samchain/econo-pairs-v1 huggingface dataset:
12 Towards the end of this  9  Article by Kåre Lunden in the newspaper Klassekampen, 11 November 2008. 10  Encyclopædia Britannica, http://search.eb.com/. 11  Eitrheim, Øyvind (2005) in Eitrheim and Qvigstad (Eds. ): “Tilbakeblikk på norsk pengehistorie. Konferanse 7. juni 2005 på Bogstad gård (Norwegian monetary history in retrospect. Conference, 7 June 2005, Oslo)”, Occasional Papers No. 37, Norges Bank. 12  See for example Hodne, Fritz and Ola Honningdal Grytten (2000): Norsk økonomi i det 19. århundre (The Norwegian economy in the 19th century), Fagbokforlaget. 4  BIS Review 136/2008  period, confidence provided Norges Bank with the scope to adjust the interest rate to the domestic economic situation rather than solely in relation to the gold standard. 13,14 4. The era of broken promises  The interwar years proved to be highly turbulent, both in Norway and abroad. In 1921, for example, per capita GDP in Norway fell by 11 per cent. The structure of the economy had changed, the functioning of the labour market had deteriorated 15 , external trade had become more important and the share of employment in agriculture had declined. We had become more vulnerable to external economic developments. The objective of monetary policy continued to be a stable value of money in relation to gold. However, the authorities set an ambitious goal: they aimed to restore the krone’s pre-war value, which implied deflation. Moreover, they were more patient than had been the case after the Napoleonic Wars a hundred years earlier.

Under the Bretton Woods system, countries whose public finances were in disequilibrium, or who allowed inflation to rise for other reasons, had to let their exchange rate depreciate against the dollar. When the exchange rate against the dollar fell, the value of money measured in gold decreased. BIS Review 136/2008  5  The post-war period was marked by the strong conviction that the economy could be finetuned by the coordinated use of instruments decided at a centralised level. The value of the krone was pegged to the dollar and to gold while a policy of low interest rates was accompanied by an ample credit supply. This was possible in a highly regulated economy. The positive attitude to regulation probably stemmed from the period of rationing and centralised government during World War II. The system had functioned reasonably well and a regulatory apparatus was already in place. 21 Internationally, there was widespread desire to stabilise economic developments, originating in theories published by John Maynard Keynes in the early 1930s. This was part of the background for Norwegian politicians’ ambition to fine-tune the economy in Norway. The works of A. W. Phillips 22 , published in 1958, also supported this view. According to Phillips, a country could apparently choose between low unemployment and low inflation. This menu option is often referred to as the Phillips curve. And what kind of “option” was that? Unemployment is real, while inflation is only changes in an index! By formulating the question in this way, the choice was obvious.
14 The Riksbank has communicated that the interval of 3.5 – 4.5 per cent is a reasonable assumption for the level of the long-term normal repo rate (Sveriges Riksbank, 2010). There is a great deal to suggest, however, that the normal level of interest rates has fallen (see, for instance, Armelius et al., 2014, and Holston, Laubach and Williams, 2016). For example, members of the US central bank’s monetary policy committee, the FOMC, have recently lowered their assessment of the level of the long-term US policy rate from just over 4 per cent to just under 3 per cent. 7 [12]  Chart 5. Yield in accordance with the forward curve but funding at the repo rate Per cent 4  4 Repo rate Forward curve  3  3  2  2  1  1  0  0  -1  -1 12  14  16  18  20  22  24  26  Note. Projection of the repo rate extended from the forecast in the Monetary Policy Report in Oc tober 2016. The forward curve is estimated on 26 October 2016. Source: The Riksbank  Changed interest rate environment directly impacts the Riksbank’s profit and dividend Up to now, the bond purchases have thus been profitable for the Riksbank. There are, however, good reasons to anticipate counteracting losses in the period ahead, but it is still unclear what the total effects on the Riksbank’s financial position will be.

