samchain/econo-pairs-v1 huggingface dataset:
In this context, future efforts at policy coordination should start by setting out a clear and concrete medium-term goal, then followed by a few but concrete and specific issues to be addressed or projects to be executed. A case in point is the development of a shared regional financial infrastructure such as linking the clearing and payment systems, harmonizing minimum regulations on cross-border investment flows, and developing a shared facility to promote greater flows of investment information. This type of specific efforts and projects would be easier to win region-wide political commitment and support. 2  BIS Review 66/2006  Another suggestion is that, for the market-based approach to work efficiently, we may need to engage more formally the cooperation of the private sector. On this, I think East Asia can learn a lot from the experience of the EU in engaging the private sector in planning and reviewing major financial initiatives. Specifically here, I am thinking of the Giovannini Group of private experts, established in 1996, which has done at least four useful reports for the EU Commission. Their inputs have helped the EU in introducing the necessary directives. My last point is on the role of IFI’s such as the World Bank. In recent years, in a good way, we have seen active involvement of all major IFI’s in the region’s financial market development. They contribute to research, ideas, technical assistance, policy advice, and funding. Some are even involved as market participants.

I am thinking here of the World Bank, the ADB, and the IMF. But while their efforts are good, well-intended, and should definitely continue, their contributions should aim to cover or be useful to all markets in all countries in the region. This is because of the diversity in terms of stages of market development in the region. And for the IFI’s themselves, it can be useful that their resources are not wasted in overlapping projects. On this point, I see considerable value if each IFI can establish its own areas of expertise and specialization, so that the value added they are contributing collectively to the region are further enhanced. I think I have take up enough time already and should stop. So, let me stop here and I hope my contributions have been useful. Thank you, Mr. Chairman. BIS Review 66/2006  3
Price stability, defined as low and stable inflation in line with that of trading partners, was established as an anchor for economic policy.41 To implement this policy, both the monetary system and Norges Bank had to be re-established as independent institutions. Whether government gave or Norges Bank repossessed control over the policy instruments, especially the key policy rate, is subject for debate. But the result was that Norges Bank in fact gained independence in interest rate setting to achieve the government-defined policy objectives. Inflation fell from double-digit figures around 1980 to 2–3 percent a decade later. During the banking crisis around 1990, Norges Bank played a key role, which Bomhoff had paved the way for 90 years earlier, as a provider of liquidity to troubled banks. During the 1990s, the intellectual basis for modern monetary policy was laid in Norges Bank. The transition from exchange rate targeting to inflation targeting, with an explicit price  38  In a letter to Norway’s ambassador in London dated 1963, for example, he wrote: “As you may have seen from the Norwegian newspapers, I have in several lectures proposed that we should consider building entirely new towns as part of solving the problems of the districts.” Discussions with Viking Medstad on 3 January and 24 October 2013. 39  http://www.nhh.no/Files/Filer/Om%20NHH/lehmkuhlforelesning/lehmkuhl_1972.pdf. 40  Berg, Thomas N. (2011): “Mellom politikk og marked” [Between policy and market], Norges Bank Staff Memo no 19, Norges Bank. http://www.norges-bank.no/Upload/Publikasjoner/Staff%20Memo/2011/StaffMemo 1911.pdf , p. 62.

Jan F Qvigstad: On institutions – fundamentals of confidence and trust Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 12 November 2013. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in drawing up this speech, in particular from Mike Bordo, Arne Jon Isachsen, John Llewllyn and Anders Vredin outside Norges Bank, and from Norges Bank staff; Øyvind Eitrheim, Amund Holmsen, Marie Norum Lerbak, Inka Rogne, Øystein Sjølie, Birger Vikøren and Jan Fredrik Øksendal. I would also like to thank Helle Snellingen for the translation into English. Institutions The concept institution has many meanings. For example, there is an important distinction between its meaning as an abstract concept and as a concrete one. The judicial system in Norway is an institution in an abstract sense, while the Supreme Court is concrete. The Norwegian Opera & Ballet is a concrete cultural institution within our more abstract cultural heritage. In my own field, the monetary system is abstract whereas Norges Bank is concrete.
It says that a country cannot simultaneously maintain independent monetary policy focused on domestic objectives, a high degree of capital mobility, and currency stability. Any two of these regime characteristics can be chosen, but not all three. While the trilemma suggests sharp tradeoffs, additional policy tools can soften the tradeoffs. Fiscal policy is one tool that serves this purpose. When foreign credit conditions tighten, expansionary fiscal policy can allow a country with a high degree of capital mobility, and a policy preference for currency stability, to effectively manage towards domestic macroeconomic objectives and internal balance. In fact, fiscal policy can also be used to rebalance the composition of demand towards the desired mix of investment and consumption. Softer tradeoffs than implied by the trilemma are suggested by some of the empirical evidence on interest rate co-movements. For example, there is ample evidence that domestic short-term interest rates become progressively less correlated with short-term interest rates in large foreign countries, and that monetary policy is more autonomous, as countries move from high capital mobility to low capital mobility, and from rigid currencies to flexible currencies.5 Using foreign exchange reserves to support currency stability is unlikely to be as effective in enabling the country to attain domestic growth and inflation objectives. If losses of foreign reserves are not sterilized, the effect will be similar to that of domestic monetary tightening, and as already discussed, might work against domestic growth and inflation objectives.

