samchain/econo-pairs-v1 huggingface dataset:
Luis de Guindos: Interview with El Mundo Interview with Mr Luis de Guindos, Vice-President of the European Central Bank, and El Mundo, conducted by Mr Pablo Rodríguez Suanzes on 25 November 2019 and published on 2 December 2019. * * *  How are you finding life in Frankfurt? Frankfurt is a nice city, I like it. The ECB is the most important institution in the framework of the EU, and of the euro area in particular. Exposure to the public is very different to when you’re in government. Here, the relationship is mainly with the European Parliament, through hearings, and with the public, through speeches. Is my life better? It’s different. How do you feel about not being able to speak as freely as before? I can keep speaking normally. I still attend the Economic and Financial Affairs Council (ECOFIN); each week, we have discussions in various forums on issues around monetary and economic policy and financial stability. So I have something to offer, but my contributions aren’t political. Do you miss it? I don’t miss anything. That was my job for six years. I’m not at all bored here. When and why did you decide you wanted to try to become the Vice-President of the ECB? I wanted to leave the government at the end of its first term. I spoke to President Rajoy and we said it could be a possibility, and it was very attractive to me. It’s the most important institution in the euro area, very prestigious.

Luck has been supplemented with what I dare to claim is sensible resource management, based on a well-functioning democracy and longstanding and trustworthy institutions. The first point I would like to emphasise is related to ownership of the natural resources. At an early stage, it was concluded that such resources belong to the Norwegian people. Direct government participation in the industry and an extraordinary tax rate on oil company profits, currently 78 percent, ensure that most of the resource rents flow into government coffers. The government also has direct ownership stakes in the most profitable oil fields. Chart: From natural resources to financial wealth Petroleum revenues have been redistributed to all inhabitants in form of investment in infrastructure and public services, such as education and health care. At the same time, revenues have been put aside. This brings me to my second main point. It is important to remember that although revenues from the extraction of a depletable resource count as income in the national accounts, these revenues are of a special kind. In many ways, it would make more sense to view them as transformation of wealth – from natural resources in the ground to financial assets. This is the idea behind the Norwegian sovereign wealth fund, known as the Government Pension Fund Global. Chart: The petroleum fund mechanism All oil revenues are channelled to the fund. The fund’s capital is invested abroad, mainly in equities, but also in bonds and real estate.
It is my opinion that we should run that risk only in the most dire of circumstances, and I presently do not see those circumstances obtaining. So much for forecasting and monetary policy. Let me now walk you through an overview of the Texas economy to set the stage for a broader discussion of what I believe continues to bedevil a lasting recovery and more efficient job creation in the United States. I will use some slides to illustrate key points. The National Bureau of Economic Research, the arbiter of when recessions begin and end, dates the onset of the Great Recession as December 2007. The economic performance of Texas since December 2007 can be summarized with the chart projected on the screen. It depicts employment growth in the 12 Federal Reserve districts. In the Eleventh Federal Reserve District – or the Dallas Fed’s district – 96 percent of economic production comes from the 25.7 million people of Texas. As you can see by the red line, we now have more people at work than we had before we felt the effects of the Great Recession. All told in 2011, Texas alone created 212,000 jobs.3  3  According to the National Bureau of Economic Research, the nation went into recession in December 2007 and came out in June 2009. According to the Dallas Fed’s Texas Index of Coincident Indicators, Texas went into the recession in August 2008 and came out in December 2009.

