samchain/econo-pairs-v1 huggingface dataset:
All three aspects of this principle – “lending freely”, “good collateral” and a “penal rate”, are problematic at the international level. An effective LOLR must be willing to lend whatever it takes to prevent a liquidity run. The more credible is the LOLR, the less the resources that are required to be lent in practice. Domestic LOLRs have credibility. But for a prospective ILOLR the decision for a group of countries, either jointly or via the IMF, to lend large sums to another country will always be difficult. In a world of nation states, it is unreasonable to suppose that political considerations will not enter the choice of recipient of such largesse. And the greater the political uncertainty about the willingness to act as an ILOLR, the larger the amount of funding that will be required. In turn, the operation will appear less credible, and the authorities are caught in a vicious circle. The current resources of the IMF – between $ billion and $ billion depending on how they are measured – are wholly inadequate for an ILOLR. Nor are resources on the appropriate scale likely to be forthcoming. Moreover, serious moral hazard arises when the private sector ignores the risks of lending to a country because it believes that the country would be bailed out by the international community in the event of a liquidity crisis. And investors are encouraged to lend to emerging markets in forms – short-term debt – which are more likely to be bailed out.

The average level of such quantities is determined by other factors, such as demography, competition and tax policies, research and development and education and training. There are therefore good reasons why monetary policy should focus on inflation and have an inflation target. Flexible inflation targeting policy A strict interpretation of the possibilities of monetary policy can easily be perceived as being that central banks can only affect inflation. However, although monetary policy can not affect the average level of real factors, this does not mean that it is ineffectual in stabilising  BIS Review 111/2009  1  fluctuations in these factors. I mean by this that monetary policy can contribute to the stabilisation of resource utilisation at a normal level. In practice, central banks with an inflation target conduct what is called flexible inflation targeting. This flexibility means that – alongside the long-term inflation target – the central banks also strive to ensure that fluctuations in both inflation and the real economy are kept at a reasonable level. Striking the right balance between these factors is what the Riksbank calls a well-balanced monetary policy. The flexibility of inflation targeting becomes particularly important in situations where a conflict arises between the objective of reaching the inflation target and the objective of stabilising the real economy. In some situations, the inflation target calls for a certain type of monetary policy while resource utilisation calls for another. One example of this is the situation that prevailed during most of 2008, the year before I joined the Executive Board.
Loans with homes and other kinds of property as collateral make up about 80 per cent of the major banks’ loans to Swedish households and companies. Loans to households for mortgage purposes make up the very greatest part of this. This exposure has increased over the last decade. Therefore, as I have pointed out on a number of previous occasions, what has happened is that the major banks that are usually described as commercial banks, have, in fact, become ‘mortgage banks’. The increased lending depends, among other factors, on rapidly rising housing prices and historically low interest rates, but also on the number of households and completed homes having increased over the period. 11 The banks fund these mortgages to a high degree on the capital market, in particular with covered bonds, the collateral for which is made up of mortgages. As mortgages have grown, so have the volumes of covered bonds, some of which are issued in foreign currency. Developments on the housing market can thus also affect confidence in the banks and, in a bad situation, their funding could also become both more expensive and more difficult to obtain. The fact that the major banks also own one another’s covered bonds increases the risks still further. Housing policy benefits certain groups Apart from rising housing prices leading to increased indebtedness for households, there are also other aspects of the housing market that are problematic.

We have just witnessed the signing of MOUs between the SICC and the Riyadh and Abu Dhabi Chambers’ of Commerce and Industry. I also encourage SICC to collaborate with IE Singapore and the Singapore Business Federation to organise more networking platforms to forge partnerships between foreign and local companies. For instance, given our knowledge and connections, Singapore can serve as a bridge for Middle Eastern investors interested in going into China. Finally, let me once again congratulate the SICC on your 170th Anniversary and wish the SICC and its members continued success. Thank you. BIS Review 55/2007  3
We are convinced that the improved regulations contribute to the good framework conditions that characterise Switzerland in general. This in turn is an essential prerequisite for the sustainable and successful development of the Swiss banking sector. A robust, well-regulated banking system is a key locational advantage in international competition. It attracts clients and businesses, and is therefore desirable not only in the interests of financial stability, but also from the perspective of the globally active banks themselves. d) Implementation of the TBTF regulations is already well under way  Thus, ladies and gentlemen, the Swiss regulatory approach targets the fundamental causes of the ‘too big to fail’ issue and is cost-effective. We are therefore confident that full implementation by the end-2019 deadline will create the conditions necessary for resolving the ‘too big to fail’ issue in Switzerland. What is our current status regarding fulfilment of the TBTF requirements? In our latest Financial Stability Report published in June, we stated that implementation is already well under way. In terms of the resilience requirements – the first pillar of the regulations – both big banks are on track. They already fully meet the requirements for risk-weighted capital that will apply from end-2019. As far as the second pillar – resolution – is concerned, the two big banks have made further progress. Here too, they already meet some of the requirements in full, namely those relating to gone-concern loss-absorbing capacity. Nevertheless, the finish line has not yet been reached.

