samchain/econo-pairs-v1 huggingface dataset:
In a partial analysis, where everything else remains unchanged within the economy, this is a correct conclusion. However, everything else is not the same. The real interest rate is determined internationally to a significant degree and is affected by several factors, including individual people’s evaluation of consumption today, compared with consumption later and the degree of their aversion to uncertainty. It is only if we assume that consumption today is valued as highly as consumption tomorrow and disregard the uncertainty, that the growth rate can be used as an approximation of what the neutral real interest rate should be. We are now seeing, at the same time as the higher growth, several other changes that affect the real interest rate, such as an ageing population. It is difficult to draw a clear conclusion on the total  BIS Review 93/2000  4  effect of all these changes on the real interest rate. This is one of the areas in which the Riksbank is working on improving its knowledge. Another discussion held in the trail of the new technology, deregulation and increasing competition is how the effects of the relative price changes on general price developments should be dealt with. The basic idea is that the Swedish price level is so high in relation to other countries that it needs to be adjusted downwards, so that Swedish citizens’ purchasing power will increase. This is the same as saying that the real exchange rate is undervalued, i.e.

we can buy too few imported goods for what we export. This could be corrected by strengthening the krona through a stronger nominal exchange rate or by price increases on goods subject to competition being kept lower than those in other countries. It is sometimes claimed in the economic debate that non-recurring effects of deregulation and increased competition could be utilised by the Riksbank altering its price stability target from 2% to a lower figure. However, this would involve temporary effects influencing the target formulation, which would erase the stability in the target formulation that has an intrinsic value. It is still possible to strengthen purchasing power with an unchanged operational target formulation by a nominal appreciation of the krona. It has sometimes been claimed that the “new economy” could lead to completely new economic relations. I see no reasons for such a change. It is more likely that technological developments lead to reality approaching the simplified assumptions that form the basis of many economic models, such as a large measure of competition and low transaction costs. Thus, most of the models the Riksbank uses today would function equally well or better if structural changes were to occur more rapidly in the future. Nor do I see any reasons why the Riksbank’s intellectual framework on monetary policy would need to be fundamentally changed if we were to have a period of strong growth in productivity.
The transfers to the central government budget are expected to finance 15 percent of central government expenditure in 2018.2 The GPFG has become important to the Norwegian economy. Norges Bank has been tasked with managing the fund since its establishment in 1996. Already then, objections were raised, both inside and outside the Bank, to the Bank’s role as manager of the fund. Could a bureaucratic institution like Norges Bank be suited to reaching the objective of earning the highest possible return? Would the Bank succeed in recruiting employees with the necessary expertise? What about safeguarding the central bank’s reputation? Would this weaken executive management’s focus on the Bank’s core tasks? It is interesting to note that more than 20 years later, the Central Bank Law Commission 3 addresses some of the same issues. Despite the scepticism, the management of the fund was assigned to the Bank. In the history of Norges Bank, the authors write: “Even though the challenges posed by investment management at Norges Bank were obvious, neither the civil servants at the Ministry of Finance nor the executive management of Norges Bank appeared to be in any doubt that the fund should be placed in the central bank.”4 The historians cite the need to keep investment management under control and fears of lower returns if investment management were divided among several institutions among the reasons behind the choice of Norges Bank as manager. We should also remember that it was uncertain how large the fund could grow and how long it would last.

