samchain/econo-pairs-v1 huggingface dataset:
Miguel Fernández Ordóñez: Recent developments in the Spanish economy Testimony by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, before the Senate Budgetary Committee, Madrid, 23 November 2009. *  *  *  Ladies and gentlemen, I appear before this Committee as part of the parliamentary discussion of the State Budget for 2010, at a time when the deep international financial and economic crisis is giving way to a recovery, albeit one that is expected to be slow and not free from uncertainty. Following the successive downward revisions to growth projections during the summer of 2007, the outlook has begun to improve in recent months. Indeed, many countries are posting positive growth rates for the third quarter of 2009. Yet we must acknowledge that this improvement is largely the outcome of the extraordinary large-scale measures adopted globally to boost demand and support the financial system. We still do not know whether the incipient world recovery is sufficiently self-sustaining for the exceptional stimuli to begin to be withdrawn without the risk of economic activity falling again. In the case of the Spanish economy, the situation is more complex. While there has been a similar or even lesser decline in output than in other developed countries. However, the effects in terms of employment and public finances have been sharper. Hence the role economic policies must play to consolidate the recovery is essential. We are thus at a crossroads where it is vital to make the right diagnosis and select the right economic policy tools.

In particular, there have been substantial declines in industrial goods prices over the past year, while services prices, traditionally prone to very high rates of increase, have eased substantially and have even been growing at a lower rate than in the euro area in recent months. Admittedly, this negative inflation differential is very closely linked to the weakness of demand in Spain. But it is a promising sign of the competitiveness on which the pick-up in activity should be based, so it is important that this price moderation should be preserved in the near future. As I said earlier, there are two adverse consequences of the way in which these imbalances are being corrected: the excessive toll imposed on employment by the crisis, owing to the poor functioning endemic in our labour market, and the deterioration of public finances. Job destruction began with great virulence in construction and subsequently spread to manufacturing industry and market services. It was centred above all on temporary contracts, given the prevailing duality in the labour market. In recent months employment has continued to fall, although the State Fund for Local Investment has slackened the effect. The unemployment rate skyrocketed from 8% in 2007 to almost 18% in the third quarter this year, when it stabilised due partly to the strong slowdown in the growth rate of the labour force. This slower labour force growth was the consequence of part of the population being discouraged by poor employment prospects and of the return of some immigrants to their countries of origin.
Sweden also gives advice to countries wishing to improve their application of these norms. Riksbank employees have provided assistance in countries all over the world, including Latvia, Poland and Sri Lanka. A good example of internationally agreed norms for increasing stability on the financial markets is the capital adequacy rules for banks that were developed by the Basel Committee. These rules came into force in 1988 and cover risks in for example lending, interest rate trading and foreign exchange trading. In principle, they require that the greater the risk taken by a bank, the more capital it must hold. As it costs money to hold capital, this creates an incentive for the banks to reduce their risk taking. The rules also increase the banks' opportunities to cover any losses they may incur. The current rules are applied in more than 120 countries. The proposal for new capital adequacy rules recently presented makes an even closer connection between the capital requirement and the risks taken, as well as reducing regulatory arbitrage and increasing the requirement for transparency. While the Basel rules thus reduce excessive risk taking, they do not impair transactions made with the purpose of redistributing risks between banks, enabling a healthy level of risk taking to be attained within the respective institute. These transactions contribute to reducing the banks' risk taking and currently comprise a large part of the turnover on the foreign exchange market. Allow me to give an example of how this works.

