samchain/econo-pairs-v1 huggingface dataset:
It was difficult to predict the large fall in share prices and property prices. The decline in demand was substantial in any case and production and employment fell considerably. Unemployment reached the highest level of the post-war period. The  2  BIS Review 43/2006  budget deficit and government debt (as a percentage of GDP) also increased to all-time highs as a result of the crisis. Sweden and Finland were the European countries that suffered the most from the crisis, but other countries also experienced serious problems (see Figure 4). For most countries, this proved to be dearly-bough experience. Monetary policy was reformed to inflation-targeting policy, the exchange rate was allowed to float and a deficit target and an expenditure ceiling were introduced as norms for fiscal policy. We have had this new policy in Sweden for around 10 years now, and many other countries have chosen a similar policy. The labour market situation Most people would probably agree that the period from the mid-1990s, when inflation targeting was introduced, has been a relatively successful time in macroeconomic terms. Inflation fell fairly quickly from levels close to 10 per cent to around the inflation target of 2 per cent. Inflation has remained at a low level since then, albeit slightly too low in recent years (see Figure 1). Annual GDP growth has on average been twice as high over the past ten years as during the period 1980-1993. Employment growth has also been higher (see Figure 5).

Since then the number of persons born abroad has increased by just over 15 000. Demographic changes and changes in the demand for labour are examples of structural changes that may affect employment in the long term, which monetary policy cannot do. Globalisation Another long-term change that has been under way for some time but has recently achieved a higher level of intensity can be summarised in the concept of globalisation. The question is how the increased economic integration of the trade in goods, services, capital and financial markets will affect the Swedish labour market. Will jobs disappear and wages have to adjust downwards? Globalisation could certainly entail downward pressure on Swedish real wages, but both data and historical experiences so far indicate that this will not happen. In the long term, Swedish and, for instance, Chinese wages will probably converge, but this does not necessarily mean falling real wages in Sweden. However, it is likely that the distribution of income has already been affected in terms of growing gaps between those with and without higher education. The main explanation is usually considered to be technological developments, particularly the increased use of computers, which have led to increased  2  See Forslund A, N. Gottfries and A. Westermark, "Real and Nominal Wage Adjustment in Open Economies”, Working Paper 2005:23, IFAU, p. 28. 3  See Lindbeck, A., The welfare state and social norms. In: B. Swedenborg (ed.) Why are the Swedes so sick?, SNS Förlag, Stockholm 2003, pp. 78-87.
The start is usually considered to be 3 October 1990, when financial company Nyckeln suspended payments and in its fall took with it both other financial companies and banks. This also had repercussions for the real economy, and Sweden entered a deep recession. The growing public finance deficits, rising scepticism about the prospects to reverse developments, the problems in the financial sector, rising unemployment and the high cost situation all combined to undermine the confidence of the financial markets in the Swedish economy and the currency. A brief postponement of the inevitable In late summer 1992, the situation in the Swedish economy was, to say the least, worrying. The last week of August, that is, almost exactly thirty years ago, the turbulence in foreign exchange markets intensified. Currency began to flow out of the country, market interest rates rose and on 26 August the Riksbank raised the marginal interest rate (the policy rate of the time) by three percentage points to 16 per cent. This was only one of several rate increases in the coming weeks. Finland, which had been particularly affected by the collapse of the Soviet Union, chose to move to a floating exchange rate on 8 September. On the same day, the policy rate in Sweden was raised to 24 per cent and the following day it was raised to 75 per cent. An attempt to reduce interest rates to 20 per cent on 14 September did not succeed.

