samchain/econo-pairs-v1 huggingface dataset:
Higher oil revenues towards 2000 led to calls for higher spending. The fiscal rule was established in response to this development. A fiscal rule based on the permanent income from petroleum wealth would require agreement on what this number should be. Since 2001 we have seen large revisions in the estimated permanent income, as oil prices and resource estimates have changed. The future development of the value of the fund is also uncertain, but at least the value of the fund at a given point and the actual return from year to year are observable. It is also worth noting that the proposed rule enabled a smooth transition from the actual level of spending at the time. In comparison, a permanent income rule would have implied a very large increase in spending back in 2001. In 2017 the estimated real return on the fund was revised downwards from 4 percent to 3 percent. This spurred no significant debate and was largely considered more of a technical matter. This serves to illustrate the broad political consensus regarding the fiscal framework. The 5/6  BIS central bankers' speeches  framework has served us well for 17 years, and seems set to continue to do so. CONCLUSION Graph: Conclusion The Norwegian economy has benefited tremendously from the oil and gas resources. Public and private consumption have increased. Solid public finances have provided scope to make active use of fiscal policy to counter external economic shocks.

Christian Noyer: A central banker’s personal perspective on hedge funds Introductory speech by Mr Christian Noyer, Governor of the Bank of France, at Conference on hedge funds, Washington DC, 15 April 2007. *  *  *  Thank you all for coming. It's a pleasure and a privilege to have you all here to day. Special thanks to the IMF and John Lipsky for organizing this event for us and with us. The purpose of our meeting is to present the special issue of our Financial Stability Review on hedge funds. So I want to say a few words on why we embarked on such a project and how we did it. As you noticed, this issue of our Review is mostly based on external contributions. Some authors are with me to day and I also want to thank them. We are very happy that we could assemble such an eminent roster of contributors. Let me say from the outset that we did not intend to reach a conclusion at this stage. The international community is working on this issue, in particular in the framework of the FSF. The main question is: how can we best reconcile keeping the positive inputs of this activity for financial markets functioning and innovation, while keeping the risks that may be generated for financial stability to a minimum. This is why there is a debate on hedge funds, which we think, is legitimate.
References Andersson, Björn, Stefan Palmqvist and Pär Österholm (2012), “The Riksbank’s attainment of its inflation target over a longer period of time,” Economic Commentary no. 4, 2012. Assenmacher-Wesche, Katrin, and Stefan Gerlach (2010), “Monetary policy and financial imbalances: Facts and fiction”, Economic Policy 25, pp. 437–482. Blanchard, Olivier, and Jordi Gali (2010), “Labor markets and monetary policy: A New Keynesian model with unemployment”, American Economic Journal: Macroeconomics, April 2010, pp. 1–30. Claussen, Carl Andreas, Magnus Jonsson and Björn Lagerwall (2011), “A macroeconomic analysis of housing prices in Sweden”, in Sveriges Riksbank (2011), pp. 67–95. Englund, Peter (2011), “Swedish house prices in an international perspective”, in Sveriges Riksbank (2011), pp. 23–6, www.riksbank.se. Federal Reserve Board (2012), “Federal Reserve issues FOMC statement of longer-run goals and policy strategy,” press release 25 January 2012, www.federalreserve.gov. Fiscal Policy Council (2012), “Swedish fiscal policy 2012”, www.finanspolitiskaradet.se. Ingves, Stefan (2012), “Monetary policy entails a balancing act”, speech in Luleå on 4 December 2012. National Institute of Economic Research, (2012), Wage formation report 2012, www,konj.se. Kuttner, Kenneth N. (2012), “Low interest rates and housing bubbles: Still no smoking gun”, presented at the conference “The role of central banks in financial stability: How has it changed?” Federal Reserve Bank of Chicago, November, 2011, econ.williams.edu/ people/knk1. Qvigstad, Jan F. (2005), “When does an interest rate path ‘look good’? Criteria for an appropriate future interest rate path – A practician’s approach”, Staff Memo No. 2005/6, Norges Bank. Rogerson, Richard (1997), “Theory ahead of language in the economics of unemployment”, Journal of Economic Perspectives Vol.

