samchain/econo-pairs-v1 huggingface dataset:
It was then that inflation expectations among the public finally trended down to the target of 2 per cent, and that interest rate spreads against Germany were reduced to fractions of a percentage point. This fiscal tightening could in turn be based on the predictability of the new monetary regime that would eventually allow less severe monetary policies. This interaction is rather well understood, if not always acted upon, at the national level. But on the European level there is a twist, as the single monetary policy is now matched by a multitude of fiscal policies. The risk that is often discussed is that the ECB would in the end have to bail out a single fiscally undisciplined country from unsustainable debt. But as the Stability Pact crisis has shown, the more immediate problem might be more prosaic than a cataclysmic debt crisis: the problem might be a bias towards fiscal laxity that has to be counterbalanced by tighter monetary policy - hence a bad policy mix. With a single monetary policy the effect of fiscal stimulus in one country will be diluted in the whole area and will therefore by definition meet with less of a monetary policy response than it would if monetary policy had been national. Furthermore the nature of the political set-up makes it more difficult for the ECB to comment on individual national budgets. This means there will be a strong temptation to “free ride” by expanding the budget at the expense of fellow European nations.

FDI), in line with the progress mode in the financial sector solidity and soundness; recent crises illustrated disruptive capital outflows generated by external debts highly concentrated on short-term maturities. 1.2  Improved reserve and debt management  To mitigate the volatility of capital flows and especially short term flows and reap the benefits of capital account liberalization, one should adopt a risk management strategy that involves a system for monitoring and assessing the risks and liquidity of the economy as a whole, including at a sectoral level. The international community may assist in developing best practices related to reserve and debt management: let me quote for example the more stringent publishing obligations on net foreign exchange reserves adopted within the context of the IMF Special Data Dissemination Standard (SDDS) or the IMF and the World Bank initiative to promote good practices in reserve and sovereign liability management. As recommended by the Financial Stability Forum Working Group on Capital Flows, an improved risk management by the banking sector is desirable, particularly as regards banks in emerging markets receiving flows and international banks extending cross-border credit, with the help of revised Guidelines from the Basel Committee on managing liquidity risk. Let me also note that implementing a strategy assessing the liquidity risk and foreign exposure of the economy as a whole calls for an adequate balance sheet information from both the public and the private financial and corporate sectors.
Svein Gjedrem: The economic situation and monetary policy in Norway Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), for Norges Bank’s regional network, arranged by Kunnskapsparken Bodø, in Sandnessjøen, 4 September 2006. Please note that the text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 16 August and Inflation Report 2/06. *  *  *  The economic situation The cyclical upturn in the Norwegian economy continues. Corporate sector profitability is solid. Companies are borrowing and investing. Employment is rising at a fast pace, unemployment is falling and household demand is still on the increase. Capacity utilisation in the economy is rising and a growing number of enterprises are facing constraints. Statistics Norway’s business tendency survey for the second quarter is still giving positive signals regarding developments in Norwegian manufacturing. A clear majority of industrial leaders assess the general outlook for the third quarter as more positive than for the second quarter. At the same time, consumer price inflation excluding energy products remains low and is lower than the inflation target. Norges Bank seeks to set the interest rate with a view to achieving a reasonable balance between the objective of stabilising inflation at target and the objective of stabilising developments in output and employment.