I think that pragmatism should prevail as to the form of the private sector involvement in crises resolution. But there is a need for general principles to highlight the roles and responsibilities of the public and private sectors, such as those that have been defined in the framework adopted by the G7 at the Köln Summit in June 1999. Among these principles, I would particularly stress: –  the focus on the medium term sustainability of a country’s financing position;  –  the objective to achieve comparability of treatment between and within a country’s bilateral official and private creditors. 1.5  Choice of the right exchange rate regime  The sustainability of any exchange rate regime depends crucially on its consistency with a country’s domestic macroeconomic and structural policy framework. This being said, the choice of an exchange rate regime should rest on the following principles: –  So-called “corner solutions” are not necessarily the only available options. Free floating rates may help to accommodate volatile capital flows and asymmetric shocks; however, they might not prevent misalignments leading to balance of payments desequilibrium, they might prove disruptive for the real sector of small open economies, which often lack the size for developing the necessary market infrastructure to cope with exchange rate instability. Currency boards can be warranted only under very specific circumstances.
In the assessment, potential effects of property prices and the krone exchange rate on the prospects for output, employment and inflation are also taken into account. The results of this trade-off are presented in the Monetary Policy Report in the form of a chart that presents baseline scenarios for the interest rate, inflation and capacity utilisation in the economy. In Monetary Policy Report 3/07 it was pointed out that the inflation outlook is marked by opposing forces. The rise in prices for domestically produced goods and services is gathering pace. The Norwegian economy is still expanding, with unusually high demand for intermediate goods and labour. At the same time, the krone had appreciated markedly. This  BIS Review 141/2007  5  may restrain inflation. The analysis implies that the key policy rate should be raised further, but to a lesser extent than envisaged in June. At its meeting on 31 October, Norges Bank’s Executive Board decided to leave the key rate unchanged at 5 per cent. At the same time, it was made clear that the key policy rate will probably remain in the interval 4¾-5¾ per cent until the next Report is published in March 2008, unless the Norwegian economy is exposed to unexpectedly severe shocks. The projections are shrouded in uncertainty. The projections for inflation, output, the interest rate and other variables are based on an assessment of the current economic situation and the functioning of the economy.

On one view (the “buffer stock” approach) people are relatively tolerant of small variations in their money holdings and respond – whether by spending more on goods and services, buying other financial assets or paying down debt – only once deposits hit certain thresholds. If this is right it’s the level of money that matters and the fact that, on this measure, there still seem to be “excess” deposits will continue to support consumer spending for a while yet. If, on the other hand, you believe that people respond more rapidly to an increase in the supply of money, the large accumulation of deposits during the pandemic is increasingly irrelevant and what matters more are the more recent, negative trends. I’m not sure if this is the critical judgement when it comes to our forecasts (it’s certainly not the only thing affecting household behaviour). But it is, at least, illustrative of one point – that, as with just about every other economic indicator, changes in money holdings need some interpretation and their significance is not always 100% obvious or “inevitable”. Thank you. I’ve received many helpful comments from colleagues at the Bank of England. I’d like to thank Andrea Alati, Navreen Teja and Mo Wazzi for their help in preparing the speech. Particular thanks are due to Ryland Thomas, Huw Pill and, for his comments and excellent research assistance, Fabrizio Cadamagnani. Page 31 1.
11 New FINMA-regulated participants establishing themselves in retail payments could also seek access to the SIC system in the future. As these examples show, the SIC system is moving with the times. SIC is systemically important and critical to the fulfilment of our mandate; we therefore support innovations which will improve its efficiency without compromising its safety. Conclusion Ladies and gentlemen, financial technology is evolving rapidly and calling many existing structures into question. Despite this, it is important to bear in mind that the fundamental needs of companies and households that are met by financial services remain largely unchanged. The usefulness and success of new technologies will hinge on whether they can meet these basic needs more cheaply, more securely and in a more customer-friendly manner than existing solutions. The SNB is neutral vis-à-vis the technologies underpinning financial market infrastructures. It assesses innovations in terms of their implications for the fulfilment of its statutory mandate. Our focus is on safety and efficiency, and we analyse the effects – and side-effects – of innovations closely through this lens. For this analysis, dialogue between market participants, regulators and central banks is essential. This is especially true in view of current technological changes, which make walking the line between stability and innovation particularly challenging. This exchange of views with practitioners helps us to correctly assess the uses and risks of new technologies. Such discussions are critical if we are to exploit the technologies of the future at the right time and under the right conditions.