3 At the same time, the problems of falling inflation and inflation expectations also became increasingly apparent in the euro area. This led to the European Central Bank signalling the need for even more expansionary monetary policy in the period ahead, with low interest rates for even longer, supplemented by extensive asset purchases. The increasingly expansionary monetary policy in the euro area also led to monetary policy reactions from several smaller countries on the outside. 3 The significance of the inflation target for the economy is explained in detail in Sveriges Riksbank (2015a) and  Flodén (2015). 2 [12]  Chart 2. Inflation and inflation expectations have picked up 3  3  2  2  1  1  2.3  2.3  2.2  2.2  2.1  2.1  2.0  2.0  1.9  1.9 Inflation expectations  0  0  CPIF excluding energy  1.8  1.8  1.7  1.7  CPIF  -1  -1 10  11  12  13  14  15  16  1.6  1.6 10  11  12  13  14  15  16  Note. Annual percentage change and per cent. The CPIF is the CPI with a fixed mortgage rate. Inflation expectations 5 years ahead according to money market participants. The broken line indicates the time of the monetary policy decision in February 2015.
In an attempt to protect their own real income from the unavoidable impact of higher external prices, the longer that firms try to maintain real profit margins and employees try to maintain real wages, the more likely it is that domestically-generated inflation will achieve its own self-sustaining momentum even as the external impulse to UK inflation recedes. Our baseline assumes that this risk of so-called second round effects will be contained, in part by the monetary policy measures taken and in prospect. But should this assumption come under threat or prove to be misplaced, a further monetary policy response would be required. And that brings me to the third element of our published forecast: the outlook for monetary policy. Under our baseline paths for wages and energy prices, our published scenarios suggest that leaving Bank Rate unchanged at 0.5% indefinitely would – unsurprisingly – leave inflation above our 2% target at the policy-relevant horizon, whereas following the market-implied path to 1.2% by the end of this year would have left inflation somewhat below target. I leave it to you to draw any implications for where the MPC sees the path of Bank Rate headed. But I would emphasise that these scenarios, by nature, embody the underlying assumptions about energy prices and wage developments that I have discussed. Since the outlook for wages and energy prices is uncertain as I have emphasised, then the prospective path for Bank Rate is also uncertain.

 While it is helpful to ask what might be the most adverse consequences of any decision taken, possible tail outcomes need to be balanced in a judicious and pragmatic way against more likely outcomes. 8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  I see these elements as being embodied in the so-called risk management approach to the formulation of monetary policy, which has been embraced by many central bank policymakers.17  At a practical level, in recent years this approach has acknowledged the need for monetary policy to be cognisant of uncertainties and risks stemming from (say) the lower bound on policy rates or the threat of a liquidity trap, while at the same time recognising that policy considerations cannot ignore the implications of decisions should the trap be avoided and inflation rise over the medium term. 18  The former aspect of risk management has justified a more aggressive response to downside shocks to price stability as the lower bound drew closer. Our discussions in the MPC now also address the latter aspect of the risk management approach: how policy should evolve as inflation rises and those asymmetric risks stemming from the lower bound recede. In undertaking this discussions, the risk management approach entails judgement and pragmatism. Engineering is not enough. The inevitable subjectivity of these judgements re-introduces some art into the science of monetary policy.
Erdem Başçi: Recent economic and financial developments in Turkey Speech by Mr Erdem Başçi, Governor of the Central Bank of the Republic of Turkey, at the press conference for the presentation of the October 2013 Inflation Report, Ankara, 31 October 2013. *  *  *  Distinguished Guests, Welcome to the press conference held to convey the main messages of the Inflation Report. I will now present an overview of the report, which will be published on our website soon. The report typically summarizes the economic outlook underlying monetary policy decisions, shares our evaluations on macroeconomic developments and presents our medium-term inflation forecasts, which were revised in view of the developments in the last quarter, along with our monetary policy stance. In addition to the main text, the report includes ten boxes entailing interesting and up-to-date analyses on various topics. I strongly recommend that you read these boxes, which will soon be published on our website. Now, I would like to convey the main messages of the report. Firstly, I will review the global economic outlook given its undeniable influence on our policies. Global monetary policy developments continued to influence financial markets in the third quarter of the year. Ongoing concerns over global growth led to expectations that the US Federal Reserve might soon start trimming its bond purchases, while the pullback on bond purchases was postponed later on, causing the global risk appetite to remain volatile (Chart 1.1).

