samchain/econo-pairs-v1 huggingface dataset:
It is important to realise that once the crisis has occurred, the losses cannot be hidden and must be dealt with in one way or another. In this respect Swedish institutions worked well. Party politics were clearly separated from business realities. And the politicians did a good job, realising that bygones were bygones, setting up a fair framework to sort the crisis out. From a political perspective it was important that the banks’ owners were not rescued. People at large had to take substantial cuts in living standards - at least temporarily. Letting the “big guys” go unhurt under these circumstances would have jeopardised the whole operation. 4. The macroeconomic policy mix for crisis management can differ. In our case, there was obviously not much room for fiscal stimulation of the economy. Considering the much lower BIS Review 65/1998  -7-  public debt, there could be more room in some Asian countries but the potential budget effects of the financial losses also need to be taken into account. Monetary policy has a difficult dual role: it has to strike a balance between stimulating the economy so as to ease the burden on the banks and on their borrowers and at the same time ensuring the capital inflows that are needed to rebuild the depleted foreign currency reserves. 5. On top of this - and perhaps the most important factor - there was political consensus. The government sought and received backing from the main opposition party.

That party was also allowed to appoint Board members of the Bank Support Authority so that it could be continuously informed and influence decisions. That was important both for political legitimacy at home and for credibility abroad - investors could be sure that the system we had created would be upheld even if there were a change in government. Let me end on a positive note. Economically, the crisis in Korea and in many of the other Asian countries should be manageable although it will probably take time before the results are clearly visible. Korea is in far better shape than many other countries, including my own in the early 1990s, given the high rates of potential growth and that the fiscal balances are in reasonable shape. However, what actually happens will depend on how the crisis is managed. That is now precisely the question. BIS Review 65/1998
On the basis of current assumptions for the development of external conditions this year and in 2004, prices of marine products are now expected to fall by 4% this year and to remain unchanged between 2003 and 2004. Exports of marine products are expected to grow by 3% this year due to increased quotas for the fishing year [beginning September 1] and a larger blue whiting harvest this summer. The assumed increase in catch volume for 2004 is 5%. Aluminium prices are expected to rise by 4% this year, based on futures prices and the pricing assumptions of the two aluminium companies, Norðurál and Alcan Iceland. Import prices in foreign currency are expected to decrease by ½%. Fuel prices are based on futures. These have been on an upward trend in recent weeks and are now expected to rise by 9% this year but fall by 14% in 2004. The terms of trade for goods and services are expected to deteriorate by 1½ percentage points this year. In 2004 they are expected to improve by three-quarters of a percentage point. Assumptions for short-term foreign interest rates are 3% this year and 3½% next year. BIS Review 45/2003  3  According to the Central Bank’s macroeconomic forecast, output growth will be 2¾% this year and 3½% in 2004. This forecast assumes that the Norðurál aluminium smelter expansion will go ahead; if not, the respective growth figures would be 2¼% and 2¾%. Private consumption growth is forecast at 2% this year and 3% next year.

The National Bank started such activities in 2014 when it created foreign investment securities statistics, which was then supplemented with data on domestic securities. In addition, the crisis has shown that the risks can increase largely not only in the banking system, but also in shadow banking. Therefore, there is a need for upgrading the statistics with data not only for depository institutions, but also for all other financial institutions. Following these trends in 2012, we started with the preparation of the statistics of the most important non-bank financial institutions, which enabled us to 1/3  BIS central bankers' speeches  constantly monitor their activities and the potential risks. We recently fully complied this statistics with the latest IMF’s Guide on monetary and financial statistics. The second segment is the improvement of databases on cross-border financial systems. The consequences of the global crisis have clearly emphasized the risk of international financial integration, in particular the global connection of systemically important institutions. Such a context has had major consequences on the requirements for increasing the volume and structure of statistical data that will give a better picture of these global connections with a special emphasis on international investment position statistics, as well as more detailed portfolio investment and direct investment statistics. The National Bank already prepares all these surveys on a regular basis, although there is room for further improvement in the area of international position.
6  BIS central bankers’ speeches  Figure 1 Depreciation of emerging economies' currencies (*) (percent) 30  30  25  25  20  20  15  15  10  10  Chile  5  5  0  0  -5  -5  -10  -10  Fed  Withdrawal  announcement, begins, Dec. 2013 May 2013  Most appreciated level in 2013  Early 2014  (*) Change between spot and specified date. Sources: Central Bank of Chile and Bloomberg. Figure 2 Real exchange rate (*) (index, 1986=100) 120  120  110  110  100  100  90  90  80  80  70  70  ()  88  g  90 y 92  RER  94  96  98  00  1994-2013 average  02  04 Spot  06  08  10  12  14  1999-2013 average  (*) The March 2014 figure covers information up to the 26th. Source: Central Bank of Chile. BIS central bankers’ speeches  7  Figure 3 Inflation indicators (*) (annual change, percent) 6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6 11  CPI  Jul. 12  CPIEFE  Jul. CPIEFE goods  13  Jul.

