samchain/econo-pairs-v1 huggingface dataset:
11 As a result of this arrangement and by pledging its foreign currency reserve, the Riksbank could lend a total of approximately SEK 200 billion in US dollars. Conversely, swap agreements were also established between the Riksbank and two of the Baltic central banks. 12 These experiences indicate that, in the future, even tougher requirements will be placed on international cooperation between central banks. How should we organise this in the best way? Can we expect other countries’ central banks to always be able to assist with currency in a crisis situation or must special agreements be drawn up? The development also raises the issue of whether an international ‘lender of last resort’ is needed. 13 These questions are particularly important for Sweden, which has its own small currency. And they will become even more relevant if the major Swedish bank Nordea carries out its plan to change from a subsidiary to a branch structure. With the current subsidiary structure, the central banks in the countries where Nordea has subsidiaries are responsible for providing ELA to them. After the transformation into a branch structure, the Riksbank will take on the main responsibility for providing ELA, should it be needed. This means that the Riksbank will have a greater need of being able to obtain foreign currency in a crisis situation.

With a higher inflation target, say 3 per cent, the nominal interest rate would be higher, which in turn would create greater scope for stimulating the economy in the event of future recessions and prevent the policy rate’s effective lower bound becoming binding. This is very much an ongoing discussion and it remains to be seen how it will end. The target level is not set in stone but a change should not be made lightly. There may be reason to wait until a reasonable degree of consensus has been reached among central banks and in the research community. This would probably increase confidence in a change to the target level. This is an example of how the scope for an individual central bank to take action entirely on its own is restricted. I will return to this issue anon. But there are parameters in our framework other than the target level that are perhaps more in need of adjustment. Which target variable is best? Ever since the Riksbank introduced inflation targeting, the inflation target has been expressed in terms of the CPI. The reason for choosing the CPI as the target index is not only because it is a broad price index that represents normal purchases, but also because CPI statistics are of good quality, not normally revised and published shortly after the end of the month.
According to an IPCC study, everyday behavioural changes by people which reduce demand for energy – such as adjusting temperature settings in buildings and reducing air travel – can cumulatively lead to substantial reductions in carbon emissions. People across the world are increasingly concerned about climate change and want to do something about it. Climate change is inspiring people to step up to a higher cause, to take collective action for the common good of our planet. Singaporeans too are becoming more environmentally conscious. According to a 2020 study by the Institute of Policy Studies, 61% of Singaporeans surveyed felt that protecting the environment should be prioritised even if it results in slower economic growth and some loss of jobs. More individuals are taking climate-friendly actions, motivated by a desire to preserve a liveable world for future generations. There are many things we can do as individuals to minimise our impact on the climate. We can do energy audits of our homes to identify ways to be more energy efficient. We can reduce food and plastic waste. We can become a zero-waste nation and a circular economy, where we use less resources and re-cycle resources. We can eat lower in the food chain and shift towards more plant-based protein. University of Oxford researchers have found that reducing meat and dairy products from our diet can help to shrink our carbon footprint from food by up to 73%. We can drive less and take public transport more.

Second, a green economy will need to be much more energy efficient. Energy intensity — the energy needed to produce a dollar of GDP — will have to improve substantially. The IEA has estimated that, to reach net zero, the rate of improvement in energy intensity would have to go up to more than 4% a year, which is more than double the average rate of the previous decade. Current plans and commitments made by countries will yield an improvement of only 2.8% a year. Third, a green economy will need to find ways to decarbonise so-called ‘hard-to-abate’ sectors and activities. There are currently not very good transition pathways for aviation and maritime. There are also some critical materials whose production is hard to decarbonise. Some 17% of the world’s primary energy supply is used just to make four materials – steel, cement, plastic, and ammonia (which is used in fertilisers). These four materials have been described as “pillars of modern civilization”. Not only are there no readily available substitutes for these materials, but also no practical low-carbon ways to produce enough to meet current demand. And the world must actually expand their production as Africa and Asia modernise. Fourth, the sectoral composition of economies will change. The sectors with the highest greenhouse gas emissions – such as coal, oil and gas power and petroleum products – will be most impacted. They account for about 20% of global GDP.
Because it is more economical for business transactions and liabilities to be denominated as far as possible in the same currency, a fundamental change in the position of the króna is unlikely, except directly by an act of government, or indirectly in the highly improbable event that economic policies were to collapse and erode all confidence in the króna, with accompanying hyperinflation, as has happened in some Latin American countries that have adopted the dollar or others that have been forced to adopt another currency. It has sometimes been claimed that the heavy level of external debt means that interest rate decisions by the European Central Bank possibly have even more impact in Iceland than domestic monetary policy. There is nothing new about the impact of foreign interest rate developments being felt in Iceland - and the same applies to other countries as well - although the scale of Iceland’s foreign debt leaves its economy more susceptible to foreign interest rate movements. It is worth remembering that while foreign interest rate developments mostly affect Iceland’s national income, economic cycle and current account balance, they can never have a crucial impact on the domestic rate of inflation. A heavy weight of foreign currency-denominated borrowing in domestic debt may complicate the transmission mechanism of monetary policy. In the long run, however, only domestic monetary policy measures can determine a deteriorating value of the domestic currency vis-à-vis goods and services or to put it plainly, inflation. Prospects Finally, I shall turn to economic and monetary prospects.

