samchain/econo-pairs-v1 huggingface dataset:
It is higher than in Sweden and the UK, but lower than in Denmark and the Netherlands. Norway is among the countries with the highest share of owner-occupied dwellings, at around 80 per cent. This high proportion partly accounts for the high mortgage debt of households. In recent years, new loan products have also been launched, facilitating mortgage equity withdrawal. Housing wealth has become more liquid. Borrowers have greater scope for choosing repayment profiles. We cannot identify the exact level of household debt that can be sustained over time, but the rapid build-up of debt makes households more vulnerable. BIS Review 28/2007  11  Housing investment for the household sector as a whole is now being fully debt-financed, which means an increase in net debt. It would appear that household saving has fallen markedly in Norway in the recent past. Saving was negative in the latter half of 2006, which is the first time saving has fallen since 1988. The pronounced fall in saving indicates that households are taking greater chances. At the same time, government revenues and savings are high. The long period of prosperity and government budget surpluses may have engendered a sense of security which is also affecting household saving and house purchases. Petroleum and the Government Pension Fund – Global  High oil and gas production and high prices, combined with high returns, have resulted in a rapid rise in the value of the Government Pension Fund in recent years.

For example, clothing and footwear, audiovisual equipment, furniture and white goods have shown very strong price declines. Low prices for imported consumer goods, combined with high prices for our commodity exports, have resulted in a strong improvement in Norway’s terms of trade. Since 2002, the terms of trade have  4  BIS Review 28/2007  improved by about 40 per cent. A similar situation has not been seen since World War I, when earnings in the shipping industry and other export industries were exceptionally high for a period. The supply of foreign labour has increased markedly after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for more than 30 per cent of growth in our labour force. Norwegian companies have also been able to be considerably bolder in undertaking new assignments and investments knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. Inward labour migration delayed the fall in unemployment in this expansion. It has also reduced bottlenecks in the economy and curbed the impact of the fall in unemployment on wage growth. Labour inflows have also had a dampening effect on wage growth, probably because the wage level of foreign workers is somewhat lower than for Norwegian labour.
But in some countries, notably the US and the UK, low inflation has been coupled with an unusually low degree of output volatility; and this may have encouraged an exaggerated notion of the role that central banks can play in achieving exceptionally benign outcomes, in different circumstances. Unrealistic expectations invite disappointment. And disappointment – if it dawns suddenly – is liable to have a disruptive effect on financial markets and potentially on real economies. That is the dark side. But for now, low real interest rates are supporting activity, and the main puzzle is why companies are not taking more advantage of favourable financing conditions to increase their investment – though once they do, past experience suggests that spending could rise could rise quite quickly. Let me sum up. The immediate prospects for the world economy are still robust, despite the sharp rise in oil prices. The outlook for UK weighted activity is less rosy, with relatively subdued growth in the euro area – though even here the latest business surveys are brighter than they have been for some time. The UK is fully exposed to the impact of more adverse world pricing trends, notably higher oil prices. And there are some significant risks, with considerable uncertainty about oil prices. This outlook could provide some support for a rebalancing of the UK economy. But there is no guarantee of that. The MPC may face some hard choices in the coming months.

Finally, there is the puzzling matter of long term interest rates; last year, as central banks raised their policy rates, long term nominal and real rates fell to levels not seen in 40 years (though of course, US rates have now ticked up a bit recently). At the same time, risk premia of all kinds – bond spreads and term premia – have been sharply compressed. This state of affairs has caused a great deal of head scratching, and nowhere more than in central banks. Plausible explanations for low risk free real rates include the possibility that there is a global savings glut. It is also argued that there has been an investment ‘strike’ almost everywhere except China and maybe the US, perhaps reflecting a persistent overhang from the East Asian crisis or the last IT cycle. These are speculative explanations, and it is not easy to discriminate between them. However, they all seem to point to a more or less prolonged period of low rates. More worryingly, compressed risk premia of all kinds may reflect a belief that the world is no longer such a risky place, a belief fostered by the period of low inflation that many economies have enjoyed in the past decade. Hopefully, low inflation is here to stay.
As we revisit this dramatic moment in monetary history, we need to remember that it occurred against the backdrop of nearly 15 years of disillusion regarding the ability of activist “Keynesian” economic policies to guarantee low inflation and full employment. From 1965 onwards, inflation had been on the rise and unemployment surged in the 70’s, following the first oil shock. In the beginning of the 80’s, it appeared that fiat money was inherently prone to cause periodic bouts of inflation and that there was little one could do about it. (see annex for graph 1) Since 1979, the global monetary environment has evolved dramatically. Achieving and maintaining price stability has become the undisputed guiding principle of a vast majority of the world’s central banks. Price stability ensures the signalling power of prices, thus bolstering the efficiency of the market mechanism. By preserving purchasing power, it facilitates long-term planning and induces long-term investments. Price stability also prevents social injustices from emerging between debtors, workers and retirees. Finally, price stability minimizes tax related distortions linked to the interaction of inflation and the tax code.1  1  see Martin Feldstein (1983): “Inflation, tax rules, and capital formation”, Chicago: University of Chicago Press. BIS Review 44/2003  1  The determined focus of monetary policy on price stability has contributed to anchoring the public’s inflation expectations at low levels.