Likewise, further headway would be needed in reducing sovereign-banking links, which contributed notably, as is known, to heightening the severity of the crisis in the euro area. In this connection, the banking union requires supranational support that would increase the financial capacity of the Single Resolution Fund in the event of a systemic crisis and which would afford it greater power during the transition process established for its full constitution. The European Commission’s proposal that the European Stability Mechanism should provide this support might be an appropriate solution. It is also necessary to create a common deposit guarantee scheme whereby depositors’ confidence in banks is irrespective of the health of their Public Treasuries. Progress on the set of initiatives encompassing the Capital Markets Union would also contribute to achieving greater financial integration, diversifying sources of financing and empowering to a greater extent private mechanisms geared to sharing the risks that originate through these markets. Conclusions In any event, it should be stressed that, although the recovery is providing for the correction of some imbalances, some fallout from the crisis remains at large. The high levels of unemployment and of public and private debt, low productivity growth and the weakness of the capitalisation process pose challenges that require greater reformminded ambition.
And market-based measures also indicate a rapid decline in inflation over 2023 and 2024, while the cost of inflation protection remains slightly above 2% at longer horizons (as reflected in the 5yr5yr rate). This is largely due to a positive inflation risk premium which reflects the high uncertainty surrounding inflation dynamics. The third factor that we are closely monitoring is the strength of monetary policy transmission. The ECB’s current rate hiking cycle is unprecedented in terms of its intensity and speed, with one-year-ahead expected real rates into positive territory. We generally assess the impact of our measures based on the historical evidence of previous rate hiking cycles. It can be argued, however, that some of today’s macro-financial conditions differ from those prevailing in previous cycles, especially as a consequence of the long period of expansionary monetary policy that preceded the current episode. In addition, tightening monetary policy as sharply and as swiftly as we have could also have potential nonlinear effects on the economy. One factor that might point to a slower transmission of monetary policy than in the past is related to the debt burden of the non-financial private sector, which has become less sensitive to interest rates hikes.

Finally, special attention will have to be paid to the incoming data from the financial sector in order to closely monitor the impact of recent events and tensions. The implications of recent financial sector tensions have been contained so far. But, if these tensions persist or intensify, a scenario could materialise of significantly tighter credit and financial conditions and worsening confidence, with downward effects on economic activity and prices. In this respect, special attention will have to be paid to data on the supply of bank credit, as measured for instance by the BLS. Conclusions Let me conclude by highlighting two main takeaways from my words today. First, at the ECB Governing Council we stand ready and have the instruments available to respond as and when necessary to maintain price and financial stability in the euro area. Second, in March we took a further step in the process of adjusting the monetary policy stance to the euro area inflation outlook, but uncertainty is high and future decisions will continue to be data-dependent. Inflation in the euro area is slowing and will continue to do so markedly in the coming months. But there are factors affecting underlying inflation that may delay its return to the 2% target in the medium run and that we will therefore monitor closely going forward.
The fiscal policy stance can affect the growth capacity of the economy. Government regulation and various features of the tax system can influence corporate decisions with regard to localisation, investment and technology. Other measures can affect the labour force and the functioning of the labour market. Over time, real wages must move in line with productivity and real wages. The social partners determine wage growth. We have seen in previous periods that they pull in the right direction when that is needed. The alternative could be a more painful adjustment with higher unemployment. The objective of monetary policy is low and stable inflation over time, while at the same time smoothing fluctuations in output and employment. As long as inflation is low and stable, the krone can act as a buffer during periods of adjustment. We cannot, however, rely on a depreciation of the krone to ensure Norway’s competitiveness in the longer run. Monetary policy cannot influence the long-term growth capacity of the economy. The challenges associated with low growth and changes in business structure must be addressed using other policy measures. Chart: Low growth results in low interest rates Monetary policy easing and low interest rates do not lead to longer term higher growth. The inverse is true: prospects for persistently weak growth result in low interest rates for a sustained period. In order to prevent deflation and recession, the central banks of major advanced countries have implemented extraordinary measures to keep both short- and long-term interest rates low. The medicine has worked.

