samchain/econo-pairs-v1 huggingface dataset:
What if capital requirements had not been tightened? The results in this scenario are indicated by the blue lines in the chart. Without higher capital requirements, banks’ lending margins would have been more stable. 6  For a more detailed description of the improved version of NEMO, see Brubakk, L. and P. Gelain (2013): “NEMO – A monetary business cycle model with financial frictions”. Forthcoming in the Norges Bank Staff Memo series. 7  See for example Bernanke, B., M. Gertler and S. Gilchrist (1999): “The Financial Accelerator in a Quantitative Business Cycle Framework.” Handbook of Macroeconomics, Elsevier, pp. 1341–1993. BIS central bankers’ speeches  5  Lower interest rates abroad suggest a reduction in the key policy rate. Bank lending rates largely track the key policy rate. This leads to higher demand and output and accelerating debt growth. These factors suggest that the reduction in the key policy rate should now be smaller than in the scenario involving increased capital requirements and higher lending margins. As a result, the appreciation of the krone is more marked, and inflation will deviate more widely from the target. The effects on capacity utilisation and credit growth are also slightly more pronounced. In simplified terms, it can be said that without higher capital requirements, monetary policy trade-offs become more demanding and economic developments somewhat less balanced. The model example illustrates a general point. When several instruments are available in economic policy, several goals can be achieved at the same time.

Stricter capital requirements could influence monetary policy in a number of ways. First, a tightening of capital requirements would counteract the build-up of financial imbalances. Second, the countercyclical buffer could cushion the adverse effects of a future downturn on bank lending. Third, higher levels of equity capital will increase banks’ resilience and thereby reduce the likelihood of financial crises. The example also sheds light on conditions that have been important to the conduct of monetary policy in recent years. Low interest rates internationally are an important explanation for the low key policy rate in Norway. At the same time, banks have increased their lending margins in anticipation of higher capital requirements. Let me emphasise that capital adequacy requirements are only one of several factors influencing bank lending margins and rates. And bank lending rates are only one of many factors that are given weight when the key policy rate is set. The relationship between capital requirements and the key policy rate is not straightforward. The example above shows that it may be appropriate to lower the key policy rate while at the same time tightening capital requirements for banks. But situations could also arise where it would be appropriate to raise the key policy rate while at the same time tightening capital requirements for banks. This could be the case if the economy was booming, with prospects for high inflation and a concurrent risk of a build-up of financial imbalances.
One example is the Bank of England, which has created new liquidity instruments that are proactively aimed at affecting financial institutions’ risk-taking. These instruments can be described as a cross between typical standing facilities for monetary policy and crisis facilities. The development of new types of liquidity instrument will probably make it even more difficult in the future to draw boundaries between monetary policy measures and measures to promote financial stability, as well as between crisis tools and tools for normal conditions. It thus illustrates the importance of the Sveriges Riksbank Act giving the Riksbank sufficient flexibility to be able to change the Swedish liquidity framework on the basis of Swedish needs, both with regard to monetary policy targets and financial stability aspects. 8 [12]  Regular analysis of financial stability necessary for monetary policy decisions Let me now move on to the link between monetary policy and financial stability in the analytical work. The close relationship applies here too. As I have just described, the Riksbank needs – to fulfil its liquidity supporting role in crisis and to safeguard the stability of the RIX system – to analyse the participants, infrastructures and markets in the financial system, as well as the links within the system, also under normal circumstances. This type of analysis is also needed for our monetary policy decisions, both under normal circumstances and in a crisis.

