samchain/econo-pairs-v1 huggingface dataset:
Second, crises typically reduce potential supply growth, for example by disrupting the supply of credit to productive firms. A failure to take financial instability into account creates an unduly optimistic view of where the Taylor frontier lies, especially when it is based on data drawn from a period of stability. Relative to a Taylor frontier that reflects only aggregate demand and cost shocks, the addition of financial instability shocks generates what I call the Minsky-Taylor frontier, shown in Chart 5. This reflects the influence of misperceptions, financial cycles and the search for yield. On the Minsky-Taylor curve, for a given degree of inflation variability, output is more volatile in the long run than on the simple Taylor curve. Ignoring financial instability might mean choosing a policy reaction function that is believed to imply a trade-off at point O in Chart 5. In fact, the true trade-off is given by point P. Once that is understood then the optimal policy reaction function might well change and correspond to a trade-off at point Q. 22 The examples I have given suggest the possibility that there is a trade-off between meeting the inflation target in the short run and reducing the risk of a financial crisis in the long run. To shed light on whether that possibility warrants a change to the way we implement inflation targeting, I want now to conduct a counter-factual thought experiment and ask whether monetary policy before 2007 might have moderated the crisis if it had not simply pursued a target for inflation.

Since the onset of the crisis, to prevent market-wide liquidity problems from turning into solvency problems for individual banks, the Eurosystem introduced, as of October 2008, a  discipline in the unsecured money markets as a provision of ex ante incentives to mitigate risk of borrowers’ investments; see M. Hoerova and C. Monnet, “Money market discipline and central bank lending”, presented at the workshop on the “Post-crisis design of the operational framework”, mimeo, European Central Bank, 2011. 17  The effects of asymmetric information and counterparty credit risk on the interbank market functioning are analysed in F. Heider, M. Hoerova and C. Holthausen, “Liquidity hoarding and interbank market spreads: The role of counterparty risk”, ECB Working Paper No. 1126, 2009. 18  See B. Cœuré (2013), “The implications of bail-in for bank activity and stability”, opening speech at the conference on “Financing the recovery after the crisis – the roles of bank profitability, stability and regulation”, Bocconi University, Milan, 30 September. 19  The LOLR should lend freely against good collateral, valued at pre-crisis levels, and at a penalty rate. These conditions are due to Bagehot (1873) and are also presented, for instance, in Humphrey (1975) and Freixas, Parigi and Rochet (2004); see W. Bagehot, “Lombard street”, H.S. King, London, 1873; Humphrey, T. “The classical concept of the lender of last resort”, Economic Review, 61, 2–9, 1975; and Freixas, X., Parigi B., and J.-C. Rochet “The lender of last resort: A 21st century approach”, Journal of the European Economic Association, 2: 1085–1115, 2004.
And as we continue to invest in the future – in skills, in technology, and in infrastructure, we will emerge a stronger and more dynamic economy. 7/7  BIS central bankers' speeches

As you well know, in response to the financial crisis, measures were taken along different lines, which helped solve the main shortcomings affecting the Spanish banking sector at that moment in time and positioned it in a good starting point for the implementation of the SSM. In addition to measures taken to reduce the level of exposure to real estate development and to drive greater consolidation in the sector, a major effort was made in the field of recapitalisation, which went beyond the actions taken by public authorities. Since 2008, the sector has set aside new provisions for outstanding loans or foreclosures for approximately € billion. And, after absorbing this substantial balance sheet clean-up into results or reserves, banks have managed to increase their own funds by approximately € billion over the same period. However, a key part of the reform was the overhaul of the regulatory framework of the saving banks’ sector, which represented almost half of the Spanish banking system. As you are aware, this reform aimed at separating the ownership of the banking institutions from their management. Former saving banks (except for two small institutions) have all become banking foundations whose main asset is the participation in credit institutions. The latter are managed independently of the foundation and take the form of regular corporations which, in most cases, are or will soon be listed in capital markets.
BIS central bankers’ speeches  3