I would like to express my special thanks for the good cooperation with all parties involved on these important issues. Even though important milestones have been attained, sound operation of payment systems will remain an important and extensive task. A multicurrency country? Every so often the question has cropped up of whether Iceland is destined to become what has sometimes been called a multicurrency country. This apparently refers to when a large share of business transactions are conducted in more than one currency and liabilities of various kinds are mostly denominated in foreign currencies. Indications that have been cited include performance-related wages in the fisheries sector, which represent indirect indexation of wages to the exchange rate; an increasing trend for corporate accounting to be conducted in foreign currencies;  4  BIS Review 18/2004  and the fact that recently even households have been offered foreign currency-denominated loans. Other factors mentioned have been greater globalisation, the growing importance of external trade, and of foreign investment. There is a tendency to paint a rather exaggerated picture of Iceland’s dependence on global trade. Admittedly, foreign trade has been on the increase, but is still quite small relative to the size of the economy. Direct foreign investment is proportionally much lower than in most advanced economies, while the scope of foreign indirect investment is similar to that in neighbouring countries. Foreign currency deposits are an established feature of the banking system in Iceland.
Through the transfer of the risk, the insurer reduces its longevity capital and risk margin[1], but takes on an exposure to the failure of its reinsurance counterparty. Chart 1 [see Annex] illustrates the impact of the transfer on the insurer’s capital position. The combination of adequate collateral, a high credit rating, and sufficient capital resources from the reinsurer means that the resulting counterparty risk capital charge for the insurer is typically low – an attractive arrangement. Reinsurance is an important component of well-functioning insurance markets, where reinsurers themselves have the financial strength to absorb the risks they are taking on. From a risk management perspective, it allows insurers to achieve the balance of underwriting and credit risk in line with their risk appetite while continuing to deliver for their clients. It allows reinsurers to gain indirect access to diversification or natural hedges that might not arise on their own balance sheet. For example, a reinsurer with large books of protection business featuring mortality or morbidity risk might welcome longevity risk as a natural (albeit not perfect) hedge[2]. Diversification of different[3] sources of callable capital also enhances the efficiency of insurance markets. All of these factors could help to improve the pricing that insurers can offer. However, in recent years, the UK life market has become reliant on this method of freeing up capital to improve pricing. We estimate that over 80% of new business since 2016 has been reinsured at industry-level.

This has partially been driven by the introduction of the risk margin under Solvency II but also by an increasingly competitive marketplace. Indeed, in feedback to the Discussion Paper (DP2/22)[4] we issued in April, firms generally told us they see the continued use of high levels of longevity reinsurance over the long-term as an inherent part of their new business strategy, even after substantial cuts to the risk margin. The PRA is therefore considering how well the resulting risks are managed and mitigated, including risks on recapture. A recapture event requires the insurer to reassume the transferred risk on reinsurer default or if  Page 4  legal conditions are breached[5]. Recapture thus necessitates taking control of any collateral assets and separately, putting aside sufficient capital to back the reassumed risk. Firms may argue that they could reinsure the risk to a different reinsurer but with a market dominated by a small number of counterparties whose financial position may be positively correlated, this assumption may be unrealistic. Beyond the risk to individual firms, there is the potential for systemic risk to arise where a large proportion of the UK insurance and pension[6] industry’s exposure to longevity risk is ceded to a small number of reinsurers. Funded reinsurance The second development in the annuities market is an emerging appetite for funded reinsurance. In its most extreme form, this is a fully funded transaction that involves the insurer paying a single, upfront premium which will be invested by the reinsurer to make the annuity payments.
Provide the public with tools to assess trustworthiness  It is hard to imagine a return to an age when large media companies controlled the flow of information, a small number of political parties dominated the political discourse and professionals of all sorts were trusted almost unquestioningly. Therefore it is even more important for citizens to be able to assess the quality of the flood of information and opinions they receive and to differentiate facts from falsehood. The online commerce world has developed many tools to inform judgments about who to trust such as ratings provided by other consumers, feedback on the reliability of other users, and data on performance measures such as timeliness of delivery. What tools might be relevant for the world of ideas? In some instances, traditional institutions have evolved to meet this need. NHS Direct and the National Institute of Heath Information for the Public websites are good responses to the phenomenon of patients coming to surgeries armed with reams of data and views from the internet. These authoritative websites provide a reliable source of information to discerning patients who would otherwise have to sift through sometimes contradictory information from multiple sources. In other instances, non-traditional sources of judging the quality of information have emerged. Fact checking websites (who appraise the veracity of claims made by public figures) are one example and have some similarities to peer review in academia which lends credibility (or not) to news and statements made by individuals.

