samchain/econo-pairs-v1 huggingface dataset:
Namely, high inflation in the 1970s, feed by the inflationary bias of the discretionary fiscal policy, drew a clear distinction between monetary and fiscal policy objectives and instruments by granting a high level of central bank independence, on the one hand, and setting fiscal rules, on the other. The aim was to eliminate any monetary financing of governments and their excessive borrowing, which, as witnessed in the past, could lead to high price volatility. Alongside the concept of enhanced independence, greater central bank responsibility was required, which is also achieved with greater transparency. This required introduction of different communication and information on the policy conduct, and on central bank data and positions, assessments and expectations for the economic variables. At the end of the last century, the central bank community realized that besides performing its function effectively, it can also fully achieve its independence, only if it applies higher level of transparency and developed communication within its mandate. Yet another factor that emphasizes the need for greater central bank transparency is the financial market liberalization in the 1990s. The perception and theory that the monetary policy is more effective if the central bank systematically surprises the markets has long been left to oblivion, as it became clear that bringing policies through surprises and isolated steps cannot have a lasting effect on the economy.

The same focus is required for our reports, where even footnotes contain important data that 2/3  BIS central bankers' speeches  ensure analytical and studious rather than only informative reporting. Accurately and precisely communicated or analyzed data is crucial for timely and professional information to the public. Unfortunately, even unintentionally inaccurate or incomplete communication or analysis of central bank data and views, especially in times when the information/news are transmitted at the speed of light, can create undesired environment for the economy, especially if it creates an unreasonable panic among the public. Comprehensive and thorough communication requires understanding of many methodological aspects, information and data that the NBRM uses, and which we feel obliged to supply you with through our communication. Among other things, guided by our firm commitment to social responsibility, for several years now we have hosted this workshop, which becomes a tradition. This year’s workshop has a different format, which is the result of our attempt to follow your interest, as well as your recommendations expressed during the successful cooperation so far. It will be focused on two very important, but so far insufficiently covered topics – the Lending Survey and the profitability of the banking sector.
For my part I considered it important to ensure, when making the interest rate decision that the strong price impulses from the world market do not push up inflation expectations lastingly and through second round effects lead to higher permanent inflation. However, there is considerable uncertainty as to how commodity prices in the world market will develop and what consequences this will have for inflation and monetary policy. Let me explain this reasoning. Relative prices are only important to monetary policy if they influence inflation… Since last autumn Swedish food prices and oil product prices in the CPI have increased rapidly. In April this year food prices had risen by around 6 per cent compared with the same month last year. They thus contributed around 1 percentage point in April to the CPI inflation, which amounted in total to 3.4 per cent. Oil product prices contributed a further 0.3 percentage points. The upswing in Swedish food prices mainly reflects the rapid price increases in the world food commodities market over the past year. Despite the turbulence in the financial markets and weaker growth in the world, food prices in the world market have increased by 60 per cent (expressed in USD) since the end of 2006. 1 Prices of many goods have reached record high levels, including prices of soya beans, maize and wheat. The oil price has also constantly reached new record levels in recent years.

In April it was 3.4 per cent according to the CPI. This was entirely in line with our assessment at the most recent monetary policy meeting. Since April the oil price has risen substantially. Spot and forward prices of oil are now around 30 per cent higher than they were in April. It is probable that the higher oil prices may affect inflation via higher petrol prices. In July we will once again weigh up these counteracting forces This was some of the new information received in recent weeks. Further information will be presented over the coming weeks, and we will give consideration to this information as well at our next monetary policy meeting. At the most recent meeting in April the Executive Board’s view of the interest rate path was the same as in February. My view then was that there was a greater risk of international price impulses forcing up inflation through higher inflation expectations. This was a reason why I voted to hold the repo rate unchanged. At the same time, I also considered that the financial unease and the slowdown in international growth could mean a risk of weaker growth and inflation in the long term. The counteracting forces we had to consider in April are still in place. There are discussions of what will happen to monetary policy when the oil price has risen roughly in line with the alternative scenario outlined in our February report. This could indicate a higher interest rate path. But it is not that simple.
The share of household wealth invested in risky assets 2 is much higher in the euro area than in France (89% of GDP in Q4 2014, versus 74% for France), and nearly three and a half times higher in the United States (250% of GDP). A large part of the gap with the United States can be attributed to the significant role played by US pension funds; however, rates of share ownership are also markedly higher among US households than they are in France. c) On the one hand, this means that French savings generate smaller returns, especially in the current low interest rate environment; on the other, it also undermines France’s economic growth potential, as insufficient savings are used to finance innovative business investments – an area which requires large amounts of capital, particularly equity capital. Let me just give you a few figures by way of comparison: in the United States, the net equity of non-financial corporations amounts to 123% of GDP, compared with an average of 52% in the euro area, which is less than half, and 66% in France. The challenge is therefore this: how can we encourage French savers to take on a greater, sensible amount of risk in order to better finance our economy? The question is even more relevant in light of our current financial and monetary policy stance: interest rates are low and are likely to remain so for a significant length of time.

