samchain/econo-pairs-v1 huggingface dataset:
3  See inter alia Report No. 29 (2000–2001) to the Storting, Guidelines for economic policy, Ministry of Finance, and the Regulation on Monetary Policy of 29 March 2001. BIS Review 147/2010  1  That it is tempting, but dangerous, for a government to focus on short-term gains was a lesson Greek politicians learned this spring. Government spending exceeded revenues over a long period. Accounts and official statistics were fudged. Politicians may have hoped to secure a quick admission for Greece into the euro area, with the advantages this would bring. They may have also believed that high government spending and low taxes might help their re-election prospects. Instead, they now have to steer the country through harsh reforms and substantial cuts. 4 The Norwegian economist Finn Kydland received the Nobel Prize for economics in 2004 for having shown that on the whole, monetary policy decisions are better if policymakers delegate interest rate setting to an independent central bank under a clear mandate. 5 As a central bank we must adhere to the mandate we have been given and be able to set the key rate based on a professional assessment. 6 This is a system that lays a solid foundation for making good decisions. 3. We make decisions under uncertainty  Independence alone does not guarantee good decisions. Even if an independent central bank is better positioned to avoid having short-term expediency and changing preferences dictate interest rate policy, its decisions must be made under considerable uncertainty.

It has never been the intention of the MPC to retain indefinitely the stock of assets purchased as part of QE. 9 Were it to do so, there is a risk that maintaining such a large stock of government debt as a monetary policy tool might blur some external perceptions of the distinction between monetary and fiscal policy. That could lead to doubts over the independence with which we were pursuing our objective of price stability, which would represent a significant step backward. Decisions on the stock of gilts held in the APF have always been made solely by the MPC in the sole pursuit of its monetary policy objectives mandated by Parliament and that should always remain the case. Central bank independence has been shown to bring great economic benefit in the form of lower and more stable inflation – a result that has stood the test of the financial crisis and is something we should treasure. 10  8  Joyce, M, Tong, M and Woods, R (2011), “The United Kingdom’s quantitative easing policy: design, operation and impact”, Bank of England Quarterly Bulletin, Vol. 51, No. 3, pages 200–12.
And, the odds are that the cause of the next one will not be the same. I have been involved in mopping up problems in banks long enough to have been involved in Barings, which was an idiosyncratic fraud, not a sector-wide problem. This is the resolution element. In short, we need better fire prevention and better fire-fighting. In the UK we took a major step earlier this year by creating a Special Resolution Regime. But that is not the end of the response to the crisis. Rather, it is where “living wills” or what we now prefer to call Recovery and Resolution Plans, or RRPs, come in. I want to spend the rest of my time setting out what I think should be the role and form of these plans, and why they should be critical tools both for banks themselves, banking supervisors and resolution authorities. I have been struck by the strength of support for RRPs. In April, the G20 leaders endorsed a set of principles from the Financial Stability Board that include strong encouragement for firms to maintain contingency plans and procedures for use in a wind down, with regular reviews to ensure that they remain accurate and adequate. The Financial Stability Board cross-border Crisis Management Working Group, chaired by my colleague, Paul Tucker, has  BIS Review 156/2009  1  published principles aimed at strengthening the ability of authorities to deal with a crisis in certain cross-border financial groups.

Had there been one, the Northern Rock recovery plan should have challenged the management and the Board on how its business model could adapt to and survive the closure of its key funding markets, given the sheer scale of its dependence on securitisation. Likewise, how could it have handled a serious stress when it had pursued a business model of aggressively taking market share by squeezing its net interest margin and accepting more borrower default risk? And then moving further into the guts of the bank, how would it deal with stress to a funding model where the bank was excessively dependent on cash deposits from the securitisation master trust but with a hard rating agency trigger linking that funding to the position of the bank, thus creating a severe amplification of any stress? Finally on Northern Rock, how would the bank deal with a funding stress when it was having to encumber such a high proportion of its good quality assets in order to over-collateralise its securitisation master trust? A very good example of the need for resolution plans is the case of Lehmans in Europe. Two questions are relevant here: what should the resolution plan have contained; and what changes to its organisation and operations might have made the massive task of dealing with Lehmans more straightforward? You will, I hope, appreciate that I can only scratch the surface of the Lehmans case in the time available so I apologise for the laundry list approach.
But as it progresses and we at the global level get closer to the limiting case of free and frictionless capital movements, then real risk adjusted asset returns increasingly become equalised across countries. As that happens, less and less of the transmission of monetary policy goes through what I call the interest rate channel. There would still be an interest rate channel at the global level, but that would be determined by the big countries. The small, open economies that have adopted a floating exchange rate could still achieve their inflation targets through the exchange rate channel. The scope for short run output stabilisation would be more limited, however. Is this necessarily a problem? If the exchange rate channel were relatively well behaved – i.e., if it provided smooth adjustment based on fundamentals and uncovered interest rate parity broadly held over relevant horizons – then the answer might be no. The problem is, however, that experience has shown that uncovered interest parity does not hold except perhaps over long horizons. Interest rate differentials give rise to widespread carry trading, which is by nature a bet against UIP. Exchange rates therefore diverge from fundamentals for protracted periods, followed by sharp corrections. So the exchange rate often seems to be as much a source of shocks and instability as a tool for adjustment and stabilisation.