The rapid spread of the pandemic in March 2020 also led to wide, abrupt swings in financial markets. The global composite equity index fell by 20 percent in 22 days. However, markets recovered rapidly, and by the second quarter the GPFG had posted one of its best ever quarterly results. For the year as a whole, the GPFG’s investments posted an overall return of 10.9 percent before management costs. The return was 0.27 percentage point higher than the return on the benchmark index the GPFG’s performance is measured against. The Executive Board is pleased that a solid excess return was achieved in a turbulent year. The positive trend has continued, and the return on the GPFG in the first quarter of 2021 was 4 percent. The GPFG’s performance must be assessed over time. The Executive Board is satisfied that the return over time has also been good. The substantial market fluctuations in 2020 nevertheless serve as a reminder that the return on the GPFG may vary considerably. The GPFG’s equity allocation is the decision that has the greatest impact on the volatility of the fund’s return. The equity allocation is not specifically assessed in this year’s report to the Storting, but the Ministry has proposed a number of changes in the equities selected to be included in the benchmark index. Norges Bank has provided analyses and advice when requested by the Ministry.
It is also necessary to move towards a fiscal governance framework that allows the stabilising capacity of fiscal policy in the euro area in times of crisis to be increased. For this purpose, countries should take advantage of the current upswing to generate scope for stabilisation in future crises, since national fiscal policy will continue to be the first line of defence. 8/14  In fact, a fiscal union, with shared responsibility for macro-financial risks that are already subject to common supervision, besides improving incentives would be conducive to the sustainability of public finances and macroeconomic stability in the area. However, clear, strict fiscal rules are also necessary for the Member States. Simplification of the complex web of rules and procedures that currently make up the Stability and Growth Pact, more automatic rules and stronger independent fiscal institutions, as well as a stronger European Fiscal Board, could also help achieve this objective. Also, the development of a common fiscal capacity that enables an aggregate fiscal stance to be defined and applied in the area would supplement the scope for national fiscal action and, as I have already mentioned, the stabilising efforts of monetary policy. Completion of the current design of EMU and providing it with solid governance are priorities that will, however, require broad consensus and political will. Monetary policy I would now like to discuss the role monetary policy has played in these years and that which it could play in the response to future crises.

The latest estimates predict a significant increase in public expenditure on pensions, health-care and long-term care stemming from the substantial rise in the dependency ratio. Even on the most optimistic demographic projections, this ratio is set to rise from 25% today to 50% by mid-century. In the case of the pension system, the 2011 and 2013 reforms included a number of adjustments that made it possible to significantly counteract the effect of the expected longterm increase in the dependency ratio. Nevertheless, the latest legislative developments have eased the implementation of these mechanisms with the postponement in application 11/14  of the sustainability factor until 2023 and, above all, the return to a system of annual pension increases in line with the consumer price index. According to the Banco de España's calculations, reintroducing this indexing system on a permanent basis would lead to an additional spending increment of more than 3 pp of GDP in 2050. Consequently, guaranteeing the financial sustainability of the public pension system will require additional measures on the revenue or expenditure sides of the system to offset this additional burden. Pending structural reforms In the context just described, characterised by the need to pass the baton to demand-side policies to underpin the current expansionary phase and boost growth potential, it would be particularly desirable to give more prominence to measures to correct the Spanish economy’s structural vulnerabilities and strengthen its capacity to adapt to future shocks.
The policy rate action after Easter halted the slide of the króna and it has remained in a range above the low level it touched in late March. The sudden depreciation in the early part of the year greatly worsened inflation prospects. The rate of inflation is set to rise to above 10% in the near term before subsiding again. Given the policy rate path that the Central Bank published on April 10, the inflation target of 2½% will be achieved in the second half of 2010. The policy rate path also shows that given present prospects the Bank can begin to reduce its policy rate before the end of this year. All of this is covered in detail in the latest issue of the Central Bank’s Monetary Bulletin 2 . Just as in other equity markets, stocks on the Iceland stock exchange have fallen in price from their peak in mid 2007. The decline in the Icelandic index is more pronounced than in many other countries largely because the relatively heavy weight of financial companies in the Icelandic index. Financial companies have declined more in price on the world stock markets than other companies on average. The stocks of Icelandic banks have not fallen more over the past year than those of many banks in neighbouring countries and big international banks, in some cases by less or even much less.