2.3  The challenge for the EU institutions: enforcing economic union  The weakness of European economic union in the context of monetary union contributed to the development of the current crisis and, if we are to emerge from it stronger, real improvement is required in this area. European governments have fully understood this issue and have made concrete and significant progress towards a more integrated economic union. On the one hand, Europe has considerably enhanced its fiscal discipline framework. The legislative package (the so-called “Six Pack”) entered into force in December and considerably reinforces the Stability and Growth Pact: the surveillance powers of the European Commission over national budgets have been enhanced, sanctions have become quasi-automatic, the criteria for public debt and public spending are being more closely scrutinised and a new framework for the surveillance of macroeconomic imbalances and competitiveness developments has been put in place. In addition, 25 European Heads of State or government signed the Treaty on Stability, Coordination and Governance which establishes a comprehensive new “fiscal compact”. It includes in particular a requirement for national budgets to be in balance or in surplus, a criterion that will be met if the annual structural government deficit does not exceed 0.5% of GDP. This rule must be incorporated into the Member States’ national legal systems, preferably at the constitutional level. On the other hand, Europe has equipped itself with an instrument to combat crises.
The differences compared with developments during the inflationist and unstable 1970s, often entitled ”The Great Inflation”, have been so notable that this development has been awarded its own title in academic research – ”The Great Moderation”. 6 Although the reasons for the greater real economic stability are not entirely clear; there are hypotheses that economies have undergone various types of structural changes which have subdued the fluctuations – such as improved stock management among companies and financial innovations – or that the shocks to the economies have quite simply been smaller than during the 1970s. However, it is most likely that a better monetary policy has played some role in the increased real economic stability. We have thus established what a central bank’s primary tasks should be: to maintain price stability, to promote stability in the financial system and – as long as the nominal anchor formed by the price stability target is not threatened – to try to stabilise the real economy. There may nevertheless be reason to provide an example of what is not an appropriate objective for a central bank. As I have tried to emphasise, the real economic objectives that central banks have entail stabilising real quantities such as production and employment. By stabilising I mean that one tries to reduce the fluctuations around the long-term trend. However, it is important to realise that this long-term trend development is not something that monetary policy can directly influence.

Inflation targeting is thus much more demanding than a fixed exchange rate regime with regard to the central bank’s analytical work and its ability to communicate its policy. Whether this is something that should be regarded as a disadvantage or not is of course a question of judgement. For the Riksbank, the transition to inflation targeting heralded the start of a fairly comprehensive increase in competence in the field of economics. The number of PhD economists at the Riksbank has risen sharply in recent years and our research in areas related to monetary policy has expanded considerably. Financial stability Let me now move on to the other central component of an efficient payment system. This concerns the stability in the financial system; particularly in the financial institutions that supply payment services, i.e. primarily the banks. Financial stability is currently regarded, parallel to the price stability target, as the main task of a modern central bank. The financial system has essentially three main tasks: converting savings into financing, managing risk and providing efficient channels of payment. Let me give a basic example. A bank receives savings from households which it then lends to other households or to companies that need to invest. Banks are specialists at valuing, monitoring and managing credit risks in the households and companies to which they lend.
In addition, negotiations on an FTA between ASEAN and Japan, South Korea, as well as India, Australia and New Zealand have been initiated. Given these regional initiatives in trade and investment, Asia's export market has become increasingly diversified with intra-regional trade gaining a greater importance. Intra-regional trade in South, East and South-East Asia as a share of total trade of all three regions has risen from 25% in 1980 to 44% in 2006. More specifically, growth in intra-regional trade of East Asia-9 (EA-9) has been higher at 17% than that of total regional trade (15%) and world trade (12%) for the period of 1999-2008. Whilst EA-9's trade to the US as a share of the region's total trade has declined from 17% in 1990 to 11% in 2008, intra-regional trade rose from 28% to 39% during the same period. Overall, intra-regional trade in South-East Asia and East Asia has about the same volume as intra-regional trade in Europe and North, which is significantly more than either regions at the outset of their integration efforts. These  6  BIS Review 130/2009  developments reflect the deeper and considerably strengthened trade and investment linkages within the Asian region. Of greater significance in this recent decade is that regional efforts have transcended trade and investment areas toward an intensification of financial cooperation.