11  “Norges Bank operates a flexible inflation targeting regime and seeks to achieve an interest rate path that provides a reasonable balance between the objective of bringing inflation up towards 2.5% over time and stabilising developments in output and employment.” - Norgesbank, Inflation Report, March 2006. 12  According to the Federal Reserve Act, the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”  13  Cukierman A. “Central Bank Independence and Policy Results: Theory and Evidence”, Lecture prepared for the International Conference on: “Stability and Economic Growth: The Role of the Central Bank”, Mexico City, 14-15 November 2005. 2  BIS Review 42/2006  way central banks should respond to asset prices. Fed Chairman Bernanke claims that central bankers should respond to asset prices only insofar as they affect output gap and thus inflation 14 . Another FOMC 15 member Donald Kohn has described this approach as “conventional strategy” and proposed, what he called, an “extraaction” policy 16 . Monetary “extra action” – according to Kohn would be required if there were clear signals of an asset bubble building up – especially a one fuelled by excessively loose monetary policy – and if costs of “extra action” policy were smaller than the costs of further build-up and subsequent collapse of a bubble.
“Do not trust strangers” was a learned evolutionary heuristic, a simple and robust decision-making rule to guard against the threat of extinction. Paranoia in primitive man was rational – everyone really was out to get you. Psychologists call this ecological rationality. 4 Fear of strangers was a rational response to the ecology of the time. This behavioural trait is shared by other primates, such as apes. 5 What is interesting is that these primordial fears may have persisted long after the ecology itself has changed. To give a trivial example, fear of snakes, spiders and dense rainforests probably arose on the grasslands of Africa in 50,000 BC. It was an ecologically rational response then. Whether it is an ecologically rational response on the high streets of Edinburgh and London today is altogether more questionable. What is true about fear of snakes and spiders is true, too, about fear of strangers. The evolutionary heuristic – “do not trust a stranger” – remains alive and well today. And in some situations, it remains a useful guide. Among parents, it is a simple but still powerful decisionmaking rule for children. As Benjamin Franklin put it: “Distrust and caution are the parents of security”. At the same time, this neurological relic from the ancient past may be seriously out of kilter with the workings of a modern, multi-cultural society.

In this way, recruitment is meritocratic, a Darwinian survival of the fittest. Yet most organisations are not singular. They are team sports. What matters most to organisations is collective performance, not individual brilliance. Most successful ones are not a Darwinian dog-fight. Diversity is important precisely because it improves collective functioning, over and above individual ability – recall the “Page equation”. Diversity is, by definition, a collective concept. That lays bare a potential tension between recruitment practices, which typically focus on the characteristics of the individual, and organisational success, which typically relies on the characteristics of the collective. This disconnect is, interestingly enough, the self-same one exposed by the global financial crisis. Pre-crisis regulation was also individually-focussed. Regulators looked at banks one by one. Each of them individually had good CVs, strong social skills, were smartly dressed. Yet the collective consequence was a financial system in which everyone looked the same, thought the same and placed the same bets. That lack of diversity left the whole system vulnerable to collapse which, of course, it duly did. Since the crisis, regulators have learned their lesson. Regulation has taken on a systemic orientation, with regulatory measures calibrated to risk across the financial system as a whole. That means regulators taking measures which promote system-wide diversity, such as encouraging new entrants into the field with new business models. In short, financial regulation these days seeks to take explicit account of the social externalities of systemic risk.
To sum up, supervision is something that must work based on a regime of verification, analysis and conclusion. It is important to highlight the intensity and deepness of government-owned banks supervision, which brought us the knowledge of their existing problems and the costs involved in their recovery. Significant restructuring has been carried out in federal banks, after deep and comprehensive general consolidated inspections done by the CB. The adjustments that were made aimed at making the government-owned financial institutions sounder, more efficient and more competitive, rendering them apt to meet the same requirements faced by the private financial system. The maintenance of this behavior will reveal the true costs of governmental programs and will avoid recursive expenditures, which could become skeletons (hidden liabilities) in the public accounts. The continuation of reforms is important in other areas of the CB. In the external area, the CB must aim at intensifying transparency and communication with the markets and investors, while seeking to increase flexibility and to simplify the regulations on foreign currency operations, within a process intended to increase the country’s participation in world trade and international financial markets. In the banking area, the restructuring of the Brazilian Payment System improved risk reallocation, and favored a higher efficiency of the system. This is due to the fact that the Central Bank no longer has any role in financing the institutions that did not have the necessary funds for their operations, reducing moral hazard.

