samchain/econo-pairs-v1 huggingface dataset:
But, there are also other parallels. This includes in particular the arrangements that made the banks’ real risk-taking more abstruse. The banks’ formal and informal promises of loans to special investment vehicles meant that the problems quickly bounced back into the banks' balance sheets. In the Swedish bank crisis one can say that the finance companies in some respects played a corresponding role to the special vehicle. It was the finance companies that primarily financed the expansion in the construction and property markets. The finance companies largely financed themselves in the short term by issuing so-called commercial papers in the  BIS Review 30/2008  3  fixed income market. When the property market folded, it was a finance company, Nyckeln, which in September 1990 was the first to throw in the towel when it could not renew its financing. Other finance companies then followed suit. Many of the finance companies were owned by the banks. And the banks were tied by both formal and informal commitments. The losses therefore soon returned to the bank system. In 1991 it became apparent that the banks had substantial problem loans through their exposures to the property branch both directly and indirectly through the finance companies they supported. The bank crisis had become a reality. Perhaps you begin to see a pattern now?

There is an evident risk that the crisis management can be prolonged by political negotiating games. When the stakes are high, there is a risk that many countries will choose to play their cards close to their chest as long as possible. In the worst case scenario, this could lead to crisis measures not being taken in time, which could have devastating results for all those involved. In September 2007 a Nordic-Baltic crisis exercise was organised around a financial crisis scenario. Taking part in this exercise were the central banks, financial supervisory authorities and finance ministries of all of the five Nordic countries and the central banks of the Baltic states. Without going into any details, I can reveal that the exercise brought to light many deficiencies in coordination – both between authorities within individual countries and across national boundaries. In particular, it showed that measures taken unilaterally by the authorities in one country can easily have disastrous consequences for financial stability in other countries. It also further emphasises the importance of continuing to develop the cooperation and ensuring that national regulations do not form an obstacle to cross-border crisis management. In a crisis it is essential that the authorities in different countries understand one another’s assessments of the situation and preferable that they can reach a common view. This makes demands for common criteria and joint terminology. It must also be possible to coordinate various measures across borders, such as emergency liquidity assistance and payments of deposit guarantee funds.
The conclusions I have drawn from developments during the 1970s and 1980s are that the economic policy conducted together with the functioning of the economy during this period could not lay a foundation for macroeconomic stability and good economic growth. Price and wage formation that got out of hand in the 1970s, a series of devaluations that created considerable pressure in the economy during the 1980s, deregulation of the credit market that triggered a large credit boom, which could not be counteracted by monetary policy as this was detailed to defend the krona’s fixed exchange rate, and a fiscal policy that could not withstand inflationary pressures. All in all, this led to repeated crises and finally to economic collapse. This leads me in to the next three episodes. The reform of wage formation Before I get into the changeover in exchange rate and monetary policy at the beginning of the 1990s, I want to mention two episodes that have contributed to making the changeover in exchange rate and monetary policy successful with regard to bringing down inflation to a level comparable with other countries. These are the reform in wage formation and the budget consolidation in the 1990s. At the end of the 1980s it had become increasingly evident that Swedish wage formation did not function in a manner compatible with macroeconomic balance.

It was common for central wage agreements signed during the 1980s to contain price trend guarantees, wage development guarantees, earnings guarantees, checkpoints etc., which led to prices and wages pushing one another upwards in an increasing spiral. On 1 March 1990, the Government appointed the Rehnberg Commission to follow negotiations of new central wage agreements in the labour market and to act to achieve new agreements that would contain price clauses to replace the agreements for 1990 and new agreements for 1991 and lead to a radical reduction in total wage increases, including wage drift, during 1991. Based on the Commission’s proposals, stabilisation agreements were signed for the period 1 January 1991 – 31 March 1993 for just over 75 per cent of the labour market, which contributed to the rate of wage increasing falling from around 10 per cent in 1990 to 3 – 4 per cent a year during 1992 – 1993. After that, however, the rate of wage increase rose again to around 6 per cent in 1996. In April 1997 I was given the task by Deputy Labour Minister Ulrika Messing of making an inquiry into wage formation and mediation. When I was given this task, the social partners in the industrial sector had recently (in March 1997) signed a new cooperation agreement, known as the Industrial Agreement, whereby the parties took joint responsibility for wage formation in their part of the labour market and had agreed on a regulatory framework for negotiating wage agreements.
Continued implementation of prudent monetary and fiscal policies, fairly favourable developments in the exchange rate coupled with pro-growth and pro-poor agricultural policies that have led to an increase in food supply and subsequent improvement in the country’s food security largely explain the favourable developments in inflation. For instance, the country recorded an increase in maize surplus to 250,000 metric tons (mt) this consumption period from 160,000 mt during the 2006/2007 consumption period. With respect to the money market, given lower inflation and yield rates on Government securities, commercial banks lending rates have been on the downward path. This can be illustrated by the nominal average lending rates which declined to around 28% in December 2006 from about 34% in December 2005, and further fell to 24.3% in September 2007. This is consistent with Government’s desire of making more funds available for priority sectors of our economy at reasonable cost, in line with the objectives the Fifth National Development Plan, 2006-2010. Ladies and gentlemen, testimony to this was the recent lowering of the statutory reserve ratio by the Bank of Zambia to 8% from 14% effective 1st October 2007. We expect this action, will release more funds to the commercial banks for on-ward lending to the priority sectors. Availability of investible funds to sectors such as agriculture, manufacturing, tourism and mining will stimulate further growth in the economy, create more employment and incomes, and contribute to alleviation of poverty.

