samchain/econo-pairs-v1 huggingface dataset:
We have taken into account that an interest rate change will affect the krone exchange rate. It is assumed that monetary policy credibility remains intact. Developments in the krone exchange rate have a considerable impact on inflation in a small economy such as Norway. Our analyses, which are based on relationships in the Norwegian economy over the past 20-30 years, indicate that it takes some time for the effects of a lasting change in the exchange rate to pass through to consumer price inflation. The effect seems to be strongest the second year and then shows a gradual decline. A sustained appreciation of the effective krone exchange rate of 5% could reduce the rise in consumer prices by a quarter percentage point the first year, by close to half a 2 percentage point the second year and about a quarter percentage point the third year . Our analyses indicate that a sustained increase in wage growth of 1 percentage point will, in isolation, push up consumer price inflation by a quarter percentage point the first year and half a percentage point the second year. The mandate implies that the interest rate must be adapted to the outlook for the Norwegian economy. If it appears that inflation will be higher than 2½% with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½% with unchanged interest rates, the interest rate will be reduced. This orientation of monetary policy will normally also contribute to stabilising output and employment.

Change in consumer price inflation in percentage points 0 -0 .1 -0 .2 -0 .3 -0 .4 -0 .5 År  -0 .6 1  2  3  4  Source: Norges Bank JB 7. februar 2003  Effects on consumer price inflation of a persistent appreciation of 5 per cent of the import-weighted krone exchange rate.
Typically, a bank that runs its operations in a normal course of business is already expected to generate returns on their business or normal profits. If the entire profit is taken as base to calculate bonus for their board members, would that seem fair to the institution? I understand that some banks are exploring ways to remunerate board members which are linked not only to the profits of the bank, but also to other factors, such as the reduction of NPL, appropriate provision of loan loss and other indicators of stability. There is still no consensus on the issue, but moving away from the model of basing remuneration solely on net profit is the move in the right direction and is to be encouraged. In fact, if we continue to explore the question with an open mind, we should be able to come up with a better and fairer model. I would like to leave you with a thought:  4  BIS Review 25/2006  the part that is linked to profits should more appropriately be linked to excess return rather than normal profits. Finally when the remuneration has been set, the Board of Directors should take care to reconsider that the amount is not unreasonably high, as the Board is in the position to be the “Role Model” of what should be appropriate practices for the bank. If the Board takes undue benefits from the institution, this would undermine its authority and set bad example for staff and management to follow.

And that’s probably because the UK economy has weathered the squalls of the past few years rather better than both the US and the euro area. Since 2000, we have grown more strongly than the euro area, and more steadily than the US; indeed we are alone among major industrial countries in not having experienced a single quarter of falling output for more than a decade. As a result the UK emerged from the slowdown in the world economy with less slack than other economies. That is the key reason why we were the first to start raising interest rates last November, when world activity started to pick up and demand at home accelerated. Since then, a number of other countries, including the US, have begun to raise their rates to more normal levels. When I joined the Monetary Policy Committee a year ago, both the Fed and the ECB had just cut their interest rates to exceptionally low levels, reflecting real concerns about the strength of the world recovery. Activity picked up sharply in the US last autumn, but the mood only changed decisively early this year, when a million new jobs were created in just three months. It is now clear that a broad based world recovery is well under way, led by the US and Asia, especially China, but spreading to other regions. The news from Japan is more encouraging than it has been for over a decade.
Can one be sure that confidence in the inflation target will not weaken if the interest rate is lowered still more? Perhaps demand can be stimulated deliberately. Timing these matters is still not easy and there is a large risk of cyclical tendencies being reinforced instead of the opposite. But few of us would be prepared to relinquish the 3 possibility entirely. Current challenges So what does this imply in relation to the present situation in Sweden? How should we handle the combination of clearly slowing activity, persistently large uncertainty as to the direction in which we are travelling, an exchange rate that at present is unprecedentedly weak and inflation above the Riksbank’s target? First let me repeat that the initial position is relatively favourable, even though the strong upswing in recent years would have been an appropriate time to press forward with the work of improving our economy’s long-term growth potential. Just a few years ago, not many people would have believed, for instance, that our public debt would fall below the EU average. The remarkably high growth has contributed to this but so has a relatively tight stance based on clear principles for budget policy. Given a downturn of the magnitude most people now foresee, there is a risk of the budget surplus slipping to less than 2 per cent. That need not be dramatic, however. What matters is that the 2 per cent target is met over the business cycle.