“Rounding the Corners of the Policy Trilemma: Sources of Monetary Policy Autonomy”, American Economic Journal: Macroeconomics 2015, 7 (4): 33–66, http://dx.doi.org/10.1257/mac.20130237. Krugman, P. (1999). Balance Sheets, the Transfer Problem, and Financial Crises, in International Finance and Financial Crises: Essays in Honor of Robert Flood, edited by Peter Isard, Assaf Razin and Andrew Rose (Springer Netherlands) pp. 31–55. Mundell, R. (1963). Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates, Canadian Journal of Economic and Political Science, 29 (4), pp.475–485. Obstfeld, M. (2015). Trilemmas and tradeoffs: living with financial globalization, BIS Working Papers No 480. Obstfeld, M., Shambaugh, J., and Taylor, A. (2005). The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility, Review of Economics and Statistics, vol. 87 (3). Rey, H. (2014). International Channels of Transmission of Monetary Policy and the Mundellian Trilemma, London Business School, Paper presented at the 15th Jacques Polak Annual Research Conference Hosted by the International Monetary Fund, Washington, D.C., November 13–14. United States Congress (1913), Federal Reserve Act, Amended 1977, Section 2A. 4  BIS central bankers’ speeches
A somewhat higher cost for the provision of market liquidity during the more benign stages of a financial cycle might be worthwhile if it were accompanied by less volatility and stress when the cycle inevitably turned down. In fact, even if market liquidity costs are now going to be higher on average, this might be a small price to pay for a much more stable financial sector. Also, it is important to recognize that market liquidity conditions a few years from now may be very different from the situation today. If the cost of providing liquidity services has increased, this creates strong incentives for innovators to find better ways to match buyers and sellers. In my view, this innovative response is already underway. For example, in both the Treasury and corporate bond markets, firms are being established to more efficiently match buyers and sellers of less liquid bonds in order to reduce search costs and the need to carry inventory. Furthermore, execution algorithms have been developed that divide large trades into smaller sizes, thus reducing the costs of moving large blocks of securities. Market liquidity conditions could very well improve over time as innovation occurs in response to this new regime. Let me now turn to the topic of funding liquidity. I think this issue deserves as much attention as market liquidity. After all, during the financial crisis the demise of several major financial institutions resulted from their inability to finance their long-dated illiquid assets. The  5  Mizrach, B. (2015).

In any event, the recovery was still influenced by the course of the pandemic, partly as a result of the emergence of new variants of the virus. Another novel feature of economic performance in 2021 was the strong global surge in inflation. This was especially severe in both energy and non-energy commodities, after many years in which their price increases had remained at persistently low levels. The intensity and persistence of the inflation surge – fuelled by both demand and supply factors – systematically surprised on the upside. Notable among the demand factors are the relatively strong recovery in activity following the collapse in 2020 and the changing consumption patterns as a consequence of the pandemic and the measures adopted to contain it. Among the supply factors, global production and supply chain disruptions, as a consequence of the disruptions in the production of certain intermediate goods and in some modes of international goods transport, stand out. Both these aspects – a recovery influenced by the course of the pandemic and continuous upside inflation surprises – continued to determine the pace of the global economy at the start of 2022. Accordingly, before the invasion, analyst consensus forecasts broadly coincided in expecting a first quarter in which economic activity would decelerate somewhat as a consequence of the negative, but relatively limited, impact of the Omicron variant.
T1  T2  T3  T4  2003  Deficit financing  7.2  4.2  3.6  5.0  20.0  Credit to the economy in Lek  0.5  0.5  0.5  0.5  2.0  Foreign currency reserve growth  0  1.8  2.4  1.2  5.4  Sum  7.7  6.5  6.5  6.7  27.4  M2 growth  5.8  6.7  7.0  10.2  29.7  Achieving equilibriums of monetary indicators and the reduction of the core interest rate down to the levels of early 2002, are expected to provide the normal growth of the M1 aggregate. Demand deposits in Lek are forecasted to be slightly higher in the coming year. However, the strongest impact on the M1 aggregate growth will be the growth of money outside banks. Money outside banks is forecasted to increase by Lek 14.9 billion in the next year. Money outside banks ratio versus money supply is assumed to be round the level of 28.0 percent. Such a forecast is based on the fact that this ratio has generally appeared as an equilibrium level in the Albanian economy. Also, the forecast for a stability (or fall) of interest rates, gives a greater back up to this assumption. However, considering the historic trends, this ratio is expected to have an upward trend in the last trimester of the year.

