samchain/econo-pairs-v1 huggingface dataset:
Because it is a major investor, the Fund can contribute  5/8  effectively to the promotion of recognised principles of corporate governance. We believe that this will result in higher returns on the Fund’s equity investments in the longer run. The size of the Fund allows us to keep management costs low. We have built up an infrastructure that can handle large transaction volumes. Investments involving much larger amounts can be made without expanding the current infrastructure. Even though the Fund is a large institutional investor, it is not one of the world’s largest investment managers. Companies like UBS, Allianz, Barclays and State Street invest up to ten times as much as the Petroleum Fund, and these companies have funds in a much larger number of accounts with different investment mandates than the Petroleum Fund. Although the challenges facing the Petroleum Fund are considerable, the Fund’s structure is nevertheless much simpler than that of the largest investment managers. Government reserve funds Norway is not the only country to establish a reserve fund to be used in periods of fiscal stress. The age structure of virtually all the developed countries will lead to substantial changes in the ratio of pensioners to the working-age population over the next ten years or so. The working age population must be prepared for a larger share of national income to be spent on pensioners and others outside the working population. Substantial increases in pensions, benefits and health service costs will be necessary.

In these countries, fund-based occupational pension schemes account for a large portion of the pension system, in the public as well as the private sector. If we include the Petroleum Fund and the National Insurance Fund at current market values, the picture changes, and funds in Norway are then higher than the OECD average. But even today, the level in Norway is below that of the Netherlands in 2003. Long-term investment strategy The Petroleum Fund employs a very careful investment strategy, with broad diversification. Large pension funds in other countries employ the same kind of strategy. Like the Petroleum Fund, these funds are intended to secure future payment flows. The consequences of large losses over time would be severe. For pure pension funds, this would mean they would not be able to honour their obligations to their members. For the Petroleum Fund, it would mean that the state would have to find other ways to finance the costs of the age wave that we know is approaching. Because of the prudence requirement, return requirements cannot be the same as for many private investors. It is important to remember that for every successful investor that achieves high returns, there are many other investors that have the same level of ambition and risk willingness, but a far  6/8  poorer track record and a history of insolvencies. The Petroleum Fund cannot run the risk of joining the worst group. Some large institutional investors have tried to copy successful private investors.
The potential production frontier shows alternative combinations for the production of sheltered goods and goods exposed to international competition when labour and capital are used efficiently. Consumers prefer a combination of sheltered and traded goods. In equilibrium, the relative price of sheltered goods in terms of traded goods is the price that clears the markets. In this simple one-period model, the trade balance is zero. Furthermore, the relative price is equal to the real exchange rate. Introducing petroleum revenues, which can be seen as a cost-free foreign exchange gift, separates the consumption possibility frontier from potential production in mainland Norway. Consumers can increase their consumption of traded goods without producing more. However, with a higher income level, demand for sheltered goods also increases. In order to facilitate the transfer of resources, wages are bid up and prices for sheltered goods increase. Consequently, the real exchange rate appreciates. The new equilibrium implies that consumption and production of sheltered goods have risen. Production of traded goods has declined, while the consumption of these goods has increased due to the foreign exchange gift. Structural changes – i.e. the transfer of resources from production of exposed to sheltered goods – are amplified when petroleum revenue spending increases substantially. And the challenges resulting from these structural changes would be amplified if petroleum revenue spending varied from one period to another.

