samchain/econo-pairs-v1 huggingface dataset:
How do developments in house prices and household indebtedness come into the picture? House prices must be given consideration in the forecasts as they affect, through the wealth effects, households’ decisions regarding consumption and saving. The size of household debts is important to the way in which interest rate changes affect consumption. However, one problem is that it can be difficult in the normal forecasting and analysis work to capture the risks that ensue from large fluctuations in house prices and other asset prices. One reason for this is that the models usually used to make forecasts do not have such sophisticated descriptions of the financial sector and its interplay with the real economy. The problems are particularly great when house prices and credit growth have over a long period developed in a manner that is not sustainable in the long term. It is simply not possible, with the analysis and forecasting tools currently available, to forecast with sufficient accuracy whether, for instance, there will be a sudden correction in house prices, or whether there will be a calmer, more protracted adjustment. At the same time, the Riksbank must take into account the risks when conducting its monetary policy. If the rate of increase in house prices and household debts remains at a high level over a long period of time, the risk increases that imbalances will build up and will force an adjustment later on, which could in the worst case have significant consequences for the real economy and inflation.

She and her staff see some 500 business contacts a year, and report the information gathered directly to the Monetary Policy Committee. In addition, members of the MPC themselves make regular visits to different parts of the country to listen and learn. And I shall be doing that during my visit to Scotland. So whatever the critics may think, we are not short of information. Of course, whenever interest rates rise it is always said that the rise might be appropriate for certain parts of the country, but is wrong for some sectors of the economy, some regions or even some companies. The UK economy, we are reminded, is not homogeneous. Of course it isn’t, and a good job too. But policy can never be set with the interests of one sector, or one region, let alone one company in mind. And it isn’t. I can assure you that policy is not set with the South East of England in mind. But equally, it is not set either in the sole interest of the North East of England or Scotland. It is set for the United Kingdom as a whole. Some have argued that if monetary policy has but a single instrument, namely the national interest rate, then would it not be sensible to use other policies to reduce imbalances in the economy? In particular, it has been suggested that fiscal policy should complement monetary policy in bringing demand into line with supply. 3  BIS Review 111/1999  3.
Before I turn to our most recent assessment of the stability of the Norwegian financial system, let me give a brief outline of the structure of the financial system. The Norwegian financial system is dominated by banks, with a market share of more than 56 per cent, calculated as the banks’ share of total assets in financial institutions and mutual funds. The banking system is relatively concentrated. The largest bank had a market share of 37 per cent in terms of total assets in the banking sector at the end of 2005, while the largest five had a market share of 61 per cent. Savings banks account for a substantial part of the banking sector. However, most of the savings banks are quite small. To partly compensate for that, some cooperate on a range of products which provides economies of scale while maintaining their independence. During the past decade, activities of foreign-owned banks in Norway have expanded considerably both through take-overs and organic growth. At the end of 2005, they had a market share of over 30 per cent, in terms of total assets. Their lending growth has been higher than for Norwegian-owned banks for several years. The development towards larger cross-border banks makes supervision and crisis management more complicated. In the event of a crisis, central banks, supervisory authorities, political authorities as well as deposit guarantee funds in several countries will have to be involved.