BIS Review 8/2004  7  institutions and households in the treasury bills market has demonstrated upward trends in the last two years. In the coming year, their deficit financing is expected to reach the value of Lek 2.6 billion. Budget deficit financing from the banking system in 2004 is forecasted to be Lek 20 billion or 2.3 percent of the GDP. The law provided the Bank of Albania to finance the budget deficit up to the level of 5 percent of the average budgetary government revenues during these three last years. In absolute value, this limit is estimated to be Lek 7.7 billion. The monetary program for 2004 forecasts that the Bank of Albania financing of the budget deficit will be Lek 7.5 billion. This financing by the Bank of Albania is necessary in covering the budget deficit, considering a small growth of the M2 and Lek deposits. The monetary program forecasts that the increase of Lek deposits during 2004 will be sufficient in covering the other part of Lek 12.5 billion of the deficit financing from the banking system. The following table shows the allocation as to trimesters of the budget deficit financing for the banking system. Table 9. Allocation of the budget deficit financing (Lek billion).
Bank of England work suggests a central range of 0-1% for the long-run equilibrium real interest rate in the United Kingdom.6 Widely cited estimates for the United States suggest that the long-run  3 In addition to affecting the market rates directly, monetary policy easing could lead to a further compression  in market rates because of spill-overs via exchange rates (in case of interest rate cuts) or compression of term premia (in case of asset purchases). See Brainard (2017). 4 King and Low (2014) document a sizeable decline in market based measures of long-term real interest rates in several advanced economies. 5 See, e.g., Eggertsson et al (2017), Gagnon et al (2016), Rachel and Smith (2017) on the role of demographics and productivity growth and Vlieghe (2017) on the role of financial liberalization and increased risk taking. Some very different candidate explanations have also been suggested. Borio (2017) links the fall in long run real interest rates to monetary policy regimes, while Caballero (2017) links them to a shortage of safe assets. 6 See Bank of England (2018), Box 6 on pages 39-43. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  equilibrium real interest rate fell to close to zero during the crisis and has remained there into 2016.7  Of course, the long-run real rate is not the only driver of real interest rates.

Financial sector debt in  advanced economies  advanced economies Per cent of GDP 400  Japan UK Mature markets  US Euro area Per cent of GDP 250  350  230 210  300  190 170 150  250  130 Excluding financial sector debt  110  200  90  Including financial sector debt  70  150 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017  Source: IIF Global Debt Monitor. 50  Source: IIF Global Debt Monitor. Moreover, debt in emerging markets grew much faster than GDP between 2011 and 2016. Chinese debt-to-GDP ratios have risen particularly sharply and are now very high. Whilst the growth rate of the aggregated global debt stock has moderated more recently, the level remains high by historical standards – as one might expect in a low for long world. While this may not in itself cause or presage a correction, it could well amplify one, making the global economy more vulnerable to adverse macro-economic shocks26. 26 Research suggests that it is the growth rate of debt rather than its actual level that is the leading indicator of financial  crises. Bank of England work based on 130 downturns in 26 advanced economies since the 1970s suggests that a rapid build up of debt is the best early warning indicator of a recession. See for example Bridges et al (2017), Carney (2019b) and Schularick and Taylor (2012).
He is also Governor of the Banco de Espana, and a Member of the Governing Council of the European Central Bank. Governor Caruana has extensive experience in both the private and public sector in Spain, and is the author of several publications on the Spanish financial system. We are greatly honoured that he has accepted our invitation to speak on Basel II today. The Basel II project was already several years old when Governor Caruana took over its leadership, as Chairman of the Basel Committee, in May 2003. But he has put his own stamp on this project, and has made three special personal contributions. First, he has brought the formulation process to a successful conclusion with the publication last June of the definitive document on the revised framework. Producing this necessary road-map was no easy achievement given the differing views that had to be taken into account, and the considerable degree of scepticism in the industry. Secondly, he has, through persuasion and advocacy, managed to convert scepticism towards Basel II into a positive and constructive attitude. He has done this in particular by stressing that, when you look beneath the surface, Basel II is not so much about how capital adequacy ratios are calculated, as about how banks can improve their risk management and, thereby, how the efficiency of the banking system can be improved.

