samchain/econo-pairs-v1 huggingface dataset:
Lars Nyberg: Challenges following the current crisis Keynote address by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at the 12th annual conference of the Central Bank of Chile “Financial stability, monetary policy and central banking”, Santiago, 6 November 2008. Johan Molin, adviser at the Riksbank, represented Mr Nyberg in Chile. *  *  *  In the last couple of months we have seen authorities all around the globe taking massive actions to deal with the current financial crisis. Few countries are spared as the crisis spreads over the world, not even those that have not been directly exposed to the problems that initially triggered the crisis. Never before has a crisis had such a widespread global impact as the one we are now witnessing. This obviously puts governments, central banks and supervisors in a somewhat new position as they have to deal with the challenges that financial globalisation entails. Needless to say, these challenges are huge. Today I will only be able to address some of the issues that we will have to deal with when the crisis is eventually over. I will also try to give my views on what the lessons from the crisis imply for the central banks’ work on analysing financial stability and systemic risks. However, let me first say a few words about the context of the crisis. Context of the crisis When the crisis was triggered it happened in a quite traditional way.

Even if it is too early to tell, we can see that the financial support plans have contributed to a certain degree of recovery in the markets. Interbank rates are falling, credit spreads are narrowing and liquidity is returning in some markets. However, most of the content of the support plans is directed at handling the most pressing problems in the financial system. In the longer term other measures will be needed, and this is what I will discuss now. What are the future challenges? Let me first say that we need to realise that times of financial turbulence are unavoidable and something that we have to learn to live with. What is important is that we learn from previous experiences and use this knowledge to lower the probability of future crises occurring, and when they actually do happen, to mitigate their costs. We also need to realise that despite the many similarities between various crises they are never exactly the same. Therefore, flexibility is needed in the policy frameworks aimed at preventing and managing financial crisis. If I may start on the prevention side, it is hard – given the present circumstances – not to get in to a discussion of what role monetary policy can play in preventing the build up of economic imbalances.
Improved confidence has also benefited from the changes in certain external conditioning factors, such as those linked to the ECB’s monetary policy and to the progress in economic and monetary union, which have prompted an easing in financing conditions. On top of these are other more transitory effects, such as those linked to the low level of oil prices or to the depreciation of the euro. I shall continue with the analysis contained in the Annual Report, briefly reviewing the key factors behind the recovery. Budgetary consolidation Firstly, regarding public finances, the general government deficit met the objective set by the European Council (5.8% of GDP) for the third year running. In 2014, fiscal policy had a less restrictive impact than in the preceding years and was a less prominent conditioning factor of macroeconomic developments. The reduction in the deficit in 2014 came about as a result of the greater adjustment made at the central and local government levels, since most of the regional governments exceeded the targets set. The budgetary improvement was also the consequence of a similar-sized contribution by revenue and public spending (once the impact of the financial assistance to the banking system is stripped out of spending). The tax take progressively picked up during the year, in step with the cyclical improvement and the change in the composition of GDP.

In particular, I think it will require ongoing collaboration between the private and public sectors to push the industry toward greater resilience to the financial risks of climate change. Discussions like this one are a critical step in that direction. Thank you for your attention. 1 Federal Reserve Board of Governors, Supervision and Regulation Report, November 2020. 2 Stiroh, Kevin J., The Basel Committee’s Initiatives on Climate-Related Financial Risks, October 14, 2020. 3 Basel Committee, Climate-Related Financial Risks: A Survey of Current Initiatives, April 30, 2020. 4 David J. Snowden and Mary E. Boone, “A Leader’s Framework for Decision Making," Harvard Business Review,  November 2007. 2/2  BIS central bankers' speeches
Haldane, A (2016), ‘The Dappled World’, speech available at https://www.bankofengland.co.uk/speech/2016/the-dappled-world Haldane, A and McMahon, M (forthcoming), ‘Central Bank Communication and the General Public’, American Economic Review: Papers & Proceedings. Henderson, V, Storeygard, A and Weil, D (2011), ‘A Bright Idea for Measuring Economic Growth’, American Economic Review: Papers & Proceedings, Vol. 101, No. 3, pp. 194-99. Henke, N, Bughin, J, Chui, M, Manyika, J, Saleh, T, Wiseman, B and Sethupathy, G (2016), ‘The Age of Analytics: Competing in a Data-Driven World’, McKinsey Global Institute. IMF (2018), ‘Cyclical Upswing, Structural Change’, World Economic Outlook, April 2018. Lagos, R, Rocheteau, G and Weill, P-O (2011), ‘Crises and liquidity in over-the-counter markets’, Journal of Economic Theory, Vol. 146, No. 6, pp. 2169-2205. Lazer, D, Kennedy, R, King, G and Vespignani, A (2014), ‘The Parable of Google Flu: Traps in Big Data Analysis’, Science, Vol. 343, pp. 1203-1205. 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  Leamer, E (1983), ‘Let’s Take the Con Out of Econometrics’, American Economic Review, Vol. 73, No. 1, pp. 31-43. Lehdonvirta, V and Castronova, E (2014), Virtual Economies: Design and Analysis, MIT Press. Levitt, S, List, J, Neckermann, S and Nelson, D (2016), ‘Quantity discounts on a virtual good: The results of a massive pricing experiment at Kind Digital Entertainment’, Proceedings of the National Academy of Sciences of the United States of America, Vol. 113, No. 27, pp. 7323-7328. Moore, G (1965), ‘Cramming more components onto integrated circuits’, Electronics, Vol. 38, No. 8.