In principle, these policy guidelines are just as appropriate for coping with favourable periods as with adverse periods. We will face another test of the macroeconomic framework when the terms-of-trade change is reversed and the gains either fully or partly dissipate. 4  BIS Review 50/2006  Structural policies aimed at maintaining flexibility in labour, capital and goods markets are, however, probably more important than stabilisation policy to sustain both high growth and economic stability in the future. Developments in labour productivity over the last two decades may be an indication of the importance of structural policies. Norway has managed to sustain productivity growth at a high level. Restructuring in the Norwegian economy in the 1990s, changes in the tax system, broader and deeper financial markets, and deregulation in trade and service markets appear to have resulted in a more efficient use of resources. Many of these changes were advocated by Victor Norman in the 1980s and early 1990s. For example, in 1991 he chaired an official committee 5 exploring possible efficiency gains in the government sector. In the report, high possible efficiency gains were envisaged as a consequence of the committee’s proposals, including a better functioning labour market. Victor’s conviction as to what economic policy can accomplish can be illustrated by the following quote from the committee’s report: "We believe that in principle it should be possible to once again reduce unemployment in Norway to one per cent without creating permanent pressures and restructuring problems in the economy." Thank you for your attention!
For example, if the education system is working inequitably across gender or race, in a way that causes pay gaps to emerge, this would be a clear market failure that would justify policy intervention. In other cases the choice of an occupation or sector may be a personal decision, reflecting lifestyle and values, and less obviously a market failure or policy concern. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  The decompositions we carry out aim to identify the role of individual and environmental factors. One way of doing so is by using the so-called Oaxaca-Blinder decomposition. This decomposes the gap between the wages of two groups into two parts. The first captures the share of the gap explained by the different compositional characteristics of the two groups. The second captures the sensitivity of pay to those characteristics, something which is not typically observable. Suppose y is our variable of interest, in this case wages. We have two groups, say male and female. We assume y is explained by a vector of determinants, x, according to the following model:  (1)  =  where the vectors of the β parameters include intercepts. To keep things simple, assume there is a single factor – education – and that males benefit more, wage-wise, than females from a given level of education. In other words, at each educational level (x), the level of wages (y) are higher for males than females.

Conversely, the shares of people without a qualification have decreased significantly across the four groups, with the trend for UK-born ethnic minority women reducing at a faster pace than for non-UK born ethnic minorities. Both UK-born and non-UK born workers entering the labour force market in the UK are materially more qualified than in the past. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 2: Highest qualification attained Per cent 100 80 60 40 20 0 1994  2019  1994  White male Degree  2019  White female Higher education  1994  2019  Ethnic minority male GCE/A‐Level  GCSE  Other  1994  2019  Ethnic minority female No qualification  Source: ONS Labour Force Survey and Bank of England calculations. Chart 3 shows the composition of the labour force by occupation across the four sub-groups. Occupational participation differs strikingly by gender, less so by ethnicity. There is a higher share of managers, professional, and associate occupations among men than women. Compared to men, women have a larger representation in administrative, and personal, sales and customer service occupations, while men have a larger representation in skilled trades and process and plant occupations. This holds true across ethnicities.
The third reason I believe that Basel II will promote financial stability is that it reinforces the need to implement sound policies in both capital and provisioning. I have already mentioned that no bank can maintain public trust for long if it lacks sufficient capital. One of the fundamental tenets of risk management and banking supervision is that banks need to create provisions to absorb expected losses and to have sufficient capital to absorb unexpected losses. Let me add here that given the unique positions of banks at the crossroads of businesses and consumers in every economy – and their special role as intermediaries of credit to both – nothing threatens financial stability more than the presence of poorly managed and poorly capitalised and provisioned banking institutions. I believe that Basel II will contribute to a more resilient and stable banking system that is capable of promoting sustainable economic growth. Adoption of Basel II: who and when? Let me turn now to my second point, which is the timing of adoption of the new framework in different countries. Whenever I speak with colleagues from other countries, I stress that only national authorities can decide when to adopt Basel II. While the Committee believes that the framework is appropriate for all economies and banks, no country should adopt Basel II until it is ready. This view has been expressed consistently by not only the Basel Committee, but by the IMF and World Bank as  2  BIS Review 45/2006  well.

The value of the Norwegian krone against the Deutsche mark was nearly halved between 1973 and 1987. We paid about 2 kroner for 1 mark in 1973 and close to 4 kroner in 1987. Since 1987, the krone exchange rate against the Deutsche mark has remained more or less unchanged. During this period, price inflation in Norway has been no higher than that in Germany. We cannot be sure how fast the inflation differential between Norway and other countries will translate into changes in nominal exchange rates in the future. Nevertheless, we must expect that any differences in the rate of inflation may be a key cause of changes in the nominal krone exchange rate over time. The Norwegian monetary authorities abandoned the devaluation approach in 1986. From 1986 to 1992 Norway had a fixed exchange rate with a defined central rate and fluctuation margins. This system was abandoned in 1992 following extensive speculation against the krone in connection with the turbulence in European exchange markets. After the krone was allowed to float on 10 December 1992, the guidelines for monetary policy were also revised. Monetary policy was still oriented towards the objective of krone exchange rate stability, but no specific central rate with fluctuation margins was stipulated. The krone depreciated slightly in 1992, but thereafter it remained relatively stable. Looking back at developments in the Norwegian foreign exchange market in the 1990s, no significant change really appears to have occurred in 1992. However, there was a marked shift in January 1997.
Our monetary policy objective is set in the annual Inflation Target Remit given to us in a letter from the Chancellor.6 The Remit requires the Monetary Policy Committee to target a 2% inflation rate in the Consumer Price Index, but it is also made clear that we should avoid “undesirable volatility in output” which might arise from “external events or temporary difficulties” beyond the control of the monetary framework. In order to steer inflation towards the 2% target, in effect we can control either the price or the supply of narrow money. Prior to 2009, we would set Bank Rate and then adjust the supply of commercial bank reserves to guide overnight interest rates towards it. To do this the Bank would conduct Open Market Operations (OMOs) in which we lend to, or borrow from, the commercial banks so as to increase or decrease the level of reserve balances in aggregate, in line with the banks’ stated targets. We would adjust those operations precisely to ensure that short-term market rates are driven towards the rate we pay on those reserve balances – which is Bank Rate. Since we also charge Bank Rate in our routine OMOs, Bank Rate is essentially the anchoring price of short term money.

