problem, enlarging the frames of reference and involving different worldviews, rather than seeing a situation from a single perspective. Essentially scenario planning interventions have been most useful in supporting the construction of multiple frames of future states of possibilities. The process of scenario planning enhances the evaluation and integration of information and promotes contingency planning. Scenarios are also important for risk management. As risk is inherent in any business activity the framework becomes a useful tool in risk assessment and management. Most of all a major risk in the current environment is the lack of preparedness for how the environment might change and for the new challenges that may emerge. To attempt to predict these changes in any specific manner in this environment would be highly speculative. The risk management process therefore involves preparing for, rather than attempting to predict the change. This would promote an increased level of preparedness to cope with the inevitable changes. Scenarios also help to connect strategies and action plans to our visions. Using scenarios will essentially widen our perspectives, increase our understanding of the issues and developments. It also allows us to see opportunities that we may otherwise miss. New developments emerging would be seen from different angles and perspectives.