samchain/econo-pairs-v1 huggingface dataset:
In the UK we have experienced a sharp and broad-based slowdown in activity that gathered momentum in the autumn (Chart 4). In part that reflected the concerted credit squeeze that started in summer 2007. But we also saw a sharp drop in confidence among consumers and companies after the crisis in the banking system which followed the decision to allow Lehman Brothers to fail in September last year. A similar drop in confidence has been observed across the world – in China and India as much as in the West – and we are now in the throes of a severe and coordinated contraction worldwide (Chart 5). Even those countries which sat out the excesses of the credit boom  2  BIS Review 5/2009  have been affected by the slowdown. Around the globe, sectors like manufacturing which are heavily dependent on world trade have been particularly badly hit by the ebb tide of global demand. In the United States, the ISM survey of manufacturing activity posted a near thirty year low in December. And in Japan, the November fall in industrial production was the largest percentage contraction on record. The recent industrial production figures from Germany, France and Italy tell a similar story. The outlook for the remainder of 2009 The immediate prospects in the UK, as elsewhere, remain difficult.

Chart 1: Annual GDP growth percentage changes on a year earlier 12 10 Average annual grow th since 1970  8 6 4 2 0 -2 -4 -6  1970  1975  BIS Review 5/2009  1980  1985  1990  1995  2000  2005  5  Chart 2: Property prices Indices: March 2003 = 100 150 Rat io of house prices t o earnings  140 130 120 110 100 90 80  Rat io of commercial property prices t o PNFCs profit s  70 60 50  98  99  00  01  02  03  04  05  06  07  Chart 3: Customer funding gap  Chart 4: Survey measures of activity £ billions  Ratio  Cust omer funding gap (RHS) Int erbank deposits from abroad (RHS) Household saving rat io(b)(LHS)  8 7  5  500  4  400  3  300  2  200  1  100 0 02  03  04  05  06  07  08  Expansion  Indices: 50 = output unchanged on a month ago 70  700 600  0  6  800  6  01  08  60  50  Construction Services  40 Contraction  Manufacturing  30  97 98 99 00 01 02 03 04 05 06 07 08  BIS Review 5/2009  Chart 5: Global output  Chart 6: Investment intentions 65  Global output balance  August 2008 60  Services Manufacturing  Balance reporting an upwards revision to 40  55  30  50  20  45  10 + 0 10  UK CIPS output 40 35  20  30 2006  2007  2008  30 88 90 92  94 96 98 00  02 04 06 08  Chart 7: Growth in secured lending 3m annualised growth rates (nsa)  Other lenders Major lenders  25  20  15  10  5  0  -5  -10 2003  BIS Review 5/2009  2004  2005  2006  2007  2008  7
In addition, the return of the Istanbul Stock Exchange, though volatile, increased substantially this year. Market volatility creates liquidity and great trading opportunities. When I talk about money markets I mean the Turkish lira money market and the foreign exchange cash and deposit market, open market operations, and government securities auction markets. These markets, which were introduced as a part of the financial sector reforms, have increased the effectiveness of the central bank’s control over the liquidity in the financial system, and increased the role of market mechanisms in money management. When market mechanisms began to play a larger part in the allocation of resources, the responsibilities and instruments of the central bank also changed, bringing the issue of central bank autonomy onto the agenda of the Turkish economy. Turkey now has a well established and efficient system of financial markets. The main obstacle at present to the functioning of the financial markets is our large public sector borrowing requirement, which crowds out other demands for financing. The inability of domestic resources to cover the financing needs of the public sector has kept real interest rates very high for over a decade. Bold privatization efforts, broadening the tax base, and reforming the social security system are the best ways to correct this situation, and I may say that they are all under way. Macroeconomic stability and political stability are the keys to achieving sustainable growth in a low inflation environment. BIS Review 42/1997

51, No. 4, s. 657-665. Schadler, S., Drummond, P.F.N., Kuijs, L., Murgasova, Z., Elkan van, R. 2005. “Adopting the euro in Central Europe: Challenges of the Next Step in European Integration”, Occasional Paper No. 234, International Monetary Fund, Washington. Wicksell, K. 1898. “Interest and Prices”, tłum. R.F.Kahn, MacMillan, New York, 1936. Woodford, M. 2003. “Interest and Prices”, Princeton University Press, Princeton and Oxford. 4  BIS Review 6/2007
Broad diversification can therefore reduce the total risk of a portfolio, without necessarily lowering the expected return. Systematic risk is risk that cannot be eliminated through diversification and is the risk associated with market returns that must be accepted when investing in global financial markets. This is the risk that an investor can expect to be compensated for and that delivers a higher expected return. For the GPFG as a long-term investor, short-term fluctuations are not the most important factor. Periods of weak economic growth occur in all countries. Investing in a broad range of assets reduces the risk of the return being dominated by such a period. The objection could be raised that international capital markets have become increasingly interwoven. Equity markets in different countries are correlated to an increasing extent. Common factors will often dominate in acute crises. At the same time, it seems likely that the more fundamental features of an economy are more important in the slightly longer term, as exemplified in the chart. The calculations are based on a data set for equities and ten-year government bonds in 42 countries through all or parts of the period 1950–2016.5 The lines show the five percent worst outcomes for the value of two different portfolios for different time horizons. The light blue line shows a portfolio diversified across a large number of markets. The dark blue line is a portfolio invested in a single country.

