samchain/econo-pairs-v1 huggingface dataset:
Risks: Going forward, we expect economic growth to moderate, while remaining robust and well above the euro area average. We consider that risks around this scenario are balanced. On the upside, there is the potential for private consumption to grow even more rapidly in a low interest rate environment especially if labour productivity increases to permit higher wage settlements. The downside risks relate mostly to the external situation. Malta is one of the most open economies in Europe, heavily dependent on international trade for its long-term prosperity. Slower than expected growth in key trading partners, geopolitical tensions in our immediate neighbourhood and a resurgence of protectionism threaten this prosperity. Another dimension of risk relates to inflation. I have already explained that the Bank  believes that Malta’s potential economic growth rate has risen in recent years, implying that the economy can grow more rapidly than it used to without fuelling inflation. Nevertheless, output currently exceeds potential. Page 5 of 8  Should such a situation persist, we would normally expect to see upward pressures on prices and costs. We have not observed them yet, as wage growth has remained largely contained and foreign inflation is subdued. The labour market situation, however, is tightening, which could lead to an intensification of wage pressures. This underlines the need to achieve better results in labour productivity growth to support wage demands without loss of competitiveness. In addition, global oil prices are now rising after having reached a trough towards the beginning of this year.

The external balance, traditionally in deficit, has now been in surplus for a number of years, reflecting growth in services exports. The fiscal deficit narrowed to 1.4% of GDP in 2015  Page 2 of 8  and should continue to decrease further this year. Indeed, in the foreseeable future the budget deficit is planned to fall to zero, while the government debt to GDP ratio should decrease to less than 60% of GDP. This healthy economic performance and fiscal consolidation efforts have been well noted by the credit rating agencies. Indeed, last month, Standard & Poor’s raised Malta’s long-term sovereign rating to ‘A-‘ with stable outlook. Earlier, Fitch had raised their outlook from  neutral to positive. In sum, the Maltese economy is going through an unprecedented period of strong growth, low unemployment, restrained inflation, a positive external balance and diminishing budget deficit and debt ratios. Over the medium term, this performance has resulted in the convergence of Malta’s real per capita income with the EU average. Real GDP per head went up from 81% of the EU average in 2004 to 89% in 2015. The conditions that determine performance: It is worth examining the conditions that have made this performance possible to ascertain the extent to which it is sustainable or otherwise. Some of the growth can be attributed to cyclical factors. For example, Malta is benefiting from the European Central Bank’s accommodative monetary policy stance.
Public finance Distinguished Participants, It is well known that developments in debt stock are of great importance with respect to managing the expectations of economic agents and, thus, the course of the risk premium. In this framework, these developments are closely monitored as regards monetary policy and inflation. In the current period, the rate of increase in the debt stock slowed down significantly due to decreasing interest payments and the high primary surplus and the downward tendency in the ratio of public debt stock to GNP continued. It is observed that the same trend still continues even when parity and exchange rate effects are excluded from the change in debt stock. Additionally, it is considered that the structure of debt stock has become stronger against the risks in the said period. Decreasing the susceptibility of debt stock towards exchange rates and limiting its susceptibility to interest rates on one hand, and the risk reduction in debt roll-over owing to the extension of the borrowing maturity and the strengthening of cash reserves on the other hand, are the factors that support our mentioned assessment (Graph 24). BIS Review 67/2006  15  Graph 24.

In the monetary sphere, that takes the form of purchases from the private sector of longer-term public and private securities, financed by issuing claims on the central bank. As we saw in Charts 1 and 2, both the Bank of England and the US Federal Reserve have made substantial large-scale asset purchases, worth about 15% of GDP in each case. The aim of such purchases is to drive down the yields on these and similar assets by increasing their scarcity, so boosting demand. Commonly referred to as “quantitative easing”, the moniker is somewhat misleading as it focuses attention on the associated reserve expansion, rather than the change in the portfolio composition of the central bank and private sector. But do they work? Under Ricardian equivalence the answer would be No, as the associated transfer of risks from private sector balance sheets onto the public sector’s is matched by offsetting movements in future taxes (Gauti Eggertson and Woodford, 2003). Be that as it may, event studies by Joe Gagnon and others (2010) for the United States, and Mike Joyce and others (2010) for the United Kingdom suggest that long-term bond rates in each jurisdiction fell by around 100 basis points as a result of the purchase programmes, though the ultimate impact on aggregate demand is harder to judge. From this I draw my fourth lesson: central banks do not run out of ammunition when policy rates reach their zero lower bound.
Markets characterised by high entrance barriers, synergies and network effects can easily be concentrated in the hands of a few dominant actors. The competition authorities in different countries must therefore have cross-border cooperation to monitor and when necessary regulate various markets and in this way safeguard the interests of the general public. Effects of digitalisation – a conceptual framework for monetary policy So far I have focused on the potential effects of digitalisation and what problems they can entail. I have also taken up various areas where I think we need to meet and make use of the technological advances. But we also need to investigate what effects digitalisation has had on the Swedish economy and to ask ourselves what monetary policy should do. This is often a question that is not so easy to answer, as structural transformations and their effects can be difficult to identify, despite often affecting the economy over long periods of time. For a general description of how digitalisation can affect inflation, one can use a model that we presented in our Monetary Policy Report in February 2015.17 It provides a general view of the channels through which inflation can be influenced when a change such as digitalisation occurs. Firstly, digitalisation affects companies’ output capacity via automation, which reduces their cost pressures in total. Secondly, consumers can more easily find information through price comparison sites or e-commerce platforms.