4  Commodity cycles may be linked to global business and financial cycles at critical junctures, but commodity long cycles are more related to technological progress, changes in the composition of demand, and global trade patterns (see Figure 2). 20 15 10 5 0 -5 -10 -15 -20 -25 -30 1980  Figure 2: Commodity super cycles and global conditions (†)  1985  1990  1995  2000  2005  2010  2015  40 30 20 10 0 -10 -20 -30 -40 -50 -60  EMEs Business Cycle AEs Business Cycle VIX (inverse, standardized, 10x) Comm. PX Cycle (excl. Fuel) [RHS] (†) Business and commodity prices based on HP filter. Source: Central Bank of Chile based on IMF and FRED databases. The experience of Chile since 2000 Chile has been traditionally exposed to global cycles, speeded-up growth in the mid-1980s, once a major financial crisis led to a major upgrade in financial regulations. This bonanza period was halted by the Asian Crisis in mid-1997. The Central Bank tried to sustain the Chilean currency, by then under crawling bands, in the middle of a substantial external shock. This led the Central Bank to raise the interest rate to 14%, by then a real interest rate. Thus, the financial system face overnight rates of nearly 100%. The Chilean economy enters into a recession in late 1998. Floating ER was added to forward-looking inflation targeting, and then complemented by a Structural Balance-based fiscal policy in the early 2000s.
All in all, this recent recommandation from the Governing Council is testimony to its ability to smoothly adapt its internal governance to the challenges posed by enlargement. Strategy of the single monetary policy The Maastricht Treaty clearly defines the ultimate objective of the single monetary policy, that is to say maintaining price stability. However, for attaining this goal, it is essential to clearly define price stability: we define it as a year-on-year increase in the overall Harmonised Index of Consumer Prices (HICP) of below 2% in the whole euro area. Bearing in mind this objective, our monetary policy strategy is based on two “pillars”. We have first assigned a key role to the monetary aggregate M3. This “pillar” is based on a reference value which is set at 4.5% for the annual growth rate of the broad monetary aggregate M3. The concept of a reference value does not mean that the Eurosystem is committed to automatically correcting deviations in monetary growth in the short term. Naturally, we also follow the components and counterparts of M3 closely. In this regard, the development of loans to the private sector, as well as the evolution of government finance and capital flows with the rest of the world, deserve a particular attention. However, it is common sense to say that monetary developments do not account for all the risks to price stability.

This is why we have defined a second “pillar” for our monetary policy strategy, consisting of a broad range of variables that are referred to as indicators for the euro area price outlook. The relatively low yields on long-term euro-denominated bonds confirm investors’ confidence in the new currency. This was not the case four or five years ago. At that time, financial markets were convinced that the euro would be the weighted arithmetic mean of its legacy currencies and would not inherit the level of confidence and credibility of the strongest of these. The euro has actually been founded on a benchmarking principle, not on a convergence towards an average. This may explain why the interest rates of the euro were the lowest in Europe from the outset. To sum up, we consider the maintenance of price stability over the medium term to be the Eurosystem’s greatest contribution to fostering an environment which is conducive to sustainable growth and employment. And, it is also its greatest contribution to limiting unnecessary volatility of output and employment in the short run. The success, thus far, of our strategy does not mean that our current monetary policy strategy is engraved in the marble. With the benefit of hindsight, 2003 seems the appropriate point in time to take stock of our experience thus far and to reflect on the various elements of the strategy. This issue is actively dealt with our Eurosystem’s staff and we plan to complete this evaluation in the course of the spring and to publish it.