samchain/econo-pairs-v1 huggingface dataset:
Jarle Bergo: Flexible inflation targeting Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at a seminar arranged by the Association of Norwegian Economists, Gausdal, 23 January 2004. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 17 December 2003 and on previous speeches and publications. The references and the Charts in pdf can also be found on the website of the Norges Bank. *  *  *  Price stability, or low and stable inflation, is the primary objective of monetary policy in most countries. Historical experience from Norway and other countries has shown that the absence of price stability has resulted in low and unstable output and employment. High inflation or deflation is both a cause and a symptom of systematic imbalances in resource allocation. In the 1920s, John Maynard Keynes suggested that monetary policy should be aimed at stabilising the price level.1,2 This did not become common until the 1990s, however, even though Sweden had an explicit target for price stability in the period 1931-1937. We have had four periods of high inflation over the past 100 years: during the two World Wars, the Korean War and a 15-year period from the first half of the 1970s to the second half of the 1980s. In Norway, high inflation is a wartime phenomenon and a 1970s and 1980s phenomenon.

[...] Moreover, the analyses were based on projections of productivity growth that proved to be too high.” As I pointed out in my introduction, there was strong growth until 1973, and it took time before it became apparent that there had been a negative shift in potential output. The red dotted line in the chart shows what GDP would have been if the growth rate had been the same after 1973 as in the previous 10 years. Because the negative shift in the level of potential output was not discovered in time, a counter-cyclical policy was employed in an attempt to sustain the output level. Whereas the output gap was believed to be negative, it subsequently proved to be positive, as illustrated by the chart. Similarly, in a study of previous US monetary policy, Ophanides11 finds that central banks overestimated the level of output that was consistent with stable inflation in the 1970s because they were not aware of falling productivity growth in time. As a result, the output gap was underestimated and policy was too expansionary. Also in the 1990s, we saw an increase in productivity growth, and even though the mistake from the 1970s was not repeated, there was a vigorous debate concerning different targets for trend growth and the output gap. In addition to the difficulty of capturing changes in potential output fast enough, there is also considerable uncertainty about the level of actual GDP. As an example, Norway’s GDP figures were extensively revised in June 2002.
BIS Review 67/2004  I see at least six such necessary conditions: the institutional independence of the ECB; the clarity of its Treaty mandate - price stability; the accountability vis a vis public opinion, including through the hearings before the European Parliament; the comprehensive nature of its monetary policy concept, with an economic and a monetary pillar; its medium term perspective and, last but not least, its transparency. We are displaying publicly our monetary policy concept. Not all central Banks do that. We are displaying our definition of price stability. Not all central Banks do that. We were the first important central Bank, in January 1999, to publish in quasi real time after our decisions our diagnosis and the reasons for our action and to hold a press conference. Not all central banks do that, even today. We are making public the quarterly projections of the staffs of the ECB and of the Eurosystem. And I profoundly trust that it is this substantial level of transparency which has also contributed to make the ECB’s policy decisions highly predictable for the market as academic research has documented. A last remark. As already mentioned, all what I have said presupposes that data are reliable and credible. It is absolutely imperative that figures are not influenced by political interference and by electoral cycles. The ECB’s Governing Council strongly encourages countries to tirelessly improve the professionalism and independence of the relevant institutions.

This fragmentation was affecting the whole economy of the area, and a banking union has been proposed in order to re-establish a smooth transmission of monetary policy and ensure that the credit supply meets the real economy’s needs. Some evidence on the fragmentation of the banking system First of all, let me give you some evidence on the fragmentation of the banking system. BIS central bankers’ speeches  1  The ECB has been continuously monitoring the degree of integration in the euro area financial markets. The latest Financial Integration in Europe report, published in April 2012, showed several indicators pointing to rising fragmentation in various market segments as the sovereign debt crisis has escalated. In addition to the price-based indicators highlighted in the report, quantity-based indicators also continue to point to a further and significant renationalisation of euro area banks’ funding markets. Banks located in peripheral countries continued to lose market funding, while those in some other countries retained it and managed to issue bank debt at attractive yield levels. The market for secured bank funding has also been affected by the increased tensions in some euro area government bond markets. Differences between bank lending rates offered to non-financial corporations and households in euro area countries reflect divergences in bank funding conditions that go beyond country-specific economic conditions. Let me give you a few examples. The coefficient of variation across euro area countries of the short-term cost of borrowing for non-financial corporations has been increasing towards all-time highs.
Pillar II – supervisory review process This is a critical and integral part of Basel II which aims at ensuring that banks have sufficient capital to support the risks in their business activities, encourage banks to develop and use better risk management techniques, and foster an active dialog between the banks and supervisors regarding capital adequacy and risk management standards. In this regard, banks are expected to have an internal process for assessing overall capital adequacy in relation to their risk profile and a strategy for maintaining the required level of capital, which is expected to be evaluated by the regulator, and intervene at an early stage to prevent banks’ capital from falling below prudent levels. Accordingly, the implementation of Pillar II will be an extension of the current regulatory practice and an elaboration and refinement rather than a radical change of existing practices. Where necessary, the Central Bank will consider imposing higher capital adequacy levels for certain banks, depending on their risk exposure. This is expected to result in developing a transparent and systematic approach for evaluating the capital assessment processes of the banks and refinement of the CBSL’s risk-based approach to supervision to cover the Pillar II aspects. Its aim is to ensure the quality of risk management standards rather than just setting capital against risks. In particular, the emphasis on other non-credit risks such as interest rate, market, liquidity, concentration, operational, strategic, legal and reputational risks should increase.