BIS Review 65/1008  9  There are signs of a cooling housing market throughout the country. House price inflation peaked about a year ago. For Norway as a whole, house prices have remained approximately unchanged over the past twelve months. There are nevertheless regional differences in house prices. House prices are rising fastest in Rogaland, and falling fastest in Hordaland and the inland regions. Housing investment gradually slackened through 2007, reflecting higher interest rates, rising inventories of unsold homes and increased construction costs. Several large residential construction projects have now been shelved. We also expect commercial property starts to show a gradual decline. 10  BIS Review 65/2008  Developments in capacity utilisation abroad have an impact on capacity utilisation at home. After several years of strong growth in the world economy, growth is slowing in a number of countries. Growth in the US seems to have come to a halt, and there are fears of a downturn. Growth is also slackening in many western European countries, but emerging economies such as China and India are still growing at a brisk pace. Inflation is picking up in many countries due to rising food and energy prices. Central bank key rates have been cut in the US and the UK to address deteriorating growth prospects. In the euro area the interest rate has been kept unchanged, while the Swedish central bank has increased its interest rate. Developments in the world economy will affect the Norwegian economy.
For Islamic banking, the sector has registered a strong growth of 19% per annum from 2000 to 2004. While the Islamic assets accounted for almost RM95 billion or 10.5% of total assets of the banking system as at end-2004, market shares of Islamic deposits and financing increased to 11.2% and 11.3% of the banking system respectively. The capital position of the Islamic banking sector remained strong during 2004, registering an increase of 14.7% to RM7.8 billion. The risk-weighted capital ratio and core capital ratio were sustained above 12% and 10% respectively. Ladies and Gentlemen, While our banking sector has made progress, as financial liberalisation and consolidation gather pace, greater competition in the banking sector is likely to ensue. As such, the need to enhance the competitiveness of the banking sector to withstand forces of change and compete in this more liberalised environment becomes even more pressing. Successful institutions will be the ones with the agility to adapt swiftly and respond to the changing market needs through - innovative and differentiated product offerings; excellent service quality; and superior level of efficiency. With growing competition in traditional banking products and services, banking institutions need to continually strive for excellence in product development capabilities with a greater focus on customised and higher value-added services. In this respect, banking institutions should capitalise on the opportunities presented by the emergence of new growth areas as well as rising households' wealth by strengthening their capabilities in the areas of wealth management, financial advisory services and consumer banking.

Zdeněk Tůma: The exchange rate forecast Speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the Forecasting Dinner 2007, Czech National Bank, Prague, 22 February 2007. *  *  *  Ladies and gentlemen, dear colleagues, Over the last few years when I had the opportunity to open the Forecasting Dinner I tried to discuss several issues connected with forecasting at central banks. Three years ago I discussed the forecasting process at the Czech National Bank in general. A year later I went through uncertainty and the role market forecasts can play as an information source in central bank decision making. And finally, last year I talked in more detail about the inevitable uncertainty surrounding any attempt to forecast and about the observation that this specific feature of any forecast quite often seems to be forgotten. Following this nice tradition, tonight I shall talk in more detail about one of the critical issues in forecasting: the exchange rate forecast. There is little doubt that the exchange rate plays a critical role in any attempt to forecast the business cycle in a small open economy. Consequently, an exchange rate block is of primary importance in any tool the central bank may use for forecasting. If you look at central banks’ models, however, you will find that the exchange rate equation is in fact always governed by a very simple relationship called – in economic jargon – the “uncovered interest rate parity”.
Then the Government issued the statement that all deposits in Iceland were guaranteed. 7 The tool used to reach this goal was to split the banks into new and old banks, along domestic and foreign lines, in such a way that the foreign creditors do not suffer over and above what was implied by giving deposits seniority over other claims. When these drastic actions are assessed, one must bear in mind the dire straits Iceland was in at the time and the sense in the country that it was under financial siege. Furthermore, the banks’ assets were 10 times GDP, and in the absence of international cooperation, forced downsizing was the only option. The new banks are 1.7 times GDP. The domestic system functioned more or less seamlessly throughout, but demand for cash tripled and almost outstripped physical supply for a few days until the Government issued the statement that domestic deposits were safe. International payment flows were seriously affected, however. Payments stopped at first, as the correspondent banking system seized up due to uncertainty, attempts at netting and punitive actions, and the UK freezing order. Normal functioning was gradually restored with Central Bank involvement. 8 Since November 2008, continuation of the resolution process has been part of an IMF programme whose main elements are stabilisation of exchange rate, a plan for fiscal sustainability, and resurrection of the financial system. 9 All the three banks are now up and running, and two of them are majority-owned by the foreign creditors of the old banks.