3 [5]  The idea of all these seven measures is that together they will function as a type of insurance for the Swedish economy. This is a point that needs to be reiterated. The purpose of the measures is to prevent problems on the financial markets which in turn exacerbate the situation for Swedish companies. The Riksbank is supplying banks with money almost free of charge to create the conditions for companies to gain access to loans if and when they most need them. Banks having good liquidity themselves and not seeing a need to participate in the Riksbank’s programme can be a positive sign. It means that companies should not have problems obtaining bank loans and the Riksbank’s measures act as an insurance that this will continue to be the case. Another point that is worth reiterating is the magnitude of our measures. The programme of corporate lending amounts to SEK 500 billion in total, which is more than the sum of all the loans currently taken out by small and medium-sized enterprises put together. Added to this are new asset purchases of up to SEK 300 billion, almost doubling the Riksbank’s bond holdings. The Riksbank also has the possibility to, via an agreement with the US Federal Reserve, lend US dollars corresponding to SEK 600 billion. This is more than the total value of the Riksbank’s gold and currency reserves.
We have planned an open and rolling application process for these roles and intend to name additional counterparties in the weeks ahead. Complementing this effort, the New York Fed also announced a parallel process last week whereby firms may also apply to become agency CMBS dealers to support the Desk's purchases of agency CMBS. In closing, let me finish where I started. In this time of pain and hardship, we have choices to make in how we respond, and the opportunity before us is to create generational opportunities for a broad and inclusive set of businesses to help advance an equitable recovery. I look forward to partnering with you on this work for years to come. 1 1 Rajashri Chakrabarti and William Nober, “Distribution of COVID-19 Incidence by Geography, Race, and  Income,” Federal Reserve Bank of New York Liberty Street Economics, June 15, 2020. 2 2 Rajashri Chakrabarti, William Nober, and Maxim Pinkovskiy, “ Are Financially Distressed Areas More Affected  by COVID-19?,” Federal Reserve Bank of New York Liberty Street Economics, August 17, 2020. 3 3 Daleep Singh, “The Fed’s Emergency Facilities: Usage, Impact, and Early Lessons,” remarks at Hudson  Valley Pattern for Progress, July 8, 2020. 4 4 Jerome H. Powell, “Coronavirus and CARES Act,” testimony before the Committee on Financial Services, U.S.  House of Representatives, Washington, D.C., June 30, 2020. 4/4  BIS central bankers' speeches

This indicates that the countries which are still below that level have an enormous potential for further growth. But the question posed has been whether such growth would be sustainable or not in the long run. In other words, whether it could continue to create wealth and improve the standard of living of the people. It has also been observed that countries which generate a share of 60 percent and above from the services sector have been able to record a sustainable GDP expansion over the years. The larger share of services, as claimed by critiques, has in no way contributed to retard their growth. In fact, the preponderant growth in the services sector has helped them to improve both agriculture and the industry sectors on efficiency grounds, infusing sustainability to those two sectors as well. Hence, it can be safely concluded that a share of about 65 to 70 percent in the services sector would provide a country with immense prospects for wealth creation, provided it gains competitive advantage in the production of such services. In this context, the future growth prospects available to China are enormous, since its services sector still accounts for only 35 percent of its GDP. Both India and Sri Lanka too stand to gain on account of the leeway available for them to push the services sector’s contribution to above 65 percent. Hence, it is important that they should exploit this growth potential without further delay.
The fundamental problem with this arrangement was that these hybrid debt instruments often only absorbed losses when the bank entered either a formal resolution or insolvency process. It was more often the latter in many countries, including the UK, since there was no special resolution regime for banks (unlike today). But the insolvency procedure could not in fact be used because the essence of too big or important to fail was that large banks could not enter insolvency as the consequences were too damaging for customers, financial systems and economies more broadly. There were other flaws in the construction of these capital instruments. They often included incentives to redeem which undermined their permanence. They were supposed to have full discretion not to pay coupons and not to be redeemed in the event of a shock to the bank’s condition. But banks argued that the exercise of such discretion would create an adverse market reaction which would be disproportionate to the benefits, thus undermining the quality of the capital. More broadly, these so-called innovative instruments introduced complexity into banks’ capital structures which resulted from the endeavour by banks to optimise across tax, accounting and prudential standards. The big lesson from this history is that a going concern capital instrument must unambiguously be able to absorb losses when the bank is a going concern. Apologies for stating the blindingly obvious, but history painfully demonstrates why it is important to state the obvious.