In experts we trust? Speech given by Minouche Shafik, Deputy Governor for Markets and Banking  Oxford Union 22 February 2017  I am grateful for discussions with or comments received from Kristin Forbes, Anil Kashyap, Sujit Kapadia, William Moy, Onora O’Neil, Nick Stern, Martin Taylor and Sharon White. I would also like to thank Grellan McGrath, Dami Ayeko, Ankita Mehta and colleagues within the Bank for help in preparing this speech, though all views are my own. I would also like to thank Michelle Madden, Vicky Purkiss, Cheryl Gibb and Julie Welland for their excellent support during my time at the Bank of England. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction  Experts have come in for a great deal of criticism of late. The turning point was probably the 2008 financial crisis which was seen as a failure of mainstream economists as well as of the “establishment” more generally who had previously touted the benefits of a system that came crashing down on the heads of ordinary people. Another wave of expert skepticism followed the Eurozone crisis, perceived by some as an elite project that had painful consequences for the public at large, especially for countries in the southern periphery. This was compounded by a conduct crisis as scandals broke out over mis-selling, currency manipulation and LIBOR rigging in the financial sector which only strengthened the suspicion that the system is rigged in favour of the rich and powerful.
The broad spread of fairly complicated constructions of financial instruments that has contributed to the current confidence crisis in the financial markets is a clear example that risk awareness has been low. There is currently a process under way where various authorities around the world are reviewing their regulations, supervision and general frameworks for crisis management. This applies not only on a national basis, but also at an international level. If, for instance, one does not harmonise the regulations for crisis management, one country’s measures may create problems for another country. These are not merely challenges for the "external” systems. There are also challenges for our analysis framework. It is difficult to take credit markets and asset prices into account in a really good way in our forecasts. Some work still remains in this field, for instance, with regard to finding good ways to include asset prices and other financial variables in models of the whole economy. There is a lot of work going on in this field in many parts of the world, not least at the Riksbank. I also believe that there will be many developments in this area, too, over the coming years. Concluding remarks It has been incredibly interesting and stimulating to work at the Riksbank. And it is possibly even more stimulating today than when I first began here. I must confess that it feels a little strange to know that I will no longer be ”on the inside” and involved in managing the challenges we face.