Now, I would like to talk about developments in economic activity and the short-term outlook, on which the inflation forecasts are based. Economic activity was more favorable in the second quarter of 2013 compared to the outlook set in the July Inflation Report. The stronger-than-expected economic activity was mostly driven by changes in inventories. Private consumption demand saw a dramatic recovery, while final domestic demand remained almost flat due to slowing public demand (Chart 18). On the other hand, imports grew strongly, while exports increased only modestly due to weak global demand. Indicators for the third quarter of 2013 suggest that economic activity will grow more moderately than in the second quarter. In the July-August period, production of consumer goods was down from the previous quarter, while imports of consumer goods continued to rise. On the investment side, indicators show a weaker outlook compared to consumption demand. While exports were flat, imports saw a remarkable decline. Therefore, we expect the negative contribution of net exports to growth to decrease in the third quarter. Meanwhile, the export-weighted global growth index remains virtually unchanged from the previous reporting period (Chart 19). Final domestic demand is likely to continue to recover modestly in the second half of the year. Thus, we revised output gap forecasts slightly upwards for 2013. However, downside  BIS central bankers’ speeches  3  risks to recovery increased following the latest financial developments. Accordingly, we revised output gap forecasts downwards for 2014.
They make threats, even though Member States have taken strong and positive decisions. Rating agencies behave as if nothing had happened. It may seem that agencies are no longer a useful guide for investors. Would you say that their judgments are based on political criteria? Indeed, in the arguments they develop, there are more political arguments than economic ones. Credit agencies have downgraded the ratings of three large French banks. Are our banks undercapitalised? No, they are very well capitalised, in particular compared to their European and US counterparts. The importance of this downgrade should not be overstated especially since rating agencies have recently downgraded most large banks in developed countries. There is no doubt that the capital buffers of our banks are largely adequate in relation to levels in the global banking system. It is true that we are asking them to enhance their soundness in order to meet the new regulatory requirements that have been agreed at the European and global level. Banks are doing this through their own resources and needless to say without State aid. That is why I have no concerns about the French banking system. Should banks’ customers, companies and individuals, fear a credit crunch? No, and the figures bear it out. French banks’ lending activities remain very robust: up 8% for mortgage lending, up 5.6% for corporate lending and up 5.1% for lending to SMEs. It is precisely their retail banking business that makes them sound and profitable.

BIS central bankers’ speeches  5  forward, banks will destroy value. This is not the sign of a vibrant banking system ably supporting the real economy. The last time price to book ratios were this low was in the euro-area crisis in 2011/12 and before that in the global financial crisis in 2008. In those cases, particularly the latter, the fall in banks’ price to book ratios reflected concerns about their resilience and indeed their solvency – that is, whether they had sufficient capital to back the riskiness of their assets. Low price to book ratios were accompanied by very high debt spreads on bank debt for the same reason. This time round, banks’ low price to book ratios are accompanied by relatively low debt spreads. 12 In the main, they probably do not reflect concerns about banks’ resilience, which has improved significantly since the crisis. The FPC and PRA Board, in 2014 and 2015, subjected the UK banking system to severe but plausible hypothetical stress tests. The 2014 test was centered on a sharp contraction in UK economic activity – in the test house prices fell by 35% and CRE prices fell by 30%. The 2015 test featured a global slowdown emanating from weak growth in emerging-market economies. The results of both tests showed that, on the whole, UK banks would be able to withstand these scenarios and continue lending to the real economy. Therefore, the current low price to book ratios probably reflect concerns about banks’ future prospects.
The Government’s efforts need to be complemented with a better utilisation of savings accumulated by the private sector. The Malta Development Bank can help in this regard, by identifying gaps in the financing of viable projects and partnering with financial intermediaries and other stakeholders to develop financial instruments that can finance them. Apart from infrastructure bottlenecks, international institutions that monitor the business environment flag other areas that warrant immediate attention. While we have significant  reservations on a number of methodological aspects underlying such surveys, we also share the view that in some areas we do need to step up our efforts very considerably. This is notably the case as regards the efficiency of court proceedings. Although the time it takes to resolve court cases has more or less halved since 2010, it is still among the longest in the European Union. Other challenges we need to address concern the length of procedures to set up a business, the low educational attainment level relative to our peers and a limited capacity to innovate. These are essential elements that support investment and productivity. The development of an intelligent online business portal which ties all Government business-related services into a one solid platform should put businesses in a better position to do business. The new legislation in the area of digital innovation provides the legal framework for business to embrace disruptive technologies.

