samchain/econo-pairs-v1 huggingface dataset:
The change in the view of fiscal policy’s role also reflects the growing focus on structural challenges: economic inequality, a shift towards a greener economy and the need for investment in digital infrastructure. In the new US administration, we find this policy expressed by the motto “Build back better”. In the euro area, the policy has been labelled the “European Green Deal”. 9  NORGES BANK  Chart 8 Debt grows in response to each crisis Advanced economy public debt as a share of GDP.1) Percent 140  140  120  120  100  100  80  80  Pandemic  60 40  0 1970  Financial crisis and euro crisis  International currency crisis  60 40  Dotcom bubble  20  ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  20 0  1980  1990  2000  2010  2020  1) Projections for 2020 and 2021. Source: IMF  If government spending increases, there is one concern that arises. An amount borrowed today becomes a debt that must be repaid tomorrow. Experience from the past 40 years shows that while public debt grows during crises, it does not shrink when economic conditions normalise (Chart 8). During the financial crisis, governments in many advanced economies borrowed on a large scale. Much of this debt was still outstanding at the beginning of 2020. During the pandemic, borrowing needs have again been substantial. Public debt has ballooned to new heights.

The most devastating ones have laid fertile land barren, reduced the supply of labour and entailed a loss of knowledge. During the Spanish flu pandemic, more than 50 million lives were lost, many of working age. Once the Covid-19 pandemic is over, we will have been through a long period of restrictions on how we spend money, how we get from place to place and how we work. The Covid-19 pandemic will leave behind scars as well. 4  NORGES BANK  Chart 3 Economic growth has fallen Mainland GDP per capita. Contribution to average annual growth 4  4  Productivity Employment GDP per capita  3  3  2  2  1  1  0  0  1970-79  1980-89  1990-99  2000-09  ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  2010-19  Sources: Statistics Norway and Norges Bank  Growth in output per capita has been moving down over several years (Chart 3), and labour input is now growing at a snail’s pace. At the same time, the primary source of growth – productivity – is making a steadily smaller contribution. This is a trend we share with other advanced economies. An underlying driving force – cross-border trade – is showing signs of flattening out. The pandemic could influence these trends. Previously, sharp declines in economic activity have been followed by a persistent rise in unemployment and a lower labour force participation rate.
Foreign money instead of our own money The final proposal is considerably less challenging in theoretical terms, but is highly explosive politically. Is there any reason why Switzerland should maintain an independent currency for its relatively small territory and conduct its own monetary policy? Since Switzerland has close economic ties with other currency areas, and the central banks in question also pursue stability policies, the idea of importing monetary policy from abroad would not be so far-fetched at first glance. After all, there are examples such as Denmark and Hong Kong which voluntarily and unilaterally peg their money to foreign currencies, even though they still mint their own coins and print their own banknotes. They hand over their monetary policy de facto to a foreign central bank and have often had quite good experiences with this approach. However, as soon as we look at the situation a little more carefully, surrendering monetary policy autonomy appears considerably less favourable from a Swiss point of view. First, our country has had good experience with its independent monetary policy, and this differentiates us from countries where the adoption of foreign monetary policy has brought a real gain in terms of stability. Second, structural and economic differences continue between the currency areas, irrespective of all the interrelationships, and these are decisive for the effectiveness and apportionment of monetary policy. Equally, the preferences of the general public as to how the central bank should react to given challenges vary from one country to 6  BIS central bankers’ speeches  another.

Yet in recent years, the central banks, including the SNB, have become quite creative and innovative when faced with difficult circumstances. However, two points need to be noted in this respect. On the one hand, central banks must never lose sight of their mandates. There should never be any doubt about their unflinching adherence to their stability mandates. On the other, it is important to recognise that monetary policy cannot be used to solve all economic problems. Otherwise we run the danger that, in the long term, monetary policy will no longer achieve its intended effects, and our money will deteriorate. As far as the Swiss monetary order is concerned, I am confident that the SNB is in a position to fulfil its mandate in the interests of the country – now and in the future –because of the backing it enjoys among the general public. My optimism is also founded in the history of the Swiss currency, which began moving in a positive direction after the memorable Ustertag of 1830. Admittedly, the efforts to achieve sound money in our country were not immediately crowned with success and it was a gradual process. However, our monetary order and institutions have enjoyed broad acceptance and a high level of basic trust for over 100 years now. This has made it possible, while adhering to the basic foundations of the monetary order, to carry out essential adjustments on repeated occasions, while at the same time allowing transient fashion trends to pass and forgoing experiments with uncertain outcomes.
(c) The average 0% balance transfer term is the average of the maximum 0% balance transfer term available for each lender. 05  07  09  11  13  15  17  Source: Bank of England. 19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Chart 11. Major UK banks’ average risk (a) weights on consumer credit exposures  Chart 12. Cumulative distribution of credit scores on the flow of new consumer credit lending  100% Accounts opened in 2014 Accounts opened in 2016  80% 60% 40% 20% 0%  0  0.25  0.5  0.75  1  Anonymised credit score Higher risk  Lower risk  Source: Bank of England. (a) Risk-weighted assets include both IRB and standardised exposures and are measured as a percentage of drawn balances for end-year periods 2014 to 2016. Source: FCA CRA data. (a) Credit scores have been anonymised. (b) Blue lines represent distribution of scores at January 2015 on accounts opened between November 2013 and November 2014, weighted by balances as at November 2014. Purple lines show distribution of scores at January 2017 on accounts opened between November 2015 and November 2016, weighted by balances at November 2016. Chart 13. Value of annual dealership car finance for new car purchases, and proportion of private new car purchases funded with dealership car finance  Chart 14.