More expansionary monetary policy can reduce unemployment Can a less tight monetary policy really reduce unemployment in our present situation? I think it can. Expansionary monetary policy improves matching… It is often said that the matching of jobseekers to job vacancies is not functioning as well now as it did before, and that monetary policy cannot do anything about this.17 The discussion in the Fiscal Policy Council’s report for 2012 (Fiscal Policy Council 2012) is relevant in this context. This shows that matching for both experienced and inexperienced labour is sensitive to demand fluctuations and improves when demand in the labour market improves. It is however more sensitive to economic fluctuations in the case of inexperienced labour. This means that if the demand for labour increases, matching improves most for inexperienced labour. The business cycle, and thus monetary policy, therefore plays a role for the matching process, and a more expansionary monetary policy that leads to a higher demand for labour improves matching most for the vulnerable groups. Monetary policy can thus contribute to improving matching in the labour market. The deficiencies in matching are, in the current economic downturn, an argument in favour of more, not less, expansionary monetary policy.
The interaction between the collateral framework and liquidity regulation is of great importance, especially for the Eurosystem.10 Let me illustrate this. A possible strategy for euro area banks to meet their LCR requirements is to increase their reliance on central bank funding using non-HQLA collateral. This is due to two features of the LCR calibration, which are of particular relevance for the ECB. First, the LCR and the Eurosystem’s monetary policy framework differ as regards the definition of qualifying assets. The stock of HQLA accepted in the LCR is narrower than the stock of assets which are eligible as collateral for the Eurosystem’s monetary policy credit operations. For example, asset backed securities (ABS) and uncovered bank bonds are accepted as Eurosystem collateral, but do not qualify generally as HQLA in the LCR. In addition, the LCR and the Eurosystem’s collateral framework differ as regards haircuts that are applied to specific categories of assets.11 Thus, there is no alignment between the definition and the risk assessment of liquid assets and the central bank’s collateral framework. This is justified by the different purposes of liquidity regulation and of the central bank’s collateral framework: the collateral framework protects the balance sheet of the central bank and, without prejudice to this objective, can support monetary policy transmission to the economy, which calls for a broader range of eligible assets, especially in such a diverse region as the euro area. This is also justified by the global nature of the LCR while central banks frameworks are all different.

The size of the fund and how it is funded is left open to discussion. That’s why it depends on what the European governments decide. Why did the ECB decide to launch a new programme, the PEPP, just a few days after announcing that it was strengthening the previous programme. Was your initial assessment of the situation too optimistic? Within three or four days we saw a rapid deterioration in the situation. Containment measures were taken in several countries, and we realised that the impact on the economy could be enormous, with repercussions on the financial markets. It was a swift reaction on our part. It helped to calm the financial markets and it was well understood. Interest rates are falling in several countries, in particular in Italy. Is this something that the ECB is concerned about? We are concerned about a combination of problems: a deep recession, a huge impact on public finances and an increase in funding needs. This causes tension in the financial markets and, in particular, the government bond market. We are going to remain vigilant. As we have said on several occasions in the recent past, we are not going to allow any fragmentation of the bond market and we will act accordingly. We have a new instrument – the PEPP – and we can use it flexibly in terms of timing and the assets we purchase. That’s why I hope we can deal with this situation.
As a consequence, demand for credit expanded rapidly: households and firms in the periphery sought to borrow, so as to reap the available growth opportunities via investment and enjoy the benefits of prospective wealth gains immediately. BIS central bankers’ speeches  1  This surge in the demand for borrowing was met with a relaxation of the credit supply (Chart 5). Financing conditions eased significantly as real rates fell. Country risk premia diminished, as peripheral countries adopted a credible and stable currency. Spreads between government bond yields of euro area countries narrowed to very low levels. Financial institutions could borrow more easily abroad, as currency risk diminished. Deeper and more integrated capital markets facilitated greater opportunities for cross-country diversification. And greater competition spurred rapid adoption of financial innovations, with securitisation and risk transfer markets playing an important catalytic role in expanding the loan supply. 1 Credit growth surged dramatically. No doubt part of the rapid expansion of credit was justified on fundamental grounds. After all, studies by the European Commission during the 1980s and 1990s had promised a sizable growth dividend from the Single Market and Monetary Union. 2 But, in an environment of large-scale structural change in peripheral economies and their financial systems, distinguishing the impact of improved fundamentals from that of “bubble-like” behaviour proved a formidable challenge.