It is rather a time when we should be having some fun, watching both our ladies’ football teams from the Ndola and Lusaka offices battling it out on the battle field. Thereafter, it will be the turn of the gentlemen to break a sweat in friendly combat. We naturally expect that when the opportune moment is presented, commercial banks and other invited entities will also produce teams comprising ladies and gentlemen – after all the Central Bank of the Republic of Zambia will soon be showing you precisely how it is done. It is now my honour and privilege to officially launch the commencement of 50th anniversary celebrations of central banking in Zambia. Please enjoy yourselves. I THANK YOU. 2  BIS central bankers’ speeches
After the introduction of the euro the issue of potentially new co-operation modes has been raised repeatedly, This is also discussed at the Convention on the Future of Europe. Figuratively speaking, the question means which policy measures foster the best utilisation of the possibilities offered by the single currency. C.  Challenges facing Estonian economy on its way to the European Union - the EU perspective  The first priority issue is naturally the further improvement of the EU internal market. The on-going convergence and improved operational efficiency of the internal market will make prices more flexible and allow better use of resources. It is extremely important to develop the common market for all goods and services, including telecommunication services and other utilities - also financial services in order to ensure free competition and price formation based on the demand and supply on the Pan-European market. A well-functioning common market should help to reduce transaction costs, by offering more and more services via the internet, for example. A common innovation policy, system of business support measures and dissemination of experience of different businesses, availability of start-up capital - all this is deemed to promote productivity and further convergence. BIS Review 51/2002  5  Flexibility and mobility of production factors Another set of critical issues is related to flexibility and mobility of production factors. Here I must stress the importance of capital and labour market flexibility. Both need all possible support in order to increase the efficient use of resources in the common market economies.

Allow me to express in my address also full recognition to Prime Minister Mart Laar who has been the leader of the Estonian government during several critical periods. Mart Laar was the head of the Estonian government during one of the most difficult periods - from the autumn of 1992 to November 1994. This was the turbulent period of initial reforms not only in the economy but the entire society, immediately after the monetary reform and adoption of the constitution. But, with your kind consent, I shall hereby focus on economic issues. These were the times when Estonia’s foreign reserves, in the current denomination, could have been expressed in hundreds millions of euros, the average monthly wage was slightly above one thousand kroons and, by the end of 1992, three big banks had collapsed. These were the years just after the monetary reform when the question “for how long this kroon is going to last” was often asked in Estonia, but even more frequently abroad. The central bank has always stressed the essential backing provided to the stability of the kroon’s exchange rate and the financial system by the economic reforms at large and a stable, predictable budget in particular. We have repeatedly stressed that the foundation for our relative economic success was laid in 1992 and 1993. Our banks would not be so strong to date without solid customers - private enterprises, individuals.
There are no definitive rules or prescriptions when it comes to monetary  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  policy tools, and no such thing as a manual for monetary policy makers.5 I’ll start by looking at QE, then come on to forward guidance, and finish with some thoughts on the possibility of negative Bank Rate.6 a. QE – plenty of headroom QE has been an effective tool for stimulating demand through the 11 years of its use in the UK. Even though we are well on the way to purchasing £ billion between March and December 2020, we have QE “headroom” remaining. And while it is increasingly clear its implementation and impact is state contingent7, to my mind it is a tried and tested tool and for me it is the MPC’s marginal policy tool at present. The headroom point is worth expanding on because it is one that isn’t always appreciated. There are £ of conventional gilts in “free float” by market value (as well as another £ of index-linked gilts which are out of scope)8. The Bank’s Asset Purchase Facility holds approximately £ of those9: so there is a further £ remaining in the market that could potentially be available for purchase. In practice the Bank does not buy very short maturity gilts. And to avoid distorting the market it avoids specific gilts where it holds more than 70% of the free float, and attempts to buy evenly across three maturity “buckets”.

