samchain/econo-pairs-v1 huggingface dataset:
The difference in credit growth between households and non-financial enterprises is a good illustration of Norway’s dual economy. Over the past few years, credit growth has been far higher for households than for enterprises. The level of household credit growth has remained high recently in spite of increased unemployment and a downward revision of the prospects for economic growth. An important reason for this is the sharp rise in house prices in recent years. Low investment demand is reflected in credit to non-financial enterprises, which has declined to a very low level. Developments in prices for commercial property compared to house prices also indicate that the situation is better for households. The current level of vacancy in commercial premises is very high. Although lower interest rates will, in isolation, stimulate investment, a substantial share of the vacant premises will probably have to be filled before renewed growth can be expected. Developments in mainland enterprises have been characterised by low output growth, falling investment and declining profitability in many industries. In order to boost returns on invested capital, enterprises have taken steps to reduce costs, primarily by reducing their workforce or relocating parts of their production abroad. There are some positive impulses, however. Interest rates are low, and equity prices have increased sharply since the trough in February 2003. The krone has depreciated and there are signs of a global upturn. Wage growth has moderated and cost inflation is likely to be lower than in the years from 1998 to 2002.

Given the high level of costs and excess capacity in a number of sectors, we expect, however, that it will take some time for employment and investment in the business sector to pick up. On balance, we expect investment by mainland enterprises to make only a marginal contribution to growth in the Norwegian economy in 2004. Renewed growth is not expected until 2005 and 2006. Investment in the petroleum sector, however, is expected to increase markedly both in 2003 and 2004. Even though the share of imports is high, these investments will contribute to holding up activity in oilrelated industries. The current low level of exploration activity on the Norwegian continental shelf points to a relatively sharp fall in investment looking further ahead. Demand is also being sustained by investment to keep mature fields in operation and by the scrapping of old platforms. Another important factor influencing overall demand in the economy is fiscal policy. In recent years, expenditure growth in the government budget has increased at a faster pace than growth in mainland GDP. Nominal expenditure growth was particularly strong in 2002, but slowed markedly in 2003. In the central government budget for 2004, the Government proposes a 5.4 per cent increase in expenditure, or slightly more than estimated trend growth in nominal mainland GDP. The level of taxes remains virtually unchanged in real terms. Fiscal policy has stimulated economic activity, also when adjusted for cyclical fluctuations. This is reflected in the increase in the structural, non-oil budget deficit since 2001.
A people’s initiative on this issue has been submitted in Switzerland, and a referendum is to be held later this year. The second proposal concerns allowing private individuals (as opposed to just commercial banks) to hold sight deposits at the central bank. Both proposals give the public access to digital central bank money and have consequences for money and credit creation by banks and thus for the financial system. Comments on sovereign money  What specifically does the Swiss sovereign money initiative propose? At the heart of the initiative lies the separation of money and credit. Under the current regime, as we have seen, there are two types of money: central bank money created by the SNB, and bank deposits, which are created by commercial banks in their interactions with the general public and the 8  Cf. D. Niepelt (2017), Geldschöpfung «aus dem Nichts», Neue Zürcher Zeitung, 238 (267), 16 November. Page 7/12  central bank and represent a claim on central bank money. Under the Swiss sovereign money initiative, bank deposits would be converted into central bank money – what the proponents of the initiative call ‘sovereign money’. Customers’ sight deposits would be transferred from commercial banks’ balance sheets and kept as separate sovereign money accounts. Sovereign money would be issued by the SNB through allocations of central bank money to the Confederation and cantons, or directly to the public. Banks would ultimately be payment agents for the SNB.