In brief: the definition of capital set in Basel I included instruments that did not properly absorb losses; capital requirements were too low in relation to the underlying riskiness of assets, particularly for the trading book; and banks were able to move risk assets increasingly into the trading book. The finger is often pointed at Basel II for enabling all of this to happen, but the timeline suggests that the problems built up under the combined Basel I and Market Risk Amendment regime. That said, Basel II had its own flaws, and was not well implemented, points I will return to later. But, first, I want to look more at the flaws of the pre-crisis regime, starting with the definition of capital. This was flawed from the outset in the late 1980s, both in the definition of eligible capital instruments and the approach taken to the adjustments which should ensure that accounting balance sheet items such as goodwill are not recognised in regulatory capital. A further issue in my view has been the treatment of provisions. Basel I allowed hybrid debt instruments to count as Tier 1 capital even though they had no principal loss absorbency mechanism on a going concern basis. They only absorbed losses after reserves (equity) were exhausted or in insolvency. It was possible to operate with no more than two per cent of risk-weighted assets in the form of equity.
Zeti Akhtar Aziz: Expanding further understanding of Islamic finance Welcoming remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the INCEIF's (The Global University in Islamic Finance) Public Lecture by Dr Abbas Mirakhor, the First Holder of INCEIF Chair of Islamic Finance, Kuala Lumpur, 29 January 2010. *  *  *  It is my great pleasure to welcome you to the INCEIF's Inaugural Public Lecture by Dr Abbas Mirakhor, a distinguished scholar and the first holder of the INCEIF Chair of Islamic Finance. The INCEIF Public Lecture Series aims to provide a forum for promoting intellectual engagement to discuss the issues, developments and challenges in the area of Islamic finance. The global financial crisis that has dominated the headlines across the world for more than two years has brought to the forefront the fundamental issues in the international financial system that need to be addressed. Now, as the growth prospect resumes, the debate is focussed on the priorities and direction needed to reshape the post crisis world to ensure that the recovery will be sustainable. While Islamic finance has demonstrated its resilience during this period, the industry is now entering into an environment that is fundamentally different in this post crisis era. The international financial reform agenda will result in new structures, standards and regulatory regimes for the global financial industry. Greater financial inter-linkages and integration will also require greater cooperation and collaboration in the endeavour to preserve global financial stability.

The dilution of investment yields has reinforced risks for the industry such as a serious lapse risk if interest rates were to rise abruptly, financial losses for insurers who guarantee high technical rates compared to financial returns, or risks related to insufficient cost coverage. Among this quick review of the most salient characteristics of the environment in which insurers have been operating I would like to add that climate change risk has now become a reality and although insurers usually know how to deal with climate risks, including in extreme events, it is more than likely that further adjustments will be needed. Against this backdrop, French insurance companies have reacted in three main ways: lowering of paid interest rates in life insurance, development of alternative investment strategies  and  adaptation  of  their  traditional  business  model  including  an increased business diversification. As a result, for instance, unit-linked liabilities are increasing, and the profit-sharing payments for euro-denominated contracts are decreasing. However, I note that these payments remain significantly higher for mutual undertakings: they amounted to 2.3% last year while the French average is lower, and the reserves for deferred profit sharing have been strongly reinforced and amount to approximately 6% of mathematical reserves at YE 2017, which is 50% higher than the French average.
The conditional inflation forecast is based on the assumption that the three-month Libor will remain at –0.75% over the entire forecast horizon. Despite depreciating somewhat in recent months, the Swiss franc is still significantly overvalued. Furthermore, inflation prospects have largely remained the same. We have therefore decided to maintain our expansionary monetary policy. The target range for the three-month Libor is unchanged at between –1.25% and –0.25%, and interest on sight deposits at the SNB remains at –0.75%. The interest rate differential with other currencies, even following the European Central Bank’s (ECB) mild interest rate cut, is thus still markedly higher than at the beginning of the year. The negative interest rate makes the Swiss franc less attractive, and continues to help weaken the currency. The SNB also remains active in the foreign exchange market in order to influence the exchange rate situation, as necessary. The negative interest rate and our willingness to intervene in the foreign exchange market are intended to ease pressure on the Swiss franc. Our monetary policy thus helps to stabilise price developments and support economic activity. Global economic outlook As our inflation forecast is heavily influenced by economic developments abroad, let me now present our assessment of the global economy. Global economic growth was weaker than expected in the third quarter of 2015. This was mainly due to subdued manufacturing activity around the globe and sluggish world trade.