In addition to long-standing issues that are awaiting resolution such as conflicts in the Middle East, tensions in the Korean Peninsula, and Brexit, new sources of potentially abiding fragility keep adding on to this list. The US-Russia conflict, Iran nuclear sanction, the militarization of the South China Sea, and the increased cyber-attacks by both state- and nonstate-actors, are some of the issues that have emerged over the past few years. While heightening geopolitical risks have not led to a serious market correction or slowdown in global economic activities, persistent geopolitical risks still warrant close monitoring, as these could heighten volatility in the financial market and commodity prices, especially that of oil. The last source of risk that I would like to highlight is on the domestic front. While financial stability remains sound overall, there are some pockets of risk that might pose vulnerabilities to financial stability going forward. The prolonged period of low 2  interest rate environment leads to search-for-yield and underpricing of risks. This is especially challenging in a multi-regulator environment, since increased regulations by one agency is likely to simply push the potentially risky financial activities out of the agency’s regulatory umbrella. The evidence of this is presented by risk areas that span across all regulatory bodies’ responsibilities: delayed deleveraging of household debts; large expansion of foreign investment funds with high concentration in some emerging economies; saving cooperatives’ rapidly growing deposits; maturity mismatch of corporate borrowers; and rapid growth of corporate bonds, especially unrated bonds.
It shows that the policy stance is also underpinned by the information stemming from our monetary pillar: - From 2001 to 2003, the annual growth of M3 was well above its reference value. However, an indepth analysis of M3’s components and of its main counterparts showed that the dynamics of M3 was mainly due to extraordinary portfolio shifts into M3, in a context of heightened economic, financial and geopolitical uncertainty. This implied low medium-term risks for price stability, as captured by the monetary indicators presented in figures 4 and 5, and allowed the Eurosystem to enter an easing cycle. 6  BIS Review 4/2006  - The situation has changed since the second half of 2004 as reflected by the monetary indicators: first, broad money aggregates accelerated in parallel with increasing demand for loans to the private sector; second, this acceleration was mainly driven by the most liquid components of M3, pointing to a significant impact of low interest rates on monetary dynamics. Furthermore, the growth of borrowing, especially mortgage loans, remained very robust, fuelling a sharp increase of housing prices across the euro area. In such a situation, the risks revealed by the monetary analysis to price stability over the medium-term were strongly revised upward. 4. Predictability and frequency of policy actions Contrary to some preconceptions, most monetary policy decisions have been perfectly anticipated by the markets.

Benjamin Franklin is the very example of what was known at the time as an “honest man”. Benjamin Franklin showed a marked interest in Europe from a very early age. He started learning French, Italian and Spanish (in addition to Latin) in 1733. He journeyed abroad and lived both in France and England. I would like to stress his interest in France by pointing out that he was elected Associé Etranger of the French Academy in 1772 and became Plenipotentiary Minister in Paris in 1779. When referring to Benjamin Franklin, one often has in mind the great inventor, the philosopher, the essayist or the polemicist but one often forgets to mention that he also published a number of economic essays and studies. It is worth mentioning the book “Way to Wealth”, which some people consider as “the first American book on personal finance” or as “the best and the wisest money book ever written… ”. As you can probably imagine, Benjamin Franklin’s philosophy has crossed the Atlantic and still guides decision-makers today, including at the European Central Bank. In that regard, I would like to touch on a few ideas drawn from his autobiography. I need not remind you of his great fondness for quotations, especially in Poor Richard’s Almanack. In his autobiography, Benjamin Franklin defined a number of virtues that he believed to be cardinal. They included temperance, silence, order, resolution, frugality, industry, sincerity, justice, etc. I find his interpretation of these terms interesting.
These forecasts are, of course, uncertain and developments in recent years in particular have shown that events occur from time to time that are difficult to predict. It is therefore necessary to assume that inflation will during certain periods deviate from the target and sometimes deviate substantially. The important thing in the long term is not the temporary fluctuations in inflation, but that expectations are anchored around the inflation target. The inflation target can then fulfil its important function as nominal target when prices and wages are set and investment decisions are made. And in this respect we appear to have succeeded well (Figure 7). Let me in this context also briefly mention how we make our forecasts. Previously we made forecasts on the basis that the repo rate - our policy rate - would remain constant during the forecast period. If inflation was expected to be lower than two per cent, this was a signal that the interest rate needed to be cut, and if it was expected to be higher, the rate needed to be raised. However, the assumption that the repo rate would remain entirely unchanged over a long period of time is fairly unrealistic. Many times – for instance when everyone is expecting a long period of interest rate increases or interest rate cuts – this assumption of a constant repo rate makes it difficult for us to make reasonable forecasts. Now our forecasts are instead based on an assumption that the repo rate will develop in line with market expectations.