Chart 5: Six large falls in 100 years If we look at annual returns in global equity markets since 1900, the chart shows that negative real equity market returns of the same magnitude as during the financial crisis have occurred in five periods: the Great Depression 1929–31, two world wars, the rise in oil prices at the beginning of the 1970s and the repercussions after the dotcom crash.3 Both the owner and the manager of the GPFG must be prepared for new crises. Chart 6: The fund is larger A larger fund also means more pronounced fluctuations compared with the wider economy. Chart 6 shows the same percentage decline in the value of equities and fixed income instruments as in 2008, disregarding movements in the krone exchange rate. With today’s fund, the same decline would have resulted in a fall in the value of the GPFG of NOK 2700 billion. This is equivalent to more than 90 percent of annual mainland GDP, compared with just over 30 percent in 2008. In previous periods of falling equity prices, petroleum revenue transfers to the GPFG have been substantial relative to the fund’s size.
It is clear, for instance, that the maturity of the covered bonds is considerably shorter than that of the government bonds, which means that most of the holding will have declined within five years through maturities, should the Executive Board decide not to make any reinvestments after 2022. Thoughts regarding the future In conclusion, I would like to talk about the lessons we can learn for the future. During the coronavirus crisis we made extensive purchases that we are now planning to phase out in a predictable manner. We believe that the purchases have worked well. But as you know, no two crises are the same. What strategies are available in the future? Go big and fast, buy a little at a time or take a middle way? One alternative is what Andy Bailey and others at the Bank of England have discussed, namely to 'go big and fast' and then fairly quickly dismantle the holding as soon as the situation improves, to have your ammunition ready for the next crisis or economic downturn.24 I think that the holding should be phased out when it is politically motivated and I am not keen on dismantling it to increase our purchasing scope. This is a variation on the theme of raising the policy rate just to be able to lower it later. Another option is to buy a limited amount of assets when the need arises, combined with a commitment to buy more if the situation deteriorates.

The Bank of Canada, on the other hand, has a short maturity on its holdings, which means that selling them has not been judged to be appropriate.22 The Federal Reserve has a very long maturity on its holdings of mortgage bonds, which has led the Monetary Policy Committee to begin discussing active sales of those assets in the future, to achieve the long-term goal of primarily owning government bonds.23 Figure 9 shows how our aggregate holdings of securities would develop if no further purchases are made after 2022. Please note that this should be seen as a simple projection and not a forecast. As early as the forecast period up to the second quarter of 2025, the holding may well have been halved through maturities. This means that we do not have to consider active sales in the same way as, for example, the Bank of England to reduce the holding at a relatively rapid rate. I mentioned earlier that there are no reasons for the Riksbank to have any major holdings of private assets as the financial markets are functioning normally. Figure 20 See Bank of England (2021, 2022). 21 See Office for Budget Responsibility (2021). In addition to government bonds, the Bank of England has pur-  chased corporate bonds for a small amount, with sales of these starting in the second quarter of this year. 22 See Bank of Canada (2022). 23 See Federal Reserve (2022b). 8 [19]  10 shows the distribution of the securities held by the Riksbank.
In this judgment, the initial fall in productivity is combined with Page 3 of 18  the increase in the labor force and the expected lags in the adequacy of the capital stock in response to this phenomenon. The updating of potential growth, together with the performance of the economy in the first quarter, drive the activity gap level (-0.7 percentage points) to be wider than previously considered (Figure 6). It is important to note that, with respect to last December, the estimated level of the activity gap is greater in the beginning—the first quarter of 2019—, but also throughout the projection horizon. Although first-quarter activity figures play a role in the former, in the latter the fundamental factor is the potential growth update. The baseline scenario assumes that the gap will gradually close along the projection horizon, although at a slower pace than previously expected due to the magnitude of the adaptation process that the economy will have to go through in the face of the migratory shock. II.5. The neutral MPR About the neutral policy rate, I think a couple of conceptual clarifications are in order. The neutral MPR is defined as the rate that is consistent with a GDP in its equilibrium (trend) level and an inflation rate in the 3% target. All this, once the effects of transitory shocks in the economy have dissipated.

