samchain/econo-pairs-v1 huggingface dataset:
Even if residents choose to move into foreign assets, the liquidity in the domestic currency will not disappear and will ultimately be deposited with the domestic banking system. In the end, and as a whole, the banking system is trapped. The question then is how banks will react and with what consequences for the economy. They could impose negative rates on depositors, but that is not always easy, and in the case of households, it could have a negative impact on the wealth sentiment. They could increase their credit margins, with the effect of tightening credit conditions, although that may also be difficult if the demand for credit is weak. Or the banking system could simply become weaker, with the paradox that the more a bank is conservative and well-managed, extending high-quality loans and covering them by deposits with no short-term market funding, the more it will be penalized! A second, different challenge, relates to the rigidities in the economy. Price rigidity is higher in Europe than in the United States as the goods and labour markets are less “contestable” and outsiders find it harder to compete. And in the labour market, there is a strong downward rigidity on wages. Structural rigidities have complex effects on inflation and monetary dynamics. In the very short run, price rigidity may somehow protect the economy against deflationary shocks and, more generally, increase the output response to a monetary stimulus.

Futures prices have also risen markedly, indicating expectations of a sustained increase in metal prices similar to the increase in oil prices. Prices for fresh farmed salmon have also exhibited a pronounced rise. Rising commodity prices and buoyant activity in markets that are important for Norway have fuelled growth in the Norwegian economy, even though growth has been low in some of Norway’s most important export markets. Overall, prices for our imported goods are falling in relation to prices for goods we export. Norway’s terms of trade are improving. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains for the mainland economy have also been high. The domestic economy is partly insulated thanks to the oil fund mechanism. The situation in Norway differs from that of its Nordic neighbour countries. Sales of Swedish and Finnish high-tech products are growing strongly in volume terms, but prices are falling. Denmark has a diversified business sector, which is overall moving on a steady path. Growth among our trading partners remains solid. High commodity prices are exerting upward pressure on consumer price inflation in a number of countries, although underlying inflation remains low. Economic growth in the US probably picked up again in the first quarter. In Japan, growth appears to be solid. In the euro area, confidence indicators point to optimism in the business sector. There is a broad-based expansion in the Swedish economy, while some indicators in the UK have shown weak developments.
In principle, a suitable central rate for the krona could be estimated by producing a forecast for the nominal krona/euro rate for the exact date on which ERM2 membership is expected to begin. However, all of this is complicated by the existence of several theories for exchangerate determination and the uncertainty of the forecasts themselves. Nor are models capable of encapsulating all the relevant aspects that could conceivably affect the development of the exchange rate, which is why it would be necessary to complement the modelbased analysis with different kinds of expert assessments. This implies that we have to confine ourselves to narrowing in on an interval of conceivable central rates. In various situations, including the December Inflation Report in 2002, the Riksbank has shown forecasts of the krona’s real exchange rate against the euro according to a number of models under the assumption of a floating nominal exchange rate in the future. Forecasts of this kind underline what I’ve just said: the forecast outcome is highly dependent on the chosen model of application. Common to all models, however, is that they predict a strengthening of the real exchange rate over the coming years. According to the models, this strengthening is due to the expected development of a number of factors including relative GDP, Sweden’s relative net assets, our terms of trade, relative demography, etc.

Thomas Jordan: Does the Swiss National Bank need equity? Summary of a speech by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, to the Statistisch-Volkswirtschaftliche Gesellschaft, Basel, 28 September 2011. *  *  *  The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). The Swiss National Bank (SNB) had to report heavy losses for 2010 and the first half of 2011 due to the strength of the Swiss franc – or, more precisely, due to valuation changes on its foreign currency reserves. Consequently, it suffered a substantial reduction in its equity. Understandably in such a situation, concerns began to be voiced in public. Questions often posed in this context include: Might the SNB lose its capacity to act as a result of a negative equity level? And, if its equity were negative, would the SNB have to be recapitalised, or might it even have to go into administration? The short answer to these questions is “No”, because the SNB cannot be compared with commercial banks or other private enterprises. For one thing, a central bank cannot become illiquid. This means that a central bank’s capacity to act is not constrained if its equity turns negative. Moreover, unlike other enterprises, it is not forced to implement recovery measures or go into administration. For another, central banks enjoy a funding advantage over private companies, owing to their banknote-issuing privilege. Moreover, they generate surplus income over the long term.
Having become independent in the 1990s, both the Banque de France and the Bank of Japan maintained price stability in the face of adverse pressures, whether inflationary or deflationary, making use of a range of appropriate instruments. Participating in the community of central banks that has gradually been built up, the Banque de France and the Bank of Japan, in parallel, have been regional pivots of the central bank function. After the Second World War in particular, our two institutions favoured co-operation with the central banks of economic regions undergoing reconstruction and newly emerging markets. Finally, during the twentieth century, we carved out a place for ourselves in the world by adapting to the new international functions: the more dynamic the international markets were, like in the 1920s and in stages from the 1960s onwards, the more our two banks’ international functions developed. 2  BIS Review 1/2008  This morning’s session, concerning the history of our economies and institutions, will enable us to shed light on all these aspects. The afternoon’s session will focus on developments in our economies and institutions in an increasingly globalised world. Globalisation is not a new phenomenon. The past 150 years of diplomatic and economic relations between our two countries are proof of this. However, the scope and the speed of the current stage of globalisation have far outstripped anything experienced in the nineteenth and twentieth centuries.

