samchain/econo-pairs-v1 huggingface dataset:
37  Nor was this decision criticised by the business sector or the press, and in its publication “Økonomiske utsyn over året 1949”, Statistics Norway wrote that “the Norwegian external economy is so closely linked to that of the UK, that there was hardly any alternative to following the pound sterling”. See Jahn, Eriksen and Munthe (1966), p. 371. The decision to devalue the krone in 1949 is also discussed in Jansen (1975). BIS Review 147/2010  9  that alone. From a consequentialist standpoint, it matters little whether the intentions were good, if the consequences of the decision were not. Our decisions are good only if we reach the objective of price stability. As mentioned, our performance cannot be measured by whether inflation is always at target, partly because the economy is frequently exposed to abrupt and unexpected shocks. We will nearly always be slightly over or slightly under the target. But over time we can expect that these disturbances will even out, and in the long run we must also be evaluated on whether or not we achieve the objective of monetary policy. Have we, or have we not, achieved price stability these past ten years? 8. Conclusion  Making a good decision is of little use unless one also manages to have it implemented. Norges Bank enjoys a privileged position. When we make a decision, we can also implement it. Our independence gives us the freedom to decide what the key policy rate shall be.

Exchange rate adjustments in the face of large capital inflows, however, are not without costs. An excessively rapid appreciation of the currency could be disruptive to the real economy, since there often are constraints in the adjustments of the real economy, from labor market frictions to pricing behaviors. Here we have a challenge and need to balance well. In general, we would allow the currency to appreciate to the extent that the movements are broadly consistent with the economic fundamentals and that they would not cause undue disruptions in the real sector. Let me note here that I think the Thai economy, over the years, has become more capable in coping with exchange rate movements. We see more risk protection via financial market instruments on the part of the private sector. Exporters, in particular, have been able to diversify in terms of product lines and market destinations. Nevertheless, from time to time there is still a need to dampen the pressures on the exchange rate, and central banks often resort to exchange rate intervention. While such intervention could help contain excess exchange rate volatility, its focus is at the end of the process. In other word, FX intervention is a “passive” mechanism in dealing with capital inflows. By the time of intervention, capital would have already flowed into the economy. Imbalances could have already built up.
Sabine Lautenschläger: How innovative should central banks be? Keynote speech by Ms Sabine Lautenschläger, Member of the Executive Board of the European Central Bank, at the Wirtschaftsgipfel 2014 “Wirtschaft neu denken – die Kraft der Innovation”, organised by Süddeutsche Zeitung, Berlin, 29 November 2014. *  *  *  Tradition and innovation in monetary policy More than six years after the start of the global financial crisis, monetary policy in the euro area still faces major challenges: Monetary policy, the ECB, faces a challenge – perhaps more than ever before. It faces a challenge because inflation rates are too low. At 0.4% for the whole euro area, the inflation rate is well below our target of nearly 2%. The prospects for economic growth and further price developments in the medium term are subdued. Monetary growth and lending are weak. Geopolitical risks are adding to the uncertainties which are causing investor appetite to continue to fall. Expectations of the ECB are high, from markets and from politicians. Every month people give us good advice, often referring to actions taken by other central banks. And they do so despite the fact that our monetary policy decisions from June and September haven’t yet been able to fully take effect. So what else can a central bank do in the current situation? How innovative may central banks be?

