samchain/econo-pairs-v1 huggingface dataset:
They are an asset item on our balance sheet and are offset by the increased money supply as a liability item. If we were to make an unrequited transfer of our foreign currency to a sovereign wealth fund, our equity would reduce or even become negative. The sovereign wealth fund or the Confederation would therefore have to buy the foreign currency from us. But where the money would come from for this is not clear. In principle, the Confederation could borrow from the capital markets, though this is unlikely to be feasible due to the debt brake. Or, we could grant the Confederation a loan, but this would be equivalent to state financing via the central bank’s printing press, which is prohibited under the National Bank Act. BIS central bankers’ speeches  3  A further problem would arise if, in the future, a reduction in the money supply were to become necessary for monetary policy reasons. The money supply was originally expanded to satisfy the increased demand for francs. However, it is possible that demand may also fall again. If there were to be a sharp decline in demand, the SNB would have to reduce the money supply again in order to keep monetary policy conditions stable. The simplest way would be to buy back Swiss francs, namely by selling foreign exchange reserves. But if the foreign exchange had already been transferred to a sovereign wealth fund, this would no longer be possible.

The first is the negative interest rate, which is currently –0.75%. This is charged on sight deposits held at the SNB by banks and other financial market participants. The second is our willingness to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. Our monetary policy is thus expansionary and aimed at easing pressure on the Swiss franc, thereby ensuring price stability in the medium term. Many feared a recession on the back of the discontinuation of the minimum exchange rate and the rapid appreciation of the Swiss franc. Yet our economy grew by 0.9% last year. This may not be a strong growth rate, but it is still a good sign. On the one hand, it reflects the flexibility and adaptability of Swiss companies and employees. On the other, the economy was also supported by our expansionary monetary policy. This contributed to the weakening of the Swiss franc over the course of the past year. It remains significantly overvalued, however. The slight increase in economic output in Switzerland is a positive development, particularly in view of the continued tentative recovery of the global economy. This hesitant recovery was accompanied by a collapse in commodity prices in 2015, in which both weak demand and increased oil production played a role. The drop in oil prices and the appreciation of the franc following the discontinuation of the minimum exchange rate pushed inflation in Switzerland into negative territory. Both factors produce a one-off downward adjustment in prices.
But this would have led to fluctuations in output and employment. Household and enterprises might have continued to increase their borrowing. In addition, we might have been confronted with waning confidence in financial markets and a weaker krone. Once the effects of high wage growth had fed through to prices and pushed up inflation, the interest rate would have been raised irrespectively, perhaps to a higher level than has been the case. The end result of such a policy would have been wider fluctuations in aggregate demand, output and employment. As the inflation target gains confidence and credibility also among the social partners, the interest rate will make an even greater contribution to stability in the real economy. Overall employment is influenced by wage formation. Monetary policy cannot prevent an increase in unemployment that is caused by a wage-driven cost shock. Output gap for the euro area, the OECD countries and Norway.

Improved competitiveness and the development of the oil industry facilitated the rapid integration of new technology by firms. Productivity growth remained relatively high up to around 2005. But since then it has declined. The decline has been more pronounced than among our trading partners. The phasing-in of a highly profitable oil industry and higher petroleum revenue spending via the central government budget has amplified the structural shifts in the Norwegian economy. Services production has increased. When the financial crisis hit, industries that do not benefit from oil sector demand or public spending stagnated. The differences in growth across industries has thus widened since 2008. 12  BIS central bankers’ speeches  Chart 14  Labour-intensive sectors with relatively low productivity have accounted for a large share of employment growth in recent years. Employment has shown only moderate growth in industries with a high productivity level, such as manufacturing and engineering. Productivity growth has stagnated in most OECD countries. Goods production has declined, while services production has increased, as in Norway. In many countries this shift was based on borrowing rather than increased earnings. After the financial crisis, funding sources dried up and these countries were faced with a debt crisis. Fundamental structural problems with eroded competitiveness came into evidence. These countries must not only reduce their debt levels, but also engage in a painful process of structural adjustment. Only then can these economies find the path to renewed growth. The Norwegian economy has experienced virtually 20 consecutive years of growth.
An attempt to increase output beyond the level that is consistent with stable inflation will over time lead to steadily rising inflation. Economic agents will eventually incorporate higher inflation into their inflation expectations. In the long run, the result will only be higher inflation, not higher employment. Output and employment will return to their supply-determined level. In the long term, output is determined by the supply of labour, capital, technology and adaptability. Monetary policy has little effect on these factors. In other words, there is no permanent trade-off between inflation and output. Very high inflation is a wartime phenomenon and a phenomenon of the 1970s and 1980s. Substantial real economic losses have followed in the wake of high inflation. High and variable inflation impairs the function of prices as an information vehicle. Over time, monetary policy can determine the inflation rate. Low inflation is monetary policy’s contribution to stable, high economic growth over time. The responsibility for interest rate decisions was delegated to Norges Bank pursuant to the amendment to the 1985 Norges Bank Act and through the change in its application in 1986. The interest rate would no longer be an instrument of industrial or social policy. The last devaluation took place in 1986 after a fall in oil prices. We then shifted to a fixed exchange rate regime. The Norwegian economy had to go through an extensive turnaround operation. The objective of monetary policy was to provide the economy with a nominal anchor.