The US economy in particular is on the road to recovery. Financial market participants see opportunities, not just problems. However, in a number of emerging economies volatile capital flows are creating problems. High debt growth and rising house prices may constitute a risk. The recovery abroad is fragile. The key policy rate is also low in Norway. Our inflation target is slightly higher than that of other European countries. As a result, inflation and nominal interest rates in Norway are also slightly higher. But prospects for a persistently low interest rate level internationally will inevitably also have consequences for Norway. The real interest rate in a small open economy cannot in the long run differ substantially from that of our closest trading partners. Given the prevailing long-term interest rates abroad, it will likely take a number of years for interest rates in Norway to move up towards a level that was previously considered to be normal. When the drafters of the Constitution gathered at Eidsvoll 200 years ago, there were no private banks in Norway. It was not until the latter half of the 1800s that a private banking system truly came into being. Norges Bank acquired its present-day role as lender of last resort. With private banking came banking crises. The 1899 crash in Christiania triggered the first serious banking crisis in Norway. A real estate bubble in the capital burst and house prices plummeted. It took more than 100 years for real house prices in Oslo to return to their pre-crisis level.
Those two risks broadly offset each other in terms of the balance of demand and supply, meaning that my best guess for inflation, and the outlook for policy, is in line with the central view. But as I have argued today, the outlook for policy depends on more than just our central expectation for the path for the economy – we need to consider the risks as well. My third lesson from the crisis was that policy needs to be prepared for the unexpected. That is true both for the MPC, who need to take the balance of risks to their central forecast into account when setting monetary policy, and for the FPC, who set financial policy based on their assessment of the risks to financial stability. The FPC track a very large number of risks; I will focus on just two – first, market volatility, and, second, Brexit.6  6  Jon Cunliffe’s speech “Financial stability post Brexit: risks from global debt”, available online at https://www.bankofengland.co.uk//media/boe/files/speech/2019/financial-stability-post-brexit-risks-from-global-debt-speech-by-jon-cunliffe.pdf, goes into more detail on several key risks including Brexit and global risks. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  First, one widely-used measure of the risks to economic  Chart 10: Measures of uncertainty  stability is the measure of global policy uncertainty shown in Chart 10, taken from the May 2019 Inflation  6  Report.

To achieve the 2% inflation target over the medium term but at the cost of an avoidable depletion of the economy’s supply capacity would not be congruent with the MPC’s Remit, which includes supporting growth and employment in so far as that is consistent with the overriding goal of price stability. I was glad that the “effective supply” way of thinking about this was reflected in our latest Inflation Report. But I would readily concede that we must not lose sight of the potential “speed limit” effects that featured in our November Report. Given the need for some rebalancing in the pattern of demand and activity, and the likely lags in firms bringing even suspended capacity back on-line, bottlenecks are a distinct possibility. We will need to be especially alert to messages from the Bank’s Agents, to survey evidence, and to data on productivity, wages and prices for any sign of inflationary pressures. Volatility of inflation, and inflation expectations The Committee’s strategy has warranted maintaining the very substantial monetary stimulus notwithstanding the marked pick-up in inflation over recent months. As the Governor explained at our press conference a fortnight ago, we think that the recent rise in inflation is accounted for mainly by the increase in petrol prices, the restoration of VAT to 17.5%, and lagged effects of sterling’s substantial depreciation. But we can’t be, and aren’t, comfortable about it. Not least because the country has to trust us that these will be temporary disturbances.
The Minister of Trade and Industry at the time, Erik Brofoss, advocated following UK actions to the full, and was supported in this view by Gunnar Jahn, the director of Norges Bank. They feared a substantial loss of competitiveness if Norway was the only one among its trading partners not to follow the sterling devaluation. When the magnitude of the UK devaluation became known, Gunnar Jahn was attending the annual meeting of the IMF in Washington. He had received provisional authorisation from the government to inform the IMF that Norway would follow a moderate British devaluation. The expectation was a sterling devaluation of around 20 per cent. However, Erik Brofoss had informed Jahn that he favoured following the UK move regardless of how much they devalued. At an IMF dinner on the evening of 16 September Jahn received a business card with the date “18 September”, the number “30.5” and the words “Tell Bramsnæs” written on it (Bramsnæs was the director of Danmarks Nationalbank, who was also  BIS Review 147/2010  3  demand pressures were elevated. The krone devaluation triggered high inflation. 14 This time, the rule “do what the UK does” contributed to a less favourable outcome. 15 4. Groups often make better decisions than individuals  So what steps can we take to ensure that important decisions are the best they can be, even if they have to be made under uncertainty? In his novel L, Erlend Loe discusses advantages and drawbacks of different decision systems.