In my view, a consideration of the costs and benefits, and the opportunities and risks of a broad purchase programme of government bonds does not give a positive outcome at the current time. Concluding remarks Owing to my position, I have limited myself today to talking about innovations in monetary policy. At this point we should look first at the effect of our recent measures and of the asset quality review and the stress test on bank lending. Innovations in other political areas are also necessary, if not even more so. The reasons for weak growth and funding shortfalls primarily lie elsewhere, not in a lack of central bank liquidity, to say nothing of capital markets. Innovative political approaches are called for when it comes to increasing growth potential in the euro area, strengthening economic adjustment efforts and making budget consolidation compatible with growth and employment. But let me conclude by returning to the original question: how innovative may the ECB’s monetary policy be? As innovative as necessary and as effective as possible. This requires careful consideration. The risks and side effects must always be taken into account. For me, given the current situation, the hurdles for further measures are very high, especially for broad purchase programmes. The interest and spreads for many debt instruments are already very low: the risk of market distortions cannot be dismissed.
By structural reforms and institutions I am here referring not only to the effective functioning of labour, product and financial markets, but also to the general framework configuring the environment in which economic agents make decisions regarding their investment in businesses, education, innovation, etc. Experience shows that, it is not easy to carry through some structural reforms at least. However, it is particularly important to resolutely pursue such reforms in the current environment, which includes a number of important challenges, such as rapid technological change, accelerating globalisation and ageing populations. This applies to the Spanish economy as well as to all other economies members of the euro area. I will first compare the economic growth performance of the euro area with that of the United States, focusing on some of the underlying factors of potential output growth. Then I will elaborate on the structural reforms, which I consider to be most essential to increase the potential growth rate of the European economies. I. The economic performance of the euro area since the mid-1990s. Since 1995, the annual growth rate of the euro area has averaged 2.2% per year compared with 3.1% in the United States. What are the fundamental causes of this lower trend growth in the euro area? The answers can be found by looking at the factors determining the trend in economic growth, namely employment growth, which in turn is related to labour utilisation and, demographic trends; and productivity growth.

The European Commission estimated that if Member States achieve their targets, R&D activities will rise by 50% in 2025, generating an increase of between 2.6% and 4.4% in GDP on the basis of conservative assumptions (see report from European Commission “Implementing the renewed Lisbon strategy for growth and jobs: A year of delivery” (2007)). 6  BIS Review 18/2008  euro area, and are crucial to maintaining and ensuring the competitiveness of the individual European companies over the medium to long run. We should keep in mind that in a context of monetary union, not only fiscal policies, but also price competitiveness and unit labour cost developments across countries should be continuously and closely monitored. III. Conclusions  Ladies and gentlemen, I would like to conclude by stressing a few points. Europe is in the process of reforming its economy so as to adapt to the challenges of globalisation, technological change and an ageing population. Significant progress has already been made as reflected by the notable rise in employment growth over the last decade. Monetary Union has been effective – and hugely successful – in supporting growth through a credible monetary policy that delivers price stability in the medium run, hence contributing to lower financing costs in the euro area through a reduction of risk premia. It has also given a further impetus to resolute European integration, particularly in financial markets. The challenges ahead are a reminder that European integration is a dynamic process and that it will bring about deeper structural transformations.
As representatives of international banks, I know that consistent cross-border implementation of Basel II is a high priority not only because you want supervision to reflect as much as possible the manner in which your organisations are managed, but also because you may be concerned about supervisory burden. Let me assure you that it is also in the best interest of supervisors that we try to minimise as much as possible any duplication of effort and make the most of our limited resources. Having said that, I should also be clear that Basel II will never be implemented with 100% consistency across borders, just as Basel I is not currently implemented with 100% consistency. There are important differences in laws, financial markets and supervisory practices, among others, that make it impractical to expect that Basel II will look exactly the same in every country. The role of the AIG, then, is to share information and promote—not mandate or enforce—consistency in implementation of Basel II. It is clear that there is no “one-size-fits-all” approach to implementing the new Framework. Rather, implementation should be tailored to the specific circumstances of a bank and the jurisdictions it operates in. It seems to me that to enhance consistency we need to work on improving vertical co-operation, namely home-host issues, and also horizontal co-operation, that is to say convergence of practices. We think that the bottom-up approach is the most efficient and less prescriptive method of achieving these goals.

