samchain/econo-pairs-v1 huggingface dataset:
This practice is also in line with recommendations in economic literature. Commodity-exporting countries tend to experience wide fluctuations in their exchange rate. Australia is one example. Fluctuations in commodity prices lead to changes in countries’ terms of trade, which measures the ratio of export to import prices. Fluctuations in the terms of trade affect the exchange rate. This dampens the effects of commodity price changes on profitability in business and industry. The exchange rate thus serves as a buffer against changes in the terms of trade. In Norway, the petroleum fund mechanism and the fiscal guidelines dampen the effect on the exchange rate of changes in oil prices. We have nevertheless stated previously that we must be prepared for fluctuations in the value of our currency that are more in line with the fluctuations observed in other countries. The exchange rate will vary. The exchange rate may also act as an automatic stabiliser. In periods when economic activity is too high - or there are expectations of overheating - the exchange rate may appreciate, even if Norges Bank does not change the key rates. Similarly, the exchange rate may depreciate if the activity level is too low. 2  BIS Review 2/2003  In the long term, monetary policy determines the average level of inflation. Therefore, over time, monetary policy also has a significant influence on the nominal exchange rate. Output is determined by the supply of labour, capital and technology.

As the result of the action taken following the analysis of the banking sector conducted in 2014, the SSM has led to an appreciable increase in the sector’s capital and has prompted the most vulnerable banks to start cleaning up their balance sheets. The SSM has also shown itself capable of participating effectively in the resolution of crisis episodes, like the one involving Greek banks. Moreover, the SSM has managed to eliminate many of the national regulatory particularities, has created a common methodology for the supervisory review of all banks and has made  8  BIS central bankers’ speeches  significant progress in harmonising inspection practices by drafting and developing a manual of common procedures. At the operational level, in record time, joint supervisory teams have been put in place for each significant institution and an ambitious programme of on-site inspections has been developed. All these actions have been carried out within a framework of cooperation between national authorities and the European Central Bank which is, generally, functioning appropriately. Naturally, the fact that almost 100 employees of the Banco de España have been recruited to the ECB’s supervisory arm, making it the national authority that the ECB has most relied on to cover its supervisory staff requirements, is something to be proud of, although it is also an organisational challenge. Given the complexity of the project, which includes coordinating the staff of 19 national supervisors plus the ECB, and the short time that the SSM has existed, there is obviously still room for improvement.
What was unexpected was how soon and how fast the króna fell. It depreciated by 19% against the exchange rate index over 2006 as a whole and all the weakening was confined to the first half of the year. So far in 2007 the króna has been roughly 15% weaker on average than at the beginning of 2006. By comparison, the US dollar depreciated against the euro by almost 11%. For most of the  2  BIS Review 16/2007  period since the middle of 2006, the króna has fluctuated within a fairly modest range. Since the end of the sharp depreciation in the first half of last year the króna can be described as relatively stable and marginally above its long-term average value. At present, the real effective exchange rate is slightly stronger than on average over the last quarter of a century. A wide current account deficit could potentially erode confidence in the króna. The Central Bank has underlined the importance of restoring macroeconomic balance by realigning domestic demand with output capacity, and of establishing a sustainable external balance by such means rather than through a sharp currency depreciation that would fuel inflation and other instabilities. Inflation developments depend heavily on the króna not slipping much from its level over the past few months, at least for as long as pronounced macroeconomic imbalances remain. Confidence in the exchange rate will be a crucial factor over the coming months.