Ladies and Gentlemen, the development of the local bond market is central to Government’s strategy for diversification of the economy for one key reason. All businesses, including state owned enterprises, require finance, covering both equity and debt, and ranging from short-term to long-term. In the absence of a properly functioning local bond market, those in need of capital and qualified enough have had to turn to international financial markets to finance their local projects with the attendant exchange rate risk. Similarly, those seeking a competitive return on their investments that also meet their maturity preferences but are unable to find these features locally, have always sought out alternative avenues offshore in foreign currency, thereby creating pressures in the foreign exchange market. Therefore, Government’s involvement in improving the local bond market has been deliberate. Ladies and Gentlemen, Government’s participation in improving the functioning of the local bond markets has seen the establishment of appropriate market infrastructure that facilitates cost-effective and secure trading, and a transparent price discovery process. Further, Government’s decision to bring to market longer term bonds in 2005 have proved to be positive and catalytic for the local bond market as this has resulted in an extended yield curve that has provided a benchmark for pricing longer dated security issues by the private sector and banking industry.
But if you are used to eating lavish lunches like this one every day, check with your doctor before you tackle the mountains in Sai Kung. And avoid Sharp Peak, the steepest, slipperiest and sharpest summit of the lot. 2. Hong Kong’s economic development bears some resemblance to its mountain ranges: indeed, the dramatic ups and downs of the past decade alone form as stark a profile as anything that can be seen on the Maclehose Trail – the most daunting and relentless of all of Hong Kong’s hiking trails. Go back further into Hong Kong’s history, and it is possible to see, decade after decade, this same jagged landscape. The remarkably rapid reconstruction of an entrepot economy after the devastation of World War II. Then the blow to Hong Kong’s entrepot position from the UN embargoes on China during the Korean War, which, far from destroying Hong Kong, helped stimulate its dramatic transformation into a major manufacturing economy. And again, in the late ’70s and early ’80s, when the Mainland began to liberalise its economy, and when manufacturing industries began to shift from Hong Kong to the Pearl River Delta and beyond, Hong Kong’s re-creation of itself as a regional entrepot and its further development beyond into an international financial and services centre. Hong Kong has been sent more than its fair share of challenges, and there have been hardships and casualties along the way, but it has scaled each of them with the skills and the stamina of the best mountaineers.