These include: The Paycheck Protection Program Liquidity Facility will bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program by supplying liquidity to participating financial institutions through two-year loans backed by PPP loans as collateral. The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by purchasing up to $ billion in fouryear loans to small and mid-size businesses. The Term Asset-Backed Securities Loan Facility (TALF) will support issuance of securities backed by student loans, auto loans, credit card loans, small business loans, and other debt. Moving with Maximum Care Considering the speed and scale of damage caused by the virus outbreak, we are making all efforts to implement these facilities at maximum speed. At the same time, though, we are moving with maximum care, drawing upon all of the lessons learned since 2008. First and foremost, we know that transparency will be key to sustaining public confidence in our efforts. What does this mean in practice? It means that when we work with outside vendors, we explain why we’re doing so, who we’re working with, and how much we’re paying for their services. It requires if we accelerate the vendor selection process to minimize time to market, we operate under a short-term contract and then open up the process to a competitive range of bidders, looking beyond the largest and most established players and providing broad access to a diverse range of smaller players.
Far from putting on the back burner questions concerning Basel III and its application in Europe, that is to say CRD IV and its project to create a “single rule book” for European banks, I believe, on the contrary, these developments underscore the importance of better understanding the current reform and taking time to reflect, in order to ensure that the new framework for banking regulation and the distribution of supervisory responsibilities in Europe will deliver all their expected benefits. Before leaving you to discuss in greater detail the impact and stakes of the Basel III reform, I would like to make a few remarks on this topic in relation to the current environment. 1. Basel III and CRD IV represent a quantitative and qualitative leap aimed at addressing the shortcomings highlighted by the current financial crisis  First, I believe that it would be useful to rapidly place the Basel III reform in its context, in order to fully understand its scope. Basel III is first and foremost a response to the financial crisis that started in 2007. This crisis and the subsequent wave of shocks to the banking system have not merely resulted in a temporary loss of output for the major advanced economies. They have also had a lasting impact on employment, industrial production, the confidence of investors and households, and needless to say on public finances, which make crisis exit even more difficult.

Another option would be to introduce a multiplier on model-based risk weights for specific positions, as already imposed by FINMA for some mortgage loans. Efforts are underway at FINMA, supported by the SNB, to analyse potential differences between the two approaches. In this context, the SNB recommends that the big banks increase transparency with regard to their risks. This includes, among other things, publishing their internal measures of total risk. Disclosing RWA according to the standardised approach in addition to model-based RWA would likewise lead to greater transparency with regard to risks. Greater transparency would help to make changes in model-based RWA easier to understand, and thereby increase the credibility of the model-based approach. Domestically focused banks: resilience and lending policies I would now like to turn to our assessment of domestically focused commercial banks. At present, the risks for these banks are primarily linked to the situation and momentum on mortgage and real estate markets. In an environment of historically low interest rates, there has been a build-up of imbalances on these markets. On the one hand, the ratio of mortgage loans to GDP has increased to very high levels in a historical comparison. On the other, growth in real estate prices has been persistently stronger than what can be explained by fundamental factors. Owing to these developments, measures were announced in June 2012 to reduce risks in the Swiss mortgage market. These measures include a revision of the self-regulation rules for mortgage lending and stricter capital requirements for mortgage loans.
More likely, Southeast Asia and China will complement each other in an international division of labour, for example, with Southeast Asia providing the components and intermediate processing, and factories in China doing the final assembly for the Chinese market. The desire of MNCs to diversify their investments beyond one or two countries will also promote such an outcome. For our part, Singapore is actively positioning itself to benefit from China’s growth. When Chinese Vice President Hu Jintao visited Singapore recently, he proposed four areas for increased bilateral cooperation: high-tech industrial sectors, the economic development of China's western provinces, helping Chinese enterprises to exploit international opportunities, and the training of personnel and exchange of talent. Officials from both countries are pursuing these ideas. To help Chinese companies go international, Singapore has mooted the idea of setting up a base in Singapore to help Chinese companies market their products to the region and beyond. We are actively facilitating Singapore business ventures interested in China, providing market information, office space and consultancy services, and maintaining business networks. We have also launched an Asian Business Fellowship Programme, to develop a talent pool with operational experience, and network and market knowledge in China. Politics & Security Second, Southeast Asian governments must tackle the security problems resolutely and decisively. Terrorism is not unique to Southeast Asia. It is a global problem, originating in the Middle East, and spreading to every continent. Southeast Asia cannot be immunised against the terrorism virus.