Irma Rosenberg: Monetary policy in Sweden Speech by Ms Irma Rosenberg, Deputy Governor of the Sveriges Riksbank, at the Swedbank, Stockholm, 18 September 2006. *  *  *  Thank you for the invitation to come here and speak. The topic of the conference is economic prospects and I will of course provide my views on these. However, I will speak in fairly general terms – a more detailed analysis will be presented in the Riksbank’s Inflation Report, which is published at the end of October. Before I move onto economic developments, however, I would like to take this opportunity to say a few words about how monetary policy is conducted in Sweden in general, or the monetary policy strategy, as it is usually called. More specifically, I intend to take up some questions that have arisen in the discussions in the media and elsewhere as there still seems to be some confusion. This applies in particular to the objective of monetary policy. Do we attach less importance to the inflation target now, or have we even introduced other objectives in addition to the inflation target? Let me emphasise right now that no such changes have been made. Our focus is on the inflation target and the central aim is to anchor inflation expectations in the economy around this target. However, when we formulate our monetary policy we also give consideration to the way the rest of the economy is developing. It is our reasoning on this that I intend to begin with.
The black line is the difference between the current interest rate path and the path in the previous Report. The “interest rate account” is a technical model-based illustration of how the change in the interest rate forecast from the previous Report can be decomposed by different exogenous shocks to the model. The illustration shows how changes in the assessment of international and domestic economic variables as well as changes in shock processes have affected the interest rate path, and is based on our core forecasting model. Since the “interest rate account” follows from a specific model, the exact decomposition is model-dependent and should thus be interpreted as a model-based illustration rather than a precise description of the Executive Board’s reaction pattern. Notwithstanding this reservation, the “interest rate account” serves several purposes. First, it gives information about the reaction function. Second, it provides a compact summary of the Monetary Policy Report. Third, it is a tool of communicating commitment. Norges Bank aims at influencing expectations in order to stabilize inflation. In this respect, our policy has elements of commitment. The interest rate forecast should reflect economic news and not re-optimisation of monetary policy. With an “interest rate account”, the public is better able to check whether the central bank honours past commitments. Let me turn to the criteria underlying the interest rate forecast and reaction function. Among the few central banks that publish interest rate forecasts, it is common to communicate these in quite general terms.