It is also pertinent that teachers obtain quality and professional training to harness and effectively utilise computers. I therefore urge you to consider enhancing computer literacy amongst your staff. In an information age, knowledge and effective use of computers along with sound education will be the cornerstone of a vibrant, modern society. This is why our teachers are absolutely critical to the future of our economy. I have no doubt that supporting our schools in the manner that the Bank of Zambia is doing today will lead to stronger motivation and morale amongst our students and teachers alike. I am certain that we all desire a country where our  BIS Review 14/2010  1  teachers and students are proficient in using computers and extract immense value from them. This should be the vision that we should all aspire. Ladies and Gentlemen, In conclusion, I would like to urge all students present here today take an interest in using computers. Computers will assist you in your studies and make your lessons more effective, easier and enjoyable but they will not automatically make you a genius. The computer will open doors to communication, research and opportunities. Remember that the goal of computer literacy is for the user to become an explorer, and an active seeker of information which I hope you will be, with this donation. Seize what you have been bestowed with today. Guard against vandalism and use the computer facilities to ensure a brighter future for yourselves.
I find it very unlikely that we should again experience any time soon double digit inflation rates in the United States, and this is very good news indeed for the continued health of the international monetary system. The two-headedness of the new international monetary system confers special responsibility to the guardians of the dollar and the euro. Does this mean that their role and duties now extend beyond their respective monetary areas? Should the Fed and the ECB become the policemen of the international monetary system? I do not think so. Markets tend to police themselves. The greatest contribution that the United States and Europe can make to the good health of the global economy is to keep their house in order. Price stability and responsible fiscal and trade policies in both the European Union and the Unites States would go a long way in ensuring that the new international monetary order is a framework for world growth and prosperity. 5. Conclusion  Our experience convincingly demonstrates that a flexible exchange rate regime and an autonomous monetary policy are perfectly feasible in a world dominated by two currency blocs. The external value of the franc today is much more likely than in the past to reflect fundamentals. We are now free to pursue domestic policies destined to improve the working of our economy, without excessive concern about external implications. Ultimately, the markets’ reaction will give us an objective assessment of our action.

The financial crisis clearly demonstrated that high quality and up-to-date statistics are indispensable to policy makers and market participants alike. Thank you very much for your attention. Now, the Director General Statistics, Mr. Steven Keuning, will present more detailed features and the first results of the new statistics. Following his presentation we stand ready to answer your questions. 2  BIS Review 165/2009
There is reason to underline the fact that this would already occur during the ERM2 period, even if the shift in responsibility for  BIS Review 29/2003  3  stabilising the economy from monetary policy to fiscal policy would be a gradual one. As the effects of economic policy are exerted with a time lag, this is something that fiscal policy decisionmakers should already be considering. For the Riksbank, the issue would be to define a strategy for monetary policy in the light of the boundaries imposed by fiscal policy and the central rate and conversion rates chosen for the krona versus the euro. Essentially, it is a question of conducting monetary policy in a way that would make the conditions as favourable as possible for ensuring both the attainment of the price stability target and the objective of holding the exchange rate close to the central rate. This is a pre-requisite if we are to meet the entry requirements, or convergence criteria, of monetary union. From this perspective, it is interesting that the forecasts of the development of the exchange rate and inflation indicate that a relatively stable development for both of these variables is to be expected over the coming years. In ERM2, the Riksbank would still have control over the repo rate. Given the boundaries established by fiscal policy in particular, this should be set with the aim of ensuring price stability, as is the case today. Normally, this should not constitute a problem as regards the exchange rate.

The shift to advanced models for calibrating economic capital has not arrested this trend. More likely, it has intensified it. The quest for precision may have come at the expense of robustness. Hayek titled his 1974 Nobel address “The Pretence of Knowledge”.7 In it, he highlighted the pitfalls of seeking precisely measurable answers to questions about the dynamics of complex systems. Subsequent research on complex systems has confirmed Hayek’s hunch. Policy predicated on over-precision risks catastrophic error. Complexity in risk models may have perpetuated Hayek’s pretence in the minds of risk managers and regulators. (c)  Timeliness  One of the purported benefits of model-based calibration is that it increases the sensitivity of capital requirements to changes in risk. Reported regulatory capital ratios should better reflect risk and thus should in principle offer timely advance warnings of impending bank stress. The data tell a somewhat different story. To see that, consider the experience of a panel of 33 large international banks during the crisis. This panel conveniently partitions itself into banks subject to government intervention in the form of capital or guarantees (“crisis banks”) and those free from such intervention (“no crisis banks”). Chart 5 plots the reported Tier 1 capital ratio of these two sets of banks in the run-up to the Lehman Brothers crisis in September 2008. Two observations are striking. First, the reported capital ratios of the two sets of banks are largely indistinguishable. If anything, the crisis banks looked slightly stronger pre-crisis on regulatory solvency measures.
We can’t be sure since no two historical episodes are ever exactly the same. Until underlying growth resumes, we can’t be certain that it will, of its own accord. At the very least, that makes me pause to consider when policy should start to be normalised or even whether further loosening might be justified. The recovery in 2010 was driven by a particularly strong contribution from business investment and stock-building (Chart 4). The latter was always likely to offer a transitory boost to overall growth as companies returned stock holdings towards their desired levels, after de-stocking during the recession. And investment was always likely to make some positive contribution – at least once delayed projects and routine maintenance were re-started. But that boost is unlikely to persist without a pick-up in final demand to justify it. And consumer spending, the most important component of UK demand, has been stagnant for a year (Chart 5). The current behaviour of consumption is markedly different to that during the 1980s and 1990s when consumption had broadly regained its pre-recession level by this point in the cycle, rather than being around 4% below it (Chart 6). BIS central bankers’ speeches  3  Chart 4  Chart 5  Contributions to 4-quarter GDP growth(a)  Household consumption(a)  Percentage points 6 4 2 0 -2  Consumption Government spending Investment Stockbuilding Net trade GDP (per cent)  -4 -6 -8  2000  2002  2004  2006  2008  (a) Investment includes valuables. excluding the alignment adjustment.