Aggregate cumulative UK impairment charges over the five years of the (a) stress Impairments in the stress (left-hand scale) Impairment rates in the stress (right-hand scale) Per cent 25  £ billions 20  20  15  15 10 10 5  5  0  0 UK mortgages  Sources: PRA regulatory returns, published accounts and Bank calculations. (a) Major UK banks’ core Tier 1 capital as a percentage of their risk-weighted assets. Major UK banks are Banco Santander, Bank of Ireland, Barclays, Co-operative Banking Group, HSBC, Lloyds Banking Group, National Australia Bank, Nationwide, RBS and Virgin Money. Data exclude Northern Rock/Virgin Money from 2008. (b) Between 2008 and 2011, the chart shows core Tier 1 ratios as published by banks, excluding hybrid capital instruments and making deductions from capital based on FSA definitions. Prior to 2008 that measure was not typically disclosed; the chart shows Bank calculations approximating it as previously published in the Report. (c) Weighted by risk-weighted assets. (d) From 2012, the ‘Basel III common equity Tier 1 capital ratio’ is calculated as common equity Tier 1 capital over riskweighted assets, according to the CRD IV definition as implemented in the United Kingdom. The Basel III peer group includes Barclays, Co-operative Banking Group, HSBC, Lloyds Banking Group, Nationwide, RBS and Santander UK. (e) CET1 ratio less the aggregate percentage point fall projected under the Bank of England’s 2016 annual cyclical stress scenario for the six largest UK banks.
This broader approach is usually referred to as macroprudential policy. At the European level, the efforts to develop a framework for macroprudential policy have resulted in the formation of the European Systemic Risk Board (ESRB). This body, in which the Riksbank is represented, will be responsible for overall macroprudential policy for the financial system in the EU. The ESRB’s tasks include identifying and ranking systemic risks. When such systemic risks are discovered and are deemed to be significant, the ESRB should issue warnings and, when appropriate, recommend that corrective measures should be taken. When necessary, the ESRB will make these warnings and recommendations public. A so-called comply or explain mechanism is linked to these recommendations. This means that the recipient of a recommendation is expected to comply with it or otherwise explain why it will not do so. The ESRB thus has no direct regulatory tools. In order for this to work, there must therefore also be effective frameworks for macroprudential policy at the national level. It is at the national level that the ESRB’s warnings and recommendations must be met. It is also at the national level that the actual macroprudential policy decisions must be made. Each country thus needs an institutional framework for this. There is also a need for concrete tools that the national authorities can use for the exercise of macroprudential policy. What tools are needed and how do they work? But what tools are we talking about?

