samchain/econo-pairs-v1 huggingface dataset:
Although the aggregate debt ratio has grown somewhat more slowly in recent years, it is still very high in an historical perspective (see Chart 1). Chart 1. Aggregate debt ratio Per cent 190 170 150 130 110 90 70 50 70  79  88  97  06  15  Sources: Statistics Sweden and the Riksbank  This has led to the households becoming increasingly sensitive to shocks such as a loss of income, falling asset prices or rising interest rates. Our primary concern is not that the households will cause the banks any major loan losses. As we have pointed out for some time, our assessment is that this risk is limited. However, such shocks may lead the households to drastically reduce their consumption, especially in the case of households with large debts, and this may have an impact on the development of the macroeconomy. 3 Falling consumption may in turn reduce the profitability of Swedish companies and ultimately lead to increased loan losses from the banks’ lending to companies. The risk of such a scenario occurring in Sweden may also have increased in connection with the dramatic increase in the  2  Data from, among others, the European Central Bank,indicates that households in countries that were hit relatively hard by the recent financial crisis often had higher debts, fewer liquid assets and higher interest expenditure in relation to incomes than countries that were hit less hard.

Banks are increasingly providing technology services, such as account reconciliation software and “web-enabling” assistance, while technology firms are making inroads into services once the domain of banks and brokerage firms, such as financial planning and bill payment. Indeed, many banks are beginning to think of technology firms as competitors – or are contemplating ways to partner with them. I’d guess that most of us, perhaps even all of us, consider the advancement of computing and information technologies, and their role in the development of ever-more sophisticated financial instruments and techniques, to be decidedly positive developments. Such technologies, and the innovation they enable, have reduced the costs of financial transactions, improved the allocation of financial resources, increased the competitiveness and efficiency of financial institutions and markets, and opened new avenues through which individuals and institutions can better diversify and hedge their risks. But with this progress has also come new and difficult challenges. The rapid pace of technological advancement and financial innovation has introduced new, highly complex elements of risk, increased the speed and volatility of the markets, and blurred the barriers between previously distinct sectors of the financial marketplace. Even as supervisors confront change, the fundamental questions remain the same. Where is the risk in banks’ activities, and how effectively are they managing it? Where are banks extending credit and in what form? Who are banks’ customers, and how are those customers changing? To what extent are credit risks being transformed into liquidity and operational risks?
Indeed, the latest readings from the nonmanufacturing PMI last week showed a surprising pick-up in growth. The latest US data on retail sales and industrial production are also reasonably positive and help offset some of the more downbeat indicators from the housing market. In the US, just as in the UK, we have to recognise that the data may be somewhat variable at this stage of the cycle. We should therefore beware of interpreting this variability in the economic indicators as a sign that the recovery is seriously faltering in the United States, or anywhere else in the global economy. There is, however, a flip side to the strong rebound we have seen in the global economy since the middle of last year. While the growth of the global economy is helping to sustain the recovery in UK economic activity, it is also putting upward pressure on global energy and commodity prices, along with the impact of a number of weather-related events affecting the supply of commodities. And in a world affected by climate change, we may expect to experience these weather-driven upward price shocks more often. These upward shocks to UK inflation from import prices – amplified by the relative weakness of the pound – have contributed noticeably to the recent experience of above-target UK inflation.