There were in fact transitional regulations that initially meant that the banks were not able to calculate so liberally, but these were the regulations that would apply in the longer term and thus those that the banks and investors, and often the authorities, primarily focused on. Given that the banks, in Sweden and in other countries, only needed a small amount of capital, and given that it was often assumed that they were backed by government guarantees, it was highly profitable for them to take substantial risks. The banks themselves carried only a small part of these risks, while it turned out that the banks’ customers and the taxpayers had to carry the major part. In several countries – Spain, Ireland and Denmark for example, in addition to the United States – we have seen how substantial falls in the prices of the banks' assets, mainly in the form of mortgages, have led to major economic problems. The point is that the risk capital that the banks and their shareholders provide is limited to the value of the share capital. But society’s risks are greater than this. A mainstream assessment in economic research is that a national crisis in the financial system costs the economy around 60 per cent of GDP. In Sweden, this would be equivalent to over SEK 2 000 billion, or  BIS central bankers’ speeches  1  more than SEK 200 000 per Swede.
They failed to see the nature of the exchange rate regime and that changing such concept could only make greater damage. We endured. The situation consolidated. The data on credit growth, which, even back than, was not within the negative zone, unlike most of the European countries, and the banking sector stability justified our beliefs. Certainly, there are other sensitive situations. They will maybe take their turn on some other occasion. Not now during the pre-election period! Dear all, As I already said, the economy is an open equation with constant unknown variables. The financial crisis and economic recession denied many lessons developed to the level of a  BIS central bankers’ speeches  3  dogma. The central banks started a new post-recession period. They will have to take care more of the financial stability, because it turned that the price stability is not sufficient to ensure financial stability. It raises many new issues that will not be discussed now. I am convinced, however, that this institution becomes more capable to face all challenges. I wish that Dimitar and all staff members achieve better results and certainly, a personal happiness. I would like, once again, to thank you for being here tonight, for the cooperation we had, for each word of kindness that we exchanged and for everything that could join us in the future. I also wish you professional satisfaction and personal happiness. Thank you. 4  BIS central bankers’ speeches

Do we as economists and policymakers truly understand all the synergies, complementarities and marginal effects of different reforms? Probably not to the extent that we would like. Are we on the same boat when it comes to their positive gains and externalities? I would dare say yes. We also have to keep in mind the political economy dimension of the process. We need to ensure broad support for the reform agenda especially since there might be some short-term costs of certain reforms. In that sense, lacklustre support for market economy and democracy as well as low faith in justice systems in CEE countries compared to long establishes democracies might complicate matters further. This is where policy transparency and communication plays an important role. Clearly, not everything we do will always get full support from the broad public, particularly in the case of structural reforms with long-term gains and short-term costs, but sometimes boldness is rewarded beyond our expectations. 2/2  BIS central bankers' speeches
Elvira Nabiullina: Review of recent inflation developments in Russia Statement by Ms Elvira Nabiullina, Governor of the Bank of Russia, in the follow-up to the Board of Directors meeting, Moscow, 24 March 2017. * * * Today the Bank of Russia Board of Directors decided to reduce the key rate to 9.75 p.a. The economic situation is more favourable than we expected in December 2016. The upturn in the economy has started earlier and is progressively gaining sustainability. The balanced growth in supply and demand exerts no considerable inflationary pressure. Inflation is slowing down faster than we predicted. Inflation expectations continue to go down. These developments favour a change in the key rate. We reduced it today by a quarter percentage point and we are looking into further cuts in the second and third quarters of this year. At the same time, we need to be convinced that the positive trends will gain momentum. We need to see inflation not just slowing down, but anchoring near the 4% target. Therefore, inflation expectations should be anchored at this level. Inflation risks have abated somewhat for now, but they may materialise over the forecast horizon. Therefore, we will reduce the key rate progressively in the medium term and are likely to take short pauses while sticking to moderate tightness in our monetary policy. We will mostly rely on our pivotal meetings when we update and release our macroeconomic forecast whereon our decision is based.

It is very important for the economy to have inflation anchored at 4%. What stands in the way? The uncertainty of external factors, including oil prices. We are conservative about it and therefore will pursue our monetary policy, and easing thereof, with great care and precision, taking these external factors into account. Households still have high inflation expectations. There is a risk that they will be too slow in verging towards our inflation target. This 10 / 14  BIS central bankers' speeches  is also a risk which may sustain conditions of high inflation. Taxes are still adding to the uncertainty. However, we realise that at some point forthcoming tax decisions will have inflation repercussions. Certainly, we have taken all of these factors into account. Again, we assume that we will always analyse the situation, analyse newly received data on the current situation, revise our forecasts and make decisions accordingly. I have already said that we believe 0.25 pp to be an appropriate pace for reducing the key rate to a specified level, which we have actually already reached. However, we may deviate from this pace of 0.25 pp during this period. Is there any difference between 9.75% and 10%, and does our rate work? The rate works, as we can clearly see. It effectively determines short-term rates on the money market and ultimately translates these into rates on bank loans and deposits. This takes effect with a certain lag.
Furthermore, as the final outcome of this task is necessarily uncertain, it is no exaggeration to say that much of the success of the entire process hinges critically on how banks cope with the risks they face when deciding how to allocate resources. I have tabled some of the main elements on which I will base my subsequent arguments, which may be summarised as follows. The overall effects of monetary policy decisions cannot be meaningfully understood without previously assessing how the banking system is performing the job of channelling the original impulse of the central bank in the money market into the rest of the financial system and, ultimately, into the whole economy. Thus, a continuous assessment of the norms of behaviour and the overall conditions of the banking industry is a key input for any central banker wishing to be in the best position to foresee and evaluate the potential outcome of policy choices. In my address, I will focus on the general question of how Basel II may affect the way monetary policy influences some key financial and real variables. In doing so, I will follow a strategy that is very familiar to the economics profession, in the sense that I will regard the application of Basel II as an “exogenous shock” that will eventually unleash some spillover effects into an otherwise unchanged current monetary policy framework.