The conclusion of this point of view is, put simply, that more recent innovations have not been as significant as those during earlier industrial revolutions.4 Others, such as Andrew McAfee and Erik Brynjolfsson at MIT, say that the effects of digitalisation have passed under the radar and that we will see major productivity increases in the future when the new technologies are used more broadly in the business sector.5 Economic historian Joel Mokyr also points out that the productive potential in new technologies will lead to strong pressure for change in the economy.6 As you can hear, there are very differing views on the subject and the assessment of future productivity growth is a question we are constantly struggling with. We are in the “installation phase” Personally, I think that that model from Bart van Ark (2016) is useful when considering the different views. This distinguishes between an “installation phase” and a “deployment phase” for new technology. The first phase involves exploring new markets and growth is limited to a couple of companies. During the second phase the markets are consolidated and there is broad growth in the economy. One can imagine that Brynjolfsson and McAfee consider we are in the first phase, while Gordon thinks we have already passed the second phase. My assessment is that we are probably somewhere in the installation phase with regard to digitalisation.
The ultimate assessment is, as mentioned, a result of Norges Bank’s professional  9  The estimation is based on a one percentage point increase in the interest rate, followed by a gradual reduction in line with the response pattern in the model. The analysis shows the impact of the interest rate increase on mainland GDP for Norway and inflation adjusted for tax changes and excluding energy products (CPI-ATE). 6  BIS central bankers’ speeches  judgement and will also capture considerations that are not sufficiently safeguarded by our models. As such, the models are only a tool. But, a model such as NEMO is a very useful tool for analysing developments and in interest rate setting. It helps us interpret and understand the dynamics of the Norwegian economy. The model apparatus is continually being developed. Among other things, we are exploring how financial markets and the linkage to the real estate market can be incorporated into such a model. Norges Bank’s response pattern expresses the assessments we make and how we set the interest rate to attain our objectives. We must use professional judgement and our experience of how the Norwegian economy functions. We attempt to incorporate our response pattern into NEMO by setting the interest rate in the model so as to stabilise inflation at target while reducing fluctuations in output and employment. The model can in this respect be a tool for ensuring consistency over time when we set the interest rate.