6  See: McKinnon, R.I. and H. Pill (1997). “Credible liberalisations and overborrowing,” American Economic Review 87(2), pp. 189–193. BIS central bankers’ speeches  3  The inflationary consequences of strong growth led to a loss of competitiveness, as the real exchange rate appreciated (Chart 14). The current account of the balance of payments shifted into deficit, creating a dependency on the inflow of foreign capital (Chart 15). 7 And the rapid pace of economic growth obscured the underlying weakness of public finances, in some cases abetted by creative accounting practices, such as shifting government liabilities off the balance sheet. The case of Ireland seems particularly close to Asia’s experience in the 1990s: while public finances appeared relatively strong, a vast external debt was being accumulated by the banking system. The implicit government liabilities towards the financial sector arising from deposit insurance schemes and the need to manage systemic risks were neither fully recognised nor appropriately priced (Chart 16). By contrast, the Greek experience appears closer to that of Latin America. In these cases, fiscal indiscipline, in part initially obscured by creative accounting practices, lies at the heart of the accumulation of financial imbalances, rather than a build-up of external debt on bank balance sheets. Argentina’s crisis in 2001 is a case in point, although the experience was shared by many Latin American countries in the 1980s (Chart 17).
Some of the adjustments are already taking place. The nominal exchange rate has depreciated more than 6 percent since the closing of the March Monetary Policy Report, while the real exchange rate has done so by 5.5 percent and domestic demand has begun to slow. These movements go in the direction of reducing the trend current account deficit, which excludes the fluctuations in the terms of trade, which is a worrying factor as we have said throughout the last year. 2  BIS central bankers’ speeches  Let me now turn to our baseline scenario for the Chilean economy and the main risks we have identified in our two Reports. Macroeconomic scenario In Chile, in the first quarter of 2013 the q-o-q seasonally-adjusted annual rate of GDP dropped to 2.1 percent from 7.7 percent in the last quarter of 2012. This slowdown was particularly visible in the sectors linked to domestic demand, which was partly offset by a better performance of natural resources. As I noted a moment ago, spending was primarily driven by investment. Partial second-quarter indicators suggest that the deceleration will continue, but with less intensity than in the first. Imports of capital goods remained at their lowest level of the first quarter. Existing home sales have moderated their growth rates, but other sectoral indicators are less conclusive. In this context of economic deceleration, banks’ commercial loans have reduced their annual variation rate significantly. This reflects slower growth in investment, but also a process of substitution of corporate financing sources.

In the short term, however, these adjustments can lead to greater volatility in the real economy and financial markets as investment portfolios are adjusted to new conditions and spending plans are reviewed. I can responsibly say that our economy is well prepared to accommodate these changes in the international arena, emphasizing the contribution of our inflation targeting with floating exchange rate scheme, the strength of the fiscal accounts and the financial system as well as our sound external financing structure. All these elements allow us to be reasonably confident in dealing with the ups and downs of the external environment and mitigating its impact on the Chilean economy and the welfare of our population. In the first quarter of 2013, output increased 4.1 percent annually, 1.6 percentage points less than it did in late 2012. On the expenditure side, the slowdown of investment stood out. Part of this adjustment was expected, considering that a number of wide-ranging mining and energy projects are entering their final phase. There are also transitory elements relating to one-time imports of capital goods that are more volatile. Another portion of the adjustment has to do with our external scenario, where the world economy is expected to slow down, manufacturing industries are decelerating across the board and where, moreover, the copper price has fallen around 20 percent from the $ per pound it averaged in 2011. These factors have introduced greater caution in assessing new investments, so some of them have been postponed pending further clarity in the international scene.
We should now, when the economic and financial situation in the world is relatively calm, take the opportunity to simplify and clarify the rules further, particularly as regards their application. When the next financial crisis occurs it may be too late. Another aspect of the Fund's function in crisis management is its role when countries are forced to suspend payments. It is possible to further strengthen the instruments available today – Collective Action Clauses as well as Principles for Stable Capital Flows and Fair Debt Restructuring – in order to ensure a transparent and predictable debt restructuring process for borrowers and lenders. These instruments lay the main responsibility for agreeing on debt renegotiation terms on the borrower countries and creditors. The Fund’s most important function in such circumstances is to provide the parties with the best possible information about the economic situation so as to facilitate agreement. The Fund should also try to contribute to ensuring that economic policies in the debtor country make it possible in the longer run to restore balance and to reduce the country’s debt to a level that is sustainable in the long term. The Fund itself may have to provide some financing to achieve this, but when it comes to countries in highly vulnerable positions Fund financing can only play a limited role. It will not always be possible to bring about a sustainable debt level in this way without drawn-out negotiations and considerable economic costs.