•  There was early sale of “good” assets at fire sale prices, which will lead to lower recovery ratio for bond holders. 6  A report by Tryggvi Thór Herbertsson and Frederic Mishkin was particularly influential in this regard. See Mishkin, Frederic S., and Tryggvi T. Herbertsson, (2006). Financial stability in Iceland, Iceland Chamber of Commerce. (http://www.vi.is/files/555877819Financial%20Stability%20in%20Iceland%20Screen%20Version.pdf). BIS Review 9/2010  7  •  UK authorities froze and ring-fenced assets. •  Further research will throw light on the UK decision to close Singer & Friedlander, which brought down Kaupthing – however, a lender of last resort (LOLR) loan in Sweden. •  A consequence of all of this is the dispute with UK and Dutch authorities over the settlement of deposit insurance claims related to Landsbanki branches. This problem is still negatively affecting the economic resurrection of Iceland. It is a big topic in its own right, but I am not going to say more about it here, as involves international relations, European legal issues, and balance of payments and debt sustainability issues, and as such, is far beyond the scope of my topic today. Bank resolution on the Icelandic side has been somewhat more orderly. It was shaped by the initial goal of securing continued banking operations in the country. First, we have the Emergency Act of 6 October 2008, under which the FME acquired broad-based intervention rights; deposits were assigned higher priority than other unsecured claims; and government capital injections received parliamentary approval.
However, although loans for housing seldom constitute major problems for the banks, they may mean disaster for individual households that suddenly find it difficult to make the payments. At  9  In the economic literature this ratio is called Tobin's q after the Nobel Prize winner James Tobin who, among much else, has studied property prices. If Tobin's q is equal to 1, then the cost of buying an existing house is equal to the cost of building a new one. This means that if house prices increase so that the market value is higher than the replacement value, then it pays to build a new house as each invested krona is valued at more then one krona by the market. In several of our large cities, Tobin's q is between 1 and 2, or even higher. In many parts of Sweden, however, the value is well below 1, which means that it does not pay to build new housing there. 6  BIS Review 105/2009  present the interest rate is very low. However, our forecast indicates that the Riksbank, following a period with a low interest rate, will need to raise the interest rate quite quickly in the period ahead. It is therefore particularly important that the banks check that every household that borrows money can cope with the expected interest rate increases and potential losses of income. The major Swedish banks have strengthened their capital bases and in international terms appear to be well capitalised.

Only a year ago, the level of unemployment was approximately 5 per cent (see Figure 4). For several years, development in the Baltic states could be described as a fantastic success story with high economic growth. In the period 2005 to 2007, for example, economic growth in Estonia and Latvia was approximately 10 per cent per year, while development in Lithuania was more moderate. At the same time, however, major domestic imbalances developed which laid the foundations for the crisis we are witnessing today. When the Baltic states moved from being regulated economies to market economies, optimism about the future was high and both household consumption and private sector investment increased dramatically. However, the investments went to the service and property sectors instead of to developing production capacity in the industrial sector. Export development was thus weak while imports increased rapidly as a result of strong domestic demand. Consequently, the current account deficits of the Baltic states increased (see Figure 4). The deficits were largely funded by taking loans in euro, mainly from Swedish and other foreign banks. The high level of economic growth led to the overheating of the labour market and wages and inflation increased (see Figure 6). In Latvia, for example, nominal wages in  3  Swedbank's market shares in the second quarter of thiss year amounted to 43 per cent in Estonia, 25 per cent in Latvia and 22 per cent in Lithuania.
In his First Essay on Population, Malthus wrote in 1798 that “with regard to the duration of human life, there does not appear to have existed, from the earliest ages of the world, to the present moment, the smallest permanent symptom, or indication, of increasing prolongation”. We know now that in 1798 life expectancy in Britain was around 40. Today it is nearly 80. There is no agreed method of forecasting life expectancy. The most widespread approach is to assume that life expectancy will gradually approach some limit determined by medical knowledge and our choice of lifestyle. A key uncertainty is what the limit to life is, and demographers have pursued many ways of estimating it.6 But successive forecasts of the limit to life have been disproved as actual life expectancy data surpassed the supposed limit. Chart 4 plots the forecast limits to female life against the life expectancy achieved by the longest lived female population. As life spans have increased, forecasts of the limit to life have been revised up. The fact is that we simply do not know how life expectancy will change in the future. Unforeseen, indeed unimagined, developments in medical science could change the prospects for life expectancy radically. In the end we have to face up to our ignorance. Providing insurance against longevity, whether as private annuities or public pensions, rests on an ability to calculate the risks involved.