Anita Angelovska Bezhoska: Opening and closing address presentation of the EBRD Transition Report 2021-22 Opening and closing address by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the presentation of the EBRD Transition Report 2021-22, Skopje, 24 March 2022. ***  Opening address Dear colleagues, ladies and gentlemen, At the beginning let me thank you for the kind invitation to address you at the launch of the latest Transition Report that analyses and measures the progress of transition economies on their way towards higher income levels. It is indeed my privilege. For us, in the transition world, the Report has always been an important guideline, both with respect to advices on how to address the deep-seated structural issues, but on cutting edge maters as well. In the current context, it even gets more prominence by providing valuable insights in the extent to which the unprecedented shock have derailed policymakers from structural agenda, which is a key precondition for faster transition. Similar to most of the countries in the world, the emergence of the pandemic has hit Macedonian economy severely. Although it caught us on a strong footing with solid economic fundamentals and absence of any significant disequilibria, the economic activity plunged by 6%-which has not been observed in the last two decades. Despite the rebound during last year, not all economic losses were recovered.
I want to pause here to acknowledge that, as an overnight rate, SOFR has been the subject of criticism for sometimes being volatile from day to day, especially near quarter- and year-end. I think such criticism is misplaced. Most users of SOFR don’t use a single day’s rate to determine their payments; they use average rates, which are not much affected by daily volatility. Parallel work has been going on in other jurisdictions whose currencies are used in major benchmarks. Working groups for sterling, euro, Swiss franc and yen IBORs11 have all endorsed overnight rates as their preferred alternatives to those rates.12 Three of the alternative rates are (or will be) administered directly by central banks, reflecting the recognition that crucial interest rate benchmarks are a public good, and their integrity and sustainability are key to financial stability. I’ll note that, at the outset of these reform efforts, the idea was not to completely replace LIBOR. LIBOR was being reformed to address its weaknesses as far as possible in the expectation that it could continue to be used. Efforts to “fix” LIBOR proceeded alongside the program to identify better alternatives. The idea was that if there were a more attractive alternative, firms would gradually move away from LIBOR of their own accord, with a minimum of disruption, and that LIBOR then would be seldom, if ever, used. LIBOR could still be inherently unstable despite the 2/8  BIS central bankers' speeches  reform efforts.

Zeti Akhtar Aziz: Enhancing financial integration in the new Nusantara Luncheon address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Malaysia-Indonesia Investment & Finance Summit, Jakarta, 18 June 2007. *  *  *  Ladies and Gentlemen: There has been a long history that transcends several centuries in which international trade flourished in the Malay archipelago . The South East Asia region contained the important maritime routes for the trade between the East and West. This had brought with it, robust economic growth and regional prosperity. Today, the South East Asian region – the Nusantara region continues to be one of the world's most dynamic regions. Since the turn of this century, our economies have re-emerged to be amongst the fastest growing in the global economy, amidst new challenges and fundamental economic and financial developments. Our steadfast reform and restructuring efforts have rewarded us with strengthened macroeconomic fundamentals and sound and stable financial systems. These efforts continue to be augmented by the strong the foundations that the region possesses, namely abundant natural and human resources, high savings rates and the ingrained aptitude to persevere and rise to the challenge. The ASEAN 5 group of economies that includes Indonesia, Malaysia, the Philippines, Thailand and Singapore have now for an extended period of time been on a steady growth path. A more recent phenomenon in this decade, has been the increased economic and financial linkages within the region spurring further regional economic and regional financial integration.
According to the August Inflation Report forecasts, they will continue to ease in the period ahead. BIS central bankers’ speeches  1  •  Asset prices have risen significantly, boosting economy-wide wealth. Since 2009, UK equity prices have risen by over 50%, UK ten-year government bond prices by around 15% and UK house prices by around 20%.1  •  Perhaps most striking of all, employment in the UK has risen by almost 1.8 million since its trough and by around 750,000 in the past year alone. The unemployment rate has fallen from a peak of 8.4% to 6%. According to the August Inflation Report forecasts, it is expected to fall further in the period ahead, to close to 5%. Economists since Arthur Okun have often combined macro-economic measures into a single index.2 It speaks volumes for economists’ psychological state that they tend to call these “misery indices”. Although something of a dog’s breakfast, misery indices provide a simple summary statistic of macro-economic health. I have constructed an index of unemployment, inflation and GDP growth in the UK. The higher GDP growth, and the lower unemployment and inflation, the higher is the index and the healthier is assumed to be the economy. The choice of these measures, and their weighting, is rather arbitrary.3 To buck Thomas Carlyle’s image of the economist as dismal scientist, let’s call this an “ecstasy index”. Chart 1 plots the ecstasy index for the UK since 1970.