Be that as it may, the economy was no less overheated than forecast in mid-2006, as witnessed by the current account deficit and tight labour market. Thus it is untenable to claim that the Central Bank’s policy rate hikes in 2006 were unwarranted. On the contrary, a higher policy rate was the main precondition for the króna to hold relatively strong, and contributed to subduing demand growth. Had the Central Bank not raised its policy rate, there is little doubt that inflation would be higher than at present. Some commentators who were surprised by the December policy rate hike apparently considered that the Central Bank had underestimated the scope of the turnaround in the economy in the second half of the year. National accounts statistics for Q3 that were published in mid- December, supposedly showing a substantial slowdown in economic activity, were repeatedly cited as evidence. The Central Bank considers it imprudent to draw sweeping conclusions solely from preliminary estimates in the quarterly national accounts, which tend to undergo sharp revisions. For this and other reasons, a  BIS Review 16/2007  3  broader range of indicators contributed to the December policy rate decision, including the current account deficit and labour market conditions. The scenario today is that commercial bank analysts expect the cycle of policy rate cuts to begin later this year than they were forecasting towards the end of 2006. In other words, they consider that more underlying pressures remain in the economy than they may have thought at the time.
Jean-Pierre Roth: Autonomy on the edge of a large monetary zone - the Swiss experience Address by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Leonard Davis Institute for International Relations, Hebrew University, Jerusalem, 28 May 2006. This paper was prepared with the support of Ms Petra Gerlach-Kristen, Economic Research Section, Swiss National Bank, Zurich. *  *  *  This is my second visit to Israel and I am delighted to be back. I am especially happy to speak at this institute which, according to the will of its founder, Leonard Davis, should promote a better understanding of Israel external policy. The first time I was in Jerusalem was in November 2004 when the Bank of Israel celebrated its 50th anniversary. The Swiss National Bank is itself approaching an important anniversary. Next year, it will have been 100 years since we opened our doors for business. Since 1907, our institution has seen large changes in the monetary environment. When the SNB began operating, the Swiss franc's parity was defined in terms of gold and silver. In the early 1920s, Switzerland adopted a gold standard and fixed exchange rates remained the dominating feature of its monetary regime until the collapse of the Bretton Woods system. Since then, we have learned how to conduct our monetary policy independently and how to live with flexible exchange rates.

To achieve quality and continuity in this area, a central bank must be able to attract and retain staff versed in monetary economics, market operations and many other fields. Only if a central bank's finances are insulated from daily politics, can it compete freely with the private sector in the access to human resources. Transparency A second condition for successful monetary independence is a well-communicated monetary policy strategy. Policymakers need to announce clearly what they are trying to achieve in both the long and the short term, and with what means. Transparency of this kind makes it easier for market participants to judge the likely course of future monetary action. As a consequence, monetary policy changes rarely cause major fluctuations in financial markets, and the central bank can set interest rates to achieve the goal of price stability without having to fear financial distress. The SNB attaches great weight to communication. Our monetary policy goal is clearly spelt out in the National Bank Act and in our monetary policy concept. Our interest rate decisions are communicated together with an explanation that includes our inflation forecast, which is based on the assumption that interest rates remain constant. This allows the market to understand how we judge future developments in the absence of monetary policy changes and thus makes it possible to infer the likely direction of future interest rate adjustments. In between monetary policy decisions, my two colleagues in the Governing Board and I give frequent speeches – as today – to clarify our view on things.
As I pointed out in my brief remarks on the financial standing of the banking sector, Turkish banks have reached a level of financial and institutional development that should not be underestimated. But despite all the aforementioned positive aspects, there are also various threats to the wellbeing of the Turkish banking sector which I believe are worth mentioning. Turkish banks, like all the other banks in the world, are exposed to credit risk, liquidity risk, interest rate risk and foreign exchange risk. This is true even in the absence of an environment of global crisis and macroeconomic risks stemming from political uncertainties. These are other issues that merit separate consideration. I will turn now to financial risks. The most important of these is credit risk, which Turkish banks pay the most attention to managing. The Turkish banking sector has become used to accepting and managing credit risk over the years. A credit culture has been developed in which firms, sectors, regions and individuals participate. Increased competition in the sector clearly has implications for the risk-taking process, which requires that the banks restudy their credit strategy. An overall examination of credit risk showed that the banking sector has been able to manage its credit risks by keeping the level of non-performing loans low in spite of an environment of shrinking international financing.