Jan F Qvigstad: Trends in monetary policy transparency – comments on Petra M Geraats' paper Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the conference "International Experience with the Conduct of Monetary Policy under Inflation Targeting", hosted by Bank of Canada, Ottawa, 24 July 2008. The Charts in PDF-format can be found on the Norges Bank’s website. *  *  *  The paper by Petra Geraats provides an up-to-date and thorough analysis of the trends in transparency during the last ten years. Her analysis confirms the general trend of improved transparency, but she also provides an interesting analysis of the differences across alternative monetary policy regimes. I am sure Petra’s paper will be a key reference in future research and policy discussions on transparency. 1 As discussed in the paper, transparency can be motivated both by accountability requirements for independent central banks, and by the purpose of enhancing the effectiveness of monetary policy. Both have been important factors behind the process in Norges Bank towards increased transparency. It is now widely accepted that monetary policy works mainly through private agents’ expectations. The widespread influence of the New Keynesian model in academic research on monetary policy and the trend towards using DSGE models in central banks have underpinned the focus on expectations. Michael Woodford puts it in a clear-cut way: 2 “For not only do expectations about policy matter, […] very little else matters”.
All of this this work is being closely co-ordinated by the Financial Stability Board (FSB), which, as it set out in yesterday’s statement[8], is working to ensure cryptoassets are subject to robust regulation and consultation. The FSB will publish a consultation report later this year with recommendations for promoting international consistency in regulatory and supervisory approaches to non-stablecoin cryptoassets, markets and exchanges as well as for strengthening international coordination in this area. And, putting on my domestic hat, given that the the Bank of England is responsible for regulation and supervision of systemic payment systems in the UK, our intention is to apply the ‘same risk, same regulatory outcome’ approach in the UK. The Government has announced its intention to legislate in the current session of Parliament to update the powers of the Bank of England and the Financial Conduct Authority to regulate and supervise stablecoins. We hope to issue a consultation document on the regulatory policy framework later this year. Taken as a whole, the UK authorities have made clear that they are prepared to see stablecoins – issued by either banks or non -banks - operate in the UK, provided they are properly regulated and supervised[9]. This should not, however, be interpreted as any weakening in standards for risk mitigation. I doubt any of the stablecoins currently in operation in other jurisdictions would meet the necessary standards for operation at systemic level in the UK – whether in the crypto world, should that become systemic, or in conventional financial services.

Petar Goshev: Alleviating the negative effects of the financial crisis Welcome address by Mr Petar Goshev, Governor of the National Bank of the Republic of Macedonia, at the World Bank event, Skopje, 15 March 2010. *  *  *  Distinguished ladies and gentlemen, It is my honor to give a welcome address at this important World Bank event that it is taking place at a critical transitional stage when it seems that the strongest impact of the severest crisis since the Great Depression is behind us and the global economy is beginning to grow again. Still, although we believe the worst is behind us, the global crisis has had strong negative effects that will continue to be felt in the years to come. Because of that, the efforts of the national authorities and international financial institutions for mitigating the negative effects have to continue. In this regard, the enhanced role of the international financial institutions, including the World Bank, is vital. The economic, social and human implications of the global crisis have further emphasized the World Bank’s mission of eliminating poverty, enhancing growth and providing inclusive and sustainable development. Achieving Millennium Development Goals (MDGs), as a set of priorities for the World Bank, is becoming more challenging.
It is also difficult to make direct comparisons between the countries, in particular over short periods of time, as property prices are measured differently in different countries. 7  Statistics on property prices are taken from the Bank of Estonia and Global Property Guide. 4  BIS Review 105/2009  increased the crisis was upon us. As well all know, this entailed substantial loan losses for the banks. Today too, the property companies account for the banks' largest single exposure – almost 20 percent of lending goes to this group of borrowers. This is, however, a lower figure than during the crisis of the 1990s when the banks' exposure to the property companies amounted to one third. But, despite the fact that the percentage is now lower, exposure is still at such a level that it can constitute a potential credit risk for Swedish banks. A similarity between the increase in prices we have just seen and the increase at the end of the 1980s is that prices were not driven by so-called fundamental factors. In other words, prices increased not because of a higher demand for offices, lower vacancy rates or higher rents but rather because the investors did not demand as high a return on their invested capital. This in turn indicates that higher rents were expected in the future. 8 The risk premium was, for example, close to zero at the end of 2007.

The Baltic states and Sweden are naturally closes to our interests, so I will focus primarily on these countries. And as all financial crises are in various ways linked to the banks' loans on the property markets, I also see this seminar as an excellent opportunity to discuss these markets too. We have heard and seen little more than negative news over the last 12 months and most forecasters, including the Riksbank, have underestimated the strength of the international economic downturn. Now, however, we are beginning to see increasingly distinct signs of a stabilisation of the global economy, above all on the financial markets. I therefore intend to conclude my speech by saying a few words about this. The economic integration of the Baltic region is increasing The Baltic region consists of eight countries. They are all members of the European Union (EU) and the region has a total population of almost 72 million. 1 This is more than 15 per cent of the total population of the EU member states. 2 Throughout the course of history, the countries in the region have had close links with each other, not least because of common economic interests. The Hanseatic League is a thing of the past, but the ties between the countries have not weakened, quite the reverse. The economic links are now stronger than ever and a large part of the countries' trade takes place within the region. However, the integration does not relate to trade alone.