According to the monetary policy strategy in Inflation Report 2/06, the sight deposit rate should be in the interval 2¾ - 3¾ per cent in the period to the publication of the next Inflation Report on 1 November, conditional on economic developments that are broadly in line with projections. In the first six months of 2006, the key rate was increased twice by increments of 0.25 percentage point. There are prospects that the interest rate will rise further at about the same pace. In line with this strategy, Norges Bank’s Executive Board decided to raise the sight deposit rate by 0.25 percentage point to 3.00 per cent at its meeting on 16 August. Capacity constraints and a shortage of skilled labour were cited as mounting challenges to a number of industries. At the same  4  BIS Review 80/2006  time, corporate earnings are very high. Local government tax revenues have increased substantially. Household and corporate borrowing remains high. Property prices are rising markedly, and the level of building activity is high. Growth among our trading partners is solid, and a number of countries have raised their policy rates. These factors point to a higher interest rate. At the same time, inflationary pressures, with the exception of energy prices, in the Norwegian economy remain fairly moderate. The krone exchange rate has depreciated recently, but over a period of several quarters the krone has varied around fairly strong levels. Exchange rate movements are difficult to project.
What this entails is that if the inflation rate 1-2 years ahead is expected to be below the 2 per cent target, the repo rate will usually be lowered, and vice versa. However, it is important to point out that this rule cannot be applied mechanically and nor has this been the case earlier. It is also important to emphasise that openness regarding our forecasts is a vital part of the monetary policy reasoning, as it enables discussion and assessment of our decisions. I will return to this issue later. Monetary policy therefore focuses on expected future inflation and not the most recent CPI outcome. However, new results can of course affect the assessment of future events. The current economic situation is very important in that it comprises the foundation for our forecasting work and therefore affects the conclusions we will reach regarding future inflation. Nevertheless, we cannot use monetary policy measures to influence economic conditions in the very short term, unless we are prepared to make drastic changes in the interest rate. The Riksbank’s views on inflation prospects are described in detail four times a year in our Inflation Reports. In connection with the publication of two of these reports there is also a public hearing of the Riksbank Governor in parliament by the Riksdag Committee on Finance. The initiative to these meetings came from the Riksbank, as a way of creating further clarity and transparency with regard to monetary policy.

Our scope of responsibilities and stakeholder groups have also expanded in tandem. In order to ensure continuous integrity safeguards, the Bank has refreshed its framework and guidelines to include the procurement process, project management and whistle blowing to mitigate current and emerging project risks. Third parties which are engaged by the Bank must adhere to ethical practices as outlined in the vendor code of conduct, to be made publicly available soon. In closing, I would like to express my deep appreciation to Assistant Commissioner Tuan Mohan and his colleagues from MACC. We are very privileged to have had the opportunity to benefit 1/2  BIS central bankers' speeches  from their insight and experience and it will help us do our part in combating corruption. May this occasion foster an even closer cooperation between the Bank and MACC, and herald many more joint events to come. 2/2  BIS central bankers' speeches
Therefore, the existing rules should be applied, and they should not be stretched to a point where they would lose their credibility. There is built-in flexibility in the Stability and Growth Pact to account for the cost of major structural reforms – but it cannot be based on empty promises. The sequencing should be clear. First, reforms need to be adopted and implemented. Then,  3  Euro area GDP is expected to recover at a pace of 1% in 2014 and 1.7% in 2015 according to the latest ECB staff projections. 4  Total investment in the euro area has shrunk by almost 20% since the peak in economic activity in 2008. In addition, total factor productivity has also been disappointing in the euro area since 2000: it grew by 0.45% annually from 2000 to 2007 before receding by 0.47% annually between 2007 and 2012 (source: Ameco database, European Commission). 5  See Barroso, J.M., “Remarks by President Barroso on the Country Specific Recommendations 2014”, speech given in Brussels on 2 June 2014. BIS central bankers’ speeches  3  the cost of such a reform, independently assessed, could be taken into account under the Stability and Growth Pact, with due attention to the limited fiscal space provided by the high debt levels. Economic stability is a necessary condition for growth, but is not sufficient alone. For our economies to grow out of high debt and unemployment, and thereby ensure social stability, we need to do more.