We have made it clear that a relative lack of historic data should not automatically preclude portfolios from use of the IRB approaches and that relatively sparse data might require increased reliance on alternative data sources and data-enhancing tools. These alternative data sources and data-enhancing tools are mentioned in a non-prescriptive manner in this newsletter. I would like to spend the remainder of my time this morning discussing this implementation stage. Specifically, I would like to discuss three aspects of implementation that I believe will be of interest to internationally active banks: (1) the forthcoming quantitative impact study, or QIS 5; (2) the work of the Accord Implementation Group; and (3) the role of non-G10 supervisors in Basel II implementation. What I will not discuss, however, is individual countries’ approaches to implementing Basel II. A great deal of work is under way in a wide range of countries to implement Basel II through legislation and/or regulation, and while I believe this work is proceeding quite well, my colleagues on this panel are in the best position to address specific questions about national implementation since this is a matter for national supervisors. QIS 5 Turning now to implementation, the Basel Committee has announced that it will conduct a fifth quantitative impact study beginning next month and running until the spring next year. The purpose of  1/3  this study is to evaluate the calibration of the Framework and assess the impact of the recently published guidance on trading book, double-default and downturn LGDs.
Clear communication reduces the risk of confusion, volatility, and spillovers, and helps others prepare for challenges that may lie ahead. Experience has demonstrated that transparency in monetary policy can both increase its effectiveness and reduce unintended consequences. Shared Insights and Analyses 1/2  BIS central bankers' speeches  That is why the perspectives we gain through ongoing dialogue with our counterparts are so valuable. Across the globe, many central banks—including the Federal Reserve—are moving to unwind the highly accommodative policies they put in place at the start of the pandemic. And we are doing this at a time when the economic implications of COVID-19 and the war in Ukraine remain highly uncertain. As we all take these steps, the Bank for International Settlements (BIS) has provided an indispensable venue for sharing insights, analyses, and concerns. By engaging with each other, we are able to stay ahead of the trends and issues that affect other economies and their financial markets. And that is true not only when it comes to policy development and execution, but also in understanding economic and financial developments across the globe. A particularly apt example of the value of dialogue is the BIS’s Consultative Council for the Americas, which I’ve had the pleasure of chairing since 2020. Agustín, Julio, Roberto, and our colleagues from Argentina, Canada, Chile, Colombia, and Mexico are participants in meetings of the Council. Suffice to say, we’ve had a great deal to discuss over the past two years.

And to do so, we have significantly increased the frequency of our meetings. These meetings provide us with opportunities to communicate the reasoning and implications of our policy strategies, goals, and actions, and to hear how these affect other economies in the region. We exchange perspectives on shifting policy imperatives, and we share experiences and insights related to managing risks. Through the BIS, we also jointly meet with members of the private sector, including bank CEOs and chief economists from the region, to hear their views about the economy. This is another valuable aspect of our work as central bank governors, and it’s insightful for all of us to hear from leaders beyond our own organizations and the borders of our countries. Global Issues I touched on many topics—the pandemic, the war, and inflation. These are global issues with domestic implications, and when we address them to fulfill our own mandates, we affect the economies of other countries in the region as well. In this regard, the work of the BIS in bringing central banks together has never been more important. I look forward to continuing our dialogue and engagement in the future. Again, congratulations to the Central Reserve Bank of Peru, and best wishes for your second century. 2/2  BIS central bankers' speeches
When it comes down to it, the inflation-targeting policy has functioned well for a long time, and problems only arose when there was difficulty making policy sufficiently expansionary, as a result of the lower bound, after the financial crisis. Raising the target would solve, or at least reduce, this problem. It would also only affect one parameter of the framework and would not entail any extensive revision of it. This means it would not be necessary to try to convince and explain the merits of a new system and deal with potential adjustment costs and teething problems. It is not always an advantage to hold on to as much of an old system as possible, but in this case I think it would be a good idea. Would the economic agents accept an inflation rate of 3-4 per cent? I think they would, especially as it would entail less of a negative interest rate in the future – something we now know from experience is perceived as unnatural and problematic in several ways. It could also reasonably mean that it would be less probable that one needs to employ purchases of various financial assets as a complement to policy rate cuts. Although the criticism of this part of the policy may not have been as sharp as the criticism of the negative interest rate, it has still arisen.