865–934, New York: Elsevier North-Holland. Micco, Alejandro and Ugo Panizza (2006), “Bank Ownership and Lending Behavior,” Economic Letters, Vol. 93, Issue 2, pp. 248–254. Micco, Alejandro, Ugo Panizza and Monica Yanez (2007) “Bank Ownership and Performance. Does Politics Matter?,” Journal of Banking and Finance, Vol. 31, No. 1, pp. 219–241. Rajan, Raghuram (2010), Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton, NJ: Princeton University Press. Reddy, Y.V. (2012), “Society, Economic Policies and the Financial Sector,” Per-Jacobsson Lecture, BIS. www.bis.org/events/agm2012/sp120624.htm. 4
I am simply describing the sort of economic risks which might occur, and which have been identified in the debate about monetary union in the United Kingdom as the potential downside to be set against the potential benefits of nominal exchange rate certainty which I touched upon earlier. You here in Belgium may think that these risks are sometimes exaggerated - you have after all been effectively in de facto monetary union with Germany for some considerable time. But I don’t think one can reasonably argue, certainly in the case of a larger country, that the risks can be ignored. It was against the background of this kind of economic debate that the Chancellor of the Exchequer announced a year ago that the United Kingdom would exercise its opt-out and not participate in the first wave of euro membership. That was a disappointment to some of our European partners. But it was a considerable relief to others, because UK participation from the outset would undoubtedly have complicated the project - not least because of the substantial cyclical divergence between ourselves and the major countries on the Continent. But the Chancellor also made it clear that the present British Government is not opposed to euro membership as a matter of principle; it will make its decision on pragmatic grounds - the test being whether membership would be in our economic interests; and it would BIS Review 88/1998  -4-  submit that decision to Parliament and to the British people in a referendum.

4 That means that the majority of panelist submissions each day are based solely on “expert judgment.” Although actual transactions underlying LIBOR have diminished, its use as a benchmark has become ubiquitous. The gross notional value of all financial products tied to U.S. dollar LIBOR is around $ trillion—about 10 times U.S. GDP. 5 That includes $ trillion of business loans, $ trillion of floating-rate notes and bonds, another $ trillion of securitizations, and $ trillion 1/8  BIS central bankers' speeches  of consumer loans held by about four million individual retail consumers, including around $ trillion of residential mortgage loans. The remaining 95% of exposures are derivative contracts, which we learned in the financial crisis have consequences for both Wall Street and Main Street. So, every day, the payments on $ trillion of exposures are calculated based on a handful of transactions worth a few hundred million dollars at most. That’s like a very tall, very broad building built on a very narrow foundation. Imagine an upside-down pyramid. It’s not stable, and, as we will discuss shortly, it’s getting more rickety by the day. You don’t want to be standing near it when it comes down. There is, thankfully, a coordinated global effort to address LIBOR’s shortcomings. That work has focused on creating more reliable alternatives. The Financial Stability Board (FSB)6 and the International Organization of Securities Commissions (IOSCO)7 have published roadmaps for reform. Their shared principle is that benchmarks should be based on observable, arms-length transactions rather than estimates.
Monetary Policy From End To End: Define, Decide, Deliver Speech given by Dave Ramsden, Deputy Governor for Markets and Banking  The Strand Group Lecture Series King’s College London 20 November 2017  I’d like to thank Grellan McGrath for his assistance in preparing this speech, and colleagues around the Bank for their useful comments 1  All speeches are available online at www.bankofengland.co.uk/speeches  End to End Monetary Policy  This is my first speech in my new role as Deputy Governor for Markets and Banking, and as a member of the Monetary Policy Committee (MPC). It is a pleasure to be giving it in the newest part of King’s College London th  and in my position as a visiting professor here at King’s. And I’m delighted it’s the 25 Strand Group event, showing how this flagship series of policy relevant events has already become well established. One of the key differences between my old and my new role is the level of accountability. As Chief Economic Advisor to HM Treasury for the past 10 years, as would be expected under the civil service code, I was generally responsible for giving evidence-based advice to ministers who were ultimately accountable for their decisions to parliament and the public. That is very different in my new role in which I am directly accountable to parliament and public for decisions taken as a member of the MPC, Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC).

