samchain/econo-pairs-v1 huggingface dataset:
At the beginning of the 1990s, the Norwegian economy was in a deep recession. Production was far below capacity. The output gap was negative. When growth in the economy picked up, capacity utilisation increased. Around 1996, there was full capacity utilisation, and the output gap, as we normally measure it, closed. The mid-1990s represents a period of stable and solid growth. In contrast to the situation in the two previous decades, inflation was low and stable. From the mid-1990s, the rise in labour costs and in prices for goods and services produced for the Norwegian market accelerated. The upturn peaked in 1997, with mainland GDP growth approaching five per cent. The economy then shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. Since 1998, output growth has been low and the output gap has narrowed. Current capacity utilisation is on a par with the level prevailing in 1995-1997, before cost inflation accelerated. Growth stalled last winter and has been well below capacity in the first half of 2003. Growth is now picking up momentum, however. Inflation has slowed over the past 12 months and is now considerably below target. Annual CPI-ATE inflation was 0.8 per cent in October. Inflation in 2003 has also been lower than projected in the 2001 and 2002 Inflation Reports.

Given the high level of costs and excess capacity in a number of sectors, we expect, however, that it will take some time for employment and investment in the business sector to pick up. On balance, we expect investment by mainland enterprises to make only a marginal contribution to growth in the Norwegian economy in 2004. Renewed growth is not expected until 2005 and 2006. Investment in the petroleum sector, however, is expected to increase markedly both in 2003 and 2004. Even though the share of imports is high, these investments will contribute to holding up activity in oilrelated industries. The current low level of exploration activity on the Norwegian continental shelf points to a relatively sharp fall in investment looking further ahead. Demand is also being sustained by investment to keep mature fields in operation and by the scrapping of old platforms. Another important factor influencing overall demand in the economy is fiscal policy. In recent years, expenditure growth in the government budget has increased at a faster pace than growth in mainland GDP. Nominal expenditure growth was particularly strong in 2002, but slowed markedly in 2003. In the central government budget for 2004, the Government proposes a 5.4 per cent increase in expenditure, or slightly more than estimated trend growth in nominal mainland GDP. The level of taxes remains virtually unchanged in real terms. Fiscal policy has stimulated economic activity, also when adjusted for cyclical fluctuations. This is reflected in the increase in the structural, non-oil budget deficit since 2001.
Mr. Chairman, the near collapse of the financial system has in turn led to a rapid and deep global recession – the sharpest since World War II and the first in which all regions of the world were suffering a downturn in fortunes at the same time. This downturn may well have its most devastating impact on poor countries, particularly in Africa – who incidentally were not responsible for the crisis. It is worth asking the question that if the basic insights on the powerful impact that a lack of information could have on markets was known as far back as 1970 – why were these lessons not assimilated into the policy making tool kit of central banks or in the financial architecture of our economies? BIS Review 95/2009  1  Mr Chairman, I have no doubt that perhaps a large part of the answer to this question is in the fact that the 1970s had a very different financial environment when compared to our current environment. As the financial markets developed, driven by technological and financial innovation and the deregulation of financial services, financial institutions were able to price and sell risks through ever more complex financial products. The very nature of complexity of these products created the asymmetries in information that has proved catastrophic to the world economy.

Back to liquidity Given the unprecedented shocks facing the global economy it is more important than ever that there is a focus on ensuring the right frameworks and approaches are in place to bring about appropriate levels of risk management and resilience to safeguard financial stability. This is particularly true in terms of liquidity, where the experience of recent weeks reminds us of the range of vulnerabilities which exist, particularly in the NBFI sector, which is why it is an ongoing focus for the G20. Liquidity is an important and topical subject. But given our focus for today let me return to the Bank's Alternative Liquidity Facility (ALF) to illustrate my favoured approach of using the 4Cs. For many years Islamic banks have faced challenges in efficient liquidity management, unable to hold the same high-quality liquid assets as conventional banks, such as central bank reserves, sovereign debt and asset-backed securities. Further, while Basel liquidity rules gave national supervisors discretion to treat sukuk as high quality liquid assets, the amount of sukuk in issuance eligible for this treatment is modest relative to demand for it. To avoid being caught short, Islamic banks have historically needed to structure themselves in inefficient ways by, for example, holding large stocks of non-interest bearing cash, or having limited offerings of short-term deposits. The ALF – structured as a wakalah, or fund-based facility – provides a creative solution.
This is very much work in progress, with the aim of helping the MPC to form judgements both about the most likely outturns and the uncertainty surrounding them. Handling uncertainty and disagreement Even armed with a range of economic models to aid structured discussion and enforce a degree of intellectual discipline, how is it possible for a group of nine individually accountable economists to reach sufficient agreement to publish a forecast which is described as reflecting their best collective judgement? An important part of the answer lies in the use of formal techniques to capture uncertainty and risk. These antedate the MPC. The Bank of England started publishing fan charts for its inflation projections in February 1996, following an early experiment with what might be called ‘trumpet charts’.7 The motivation was purely to illustrate the uncertainty inherent in all economic projections. While trumpets consisted of a single shaded area around a central projection, corresponding to average absolute forecast errors (see Chart 1), fan charts (see Chart 2) were graduated to show the full distribution of possible outcomes.8 Chart 1. November 1995 RPIX inflation projection – symmetric error bands  Chart 2. February 1996 projection – fan chart  RPIX  inflation  6  Ashley, J, Driver, R, Hayes S and Jeffrey, C (2005) ‘Dealing with data uncertainty’ Bank of England Quarterly Bulletin Winter 2005, published on 14 March 2005. 7  I am indebted to Mark Allan and James Bell for this nice descriptor.

