samchain/econo-pairs-v1 huggingface dataset:
One argument that has been put forward for trying to slow down an increase in housing prices is that future falls in housing prices would have negative effects on future inflation and the real economy. However, Claussen, Jonsson and Lagerwall show that the macroeconomic effects of a 20 per cent fall in housing prices would be relatively limited and possible to counteract by adopting a more expansionary monetary policy. This is shown in more detail in the minutes of the monetary policy meeting held in June 2010, when I presented simulations of how expansionary monetary policy can stabilise CPIF inflation and GDP growth following such a fall in housing prices (Sveriges Riksbank 2010). According to Finansinspektionen’s (the Swedish financial supervisory authority) report on the Swedish mortgage market (Finansinspektionen 2012), Swedish mortgages do not constitute any threat to financial stability at present. Mortgage borrowers have a good debt-servicing ability and pass stringent stress tests, credit assessments are thorough, the loan-to-value ratio for new mortgages is declining and the loan-to-value ceiling appears to be effective. If the growth in mortgages or the loan-to-value ratio were to develop in a problematic way further ahead, it is possible to lower the mortgage cap. This is a better means of influencing growth in mortgages and loan-to-value ratios than using the policy rate.

The academic faculty will include permanent as well as regular visiting professors and scholars-in-residence. INCEIF will also form strategic alliances with leading local and international learning institutions to complement our pursuit to provide world-class knowledge for the benefit of the industry in particular, and the ummah in general. It is our vision that INCEIF will one day be an international nucleus for tertiary education in Islamic finance, training and research and provide a strong support in the development of Islamic financial infrastructure. With the grace of Allah, and with the support of the international Islamic financial community, it is our hope that INCEIF will make a meaningful contribution to the future development of Islamic finance for the benefit of the ummah. In closing, once again, I would like to express our deepest appreciation to the Yang Amat Berhormat, Dato' Seri Abdullah Haji Ahmad Badawi, Prime Minister of Malaysia for gracing this occasion and for accepting to officiate the launch of INCEIF. 2  BIS Review 22/2006
Liviu Voinea: Europe - managing the upswing in uncertain times Speech by Mr Liviu Voinea, Deputy Governor of the National Bank of Romania, at the Conference CEPS-IMF Spring 2018 Regional Economic Outlook, Brussels, 15 May 2018. * * * Dear Governor Smets, Dear Director of the IMF’s European Department Thomsen, Dear CEPS Director Gros, Thank you for having me here. It is an honor for me to speak at the launch of the IMF Regional Economic Outlook for Europe. This report is remarkable in many respects: it is comprehensive, well-documented and clearly written, with strong messages and judicious policy recommendations. It comes in times of uncertainty, when the European economy is rebounding, but challenges remain; in particular, the business and financial cycles of advanced economies are so dissimilar to those of the new member states that a distinct analysis is warranted. The first chapter of the report is entitled “Managing the upswing in uncertain times”. The report shows that growth has recovered in advanced European economies and even picked up in the new member states, some of which are now having large positive output gaps. Moreover, growth forecasts are strong in 2018, but growth is not taken advantage of to advance with fiscal consolidation and structural reforms. This recovery has created more than 12 million jobs in the EU since 2013, exceeding pre-crisis peaks. Consequently, unemployment fell by a total of 5 percentage points in NMS and 3 percentage points in EU-15 over the same period.