Moreover, the effect of an interest rate change will depend on whether the change is anticipated or comes as a surprise. For example, a lower-than-expected interest rate increase might easily be perceived as an expansionary monetary stance, even though the rate is actually being raised. Expectations may also result in a change in market interest rates well in advance of an actual adjustment in the key policy rate. This may influence how quickly an interest rate change feeds through to the economy. Furthermore, the impact will depend on the expected duration of the interest rate change. If the Bank were to embark on a totally new monetary policy course, we would have to assume that this would result in a different path for the economy than if an interest rate hike occurs one month earlier than planned. Chart: VAR model  5  Unemployment measured according to LFS. 6  Mainland hourly wage growth from quarterly national accounts. 7  Adjusted for tax changes and excluding energy products, seasonally adjusted figures. 4  BIS central bankers’ speeches  In order to analyse the effects of the interest rate, we need to study more than pure correlations. We need an analytical apparatus that allows the interest rate to be endogenous. A vector autoregressive model (VAR) model on Norwegian data quantifies how the interest rate has reacted historically to other key economic variables. The model is based on statistical relationships between GDP, interest rates, exchange rates and inflation, taking into account that variables may be interdependent.
This is why the recent regulatory changes on capital in Spain are crucial.9 Banking assets are however opaque, which – combined with the high leverage – make recapitalisation in private markets difficult, especially in crisis periods.10 Therefore, to reduce these problems, high transparency is extremely important: the stress tests and Bank of Spain’s publications on key bank variables are thus indispensable. If, after these exercises to promote transparency, some small groups of banks cannot fulfill the capital requirements, restructuring may be the only solution. Banks are still too highly exposed to real estate assets in their balance sheets and so the new haircuts introduced by the Bank of Spain go in the right direction. Geographical diversification (notably the internationalisation of some banks) and better risk management are also crucial factors, I believe, in addressing the current challenges. But also the strengthening of corporate governance is of utmost importance to avoid excessive risk-taking. In other words, transparency and risk management are important, as I said, but incentives as well! In this sense, the restructuring of some groups of banks may be vital.11 Second, looking into the future, with the crisis behind us, higher bank capital requirements will also play a positive role by reducing incentives for excessive bank risk-taking.12 On that  8  See Iyer and Peydró (2011) and Rochet and Vives (2004). 9  See Jiménez, Ongena, Peydró and Saurina (forthcoming). 10  See Morgan (2002). 11  See Cuñat and Garicano (2010). 12  See Freixas and Rochet (1997) and Acharya and Richardson (2009).

Perhaps the first point to make is that Lehman was allowed to fail, even though no one can seriously have been in much doubt about the severity of the consequences. In a democracy, interventions are sometimes severely constrained. It would be myopic for market participants to set aside the probability of that happening again. In fact, I doubt markets will forget for a long time. And arguably one can see awareness of this risk in bank debt spreads today and in the movements following policy consultations in Europe and the US on “bailin” and resolution reforms. But, secondly, the idea of not equipping ourselves with better tools for the “last chance saloon”, when all else had failed, would be a counsel of despair. Adair must be right, though, that we will need to build credibility for our commitment to resolve rather than bailout. That means building institutions to underpin that commitment. Idiosyncratic failures do occur. We can – and where appropriate should – prospectively apply the same resolution tools to the failure of medium-sized firms as we are developing for the largest global firms, demonstrating our willingness to use them. Living wills – or, as they are now called, Recovery and Resolution Plans – will help, provided they have teeth. Which means ensuring that firms are organised and structured to permit effective resolution of different kinds of business line. And a prompt-intervention supervisory action regime can be designed to limit the scope for regulatory forbearance.
Before it can adopt the euro, a member state should have fulfilled the convergence criteria, known as the Maastricht criteria, on the interest rate, inflation and public finances, achieved a high degree of structural similarity with the euro area and completed the necessary logistical, administrative and legal preparations. Details of these preparations were explained in an article which was published in the June 2003 edition of the Bank's Quarterly Review. The Treaty, however, does not specify a target date for the completion of these preparations. Neither does it specify a date for entry in ERM II. You have pointed out on several occasions that you are in favour of an early adoption of the euro. What are your arguments for that? What are the implications of a delayed entry? The importance for Malta's small, open economy to lock in, at the earliest practical opportunity, the increased economic security and credibility which this step implies is indeed acknowledged by all the experts the Bank has exchanged views with. This is because the euro offers the prospect of being anchored in the relative safety of the world's largest economy. This would not only mean reduced exchange rate risks and less uncertainty for Maltese economic agents and their foreign business partners but it would also eliminate the need to maintain higher interest rates to compensate for the element of risk associated with the small size of the Maltese economy.