Ingimundur Friðriksson: The Icelandic economy and financial system in April 2008 Presentation by Mr Ingimundur Friðriksson, Governor of the Central Bank of Iceland, at a meeting of the Board of Directors of the Norwegian Financial Supervisor, Kredittilsynet, Reykjavík, 24 April 2008. *  *  *  It is a great pleasure for me to have been invited to speak to the Board of Directors and management of the Norwegian Financial Supervisory Authority at its meeting in Reykjavík this week. There are good reasons for the Norwegian Supervisor to come into direct contact with both colleagues in the Icelandic Supervisory Authority and with leaders of financial institutions in general. Much has been written and said about the Icelandic economy and financial system of late, some of it accurate, some of it not so accurate. For the outsider, it may be difficult to separate the accurate from the inaccurate. As requested, I will in my presentation give an overview of recent economic developments and prospects and then touch briefly on the Icelandic financial system. Economic developments and prospects As you know, Iceland is one of the highest income countries of the world and one with a highly developed infrastructure and institutional framework. You may also know that Iceland is prone to greater economic fluctuations than most or all highly developed economies. In the 1990’s, the Icelandic economy was deregulated and liberalised and that process was largely completed with the full privatisation of the Icelandic commercial banks shortly after the turn of the century.
On 6 October, a statement of government policy declared that there was almost total support for the hard currency policy and that the prospects of success were good. We all know what happened. Just over one month later, on 19 November, the Riksbank was forced to give up the fight and the krona was allowed to float, or perhaps I should say sink. As I have understood things with hindsight, there was no clear plan in place as to how monetary policy would be conducted from then on.1 And this was perhaps not so strange – with the exception of a couple of brief periods between the wars, Sweden had had a fixed exchange rate for the past 120 years. So it was probably difficult to think along new lines. The aim also seems to have been that Sweden would return to some form of fixed exchangerate system as soon as possible, and so the idea was to find some way of conducting monetary policy until then. Inflation targeting has worked well, but has been criticised Some countries, New Zealand, Canada and the United Kingdom, had begun to apply a new type of monetary policy known as inflation targeting. This entailed setting a numerical target for inflation, which the central bank then tried to attain by using the policy rate to affect aggregate demand. Sweden also jumped onto this bandwagon and it proved to be a much more enduring solution than most people expected at the time.

But in this particular case it feels as though theory is not being used as a tool to model and structure reality but rather the opposite; that is, that one tries to adapt reality so that it fits the theory. In my world at least this is not the way to proceed if you want to make monetary policy clearer. A lack of clarity on a more general level? There is also a more general criticism that the Riksbank’s communication has not always made it easy to understand exactly why certain decisions have been made and why these decisions have been seen as being better than conceivable alternatives. Here, as I understand it, it is not a question of the critics lacking explanations in terms of any specific loss function, but rather that they feel the Riksbank’s reasoning has not been clear enough on a more general level. This is a criticism that I understand a bit better. Let me try to explain my view on this. The criticism often seems to centre on the debate between the members of the Executive Board in recent years, during the recovery from the global financial crisis. Put briefly, a majority of the Board members have advocated a somewhat higher repo rate than the minority. I would like to stress that it has not been a question of huge differences – it has not been about  20  The economist who has probably gone furthest in his criticism of fine tuning in monetary policy is Milton Friedman.
The composition of the loan portfolio, which is dominated by the euro dominated loans, is also a point of concern, although this position is supported by a strong presence of foreign currency denominated liabilities in banks balance sheets, a generally supportive environment of exchange rates and interest rates over time and very close trade links to Euro-area countries like Italy and Greece. In this regard, Bank of Albania has been consistent in its approach to introduce regulatory measures that would discourage rapid increase in lending, encourage banks to lend more in domestic currency and increase transparency toward clients on banks products and services. Since the middle of last year, Bank of Albania has been vocal in its concern regarding the indirect impact of the financial crises, in particular regarding the performance of the real economy. We pointed out risks to economic growth related with a potential decline in credit from the banking sector, an increasing trade deficit (due to a slowdown in exports), a sharp contraction of remittances (due to perception of lower wealth and increasing unemployment in the developed countries). We stated that at these times, there is a much stronger need for a careful monetary policy and responsible fiscal policy. When it comes to the monetary policy, we have been careful in maintaining incentives for promoting savings in local currency assets and anchoring expectations for low and stable inflation rates.

In this age of increased connectivity and correlation of markets, respondents felt that a shock event such as a terrorist attack, pandemic or geopolitical instability could cause market disruptions. Respondents also highlighted the current liquidity in the financial markets. They observed that speculative liquidity was circulating in the financial system. This has led to historically unprecedented pricing and terms. When referring to the new players in the financial markets, respondents spoke of hedge funds and private equity in the same breath as “highly leveraged”, “covenant-lite structures” and “large speculative positions”. In the current low interest rate environment, many yield-hungry investors have become hedge providers for institutions. Respondents expressed concern about the systemic risks such providers posed and their default risk in a severe market correction. In summary, the responses to the survey indicated that there seems to be a heightened level of risk in the macroeconomic and financial environment. Nevertheless, these responses are encouraging from another perspective. They indicate that financial institutions are aware of this heightened level of risk. With acceptance comes preparedness for the risks that may materialize in future. It is important for banks not to become complacent. As banks pursue the many opportunities that lie ahead, we must not let our guard down. Banks must not be lulled into a false sense of security by the external environment’s bullishness and resilience to shocks so far. We must not allow ourselves to get over-confident with our knowledge and analyses of the risks out there. Risks may deviate from expectations.