Proportion of actual and expected interest rate changes occurring in Inflation Report  (A) Actual changes Percentage of interest rate changes 100 90 80 70 60 50 40 one-third 30 20 10 0 1997-2000 2001-present whole period IR months Not IR months  (B) Expected changes Percentage of interest rate changes 100 90 80 70 60 50 40 one-third 30 20 10 0 1997-2000 2001-present whole period IR months Not IR months  What – if anything – should be read into the MPCs apparent change in behaviour? On the face of it, the evidence might suggest that the re-evaluation of the outlook undertaken during the quarterly forecast has become more influential. But there are a number of possible explanations. Most obviously, it could be a reflection of the shocks that have come along in the last 4 years. These may have required fewer changes in the policy rate than in the pre-2001 period. Alternatively, the required adjustments in rates might have been bigger in the early days, and if the MPC had an inclination to change rates in small steps, perhaps because it had good reasons for proceeding cautiously, then larger desired adjustments might have required more frequent changes: of the 16 changes in the first period, 7 were back-to-back, while in the second period, only 4 out of the 14 changes happened in consecutive meetings. The turnover in the Committee’s membership since 2000 might provide a different kind of explanation.
In Australia, for example, the 1998 Payment Systems (Regulation) Act gives the RBA powers to regulate the payments system and purchased payment facilities (such as travellers’ cheques and stored value cards). It also allows the RBA to obtain information from payment system participants and to set access regimes and determine risk control and efficiency standards for designated payment systems. The RBA’s responsibilities in this regard are discharged by a Payments System Board. The adoption of Real Time Gross Settlement (RTGS) has been another key risk reduction initiative on the part of many central banks in the past decade and a half. These systems eliminate the build up of settlement exposure and Herstatt risk between financial institutions as a result of the exchange of high-value payments and debt securities settlements. Instead, individual transactions are settled in real time across accounts at the central bank. The availability of RTGS is also an important step in dealing effectively with foreign exchange settlement risk. Finally, no discussion of payments system oversight would be complete without some mention of AntiMoney Laundering initiatives. AML is important for the integrity of payments systems, and thus also has important macroprudential implications. The publication of a Financial Stability Report is the second way in which central banks have given more prominence to their macro prudential responsibilities. The Bank of England was among the first movers and its Financial Stability Report is now a decade old. The report recently underwent a revamp reflecting how rapidly this type of analysis has evolved in that time.

Given the huge bills we, as taxpayers, are facing, that is very understandable. I welcome the ongoing discussion and many of the regulatory tools and changes that are being introduced. But while many of these new preventive tools – such as heightened capital requirements and liquidity regulation – will strengthen the resilience of the financial system, we can never completely eradicate the risk of a financial crisis. Also, over time, people either tend to forget or to put too much faith in some new remedy. This time, sophisticated risk management techniques and new models of financial intermediation fostered complacency among investors and regulators. Everyone seemed to believe that history would not repeat itself. But it always does. Regardless of the preventive measures we introduce, crises will reoccur. And when they do, you need to act effectively and swiftly with the regulatory framework you have at hand. Today, I am going to focus on what I see as the core principles of effective crisis management. I am going to give you some examples of what I see as good crisis management, but I will also show the detrimental outcome that may result when these core principles are violated. In addition, I will also touch upon how regulation may facilitate – but sometimes also hinder – the application of these crisis management principles. One of the lessons I have learnt is that resolving a financial crisis takes time. It is a messy process and it costs a lot of money.
Today's forum therefore seems to fit in very well with the European spirit now sweeping Hong Kong, and I congratulate the organisers on putting together a very lively and topical programme. It is a particular pleasure to be presenting together with Christian Noyer, Governor of the Banque de France. He has made some very thoughtful remarks on the first question for discussion. I intend to comment on the second question: "Can the euro be a benchmark for Asian monetary co-operation?" But before I address this question, we need to ask another question: how ready is Asia for closer monetary co-operation? We are, I think, all aware of the considerable differences in the political systems, the cultures, the historical backgrounds, and the economic, financial and monetary systems of the countries in this region. I think it is largely accepted that these differences are greater than the differences between the various economies that make up the euro zone. Nevertheless, it is important not to overstate them. Nor should we overlook the regional integration already in progress in the trade, financial and monetary spheres. Let me briefly outline these three forms of integration. About half of total trade in the Asia region is intra-regional trade. Trade integration has been largely market-driven, and the process has stimulated the signing of various free trade agreements, which will, in turn, encourage further trade integration in the region.