Racing to the top: “convergence process 2.0” The challenges I outlined a minute ago call for an answer that goes beyond the necessary application of the existing rules of EMU. An answer that not only fosters stability and confidence today, but also in the future. An answer that gives EMU the institutional shape it needs to be a successful project in the long run. This answer could in my view take the form of what I call “convergence process 2.0”, which should have an agreed timeline and milestones. To run the political triathlon of EMU and perform well in all three disciplines, there needs to be a convergence of economic policies and structures. Moreover, joint action is of the essence. Let me be clear on what I mean by convergence. The crisis has shown the fragility of the convergence of economic outcomes; it can unravel quickly in the face of exogenous shocks. Convergence can only be sustainable if it is associated with a commensurate deepening of integration, if it is a race towards best practice institutions and policies rather than towards mere nominal outcomes. In this context, structural reforms, if properly designed, lead to greater prosperity in each country and, at the same time, ensure greater resilience of EMU as a whole, thereby contributing to economic and social stability. Growth and stability are therefore mutually reinforcing. With regard to convergence in economic structures and policies, the starting point has to be decisive action at national level.
German inflation has been lower under the aegis of the ECB in the past 20 years than in the two preceding decades: 2.9% on average from 1979 to 1998 compared with 1.4% since 1999. The permanent stability of exchange rates between our economies is an undeniable advantage for German exporters: in 2018, 36% of German exports were to euro area countries. The low level of interest rates is itself partly a reflection of Germany’s large savings surplus. And Switzerland, another country that is in surplus but that is not part of the euro area, has to apply interest rates that are even more negative! Let us be in no doubt: the euro is an asset and not a burden for Germany. This brings me finally to the fourth cliché: the ECB’s monetary policy has betrayed its mandate. This idea was propagated in a recent “memorandum” by a number of former central bankers. I have every respect for them as people,  Page 4 sur 7 but I disagree with their argument. They unfortunately chose to ignore the positive results of non-standard monetary policies. Jean-Claude Trichet himself, who can hardly be accused of laxity, underlined these benefits, and I would just like to remind you of them: estimates of the effectiveness of the ECB’s policies put the impact on growth at around 2.5 percentage points and the impact on inflation at between 1 and 1.5 percentage point for the period 2014-18. What is more, since 2013 the euro area has created 11 million jobs.

A dynamic economy requires a strong banking industry; it's true in France, and it's also true in Germany. Undeniably, euro area banks are stronger than they were ten years ago. As a result of regulations and of their streamlining efforts, they  Page 5 sur 7 were able to significantly shore up their balance sheets. In particular, their solvency and liquidity have improved, while the weight of NPL has drastically declined: their Common Equity Tier 1 ratios (CET1) rose from 9% at end-2009 to 14.6% in June 2019. In addition, the major German banks themselves have seen their NPL amount fall more than twofold over the past five years, sliding from EUR 81 billion at end-2014iii to EUR 33 billion at end-March 2019. Euro area banks are nevertheless experiencing a serious problem of profitability, which is a cause for concern, both for you and us. I would like to outline three challenges that are often mentioned in this regard: low interest rates, the digital challenge, and consolidation. Let's start with the subject that is perhaps the most obvious to you: low interest rates. Negative rates are not an end in themselves, and we, as central bankers, are aware of the difficulties this represents for banks. However, I would like to qualify this statement. First, the effect of monetary policy on banks is not limited to exerting pressure on the net interest margin.
2  BIS Review 61/2006  entry into the euro area have made the Polish T-bond market, with the average daily net turnover of PLN 6 billion (the largest and the most liquid market in the region), more attractive to foreign investors. EU membership has enabled institutional investors, that are allowed to invest in instruments issued within the Community, to increase their exposure to Polish securities. In 2004, non-residents’ investments in T-bonds issued in Poland rose by about PLN 20 billion, and in 2005 - by a further PLN 7 billion. The beginning of 2006 was also marked by new records on the Warsaw Stock Exchange amid purchases made by foreign investors and domestic investment funds. In 2005, the number of IPOs amounted to 35 and the market capitalization increased by almost 50%. However, one should not take these favorable global liquidity conditions for granted. Federal Reserve has already raised the interest rate to 5 percent. The ECB is in the process of normalizing interest rates and the Bank of Japan has announced an end to quantitative easing and markets started to price in first increases of BoJ interest rate. This may expose some emerging markets, which have weak fundamentals to a change in investors’ sentiment, may lead to the depreciation of local EM currencies and a significant drop in market liquidity. 11 Some risks are also related to the changing structure of our financial markets.