Consequently, Switzerland – unlike other countries – was able to avoid introducing state-guaranteed bonds. With the drastic reduction in key rates and the subsequent decline in mortgage rates, the burden on households and companies was eased. In this way, the severity of the recession was somewhat alleviated and the risks of deflation reduced. However, the interest rate is now at a historic low and this means medium-term risks for the Swiss real estate market and financial stability. Experience shows that periods of low interest rates provide scope for excesses on the mortgage and real estate market. Consequently, in the current environment in particular, attention should be given to ensuring that past mistakes are not repeated. Caution must remain the watchword when granting loans. BIS Review 140/2009  1
The 75 basis point cut in the ECB main policy rate implemented in late 2011 has been accompanied by little reaction or even an increase of lending rates in countries under stress, whereas there has been a complete pass-through in euro area countries considered by the markets as financially solid (see slide 9). Self-fulfilling equilibria driven by break-up fears The third, and most recent, dimension of the debt crisis has taken the form of investor fears of a break-up of the currency union. Whereas exchange rate risk across euro area countries should have disappeared permanently with the creation of the single currency in 1999, there have been signs, especially over the summer, that investors have started pricing in redenomination risk. Investors require a compensation for the risk that the euro might not remain the irreversible currency of the euro area – at least in its current composition. Although it is difficult to disentangle redenomination premia from other sources of risks – and it requires econometric analysis – the inversion of the slope of the term structure of sovereign bond spreads 5 observed in early summer 2012, for instance, for Spain and Italy was consistent with expectations of imminent break-up risks. Market fears of a high probability of not paying back in full, or of equivalently to repaying in a different, lower-valued currency, command high spreads.

OMTs will be conducive to the monetary authority restoring its power to control credit conditions in the euro area and, through that channel, inflation in the medium term. It thus creates the conditions for a transition from a regime of undisciplined fiscal policies – from a “non-Ricardian” or “active” fiscal policy, using the terminology of the economic literature referred to above – to a regime where fiscal policy respects its inter-temporal obligations – it becomes “Ricardian”, or “passive”. This means that monetary policy has regained its pre-eminence in determining credit conditions and inflation. This renewed assignment of tasks pushes back fiscal dominance and affirms monetary dominance. The second concern can be formulated in terms of the question: will OMTs bring large risks to the central bank’s balance sheet? The answer again is: no. OMTs establish a second type of interaction: between the central bank, real money investors and households and firms,  BIS central bankers’ speeches  7  which save and borrow to finance real economic activity. To the extent that break-up and reversibility premia are squeezed out of bond pricing, real money investors will return to the euro area securities market, and the prices of securities will again better reflect the fundamentals. Households and firms will benefit from restored credit conditions. And the associated widespread reassessment of risks will make market portfolios and the central bank portfolios grow in value. Ultimately, strict and effective conditionality could be seen as acting as a credit enhancement of all euro area portfolios.
Unemployment Percentage of labour force, seasonally-adjusted data 14  14 Arbetslöshet 16-64 år  12  12 Arbetslöshet 15-74 år  10  10  8  8  6  6  4  4  2  2  0  0 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  12  Note: Broken line is the Riksbank’s forecast, 15-74 age group. Data before 1993 is linked by the Riksbank. Sources: Statistics Sweden and the Riksbank  BIS Review 154/2008  13  Figure 11. CPI and CPIF inflation Annual percentage change 5  5 CPI  4  4  CPIF  3  3  2  2  1  1  0  0  -1  -1 00  01  02  03  04  05  06  07  08  09  10  11  12  Note: Broken lines are the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank  Figure 12.

Slow growth, lack of economic mobility and erosion of trust in public and private institutions are among the factors that are likely to have contributed to this. Like undercurrents before a storm, these trends have far reaching implications for political, economic and social systems. Last but not least, the fifth shift is the advancement of technology. This has and will continue to 1/5  BIS central bankers' speeches  dramatically alter the way we behave, interact and transact. Much has been said about the benefits, but an increasing reliance on technology presents risks that we cannot ignore. This includes issues of data privacy, discrimination or biases and also displacement of certain segments within society. In the digital age, higher order risks of cyber-attacks and operational disruptions are magnified in ways that we have yet to fully comprehend. Calling for a financial system that is relevant, safe and socially responsible These five megatrends and finance are deeply intertwined. While undoubtedly finance has helped to power the economic rise of ASEAN, its role in contributing to an increase in climate risk and inequality cannot be denied. Therefore, as we consider the future of finance, we need to contemplate not only how these megatrends may impact finance, but how finance itself can respond to and shape these trends in more positive ways moving forward. In my mind, this calls for a financial system that is relevant, safe and socially responsible. Finance must be relevant to the needs of the economy.
Beijing is concerned that in the run-up to the Taiwan Presidential Election in March next year, President Chen Shui Bian may make one last throw of the dice which may compel China to act. How the US handles this issue will be crucial in maintaining stability across the strait. Third, Myanmar cannot return to the status quo ante after the government’s crackdown on monk-led protests. Instability in Myanmar can affect its immediate neighbours and hurt the reputation of ASEAN. National reconciliation and an agreement on phased changes and  BIS Review 124/2007  1  power sharing is the only way to prevent another widespread protest, which may end up in a bloody uprising to bring about change. Therefore, ASEAN and Singapore, and so too China and India, fully support the mission by the UN Secretary General’s Special Advisor, Mr Ibrahim Gambari, to help the various parties in Myanmar work towards genuine dialogue and compromise. However, this compromise is not so easy to achieve. Myanmar’s military rulers, the many ethnic groups and the political players deeply distrust one another. The rulers are also highly suspicious of the outside world. This psyche of distrust was borne out of the violent and divisive history of Myanmar after World War II, its complex national make-up of many diverse ethnic groups and, until the recent agreements on ceasefire, the fighting with insurgents. There is no quick and easy solution. Negotiations will be long and complicated.