Hence risk transfer includes both the longevity and investment risk. Substantial collateral from day 1 is required from the reinsurer, backing its promises to make the annuity payments in the reinsured portfolio[7],[8]. The impact of funded reinsurance is illustrated in Chart 2. While far from being common, a business model predominantly built upon funded reinsurance can be likened to an ‘originate-to-distribute’ model with upfront gains and a perception of limited retained risk. Funded reinsurance also appears to be a long way from the traditional purpose of reinsurance, which is to access wider diversification of liabilities. Nevertheless, funded reinsurance is able to unlock value from an annuity book and materially reduce the on balancesheet capital costs for the insurer, since there is no need for any investment and longevity risk capital, nor related risk margin. Given the presence of significant collateral from day 1, the recapture process this time adds the material additional risk that there are insufficient or inadequate assets in the collateral pool to meet liabilities, should a recapture event occur. The PRA is particularly focussed on the following recapture risks: 1. The recaptured assets may not always be Matching Adjustment (MA)[9] eligible or meet the cash-flow matching requirements of Solvency II. Firms may face large and uncertain costs reestablishing MA-compliant portfolios where more exotic collateral assets recaptured[10] need to be replaced, especially in a potentially dislocated market. 2.
Øystein Olsen: Economic perspectives Annual address by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), to the Supervisory Council of Norges Bank and invited guests, Oslo, 18 February 2016. *  *  *  Accompanying charts can also be found on the Norges Bank’s website. Introduction In late autumn 1857, a steamship left Christiania bound for Hamburg carrying a cargo of silver from Norges Bank to be deposited in one of Hamburg’s finance houses. In only a few months, 20 tonnes of silver worth 800 000 speciedaler were shipped south as collateral for the redemption into silver of bills and notes issued by Norges Bank. There was to be no doubt that the speciedaler was worth its face value in silver. Europe had just been hit by a financial crisis. Norges Bank intervened to maintain confidence in the country’s currency. The Bank remained faithful to the social mission it had been assigned 40 years earlier. This year is Norges Bank’s 200th anniversary. Under the Constitution, control of the monetary system was given to the Storting (Norwegian parliament). The establishment of Norges Bank in 1816 gave the authorities a tool to restore confidence in the country’s means of payment. Norges Bank had a monopoly on the issuance of currency, but the amount of currency in circulation was limited by the stock of silver. The organisation of Norway’s monetary system was inspired by the note-issuing banks that had emerged in Europe since the end of the 1600s.