The board is also responsible for the follow-up of recommendations made by the ESRB. A further euro area governance reform relates to the Single Supervisory Mechanism (SSM) which involves the establishment of effective and early intervention mechanisms. The SSM endows the ECB with the ultimate responsibility for specific supervisory tasks related to the financial stability of Euro area banks. The rationale for a single supervisory mechanism comes from the increasing interconnectedness between financial institutions and markets across the euro area. In addition, the proposed banking union does not only provide for the shifting of supervision of banks to the European level, as in SSM, but also brings up for consideration the introduction of an integrated system of bank crisis management and deposit protection. 4  BIS central bankers’ speeches  Various recent reports, such as those authored by Liikanen, Volcker and Vickers, recommend a structural reform of the banking sector. The proposed reforms are designed to limit the likelihood of banking crisis, improve the resolvability of banks and safeguard taxpayer interests. Furthermore, the Liikanen Group concludes “that it is necessary to require legal separation of certain particularly risky financial activities from deposit-taking banks within a banking group.” Conclusion Regardless of the particulars of the eventual governance changes, it is clear that the economic and financial crisis has been the spark for reforms that may reshape economic institutions and financial supervision at both the national and international levels.
The Executive Board’s monetary policy decisions are normally recorded in separate minutes that are published about a fortnight later. We have chosen not to publish any minutes after the interventions. This is primarily because, as a monetary policy instrument, the effective implementation of interventions is a considerably more complex matter than a repo rate decision. As you know, a central bank does not control the currency market in the same way as the market for overnight loans. By setting the repo rate, the Riksbank determines interest rates in the market, whereas in currency interventions the Riksbank is one of many players. Releasing information that might weaken the Riksbank’s market position is therefore a problem. Preparations for a currency intervention normally include, for example, a strategy for the intervention’s size, the criteria for how and when the interventions should be made, the choice of currencies, deliberations about counterparties and contacts with other central banks. In my view, it would not under normal circumstances be reasonable to publish this type of operative deliberation. That might prejudice the possibility of achieving the approved or envisaged goal. Another question concerns the Executive Board’s position on the publication of minutes when the Board’s discussion has more to do with matters of principle, including information about the views of individual members. This, too, is a complex issue because information of this type can also affect the effectiveness of the measures that are taken.

A factor that may have contributed to the exchange rate pass-through to consumer prices being smaller after the Asian and Russian crises is that importers turned away from traditional trading partners in the United States, for instance, in favour of countries whose currencies have not appreciated against the krona. Our imports from Eastern Europe and Southeast Asia, for example, have increased markedly since 1995. It is conceivable that the krona’s depreciation at the time of the Asian and Russian crises has been exaggerated because the TCW index measures the exchange rate against the most important industrialised countries and uses weights based on export and import shares from 1989-90. In order to throw light on this, we have constructed a simple, broader preliminary import-weighted index that covers 44 countries. The results again show that the krona was weak in 1998 and 1999 but not as weak as the TCW index indicated. One reason why the exchange rate pass-through to consumer prices became smaller than expected may have to do with changes in the composition of imports. There are, however, also reasons for supposing that the krona’s direct pass-through to inflation has decreased. Simple estimations indicate a marked reduction in the early 1990s, followed by some further fall (Fig. 2). A variety of factors may have contributed to this. •  Exchange rate movements, upwards or downwards, may now be perceived as a more transient phenomenon, whereas the devaluations under the fixed exchange rate regime were regarded as more permanent.
Svein Gjedrem: Perspectives on managing the Government Pension Fund Global Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Norwegian Polytechnic Society, Oslo, 2 November 2010. *  *  *  The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. A thought-provoking finding in economics is what is called “the resource curse”. In a 1995 study the economists Jeffrey Sachs and Andrew Warner 1 demonstrated that resource-rich countries generally do not become wealthier. Natural resource wealth is not necessarily a blessing, but is more often than not a curse. They argue that spending this wealth crowds out industries that are exposed to international competition, thereby reducing growth capacity – the so-called Dutch disease. Halvor Mehlum, Kalle Moene and Ragnar Torvik 2 find that the relationship between economic development and natural resources is more complex; many countries become poorer after discovering abundant natural resources, others become wealthier. They conclude that the quality of the institutional framework is decisive. Vast natural wealth can often induce interest groups to devote considerable time and energy to rent-seeking, weakening a country’s productivity. High quality institutions rein in this tendency. The oil fund, now called the Government Pension Fund Global, has helped Norway to escape the resource curse. I shall first speak about how the mechanisms for the Fund were developed.