As in Puerto Rico, the fiscal woes of many of our largest cities have been closely related to long-term economic transformations—essentially, changes in the industrial specialization that occurred in those particular places. In the case of New York City, the transformation was from manufacturing to services, and it took a generation to complete. The city’s management of that transition was far from perfect, and the fiscal crisis was the major manifestation of that failure. The institutions set up to respond to the crisis were crucial to ensuring that fiscal policy didn’t continue to amplify the problems associated with the economic transition. For a city to turn its circumstances around, it must navigate this economic transformation, identify what will define its comparative advantages going forward, and then build 2/4  BIS central bankers' speeches  anew around those sources of strength. The road to recovery A successful fiscal reform first requires a regime in which local officials recognize and accept the reality of the changing economic situation, and set spending budgets accordingly. This part is fairly straightforward, because it produces the simple policy dictum that borrowing—in all its forms—must be strictly limited. Of course, knowing what to do and actually getting it done are different things, especially when politics are involved. As a result, the record suggests that it can be extremely helpful to have some kind of independent fiscal monitor in place on an ongoing basis.
Is it worth accepting slightly weaker demand and thereby inflation over the coming years if the economy develops as we have assumed in our forecasts in order to perhaps reduce the effects of possible corrections following inflated asset prices and loan stocks? Before I get into a discussion of this dilemma, I would like to give a brief reminder of how central banks with price stability as their objective take into account developments in the real economy. Flexible inflation-targeting policy requires openness and clarity In the short term, monetary policy can affect demand in the economy. Most countries with an inflationtargeting policy use this possibility and conduct what is known as flexible inflation-targeting policy, which means that some consideration is given to short-term fluctuations in the real economy. However, in the long term growth is essentially determined by factors outside of the control of monetary policy, such as technology and population growth. As I mentioned earlier, monetary policy’s best contribution is to ensure that inflation is low and stable, which requires confidence in the target. This sets limits as to how much consideration can be given to short-term fluctuations in the real economy, but also limits the uncertain negative effects on inflation and the real economy that in some cases risk arising from a strong growth in asset prices and loans. To be able to maintain confidence, it is necessary that the inflation target has strong support from the general public, the politicians and the financial markets.

However, at the same time, transition countries and previously strictly-regulated countries inspired by planned economies such as China and India are playing an increasingly important role in the world economy. While the adjustment towards market conforming economies is moving at a rapid pace, there is still a long way to go until conditions in the domestic markets are the same as those in the old industrial nations. Fixed exchange rates, undeveloped credit markets and a high level of domestic saving in emerging economies can, for instance, delay price adjustments and thereby push down both short-term and long-term interest rates in the international capital markets. Increased competition from low-price imports coupled with low import prices for clothes, for instance, have already kept inflation down for several years in many parts of the world and contributed to the interest rates determined by monetary policy being very low. There is thus some risk that demand for credit and asset prices in many countries have been pushed up by expectations of lower interest rates in the future than is sustainable in the long term. We thus find ourselves in a situation where the inflation rate has been pushed down by increased competition from low-inflation economies at the same time as asset prices and indebtedness have increased rapidly. A dilemma ensues here.
Svein Gjedrem: Economic policy challenges Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to the Executive Board of the Confederation of Norwegian Business and Industry, 19 September 2002. Charts for the speech can be found on the Norges Bank’s website. *  *  *  A year and a half ago, the Government and the Storting adopted new guidelines for economic policy, which call for an annual use of petroleum revenues equivalent to the expected real return on the Government Petroleum Fund. At the same time, the Government issued a new operational mandate for monetary policy. Norges Bank shall set the key rate with a view to maintaining low and stable inflation. The first sentence in the monetary policy mandate refers to the value of the krone. Stability in the national value of the krone implies that inflation must be low and stable. This is the best contribution monetary policy can make to economic growth and prosperity and is a necessary precondition for stability in the financial and property markets. The regulation also states that monetary policy shall be aimed at stability in the international value of the krone. The krone exchange rate fluctuates from day to day, from week to week, and from month to month. We do not have the instruments for fine-tuning the exchange rate. The first paragraph of the mandate sets forth an objective. The last paragraph specifies what Norges Bank shall do. The inflation target is set at 2½ per cent.

Several reasons may lead to the interplay between monetary and fiscal policy failing to function. Interplay functions well when the decision-making bodies are conscious of how one body’s decisions influence the decisions of the others. Unless this fact is recognised, a decision will not produce the result that was planned. The economy may move in a very undesirable direction, with high interest rates, sluggish economic growth and a deterioration in the state’s financial position. Without coordination, a good result may still be achieved if fiscal policy acts as “leader” and monetary policy as “follower”, to use expressions taken from game theory. The fiscal policy authorities can internalise the monetary policy response pattern. The central bank’s response pattern must of course be known so that the fiscal authorities can take this into account. The social partners can similarly take any monetary policy response into account when wages are being determined. The “leader” in this interplay - the social partners - can take the “follower’s” - Norges Bank’s - response into account. This view is most relevant in centralised wage formation. In decentralised wage formation, monetary policy will instead affect wage growth via market mechanisms by stabilising aggregate demand. A precondition for interplay that functions well is that monetary policy is known and remains firm. The outcome of this year’s wage settlement indicates that the social partners have not internalised the monetary policy response pattern.
It is not MAS’ role to front all investor education – this is where industry bodies and consumer groups come in. However, MAS will need to act as a catalyst to increase the focus on investor education in the financial sector. MAS can set out clear directions for industry, do more to explain its own market conduct regulation to investors and consumers, work with industry and other partners to co-ordinate current education efforts and, where relevant, co-fund with industry new investor education initiatives. Focusing and targeting our development efforts Fifth, we need to focus and target our development efforts. Despite the adverse environment, there are still opportunities for Singapore. The Financial Services Working Group (FSWG) set up at the beginning of the year has identified three promising areas: wealth management, universal processing centres and an Asia Risk Exchange. In identifying wealth management, the Working Group has reaffirmed a key thrust of our developmental efforts. It has gone on to single out alternative assets, such as private equity and hedge funds, as areas for development. Universal processing centres and the Asia Risk Exchange will be two new fields for Singapore, where Singapore’s efficiency, technology and infrastructure will be important strengths. For universal processing centres we need to consolidate global transactional flows into Singapore. The Asia Risk Exchange will combine Singapore’s existing insurance and capital market expertise into a new physical vehicle for the transfer of large and sophisticated risks.