Philipp M Hildebrand: Asset management at central banks - a special case? Speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the University of St Gallen, St Gallen, 5 December 2003. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Summary Next to monetary policy, the management of international reserves is another important task of the Swiss National Bank (SNB). Since its obligations cannot be defined precisely, there can be no exact determination as to the optimal level of a country’s international reserves. In accordance with the buffer stock model, the level of international reserves should be determined - just as one would choose an appropriate insurance - based on the likelihood of a crisis, on their contribution to managing or avoiding the crisis as well as on the opportunity costs implied in holding reserves. Both the insights derived from this model and from international comparison have shown that Switzerland holds a reasonable level of international reserves. The long-term development of these reserves should be based on a set of clear goals, as is the case in Switzerland with the growth of nominal GDP as a strategic benchmark. In defining its investment policy, the SNB takes into account safety, liquidity, and performance. The new National Bank Law will enable the SNB to better adapt its investment profile to its needs, which ought to lower the opportunity costs implied in holding reserves.
The longer the krona remains 2  2  These calculations are based on a Cobb-Douglas production function with a constant returns to scale. BIS Review 78/2001  undervalued, the greater the risk of bad investments being made in domestic businesses. I do not intend to go into these issues in greater detail here and now, but would nevertheless like to point out that undesirable effects on business can arise through a misaligned currency giving flawed relative prices. Companies may make decisions regarding investment and employment on the basis of these relative prices. The foremost risk here is that too many resources will be drawn to the export sector and to the import competition sector before there is a return to the equilibrium exchange rate and to corresponding relative prices. At that point, the resources overinvested in these sectors will be transferred to other sectors. We know from previous structural changes in, for instance, shipping, steel manufacture and the property sector, that such a development would result in considerable costs to the real economy. One should not underestimate the importance for welfare of a correctly valued Swedish krona. Openness is important Factor productivity is also affected by a country's capacity to utilise technological progress in the outside world. This capacity in turn depends on how open the country is to impulses from outside, which is determined by the barriers that exist to ideas, goods, services and production factors moving freely across the borders.

One measure of this is income dispersion, in 2003, the per capita GDP of Japan was about $ while that in the Philippines was less than $ Real convergence matters because complementarity and similarity in production and economic structure reduces the likelihood of so-called "asymmetric" shocks, or shocks that hit all member states in a different way calling for different monetary policy responses - something that is not possible under a monetary union. For emerging market economies, financial disturbances are an increasingly prevalent source of asymmetric shocks: the best illustration of this in recent years is the Asian financial crisis, and the differing effects - and the variety of responses - among the economies in the region may, for some, be the main argument against union. It is tempting to conclude that the lack of nominal and real convergence among Asian economies is a serious barrier to a viable Asian monetary union. However, it has been suggested that full convergence is not a necessary pre-requisite to successful monetary union, and that the act of forming a monetary union will, by itself, force greater convergence among its members. As Governor Noyer has just said in his presentation, the introduction of the euro has increased the correlation between the business cycles of European economies, and has led to a more homogenous monetary transmission mechanism.
A possible solution to this coordination problem could be to establish a central mechanism entrusted with setting the euro area’s overall fiscal policy stance and responding to tail events, with national authorities focusing on medium-term goals and placing debt sustainability as their primary objective (see slide 7). This fiscal policy tool could be automatic, such as a common unemployment insurance scheme or a more general stabilising instrument dependent on the cyclical position. In any case, risk sharing must be accompanied by an incentive system that prevents negative cross-country externalities and moral hazard, something of utmost importance in a monetary union. Furthermore, I believe that such a central instrument would also be suited to tackling global challenges, such as climate change or the process of digitalisation, and might be a better option than national “golden rules”. These rules exclude specific types of public expenses from deficit calculations, on the grounds that these could be growth-enhancing and thus need to be protected. This option is attracting much attention in current EU debates. In particular, it is argued that in the current context, with countries having to expend a great deal of effort in the fight against climate change, such investments should be excluded from the expenditure target or budget balance in order to safeguard them from EU fiscal rules. However, a golden rule would add an additional layer of complexity to an already intricate system (see 6  slide 7) and would require the definition of the types of spending to which it ought to apply.