To force nominal wages below their already depressed level would have meant much higher unemployment, a greater erosion of living standards, a marked degree of “undesirable volatility in output” (contrary to our remit), and a risk of inflation falling well below the target in the medium term. With the freedom granted from having our own currency, the mix of tight fiscal and loose monetary policy is necessary for a rebalancing of the economy. Because of the measures taken to reduce the enormous fiscal deficit here at home, UK sovereign debt funding costs have actually fallen relative to those in Germany since the start of last year. Of course, there can always be differences of judgement about the overall stance of policy, but to change the broad policy mix would make little sense. Of course, at some point, Bank Rate will need to rise to more normal levels in order to ensure that inflation returns to its 2% target. There has been, as you know, a lively debate among the members of the MPC as to when that point will come. The Committee is watching extremely carefully for any signs of a pickup in domestically generated inflation and it will take action as soon as it is appropriate to do so. So far, subdued rates of increase in average earnings, as well as remarkably – some might say disturbingly – low growth rates of broad money have provided strong signals that inflation will fall back in due course. Banks are still contracting balance sheets and reducing leverage.
Unemployment has steadily fallen since then and the inflation rate has returned towards 2%, which is the Federal Reserve’s inflation target. Only then could the FOMC stop increasing its balance sheet, raise the Federal Funds rate from its floor and so initiate an exit strategy. Obviously we, in the Eurozone, are not at the same point of the business cycle but we are travelling along the same road for monetary policy. Some consider these unconventional policies in the euro area are counterproductive because ultra-low interest rates hurt savers and banks. However, we have monitored closely banks’ profitability and – taking into account ALL elements of monetary policy  BIS central bankers’ speeches  3  – there is in 2015 no evidence that this is doing harm overall. Moreover, the global longterm real rate of interest has been falling for around 30 years reflecting an imbalance between a strong desire to save and a relative scarcity of those willing to borrow to invest. As we all know, this imbalance is extremely acute in Germany where this surplus is in the order of 8 % of German GDP. Above all, we cannot base our decisions on their outcomes for particular groups but on the common good. Economic activity does not depend only on savers but also on entrepreneurs, workers, homebuyers and borrowers who benefit from low interest rates. Eventually, these policies will lead to levels of inflation more consistent with our mandate and will call for higher interest rates both in nominal and in real terms.