Our monetary policy, which is currently geared towards this challenging set of circumstances, consists of two key elements: the negative interest rate and the SNB’s willingness to take an active role in the foreign exchange market. Both of these elements are intended to make Swiss franc investments less attractive, thereby supporting economic activity. Swiss sovereign money initiative (Vollgeldinitiative) In conclusion, let me say a few words about the recently submitted sovereign money initiative. This popular initiative aims to fundamentally remodel Switzerland’s monetary policy and banking system. The initiative aims to remove the banks’ money creation powers. Instead, all new money would be created by the SNB and distributed directly to the Confederation or the citizens. Under the new system, proponents want any income that the SNB derives from note-issuance to be distributed to the public. Moreover, they claim that such a system would enhance financial stability. The sovereign money initiative would entail a radical overhaul of Switzerland’s financial system, creating a regime that does not exist in any other country today. The introduction of sovereign money would be a risky experiment. We must therefore carefully analyse the impact of the proposed constitutional change on the structure and implementation of monetary policy. Equally, we must take a comprehensive look at its implications for financial stability, the exchange rate and the economic cycle. We will comment further on the sovereign money initiative in due course. Ladies and gentlemen, thank you for your attention.
Macroeconomic stability was preserved and performance of the Chilean economy was much better than in previous world recessions (figure 1). Also, the financial system endured the global financial crisis with no setbacks, no systemically important financial institutions experienced major stress, and macroeconomic policies set the stage for the healthy recovery we are witnessing now. The macroeconomic framework of the Chilean economy was very important in attaining these results. This framework rests on four pillars. First, monetary policy management is based on a flexible inflation-targeting regime, conducted by an autonomous central bank and supported by a floating exchange rate system. The inflation targeting scheme considers a 3% annual inflation target, with a two-year horizon to correct deviations and a ±1 percentage point tolerance range. 1 The floating exchange rate regime includes the possibility of intervening in the foreign exchange market under exceptional circumstances, which has happened four times since September 1999. Second, a fiscal policy that is accountable and predictable thanks to a structural balance rule. 2 The significant amount of savings accumulated during the run-up of copper prices was a crucial factor in bolstering the resilience of the Chilean economy and in providing a countercyclical fiscal boost. Third, a high degree of commercial and financial integration with the rest of the world.

8  BIS central bankers’ speeches  Figure 7 International reserves to GDP (percent) 60  60  50  50  40  40  30  30  20  20  10  10  0  0  Brazil Colombia Israel Malaysia Mexico 2003  2004  2005  2006  2007  Peru 2008  Thailand Chile 2009  2010(*)  (*) Growth forecast and last available data of international reserves as from the IMF. For Chile, GDP growth forecast from December 2010 Monetary Policy Report. Sources: Central Bank of Chile and International Monetary Fund. BIS central bankers’ speeches  9
The Fed wouldn’t necessarily be forced to return to the much smaller balance sheet we had prior to 2008 before we could begin the monetary policy normalization process. When interest is paid on reserves, these reserves retain value even when they are no longer scarce. Banks may be able to borrow funds at lower interest rates from financial entities such as money market funds that are not permitted to hold deposits at the Federal Reserve and place these borrowed funds with the Federal Reserve to earn the higher interest rate paid on reserve balances. How well the ability to pay interest on reserves works in practice in raising the entire constellation of short-term interest rates depends critically on the willingness of banks to engage in such arbitrage activity. Prior to lift-off, we were uncertain how much friction there might be that would limit the willingness of banks to expand their balance sheets. These frictions include limits on bank leverage that can make the use of balance sheet capacity costly, competitive frictions given the relatively narrow range of banks that are viewed as sufficiently creditworthy to warrant being recipients of large uncollateralized loans and, for those banks that accept FDIC insured deposits, insurance premiums that increase when they borrow reserves and their total liabilities increase. To help ensure that money market rates would track the federal funds rate regardless of these frictions, the FOMC developed a second tool – the overnight, fixed-rate, reverse repurchase facility (overnight RRP).

As we noted in the December FOMC statement, we anticipate that we will continue reinvestment “until normalization of the federal funds rate is well underway.” I think this policy makes sense not only because the decision to end reinvestment will represent a further tightening of monetary policy, but also because it is difficult to assess ahead of time the impact of such a decision on financial market conditions given the lack of historical experience. I also believe that continuing reinvestment until the federal funds rate reaches a higher level makes sense. We want to ensure that we have the ability to respond to adverse shocks by easing monetary policy by lowering the policy rate. Having more “dry powder” in the form of higher short-term interest rates seems more desirable than less dry powder and a smaller balance sheet. Now the words “well underway” in the FOMC statement are vague – what does that mean in terms of the level of the federal funds rate? Reiterating the disclaimer that I am speaking for myself, my view is that we should not set a numerical tripwire for ending reinvestment. If the economy were growing very quickly and the risks of an early return to the zero lower bound for the federal funds rate were deemed to be low, then I could see ending reinvestment at a relatively low federal funds rate.