Changes in our analytical framework As monetary policy has an effect after a time lag, the Riksbank must look ahead and base its interest rate decisions on forecasts of future developments, for instance, regarding economic activity and inflation. Like other central banks, we work constantly on improving our analysis work in order to produce the best possible forecasts and analyses, and these improvements in methods also contribute over time to making monetary policy easier to understand and assess. In recent years, for instance, we have focussed on improving the models we use in our forecast work. Last autumn we changed the interest rate assumption that forms the basis for our forecasts and at the same time we chose to lengthen the time horizon for the forecasts. Previously, up to and including the second Inflation Report published in 2005, the Riksbank’s forecasts were based on the assumption that the repo rate would remain constant over two years. As the repo rate is usually adjusted during the forecast period, and thereby affects the outcome of inflation and other economic quantities, it is difficult to obtain a good perception of the accuracy of the forecast with this assumption. It therefore makes it more difficult to assess monetary policy. As of the third Inflation Report published in 2005, the forecasts are instead based on the assumption that the repo rate will follow market expectations as reflected in implied forward rates. This makes is easier to compare the Riksbank’s forecasts with those made by other forecasters.
Albanian economy in the face of the global crisis Like all developing and emerging economies, the Albanian economy has undergone a rapid economic growth on its path to catching up EU economies. This growth has been mostly supported by rapidly increased consumption in economy and has been financed by using previous savings or foreign financing sources. The main beneficiaries of this demand are construction and services, i.e., the sectors that use labour force intensively and ensure increase in wages and employment but which are slightly export-oriented. On the other hand, industry and agriculture slowed down, suffering from lack of attention by the banking system, a higher degree of investments and expertise, and longer time needed for return on investments. This tendency has left Albania with a small base of export-oriented industries or of those competing with import products. The global crisis served as an important testing for this growth model. It highlighted its limits to face external shocks and its restrictions in an ever challenging global environment. In  2  BIS central bankers’ speeches  simpler words, the global crisis revealed the importance of maintaining sound balances in both public and private sectors. It also depicted that more competitive economies that have successfully competed in global markets are those economies that have higher and more sustainable growth rates. It is my pleasure to state that this lesson has been learned by the Albanian economy at both consumer and producer level. More specifically, Albanian households have been more reluctant to spend and more inclined to save.

If we assume that financial crises would otherwise occur once in every 25 years (an annual frequency of 4%) then a rise in banks capital by 10 of riskweighted assets would be justified if it reduced the probability of financial crises so that they occurred with an annual probability of 3.2%, or once every 31 years. Alternatively, taking the most favourable assumptions on cost (full tax offsets, partial Modigliani Miller offsets, a lower use of bank debt and lower sensitivity of investment spending) the blue line indicates a 10% rise in capital relative to assets would be justified if it reduced the probability of financial crises from 4% a year to 3.9%, or from once every 25 years to once every 25.4 years. (The final column in the table shows that calculation for each case). Such a small decline in the likelihood of a financial crisis would not appear to be overly ambitious for such a sharp rise in the capital ratio. For typical banks the capital ratio starts out from a level under 10%, so that a rise in capital of 10% of risk assets is more than a doubling in the amount of bank capital.
Fourthly, the central bank’s ambition to steer asset prices directly could perhaps pave the way to a much larger bubble in the future. In other words, can safeguards against financial bubbles and an absence of subsequent economic consequences lead to a moral-hazard type of phenomenon among the market participants? Circumstances must evidently be very special to warrant central bank action to counter asset price bubbles if there is no concurrent upward pressure on consumer price inflation. BIS Review 58/1998  -6-  It is also reasonable that the central bank presents a clear case for such a course of action and does so before such a special situation arises. The Riksbank has started a biannual series of reports on the financial system’s stability. The idea is to draw lessons from our recent experience of a bank crisis and be in a position - should the need arise in some distant future - to discuss any policy measures that might be called for in the event of a risk of financial instability. This could also be done in our Inflation Reports. The situation today in Sweden is very different from the 1980s. Asset prices have been rising steeply since 1994 but indebtedness did not turn upward until quite recently. This suggests that the risk that the banking sector will experience significant problems in the event of a fall in asset prices is relatively small today. However, we must continue to monitor risks in this field in the years to come.