Market participants recognize this successful defense of the exchange rate in the past fifteen years, although in a short run any change may cause, through the transmission effects, only temporary increase of the nominal, and thus of real interest rates in the economy. A logical consequence of all this is that a possible reflation in the Eurozone means that the Republic of Macedonia will not become an isolated island doomed to disinflation and, vice versa, that if the Euro continues to prove effective in delivering low inflation in the Eurozone, in the Republic of Macedonia internal depreciation will be the preferred course of adjustment. The differences between inflation rates in the Republic of Macedonia and the Eurozone will remain temporary and limited. In fact, this marks the success of the stable exchange rate as an intermediate target of the monetary policy which consists of the aforementioned difference of 0.2 percentage points between the inflation in the Republic of Macedonia and the inflation in the Eurozone. In the long run, this enables economic agents to have more definite expectations about the general price level and denotes support to the economic environment. In such monetary policy setting it should be noted that the National Bank, as a public institution, constantly needs to cooperate with the Government without undermining the autonomy of any of these two institutions.
I have mentioned four prudent principles, plus another four more forward-looking ones. Some may emphasise the former, while others may prefer to move faster. My own view is that there is some urgency in moving forward significantly. Building the European framework So let us now focus on the concrete steps that move in this direction. I would like to separate these into two categories: those that relate to the regulatory framework and those that pertain to the supervisory framework. The regulatory framework Let me begin with some reflections on the regulatory framework. Going back to the principles I highlighted earlier, I believe we should build upon the regulatory framework that already exists in the EU. Any improvement to the EU framework for financial supervision should first seek to fully exploit the potential of the existing framework. In this respect, the concepts and responsibilities of home and host supervisors and the framework for consolidated supervision are well-embedded in the existing banking directives, and it makes a lot of sense for them to form the basis of the future approaches. Indeed, the directive to implement Basel II in the EU – the so-called capital requirements directive – contains key provisions which will reinforce the role of the consolidated supervisor in relation to applications to use the advanced approaches of the new capital framework.

Once the adjustments are completed, households can consume more and regain their access to credit, and these developments help to support a more vigorous economic recovery. Of course, we don’t yet know precisely where we are in this adjustment process. For example, families may choose a permanently higher rate of saving in order to rebuild their retirement savings. What they decide to do will depend in part on their expectations for future income, their outlook for the economy, what they think will happen to housing and stock prices, and prospects for taxes and benefits such as social security and Medicare payments. However, we do know that during good times few households are likely to be delinquent on  4  BIS central bankers’ speeches  their bills. And, overall, we’d expect their borrowing to grow at least modestly as the economy strengthens. The Household Debt and Credit Report released today indicates that there has been a pickup in credit flows. Households increased their non-mortgage debt last quarter, a development not seen since the fourth quarter of 2008. The number of credit card applications increased – an indication of a pick-up in consumer demand for credit. And, the number of open credit card accounts also increased slightly – as more accounts were opened than were closed. Of course, signs of distress continued: households are still reducing their housing-related debt and delinquencies continue to be a problem. So, the adjustments remain far from complete.