The BIS Review 7/1999  –3–  exaggeratedly strong exchange rate against the core European currencies – reflecting inter alia market misperceptions about the prospective strength, or rather weakness, of the euro – was itself moderating external demand, especially for manufacturing output, while at the same time exerting a restraining price effect on domestic inflation. But domestic demand growth – including demand for services – continued to accelerate through 1997, and that was the background to the tightening of monetary policy in 1997. We could not avoid that tightening, despite the uncomfortable sectoral imbalance within the economy. To have done so would, as I have said elsewhere, have put the whole of the economy – including the internationally exposed sectors we would have been trying to shelter – at risk of accelerating inflation, so it would not have helped even those sectors in anything other than the short term. Meanwhile, in the euro-zone things were very different. Demand and output growth in the major continental economies remained generally fairly sluggish for much of the period, only really starting to pick up towards the end – helped by relatively weak exchange rates. Unemployment, which is much the most urgent and important issue confronting Europe, actually increased; and, despite some improvement over the past year or so, it remains at or close to double digit rates in all the largest euro-zone countries. Inflation against this background remained low, tending lower – as did interest rates.
Sources: Ministry of Finance, Statistics Norway and Norges Bank  The fund’s investment management model is also designed to enable future generations to benefit from this wealth. First, there has always been broad political consensus about the development of the fund’s strategy. The strategy changes have been based on thorough studies. All important decisions are taken by the Government and endorsed by the Storting (Norwegian parliament). Norges Bank has an advisory role. The authorities have stood fast at the crossroads even during demanding periods. This has served us well. A good example is the decision in 2007 to increase the equity share from 40 to 60 percent. This important change was implemented by making large purchases of equities in the period to June 2009, about the time when markets bottomed out after the financial crisis. In retrospect, we can see that the fund bought equities on the cheap in that period, and has posted large gains over the past decade. Second, Norges Bank’s mandate is clearly defined. The capital is to be invested with one – and only one aim: The highest possible return at an acceptable risk. There has been broad political agreement that the fund should not be used to promote other objectives. A clear and unequivocal objective enables the fund’s owners to evaluate Norges Bank’s performance as investment manager. If there were several different objectives, they would have to be weighed against each other. That would be a demanding task for an investment manager. Political trade-offs are a matter for the political authorities.

Perhaps the ability to pay high wages has been more dependent on the oil industry than thought earlier. Going forward, the key to success for Norway will be the same as for other countries: We must make the most of our number one resource - labour. The value of Norway’s human capital is around three times the sum of its natural resources, production capital and financial capital.7 Our future welfare level therefore depends on how many are in work and how productive they are. Employment in Norway is no longer as high as it once was. Today, a smaller share of the population aged between 25 and 54 is employed than 20 years ago (Chart 17), and the share is now higher in a number of countries, not least because female employment abroad has also risen. At the same time, the share of adult men in work in Norway has fallen. 7 See Meld. St. 29 (2016-2017), Long-term perspectives for the Norwegian economy 2017. 16  NORGES BANK  Chart 17a No longer at the top of the employment chart. Employment. Share of population aged 25-54.
An investor such as the Government Pension Fund – Global will earn more in the long term because of wide fluctuations in equity values. Many investors have suffered losses on equities. As a result of this experience, required returns will be higher in the future. Under the Fund’s investment strategy, more equities are purchased when equity prices fall and fewer when prices rise. Thus, the Fund purchased a large volume of equities in the period 2001-2003 and is buying a considerable volume now. Of the equities now held, 40 per cent were acquired in 2008 when prices were falling. The Fund’s average ownership share in international equity markets was ¾ per cent at the turn of the year, with allocations to equities accounting for close to 50 per cent at that time. The Fund has a longer investment horizon than the vast majority of other market participants. The important question is therefore how sound today’s investments prove to be in the long term. The government now owns a fair share of the global business sector. This represents real value that will provide a return reflecting both global economic growth and the risk related to fluctuations in equity prices. The financial crisis is having a broad impact and most forms of investment are falling in value. State ownership in the Norwegian business sector and its share of subsea petroleum reserves on the continental shelf have declined in real value. For large investors, there have been few places to hide from the panic that has gripped financial markets.

This virtually eliminates the possibility of one person holding a double role as both general manager and as chair of the Executive Board. The executive director’s investment mandate sets rules for the Fund’s choice of investments and risk limits for NBIM’s investment management. The financial crisis revealed that the risk measures used previously, and which were based on what was regarded as best international practice, were inadequate. The Executive Board has therefore also set supplementary risk limits, for example for the size of the percentage deviation between the actual portfolio and the benchmark portfolio, the degree of leveraging and liquidity requirements for the Fund’s investments. The mandate is also intended to ensure that active  BIS Review 53/2009  1  risk positions are taken in a balanced manner and to avoid active strategies with a considerably skewed outcome set. NBIM’s monthly and quarterly reports to the Executive Board are to reflect the guidelines in the investment mandate. The results for 2008 were influenced by the global financial crisis. The total return on the Fund was a negative 23 per cent, the weakest in the Fund’s history. There was a negative return of 41 per cent on the equity portfolio, while the return on the fixed income portfolio was close to zero. The real rate of return after costs has been one per cent since 1998. International stock exchanges lost more of their value in 2008 than in any other single year in recent history. Absolute results, especially with regard to equities, were highly abnormal.