5  See Finn E. Kydland and Edward C. Prescott (1977): “Rules Rather than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy, 85, no. 3, pp. 473–491. 6  See Arne Kloster and Kristin Solberg-Johansen (2006): “Forecasting in Norges Bank”, Economic Bulletin, 3/2006, Jarle Bergo “Interest rate projections in theory and practice” (speech at the Foreign Exchange Seminar of Norwegian Economists on 26 January 2007) and Svein Gjedrem “Inflation targeting – some theory with main focus on practice” (speech at the Centre of Monetary Economics/Norwegian School of Management on 8 June 2004. 7  In Alan Greenspan’s opening remarks to the Jackson Hole symposium in 2003, available at: http://www.bis.org/review/r030905a.pdf. 8  See for example William F. Sharpe (1964): “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk”, Journal of Finance, vol. XIX, no. 3 and Harry M. Markowitz (1952): “Portfolio selection”, Journal of Finance, vol. XII, no. 1. 2  BIS Review 147/2010  “One of our major banks, now mainly in public ownership, reputedly had 4000 risk managers. But the difficulty was seeing the risk to the system as a whole rather than to any specific financial instrument or loan (...) They frequently lost sight of the bigger picture.” 9 In setting the key policy rate, too, we often face more fundamental uncertainty, where it is very difficult to calculate probabilities for possible scenarios. 10 In decision situations like these, it may be appropriate to establish routines that can guard against especially severe consequences.
The mandate implies that inflation targeting shall be flexible, so that weight is given to both variability in inflation and variability in output and employment. Monetary policy in Norway is in line with the monetary policy conducted by most central banks in the OECD area. In 2001, a plan was also drawn up for petroleum revenue spending over the central government budget. Government petroleum revenues are transferred to the Government Petroleum Fund, now called the Government Pension Fund - Global. The plan provides for annual petroleum revenue spending equivalent to the expected real return on the Fund, that is to say 4 per cent of the Fund. A measured increase in petroleum revenue spending provides greater stability in the real economy than a rapid withdrawal. After this change in monetary policy orientation, a clear distribution of responsibilities among the different components of economic policy was established: •  Monetary policy steers inflation in the medium and long term and can also contribute to smoothing fluctuations in output and employment. The inflation target ensures a nominal anchor for economic agents’ decisions about saving, investments, budgets and wages. •  The central government budget - growth in public expenditure - influences the krone exchange rate and the size of the internationally exposed business sector in the medium term. Government expenditure and revenues must be in balance in the long term. •  Wage formation and economic structures and incentives determine how well and how efficiently we utilise our labour resources and other economic resources.

Forecasts of inflation, output, the interest rate and other variables are based on an assessment of the current situation and a perception of how the economy functions. Disturbances to the economy may result in changes in the forecasts. Data revisions imply that the current economic situation is not fully known. Our ambition must be to reduce uncertainty with regard to our own response pattern. That actual interest rate developments will deviate somewhat from Norges Bank's forecast will probably be the rule rather than the exception. Overall, inflation measured by the CPI-ATE is projected to pick up gradually over the next three years towards 2.5%. Developments since June have resulted in somewhat lower inflation than expected, and we must take this into account when drawing up the next Inflation Report. Looking ahead, labour shortages are expected to push up wage growth this year and next. Pressures in the economy are expected to continue to build up before receding towards a normal level. The forecasts are uncertain and we also attempt to shed light on this. The figure illustrates the uncertainty surrounding the forecasts. The wider the fan chart is, the more uncertain the forecast. The uncertainty implies that the interest rate should normally be changed gradually, so that we can assess the effects of interest rate changes and other new information about economic developments. Changes in forecasts are nothing new to financial market participants, who frequently change their expectations concerning future interest rates as the economy is exposed to disturbances.