They would state that that the ultimate responsibility for the crisis rests with monetary policy. Specifically, according to this view, by keeping interest rates too low for too long a time, central banks have tolerated – or even condoned – the build-up in risk and financial imbalances. They “created”, so to speak, the credit bubble which burst in 2007. Let me state clearly that I don’t share this view. It is very apparent that some features of recent financial innovation – including securitisation – have contributed to excessive risk taking and increased financial fragility. They explain why the crisis has been so severe. It is also striking that real – not only nominal – interest rates have stayed at low levels for an extended period of time. Over the medium run, long term real interest rates are beyond the control of monetary authorities. They have been driven by the continuous increase in saving rates which occurred over the last decade, especially in emerging economies. This created a demand for safe and liquid assets which could not be met by equivalent supply in those countries. Because of this “asset shortage”, saving flows were directed towards industrialized countries, first of all the USA. At the same time the financial system in those industrialized countries worked to produce “complex” assets which looked safe and liquid – and were rated as such. Apparently, supply matched demand. But we know now that this was an illusion. Complex assets were neither safe nor liquid.
In order to function democracy requires that citizens can hold decision-making accountable at the level at which these are taken. But today we can only elect and sanction at the national level, while decision making is widely done at the European level. Therefore, we have to enhance the decision-making process at the European level through appropriate democratic control measures and more direct election and sanctioning features. The solutions to these issues are not simple, and reasonable people may well disagree on their form. This forum is an ideal place to debate what laws, rules and institutions we need to put in place to strengthen the integrity of the Union. I promised earlier that I would give you something to argue about tonight! I believe the vision of a united Europe is worth striving for. To make this vision come true, we also need to understand the forces behind the populist dissatisfaction with the Union, and not dismiss them. The referendum debate in the United Kingdom has been acrimonious. In striving to deliver a united Europe, we need to be united in ourselves and build a shared EU-wide identity that delivers the necessary democratic legitimacy to the institutions. Strive mightily, but eat and drink as friends. 2  BIS central bankers’ speeches

Of course, as a central banker, I am fully aware that identifying asset bubbles is not an easy task and it may also be challenging to convince the public and politicians about the necessity of raising policy rates at a time when economy is booming but the prices of goods and services are stable. However, the recent crisis has demonstrated that central banks may ignore imbalances in financial markets at their own peril. Today, we have a unique opportunity to discuss the future of the global financial system and the role and responsibilities of the emerging economies. I believe that the timing and the framework of this conference will provide ample opportunity for sharing new ideas and highlight some critical lessons to reshape a better global financial system for a more resilient and stable global economy. Once again I extend my warm welcome to all participants. I also want to thank the distinguished participants for their valuable contributions. I hope you enjoy both the conference and your stay in Istanbul. 2  BIS Review 120/2009
But there were also important secondary effects on the relationships between the major industrial countries’ currencies. The dollar and sterling - which have in fact been reasonably stable against each other since we came out of the Exchange Rate Mechanism - strengthened, notably against the euro, notwithstanding reductions in our relative interest rates, perhaps on the expectation that an earlier or stronger pick-up in domestic demand would keep our economies operating closer to capacity than in the Eurozone. And the yen, which had been notably weak on the back of Japanese recession, has subsequently picked up as the prospect of economic recovery there improved. It is the strength of sterling’s exchange rate which gives rise to the most vociferous complaints. I am only too well aware that for many of the internationally-exposed sectors of the UK economy most of agriculture, much of manufacturing industry, and some services sectors - these developments came as a series of hammer blows - of varying intensity depending on the particular international orientation of the business. Companies trading with, or competing against, much of East Asia, but also other emerging and transition economy markets, saw their markets collapse and prices fall dramatically given the massive falls in many partner-country exchange rates. Trade with the Eurozone - by far our largest trading partner - was also adversely affected, until recently, by sluggish domestic demand in the major Continental countries and by the weakness of the euro.

This crisis has highlighted the vulnerabilities that may emerge in a monetary union lacking common fiscal and financial policies. It is thus worth considering a greater transfer of sovereignty in these areas. On the home front, the challenges the Spanish economy faces are enormous. The latest episode of the sovereign debt crisis is severely impacting agents’ confidence and the economy’s financing conditions, placing it in a position of extreme vulnerability. Following two consecutive quarters of negative growth, our economy is once again in recession and the prospects of recovery are not immediate. Moreover, the prolonged cyclical weakness is preventing swifter headway in redressing public finances and in reducing private-sector debt, and casting doubt on the resilience of the financial system. That has triggered tensions on the debt markets and activated perverse feedback loops. Lastly, the Spanish economy risks seeing its capacity to obtain external funding severely blocked. While in the short run this does not actually constrain ordinary funding flows (given the banking system’s possibility of resorting to ECB funding), the prolongation of such a situation will be extremely harmful in the medium term. Spain is in this situation despite the fact that its authorities have implemented far-reaching reforms in recent years to resolve the inefficiencies in its economic functioning, to correct the serious deterioration in public finances and to redress and restructure the financial system, in order to restore financing flows. Resolving these problems is taking longer than expected, but that should not lead to reform fatigue.