This is seen as exploitation by the donor community of developing countries' need for investment, aid and debt relief, to create conditions that will facilitate their infiltration by globalised financial interests. The following statement in the July 2004 issue of South Bulletin is typical of this perspective: “Whence this striking paradox, inherent in good governance, of calls going out from the international organisations to national governments that these latter adopt, indeed “appropriate”, neo-liberal economic policies imposed from without while the globalised financial markets dispossess them of their sovereignty and insinuate themselves into the countries' ownership structure of capital”. 4  BIS Review 109/2007  The controversy continues on the link between governance and development, and while its proponents claim strong empirical evidence for it, there is strong assertion of the contrary, or at least agnostic, view in other quarters. It would seem that the jury is still out on this debate. Aspects of governance in Sierra Leone The principal donor institutions in Sierra Leone, as in most developing countries, are the World Bank, and the IMF. Donor support programmes coordinated by the World Bank are provided within the framework of the Bank’s Country Assistance Strategy and the Poverty Reduction Strategy Paper. Following implementation of an Interim Poverty Reduction Strategy Paper, the Bank approved a full Poverty Reduction Strategy Paper for Sierra Leone in February 2005, covering the period 2006 – 2009. The major instrumentality for Fund assistance to Sierra Leone is the Poverty Reduction and Growth Facility (PRGF).
The implied productivity performance of the UK economy has, in fact, remained poor – according to the official statistics, output simply doesn’t appear to be growing fast enough to support the employment growth recorded as well as generate the rapidly rising real incomes one would like to see. Something has to give. I hope that it will be that output grows faster – either through upwards revisions to recent growth rates or faster growth in future. If, on the other hand, the UK economy uses up all its spare capacity, without having had a substantial rise in real national income, then we should all be disappointed. The weakness in productivity growth has been well documented, but a convincing explanation remains elusive. There are many plausible explanations of factors which could have contributed to the weakness, but each explains only a small part of the whole puzzle. I don’t have time to get into that debate today, but we do offer a variety of candidate explanations in recent Inflation Reports. One better feature of the current situation is that price pressures seem to be subsiding, not growing. Despite good rates of employment growth, there is no sign of nominal wages overreacting to general tightness in the labour market. Other price pressures also appear to be easing somewhat.

That guidance should help to give confidence to businesses and households and help to support demand growth. By reducing uncertainty about our reaction function, guidance should also have helped to counteract the pressure in financial markets to price in the chance of a rapid increase in Bank Rate. We chose unemployment as the threshold indicator not because it was ideal – far from it – but because other indicators were all less attractive. Of course, no sooner had we announced a policy linked to the unemployment rate than it began to fall unusually precipitously. But what is there not to like about sharply falling unemployment? After all, getting the economy back to a medium-term path quickly, allowing policy to normalise, would be a good thing? Right? Well, falling unemployment is undoubtedly a good thing for the individuals who are back in work and on many other social counts. It could only be a purveyor of the dismal science who found rapidly falling unemployment disappointing! Yet, in order to see rising living standards on average, it is crucial to see rising output per head (i.e. rising productivity) – which ultimately drives real national income per head and hence how well off we are as a country. So we need to see rising employment accompanied by even faster growth in output.
CN: What has been designed by various countries – bearing in mind the structure of their economies and the relative importance of the automatic stabilisers – is probably the right balance between what needs to be done to stimulate global demand and the necessity to retain the credibility of the fiscal policy and budgets over time. It is especially important in European countries where we have the feeling that the so-called Ricardian effects can play a role. So if we were to give the impression to citizens that public finances were to deteriorate by too much and for too long consumers might increase their savings ratio to prepare themselves for tax increases in the future that they might regard as inevitable, or the reduction of benefits and pensions. So you have to keep the right balance between long term credibility and immediate stimulation. As far as we can judge, that balance is probably appropriate. That will have to be reviewed according to future economic developments. A related issue is the fact we all agree that a condition for the revival of the global economy is that financial systems everywhere are stabilised and that stabilisation is convincing the markets. I have the impression that we are a little more advanced in that regard in Europe than in the US. It is clear that the US authorities are making every effort to reach that goal, but that is probably as important as the size of the stimulus itself if we want to stabilise the economy.