The key interest rate has been reduced by 5¼ percentage points and is now approximately the same as among our trading partners. The krone has depreciated over the past year, and is in line with the average for the 1990s. Monetary policy is expansionary. This is reflected in low after-tax real interest rates as shown in the chart. The low interest rate level has reduced household net interest expenses. This has increased household purchasing power considerably. Household demand will probably be the most important driving force in the Norwegian economy in the period ahead. Private consumption has a considerable impact on overall demand and activity and accounts for 60 per cent of mainland GDP. Low inflation and reduced interest expenses will support strong growth in household real income. Even with a moderate wage settlement, real income growth may reach about 5%. In addition, improved labour market conditions will strengthen job security and lead to expectations of higher income growth. Against the background of high real income growth, improved job security and expectations of continued low interest rates ahead, household consumption is expected to exhibit strong growth. Growth in private consumption is projected at 5¼% between 2003 and 2004. Given this path, consumption will grow at a pace that is broadly in line with real income, with little change in the saving ratio. After falling last year, house prices edged up in autumn. At the end of 2003, house price inflation was high.
Chart 7: A selection of ‘green bond’ structures  One concern sometimes expressed with this first generation of green bonds is that there are no binding requirements as to what constitutes a green project, and hence bonds may sometimes be labelled green on spurious grounds.33 There have been various attempts to address this issue, for instance the Climate Bonds Initiative’s Taxonomy and Certification Scheme34 and the European Union’s Green Bond Standard35, which set out more robust scientific criteria for identifying projects which genuinely help with climate change. The model also requires an issuer to have fairly sizeable green capital expenditures in order to issue a bond liquid enough to appeal to mainstream investors. 31  https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/Green-Bonds-Principles-June-2018-270520.pdf BIS Quarterly Review, September 2020 33 Consistent with this, researchers have so far failed to identify a near-term relationship between green bond issuance and subsequent reductions in carbon emissions (https://www.bis.org/publ/qtrpdf/r_qt2009c.htm) – though there clearly are many possible reasons for this result, not all of which suggest greenwashing. 34 https://www.climatebonds.net/standard/taxonomy 35 https://ec.europa.eu/info/business‐economy‐euro/banking‐and‐finance/sustainable‐finance/eu‐green‐bond‐standard_en 32  13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  An alternative approach is to link some element of the financial return on the bond to the achievement by the issuer of a particular climate sustainability outcome, without linking the bond to specific green expenditures.

The citizens of Texas and the Eleventh Federal Reserve District operate under the same monetary policy as do the rest of our fellow Americans. We have the same mortgage rates, pay the same rate of interest on commercial and consumer loans, and earn returns and borrow at the same interest rates as do our brethren in the rest of the country. Which raises an important question: If monetary policy is the same here as everywhere else in the United States, why does Texas outperform the rest? The answer is no doubt complicated by the fact that we are blessed with a comparatively great amount of nature’s gifts, a high concentration of military installations and other “unfair” advantages. But one cannot avoid the conclusion that one of those “unfair” advantages is that we have a Legislature, based here in Austin, that under both Democrat and Republican governors has over time crafted laws and regulations that encourage business expansion and job creation. They have conducted the fiscal affairs of the state so as to maintain confidence in the future. One might draw two lessons here: first, that Germany’s finance minister, Wolfgang Schäuble, is right when he says, “If you want more private demand, you have to take people’s angst away” by having responsible and disciplined fiscal policy;4 and second, that fiscal policy either complements monetary policy or retards its effectiveness as a propellant for job creation.
With a deepening process of financial globalisation that we are now seeing, supervisors and central banks are faced with increased challenges to analyse and manage risks, especially in the context of more complex interlinks between financial institutions and financial markets, as well as between domestic and the global economies. In such an environment, the risk management ability of financial firms and supervisors is important and rests crucially on the ability to assess quantitatively and in a forward-looking manner, the possible impact of each risk scenario on the economy and its financial sector. In this light, a sound and practical approach to integrate the quantitative assessment into financial stability and into risk-based supervision is most crucial, as it will allow the potential key risk affecting the financial sector to be identified, to be assessed, and to be ranked in order of importance. Through this, the approach will help focus policy dialogue and facilitate communication between all the key stakeholders, namely – the supervised financial institutions, the home and host supervisors, other related supervisory agencies especially in the case of complex financial conglomerates, and between the monetary authority and the Finance Ministry. In moving forward, it is important to recognize that, while these quantitative techniques are valuable tools, they are no substitute for a thorough understanding of the overall risk dynamic of financial institutions, the related systemic implications, as well as the behaviour of institutions and markets.