This is a valuable approach which should be extended to all facets of MAS’ dealings with industry. Industry feedback will help us refine our policy and avoid mistakes and unintended consequences. Our contacts with industry need not be confined to Singapore. More often than not, business decisions that affect Singapore are made in the head offices. Where possible, we should extend our presence and reach by linking up with institutions and organisations worldwide. Deepen talent pool Third, we need to deepen the talent pool in the financial sector. The vibrancy of Singapore’s financial centre is dependent on this. Without the trained talent, it will be very hard to persuade financial institutions to site new activities in Singapore. MAS must continue its efforts to build up and upgrade this talent pool. While MAS is already co-funding financial skills training, we also need to extend our efforts into improving the quality and quantity of financial training and research conducted in Singapore. One possibility is to set up specialised financial service institutes in Singapore to teach both the art and science of finance, for example in wealth management. At the same time, the local talent pool must also be supplemented by infusions of fresh blood from abroad. Singapore must continue with its open door policy to attract talented professionals to work here. Another means of deepening the overall talent pool is through greater circulation of talent between the public and private sectors. MAS has actively hired from industry in order to build up its expertise.
However, although loans for housing seldom constitute major problems for the banks, they may mean disaster for individual households that suddenly find it difficult to make the payments. At  9  In the economic literature this ratio is called Tobin's q after the Nobel Prize winner James Tobin who, among much else, has studied property prices. If Tobin's q is equal to 1, then the cost of buying an existing house is equal to the cost of building a new one. This means that if house prices increase so that the market value is higher than the replacement value, then it pays to build a new house as each invested krona is valued at more then one krona by the market. In several of our large cities, Tobin's q is between 1 and 2, or even higher. In many parts of Sweden, however, the value is well below 1, which means that it does not pay to build new housing there. 6  BIS Review 105/2009  present the interest rate is very low. However, our forecast indicates that the Riksbank, following a period with a low interest rate, will need to raise the interest rate quite quickly in the period ahead. It is therefore particularly important that the banks check that every household that borrows money can cope with the expected interest rate increases and potential losses of income. The major Swedish banks have strengthened their capital bases and in international terms appear to be well capitalised.

The Black Swan: The Impact of the Highly Improbable. Random House. 1  As the recent IEA report3 stresses “the global pathway to net‐zero emissions (…) requires all governments to significantly strengthen and then successfully implement their energy and climate policies. Commitment made to date fall short of what is required”. Meanwhile, the world has been hit by the Covid 19 health crisis. This is a crisis that is due to lack of prevention, unpreparedness at national levels and flaws in international cooperation. This is a crisis that has forced governments to lock down hundreds of millions of people and has stopped or reduced economic activity. This is a crisis with huge macroeconomic costs and which has forced governments to provide substantial fiscal support and central banks to intervene with bold monetary policies, in order to preserve favorable financing conditions. As regards climate change and the environment, scientists as well as the authors of the Green Swan try to explain to us what could happen if we don’t act. On the health front, we experienced “skin in the game” what an unexpected, severe, global crisis can be, because we did not collectively act on time. In advanced economies, thanks to vaccinations, we are seeing some light at the end of the tunnel. This is a relief. However, other crises could occur; there is no vaccine against climate change and environmental risks. This tangible experience makes the Green Swan even more interesting to read and to meditate upon now, than when it was published.