Durmuş Yilmaz: In search of an appropriate policy mix for emerging economies – monetary policy in Turkey in the aftermath of the global financial crisis Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the Euromoney Central and Eastern European Forum, Vienna, 18 January 2010. *  *  *  Dear Guests, During the global financial crisis, almost all countries focused on containing potential adverse effects of the crisis on domestic economy; Turkey was not an exception. Following the intensification of the crisis, the Central Bank of Turkey (CBT) delivered sizeable and frontloaded cuts in policy rates, reaching 1025 basis points from November 2008 to November 2009. During this period the CBT not only cut policy rates rapidly, but also pursued a counter-cyclical liquidity policy to support the functioning of money and credit markets, thereby strengthen the impact of the rate reductions on economic activity. These efforts were successful in bringing back Turkey on a strong recovery track. The healthy household balance sheets and solid banking system allowed a rapid rebound in domestic demand. Starting from mid-2009, the Turkish economy has been facing a domestic demand driven rapid recovery. Meanwhile, strengthening capital inflows has further exacerbated the divergence between the domestic and external demand, creating new policy challenges. Rapidly widening current account deficit coupled with short term capital inflows and exchange rate appreciation called for a different approach to monetary policy.
Following the arrival of monetary independence, and the departure of banking supervision and debt management, what exactly is our interest, as central bankers, in the way financial services evolve? After that I will talk a bit about some of the forces which are working to produce fairly rapid change in the financial services landscape. One of these forces – and certainly one of the most prominent just at this moment - is the advent of the euro. So I will undertake a spot of crystal ball gazing, and try to assess how financial markets in Europe may develop over the next ten to fifteen years, and what this means in terms of opportunities and challenges for UK financial services. It is in the nature of an assessment of this kind that a good deal of it may turn out to be wrong. But making judgements about an uncertain future is part of any business, and there is no reason why central bankers should shy away from it more than anyone else, so long as the uncertainties involved are acknowledged from the start. Another, almost certainly more persistent, factor is the pace of technological change. Related to that, we are seeing a trend towards consolidation – at first nationally, but now also internationally – amongst financial services providers. So I also want to make a few remarks about these factors. Before I go into these issues in more detail, I just want to sketch out how the Bank stands in relation to UK financial services.

However, performing these activities makes banks vulnerable, in particular receiving short-term deposits and transferring them into long-term loans. At worst, banks may fail and destabilize the whole financial sector and even the whole economy. To avoid such calamities from happening, society is willing, under certain specified circumstances, to rescue banks from failure by providing exceptional lending from the central bank or solidity enhancements from the government. Depositors may be protected by a deposit insurance scheme. But the willingness of the authorities to assist the banks and their customers must be matched by regulation and monitoring to ensure that the bank owners and others do not use, or I might say “abuse”, the possibility of public support to further their own purposes. Hence, there must be some regulation and supervision to make sure that banks behave in ways which are consistent with the overarching goals of society, such as financial stability and consumer protection. Regulation must also provide the necessary incentives for banks to act prudently and in fair competition with other banks and other financial institutions. An adequate level of domestic regulation is also necessary if you want your banks to do business internationally or if you allow foreign banks to do business in India. You should welcome foreign institutions but you should not open your markets to unregulated and unsupervised institutions. Ideally, regulation should be limited to what is really necessary to obtain these overarching goals. In practice, authorities have a tendency to over-regulate since they are risk averse.
Mojmír Hampl: Financial strangulation? Article by Mr Mojmír Hampl, Vice Governor of the Czech National Bank and a member of the EU's Economic and Financial Committee, published in The Wall Street Journal, Prague, 2 December 2008. *  *  *  Don't rush to change all the fire regulations while the actual fire is still raging. The reaction to the financial crisis should not be worse than the crisis itself. This is the mantra I've been repeating to myself – while shaking my head in disbelief at many ideas surfacing in the European and global debate on the "postcrisis" shape of the financial universe. The list of proposals that have appeared on the table so far is long and ranges from attempts to ban short-selling and regulate credit default swap markets to toughening up supervision of credit rating agencies, hedge funds or the whole sphere of structured financing. Capping executive pay – the easiest target for anyone searching for cheap political capital – is of course included. So are state efforts to micromanage banks, such as French attempts to set numerical targets for lending by recapitalized banks. For many people, these measures are the tolerable or even necessary by-products of fixing the crisis. At the top of the list, then, looms a concept of a brand-new, omnipotent, global (or at least European) super-regulator that would undoubtedly do everything better next time.