Having given at our last policy meeting the assurance that we would continue this as long as is needed and at least until the beginning of next year, means that we have given the assurance to the banks that the easing policy will continue for quite a long period of time. Having said that, what we need to look at now is not the theory. We have to be pragmatic, and look at what works and what does not work. The objective of so-called additional measures would be to act where parts of the credit market are not working, the transmission mechanism is not working. A central bank may consider that at a certain point it is appropriate to intervene directly in these markets. At the moment, we have some signs that the transmission mechanism, in terms of interest rates in almost all segments of the credit market, works relatively well. All money market segments have seen interest rates go down very significantly. It is interesting to note that if  2  BIS Review 29/2009  you take the 3-month reference rates, there is only 30 basis points difference between the euribor and the dollar libor, and no difference vis-à-vis sterling, so that in practice the transmission is quite efficient in the euro segment. Finally, the possibility for corporates to issue securities – short term or long term – seems to have revived significantly since December.
The standards not only reinforce the safety and soundness of individual firms. In contrast to the development of prudential framework before 2007, we now endeavour to address specifically the risks generated by the financial system as a whole. In other words, the framework is not just stronger. It is macroprudential in a way that was not true at all before the crisis. Of course, knowing where to set the detailed prudential standards that make up the framework is as much an art as a science. It is one thing to know that before the crisis systemic banks were not holding enough capital to absorb losses and keep functioning – one has only to look at the failures, the bailouts and the impact on the real economy. It is quite another to determine how much capital a systemic bank needs to hold to be able to continue to operate through a crisis. As with most things in life, policymakers have looked to the past – for example to the losses suffered by banks and others in this and in previous crises – to guide the future. But we know that it is a useful but an imperfect guide. To paraphrase Mark Twain, history only rhymes, it does not repeat itself. That brings me to the second main element of macroprudential policy. The standing framework can only go so far in addressing risk. The role of macroprudential authorities, like the FPC, is not just to ensure the framework addresses systemic risk.

2  BIS central bankers’ speeches  The development of macroprudential policy As set out by Crockett and others 1, the basic principles of macroprudential policy are that: •  assuring the stability of individual financial firms will not by definition assure the stability of the overall financial system; indeed there will be times in which what makes good sense for a specific firm makes bad sense for the system as a whole;  •  the underlying prudential standards – the reserves of capital and liquid assets that individual banks and other firms need to hold to enable them to withstand bad times – should be set not simply in relation to the risks in the individual firm, but also to reflect the importance of the firm to the financial system and the cost to the economy as a whole if the system fails;  •  the financial system does not simply respond to the economic cycle, growing as the economy grows and vice versa. It also feeds on its own exuberance in good times and on its fear in bad times which can in turn drive the real economy to extremes, as we have witnessed in recent years.
However, the six-monthly control stations that are an integral part of the Swedish consolidation programme have made - and continue to make - it possible for observers to monitor the political system’s determination in this respect to achieve the goal of balance in 1998. The current situation At the beginning of 1996, favourable prospects for inflation prompted a monetary policy realignment. Continuously falling inflation expectations, accompanied by subdued demand, improved the outlook for inflation in 1996 and 1997. At the end of 1996 underlying rate of inflation was about 1.5 per cent. The twelve-month rate of headline inflation, which was actually negative for some months in the latter part of 1996, was affected by temporary factors, above all as a result of the Riksbank’s interest rate cuts. The better prospects for inflation paved the way for a notable reduction of the repo rate during 1996, from 8.91 to 4.10 per cent, the latter being the lowest instrumental rate in Sweden for at least thirty years. Together with the impact of the exchange rate, the overall monetary conditions are accordingly contributing to a continued recovery in the real economy. A shift in the composition of demand began in the course of 1996. But although the contribution to GDP growth from net exports decreased, the effect of foreign trade remains positive. Private consumption is continuing to rise at a subdued but stable rate and its composition seems to be shifting in favour of durable goods, cars in particular.

Where, then, does the exchange rate come in? Apart from its short-run effects via import prices, the exchange rate features in our inflation assessments in two respects. One is that exchange rate movements affect demand in the internationally oriented sector and thereby in time the development of the output gap and ultimately inflation, too. The other is the information which the exchange rate may provide about the development of inflation expectations. While temporary exchange rate fluctuations hardly affect forecasts of inflation one to two years ahead, more lasting tendencies have an overall impact on demand and thereby on the output gap and consequently on the inflation forecast. Adjustment after the inflation era Sweden is one example of the numerous countries that in the 1970s and 1980s systematically aimed for higher growth and employment with the aid of expansionary economic policies, with less regard for the effects on long-term price stability. The outcome was very different from what had been intended. Compared with countries more devoted to stability, for example the Netherlands, Austria and Germany, macroeconomic development in Sweden was poorer in many respects. BIS Review 8/1997  -4-  Inflation in Sweden moved up substantially from the late 1960s onwards, trend growth weakened and the period ended in the early 1990s with a dramatic fall in production, a sharp increase in unemployment and a serious crisis in the financial system. The tendencies in the latter part of the 1980s were not sustainable.