The trend in prices for consumer goods over the past two or three years is a result of a favourable supply shock to the Norwegian and global economies. Low inflation is being accompanied by real income growth and a rise in production. Since last summer, monetary policy in Norway has been oriented towards a gradual increase in the interest rate – in small, not too frequent steps – towards a more normal level. On the basis of current information, this interest rate path provides a reasonable balance between the objectives to be given weight by Norges Bank in its conduct of monetary policy: •  On the one hand, the objective of bringing inflation up to the target and anchoring inflation expectations suggests in isolation that interest rates should be kept at a low level until there are clear signs of higher inflation. •  On the other hand, the Norwegian economy is growing at a solid pace. Capacity utilisation is slightly above the normal level and increasing, and house prices and household debt are rising sharply. In isolation this would call for a tightening of monetary policy. Norges Bank has decided to use some time to bring inflation back to target and has chosen to gradually shift to a less expansionary stance. The assessments of economic developments ahead will determine how gradual the interest rate increase will be. Our current assessment implies an interest rate path where the interest rate is raised by about 1 percentage point this year.
FOCUS: Greece, with its high levels of debt, would need to make drastic savings. How is that possible? It would result in mass demonstrations or even political unrest. Trichet: Let me say this again. All countries have to put their house in order. Greece is no exception to this rule. Ireland has also taken these courageous and difficult steps. I am convinced that, given the nature of the situation, the Greek government will do likewise in order to meet the 3% goal it has just committed itself to for 2012. FOCUS: Can you envisage Greece having to leave the euro area if the country does not manage to resolve its problems? Trichet: I have already said that I don’t comment on absurd hypotheses. FOCUS: You once said that the countries participating in Economic and Monetary Union share a common destiny. In this case, the strong countries would have to help the weak ones. Should France and Germany help Greece? Trichet: I repeat solemnly: we – the 330 million citizens of the euro area – share a common destiny. In a monetary union, the ties between the individual member countries are indeed extremely close. The external surpluses of some member countries (in the balance of payments) finance the external deficits of some others, and the constellation can change over time. We all share a credible currency, which is an immense advantage. At the same time, all countries owe it to their partners in the euro area to behave responsibly and correct their imbalances.

As market participants respond to the innovation, this may cause a surge in business activity. Consider the investment in fiber optic cable and telecommunications equipment in the late 1990s or the surge in U.S. housing demand in the 2000s. This surge in activity drives up profits and prices, which in turn sustains the boom. As part of this process, feedback mechanisms work to reinforce beliefs in the importance and sustainability of the innovation. In the tech bubble, for example, some new firms do displace traditional providers and network effects support scale and profitability and deter new entrants. In the case of the subprime lending boom, the provision of credit led to increased demand, which pushed up prices, and rising prices, in turn, held down credit losses. These feedback mechanisms reinforce belief in the sustainability of the boom, often extending the boom far beyond activity levels or valuations justified by how the innovation has changed the “fundamentals.” The process often comes to an abrupt end, and generally does so when the basic belief system that underpinned the boom is contradicted by events. In the tech boom, prices fell when earnings didn’t materialize because only a few firms could achieve and sustain firstmover advantages. In the subprime mortgage episode, loss experience climbed sharply once the options of selling or refinancing at higher prices was no longer available. With the benefit of hindsight, the inherent contradictions supporting the boom are exposed.
11  (b) Crisis-related scarring  There is plenty of evidence to suggest that financial crises can have a permanent, or certainly persistent, scarring effect on output and productivity in economies. 12  This time’s crisis, the largest in at least a  generation, is unlikely to buck that historical trend. There are several channels through which financial crises might permanently damage corporate sector productivity. First, a collapse in credit availability is likely to constrict the financing of both new and existing companies and hence constrain their investment plans. It may hit particularly hard young companies, without access to alternative sources of finance, for whom productivity growth is often fastest. Empirical evidence from the  8  For example, Feldstein (2016), Baily and Montalbano (2016). Bean (2016) discusses the potential mechanisms for the underestimation of GDP. 10 Syverson (2016), Byrne et al (2016). 11 Syverson (2016). 12 For example, Reinhart and Rogoff (2009), Oulton and Sebastiá-Barriel (2013). 9  4  All speeches are available online at www.bankofengland.co.uk/speeches  4  crisis suggests these channels were potent, in the UK and internationally. 13  As credit conditions have eased  recently, however, this has become a less compelling explanation for persisting productivity problems. A second financial channel through which the crisis may have affected firms’ investment is asset prices. Specifically, many small firms are reliant on property collateral to back their loans. A fall in property prices tightens their collateral constraint and credit conditions.

It would be unconceivable to think of a financial system and indeed of any financial instrument without a legal system to support it. The keyword for economists in this context is “asymmetric information”: the lender, in particular, does not know if the borrower is trustworthy or not, or whether the investment project the latter is undertaking is worthwhile. A financial asset is ultimately a claim in the form of piece of paper or even, and increasingly so, an account entry. In any credit relationship – and this includes almost any economic transaction beyond simple barter – the possibility of default is always looming and this inherent complication cannot be solved without a precise system of norms that protects both the creditors and the debtors. For the creditor to consider entering in a financial relationship, the legal system must not make it too easy for the debtor to walk away from his obligations. At the same time, the legal system cannot be too taxing for the debtor, as Shakespeare’s Merchant of Venice reminds us. The legal system has thus to develop along a fine line between protecting the rights of the borrowers as well as those of the lenders. No wonder that developing a sound legal system to support financial markets is a very complicated matter and we hope to learn something from today’s conference. 2.