It contributed 11% of annual tax revenues or over £ billion per week in 2016. 1  1  Employment and tax data is from “Total tax contribution of UK financial services, Tenth edition”, City of London & PWC, November 2017. Lending data from Bank of England statistics and calculations. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Internationally, the UK is the pre-eminent financial centre. It accounts for 40% of global foreign exchange volumes and trades in over-the-counter interest rate derivatives. More international banking activity is booked here than anywhere else. The UK hosts the world’s second largest asset management and fourth largest insurance industry. The City is Europe’s investment banker, and it is leading the internationalisation of green, Islamic, renminbi and rupee finance. Being at the heart of the global financial system reinforces the ability of the rest of the UK economy, from manufacturing to the creative industries, to compete globally. And it broadens the investment opportunities and risk-adjusted returns for UK savers. This evening, I want to set out some of the ways the UK financial system can continue to serve the UK and the world in the face of major structural changes. II. Core attributes of UK leadership The City’s pre-eminence reflects lessons learnt over the centuries that an effective financial system must be resilient, fair and dynamic. Resilient so that it can finance households and businesses through good times and bad. A resilient system is anti-fragile – robust even to risks we do not anticipate.
The UK is a big net importer of (non-energy) goods. And although the North Sea is still providing quite a bit of oil and gas, here too the UK runs a significant deficit. Besides, only a very small minority of UK residents actually receive any disposable income from that source. Notionally “British” companies operating in the North Sea have significant foreign ownership. What domestic shareholdings do exist are likely to be held mostly in pension funds and other long-term (i.e. inaccessible) investment vehicles. This means that, for given GDP, rises in the relative prices of goods and energy make us collectively worse off. And that’s exactly what’s happened over the past couple of years, thanks first to the pandemic and then Russia’s cut in gas exports. Over that period the price of the UK’s imports has risen by 20% more than the average price of its output. You can see this in the last bar in Chart 2. Chart 2: Bucking the long-term trend, import prices have risen much faster than output prices over the past couple of years  12 10 8 6 4 2 0 -2 -4  Change in import prices relative to GDP deflator, annual average, % points 12 10 8 6 4 2 0 -2 -4 60s 70s 80s 90s 00s 10s Last two years  Source: ONS and Bank calculations.

First, I would like to touch briefly on the Bank of Thailand’s latest view on domestic growth in short and medium term. Then I will delve more deeply into concerns in the U.S. and the Eurozone, along with the likely implications on Thailand’s recovery. Ladies and Gentlemen, I would like to first share with you the Bank of Thailand’s latest economic projection and our outlook for the Thai economy. Despite the fact that we have less than two months to go for 2011, the Bank has just revised down its growth projection for the Thai economy this year, from 4.1 percent in July’s assessment to only 2.6 percent in October’s. This significant downward revision reflects the severity and the broad-based impacts of the flood, which has brought about a halt in agricultural and manufacturing production in affected areas, and has also disrupted production chains in other areas as well. The automobile industry, which has just recovered from supply chain disruptions following natural disasters in Japan earlier this year, is once again terribly affected. And in the big picture, we have sharply lower consumption and investment spending that will require some time to resume their normal trend. But even in the face of this hardship, and amidst the external environment that is quite unpredictable given heightened risks and uncertainty from the U.S. and the Eurozone, we still expect Thailand’s growth outlook to be favorable next year.
In Japan, monetary policy announcements resulted in significantly improved investor sentiment, with the Nikkei stock index climbing by 80% between November 2012 and May 2013 on the back of a strongly depreciated yen and the ensuing higher profit expectations of Japanese companies. In the positive risk climate, investments perceived as secure have lost value. A prominent example is gold: The dollar price per fine ounce of gold had risen in 2011 to a high of USD 1,900. Currently, it is approximately a quarter lower. Government bonds perceived as secure have also fallen in value, even though their yields are still very low. This also applies to Confederation bonds. While the yield on ten-year Confederation bonds, for example, has significantly increased since the low point of last December, at around 0.8% it is still extremely low. Movements in the Swiss franc exchange rate matched this risk-friendly market environment. Since January, the euro/Swiss franc exchange rate has moved further away from the minimum rate of CHF 1.20, and at times, values were recorded which were last seen in Spring 2011, in other words, before the introduction of the minimum exchange rate. On a trade-weighted basis, however, the Swiss franc has remained largely unchanged since the beginning of the year. The favourable developments on the financial markets, which have persisted over a lengthy period, were the result of a reduction in extreme risks.