This is the first and most important challenge of the Basel Committee in the next few years. As part of this process we will adhere to the published schedule for our fifth quantitative impact study. And I believe that we already have the tools at our disposal to deal with any issues that arise from the QIS5 exercise, or that arise during this period of implementation. To be sure, a key element is not to add further details to Basel II, but rather to focus on achieving a quality implementation of the new Framework. Therefore, I do not anticipate any significant change to the Framework during the period bankers and regulators are tackling initial implementation challenges. But the main challenge is the cross border home host cooperation. On this point I would not underestimate the work and efforts that supervisors are devoting to this issue. One final related point. The staggered implementation, specially the timetable differences with EEUU raises transitional crossborder issues that will need to be managed through greater collaboration between the EU and US supervisors, but I can assure you that both sides are even more committed to this than before, and that our efforts will be redoubled in this respect. Ultimately, I hope that this commitment and effort will promote even more effective implementation. A second related challenge is to enhance the cooperation with non-G10 supervisors.
This is why it is important not to give the wrong incentives to capital flows. This reminds me of my days as a child when, being asked what I want to become when I grow up, I confessed that I wanted to be a firefighter. It turns out that I am now a central banker, which is not far from being a firefighter in these uncertain times. National Bank of Romania has started the tightening cycle of the monetary policy, to contain the higher inflation and inflation expectations. Although most of it is supply-side and temporary, and fighting fiscal loosening with monetary tightening is a sub-optimal policy mix, we considered that the 3 rate hikes we implemented this year were warranted to preserve a hard-fought public good: price stability. Coming to an end of my intervention, I would like to express a few thoughts on one of the most important remarks of the REO. It states that “the recovery provides an opportunity to move faster to deepen the Economic and Monetary Union”. The report details three lines of action in this regard: completing the Banking Union, creating a central fiscal capacity, and advancing with the Capital Union. Too much financial innovation, deregulation and the blind, theological belief in self-regulating markets have brought us here, back to the era of re-regulation; but coordination is needed for that, and Glexit is threatening this coordination. It is however undeniable that the completion of the Banking Union is of paramount importance.

Jerome Powell, the chairman of the Federal Reserve, referring to the assessment of risks in emerging economies, said that three elements are important:2 first, the vulnerabilities in the EMEs themselves; second, the evolution of advanced-economies monetary policies; and, third, how markets might respond to that evolution. Emerging economies are takers in the global markets; we cannot do much about the last two elements mentioned above, which are exogenous. Our job, our duty, is to prevent the accumulation of domestic vulnerabilities, because deterioration in a country’s economic conditions makes it more vulnerable to adverse external shocks. 1/5  BIS central bankers' speeches  High growth in emerging economies is good as long as it is sustainable. I would recall here a famous answer from Henry Ford, the father of the car industry, when he was asked about his preferred color for the new T-model: “Any color, as long as it’s black”. Any growth is good, as long as it is sustainable and, I would add, fairly distributed. True, emerging economies need higher growth rates to catch-up with the more advanced economies. True, potential GDP is a non-observable variable, like many others such as inflation expectations, non-accelerating inflation rate of unemployment, or the one to which it is directly linked – the structural deficit. New Member States have probably higher potential growth rates than the ones we are now estimating, and this estimation is subject to constant change, based on new information in the data series, but also on improved endowment with and efficiency of labor and capital.
Svein Gjedrem: Monetary policy and the outlook for the Norwegian economy Speech by Mr Svein Gjedrem, Governor of the Central Bank of Norway,Trondheim, 10 October 2005. Please note that the text below may differ slightly from the actual presentation. The speech is based on the assessments presented at the Central Bank of Norway’s press conference following the Executive Board’s monetary policy meeting on 21 September, Inflation Report 2/05 and on previous speeches. The charts in pdf-format  can be found on the Central Bank of Norway’s website. *  *  *  Monetary policy in Norway is oriented towards low and stable inflation. This is also the most important contribution monetary policy can make to sound economic developments in the long term. Low and stable inflation provides the economy with a nominal anchor. This contributes to predictability for those taking decisions about saving and investment today, although the result depends on how the economy develops in the future. In addition, we will seek to prevent unduly wide fluctuations in output and employment in the short and medium term. In the long term, output in an economy is determined by the supply of labour, capital and technology. Monetary policy influences the economy with long and variable lags. This means we must look ahead when setting interest rates.