The clearest outcome of a financial crisis is a loss of output – in other words, a severe and long-lasting recession. Using the same dataset they used to identify crises, Laeven and Valencia found that in advanced-economy nations, the median cumulative decline in output accompanying a financial crisis was 33 percent of annual gross domestic product, or one-third of an economy’s output for a year. In addition, the median growth in government debt was 21 percent of GDP, and the median fiscal cost of the crisis-related spending was 3.8 percent of GDP. Other studies confirm these grim statistics. Reinhart and Rogoff (2009) point out that recoveries from financial crises are weaker and slower than recoveries from recessions that don’t accompany a financial crisis. Employment growth is slower during recoveries from financial crises, and the associated higher unemployment can have long-lasting effects on a whole generation of young workers who sustain long spells of joblessness. There are many other maladies that come along with financial crises. Ingredients Several economic researchers agree that one crucial ingredient in creating the vulnerabilities that can foster a financial crisis is a buildup of debt.5 In particular, a “credit boom,” that is, a high and fast-growing ratio of credit to GDP, is one of the precursors to a financial crisis. Other, somewhat less reliable precursors include a prior financial liberalization or deregulation, housing price booms, and external imbalances (in practice, large inflows of capital from outside the country).
For central banks and financial regulators, technological changes have far reaching implications – in particular on the structure of financial markets, banks and other financial institutions. Corporations around the world from every industry, origin and size, are directing enormous resources towards investments in technologies that are transforming the way they conduct business. The global annual spend on business technology is estimated to be close to $ trillion in 2019 . Of this, financial services firms rank in the top quartile of annual spend to revenue. Global investments in financial technology start-ups are reported to have chalked up another $ billion in the first half of 2019 , driven by a combination of interest and demand from consumers for new fintech propositions and the scaling up of challenger and collaborative fintechs. These developments raise important questions for the conduct of monetary policy, the management of payment systems, financial regulation and supervision, and even the very concept of money as the lifeblood of any economy. On many fronts, we find ourselves in unchartered territory – often uncomfortably so. In response, central banks and financial regulators are similarly expanding resources both to better leverage technology in performing our core functions of promoting monetary and financial stability, and to defend against its attendant risks. Central to both these goals is our ability to evolve – and in many respects, re-define – our governance, risk and control environment for the age of disruption. Why is this necessary?

Consequently, the focus of the public debate should be how to speed up the reform process and its beneficial effects and thus strengthen consumer and business confidence. The role of the euro in fostering reforms in product, labour and financial markets Has the euro been of help in pushing the reform agenda? At the time of the launch of the single currency, some observers had seen the euro as a “reform whip” that, together with the completion of the single market, would push in the direction of increased competition, higher productivity growth and greater market flexibility, which are essential for the smooth functioning of monetary union. After all, in a single currency area, the adjustment of domestic imbalances cannot be corrected by exchange rate policy any longer, but rather has to take place via prices and costs. The paper by Romain Duval and Jørgen Elmeskov, which will be discussed tomorrow, will provide empirical evidence about the determinants of the pace of the reform process. Our own ECB research, presented in the paper by Lorenzo Cappiello, Philipp Hartmann, Peter Hördahl, Arjan Kadareja and Simone Manganelli, will dwell on the impact of the euro on the integration of European financial markets, notably the equity and bond markets. This stock-taking exercise and associated analysis should also assist in identifying where, precisely, structural changes are most urgently needed and how to make the necessary reforms a success.
Whether or not we then use the minimum reserve requirement would depend, of course, on the results of the investigation, but also on future developments in the mortgage market. It is in any case within the Riksbank’s mandate to introduce a minimum reserve requirement, and the risks rising from a credit expansion in the mortgage market fall within the Riksbank’s area of responsibility. Better management of systemic risk At the same time, there is a need to revise and clarify the division of responsibility between the authorities so that we become better at managing the type of problem we now see in the mortgage market. I am now talking about measures that are needed in the longer run. A central issue concerns the current hesitation over which authority should deal with a runaway development in the mortgage market. The government has a role to play here, of course. But so do Finansinspektionen and the Riksbank, because we are the first natural “line of defence” as public authorities with the task of managing this type of problem. Unfortunately, it is at present unclear exactly which one of us is responsible for what. As you know, we have our own respective areas of responsibility. Finansinspektionen focuses on the supervision of individual financial institutions and upholds consumer  6  BIS central bankers’ speeches  protection, while the Riksbank is responsible for price stability. But there is also some overlap. Both Finansinspektionen and the Riksbank oversee the financial system and try to prevent financial crises.