To illustrate this point, I want to focus on three key markets for the SNB that have experienced major changes: the goods and services market, where digitalisation may be influencing pricing and where we, in turn, must remain alert if we are to fully grasp the associated dynamics; the foreign exchange market, where the emergence of new technologies and players has led us to expand our in-house capabilities and redouble our efforts to stay at the cutting edge of technological progress (Thomas Moser, Deputy Head of Department III since 1 September, will give you more detail on this topic); and finally, the money market, where structural changes are prompting us to work on modernising infrastructure and maintaining appropriate framework conditions in order to ensure effective implementation of monetary policy. Evolution of the goods and services market and weak inflation So let me start with the goods and services market and inflation developments. This market is presenting central banks with an important conundrum: why, given that the economy has firmed significantly since 2017, has inflation remained low in most advanced economies? Page 2/9  Two major reasons stand out: on the one hand, monetary policy geared to price stability has firmly anchored inflation expectations; on the other, various structural factors linked to globalisation may have had a moderating effect on prices.
A threat is anything, be it people, object or activity with the potential to cause harm to the country, society, or the economy. In the money laundering and terrorist financing context this includes criminals, their criminal activities, terrorist groups and their facilitators, their funds, as well as past, present and future money laundering or terrorist financing activities. Identifying the threat is an essential starting point in assessing money laundering and terrorist financing risks. It provides an understanding of the nature, size and volume of the predicate offences and proceeds of crimes and an understanding of the environment in which these offences are committed and the proceeds are generated. The concept of vulnerabilities used in risk assessment comprises those factors that can be exploited by threat or that may support or facilitate its activities. In the money laundering and terrorist financing risks assessment context, vulnerability is distinct from threat because vulnerabilities are the factors that represent weaknesses in certain features of a country, or in the AML/CFT systems or controls. They may also include the features of a particular sector, a financial product or type of service that make them attractive for money laundering and terrorist financing purposes. By assessing the country’s threats and vulnerabilities, we are actually putting the risks assessment in the context of our country’s situation in terms of materiality of these threats and vulnerabilities in our country’s structural elements, and other factors that form important features of our country.

This can be seen in chart 5, which shows the example of interest rate differentials between Germany and Switzerland for three-month, two-year, five-year and ten-year maturities. While interest rates on the money and capital markets declined as a result of negative interest, mortgage rates did not decrease to the same extent. Indeed, for mortgages with longer terms, rates are slightly higher than they were at the beginning of the year. The main reason for this divergence is that a major part of bank refinancing costs consists of interest paid on savings deposits, which has not fallen below zero as did interest rates on the money market. Because interest on savings deposits is significantly higher than the money market interest rate, bank interest margins came under pressure after they had hedged the interest rate risk associated with their mortgage business, and some mortgage rates were increased. Fears that negative interest might contribute to a significant decline in mortgage rates and, in turn, to stronger growth in mortgage lending have so far proved unfounded. For investors, by contrast, the current low interest rate environment means that the challenges have increased. It is even more difficult for them to find yield-bearing investments. I should emphasise, however, that this investment predicament is an international phenomenon and not limited to the Swiss franc alone. Conclusion I will now come to my concluding remarks. Initial experience has shown that the interest rate instrument is also effective in negative territory.
On one hand, certain aspects of the application of current accounting rules for calculating credit risk are clarified. On the other, the aforementioned authorities have ruled that banks may effectively use the capital buffers available to absorb unexpected losses. Specifically, the aim of the clarification of the accounting rules is to prevent potentially temporary delays by borrowers in repaying their loans from receiving the same treatment as though what were involved was a lasting impairment in the quality of the loans. The latter would lead to an immediate and abrupt adjustment of credit ratings and, therefore, to an increase in the provisions required which, ultimately, would lead to a downward adjustment in the credit extended by banks. In exchange, it is necessary to prevent the wrongful use of this flexibility from leading to inappropriate accounting practices that translate into a delay in recognising the actual impairment of the quality of certain credit exposures. 27  In the second of the two areas mentioned, the Banco de España has conveyed to all the institutions it directly supervises the various measures introduced by the different macroand microprudential and resolution authorities to alleviate capital and liquidity requirements. Moreover, the Banco de España has recommended that banks under its supervision should temporarily eliminate dividend payouts and apply prudent criteria in the variable remuneration of their staff, so that they may channel the funds they generate towards reinforcing their capital positions.