It is what allows the Bank to deliver its core functions including the issuance of banknotes, implementing monetary policy, and acting as lender of last resort to the banking system. Only the central bank can undertake these tasks because the central bank is the monopoly supplier of domestic currency: sterling in the UK. In this context (leaving aside the small stock of coins in circulation2) sterling means banknotes and commercial bank reserves held at the Bank of England, which in combination comprise “base” or “narrow money”3. Notes and reserve balances form the vast majority of the liability side of the Bank’s balance sheet (see Chart 1) and these two types of money provide the ultimate means of settling payments between individuals, commercial firms, the Government and banks. I will talk about broader concepts of money, including commercial bank deposits,  1  E=mc2  2  Coins are actually the responsibility of the Royal Mint, not the Bank of England. The amount in circulation is around £  3  The old M0 definition in the UK. Narrow money can also be defined to include demand deposits at commercial banks – eg M1 in the US. BIS central bankers’ speeches  1  a little later. The Bank of England can control the amount of sterling liabilities it issues and thus decide the amount of narrow money in the economy and/or its price. That is unique to the central bank and is the fundamental operational tool we have to implement monetary policy.
However, over a long period of time these errors offset one another and on average good forecasts should therefore not over-estimate or under-estimate the actual events. For shorter periods it may be interesting to study individual forecasting errors in greater detail to try to analyse their causes. But even if such an analysis is valuable it cannot be used to draw general conclusions about the forecasting performance. While accuracy is very important, even more is required for a forecast to be good in a monetary policy context. A good forecast for inflation, for instance, should correspond with the forecasts for other variables. And the driving forces behind the forecasts should be explained in a comprehensible manner. Why does the forecast look the way it does? What are the mechanisms acting as a motor for this development? These qualities are also required for a forecast to function as part of the decision-making base for practical monetary policy. BIS Review 22/2008  3  Consideration to the real economy Another factor to take into account in an assessment of monetary policy is that there may sometimes be reason to deliberately deviate from the inflation target. Normally we focus our policy on attaining the inflation target within two years. This is partly due to it taking time before monetary policy has its full effect. But it also has to do with the Riksbank thereby being able to contribute to a more stable development in production and employment. However, it does assume that the inflation target is not threatened.

Thomas Jordan: Switzerland at the heart of Europe – between independence and interdependence Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Université libre de Bruxelles, Brussels, 17 January 2015. *  *  *  The speaker would like to thank Nicolas Stoffels and Attilio Zanetti for their valuable support in preparing this speech. He is also grateful to Rita Kobel and Alexander Perruchoud. Ladies and Gentlemen, I am very honoured to be with you today in Brussels, and I would like to thank the Swiss Mission to the European Union and the Institute of European Studies at the Université libre de Bruxelles for their kind invitation. When I arrived at Brussels airport, I couldn’t help noticing the range of delicious chocolate on offer. It seems to be as abundant as in Switzerland. So I can see immediately that Switzerland and Belgium have important things in common. This certainly makes me feel very comfortable here. Although I am unlikely to end up emulating Jean Neuhaus. As some of you may know, Belgium’s most famous chocolatier was actually a native of Switzerland. He came to Belgium in 1857, and decided to stay and set up shop in Brussels. As for me, I plan to return to Switzerland. 1. Introduction  Belgium and Switzerland have a lot of other things in common besides chocolate: Both are small, very open economies, which have successfully embarked on the road to globalisation.
[11] Just as the main reason the MPC forecasts headline inflation to rise to double digit levels at the end of this year is the impact of higher international energy and goods prices over which it exhibits little influence, the main reason the MPC projects headline inflation to fall sharply in 2023-24 back towards the 2% target is its assumption that those international energy and goods prices stabilise or fall six months from now. Of course, such assumptions may be wrong. We’ve seen that in the past. I’ll come back to the risks around the random walk forecast for commodity prices in a moment, since these are an important influence in our policy assessment. Alternative assumptions about the path for Bank Rate But first I want to underline that this emphasis on the external drivers on UK inflation is not to suggest that UK monetary policy has no influence. In line with its normal practice, in May the MPC published two inflation projections: a baseline that is conditioned on the path of Bank Rate implied by current market pricing (which peaks at 2.5%  Page 12  towards the end of 2023); and a variant projection where Bank Rate is held constant at the 1% level established at the May MPC meeting. In the baseline, headline inflation falls significantly to 1.3% at the end of the forecast horizon, a significant margin below the 2% target. By contrast, in the constant rate scenario, headline inflation remains above target throughout the forecast, reaching 2.2% at the end point.