(1935), The General Theory of Employment, Interest and Money, Cambridge: Harcourt, Brace and Company. Maddison, A. (2009), Historical Statistics on World Population, GDP and Per capita GDP, 1-2006 AD, updated March 2009 in http://www.ggdc.net/maddison. Mankiw, N.G. (2006), “The Macroeconomist as Scientist and Engineer,” Journal of Economic Perspectives 20(4): 29-46. BIS Review 112/2009  7  Medina, J.P. and C. Soto (2007), “The Chilean Business Cycles through the Lens of a Stochastic General Equilibrium Model,” Working Paper N°457, Central Bank of Chile. Rajan, R. (2006), “Has Financial Development Made the World Riskier?,” in The Greenspan Era: Lessons for the Future, Proceedings of the Jackson Hole Symposium 2005, Federal Reserve Bank of Kansas City. Rose, A. and M. Spiegel, (2009), “Cross-Country Causes and Consequences of the 2008 Crisis: Early Warning,” CEPR Discussion Paper N°7354. 8  BIS Review 112/2009
I’ll also go into some detail about the outlook for inflation. Finally, I’ll discuss what this means for monetary policy and the road ahead. Before I continue, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or others in the Federal Reserve System. Economic Outlook I’ll start by saying that the headline of our economic story is good news: the recovery continues to show solid momentum. But the subheading is that we’ll need to be patient. Even with the strong pace of growth we experienced much of this year, a full recovery from the pandemic will take time to complete. The adjustment to rapidly changing circumstances, along with a resurgence in COVID-19 cases, is affecting consumer spending and jobs, sustaining supply bottlenecks in sectors such as autos, and delaying a full reopening of the service sector. So, to continue with the news analogy, here’s the lede: I expect gross domestic product, or GDP, to increase around 5 ½ to 6 percent this year. My current forecast accounts for strong growth in the first half of 2021, but also balances some slowing of growth in the remainder of the year relative to the first half. Now I’ll turn to employment, something I know many of you as business leaders watch closely. Job gains by and large have been strong in recent months.

Today, viewed from an international perspective, the Swiss economy is in a relatively favourable position. GDP has been growing for two consecutive quarters. Inflation is back in positive territory but without excessive upward pressure. Fears of deflation, which constituted one of the major risks of the past year, have not yet disappeared but are receding. Employment is no longer falling and unemployment may be stabilising. The Swiss export sector was strongly hit by the crisis and is still fragile. Economic activity has been sustained by domestic consumption (both private and public) and by construction activity. Last year’s GDP growth, at –1.5%, constituted the worst performance for the Swiss economy since 1975. Yet this figure is considerably better than the corresponding figure for most developed economies. Let us spend a moment examining the remarkable fact that private consumption growth in Switzerland has remained positive throughout practically all stages of the downturn. Immigration and precaution are the two key words that explain this exceptional result (with a third contributing factor being the fact that disposable incomes have stayed high in real terms, owing to a strong pre-crisis growth performance and a job market more robust than might have been feared). The recent immigration has been a positive contribution to consumption. But even the per capita figure for consumption has not decreased during the crisis. This has been possible because, very much in a textbook fashion, Swiss consumers have been able, during times of crisis, to draw on savings that had been comfortably replenished before the storm arrived.
These loans are considered low risk under Basel II. The reduction in the required level of capital may be substantial for the banks using IRB approaches for credit risk, though transitional arrangements provide for a gradual reduction. With solid results in banks, a good financial situation for borrowers and a well functioning financial infrastructure, there appears to be little risk of a crisis in Norway’s financial system in the next few years. However, the long period of strong debt growth and asset price inflation may be a source of subsequent instability in the economy and in banks’ losses and results. During an upturn such as the current one, it is therefore important to show vigilance and provide a cushion for weaker cyclical conditions and higher interest rates. Within the framework of Basel II, banks that shift to internal risk models based on historical losses for measuring capital requirements should take into account that loan losses have been unusually low in recent years. Banks are vying for market shares. Competition is fostering more cost-effective banks, better and more flexible borrowing terms and a broader product range. This is to the benefit of customers. At the same time, it is important that banks price risk correctly. This enhances capital efficiency and promotes financial stability. Thank you for your attention. 6  BIS Review 106/2006  William A Ryback: Macro prudential policy – a new name for some old ways of thinking?