Likewise, a  4  Winje, H. and L.T. Turtveit (2014): “Norwegian banks’ adjustment to higher capital requirements”, Norges Bank Staff Memo 14/2014. BIS central bankers’ speeches  3  pronounced economic downturn with increased bank losses can be addressed by lowering both the key policy rate and the capital buffer. In other situations, it may be appropriate to reduce the key policy rate while at the same time raising the level of the capital buffer. If, for instance, there are prospects that inflation will become too low at the same time as debt and house prices are rising rapidly, the key policy rate will be reduced, in line with its primary task of maintaining a nominal anchor for the economy. Unwarranted negative effects on financial stability of lower interest rates could in this case be counteracted by raising the level of the countercyclical buffer. Macroprudential policy and stricter banking regulation help to reduce systemic risk, but we cannot act on the assumption that tighter regulation alone will suffice to prevent future crises. Monetary policy, on the other hand, has well-documented effects on house prices and debt. Thus, monetary policy deliberations at Norges Bank give weight to mitigating the risk of a build-up of financial imbalances. By taking financial stability considerations into account, we seek better, more stable outcomes for inflation and output in the longer run. A simple analytical framework can serve to illustrate this point. Chart: Framework Consider a central bank with a flexible inflation targeting regime.
This should have caused the US dollar to appreciate, at least on the basis of past behaviour. The dollar defied upward pressure, however. It continued to depreciate persistently, despite the marked widening in future expected interest rates. One reason why this might have been the case is that the signalling and the portfolio rebalancing channels of asset purchases might have worked in opposite directions. In imperfect markets, investors may give different weights to conflicting information. What I mean by this is that, despite expectations of a significant increase in policy rates, the Federal Reserve’s very gradual slowdown of its pace of Treasury and mortgage-backed securities purchases – which caught many investors on the wrong foot after the “taper tantrum” – possibly fuelled expectations that long-term rates, and hence also foreign demand for USdenominated interest-bearing assets, would remain contained for a considerable period. This interpretation is consistent with at least four observations: first, term premia on US bonds fell notably after the Federal Reserve started tapering in December 2013, pointing to a correction of the sharp uptick in term premia after the “taper tantrum”.9 Second, investors did not expect the US dollar to appreciate. CFTC data show that they continued to hold net short speculative positions in the US dollar well into 2014. Third, capital inflows into the US Treasury market did indeed decelerate somewhat during the first half of 2014, validating earlier expectations.

In all the European Union countries, Regulation and Supervision is undergoing major changes, and integrated supervision is a hallmark of the new reform. At the European Union level, reforms have led to the setting up of the European Systemic Risk Board and three European Authorities (European Banking Authority, European Securities and Markets Authorities, European Insurance and Occupational Pensions Authority). They work together in scrutinizing risks and formulating policies for dealing with systemic threats. The National Committee for Financial Stability has the task of overseeing the overall financial system. Therefore, the mission of adopting an integrated approach to examining risks is in its genes. The National Bank of Romania has a history of thinking “globally” about the Romanian financial system, which is of enormous help for the National Committee for Financial Stability. The Financial Supervision Authority itself has to develop its conceptual and operational arms in this regard. The very organizational map of the Financial Supervision Authority shows the attention granted to integrated supervision. Thus, a directorate for financial integration is a novelty and has a prominent role to play. It is commendable that its staffing has tried to bring in highly experienced individuals. But, however experienced these people are, there is a lot they need to understand better in order to fulfil their mission. For the sake of fairness, it should be said, that integrated supervision is at the beginning in many European Union member states. And even where it has a longer history, its performance is not stellar.
For emerging markets, credit spreads have increased somewhat, but the impact of the turbulence on these markets seems so far to be moderate. Equity markets have also seen a turnaround and in a number of countries have now regained lost ground. 4  BIS Review 115/2007  The market for asset-backed commercial paper has been severely affected. The volume of paper outstanding has fallen markedly, and the share of short-maturity paper has increased. This is in part due to the withdrawal of a number of money market funds from this market. Substantial losses in this type of fund would have resulted in customer flight and funds are therefore having to dispose of their investments in markets that are now considered uncertain. The current turbulence differs from previous periods of turbulence. The impact on equity markets and emerging economies has been limited. This time, we are dealing with a credit and liquidity squeeze at the core of the financial system. This affects many participants, including large banks. Subprime mortgages account for more than 6 per cent of the total volume of mortgages in the US. However, the problems in this segment are spreading to other housing market segments. The housing supply increases because of the rise in the number of foreclosures, and housing demand declines as it becomes more difficult for new borrowers to obtain a mortgage. This may lead to a further decline in house prices. The resulting wealth effects may have a dampening impact on household consumption.