With a view to strengthening economic growth in the long term, one objective of economic policies in the immediate future must therefore be to provide the education system with mechanisms enabling affected students to obtain the qualifications necessary, despite the lack of face-to-face education. As regards the employed who have lost their jobs, it is essential that the income-support measures be complemented by active policies that prevent a loss of working skills and foster the acquisition of new ones. In this respect, it is important to note that the effectiveness of active labour market policies has traditionally been an unresolved issue in Spain. International experience shows that one way of reinforcing the effectiveness of public employment services is to equip them with the skills to provide individual guidance. For those who keep their jobs after this crisis, various initiatives geared towards improving their productivity can also be conceived. First, it is desirable to apply formulas to counter the potential cuts to training expenditure that firms may make in the short term to address their liquidity needs, given the adverse impact that such cutbacks would have on aggregate productivity further down the road.
These were exactly the challenges faced by the Bank in articulating the terms of its Discount Window Facility. But the challenges are even greater in this area because the exit strategy from capital injections is so much more difficult; by potentially delivering control, capital-insurance is much more closely intertwined with issues of management; and because there would have to be clarity about treatment of all parts of the capital structure. I think that articulating and sticking to policies in this area will be one of the great challenges over the coming years and decades. Macroprudential: taming the credit cycle It would all be a lot easier if we could tame the credit cycle. This is the debate about the missing “macroprudential instrument”. What would be the objective; is there in principle an instrument; would it work in practice in a world of free capital flows? Those debates are prior to questions of institutional responsibility. And they have a bearing on the parallel debate about the regulatory boundary, which is where I will begin. I start from the position that excessive leverage and maturity transformation in parts of the non-bank financial sector – funds, conduits, securities dealers, and so on – was predicated on the availability of plentiful credit on too-easy terms from the commercial banking system. Up to a point, the same goes for liquidity in asset markets.

It starts with monetary policy being directed, of course, to ensuring that the value of central bank money in terms of goods and services is stable. But most money in economies everywhere is private money: deposits with commercial banks. In significant degree, financial stability is about safeguarding the stability of private money (deposits with the banking system) relative to central bank money. Prosaically, depositors with banks have to be confident that they can exchange their deposits at face value for our money – our notes; or that they can switch to another bank where they can be confident of that. At the level of the system, we need an “exchange rate” of unity for private money and central bank money. And we need wholesale funders of banks to be confident of that too. When that is secured, demand for our money is low, and society reaps the efficiency benefits of the private sector banking system. Absent that confidence, the payments system simply would not work. And the supply of credit would be imperilled, as we have rediscovered to the global economy’s great cost. These objectives – price stability, and banking system stability – are the two key facets of stability in a monetary economy. As recent events show, they can be affected profoundly by conditions in capital markets and in overseas financial systems. Focusing ultimately on the stability of our monetary system therefore clearly requires a broad view of financial markets more generally.
This has often been attributed to a harsh winter, despite best efforts to seasonally adjust the data. But causality is inherently difficult to establish. Indeed, statistical analysis has challenged the hypothesis that cold temperatures are behind the observed deceleration in first-quarter growth.9 Similarly, last month, we saw a puzzling persistence in petroleum prices in Germany despite a parallel fall in oil prices. One hypothesis is that this year’s hot summer caused the water levels in German rivers to fall to levels that only allow petrol tankers to carry half their capacity, creating supply bottlenecks. Uncertainty also extends to the effects of regulatory responses by governments to the growing challenges posed by climate change. German growth in the third quarter is currently projected to have stalled or even contracted, probably largely due to bottlenecks in the testing process under the new Worldwide Harmonised Light Vehicles Test Procedure. But we cannot be sure. Given the current global environment, growth may have slowed for other reasons. Or the recent emission scandal may have led to a more fundamental shift in consumer preferences.