To provide you with some insight into how we work when we make projections for the Norwegian economy, it may be practical to use a tripartite approach: the short-term or current situation, the medium-term or projection period and finally what we call the long-term. The dividing lines are not clearly defined, but are to some extent overlapping as indicated in the chart. Knowledge about the current economic situation is absolutely essential to making projections of economic developments that are useful for monetary policy. We must form a picture of capacity utilisation in the economy and whether it is increasing or decreasing. We must also try to identify the driving forces or disturbances that influence developments. A macroeconomic model will be a useful tool in this connection. Nevertheless, thorough analyses of available economic statistics are the most important source when we are assessing the current situation. To obtain a good picture of the current situation, it is important to consider developments in context and to distinguish between genuinely new information and noise. There is always uncertainty associated with statistics and the quality can vary depending on the source. Frequency and the time from measurement to publication also vary considerably. Economic data are published with a time lag and are often revised. A very useful cross-reference and alternative information channel to official statistics is therefore our own regional network which consists of enterprises, organisations and local authorities throughout the country.
The fact that the major Swedish banks do not base their funding on traditional bank deposits (which are usually considered to be very stable) but on market borrowing (which is much more volatile) is itself worth noting. On this point, Sweden clearly differs from the pattern seen in many other countries (Figure 5). However, this is essentially a reflection of the structure of household saving in Sweden. We Swedes do not deposit our money in the bank, we invest in funds. Private fund investment is thus far more widespread in Sweden than it is in most other European countries. So our savings do not arrive at the bank directly as normal deposits, but take an indirect route via the funds and insurance companies that manage our savings, not least the AP funds. This is because they invest a portion of the money they manage in the banks’ various borrowing instruments. This provides us with at least a good part of the explanation as to why our banks borrow more on the capital market and less from households than banks  BIS central bankers’ speeches  5  in many other countries do. But it does not explain why borrowing takes place abroad – and this is exactly the problem that I wish to address here. Have the banks become too large? Let me first make a small digression.

As the Swedish banks have grown so rapidly in recent decades, mostly by expanding overseas, it would not be out of place to ask whether they have become too large for Sweden. Is there, perhaps, a limit for how large a banking system can be in relation to the total production capacity and fiscal capacity of one country? The risks for society may, quite simply, become too high. Experiences from Iceland and Ireland during the last crisis undeniably suggest this. And the Swedish banks are certainly large. The combined balance sheet totals of the major banks are equivalent to slightly more than four times GDP (Figure 6, left-hand diagram). This multiple is among the highest in Europe, in the same order of magnitude as the United Kingdom and the Netherlands (prior to the crisis, Iceland was in ninth place). However, I think that we should perhaps be cautious in assessing the risks in a banking system merely on the basis of the size of its balance sheets. For example, imagine that Nordea moved its head office from Stockholm to Helsinki, suddenly becoming a Finnish bank. This would take Sweden below the European average (Figure 6, right-hand diagram). Would the level of risk in the Swedish banking system then have decreased considerably? I don’t think so. The risks in a large banking system have many other dimensions than just balance sheet total in relation to GDP. Large banking systems can be associated with low risks and small banking systems can be associated with high risks.
In this regard, there is broad consensus that the reform should be aimed at reducing the number of rules around a single objective (reducing debt) and an operating rule (the spending rule), so as to ensure that public spending does not exceed nominal long-term GDP growth and that it stays below it in countries with high levels of debt. Moreover, beyond the simplification of the fiscal framework, it would also be necessary to move towards more automatic implementation, so as to avoid excessively discretionary application. European financial architecture reforms also notably include those relating to the completion of a full-fledged Banking Union in the euro area. The cornerstone pending approval for this 9  Union is a fully mutualised European Deposit Guarantee Scheme. In this regard, it is worth reiterating here that the financial channel, and the credit channel in particular, should be a means of risk-sharing among private agents in the European economy to complement and reinforce the public channels I mentioned earlier. Moreover, these private channels are particularly important in episodes of deep-seated economic contraction, insofar as they mitigate the possibility of these episodes posing an element of financial instability that would only prolong and exacerbate the contraction. In my opinion, the early announcement of a credible commitment to the full completion of the Banking Union, even were it to come about at a later date, would be a decisive contribution to ensuring euro area financial stability, both in the coming months and over a medium-term horizon.