With respect to stock prices, the S&P 500 index has recovered by more than 50 percent from the trough reached in March. But this should be put in context. The S&P 500 index is still about one-third below its recent peak in October 2007. Moreover, compared with its level ten years ago, the S&P 500 index is down by about 20 percent. The shock to household net worth seems likely to have several important implications for household behavior. The shock creates a risk that the household saving rate could increase further. For example, during the period from 1990 to 1992, the household saving rate averaged about 7 percent of disposable personal income, considerably higher than the 4.3 percent average rate during the first half of this year. If the household saving rate were to rise, then consumption would rise more slowly than income, making it more difficult for the economy to develop strong forward momentum. In addition, it seems likely that some workers will respond to the wealth shock by postponing their retirement. This suggests that the labor force participation rate may rise once labor market conditions improve. This would tend to push up the unemployment rate, all else being equal. The second force that could restrain the recovery is the fiscal outlook. The fiscal stimulus that is currently providing support to economic activity is temporary rather than permanent. This has to be the case if we are to ensure that fiscal policy is on a sustainable path over the longrun.
I strongly disagree with the idea that confidence in rules and public institutions can be replaced by some form of “algorithmic confidence” once and for all. Preserving confidence in money and financial stability thus requires a clear, fair and balanced “technology-neutral” regulatory framework with a simple principle: “same activities, same risks, same rules” in order to prevent both excessive and hidden risks and regulatory arbitrage. But 1/3  BIS central bankers' speeches  this is easier said than done! In the European Union, the proposal for a “Markets in CryptoAssets” (MiCA) legislation aims at finding the appropriate balance between innovation and security when regulating crypto-assets issuers and service providers. It needs to be adopted rapidly but we also have to make sure the European rulebook leaves no gaps open in view of most recent trends. Another important issue to maintain trust is that of cybersecurity. Digitalization increases the exposure – and therefore the vulnerabilities – to cyber-threats, for financial institutions as well as for their customers, and their service providers. Cyber-risk is not only a major operational risk at the entity level, but also a systemic one for the financial system as a whole. In that area, the European proposal for a Digital Operational Resilience Act (DORA) is exploring how to strengthen and upgrade IT security throughout the financial sector. I would also like to mention artificial intelligence. Because trust is about not only the financial system working well, but also making sure that algorithms do not lead to outcomes that are unduly biased or unfair.

It came care of fixing the exchange rate – first to gold under the Gold Standard and latterly in the post war period to the dollar. With the demise of the dollar standard in the early 1970s, however, the exchange rate anchor had been tossed overboard. At the Bank of England, as elsewhere, the search was on for a new nominal anchor. Into this vacuum stepped Andrew Duncan Crockett. Crockett joined the Bank in 1966 as a graduate entrant, just before the break-up of the Bretton Woods dollar standard. He set to work on the biggest problem of the day, locating a new nominal anchor. In so doing, he began working alongside another young(ish) new Bank entrant, Charles Goodhart. The result was a joint paper published in the Bank’s Quarterly Bulletin in June 1970. It was titled “The Importance of Money”.11 Re-reading it now, it was a prophetic piece of work. In the UK, it laid some of the analytical foundations for what, during the late 1970s and 1980s, became monetarism. More than that, the paper placed commercial bank money and credit at the centre of the macro-economy. It could as well have been titled “The Importance of Credit” or indeed “The Importance of Banks”. After a successful spell at the IMF, Crockett returned to the Bank of England in 1989. In 1994, he then became General Manager of the Bank for International Settlements, the central banks’ central bank. In central bank circles, change was in the air.
Our projections are based on the assumption that fiscal policy will provide some stimulus to aggregate demand and output in 2008 and 2009, but somewhat less than a mechanical application of the fiscal rule based on our oil price assumption would imply. 4  BIS Review 22/2006  Norges Bank operates a flexible inflation targeting regime and seeks to achieve an interest rate path that provides a reasonable balance between the objective of bringing inflation up towards 2.5 per cent over time and stabilising developments in output and employment. Norge Bank’s projections in the baseline scenario is based on an interest rate path that we find strikes a reasonable balance between the two objectives. In the baseline scenario, interest rates in Norway and abroad are assumed to rise somewhat faster in the longer term than current forward rates may imply. Exchange rate movements are difficult to project. The interest rate path at home and abroad may be consistent with an approximately unchanged krone exchange rate. The high growth rate in the economy implies a gradual pick-up in price and cost inflation. With interest rate developments as outlined above, CPI-ATE inflation is projected to increase from about 1¼ per cent today to about 2 per cent at the end of 2007. There are prospects of a further increase in inflation, with inflation projected to be close to the target of 2.5 per cent three years ahead. According to our estimates, capacity utilisation is now slightly higher than its normal level.

On the basis of the analysis in the Inflation Reports, Norges Bank’s Executive Board assesses the consequences for future interest rate development and adopts a monetary policy strategy for the period to the next Report. The Executive Board’s assessment in its meeting 16 March was that the interest rate may gradually – in small, not too frequent steps – be brought back towards a more normal level. The objective of bringing inflation back to target and anchoring inflation expectations nevertheless implies that monetary policy will remain expansionary. The sight deposit rate should be in the interval 2¼ – 3¼ per cent in the period to the publication of the next Inflation Report on 29 June 2006, conditional on economic developments that are broadly in line with the projections. Norges Bank’s Executive Board also decided at its meeting on 16 March to raise the sight deposit rate by 0.25 percentage point to 2.50 per cent. BIS Review 22/2006  5