Successive boom-bust financial cycles have made it clear that unsustainable buildups of credit and leverage lies at the heart of financial fragility. It is hard to deny the critical role that monetary policy plays in this. Monetary policy sets the price of leverage and hence has first order implications for the pricing of all financial assets and the evolution of the financial cycle. A framework in which monetary policy reacts systematically to the financial cycle, in addition to traditional inflation and output developments, will help to keep the economy on an even keel. This differs from an approach in which policy leans against the wind only when financial stability risks become evident. Given the long and drawn-out nature of financial cycles, such an approach would inevitably lead to doing too little too late, as the cumulative impact of policy over the whole financial cycle is ignored. 8  Just as the proliferation of inflation targeting frameworks starting in the 1990s helped to bring down the level and volatility of inflation rates worldwide, a general trend towards a more systematic leaning against the financial cycle approach to monetary policy, especially among advanced economies, could yield significant benefits. I believe that if central banks coordinate on such a framework, and thereby adopt a longer through-the-cycle perspective in policymaking, the problems from cross-border spillovers and perceptions of competitive devaluations will be significantly diminished. The key challenge will be one of communication.
There is an ongoing debate about the reasons for the decline in long-term real interest rates over the last few years. I will not elaborate on that debate here; it is a subject worthy of a seminar by itself. One particular possibility, pertaining to the discussion of the roles of the real interest rate, is that the fall in long-term interest rates may partly reflect market participants’ assessment that the neutral real interest rate has fallen. During a business cycle, it is the real interest rate’s deviation from the neutral real interest rate – the real interest rate gap – that indicates whether monetary policy is expansionary or contractionary. The neutral real interest rate is difficult to estimate and may change over time. Nevertheless, we have tried. On an uncertain basis we estimate that the neutral real interest rate for Norway may now be close to 2½ per cent, having come down approximately 1½ percentage points since the mid-1990s. Forecasts in the latest Inflation Report indicate that the short term real interest rate in Norway will be close to its neutral level in about four years. According to this, the real interest rate gap (the difference between the neutral rate and the actual rate) has been negative since 2004. There is evidence that monetary policy has had the desired impact both on the real economy and on inflation. Monetary policy at the present phase of the cycle Growth in the Norwegian economy has been high since summer 2003. The expansion has gradually broadened.

Nonetheless, identifying the role of pull versus push factors poses problems akin to those of separating supply and demand. There is still room for research that finds clever identification strategies to settle this question. Under most conditions, a situation of abundant capital inflows and low global interest rates is good for developing countries. Theory tells us that, in the absence of frictions, international capital flows not only contribute to expand a country’s productive capacity, but also allow their citizens to share risk with the rest of the world. However, the presence of pecuniary externalities, of inefficient fluctuations in credit standards, or of other types of financial frictions may lead to perverse situations where these inflows result in excessive credit growth, risk taking, or misallocation of capital. An important amount of recent research has been devoted to understanding how an economy may borrow in excess and miss‐allocate credit.3 Of course, if we believe that these frictions are present and strong, first‐best policy actions should aim to undo them. But this may not be feasible, either because we are unsure about the presence, type, or magnitude of the frictions involved, or because first best policies cannot be implemented in the timeframe required. In such a situation, policymakers may have to resort to second best policies. We will address some of the roles of financial frictions in the transmission of foreign shocks in the presentation by Javier García‐Cicco this afternoon.