The question of whether borrowers should choose an adjustable or fixed borrowing rate – in order to be able to safeguard their own interests to a greater extent – became more relevant with the advent of credit market liberalisation in the 1980s. However, in almost the entire period since then, the nominal interest rate level has exhibited a falling tendency, first as a result of a decline in inflation expectations, then after 2000 due to a decline in real interest rates. Borrowers who chose a fixed-rate loan have therefore not benefited from falling interest rates during the fixed rate period. There are few success stories to be heard from borrowers who chose fixedrate loans. This will probably change ahead. The share of mortgages with a high loan-to-value ratio has increased in recent years, particularly among young borrowers. In addition, more households are choosing interest-only mortgages. The opportunity to postpone paying the principal can act as a buffer when servicing the debt becomes more demanding. For many households, this buffer has already been used. The increase in household borrowing has not been matched by a similar increase in investments in financial assets. The household saving ratio has been on the decline since 2002 and was very low, probably negative, in 2006. Household saving also seems to be negative this year. This means that in addition to financing housing investments by raising loans, borrowers are also financing some of their consumption – often a new car or boat – by increasing their (net) debt.
Ardian Fullani: A summary analysis of domestic economic developments and the banking sector situation Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the regional meeting, Shkodra, 20 January 2011. *  *  *  Ladies and Gentlemen, The Bank of Albania considers its communication with the public a key element to an effective communication of its decision-making. To serve this purpose, it makes use of all forms and types of communication. However, direct contact with the people provides us with a real perception and interpretation of their position and expectations and supports a more effective decision-making process. Therefore, I am pleased to be again in your city, the centre of a region of well-known intellectual, cultural and patriotic heritage, which also gives a significant contribution to the country’s gross economic product. I would like, to start this direct communication with you with a summary analysis of domestic economic developments and, after that, dwell in more details on a number of concrete issues that affect the strength of relations between families and businesses on one side, and the financial system and banking sector on the other. During 2010, the Albanian economy is expected to have recorded a satisfactory growth. For the third quarter, annual economic growth is estimated at 4.9 per cent. The economic growth rate has been stable for the last two years, thus proving a good level of resistance to the effects of the international economic crisis. Other macroeconomic indicators have ranged within acceptable and expected levels.

Economists at the New York Fed have examined inflation expectations using a unique survey that we sponsor. As reported in a recent post on our new Liberty Street Economics blog, they find no evidence to suggest that a wage-price inflation spiral is getting underway. However, we will continue to monitor expectations for medium-term inflation very closely. To sum up, economic conditions have improved in the past year. Yet, the recovery remains moderate and we still have a considerable way to go to meet the Fed’s dual mandate of full employment and price stability. Regional economic conditions Now, how is our region doing? As attendees at previous press briefings may recall, the New York Fed produces Indexes of Coincident Economic Indicators to help monitor the performance of the region. I am pleased to report that the latest months of data no longer suggest that the regional recovery has paused, as they indicated in February. Based on these measures:   The recovery of activity in New York State and New York City continues at a steady and sustained pace. 2  BIS central bankers’ speeches    In New Jersey, activity also has begun to increase following a long period – roughly a year – where activity in the state was essentially flat. We monitor Puerto Rico using an index produced by the Government Development Bank of Puerto Rico. The index shows that the decline in activity on the island began in 2005 and continued through late 2010.
In 2005, EU Heads of Government re-launched the Lisbon strategy with an enhanced focus on jobs and growth and a streamlined governance regime. The key elements are the National Reform Programs which cover, for each country, the commitments taken over a 3-years cycle as regards structural reforms. EMU, with a single monetary policy and 12 governments responsible for budgetary policies, requires an institutional fiscal framework. It has to be simple, easy to implement, and able to ensure that fiscal policies are sound and sustainable, to avoid free-riding behaviours as well as neo-ricardian effects. The most widely-discussed surveillance process, because it is the most binding one, is the Stability and Growth Pact (SGP). The Pact may be defined as the “users instructions” for the obligation, defined in the Treaty, for EU Member States, to achieve a medium-term budgetary position of close to balance or in surplus, while maintaining the ratio of the annual government deficit to gross domestic product (GDP) at within 3 % and the ratio of gross government debt to GDP at within 60 %. Member States which do not respect these ratios face an “excessive deficit” procedure which may lead the Ecofin Council to take a series of measures which range from simple recommendations to financial sanctions. In 2005, the European Council agreed to reform the SGP. The important role of the SGP in terms of budgetary discipline is confirmed.

The reform sets out the criteria for the implementation of the excessive deficit procedure and allows for more leeway in the time-frame for correcting excessive deficits. It does not, however, diminish the binding nature or the efficiency of the Pact. Let me conclude by mentioning how much we have achieved in Europe over the last fifty years. The EU has reached a diversified but, broadly speaking, very ambitious level of integration: it is complex because the degree of integration is largely dependent on which areas are at stake, it is ambitious since, in some areas precisely, the system is completely integrated and relies on one single policy. The euro, in that regard, is both the symbol of our achievements and our best hope for the future of European integration. Thank You. 2  BIS Review 3/2007