The European Commission and the Economic and Financial Committee (EFC), which is the advisory arm of the EU Council of Economic and Finance Ministers, will also be involved, as will central banks and ministers of Member States outside the euro area. The latter, however, will act in a consultative capacity. At no point in the process, therefore, would the Central Bank of Malta or the government be able to establish the central parity rate, or modify it, on their own. This is standard procedure and statements suggesting otherwise are incorrect. Other than the central parity rate, there are two further decisions to be taken: the date of entry and the method of participation in ERM II. What about the date of entry in ERM II? Has this been decided? Although eligibility for entry in ERM II is not dependent on the fulfilment of a set of formal criteria, it is presumed that only Member States making progress in convergence can join the mechanism. Consequently, the formal application process for ERM II is normally preceded by an examination of the prospective applicant's economy. In Malta's case, an assessment was conducted earlier this year by the European Commission. The results will be discussed at a Eurogroup meeting in early April. Subject to a positive outcome, one would expect the Maltese authorities to make a formal application. If such an application is made, the Economic and Financial Committee would consider it during one of its subsequent meetings.
The examinations showed that the performance of the banking sector improved in terms of: the quality of internal policies and their 6/9  BIS central bankers' speeches  implementation; the establishment of adequate risk management processes; and, the implementation of the supervisory regulatory framework. Moreover, the non-bank financial institutions are assessed to have still space to ensure proper effectiveness, independence and authority. Some of the savings and loan associations were examined for the first time after the conclusion of the consolidation process and the separation from the respective unions. The Law ‘'On the recovery and resolution of banks in the Republic of Albania” entered into force in 2017. This Law designates the Bank of Albania as the Resolution Authority for banks and branches of foreign banks that conduct their activity in Albania. This Law is another step in adopting the European standards in the regulatory framework of the Bank of Albania. In its role as the Resolution Authority, the Bank of Albania increases the security of the banking system. In compliance with the legal requirements, the Resolution Fund was established to provide for the implementation of resolution tools. The Bank of Albania compiled the methodology for the calculation of contributions that each bank should pay and the procedure of the payment. The calculation methodology and fund management was the topic of informative meetings organised with banks and the Albanian Association of Banks.

The Bank of Albania has continued the practice of organising scientific conferences and national and international forums to share opinions with national and international partners and groups of interest. The Bank of Albania is committed in expanding financial literacy, for an informed public understands better and responds more adequately to the decisions of the central bank. Also, a financially literate public manages better its personal finances. This commitment is further concretised with the establishment of the Museum of the Bank of Albania. During 2017, a range of informing and educational activities were organised at the Museum of the Bank of Albania with the participation of academics from various fields to share their knowledge with the public at large. The Bank of Albania has strengthened the cooperation with the national and international institutions, through information sharing, and consultation and joint projects. During 2017, a number of memoranda of cooperation were signed with national and international partners. Good governance in terms of the performance of the work processes, the efficiency in using the resources and risk management, is an element of the Bank of Albania’s accountability. In this light, I would like to mention the main improvements that have taken place in terms of internal audit systems. The internal audit at the Bank of Albania is an independent activity from the management, ensured through the Inspector General, appointed by the Parliament. 8/9  BIS central bankers' speeches  6. Internal audit The Operational Risk Management function was consolidated over 2017.
As a result, they will not be forced to dump assets, further depressing market prices, increasing volatility and the upward pressure on haircuts. The deleveraging will still take place – and we have seen it – just not so quickly and violently that it would destabilize the entire financial system. The second major intent of the liquidity facilities has been for the Fed to expand its balance sheet and, by doing so, offset some of shrinkage that has been occurring among non-bank financial intermediaries. The fact is the banking system is capital-constrained, with insufficient capital to expand its balance sheet fast enough to offset the shrinkage evident in the non-bank sector. Although the Federal Reserve cannot create capital for banks, it can provide funding directly to the private sector, attenuating the consequences caused by a balance-sheet-constrained banking system. The CPFF and the TALF are both important in restoring the flow of credit to borrowers. The CPFF essentially jump-started the commercial paper market, which had largely shut down following the failure of Lehman Brothers in September. The TALF’s purpose is to restart the securitization markets, and thereby lower the cost of borrowing to households and business. The TALF does this by providing term, non-recourse loans to investors against AAA-rated collateral. Investor demand for these loans leads to downward pressure on AAA-rated financing rates, lowering the cost of credit.

In the current circumstance, the Federal Reserve’s liquidity programs act on the asset side of the balance sheet as the Fed lends funds against less liquid collateral and expands its asset holdings via purchases of agency debt, agency MBS and Treasuries. The goals are to slow down the pace of deleveraging to reduce the risk of catastrophic failure, improve market function and ease financial market conditions. In contrast, the Bank of Japan worked on the liability side of the balance. Their goal was to expand the amount of excess reserves held by the banking system so that the banks would be more willing to expand their credit provisions. Although the Fed’s activities have led to a big jump in excess reserves, this increase is incidental – a byproduct rather than goal of the asset-oriented programs. Second, as a consequence of this my point, the size of the balance sheet, is not a good metric for measuring the impact of the Fed’s facilities or the amount of stimulus that the Fed is providing via these programs. For example, consider the impact of the Fed facilities on rollover risk. A Fed facility that eliminates rollover risk might not be used at all. There might be no balance sheet impact. Nevertheless, the facility could have an important impact on market function and financial market conditions. It is not possible to mechanically map the size of the balance sheet back onto the impact on financial market conditions.