b)  Credit Reference Law and Services  Following the issuance of the Credit Reference Services (Licensing) Guidelines and the Credit Data (Privacy) Code, the Bank of Zambia has drafted the Credit Reference Law. The draft law is currently undergoing legal review and is expected to be effected in the course of next year. Meanwhile, the licensed credit reference bureau – Credit Reference Bureau Africa Limited (CRBAL) has not yet commenced operations as some commercial banks are yet to provide the required data to the CRBAL. c)  The National Payment Systems Law  The National Payment Systems Law has been enacted and became effective on 15 June 2007. The Law is intended to mitigate the shortcomings that were in the legal framework and provide legal backing to international best practices in the payment systems. To all of you gathered here, I would like to implore you, not to only inform the public about these and other developments but to interpret what these mean to ordinary Zambians. It is only when ordinary Zambians, who are the key stakeholders, have an unquestionable understanding of these developments that they shall fully support our developmental policies and strategies. Ladies and gentlemen, allow me to remind you that our quest for development will in no doubt be without challenges. The continued higher and unstable international oil prices poses one of the strong challenges to our targeted growth of 7% this year and end year inflation of 9%.
Nominal wages do not readily fall. With some inflation, relative wages can change without a fall in nominal wages. There may also be rigidities in the pricing of goods and services. Some degree of inflation will thus oil the economic machinery. •  In periods, inflation and economic growth will be low. It is then appropriate for real interest rates to be low, or even negative. Nominal interest rates cannot be set below zero. If inflation becomes entrenched at a low level or near zero, the interest rate will be less effective as an instrument. •  There are different ways of measuring inflation. The consumer price index tends to overestimate actual inflation. The most important source of measurement errors is probably the difficulty of distinguishing between changes in the quality and price of goods. In other countries, findings show that the consumer price index overestimates actual inflation to the order of ½-1 per cent. The inflation target is a vehicle for, not an obstacle to, monetary policy’s contribution to stabilising output and employment. This objective is also expressed in the Regulation on Monetary Policy. If demand for goods and services is high and there is a shortage of labour, there will normally be prospects of higher inflation. When interest rates are increased, demand falls and inflation is kept at bay. If demand is low and unemployment rises, there will be prospects of lower inflation. The interest rate will then be lowered.

The change in trade patterns has made a considerable contribution to the sharp decline in prices for clothing, footwear and audiovisual equipment. Rapid technological advances have also pushed down prices for audiovisual equipment. 2  BIS Review 16/2004  •  Third, competition has probably increased in the retail industry and other service sectors in Norway in recent years. Initially, heightened competition affects companies’ profit margins. But enterprises will respond by reducing their costs. This will occur in part in the individual business, but subcontractors will also be required to reduce their prices and enhance efficiency. Therefore, increased competition usually triggers higher productivity growth in the economy. Low inflation may therefore be matched by growth in productivity. Prices for domestically produced goods and services are expected to rise towards the beginning of 2005 due to higher capacity utilisation in the Norwegian economy. Strong employment growth may contribute to somewhat higher wage growth than in 2004. At the same time, domestically produced goods and services are affected by exchange rate changes, albeit with a longer lag than is the case for imported consumer goods. There are clear signs that the global economy has passed the trough. However, while the outlook is brighter, price inflation is still low and interest rates are being kept unusually low. Economic growth is high again in the US, but there is still excess production capacity and very low inflation. Workforce reductions may no longer be as severe, but companies are still not hiring new staff.
Countries in this situation remain BANCO DE ESPAÑA  11	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  THE BUDGET DEFICIT TARGET AND THE FISCAL POLICY STANCE IN 2019 STRUCTURAL BALANCE CHANGE  GENERAL GOVERNMENT STRUCTURAL BALANCE  0  CHART 10  % of GDP  4.0  -1  % of GDP  3.0  -2  2.0  -3 -4  1.0  -5  0.0  -6 -7  -1.0  -8  -2.0  -9 2010  2011  2012  2013  2014  2015  2016  2017  2018  2010  2019  BANCO DE ESPAÑA (WITH 2019 STATE BUDGET MEASURES)  2011  2012  2013  2014  2015  2016  2017  2018  2019  1.3% DEFICIT FULFILMENT  SOURCES: European Commission, IGAE, 2019 State Budget and Banco de España.