There is also a risk that financial operations will simply be moved somewhere else, where the regulations function better. Role of the krona unchanged Now that I have discussed the role of the euro in integration of the financial markets in the euro zone, I will take the opportunity to deviate from the subject slightly and mention briefly the euro's role on the Swedish financial market. You will no doubt remember the discussions on the marginalisation of the krona prior to the introduction of the euro in 1999. Some prophets of doom claimed that the krona would not be able to survive so close to such a large currency. Swedish companies and individuals would spontaneously and rapidly go over to the euro. As we now know, this was not the case. According to the statistics the Riksbank collects on a monthly basis from the Swedish credit institutes, it can be concluded that the krona's share of the total assets has declined slightly. However, it has not been replaced by the euro, but by other currencies, probably chiefly the US dollar. At the end of last year, the euro comprised only 6-7 per cent of the total assets. The Riksbank's studies also show that the total Swedish activity in euro on the money market is relatively slight and in particular concentrated to the deposit and swap markets. There are still a few programmes of certificates in euro and the secondary trading in euro-denominated short-term papers is very small.
On the other hand, the turmoil on the financial markets and weaker growth in the world economy were expected to curb growth and inflation in Sweden. This led to our decision to hold the repo rate unchanged at 4.25 per cent, a decision I voted in favour of. We also held to our forecast that the repo rate would remain at this level over the coming year in order to bring inflation back to the target over a period of a couple of years and to enable production and employment to develop in a balanced way. We also emphasised that there was still considerable uncertainty over future developments. Personally, I saw an evident risk that the slowdown in the United States could become more prolonged than was assumed in the forecast. I also saw a risk that the rapid price increases in the world energy and food markets could subdue demand and thereby growth in the rest of the world, which could also further hold back Swedish growth and inflation. There were also clear signs that the Swedish labour market was about to cool down and my view was that the weak productivity growth indicated that companies’ demand for labour could decline. This indicated that there was no great risk that the rate of wage increase would accelerate more than anticipated. This was the combined reason why I did not wish to rule out the possibility of a cut in the policy rate later in the forecast period.

Consequently, the new rules are being designed to recognize the underlying risk while not discouraging or penalizing banks that wish to remain involved in venture capital and equity investing. Our goal is to create a capital approach to equity exposures that builds upon sound internal bank practice and remains flexible enough to apply in any country. Our challenge is to develop a treatment that makes sense today and that will be responsive to the evolution of banks’ practices in equity funding. An equally important consideration is implementation, given significant differences in the nature of banks’ equity holdings across countries and in the ways in which capital markets have evolved over time in each country. The Committee wants to avoid disrupting equity holdings that have developed under existing capital regulations --- whether these are long-term holdings, such as in Germany, or those associated with small business investment corporations in the United States. To this end, only new equity investments would be captured under the internal ratings-based approach for the first ten years after the date that the new Accord is implemented. This is an area where the Committee has tried to navigate differences between national practices. We see the best way forward as offering two approaches to calculating regulatory capital for banks’ equity exposures, one based on measures of market risk and a second based on the treatment of corporate loans. In either case, we intend for both methods to result in comparable capital requirements, which we will seek to confirm through our next impact study.
But a sustained increase in pay over the forecast period without a commensurate pick up in productivity would mean that the supply side of the economy could not keep pace with growing demand. That would mean upward pressure on prices. And it would mean greater pressure on the MPC than in our forecast to act to bring supply and demand into balance so as to meet the inflation target. The outlook for pay and productivity So the gradual pick up first in pay and then in productivity is central to the MPC’s forecast for both growth and inflation particularly in the later years. Given the serial disappointments on both pay and productivity in recent years, why do we now think that will happen? On pay there do seem to be signs now of stronger, more sustained growth. In the latest data, whole economy regular pay is growing at 2.7%. This is the highest annual growth rate since early 2009 and over a percentage point higher than six months ago. The latest reading on private sector pay growth was 3.2% – the highest rate since December 2008. So the period of very cheap labour seems to be ending as expected. What about productivity growth? It was effectively zero in 2014. And we forecast it to remain pretty weak in 2015.

Nor are we forecasting that we will recover any of the accumulated 15% loss in the level of productivity, relative to pre crisis trend, since 2007. The longer term issues remain; UK productivity is now around 30% behind the US. And as I have explained these longer-term issues are not something central banks can do a great deal about. 3  See Reinhart, C M and Rogoff, K S (2014) ‘Recovery from Financial Crises: Evidence from 100 Episodes’, NBER Working Paper No.19823. BIS central bankers’ speeches  5  Nor can we explain fully what has happened to productivity in the UK economy since the crisis. As well as the factors I have mentioned, other factors have surely played a role. And I don’t doubt there has been some mis-measurement of productivity growth in some sectors and of output more broadly. The Bank, like many others, has tried very hard to explain the puzzle but we can’t explain it all. Indeed, we may never solve the productivity puzzle. Perhaps that is not so strange. A very important part of productivity growth, so called Total Factor Productivity is pretty mysterious by definition. It is the extra efficiency with which a given amount of labour and capital can be used to produce output. It exists – but we can only estimate it by looking at the part of productivity growth our equations can’t explain. Indeed, because of this it is sometimes referred to by economists as the ‘Magic Fairy Dust’.