In general, most of these ideas are heading in the same direction: toward greater regulation and centralization of the financial sector, and toward less competition and a greater publicsector presence in the financial industry from now on. These thoughts – often presented in soft "Eurospeak" so as not to sound too alarming – seem as if their proponents thought them up long ago and were just waiting for a good opportunity to unveil them as miracle cures for all the financial world's ills and woes. It is as if we hadn't all known for years that unfortunately – in the world in general, and the financial one in particular – there are no such things as perfect rules, perfect regulation or, above all, perfect certainty. It is as if we'd forgotten that competition, rivalry, profit opportunities and staff motivation are not the spawn of the devil but do a lot of good. More important, the private part of the financial universe is being presented as a self-evident culprit of the crisis, while the role of the state faces much less scrutiny. The question of whether monetary authorities, prior to the crisis, properly regulated interest rates as a key price in the economy attracts much less attention in the debate than it should. The same is true for the question of whether the existing store of individual countries' supervision tools was used correctly and adequately before the crisis. This is interesting, as the crisis poses some new challenges and questions.
Against this background, during 1996 it was possible to cut the repo rate to its lowest level since the early 1960s. Low inflation and decreased inflation expectations also contributed to falling bond rates, accompanied by an appreciation of the krona from the earlier lows. Since December 1996 the repo rate has been unchanged at 4.10 per cent. All in all, conditions were gradually created for a broader economic upswing. With the time lag that generally applies in economic policy, during 1997 we have observed a mood swing among households, leading for instance to increased private consumption, while export growth has BIS Review 101/1997  -2-  been maintained. The Swedish economy is entering a phase of high activity with a combination of strong domestic demand and strong export growth. The impact of the Riksbank’s current monetary stance will take about two years to materialise in full. We therefore have to assess the outlook for inflation as far ahead as in 1999. Such an analysis was presented some weeks ago in the inflation report. I shall be returning shortly to that report and subsequent developments but first I want to discuss the approach in principle to the conduct of monetary policy over the complete economic cycle. Monetary policy in a cyclical perspective A matter that savers and investors are currently discussing is not whether but when the Riksbank will raise the instrumental rate. An expected increase in the repo rate is also indicated by the structure of market rates.

How a neutral monetary stance translates into the short real rate is difficult to determine precisely but it can be said that the current rate is comparatively low, with an impact on total demand that should be stimulatory. In addition, the level of the real exchange rate is weak in relation to a reasonable long-term equilibrium. This means that its effect is stimulatory, too. The combined effect of the short interest rate and the exchange rate is therefore tending to support the economic upswing. All else equal, an expansionary monetary stance leads to a successive acceleration of demand. In time, this may generate a growth rate that exceeds the economy’s long-term potential. The ability of the economy to cope with a high demand trend is not unlimited. As unutilised resources are activated and the output gap closes, bottlenecks of various kinds arise in the labour market or in real capital. It is in such a situation that inflation may accelerate. In order to avoid the occurrence of shortages and accelerating inflation, the monetary stance must not remain too expansive for too long in an upward phase. Instead, a timely adjustment -- bearing in mind the lag associated with monetary policy -- must be made to a more neutral position before the output gap closes. This promotes a continued growth of demand at a rate the economy can absorb -- for instance with the help of new investment, improved efficiency and labour supply -- without generating inflationary bottlenecks.
Efficient macroprudential policy increases the Riksbank’s possibilities to carry out its main tasks Let me summarise by emphasising my most important message today. Monetary policy has to some extent also given consideration to the risks arising from household debt, in addition to inflation and resource utilisation. We are eager to avoid the unpleasant developments in a number of countries in recent years. At the same time, I believe that there are several macroprudential policy tools that could be more efficient than the repo rate in preventing financial imbalances. So far, there is no framework for macroprudential policy in Sweden, and this needs to be remedied as soon as possible. In my opinion, there are good reasons why the Riksbank should play a major role in macroprudential policy. We have long conducted analysis of macroprudential policy issues; moreover, there are clear points of contact between monetary policy and macroprudential policy, for instance, the fact that they affect the conditions for one another. The Financial Crisis Committee’s proposal does not provide a clear framework for macroprudential policy in Sweden, and the proposal also differs from the ESRB’s recommendation and from the practice in other EU countries. In the future, it is desirable that the Riksbank should be able to use the policy rate to an even greater extent to stabilise inflation and the real economy in the future, and that more appropriate tools than the repo rate can be used to reduce the risks of financial imbalances.

A functioning framework for macroprudential policy can improve the conditions for ensuring that the Riksbank attains its two main objectives: price stability and financial stability. 14  An on-going inquiry into capital adequacy rules is to present its report by 15 May. Its task includes appointing an authority to be responsible for countercyclical capital buffers in Sweden. 8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13