Hence, monetary policy works primarily by influencing expectations regarding future interest rates. Monetary policy may thus be more efficient if economic agents understand the central bank’s intentions in its interest-rate setting. In the November 2005 Inflation Report, Norges Bank first published its own forecast for the interest rate for the next three years. The aim is to enhance the predictability of monetary policy. With a predictable monetary policy, market participants can react to new information in a way that contributes to stabilising developments in output and inflation. We try to establish an interest rate path that provides a reasonable balance between the objective of stabilising inflation at target and the objective of stabilising developments in output and employment within a reasonable time horizon, normally 1 - 3 years. Interest-rate setting is also assessed in the light of developments in property prices and credit. The results of this trade-off are published in the Inflation Report in the form of a chart that presents central projections for the interest rate, the exchange rate, inflation and capacity utilisation in the economy. Underlying inflation has been lower than projected in recent months. Nevertheless, several factors point to higher inflation ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy. Employment is rising rapidly and unemployment has exhibited a marked decline. There are signs of higher wage growth and expectations of rising inflation. At the same time, the krone exchange rate has depreciated from strong values.
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/effectiveness-and-impact-ofpost2008-uk-monetary-policy/written/48288.html Yellen, Janet L. (2015), “Inflation dynamics and monetary policy”, speech at The Philip Gamble Memorial Lecture University of Massachusetts, Amherst, 24 September. Yellen, Janet L. (2018), “Comments on monetary policy at the effective lower bound”, Brookings Papers on Economic Activity, 13-14 September. https://www.brookings.edu/wp-content/uploads/2018/09/ES_20180910_YellenELB.pdf  20 [24]  Figure 1. Downward trend in global interest rates 10  United Kingdom United States Germany Sweden  8  10  8  6  6  4  4  2  2  0  0  -2 1985  1990  1995  2000  2005  2010  -2  2015  Note. Per cent, annual data. Government bond yields with 10 year maturity, deflated by CPI. Sources: Macrobond, OECD, Statistics Sweden and the Riksbank  Figure 2. GDP forecasts by different analysts 3  2018  2019  3  2020  2.5  2.5  2  2  1.5  1.5  1  1  0.5  0.5  0  RB  FiD  KI  LO  Nordea  SEB  SHB  SN  Swed  24/10  15/11  10/10  27/11  5/9  13/11  7/11  13/11  8/11  0  Note. Annual percentage change, annual data. RB refers to the Riksbank, MF to the Ministry of Finance, NIER to the National Institute of Economic Research, LO to the Swedish trade union confederation SHB to Handelsbanken, CSE to the Confederation of Swedish enterprise and Swed to Swedbank.

If the use of fiscal policy in the past has not been optimised – and that is often the case, with fiscal policy often being used for political ends rather than as an economic tool – then it is likely that fiscal policy has not only been ineffective in creating the conditions for sustainable growth, but that the opportunity to use it to support growth has also become significantly narrower. This is indeed the place where many emerging and developed nations now find themselves. Today, we are seeing the limits of debt-fuelled growth. The world seems to need more and more debt to create less and less growth. That cannot go on. Debt has a role in supporting growth but over-dependence on it, and its misuse, has repeatedly resulted in bad outcomes. Therefore, we have to look at alternative means of creating more sustainable growth. One of those alternatives may be greater economic integration, regionally and globally. In fact, economic and financial integration, whether regional or global, has been occurring. As a result, it has become increasingly difficult for individual countries to determine their independent path to prosperity. While not downplaying the importance of keeping our house in order and the need to promote competitive and transparent economies, it is nevertheless  BIS central bankers’ speeches  1  obvious that the fates of economies are increasingly linked to those of others. Integration has its benefits and it has its costs.
The deposit base of MFIs in a number of stressed countries strengthened further in January. The annual growth rate of loans (adjusted for loan sales and securitisation) to non-financial corporations stood at –1.5% in January, after –1.3% in December 2012. The annual growth in MFI loans to households moderated slightly to 0.5%, from 0.7% in December. To a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. At the same time, available information on the access to financing of non-financial corporates indicates tight credit conditions for small and medium-sized enterprises. In order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue reducing fragmentation of euro area credit markets and strengthening the resilience of banks where needed. Decisive steps for establishing an integrated financial framework will help to accomplish this objective. The future Single Supervisory Mechanism (SSM) is one of the main building blocks, together with a Single Resolution Mechanism (SRM). Both are crucial elements for moving towards reintegrating the banking system. To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.

Mario Draghi: ECB press conference – introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 7 March 2013. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council. Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. HICP inflation rates have declined further, as anticipated, and fell below 2% in February. Over the policy-relevant horizon, inflationary pressures should remain contained. The underlying pace of monetary expansion continues to be subdued. Inflation expectations for the euro area remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Overall, this will allow our monetary policy stance to remain accommodative. Available data continue to signal that economic weakness in the euro area has extended into the beginning of the year, while broadly confirming signs of stabilisation in a number of indicators, albeit at low levels. At the same time, necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity. Later in 2013 economic activity should gradually recover, supported by a strengthening of global demand and our accommodative monetary policy stance.