This somewhat contradictory, in historical terms, price picture is probably partly due to developments in China, where on the one hand the vigorous industrial expansion has led to a marked increase in the demand for commodities, while on the other hand the plentiful supply of low-wage labour has meant  2  BIS Review 21/2004  that production of cheap goods for the world market is accelerating rapidly. This clearly illustrates one of the conditions of globalisation, namely the increasing specialisation and increased utilisation of comparative advantages. These factors, among others, provide better resource allocation, increased productivity and greater efficiency, which in turn have a subduing effect on prices. The increasing strong international economic activity and the upturn in commodity prices indicate that international price pressure will increase gradually in the future. However, the globalisation process may mean that price increases remain moderate over the coming years, despite the economic upturn. China and India together have more than 2 billion inhabitants, which corresponds to one third of the total world population. So far, only around 10 per cent of the Chinese population is estimated to be affected by the modern economy. This means that there is a very large unutilised labour reserve that could contribute to keeping down price increases for a long period of time.
11 In an article in the Financial Times late last year, Anders Åslund, a Senior Fellow at your Institute, argued in a refreshingly blunt manner for a change in the G20. 12 The ongoing efforts to change global governance should not be limited to the IMF alone. In saying this, I repeat that I fully recognise the important role played by the G20 in the time of crisis. However, while the G20 continues to exist and even expands into policy areas as varied as food security, energy and climate change, its legitimacy and democratic foundations must be reinforced. This can be achieved by, for example, representation and participation on a rotating basis. Everyone does not have to be present all the time. The constituency model of the IMF and the World Bank could be adopted, providing for the participation of other countries, even if only indirectly. In that vein, the G20 might be expanded by, say, four members in conjunction with the adoption of a structure which embraces the rest of the world. On the matters of economics and finance, I view the G20 as a complement, not an alternative, to the IMF. An appropriate solution would be the recognition of the IMF and the IMFC as the statutory-based principal forum. G20 collaboration on these matters would be recast in the IMFC or in an enhanced version in the Council if the membership decides to activate the provisions on its establishment. The IMFC is an institution of the IMF and thus has a statutory basis.

Yet, in a significant part of Asia, notwithstanding its financial clout, a significant part of domestic savings is still put under mattresses. A convenient and effective channel that could be used to absorb these savings, in a manner that commands the confidence of those who save, does not exist. Where some form of financial system exists for facilitating the important process of financial intermediation, it is usually a system that suffers from a preponderance of banks. This lack of diversity in the financial intermediation channels is widespread in Asia; and frustratingly so, particularly for those with responsibility for promoting such diversification, for the sake of efficiency as well as financial stability. The market capitalisation and turnover of domestic debt and equities, in absolute terms as well as relative to GDP, is generally low when compared with corresponding numbers in the developed markets. This is so even in Hong Kong, the pre-eminent international financial centre in the region. The domestic debt market there, in terms of the amount of debt outstanding in the domestic currency, is only about 45% of GDP, although this is partly the result of a long history of fiscal discipline. The emerging markets of Asia are aware of the important need for financial system development. This brings me to the third characteristic, which concerns the development strategies being adopted. Although these vary between different economies, having regard to the domestic circumstances, one underlying strategy common to all is financial openness.
that monetary policy is credible, an estimate of the expected equilibrium real interest rate can be derived from the long-term forward rate. About ten years ahead, market participants expect a short-term nominal interest rate in Norway of about 5¾ per cent. With expected inflation corresponding to the inflation target of 2½ per cent, we can estimate the market’s expected real interest rate in the long term at about 3¼ per cent. This is approximately the same level for long-term real interest rates as in the period 1997-2002, but higher than the long historical average from 1870 to 2003. Deflation tendencies in a number of countries Inflation has declined in a number of countries. This indicates that the global shift in monetary policy, with a greater focus on inflation, has been effective. However, other factors have also played a role. Fiscal policy is being used to a lesser extent in demand management. Structural reforms have been adopted in order to improve the growth potential of the economy. Financial markets have been liberalised and the markets for both financial services and products have been globalised. Deflation, i.e. a sustained fall in prices, has again become a subject of economic debate in the last few years. This is naturally due to the fall in consumer prices in a number of countries in Asia and the very low rate of inflation in many countries. Deflation can have a destabilising effect.