There is, of course, traffic in the other direction, but this is of a much more volatile, potent, demanding, and at times predatory nature, and it can sometimes - as we saw in the late 1990s - be difficult to cope with, to put it mildly. There is now a common desire among economies within the region to reduce dependence on the recycling of domestic savings through the developed markets, and therefore reduce vulnerability to financial shocks, by promoting greater regional financial intermediation. A number of regional initiatives are being implemented, the most notable of which is the Asian Bond Fund project, a collective initiative of 11 central banks and monetary authorities to develop bond markets in the region. A great deal of emphasis is also being placed on getting one's own house in order, by practising sound macro-economic policies and building robust institutions. Some attempts have been made at financial infrastructure integration: in Hong Kong, in particular, we have been operating US dollar and  BIS Review 19/2005  1  euro clearing systems and opening linkages with other jurisdictions and international systems. But it has to be said that, so far, these facilities have been serving domestic needs far more than regional needs. This is, I think, a reflection of the rather moderate level of financial system integration in the region. To take banking as an illustration, there may well be quite considerable integration across the borders of immediate neighbours: between Hong Kong and Mainland China, for example, or between New Zealand and Australia.
In each Industrial Revolution, a first imaginative step resulted in a great leap forward for societal living standards, a mass flourishing.18 In that sense the three industrial revolutions of the past three centuries fit the longer-run evolutionary arc of humankind. It is creativity and imagination, fuelled by big brains and nourished by cooked meals, that set humans on their jet-propelled evolutionary path. The rapid, ideas-fuelled, progress made by societies over recent centuries is a continuation of that ever-upward evolutionary arc. Except, that is, for one small detail. The evolutionary arc of humans has not been ever-upward. The historical path has not been a North-bound ascent. While human ingenuity and creativity have been ever-  17 18  Haldane (2018a). Mokyr (2011). 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  present, economies and societies have in fact spent protracted periods crabbing sideways. Prior to the first Industrial Revolution, living standards appear to have been essentially static for several thousand years.19 Living standards in Glasgow in 1750 were little different than their ancestors constructing Hadrian’s Wall. Levels of poverty, nutrition, infant mortality, height and longevity would also have been indistinguishable. Prior to the Industrial Revolution, societies and economies stood still, financially and physiologically. There was flat-lining, not mass flourishing. Societal progress was far from being a social norm. What explains this great pause in living standards? It was not through lack of ideas and imagination. People did not suddenly make like monkeys for millennia.

  In Texas, 38 percent of the population is Hispanic versus 16.3 percent in the U.S.    “Jose” has been the top male baby name in Texas every year since 1996, when it replaced “Michael” and “Christopher.” We are the only state in the union with a Latino baby name ranked number one. Those are some basic facts. Here are some others for you to consider: For the past 20 years, the Eleventh Federal Reserve District – in which 96 percent of the economic output is generated by Texas – has outgrown the rest of the Federal Reserve districts and the United States by significant margins. We have grown our real – or inflationadjusted output (real state gross domestic product) – by 3.6 percent compounded over 20 years, whereas the rest of the U.S. (real gross domestic product) has grown at 2.5 percent compounded; annual job growth in Texas has outpaced the nation by 1 percentage point a year; population growth within Texas has compounded over the past two decades by 2 percent per annum, versus 1.1 percent for the rest of the nation. We now have the second-largest Congressional delegation in the country behind California. But the growth dynamic here is vibrant, whereas that of California is stagnant. This is why we are picking up population and Congressional seats, while the recent U.S. census apportioned no additional seats to California. In sum, we are a vibrant and strong economy.
Besides acting in a countercyclical manner, in order to preserve the consistency and the sustainability of real convergence, monetary policy should also be flexible while avoiding extremes. On one hand, it should by no means ignore the threat of inflation for the sake of fast and easily gained (and therefore illusory) prosperity. On the other hand, it should avoid becoming, in Mervyn King’s words, an “inflation nutter”. With this philosophy, back in 2005, the National Bank of Romania decided to adopt a “light” version of inflation targeting, as monetary targeting had to be abandoned mainly due to the broken relationship between monetary aggregates and inflation. Light inflation targeting was deemed more suitable than any other monetary policy regimes for sustainably achieving price stability, while limiting the cost of excessive volatility in output and employment. A peg was not a feasible option, since exchange rate flexibility was seen as an asset for an economy as big and rigid as Romania was at the time, especially given the widening external imbalance and the upcoming stages of capital flows liberalisation. We focused our monetary policy strategy on the medium-term achievement of the inflation objective rather than on hitting the target as fast as possible at any costs. This strategy has been supported by a managed floating exchange rate, which proved to be a highly effective alternative to free floating in cushioning the economy from the impact of sizeable capital flows.