This will leave a wealth of information for authorities to exploit as they direct efforts into strengthening further the current institutional framework and operations. All stakeholders are encouraged to seize the opportunity to improve the reputation, soundness and resilience of our financial services sector. Malta is also actively working to embrace blockchain technologies, including virtual assets. 2018 will also be remembered as the year when Malta was propelled to the fore with the introduction of a holistic legislative and regulatory framework for fintech and virtual assets, asserting itself as a digital hub. Such technologies provide the benefits of reducing transaction costs which can be passed on to consumers; greater efficiency, transparency, advancement in KYC capabilities and competition. While these benefits are acknowledged and duly welcomed, one must also be sensitive to the underlying potential risks they might pose as they become more main-stream. The effective implementation of the new legislation and regulation requires expertise not only in the underlying technology, but also in its legal aspects and all the risks involved, such as cyber risks. The fast technological advancements are also a challenge and staying ahead of the game from a  Page | 9  regulatory perspective should be given high importance for the successful development in this new field. Thus, while all the legislative initiatives for this new technology to succeed augur well, the authorities need to remain vigilant about the implications for financial stability stemming from the digital economy.
Equally, the policies of the industrialised countries were aimed at ensuring a sufficient level of total demand to maintain stable inflation, and so desired levels of output and employment. That required policies to stimulate domestic demand and current account deficits to offset the surpluses elsewhere. The perverse result was huge flows of capital from the poorer developing economies to the richer mature economies. Large amounts of savings flowing into global financial markets would by themselves have pushed down real interest rates. That, together with the success of central banks in the industrialised world in maintaining low and stable inflation – something that they had not been able to do in the preceding three decades – meant that nominal interest rates fell even further. As a result, nominal risk free returns fell to levels not seen in a generation. The combination of a fall in risk-free returns, and large amounts of capital looking for a home in western capital markets, created a demand for assets offering higher returns – the socalled search for yield. Investors, including banks, overlooked the fact that higher returns could be generated only by taking higher risks. As a result, money was lent on easier terms. That helped to push up further asset prices that had already risen as real interest rates were falling. It also led to an explosion in the size of the financial sector as new instruments were created to satisfy the search for yield.

Some have suggested as a result that Bank Rate be directed not only at meeting the inflation target but also at preventing excessive increases in debt and asset prices. Leaving to one side the feasibility of targeting the latter, the obvious question is how one can meet two objectives with one instrument. The answer of course is by accepting a trade-off between the two objectives. But why should we accept unemployment or high inflation in order to reduce  2  BIS Review 8/2009  financial imbalances? It would be more sensible to use Bank Rate for its traditional task of targeting inflation to maintain a balance between demand and supply in the economy, and to create a new instrument to limit the build up of debt. What is required is an additional policy instrument to stabilise the growth of the financial sector balance sheet. There is an active international debate as to the optimal design of such an instrument, but one way or another it must provide incentives for banks to reduce the volatility of their balance sheet. It is also clear that at the heart of the crisis was the problem identified but not solved at Bretton Woods – the need to impose symmetric obligations on countries that run persistent current account surpluses and not just on countries that run deficits. From that failure stemmed a chain of events, no one of which alone appeared to threaten stability, but which taken together led to the worst financial crisis any of us can recall.
An important element of Islamic finance is the strength and soundness it derives from its Shariah principles. Islamic finance has an inbuilt dimension that promotes soundness  2  BIS Review 121/2007  and stability, underpinned by the Shariah injunctions. These Shariah injunctions essentially interweave the financial transactions with genuine productive activities. The soundness and viability of Islamic finance as a form of financial intermediation is premised on the fundamental requirement that Islamic financial transactions need to be supported by an underlying productive activity. There is therefore always a close link between financial and productive flows. The financial transaction has to be accompanied by genuine trade or lease-based and business related transactions where interest is eliminated and profits or rentals are the economic rewards. Alternatively, the Islamic financial institution may enter into a joint venture as a means of financing, in which it becomes a joint partner in the economic activity based on a pre-specified profit sharing arrangement. In addition, there are also explicit restrictions on unethical and speculative financial activities. The intrinsic nature of Islamic finance also encourages risk management and provides confidence through explicit disclosure and transparency of the roles and responsibilities defined in the contract. In Islamic finance, strategies to minimize and manage the risks involve integrating the risks in the real activities. The real activities thus need to generate sufficient wealth to compensate for such risks. In contrast, conventional instruments generally separate the risks from the underlying assets.

A number of international financial centres have recognised Islamic finance as an integral part of their financial markets in order to complete the suite of financial products and services available, and are therefore actively developing this segment. This trend is envisaged to stretch the New Silk Road from Asia and Middle East and extend to the West and to other parts of the world. Further opportunities: the Sukuk market Among the more significant developments in Islamic finance in the recent period has been the development of the Sukuk market. Although the size of the Sukuk market is modest by global standards, the Sukuk market has experienced remarkable growth, increasing at an average annual rate of growth of 40 percent. This growth is spurred in part by the growing funding requirements in emerging market economies, in particular, in Asia and the Middle East in which there has been increased investment activity. There has also been significant demand for the Sukuk spurred by the high levels of surplus savings and reserves in Asia and in the Middle East. This strong demand has also has been reinforced by the strong financial flows in the international financial system that is in search of higher returns and greater diversification of risks. It has been estimated however that about 80 percent of the sukuks issued have been subscribed by conventional international investors.