It will open in July, with a staff of seven. The Singapore office will concern itself only with trading; settlement will continue to take place in Zurich. The branch office is completely subordinate to existing SNB oversight and control. Swiss franc money market and reference interest rates The continuing high level of Swiss franc liquidity has had the desired effect of keeping money market interest rates at close to zero. The three-month Libor has been at around two basis points since mid-January. Interest rate expectations, based on Libor future contracts, are also close to zero for the foreseeable future, but not negative, as was the case over much of last year. As a result of the very low money market interest rates and high liquidity in the banking sector, money market turnover has dropped substantially in recent years. This is illustrated in chart 2, which shows the total of banks’ sight deposits at the SNB, as well as turnover in the area of secured and unsecured call money. The small number of transactions on the money market is a problem for generating representative reference interest rates. In addition, the selection and setting of reference interest rates has come under the scrutiny of market participants and the public, as a consequence of the Libor manipulation. As regards the problems surrounding the Libor, efforts at reform are underway on an international level. To ensure the continuation of the Libor, a raft of measures have already been initiated.
As soon as the global economy has recovered sufficiently, interest rates will rise again. With all the concern about negative interest it is important to remember that when inflation is negative, real interest rates are higher than nominal interest rates. This is the case in Switzerland at the moment. If inflation is lower than the nominal interest rate, the end result is still an increase in purchasing power, even if an investment is not earning a nominal return. In the past, the rate of inflation has often been higher than the nominal rate of interest. In other words, in terms of real returns, there have certainly been times when saving was even less worthwhile than it is now; times, in fact, when savings lost value in real terms. Concluding remarks Ladies and gentlemen, I come to my concluding remarks. As you will have gathered from my comments today, the international environment remains extremely challenging for the Swiss economy and the SNB’s monetary policy. Interest rates worldwide have been very low for a long time. The after-effects of the financial crisis persist and are hampering global economic developments. At the same time, the Swiss franc is significantly overvalued and presents major difficulties for our economy. Nevertheless, I will venture to make two forecasts. First, that our economy will overcome these challenges successfully. Second, that negative interest will not become the “new  BIS central bankers’ speeches  5  normal”.

Moreover, a portion of existing international investments is even being repatriated to Switzerland. This has very substantially increased private demand for Swiss francs, resulting in upward pressure on the currency. 1  4  At the end of 2012, Switzerland’s foreign assets amounted to some CHF 3.5 trillion, of which approximately 85% were invested in foreign currencies. BIS central bankers’ speeches  Some of this was absorbed by the high levels of foreign currency purchases by the SNB in recent years. Thus, responsibility for upward pressure on the Swiss franc cannot be attributed to foreign investors alone. Swiss franc investment must therefore be made less attractive for all investors. As I have just explained, it is inappropriate to differentiate between domestic and foreign investors from a monetary policy point of view. Since foreign interest rates are close to zero or negative, Swiss interest rates cannot remain at zero. They have to move into negative territory in order to restore the traditional interest rate differential. Criticism of negative interest Let me now discuss negative interest in more detail. As I have explained, negative interest helps to make investment in Swiss francs less attractive and thereby limit net inflows into our currency. This reduces upward pressure on the Swiss franc and eases monetary conditions. We are aware that the current low interest environment is very challenging for investors, especially pension funds. Acceptable investment options are limited.
According to BIS data, global turnover in commodity derivatives (measured in number of contracts) grew from 420 million to 489 million in the first quarter of 2008. On a year-on-year basis, turnover grew 52%, led by agricultural and energy products. BIS Review 90/2008  1  Others have pointed the finger at speculators for the historically high commodity prices although the extent of this has not been well established. There are concerns over speculative activities giving rise to a disconnect between the physical and futures markets. In the US where commodities are actively traded, there are claims that speculators’ interest in crude oil now account for about 70% of all trading in West Texas intermediate crude on the New York Mercantile Exchange ("NYMEX"), compared with 37% in 2000. On the other hand, some have attempted to make a distinction between speculative trading (which at the core, means taking positions based on one’s view of the market) and market manipulation (or collusive trading that interferes with the free play of demand and supply, and has an illicit element). They argue that speculators play a vital role in providing liquidity and take the risk that hedgers want to avoid. Without speculation, consumers would likely pay more for energy and other commodities. Whatever the causes, whether physical demand and supply or speculation, the world now has to grapple with higher commodity prices. What are the implications and effects of the commodities boom? Clearly the hike in oil prices, for instance has crimped the real incomes of households.

Our unconventional policies were able to address market fragmentation and the ensuing financial disruption, hence facilitating the proper transmission of our monetary stance throughout the euro area. Huge intellectual efforts are constantly needed to improve and adapt our policies to changing environments. The current crisis is a stark reminder of this, not just for policy makers but also for economists and academics. This is the very reason why the Bundesbank President, Jens Weidmann and I have high expectations for this two-day conference. Ladies and Gentlemen, dear colleagues, thank you for your attention. 2  BIS central bankers’ speeches