Nobody seriously disputes that a collective strategy involving more structural reforms in some countries including France, and more public investment in others including Germany would make for a better policy mix for sustainable growth and employment in Europe. Second, the Finance Minister would be responsible for supervising the implementation of the collective strategy, using adequate instruments to provide symmetric incentives. Negative incentives would include the existing sanction mechanisms, and could be broadened in contractual procedures, already put forward in the 2013 Franco-German contribution on EMU, or in Chancellor Merkel’s 4 “binding reform contracts” proposal. A positive incentive could be for instance the access to a euro area ”Convergence Fund”, through which Member States could benefit from common funding. Third, the Finance Minister would be responsible for implementing centralized crisis management. A Finance Minister for the euro area would naturally be in charge of overseeing European Stability Mechanism operations. Last, while moving towards further integration, the Minister could be given the authority for managing a euro area Convergence Fund, progressively evolving towards a euro budget. Further integration and democratic accountability should move forward in parallel. These institutional changes obviously require a new Treaty. 3  Marcel Fratzscher, Lessons for Europe from German Monetary Union, DIW Economic Bulletin 27.2015  4  Angela Merkel’s first parliamentary speech of the third term, December 18 2013. 6  BIS central bankers’ speeches  A legitimate institution with genuine admin.
Best practice in these areas is defined by several factors, including: •  the capacity of the firm to capture quickly and aggregate exposures across the firm to specific types of risks, and to integrate these into the stress testing process,  •  the use of a range of different approaches to measuring exposures in conditions of stress, what the Counterparty Risk Management Group II calls "a portfolio of analytics,"  •  the quality of the effort applied to understanding how risks interact in conditions of stress, particularly market and credit risk,  •  the degree of attention to how a substantial and prolonged reduction in market liquidity might amplify losses,  •  the balance between the identification of scenarios plausible or realistic enough to more easily capture management attention and those scenarios that may be less plausible but substantially more damaging to the firm,  •  the care given to the particular challenges in measuring exposure in illiquid and complex products,  •  the adequacy of the cushions – in terms of capital and liquidity - maintained against adverse scenarios where uncertainty is highest, and the strength of the connection between the identification of potential losses and changes to exposure limits and the risk profile of the firm, and  •  the attention given to the range of risks presented by greater concentration in some markets, from the implications of the failure of a major institution to the constraints a large firm might  BIS Review 14/2006  3  itself face in its capacity to limit its own losses in adverse conditions without exacerbating those conditions.

While less flexible labor markets and the absence of a federal fiscal system will certainly pose constant challenges for the management of a common European currency, a fluctuating exchange rate need not be the optimal way to respond to these shortcomings. The argument that Europe -- even a core component of Europe -- can ill afford to renounce exchange rate flexibility rests crucially on the view that Europe is significantly more BIS Review 109/1997  -6-  heterogeneous than the United States and, therefore, more vulnerable to country-specific shocks that can best be corrected by exchange rate changes. I do not support this view. Rather, I believe that in many respects differences among the European economies have been over-emphasized in the public debate. It is possible to suggest, for example, that the economies of some European countries have more in common today than do those of some individual states in the United States, such as New York and Michigan or California and Idaho. Moreover, as a result of the convergence of economic policy objectives, the economic cycles among many European countries have become more synchronized over the last ten years, a trend that is likely to be reinforced by monetary unification. Furthermore, when shocks are mainly at the industry level -- for instance, when a recession hits the automobile or steel industry in Germany and France -- the German and French economies would hardly benefit from an exchange rate change. Such a change, in this case, simply would not affect the appropriate relative prices.
5. What can and should EME policymakers do? I would argue that “keeping our own house in order” is a tried-and-tested recipe for enhancing EMEs’ resilience to global monetary policy spillovers. Indeed, as a few papers to be presented will show, the extent of global monetary policy spillovers would depend not only on the source economies, but also on the recipient economies, including their economic settings and vulnerabilities. Accordingly, macro-prudential measures would provide another line of defence through mitigating macrofinancial imbalances, and many Asian EMEs including Hong Kong are precursors in this regard. Furthermore, policymakers in the region have been working hard to grow the regional local currency bond markets and create a sticky domestic investor base, which help reduce the risk of disruptive capital outflows during times of distress. 6. A few papers to be presented today also offer other valuable policy recommendations, highlighting the importance of good central bank communications, in the sense that: (1) credible communications to anchor inflation expectations can alleviate the policy tradeoffs faced by EME central banks when external monetary policy shocks arrive, and (2) clear communications by the Fed regarding its monetary policy normalisation may help limit the resulting adverse global spillovers. These research findings corroborate well with our experience as central bankers, who have always been extolling the virtues of clear, credible central bank communication. 7. In closing, while the synchronised global monetary policy tightening will likely result in challenging spillovers to Asia and other EMEs, these difficulties are not insurmountable with the appropriate policy mix.