The Ministry of Finance will provide additional clarification and detailed explanation of the income tax treatment on more prescribed Islamic financing arrangements including financing through a partnership arrangement, project finance as well as interbank placement of funds6. This is in  6  The tax circular will cover Islamic financing arrangements based on Diminishing Musharaka (financing through a partnership arrangement) and Istisna (project financing) and interbank placement based on Wakala (agency contract) and Murabaha (sale at cost-plus) concepts. BIS central bankers’ speeches  3  keeping with our long-standing principle that Shariah-compliant products should not be disadvantaged in terms of regulatory and tax treatment where the economic substance and risks are similar to conventional products. We hope that this will expedite the development of more such financial products in Singapore. Conclusion 18. To sum up, the Middle East and Asia continue to present attractive opportunities. Both regions need to work closer together to achieve greater synergy and accelerate the global growth of Islamic finance. Singapore will play its part in this international effort together with our regional and industry partners. 19. I am glad to see more players from Middle East and Asia participating in this year’s Summit. I hope that you will take up the challenge to work together to spur the development of Islamic finance as a bridge between Asia and the Middle East. Thank you. 4  BIS central bankers’ speeches
The importance of financial systems has indeed been highlighted during the recent global financial crisis in which markets without properly functioning financial systems were affected more severely than those that had a semblance of well functioning systems. Evidently, from the theme of your conference, “Integration of African Capital Markets through technology” we can see the importance the interrelationships of financial systems and other sectors of the economy. Ladies and Gentlemen, economists and market players have long recognized the importance of the financial system. During each financial crisis including the recent global financial crisis, we have increasingly heard that the financial system was one of the main causes of the crisis, and that the financial system needs to be reformed in order to resolve the crisis. Many of these discussions treat the financial system in isolation or link it superficially to the macro-economy, however to put these issues in perspective let us first look at the importance and limitations of financial markets. The importance and limitations of financial markets I would like to begin by discussing the role of the financial system and why it is different from other sectors of the economy. Individual entrepreneurs rarely have enough of their own capital to undertake investments themselves. Individual savers, without pooling their money, would not be able to take advantage of the potential increasing returns to scale of their investments, and would face a large degree of risk with little liquidity.

Ladies and Gentlemen you will agree with me that we have come a long way since the time when many viewed the financial system simply as a sideshow, or a passive channel that allocated scarce resources to the most efficient uses. Today, almost everyone agrees that the financial system is essential for development. Improving the financial system can lead to higher growth and reduce the likelihood and severity of crises. It is essential that we have a clear understanding of the causes of business cycles and the working of monetary policy. In thinking about financial reform, we need to treat liberalization as a means rather than an end. Instead of pushing for immediate deregulation, we should try to understand the important role authorities play in financial markets. These steps will not only result in a better and more stable allocation of domestic capital, but also help countries to develop their capital markets with the requisite financial systems. In view of this I encourage you all to join hands with authorities in your countries in improving financial infrastructure so as to contribute to the development of our regional financial  BIS Review 149/2010  5  systems and thereby improving the availability of capital. I am also encouraged by the increasing number of financial service providers in our economies. As competition intensifies, banks and other financial institutions will start to reposition themselves by lowering the cost of lending to the private sector.
The challenge lies in specifying a model that fits together seamlessly with other  4  BIS Review 32/2004  international accounting guidelines and at the same time aligns well with sound insurance risk management and supervisory objectives. Given some of the issues we’ve faced in other areas of accounting, that seems unlikely to be a quick or easy job. That same challenge to align accounting guidelines to sound risk management objectives as well as supervisory objectives exists across the financial services sectors. It explains why financial supervisors, and especially the Basel Committee, attach great importance to playing an active role in the international debates on accounting. In the Basel Committee’s case, we seek to represent the supervisory perspective on key accounting issues relevant to banking, and we support the work underway in the accounting profession towards convergence in accounting standards globally. With regard to Basel II, the Committee worked closely with our colleagues in the International Accounting Standards Board to avoid conflicts between Pillar 3 and the broader accounting standards. In fact, the Committee views Pillar 3 as a further refinement of the accounting standards that apply to banks’ specific exposures. Because we recognise that we have much to do in this area, we will continue to monitor accounting and market developments in the light of Pillar 3. Our dialogue with accounting standards-setting bodies and the accounting profession will continue to grow in the years to come.

Supervisors and global market participants face significant hurdles in exercising discipline on an entity whose operations span more than one jurisdiction. Business practices differ between countries. Legal systems may be unfamiliar. Deciphering balance sheets prepared under national accounting systems can be an extremely taxing undertaking. Considering those burdens alone, it is easy to agree that supervisory and market discipline would be more effective under more harmonious - if not completely harmonised - accounting rules. But the task is formidable. In our duty to safeguard and reinforce financial stability, central banks and financial supervisors have a legitimate interest in the quality of accounting standards and their effective implementation. We believe that in order to help fortify the financial system, accounting standards should support - or at least be consistent with - sound risk management and control practices in use in the industry. In addition, accounting standards should facilitate market discipline by providing a more transparent “window” into an organisation’s financial position and performance and likewise into its measures and management of risk exposures. Finally, accounting standards should facilitate the effective supervision of financial institutions. In the specific case of the insurance industry, I think it’s fair to say that almost all of us believe that, for international standards to be complete, we need a single, high quality standard developed to address insurance liabilities.