As became evident in the previous crisis, financial fragmentation problems will adversely affect not only the economic development of countries penalised in the financial markets, but also that of the EU as a whole. Therefore, joint action enabling the crisis to be tackled on comparable terms by all European countries will help shorten its duration and protect the productive system for each and every one of the countries in the area. This is also essential to ensure a uniform and robust recovery. 1  Such common action is particularly justified against the backdrop of this crisis, whose origin is a fully exogenous shock that is not related to the existence of prior macroeconomic imbalances. To some extent, this asymmetric impact is the result of the pattern of productive specialisation among countries, itself a product of the workings of the single market. In this regard, protecting the single market also means preventing excessive economic disparity among the members. These arguments justify the forceful response given by the area’s economic authorities, at national and European scale, in the face of the economic challenge deriving from the pandemic. Another particularly important and positive aspect has been the high degree of coordination (in many cases implicit, albeit effective) between the different policies and decision-making spheres at global, European and national level. I will now briefly describe this response in the fields of monetary, prudential and fiscal policy.
And it is interesting to note that within the past year both the Federal Reserve  BIS central bankers’ speeches  5  and the Bank of Japan have adopted a target for annual inflation of 2%. The anchoring of inflation expectations has been the most successful aspect of the inflation targeting regime and it has allowed the Bank to avoid an unnecessarily damaging tightening of policy in response to short-run movements in inflation. It would be irresponsible to lose that. Second, the inflation target is not an impediment to achieving recovery today. It has not prevented the MPC from taking measures to combat the downward momentum in the economy following the shock of 2008. It is precisely because inflation expectations have so far remained firmly anchored that the MPC has been able to respond flexibly to weak demand. So the challenge we face is not the inadequacy of the framework, but the fact that there is no easy route to recovery after a major banking crisis. Recovery is inevitably slow and protracted. The healing process will take time, and patience is not a quality associated with our political debate. Patience and a sense of realism are sometimes mistaken for fatalism. Our economy is recovering, more slowly than we might wish, but we are moving in the right direction. The Bank has not been, and will not be, inactive. Low interest rates will not be withdrawn prematurely, but we should not rely solely on general stimulus to aggregate demand.