In 2015 only 4% of CSRs were fully implemented, down from 7% in 2014. In some countries excessive economic imbalances 4  BIS central bankers’ speeches  persist and could harm other Member States. More can be done to improve national implementation and I see a lot of merit in the IMF's proposal that CSRs should be linked to outcome-based benchmarks that are concrete, measurable, and clearly linked to the ultimate reform objective[28]. The dismal implementation record of the CSRs nevertheless suggests that a governance framework that envisages European economic policy priorities being legitimised and implemented at national level has its limits. Looking forward, we will need to engage in a process at European level, based on shared institutions, that provides both economic resilience and the appropriate legitimacy. In such a process, consensus would be needed on (i) the policy areas that are crucial to preserve the resilience of the euro area, and on (ii) designating those policy areas as shared competences with democratic legitimisation at European level. And as I have said before, getting there will require both economic and political convergence. The success of the Single Market is one of the few uncontroversial achievements of the EU. It has shown that shared competences can be used to implement economic policies that lead to greater prosperity in each country and, at the same time, ensure greater resilience of the euro area and the EU as a whole. We should build on it if we want to make further progress.
It allowed supervisors to ensure that the collective results of the individual banks were consistent with a top-down assessment of revenue and credit losses generated from an adverse stress scenario for the macroeconomy. We are incorporating these types of broad, horizontal reviews more deeply into our supervision process. So, what else are we doing going forward? There are a large number of initiatives under way to make our financial system more robust to shocks and more resilient to the inevitable swings in activity and sentiment. These initiatives include several aimed at strengthening bank capital requirements. When these initiatives are fully implemented, they should prevent some of the practices we witnessed during the crisis – for example, a banking organization paying out dividends to demonstrate that it is strong when, in fact, by depleting capital, such an action is making it weaker. One important initiative in this regard is to better capture all the sources of risk in the capital assessment process. This, for example, includes the trading accounts of banks. Some institutions had clearly not set aside adequate levels of capital given the risks that were embedded in their trading positions. We are also exploring the potential for contingent capital. The goal is to bolster the amount of common equity available to absorb losses in adverse economic environments. This might be done by allowing the issuance of debt instruments that would automatically convert into common equity in stress environments, under certain pre-specified conditions.

We need to improve our ability to identify catalysts for potential crises, whether those catalysts manifest themselves in the form of asset price bubbles or reside elsewhere. Perhaps most critical among the challenges facing policymakers and lawmakers is how to ensure that we have a more effective regulatory structure going forward. This is a complex subject that I do not have time to do justice here tonight. However, I believe it is important to explain why the Federal Reserve’s monetary policy, lender of last resort and supervisory functions should remain in place. These functions are interrelated so that the execution of one of these responsibilities helps the Federal Reserve in its conduct of the others. For example, consider the Fed’s lender of last resort function. For the Fed to perform this role effectively, it is important that it have first-hand knowledge about banks, the capital markets, and payment and settlement systems. To perform this role safely, it must know its borrowers, which is why a supervisory role is essential. Put simply, if supervisory and other financial oversight responsibilities were taken from the Fed, it would make it more difficult for us to perform our lender of last resort function. To do that well and safely, it is important that we understand banks, the financial system and all its interconnections. One instructive example in this context is the Northern Rock experience in the United Kingdom, where banking supervision and the lender of last resort functions were separated.
Annual wage growth1) and unemployment2) Per cent 8  8 Annual wage growth  6  6 4  4 Unemployment rate  2 0 1993  2 0  1995  1997  1999  2001  1) Average for all groups, including the cost of additional vacation days 2) Registered unemployed and on labour market programmes as a percentage of the labour force  Sources: TRCIS, Directorate of Labour and Norges Bank Fafo og Makt- og demokratiutredningen 6. september 2002  High wage growth affects the exposed business sector in two ways. First, it erodes earnings and reduces employment. Second, monetary policy has to be tightened. This leads to an appreciation of the krone, with a further reduction in earnings and employment. BIS Review 50/2002  7  Annual wage growth in enterprises in the Confederation of Norwegian Business and Industry 8  8  Salaried employees1)  6  6 Total employees1)  4  2  2 0 1993  4  0 1995  1997  1999  2001  1) Includes costs of additional vacation days  Sources: TRCIS and Norges Bank Fafo og Makt- og demokratiutredningen 6. september 2002  It is combined wage growth for all groups that influences the outlook for inflation. However, substantial wage increases for some groups can trigger wage spirals. Wages for salaried staff in the business sector have exhibited sharp growth over several years.