The profit they derive from their lending activities ultimately result from the interest spread between loans and deposits. It compensates banks for the credit and liquidity risks assumed, for services linked to customer deposits, and for the assessment and monitoring of borrowers. So banks will only grant a loan if doing so makes economic sense. Lending does not automatically generate a profit – each loan is the result of a careful weighing-up of risks and returns. In their calculations, banks take into consideration factors such as current and future interest on loans and deposits, the likelihood of deposit withdrawals and credit defaults, and the liquidity and capital adequacy requirements in force. All these factors constrain the lending – and thus also money creation – activities of commercial banks. Central banks, for their part, take a special interest in the impact of monetary policy on money and credit creation within the banking system. As you know, the SNB steers a short-term interest rate with its monetary policy and thereby influences the level of interest rates. A tightening of monetary policy leads to a rise in interest rates and thus dampens the demand for loans. Moreover, rising interest rates cause the economy to slow, which further reduces demand for loans. Higher interest rates also have a negative impact on the banks’ credit supply. As a rule, rising interest rates increase the likelihood of credit defaults, which means that the quality of banks’ loan portfolios deteriorates in the eyes of market participants.
The problems, which started in sub-prime mortgage markets in the United States, have spread the whole financial system and reached a point that threatens the economic stability. Indicators on risk perceptions are at its highest level of all times. We have witnessed some relief in the liquidity shortage after the establishment of temporary reciprocal currency arrangements of Federal Reserve Bank (FED) and Short Term Liquidity Facility established by IMF, which is designed to help member countries that are facing temporary liquidity problems in the global capital markets. However, despite these measures, liquidity squeeze in the credit markets and reluctance in bank’s tendency to lend credit have been unabated. One of the adverse features of the current crisis is the freeze in the private credit and the tendency of capital to flow back to where the current crisis originated. Recent readings on economic activities suggest that ongoing problems in international credit markets have spilled over into the real economy as well. Recent estimates of international institutions point out a prolonged period of recession in developed economies and a sharp slow down in growth rates of developing economies.

Nevertheless, since the exchange rate can affect the health of the economy the SNB will also continue to take the exchange rate closely into account when determining its monetary policy. 6  BIS Review 60/2002
BIS Review 76/2010  3  The first three factors – information asymmetries, exchange and sovereign risk – account for the well known “home bias” exhibited by most investors and asset managers who tend to privilege their own domestic assets when deciding on portfolio allocation. They also explain why, until recently, most emerging economies had to live with the “original sin” of not being able to issue public debt denominated in their own currency. Because information asymmetries have been reduced through the development of modern securities markets, emerging economies have somehow freed themselves from this constraint, although less than often assumed (Hausmann and Panizza, 2010). The last two factors – differences in financial development and public interventions – may be more pervasive and significant. Together, they have a major impact on the composition and direction of capital flows, as well as the level and persistence of global imbalances. Global imbalances in the 21st century Current account imbalances have increased both in amplitude and durability during the last decade. In fact, they have become a permanent characteristic of our economic environment. This, by itself, may be a consequence of increased financial integration and greater reallocation of savings across national borders. Since, at the same time, real long term interest rates have kept to historically low levels, the situation has been characterized, as a “saving glut” (Bernanke, 2005), a concept which has come to dominate our thinking about the international economy.

Instead, I will focus on three topics: international capital markets, the provision of international liquidity and the newly emerging question of an international store of value. These are issues of joint and common interest for all countries, whether emerging or developed, and whether their current account is in surplus or deficit. Getting to a common understanding on those matters would help in making progress on other, more contentious questions. Opinions expressed are solely mine and do not represent the views of Banque de France or the Eurosystem. What is an international monetary system? According to an apt definition, an international monetary system consists of (i) exchange rate arrangements; (ii) capital flows; and (iii) a collection of institutions, rules, and conventions that govern its operation (Carney, 2009). Presumably, the purpose of such “institutions, rules, and conventions” is to ensure the sustainability and mutual consistency between national policies. There may be also an implicit objective of “fairness” in the sense that, when international imbalances need to be corrected, the burden of adjustment should be equitably shared. Accordingly, an international monetary system should be based on explicit or implicit “rules of the games” to which national economic policies would be subordinated. This is an ambitious approach and it may seem too normative to some. But it has a long history:   the gold standard, from which the phrase “rules of the games” originated, was based on mechanisms which imposed automatic and symmetric adjustments in balance of payments, according to specie flows.
Second, a forward-looking element of the new framework is the concept of intra-group financial support, which could reduce the current legal uncertainty that surrounds asset transferability within groups. In today’s regulatory environment, group liquidity management may in some cases be suboptimal, making the survival of a group more difficult as a result of – for instance – supervisory ring-fencing measures. At the same time, some of these restrictions are in fact justified, since they serve to protect domestic creditors and shareholders from unfavourable transfers. This implies that the conditions for intra-group loans, guarantees and transfers of assets for collateral could be set out in group financial support agreements between parent banks and bank subsidiaries. However, progress in this area is extremely challenging, since group interest is not a well-defined legal concept, while national laws focus on protecting local creditors. Here I think the critical issue is whether we manage to include adequate safeguards in the framework to ensure that the financial stability of the transferring country is not exposed to undue risk as a result of the support provided according to the agreement. This means that host countries supervisors have to be involved in any solution implementation. Third, I also consider the involvement of the European Banking Authority (EBA) as a very promising element of the EU plans. The EBA could play two equally important roles in the future regime. As a standard-setter, the EBA drafts binding technical standards and nonbinding guidelines.