24 In addition, there are other structural forces, such as population aging, that may impact bond markets and,  hence, the transmission of monetary policy. See, for example, Praet, P. (2018), “Economic policymaking under uncertainty", speech at the “la Caixa” Chair for Economics and Society conference, Madrid, 17 October. 25 Our actions to protect the environment begin with reducing our own ecological footprint. In 2007 we adopted an  environmental policy and registered with the European Eco-Management and Audit Scheme. For more, see ECB (2018), “2018 update of the ECB’s Enviornmental Statement”, October. 26 See, for example, Villeroy de Galhau, F. (2015), “Green Finance – A New Frontier for the 21st Century”, speech  given at the international climate risk conference for supervisors, Amsterdam, 6 April; and Knot, K. (2017), “Sustainability: a role for central banks?”, speech at the CEP/DNB workshop ‘Central banking & Green Finance’, Amsterdam, 28 November. 27 For example, we are part of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. The ECB is also a member of a technical expert group that is assisting the European Commission in establishing an EU-wide classification system, or taxonomy, for green assets. This taxonomy has the potential to increase transparency, discourage “greenwashing” and improve market pricing of both climate and transition risks. See European Commission (2018), “Action plan: financing sustainable growth”, March. 28 For a more general overview, see ECB (2006), “Portfolio Management at the ECB”, Monthly Bulletin, April.
Figure 10: CPI in Developed and Emerging Figure 11: Core CPI in Developed and Markets Emerging Markets (Annual Percentage Change)  (Annual Percentage Change)  5  8  4  Developed Countries  7  4  Developing Countries  6 3  5  2  4  1  3  Developed Countries  2  2  Developing Countries (rhs) 0  1  Source: Bloomberg, CBT. 0409  1208  0808  0408  1207  0807  0407  1206  0806  0406  1 1205  0409  1208  0808  0408  1207  0807  0407  1206  0806  0406  0 1205  -1  2. 3  Source: Bloomberg, CBT. Monetary policy response  After making brief remarks on inflation developments, I would now like to touch on the policies pursued by the Central Bank in this period. Anticipating that inflation would decrease sharply following the last quarter of 2008, when the global financial crisis deepened, the Central Bank of Turkey (CBRT) has focused on alleviating the harsh impact of the global financial crisis on the domestic economy and financial stability. Throughout this process, the CBRT has delivered sizeable cuts in shortterm interest rates, while providing liquidity support to financial markets by following a countercyclical monetary policy.

As I said, the last inflation figure was 2.9% in twelve months, practically right on the monetary policy target. Financial risks are well contained and the Chilean economy has successfully weathered a period of significant slowdown without much trouble. As an institution, the Bank inspires credibility and trust. Over the past several years, inflation expectations two years out have remained stable at the policy target. Also, the voice of the Bank has been heard when it has identified risks emerging in the financial sector, and its model of organization and autonomy has inspired every agent searching for institutional schemes granting a transparent and equitable operation in key functions. It is important to recognize the contribution of the Central Bank of Chile’s staff, Board members and Governors that came before me to achieving those high standards. Getting to this point wasn’t easy, in either substantive or institutional terms. During the past few years, the evolution of the economy has been determined largely by the swings in the 7 / 19  BIS central bankers' speeches  world economy. The end of the so-called commodity boom, the persistence of very expansionary monetary policies—both conventional and unconventional—, deflation replacing inflation as a macroeconomic risk and the profound transformations that the Chinese economy has experienced, among others, are some of the large-scale phenomena that have generated major, even atypical, changes in the external scenario facing the emerging economies. These changes have been perceived especially clearly in Chile.
Svein Gjedrem: Perspectives on the role and effects of monetary policy Introduction by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), for the Holden Committee of Experts assessing the challenges facing the exposed sector, Oslo, 16 January 2003. *  *  *  Introduction The primary objective of monetary policy is to ensure nominal stability. There were wide fluctuations in the Norwegian economy in the 1970s and 1980s. Economic developments were marked by high and variable inflation. Inflation rose gradually and it took a long time before it fell. The absence of a nominal anchor was one of the main reasons behind these pronounced swings in the Norwegian economy. With a policy of low interest rates and devaluations, inflation took root. Nominal interest rates were kept at a low level even though inflation and the value of tax-deductible interest expenditure rose. Frequent devaluations from 1976 were not able to prevent a decline in the manufacturing sector. On the contrary, they proved to be self-reinforcing. The wide fluctuations culminated in a credit boom in the mid-1980s, followed by a deep recession and high unemployment towards the end of the 1980s. From the mid-1980s, during and after the credit bubble, it was recognised that a substantial revision in economic policy would be necessary and that the problems created by inflation had to be taken seriously. The exchange rate was chosen as the nominal anchor. A deterioration in competitiveness due to high wage growth would no longer be rectified by means of devaluations.

The EU’s new Markets in Financial Instruments Directive (MiFID), for example, is expected to bring about important changes and intensify competition in the European financial market. This development will also influence the future of financial market infrastructures in Switzerland. Against this background, it is certainly crucial for the Swiss financial market infrastructures to persistently foster their competitiveness. They have pursued this strategy so far, and will need to continue doing so in the future. BIS Review 87/2006  1