These essentially include venues used to exchange digital assets against legal currency, and providers of custody solutions for digital assets. To satisfy anti-laundering obligations, these platforms must be registered. But to address risks relating to security, market integrity and price manipulation, an optional label could be granted at the service provider’s request by the AMF after a more in-depth investigation, in order to provide security for the service offered to users. The regulation of venues used to exchange digital assets for legal currency, in France and elsewhere, is a key issue for obvious reasons, as these platforms are the interface between the virtual and real worlds and hence where risk can spread from the former to the latter. As you are doubtless aware, the authorisation and labelling schemes mentioned in the PACTE Bill are optional. But there is an exception when it comes to anti-money laundering and terrorist financing (AML/TF) mechanisms. European regulators have been firm in their resolve not to compromise in any way on this matter. Accordingly, the Fifth European Anti-Money Laundering Directive makes all participants handling digital assets subject to applicable AML/TF provisions. This is consistent with the system in place since 2014 in France, which states that an exchange of crypto-assets in euro requires a payment services provider authorisation, and, accordingly, compliance with AML/TF rules.
BIS central bankers’ speeches  3  When the government assumes a substantial portion of bank risk in this way, a problem arises that we economists refer to as moral hazard: If there is a widespread perception that the authorities in reality stand behind banks, banks may take insufficient account of the risk of losses when making decisions. In particular, the risk that things can go horribly wrong may be underestimated, because banks do not have to bear the consequences of a crisis. By bailing out banks, we in turn reduce the motivation of banks’ owners and creditors to take full account of the risk associated with their activities. The pricing of risk is easily set too low. Banks may therefore end up taking excessive risk. Now, the authorities that bail out banks will often require that the former owners forfeit their equity. This means that bank owners should, at the outset, have incentives to hedge against the risk of large losses. But owners’ risk is limited. It does not cover losses beyond paid-in capital. Owners’ motivation to avoid risk may therefore be weakened at a bank with little equity. The lower the equity capital is, the more serious the problem of moral hazard becomes. An interesting feature of the financial crisis was precisely banks’ low pre-crisis equity ratios. Many large international banks operated with equity of around three percent of their total portfolios. 8 This means that for every dollar or euro the banks owned they invested thirty.

2  Schoenmacher Dirk (2015), “Stabilizing and Healing the Irish Banking System: Policy Lessons”, CBI-CEPRIMF Conference, Dublin, 15 January 2015. 3  IMF Country Report No. 14/165. BIS central bankers’ speeches  1  was also known. 4 Losses were considerable, equity had to be written down sharply and the bank needed fresh funds to stay afloat. At that time, Foreningsbanken was indisputably Norway’s largest bank, with total assets of more than NOK 600 million, equivalent at the time to 16 percent of GDP. On behalf of the bank’s board of directors, the businessman and former Prime Minister Christian Michelsen argued in favour of a rescue package in negotiations with the authorities. Michelsen warned Norges Bank of the problems that would result from allowing the bank to fail. Michelsen requested a government guarantee for the bank, or at least a NOK 100 million loan. There were drawn-out negotiations between Norges Bank, headed by Governor Nicolai Rygg, and the board of Foreningsbanken. The resumption of pre-war gold parity, fiscal concerns and Norges Bank’s financial position were crucial for Norges Bank’s choice. But Rygg also emphasised the importance of Norges Bank’s not supporting activities that should be wound up, activities that he referred to as “unsound lending and non-viable businesses”. The negotiations ended with Norges Bank’s refusal to provide support. “We’ll survive the bank’s closure too,” Rygg is reported to have said. “Even if you’re skinned alive, you’ll still live”, Christian Michelsen responded. 5 In any event, there would be pain.