It is nevertheless true that the implementation of Basel Pillar 2 on the basis of the regular supervisory review exercises has somewhat changed the situation. Pillar 2 allows specific requirements to be made of each bank on the basis of its risk profile so as to cover aspects not contained in Pillar 1 (minimum regulatory capital ratios). In that way the supervisor can regulate solvency requirements by adjusting them to each bank’s situation, thereby  BIS central bankers’ speeches  1  extending the supervisor’s discretion and reinforcing its role, while reducing commensurately the relative significance of the general solvency requirements set in the regulations. Likewise, the inclusion of stress tests as a supervisory tool extends the supervisor’s capacity to impose capital requirements or other constraints on banks when this is necessary to withstand adverse scenarios, even if such scenarios are rather unlikely. Once again, this tool broadens the weight of supervisory action. That said, in order to optimise the scope of supervision, supplementary instruments – that are not always available in accordance with the prudential regulations in force – are needed. For instance, not in all jurisdictions must the supervisor expressly authorise the eligibility of certain capital instruments, the acquisition of qualifying holdings in other financial institutions or dividend pay-outs charged to reserves. Above all, effective supervision should occasionally be based on discretionary actions rather than mere application of the instruments expressly provided for under the regulations.
Macroprudential policy for the banking sector cannot suffice to contain the systemic risks 8  See Martínez Miera and Vegas (2021). 18  threatening financial stability if such policy omits the other financial sectors. Indeed, the introduction of new requirements in one part of the financial sector may inevitably induce a shift in or migration of risks to other sectors of the financial system, because the latter are less regulated or simply subject to looser regulation. It is thus vital to also have a macroprudential framework that can reach all segments of the financial system. To date, however, macroprudential policy has been largely confined to the credit institutions sector. Thanks to the work of the BCBS and to the regulatory commitments of the key European institutions and national authorities, it has been possible to develop a macroprudential framework on the basis of microprudential capital requirements. In other financial sectors, by virtue of their activity and the characteristics of the agents operating in them, it would be necessary to develop a specific typology of instruments that act to the benefit of financial stability and fit, in turn, into the general prudential and regulatory framework prevailing in such sectors. Thank you. 19  References Adrian, T., N. Boyarchenko and D. Giannone (2019). “Vulnerable Growth”, American Economic Review, vol. 109, no. 4, pp. 1263-1289. AMCESFI (2020). Annual Report 2019. Anguren, R., L. Gutiérrez de Rozas, E. Palomeque and Carlos J. Rodríguez García (2020). “The regulatory and supervisory response to the COVID-19 crisis”, Financial Stability Review, no.

In the short and medium term, the crisis will have desinflationary effects that are already noticeable, with inflation temporarily falling in August by 0.2% in the euro area, and by 0.1% in Germany. For a year as a whole, we are expecting a slightly positive inflation of 0.3% in 2020 and 1.0% in 2021. As you know, we unfortunately remain well below our inflation target of "less than, but close to 2%". The other aspect of the response to the health crisis are fiscal measures, primarily at the national level. Germany clearly made greater use of the financial leeway it had built up since the 2009 crisis. Its fiscal stimulus package (as a percentage of GDP) is at this stage greater than France’s. The effectiveness of its stimulus package is still difficult to anticipate: in particular, the 2/4  BIS central bankers' speeches  temporary reduction in VAT appears costly. The French government also announced a EUR 100 billion stimulus package last week. I wish to mention three positive features. It focuses on business supply and investment, and not household demand. This is fully justified, since households, protected by short-time working measures, except for the most vulnerable ones, will have saved nearly EUR 100 billion this year. This plan also has a strong focus on transformation, including ecological reconstruction - a third of the funds are allocated to this area.