In late summer the international financial crisis escalated and the krone depreciated. High wage growth cannot be attributed to flaws in wage and income determination. On the contrary, the flexible wage and income system can probably be cited as the main factor behind the high level of employment and low unemployment in Norway. In periods of strong labour market pressures, particularly in 1974–1976, 1986–1987 and last year, wage growth accelerates sharply. Such periods are normally followed by a slacker labour market and higher unemployment. The positive feature of income determination in Norway has been that wage growth returns to normal relatively quickly,  BIS Review 20/1999  10  which has allowed Norway to avoid the persistently high levels of unemployment experienced by most West European countries. Even though some increase in unemployment must be expected, we should be able to avoid a rise in unemployment to European levels or to the level prevailing in the period 1989–1992 if wage and cost inflation is rapidly reduced also during this business cycle. Fiscal policy failed in 1996, 1997 and 1998. Developments illustrate that budget discipline must be exercised down to the last billion. The economy overheated because fiscal policy was not sufficiently tight when the economy was faring well. This brought the krone under pressure and external conditions intensified this pressure, making it impossible to keep the krone on track. It is only this year that fiscal policy is again well adapted to the economic situation.
So far, the bond purchases have generated a profit but our interest rate forecasts indicate future losses and thereby lower or zero dividend payments to the  18 Sveriges Riksbank (2010). 19 See, for instance, my own reasoning in the minutes of the monetary policy meeting in February 2015 (Sveriges  Riksbank, 2015b) and Annika Alexius in Svenska Dagbladet (2016). 10 [12]  government. Despite the increased risks, my assessment is that the Riksbank’s financial position remains healthy. The Riksbank’s equity has increased from just over SEK 70 billion before the financial crisis to its current level of just over SEK 120 billion. Even though it is likely that equity will shrink substantially in the coming years, it is my opinion that profit fluctuations are unlikely to be large enough to cause equity to fall to worryingly low levels. Finally, I would like once again to remind you that the aim of the Riksbank’s operations is not to make a profit and deliver dividends to the government. Our task is to maintain price stability, and we do that by safeguarding the credibility of the inflation target. In this way, we promote efficient price-setting and wage formation in the economy, which forms the basis of sustainable economic development with high employment. References af Jochnick, Kerstin (2015), “Does the Riksbank have to make a profit? Challenges for the funding of the Riksbank", speech, 23 January 2015, Sveriges Riksbank.

Thanks to deregulation, more Swedes have been able to borrow at a reasonable rate of interest, making it possible for a larger number of people to own their own homes and to better distribute their consumption over their lives. In this respect developments in Sweden have largely followed those in the US and the UK. Of course such deregulation - or rather reregulation - is not problem-free. The fact that a greater number have the opportunity to borrow also implies increased risks in the financial system. But in the absence of risks, growth opportunities also decrease. The important thing therefore is that the risks can be managed in the event of a crisis, which, for instance, requires strong consumer protection. Here Sweden has also been at the fore by being the first to publish regular stability reports for the financial sector, with a view to avoiding any reoccurrence of a systemic collapse similar to that at the beginning of the 1990s. There are now signs on the Continent that the pace of financial market reform has increased. This is partly because the EU Member States, as a part of the Lisbon strategy, have agreed to implement the Financial Services Action Plan. Only last week new steps were taken to harmonise securities trading between the EU Member States through the signing of the Investment Services Directive. This affords both private investors and institutions greater opportunities to trade on exchanges other than those in their own country.
And this takes considerably more time than addressing or doing away immediately with problems by injecting public funds. Yet this requirement to promote private solutions does not fully explain the enormous workload that has fallen on the supervisor over recent years. Insofar as it was decided at first to retain without major changes the singular legal arrangements for savings banks, and particularly their governance, this made it necessary to pursue most complex negotiations with the parties involved, namely trade unions, managers, regional governments, etc., each with very different interests from those that prevail in any mercantile company, where market discipline leads owners to worry about minimising losses and increasing shareholder value, and not about maintaining power, or the total amount devoted to early retirements, or about where headquarters should be established. In merger operations, processes such as determining shares of interest are reasonably easy to agree upon, since it suffices to make a proper valuation and to assign to each party what corresponds to it. But those who have followed the news in recent years will have witnessed the long drawn-out discussions, on a flimsy economic basis, that have been necessary to determine the power apportioned to each player in savings bank integrations. Before their transformation into banks, observance of the legal structure of savings banks meant that their restructuring could only move forward very gradually, step by step and with great prudence.

More encouraging is the principle of better late than never, and the important thing is that Spain initiated the process of bank restructuring, now nearing completion, in 2009, that significant measures to reduce the budget deficit began to be adopted in May 2010 and that an ambitious labour-market reform was introduced in February this year. Spain has proven itself capable of making adjustments and reforms and this is essential to restore long-lasting upswings and sustainable growth. But this reassurance must not lead to complacency. What we have done so far, despite its huge importance, is not sufficient. And some of us have the thankless task of pointing this out. For example, when each financial reform has been approved it has always been argued that the result will be more credit, but although bank restructuring is certainly an absolutely necessary condition, we have always seen that it is not sufficient by itself to make credit flow again. We have to restructure the financial system so that, as in any process of industrial adjustment, the resulting banks can generate a healthy profit and be sufficiently solid to meet demand when the adjustment process is complete. However, credit will not improve until solvent demand increases. Hence the importance of other economic reforms to boost consumer and investor confidence, such as reducing the budget deficit and reforms, such as the labour-market one, to increase the economy’s growth potential.