But, as I said earlier, it is quite conceivable that given the range and speed of regulatory reforms, there are parts of the framework that might not work in the way we intended. As I mentioned, the Open Forum on 11 November will be another opportunity to assess this issue. The aim is to bring stakeholders together from across financial markets to discuss how we build markets for the public good. Second, changes in market structure and the ability of technology to connect buyers and sellers may increase liquidity. There are a number of suggestions that with the growth of assets under management asset managers and institutional investors may in future need to deal more  BIS central bankers’ speeches  5  directly with each other and might be better placed to take on some of their risks. Technological change would certainly make this increasingly feasible. It remains for me, however, an open question whether such liquidity would be resilient in times of stress. Automated markets may have driven down costs, but are possibly less resilient. Dealer-intermediated markets, on the other hand, may have become more costly, but possibly more resilient. In a forthcoming speech, my colleague Minouche Shafik will discuss the changes in market structure that we have seen since the financial crisis and what they mean for market functioning.
Nominal interest rates were kept low although price inflation and the value of tax-deductible interest expenses rose. Frequent devaluations in the period from 1976 were ultimately ineffective with regard to preventing a relative decline in manufacturing industry. On the contrary, the devaluations proved to be self-reinforcing. Chart 7  Over a period of 15 years from 1973 to 1988 consumer prices in Norway rose twice as much as in Germany. In the same period, the value of the krone was virtually halved against the Mark. While we paid around 2 kroner for one Mark in 1973, 15 years later we had to pay close to 4 kroner. Since then the krone has remained relatively stable against the Deutsche Mark. Today the exchange rate is around 4 kroner and 10 øre. The last devaluation came in 1986 after the fall in oil prices. Thereafter, the krone exchange rate was fixed. The Norwegian economy had to go through a severe economic turnaround. Confidence in the krone had to be restored in order to avoid persistent inflation. This required very high interest rates. The Norwegian economy entered the worst recession experienced since the interwar period. Unemployment rose from about 2% in 1987 to almost 6% in the winter of 1992/1993. Many companies went broke and households were faced with debt problems. The financial sector was hit by crisis. The fixed exchange rate regime led to a gradual decline in price inflation, but not to deflation as was the case in the 1920s.

BIS Review 7/2010  3  FOCUS: This problem will become even bigger if other countries – such as Bulgaria or Romania – introduce the euro. Trichet: Other European Union countries are indeed committed to joining the euro area. But only when the time is right. As you know, there are strict criteria governing the introduction of the euro, and these must be met in full. And they have to be met not just at a particular moment in time, but on a sustainable basis. The ECB is and will remain extremely vigilant in this respect. FOCUS: But what if new member countries doctor their figures – as Greece did – and trick their way into the euro area? Trichet: Let me be very clear on this. Never again will we accept budget figures that do not reflect the facts. Appropriate auditing must always be possible. As early as next month the European Commission will make proposals that will dramatically improve the relevant framework. This is absolutely critical. FOCUS: Your job and the crisis are both very demanding. Do you have the opportunity at all to see colleagues outside of work? Trichet: Yes, certainly. And that’s important, too, as the high level of mutual trust that exists within the ECB, between the members of the Executive Board and the Governing Council, is in my view absolutely fundamental. FOCUS: Is Frankfurt a good location for meetings outside of your official schedule? Trichet: I think so.
It is not possible to determine precisely where this lower bound lies, but we are confident that we still have some room for manoeuvre to lower interest rates further, if necessary. Second, the transmission of negative interest to the financial system and the economy has some peculiarities. In our experience, the transmission to the money and capital markets of an interest rate change in negative territory operates in the same way as one in positive territory. 8  9  For instance, a study by the International Monetary Fund shows that the unconventional measures taken by the Federal Reserve at the height of the financial crisis played a decisive role in calming the markets. Cf. Roache, S. K. and M. V. Rousset (2013), Unconventional monetary policy and asset price risk, IMF Working Paper, WP/13/190, August 2013. For the lessons learnt from the financial crisis and proposals for future monetary policy frameworks, cf. Bindseil, U. (2016), Evaluating monetary policy operational frameworks, paper presented at the Economic Symposium of the Kansas City Fed, Jackson Hole, August 2016. Page 5/8  An example of this is the continued efficient operation of the repo market. By contrast, the transmission of negative interest in the banking system is varied. As interest rates on bank deposits largely remain at zero, lending rates, particularly mortgage rates, have also fallen less sharply than money and capital market rates. From the SNB’s perspective, this imperfect transmission to lending rates is not entirely unwelcome in the current economic environment.