However, the rise in salaries for white-collar workers may also reflect weak cost control in enterprises and organisations following a long period of expansion. A precondition for interplay that functions well is that monetary policy is known and remains firm. The best thing Norges Bank can do to contribute to good interplay between the various components of economic policy and wage formation is therefore to be transparent about its analyses and assessments of economic developments. 3  Various game situations between fiscal and monetary policy are described in the literature. Some of these games are discussed in Kai Leitemo (2000): “Samspillet mellom penge- og finanspolitikken under et underliggende inflasjonsmål for en liten åpen økonomi” (The interplay between fiscal and monetary policy under an underlying inflation target for a small, open economy) in Norsk Økonomisk Tidsskrift No. 2/2000, and in Erling Steigum (2000): “Samspillet mellom penge- og finanspolitikken ved et inflasjonsmål” (The interplay between fiscal and monetary policy with an inflation target) in the book Perspektiver på pengepolitikken (Perspectives on monetary policy), edited by Jan F. Qvigstad and Øistein Røisland. 4  This is the game theory known as the Cournot-Nash equilibrium. 5  Cf. descriptions in the Stackelberg equilibrium game theory.
The central bank mandate of financial stability is less clearly defined particularly in circumstances in which the supervisory function does not reside in the central bank. The majority of central banks in emerging economies in Asia, however, has the responsibility of the supervisory function although for three of the region’s major economies – Japan, China and Korea, this function resides in a separate agency. Even for central banks that has the responsibility of the supervisory function, the specific outcomes to be achieved are less clearly defined compared to the mandate for price stability. In Malaysia, our new Central Bank Act of 2009 has defined this mandate in terms of the risks to financial stability – that is,  BIS Review 155/2010  1  the risk of the disruption to financial intermediation, the risk of disruption to the orderly functioning of financial markets and the risk of loss of confidence in the financial system. Common to most central banks in emerging economies is the mandate to develop the financial system. Given the stage of development of financial systems in emerging economies, this is an important mandate not only to enhance the financial intermediation process in the economy but also for the purposes of facilitating the mandate of monetary and financial stability. This mandate has involved institutional building, financial market development and the strengthening of the financial infrastructure including that of the payment systems and the legislative framework.

Let me take this opportunity to congratulate Governor Gjedrem for the achievements of the Bank under this leadership during his twelve year terms in office. My remarks today will focus on the role of central banks from the perspective of emerging economies and more specifically in the context of central banking in Asia as we confront the challenges in this rapidly changing global economic and financial environment. Central bank mandates While there is no unique blueprint for the design of the institutional arrangements for a central bank, of importance is that it needs to be relevant to our own circumstances. But of importance is that there is clarity on the mandate, the governance framework and the areas of accountability of the central bank. And that needs to be supported by the empowering legislation to ensure that the central bank has at its disposal the capabilities to deliver the mandate. Central banks in emerging economies generally have a broader mandate beyond the traditional mandates of monetary and financial stability. Even within these traditional mandates, the role of central banks have varied considerably. In the mandate of monetary stability, it has ranged from having the narrow mandate of price stability to the mandate where price stability is the primary role of the central bank while due consideration is also given to economic and employment objectives. While for some the mandates are clearly hierarchical, for others, the multiple mandates involve assessments of the trade-offs.