This initiative addresses all the three shortcomings that I have just mentioned. The FSB standard contains a comprehensive list of tools and powers which every national resolution authority should have. This means that they aim to improve the national regimes, while at the same time providing for convergence. The FSB key attributes also strengthen, in my view, the group resolution concept, by envisaging that recovery and resolution plans also have a global perspective. Making the national supervisors and resolution authorities plan together how the problems of their groups could be handled would already be a big step forward. In that context, the authorities will also be asked to take into consideration the effects of cross-border contagion in crisis scenarios and simultaneous stress situations in several significant markets. I would also highlight the fact that authorities will also have the right to improve the resolvability of large and complex groups. Let me recall here that Lehman Brothers had a presence in some 50 countries and comprised almost 3000 legal entities before the crisis. Simplifying the structure of global systemic groups could well be extremely useful in preparing for future crises, but authorities will clearly need to work very closely with one another to implement such modifications with great care. Should the group get into difficulties, the Crisis Management Groups could indeed be helpful in promoting cooperation. With such a forum in place, there would at least be a chance of authorities reaching a consensus on how to resolve a cross-border bank.
In the domestic foreign exchange market, average annual depreciation of ALL against the EUR and the USD was 7.6 and 13.2 percent, respectively. 1.5  Inflation and monetary policy  1.5.1  CPI inflation  Consumer prices rose 2.2 percent on average in 2009, which is in line with the Bank of Albania’s target for inflation. As a result of the reduced inflationary pressures worldwide, annual inflation marked low rates – 1.8 percent on average – during the first quarter of 2009. In the following two quarters, inflation rates stabilized close to the lower limit of the Bank of Albania’s target, 2.0 percent. Annual inflation displayed an upward tendency in the last quarter, when it marked 2.9 per cent in average terms and converging to the inflation target. The highest inflation rate of 3.5 percent was marked in December. The increase of inflation in the last part of the year was mainly triggered by the more complete exchange rate devaluation pass-through to consumer prices, in the presence of upward primary commodity prices in the global markets. The slowdown of economic activity at home and the low inflationary pressures from the global economy created an environment of relatively low inflationary pressures. Core and non-traded inflation marked average rates of 1.3 and 1.6 percent, respectively, in 2009 attesting to the low inflationary pressures of the domestic economy. These factors offset the devaluation effect of the national currency, which led to higher prices of imported goods and a part of products that are still indexed to the exchange rate.

It was soon followed by the reduction of current and capital account foreign inflows, an abrupt fall of foreign demand and slowdown of domestic demand for goods and services. In response to these developments, the economic growth rate marked a progressive slowdown during the last year, but still remained positive. Albania’s balance of payments was characterized by imbalances in foreign currency inflows and outflows. The imbalances were reflected in the swinging of demand and supply ratios of foreign currency, yielding the depreciation of the exchange rate in response to new balances that dominated the foreign exchange market. Fiscal policy became more expansionary in 2009, supporting economic activity in the country but also increasing the pressures on the financial markets. The shock that hit the financial system gave rise to the establishment of a challenging environment for the monetary policy to be transmitted completely and timely. Against this challenging background, the Bank of Albania accomplished its legal mandate to maintain price stability in economy successfully: CPI annual inflation remained within our 3 + 1 percent target in 2009. The Bank of Albania’s easing monetary policy established the proper monetary conditions required to maintain price stability. In addition, the supply of the economy with the necessary liquidity and at a declining cost stabilized the financial markets and created the proper conditions for the support of economic activity during 2009.
Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. Currency swings are driven by cross-border capital movements. Capital flows were heavily influenced by investor focus on stock market returns until the downturn began. In the US, equity prices almost trebled between 1995 and 2000. Stock markets in other countries followed suit. The decline was amplified after the downturn in the global economy deepened as a result of terror and fears of war. Investors sought to avert the risk in the stock market. Capital inflows into the stock market resulted in a strong dollar. However, expectations concerning corporate earnings were higher than later proved to be warranted. When expectations were lowered, equity prices fell. Demand for bonds increased, resulting in low long-term interest rates. BIS Review 14/2003  1  In response to heightened uncertainty and fears of war, traditional safe havens for capital, such as the Swiss franc and gold, have become increasingly attractive. The Swiss franc appreciated after the terrorist attacks on 11 September 2001 and towards the end of last year. Gold prices moved up sharply after UN Security Council Resolution 1441 was adopted in November last year. Oil prices fell markedly after 11 September 2001, but have since risen. Fears of war in Iraq have increased the uncertainty surrounding global oil supplies.