Financial liberalisation and advancements in information and communications technologies have connected the different national financial systems to create a global financial network through which financial resources flow around the world. In such a system, when there are disturbances in the small financial systems, it would merely be a ripple in the global financial system. But, if something happens in a large financial system, its impact would send shockwaves across the entire network. If policymakers, especially in the large economies, do not understand this, or underestimate its implications, it could lead to an overestimation of the effectiveness of national macroeconomic policies and underestimation of the global impact of those policies. The global financial system is in a state of constant evolution with key impetus coming from technological advancements, financial innovation, regulatory changes, financial incentives and regulatory arbitrage. The globalised financial system and what it means to be a part of it So, let me first turn to the implications for Malaysia of being a part of the globalised financial system for there is no doubt that Malaysia has become more financially integrated globally. Malaysia’s financial integration with the world Based on data on Malaysia’s International Investment Position, which is compiled by Malaysia’s Department of Statistics, outstanding non-resident investments in Malaysia increased by almost 4½ times between 2001 and 2014 to reach $ billion. That is the amount that non-residents have invested in Malaysia as of 2014 in the form of FDI, portfolio investments and other investments such as deposits, loans and trade credits by banks and corporates.
Within imports, the downward adjustment of consumer goods stands out, in response to the performance of car sales in the local market, but also to the decrease in the purchase of machinery and equipment (specifically trucks), which is estimated to continue beyond the first quarter. This is reflected in the current account, which will have deficits of somewhat under 3% of GDP in the projection horizon. III.3. Working assumptions The baseline projection scenario is made using a set of information and analysis that determine how inflation will converge to the target. This includes the expected behavior of the activity gap—which factors in potential and actual growth—, the copper price, the oil price, the dollar in the world, etcetera. Page 6 of 18  The baseline scenario also includes working assumptions for variables such as the real exchange rate, the behavior of fiscal policy and the MPR. In particular, with respect to the real exchange rate, we foresee that during the next two years it will fluctuate around its averages of the last 15 and 20 years. In the fiscal area, it is assumed that in 2019 the economy will receive a boost consistent with the approved budget. From then onwards, it is assumed that the structural deficit will follow the path of gradual descent defined by the authority. No modifications are introduced as a result of the recent announcements to streamline public investments given that, according to authorities’ statements, these will be made within the limits imposed by the structural balance target.

After considering these elements and the prospects for the economic scenario, the right move was to reduce the MPR. I believe it is important to stress that this decision is based on an important analytical effort of the Bank, backed by the search for more evidence and capacity to identify structural phenomena that affect the Chilean economy. This is the conclusion of an announced and documented process, which required a rigorous development before materializing in a change of the MPR, because monetary policy cannot be conducted on the basis of intuitions or perceptions. We have characterized this exercise as a monetary policy recalibration because it is largely derived from an update of the structural parameters that serve to characterize the macroeconomic situation and inform the policy rate decision. This translates into a one-time adjustment of the rate, whose exceptionality is reinforced by the unusual combination of changes in the parameters, including the new measurement of inflation. However, we must make it clear that this does not mean ignoring the recent performance of the economy. On the contrary, the effective growth rate of recent months is weaker when compared with a higher trend growth. Page 1 of 18  Similarly, recalibrating the MPR does not mean that it cannot be adjusted in the future in the face of changes in the macroeconomic environment: rather it will allow for an adequate response to said changes to be evaluated on their own merits, without mistaking them for the factors that justified this adjustment.
It was a push towards harmony in private currency, a pressing need for a wartime government in the throes of a civil war. Unlike wildcat banknotes, national bank notes were backed universally by federal government bonds and deposits of other money, such as U.S. government issued “greenback,” in each case held by the United States Treasury, and they circulated at parity with other forms of money.15 The National Bank Act also introduced the division between banking and commerce in the United States, which may have erased some of the more-speculative bank activities of the wildcat era.16 Federal intervention and tighter regulation meant that national banks and their notes were both safer and more fungible than their wildcat predecessors, and the United States’ transition into national bank notes, coupled with new, unfavorable tax treatment for state bank notes, meant the demise of wildcat banknotes.17 Decades later, the establishment of the Federal Reserve System, a central bank currency, and a push for banks to engage in deposittaking activities meant the overall demise of private currency in the United States for decades.18 The Child Is Father to the Man This is, admittedly, a fairly crude history of money and banking in the United States, but you see where I’m going with this. It is hard not to see certain parallels between today’s digital currencies and the bank notes issued during the wildcat era.

The mood is to continue cautiously down that path, but to emphasise the need, not only for sound macro-economic policies, which everyone accepts as a sine qua non, but also for steps to accompany capital account liberalisation designed to reduce the risks of volatility. These relate in part to the process of capital account liberalisation, where there is now a good deal more stress on ‘sequencing’ - that is on liberalising potentially more stable, longer-term, capital inflows initially, rather than short-term borrowing denominated in foreign currency. BIS Review 49/1998  -4-  But they relate particularly to three key conditions for living with free capital movements. The first is “transparency”. In a broad sense a need for greater transparency is recognised in relation to public policy, to the relationship between the public and private sectors, to corporate governance, accounting standards, and so on. In a narrower sense there is seen to be a need for more reliable, and greater and more timely disclosure of, financial information generally, at the level of individual borrowing entities, but especially also in relation to countries’ true foreign exchange short-term asset and liability positions. This is especially important in relation to the foreign currency liquidity position of the monetary authorities and of the banking system.