After 1945, with the introduction of the Bretton Woods system, a number of countries’ currencies were pegged to the US dollar, which was in turn pegged to gold until 1971. In many ways, US monetary policy and nominal interest rate levels functioned as a nominal anchor, and to a large extent governed global interest rates and inflation developments. Inflation has been particularly high in times of war. The 1970s and 1980s were characterised by fairly high inflation following the collapse of the Bretton Woods agreement, the oil price shocks and countercyclical policy. From the end of the 1980s, an inflation target for monetary policy has functioned as a credible nominal anchor in a number of countries, curbing the pace of inflation. To calculate historical real interest rates, an estimate must be made of expected inflation. Figures for actual inflation are normally used. Inflation expectations may deviate from actual inflation, especially in periods when the latter is subject to considerable fluctuation. From 1870 to today, developments in global real interest rates can be roughly divided into 5 periods. In the period 1870 – 1896, the real interest rate ranged between 4 and 5 per cent, and inflation fluctuated around zero. No new major gold finds were made in this period and the economy in general was exhibiting brisk growth. The real interest rate fell to about 1-3 per cent in the period 1897 -1913, reflecting some acceleration in inflation in this period. New discoveries of gold were again made in this period.
For the general public, by contrast, only 40% were positive or neutral. This is only one poll. And I am not, at this stage, making any value judgement on which faction is right. But if nothing else, these results suggest a yawning gap in people’s perceptions of finance. It seems very unlikely these word-clouds form part of the same nephological formation. To borrow from the title of a recent book by Nobel Laureate economist Joe Stiglitz, these results suggest to me a Great Divide: 2 a Great Divide between the views of financial insiders  1  Videos of the Open Forum are available at www.boeopenforum.co.uk. 2  Stiglitz (2015). BIS central bankers’ speeches  1  and outsiders, between the perceptions of producers and consumers of financial services, between the silent majority who buy and the vocal minority who sell financial products, between the echo chamber of the elites and the voting chamber of wider society. They underscore just how far finance still has to travel to regain its social licence. 3 This “Great Divide” is my jumping-off point. I want to discuss the crucial role finance plays in society and why. I want to discuss the progress made, so far, in restoring trust in finance. And I want to discuss what further progress might be needed to narrow that trust deficit.

The Federal Reserve has undertaken to keep an ultraexpansionary monetary policy in place for as long as this situation persists and does not jeopardize inflation, which has important implications for the global financial scenario that the Chilean economy will continue to face in the coming years. Plus, the U.S. has a high fiscal deficit that reflects in an excessive increase of its public debt. If a political agreement is not achieved, early next year a number of automatic adjustments of taxes and expenses (the socalled fiscal cliff) will be forced into the economy. Given the sluggish growth in this country, if they have to apply such major adjustments, the economy will relapse into a new recession. Unfortunately, when the deadline is only days away, there are no signs of agreement in sight. BIS central bankers’ speeches  1  The emerging world continues to outperform the developed economies, although with greater diversity within the group. In China, indicators suggest that growth is picking up after the deceleration of most of 2012. Latin America, meanwhile, has shown reduced growth during the year and the outlook for the next two years has also been revised downward. The slowdown has been sharper in Brazil and it is not clear what the velocity of its recovery will be. Mexico and Colombia have also begun giving signs of a slowdown. Peru continues to grow strongly, while Argentina is dealing with major adjustments. The Chilean economy has remained on an upward slope, driven by strong domestic demand and, particularly, fixed investment.