If it turns out that the anticipated fall in asset prices does not materialize, the policy constructed under the assumption of a decline will likely have been too easy, and that might itself contribute to further rises in asset prices. This might sound like a more or less generic statement about the perils of having to make policy based on forecasts, but there is a sense in which the forecasting of asset prices, or indeed even understanding the driving forces behind movements in asset price after they have occurred, is particularly challenging. This is why there is a vast literature focusing on these challenges and characterizing the many "puzzles" of the behavior of asset prices. More generally, despite the fact that policymakers can’t be completely confident in their assessment of the future path of asset prices, it seems unavoidable that these assessments will factor into policy decisions. This is not to say that central banks should lean against bubbles or against asset price movements themselves. Nor should the appropriate response to a given change in asset prices be to change policy by more than what would be appropriate to address the effects on the central objectives of the central bank. But policy, in some circumstances, will need to respond to asset price movements when those movements alter the central bank’s assessment of the risks to its outlook, and that change in the assessment of the risks to the forecast should be part of the central bank’s communication with the public.
We can observe that the developments in the individual countries have little in common and the exchange rates followed paths reflecting domestic developments in the individual countries. BIS Review 53/2003  7  Contagion Among CEEC Countries? 120 115 110 105  CZK/EUR PLN/EUR HUF/EUR SKK/EUR  100 95 90  12.9.03  21.8.03  8.7.03  30.7.03  16.6.03  23.05.2003  29.04.2003  04.04.2003  13.03.2003  19.02.2003  28.01.2003  06.01.2003  09.12.2002  15.11.2002  23.10.2002  01.10.2002  09.09.2002  16.08.2002  25.07.2002  02.07.2002  10.06.2002  17.05.2002  23.04.2002  29.03.2002  07.03.2002  13.02.2002  22.01.2002  28.12.2001  03.12.2001  09.11.2001  18.10.2001  25.09.2001  80  03.09.2001  85  14  Discussion needs to continue about potential risks, such as increased competitive pressure or implementation of new sophisticated financial products. It is also expected that some of the most sophisticated risk management techniques will be done on group wide level and thus outside of the host country jurisdictions. There will be some risks and potential threats arising from the changes. But at this time, there is not a single specific risk that would threaten to disrupt the banking and financial services in the new member states after becoming part of the single market. Capital markets in the new member states were previously non-existent. In the Czech Republic, a capital market was developed as a “byproduct” of the voucher privatization.

This could be illustrated on the table describing developments in the Czech Republic, Poland and Hungary in terms of inflation and GDP growth: 1991  1992  1993  1994  1995  1996  1997  1998  1999  2000  2001  2002  CPI Czech R. Poland Hungary  52,0 60,3 35,0  12,7 44,6 23,0  18,2 37,7 21,9  10,2 29,4 21,6  7,9 21,8 29,2  8,6 18,8 20,3  10,0 13,2 18,8  6,8 8,4 10,5  2,5 9,8 11,4  4,0 8,6 10,2  4,1 3,6 6,8  0,6 0,8 4,8  GDP Czech R. Poland Hungary  –11,6 –7,0 –11,9  –0,5 2,6 –3,1  0,1 3,8 –0,6  2,2 5,2 2,9  5,9 7,0 1,5  4,3 6,0 1,3  –0,8 6,8 4,6  –1,0 4,8 4,9  0,5 4,1 4,2  3,3 4,0 5,2  3,1 1,0 3,8  2,0 1,4 3,3  EIU Country data, national statistics  As already mentioned, since the financial sector consisted mainly of the banking sector, the impact of economic reform was felt mainly by the banks. There was no alternative source of financing for corporations, so difficulties in the corporate sector were passed on directly to the banks. The situation was complicated more by the fact that the government owned some of the most important corporations, as well as the main banks. Political rationale preceded economics. In most of the countries, the privatization of most firms happened early in the transformation process.