There are several structural challenges facing the global economy. I want to elaborate on two key driving forces that will shape the medium-term outlook in both the advanced and emerging economies: deleveraging and monetary expansion. Deleveraging 8. Let me begin with deleveraging. From around 1990, debt levels began to rise rapidly in most advanced economies. Governments ran persistent fiscal deficits that were financed by borrowing. Total government debt in the OECD economies grew relentlessly, from 58% of GDP in 1990 to 98% in 2010. Households went on a consumption binge, financed by easy borrowings on the back of rising property prices and housing equity. Household debt in the developed economies also climbed, from 62% in 2000, to 76% in 2010. Deleveraging is the process by which this excessive debt is brought down to more sustainable levels. This will be long-drawn, only because the build-up of leverage took place over such a long period of time. Synchronised deleveraging in the US and EU 9. The deleveraging process that is unfolding across the advanced economies is taking place across three fronts:   Governments in the US and EU    Households in the US    Banks in the Eurozone  10. First, deleveraging by governments. The public finances of the US, UK, and the Eurozone, have substantially deteriorated, due to pre-crisis fiscal profligacy and post-crisis discretionary stimulus. These countries have now embarked on fiscal adjustment programmes to varying degrees, primarily through austerity measures.
34  Including measures of banks’ Conditional VaR or CoVaR (NYU Stern School of Business (2009), and Brunnermeier et al (2009)). These are statistical measures of an institution’s VaR conditional on other institutions in the network simultaneously facing stress. 35  Simon (1962). BIS Review 53/2009  15  The answer lies in the structure of complex systems. Hora’s watches are designed as ten sub-assemblies each comprising ten elements, which are combined into ten larger subassemblies, ten of which then constitute a whole watch. Tempus, by contrast, assembles his watches part by part. The result is that, whenever Tempus is interrupted – in Simon’s parable by a telephone call ordering more watches – his work is lost and he must start again. Hora suffers the same fate much less frequently, due to the sub-assembly structure of his watches. The differences in the robustness of these equally complex structures are dramatic. If the probability of interruption is 0.01, Hora will complete 9 watches for every 10 attempts. By contrast, Tempus completes 44 watches for every million attempts. The probability of horological collapse is lowered from 0.999956 to 0.1. The secret of the structure of Hora’s complex watches is that they are “hierarchical”, with separate and separable sub-structures. Simon discusses how a number of other networks, both social and physical, exhibit this hierarchical structure. This is no evolutionary accident. For many networks, hierarchy emerges naturally. It is the product of a process of Darwinian selection in which it is only the hierarchical structures that survive to maturity.

Andrew G Haldane: Rethinking the financial network Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at at the Financial Student Association, Amsterdam, 28 April 2009. I would like to thank Ian Bond, Sebastiano Daros, Kemal Ercevik, David Gregory, Sujit Kapadia, Iman van Leyveld, Sarah Parkinson, Filipa Sa, Nick Vause, Lewis Webber, Matthew Willison and Peter Zimmerman for comments and contributions. I would also like to thank Lord Robert May for conversations on the topic. *  *  *  On 16 November 2002, the first official case of Severe Acute Respiratory Syndrome (SARS) was recorded in Guangdong Province, China. Panic ensued. Uncertainty about its causes and contagious consequences brought many neighbouring economies across Asia to a standstill. Hotel occupancy rates in Hong Kong fell from over 80% to less than 15%, while among Beijing’s 5-star hotels occupancy rates fell below 2%. Media and modern communications fed this frenzy and transmitted it across borders. In North America, parents kept their children from school in Toronto, longshoreman refused to unload a ship in Tacoma due to concerns about its crew and there was a boycott of large numbers of Chinese restaurants across the United States. Dr David Baltimore, Nobel prize winner in medicine, commented: “People clearly have reacted to it with a level of fear that is incommensurate with the size of the problem”. The macroeconomic impact of the SARS outbreak will never be known with any certainty.
As we move forward, we may need to strengthen that flexibility even further. We do not have perfect foresight as regards what risks we will have to tackle further down the road. Nor do I think that we will ever develop the perfect tool for every conceivable financial stability risk out there. One thing to bear in mind in all this, is that whether the perspective is global, regional or national, it all boils down to the same thing - safeguarding the stability of the financial system. And in today’s highly interconnected world, it is quite obvious that we to some extent are all in this together. This brings me to a related issue where the ESRB has played a leading role. Reciprocation of macroprudential measures – key for their effective implementation An important prerequisite for effective implementation of macroprudential policy in a financially highly integrated world is that the measures in question can affect all financial actors which influence the specific risk that authorities are trying to mitigate. This is not always the case. For example, foreign branches are regulated by authorities in the home country of the parent company, and may not be affected by measures taken in the country where they are active. Reciprocation may in such a situation help mitigate the risks, minimize potential regulatory arbitrage and also provide a level playing field.

That would enhance the abilities of the members to exert peer pressure, which may in turn help reduce “inaction bias”. When it comes to identifying, analysing and monitoring financial stability risks at EU level, many pieces of information are necessary. The processes for handling all the diverse inputs as well as our assessment tools have developed more or less of necessity. To really get the big picture we must understand how the individual pieces connect to each other and we must be able to put them all  |4  together. All in all, I think the ESRB nowadays makes good use of the broad scope of inputs from members with different expertise, connecting all the dots and their inherent dynamics from a truly system-wide point of view. A new supervisory and regulatory landscape for the EU… Of course, the ESRB was not the only response to the structural flaws in the supervisory framework which were exposed by the financial crisis. A whole new financial supervisory and regulatory landscape has by now at least roughly found its shape and form in the EU, although there are still some pieces of the puzzle that have not yet fallen into place. I should also say that I do not think that the landscape will ever be completely finalized. That would be a bad idea. These frameworks need to evolve and adjust as we move ahead, as we learn from our experiences and as the financial system which they target is constantly evolving.