Scepticism towards far-reaching parallels between theory and practice So how do the monetary policymakers view the relationship between monetary policy theories and the practical implementation of monetary policy? We can gain one indication from a survey carried out a while back. In this, a questionnaire was sent to all of those who are or have been members of the Executive Board of the Riksbank since it was first created in 1999.7 The questions concerned, for instance, how the members view different hypotheses within the research into monetary policy decision-making by a committee. As far as I know, this is the only such survey carried out on a monetary policy committee. An equivalent study is now under way in Norway. Some of the questions concern the link between the way monetary policy is often described in academic research and how monetary policymakers view it with the eyes of a practitioner. For instance, the following question was included: “Would you consider – using your own judgement or, for instance, the Riksbank’s analysis resources – stating in terms of a figure how much importance you would normally place on stabilising resource utilisation in the economy in relation to stabilising inflation (that is, stating your λ)?” A total of nine persons out of the twelve who responded to the survey replied that they would not consider this. These members were given a number of alternatives to select as the reason for their response.
A comparison with our European neighbours, which share the same social model, also points to some areas where  Page 15 sur 15 our public costs appear to be significantly higher: certain social benefits, economic aid – including tax credits – and the presence of multiple layers of local and regional authorities. None of the issues I have brought up here are easy. But everything is possible, and most of it depends on us. It doesn’t depend on anyone else, on globalisation, or even on Europe. A reform drive is guaranteed to produce results, as long as it is comprehensive, long-lasting – effective implementation over several years counts for more than the initial announcement – and fair. The gains then benefit everyone, and first and foremost those who are out of employment today and the most disadvantaged, who must be assured of a national solidarity that is finally financed over the long term. Our challenge is thus to finally project ourselves once again beyond the very short term. To conclude with Henri Bergson: "To act freely is to retake possession of oneself; it is to place oneself back in pure duration ". Good luck to our dear country, and thank you for your attention. I would like to thank Antonin Bergeaud, Marion Cochard, Marie Delorme, Antoine Devulder, Matthieu Lemoine, JeanFrançois Ouvrard, Katja Schmidt and Thomas Zuber for their contributions to this speech.

The first line of defense against procyclicality should be the accounting framework. I strongly support the current focus on changing the accounting rules. More precisely, moving from an incurred loss model to a forward looking model is essential. We need a robust, auditable and straightforward provisioning system at the accounting level based on a forward looking model that would allow provisioning efforts commensurate with credit risks through time. This framework should also be simple, bearing in mind the ultimate objective of creating synergies between prudential and accounting standards. The Basel Committee is working on a very comprehensive approach, which is casted in its “Principles for revision of IAS 39”. Accounting standard setters have also been working hard. I firmly believe that two steps are required going forward. One is that the IASB should follow the principles by the Basel Committee. Another is that the IASB and the FASB should adopt a common methodology regarding provisioning based on expected credit losses. This is a precondition to ensure that the G20 countries have convergent accounting systems. Some of the procyclicality can also be trimmed through prudential regulation. Efforts to make solvency ratios potentially less procyclical are welcome and should be pursued. In particular  2  BIS Review 35/2010  those efforts aimed at imposing a measure of risks “through the cycle” or “downturn” are useful. Other options to take some of the procyclicality off through prudential standards include a fixed buffer, which would act as a capital conservation device. I see some limitations to such an option.