However, formulating the right policy responses to monetary policy spillovers requires a better understanding of various spillover channels as well as mitigating factors that help reduce the sensitivity of EMEs to global monetary policy shocks. I would therefore like to thank you all for taking the time to join our Workshop today, which brings together seasoned researchers and policymakers dedicated to understanding these vital issues. I look forward to their insights and I hope you enjoy the Workshop. Thank you. Last revision date : 25 August 2022
One conceivable explanation is that, having waited longer than other countries, the road back to price stability was more difficult for us. There were also a number of exceptional events along the way. What was perhaps the worst bank crisis of the century erupted in the wake of the 1980s’ bubble economy. Exchange rate turmoil was such that, during some dramatic days, the instrumental rate was hiked to 500 per cent. In the early 1990s the budget deficit grew to be the largest in the industrialised world. There are many similarities, as well as some differences, between the financial crisis in Sweden and those in Mexico and Southeast Asia. In recent years the situation in Sweden has become more stable and, with a resolute economic policy, developments have taken a positive turn. The bank crisis has been resolved, the economy is in an expansionary phase and inflation expectations are low. Step by step, the credibility of the new regime is being established. Experience in other countries clearly shows that the consolidation of a changeover to a low-inflation regime takes many years. Inflation target’s historical roots and advantages The idea of focusing monetary policy on price stability goes back, as I mentioned earlier, at least to Wiksell’s arguments a century ago. It seems to me that Wiksell’s emphasis on deflation being as important to avoid as inflation has much to do with the acceptance of this policy today.

In addition, the sharp rise in stock prices led to a re-assessment of the appropriate equity risk premium. The higher that stock prices rose, the more people thought that equities had little risk. Everyone could become a millionaire with little risk or effort. 4 Similarly, in the subprime/structured finance boom, there were several important positive feedback mechanisms. In particular, the surge in credit availability drove up the demand for housing and pushed up housing prices. This increase in demand caused the default  4  In fact, one book, Dow 36,000, which was published in 1999 shortly before the stock market peaked, argued that “fair value” for the Dow Jones Industrial Average should be 36,000 because the appropriate risk premium for the equity market versus Treasury bonds should be zero. BIS Review 43/2010  3  experience associated with such lending to be very low, reinforcing the notion that subprime lending was not very risky. It also reinforced the demand for the complex CDOs secured by such assets. During the boom, the structured finance models appeared to be sound because losses on the underlying subprime mortgage loans were low and because the correlation rates in performance across different assets in the pools were low, just as the models had assumed. Fourth, the proportion of market participants who believe that a particular episode of asset price increases are justified by the innovation tends to rise as the boom persists.
The trend in interest rates is therefore not due to the fact that the central banks have been conducting an expansionary monetary policy for several decades, but to the fact that the real interest rate level – or the ‘underlying foundation’ for interest rates, if you like – has fallen. This has also led to many central banks’ policy rates for a long time, and until quite recently, being at their effective lower bound, where they could not be reduced any more, at zero or just below. The low real interest rates are probably also an important explanation as to why asset prices, seen in a longer perspective, have risen and are currently high. This leads us to the changes in the Swedish economy since the 1990s crisis. Swedish housing prices and household debts have risen in parallel and almost continuously for twenty-five years, a period that is quite well in line with the downward trend in the real interest rate. The reforms in the 1990s also meant the removal of support for construction. This has led to a shortage of housing which, combined with low interest rates, has helped to push up housing prices. It should be noted that not all countries had sharply rising house prices, despite declining  9 See, for example, Lundvall (2020). 10 [16]  global interest rates. An example of this is Germany. Thus, government policies that affect the functioning of the housing market also play an important role. Diagram 7.

Euro area banks’ CET1 capital ratios remain at a solid level of about 14%, whereas profitability has stabilised on the back of the strengthening recovery. Some weak banks have been successfully resolved with the impact on the rest of the euro area banking sector being well contained. Notwithstanding these positive developments, important challenges remain, including the still subdued profitability, structural challenges in some parts of the euro area banking sector, such as the presence of excess capacity and cost inefficiencies, as well as – in a few countries – the persistently high stock of non-performing loans (NPLs). On aggregate, however, further progress has been made with respect to resolving NPLs, and a comprehensive action plan to deal with legacy asset quality issues was adopted by the Council of the European Union and is now being followed up by EU and national authorities. The ECB has published guidance to banks on NPLs and a draft addendum, currently subject to public consultation. With respect to financial stability, we observe that at the current stage the euro area’s position in the financial cycle is consistent with the ongoing economic recovery. There are no indications of widespread asset price misalignments and credit developments remain modest. Nevertheless, relatively buoyant real estate dynamics and high household debt levels in some countries warrant careful monitoring. We expect the national macroprudential authorities in the euro area to remain vigilant and ready to use the macroprudential policy instruments at their disposal to counteract the any emerging risks when necessary.