Not only the Riksbank, but also several other central banks have in recent years faced a situation where the economy has grown strongly, while inflation has been below target, despite very expansionary monetary policy. Let me therefore go on to discuss an important issue that has arisen due to developments in recent years, namely how to deal with a situation where structural changes contribute to inflation remaining low over a long period of time. In Sweden, the upswing in world trade has contributed to strong growth in Swedish exports. Over the past year, domestic demand has also developed strongly, partly due to stimulation from expansionary monetary policy. At the same time, inflation has been kept down by high productivity growth and weak growth in import prices. This is partly related to developments in economic activity. However, there also appear to be factors of a more structural nature behind the low inflationary pressure. This is probably to some extent connected to the fairly comprehensive investment in new technology. However, it is clearly also largely concerned with the effects of increased global competition. Our analyses thus indicate that the low inflation rate has in many cases been the result of a number of changes in the supply side of the economy. Our forecast is that growth in the Swedish economy will remain high over the coming years. We also envisage inflation rising as capacity utilisation increases.
However it would be clearly a less pronounced one than in the pure cyclical case. 2  BIS central bankers’ speeches  3. Possible explanations for increasing credit-to-GDP ratios  3.1. Supply side considerations: Financial liberalization, the likely explanation for the 1970s and 1980s  A first important reason for an increase in credit volumes can be found in an improved availability of credit. It is well recognized that quantity rationing is prevalent in credit markets.6 Technical innovation and regulatory changes have an impact on the extent of credit rationing and thus very directly on the volume of allocated credit. The financial liberalization of the 1970s and the 1980s and technical innovation in financial services that resulted are therefore natural and plausible explanations for the spectacular credit development observed internationally in the later part of the last century. Here, a permanent adjustment to a new plateau seems to be a viable explanation. This does not mean that such an adjustment process is innocuous from the perspective of financial stability, nor does it imply that the adjustment process cannot overshoot. Indeed, a higher credit-to-GDP ratio means a higher degree of leverage which, in all cases, is likely to increase the fragility of the financial system. 3.2. Demand side developments  Second, structural changes in the demand for credit are also a conceivable driver of an increasing credit-to-GDP ratio. For example, an economy-wide perception of improved growth opportunities justifies a broad increase in borrowing to finance investment projects.

One can thus rationalize an increase in the credit-to-GDP ratio in economies in the process of catching up with advanced economies. This is a plausible element of explanation for credit developments in the case of a country such as Japan in the 1960s and 1970s. It is, however, much less plausible in the case of mature countries such as Switzerland in the latter part of the period of observation (Figure 3). Other structural changes in credit demand are also conceivable. For instance, it can be argued that the financial liberalization of the 1970s and 1980s (together with related sociological developments) has significantly affected the public attitude towards indebtedness making it much more socially acceptable, in particular with regard to consumption financing. Further structural changes on the demand side, such as demographic transitions or an increase in idiosyncratic income risk could lead to an increase of credit demand for consumption smoothing purposes. It is difficult, however, to connect these theoretical considerations with the realities of developed economies in the last decades. In particular the demographic trends observed in advanced countries (also in Switzerland) would imply a structural shift towards less rather than more borrowing. 3.3. The role of the interest rate  Third, the role of the interest rate deserves special attention when thinking about credit developments. The interest rate is of course an endogenous variable when examining the demand and supply for credit. Yet additional insights are possible when considering it separately.