samchain/econo-pairs-v1 huggingface dataset:
Regulators will need to be alert for pure regulatory arbitrage – seeking to change the form but not the economic substance of transactions in order to lower regulatory requirements. We have already seen, for example, transactions seeking to take credit risk in the form of derivatives rather than loans in order to lower the leverage exposure measure. More legitimately, banks might switch from activities for which risk weights have increased to activities which carry lower risk weights (Chart 2). The leverage ratio will, however, set an effective floor on the ability of banks to improve their capital position by shifting into low riskweighted assets, providing a safeguard against uncertainties around our estimates of risk. Conversely, banks for which the leverage ratio is a binding requirement may have incentives to move into higher risk-weighted activities (Chart 3) but the risk-weighted ratio should limit the extent of any such risk shifting. In this way, the risk-weighted and leverage ratios should complement one another. It will be interesting to see how banks allocate capital in a world  2  2  http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech765.pdf. BIS central bankers’ speeches  where they are subject to multiple capital constraints – risk-weighted, leverage and stresstest-based.

Øystein Olsen: Management of the Government Pension Fund Global Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting, Oslo, 3 May 2021. * * * Please note that the text below may differ from the actual address. I would like to thank the Committee for the invitation to speak on the Bank’s management of the Government Pension Fund Global (GPFG). Norges Bank manages the GPFG with the objective of achieving the highest possible return over time within the limits of the investment mandate defined by the Ministry of Finance. The GPFG is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. The GPFG is managed to track the benchmark index fairly closely, ie the return largely tracks the return on the benchmark index. The benchmark index is defined by the Ministry of Finance and endorsed by the Storting. However, even though Norges Bank closely tracks the GPFG’s benchmark index, many large and small choices have to be made every day. These choices are based on a clear mandate from the authorities and a well thought-out investment strategy. The year 2020 was a special year for us all, including the GPFG. As for many others, working conditions during the Covid-19 pandemic have been demanding.
Other critical factors that may affect the rate of transformation are, for instance, the tax system, the educational system, etc. Various factors that hamper or check an adjustment could thus result in the Swedish economy following a lower instead of a higher, path for long-term growth, with a stronger, not a weaker inflation propensity and a continuation of high unemployment instead of a reduction to the low level that most people want. These risks seldom feature in the general discussion about the new economy. Conclusion From an economic perspective, the 20th century has been a fantastic century. One of the explanations for this has been the existence of an ability to adapt the economy to new conditions and this has also led to rapidly rising living standards. The changes that many people refer to as the new economy unquestionably present a number of challenges to the Swedish economy at the end of the 20th century. The notion of a new economy is not  BIS Review 137/1999  8  correct; that is not what it is all about. It is rather a matter of a new challenge in the long series of challenges the Swedish economy has had to face ever since the dawn of the industrial era more than a century ago. Concepts such as development and winding-up are important components in an ongoing transformation and adaptation of the Swedish economy.

And, whatever the periodic outcry whenever something goes wrong - as it will from time to time - the demand for these services does not of course exist in a vacuum; it exists because of the very positive contribution that the business services sectors, including financial services, make to growth and employment and rising living standards in the wider economy. That is true nationally, but it is equally true in a global context. Indeed the unique characteristic of the City is its role as the predominant international financial centre. It accounts for a fifth of all international cross-border lending, for example; for a third of global turnover in foreign exchange and OTC derivatives, and as much as two-thirds of issuance and secondary trading in eurobonds, or of global turnover in international equities, with more foreign firms listed on the LSE than on any other exchange. And London has a near-monopoly in exchange-traded short-term euro interest rate derivatives. I will not labour the point further, Mr Chairman. Despite - or perhaps driven by - a continuous stream of shocks and competitive challenges, the City has in fact gone from strength to strength, most recently coming through the global financial turbulence of the last couple of years as well as the advent of the euro at least as strong as before. It is perhaps worth asking why the City is as strong as it is. Certainly it does have to do partly with history.
But even if this were the case, it would not automatically lead to the conclusion that macroprudential tools are significantly more effective. Some of the tools are new, some have been around for a while but used partly for other purposes. The practical experiences gained so far are thus fairly limited and it is difficult to draw any conclusions from them. It is therefore natural that a number of questions should be raised as to how effective macroprudential policy will be in practice and whether it may need support from monetary policy.15 Uncomfortable measures may be difficult to implement One question concerns their feasibility – will measures be taken in time, or even at all? Some of the macroprudential policy measures have a direct impact on households’ finances, similar to fiscal policy measures. They can be perceived to create relatively major changes in the  14  As Narayana Kocherlakota, the President of the US Federal Reserve Bank of Minneapolis, has put it, monetary policy needs to deal with the “residual risk” that remains. See Kocherlakota (2013, 2014). 15  Critical discussions on the effectiveness of macroprudential policy tools and the implications for monetary policy can be found, for instance, in White (2009, 2013), Mishkin (2011), Borio (2011a), Blanchard, Dell’Ariccia and Mauro (2013), IMF (2013) and Davies (2014). BIS central bankers’ speeches  5  economic playing-field and thus risk obtaining little acceptance from households, which could make it difficult to implement such measures.

Christian Noyer: Macroprudential policies – implementation and interactions Introduction by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, before the Bank of France’s Financial Stability Review Panel (Panel RSF), New York, 14 April 2014. *  *  *  Dear Governors, Dear colleagues, Ladies and gentlemen, I am very proud, today, to launch the 2014 issue of the Banque de France’s Financial Stability Review on “Macroprudential policies: implementation and interactions”. Since 2002, our Review has brought together contributions from prominent academics, practitioners and policy-makers from all over the world on topical issues. This year, macroprudential policy has been one of the focuses of policy-thinking and policy-making and it is likely to be so for some time to come. I am sure that this issue of the Banque de France’s FSR will provide food for thought and action. I warmly thank all the experts who have contributed to this Review for their papers of exceptional quality and depth. I do not have time to mention all of them and only some authors are here with me today. These contributions are very diverse in their assessment and experiences of macroprudential policies. Policy recommendations and proposals are sometimes difficult to reconcile but this is what we want to achieve in our FSR. Naturally, we don’t necessarily share all the views expressed in all the articles, but we do believe in the exchange of ideas.
Labour shortages had increased Net figures  70  70 M anufacturing industry Three service industries Construction sector Retail trade  60  60  50  50  40  40  30  30  20  20  10  10 0  0 91  93  95  97  99  01  03  05  07  Source: The National Institute of Economic Research  6  BIS Review 111/2007  Figure 3. The weak productivity growth was assessed as temporary Annual percentage change  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1 -2  -2 81  83  85  87  89  91  93  95  97  Note. The broken line refers to the Riksbank’s forecast in MPR 2007:2. 99  01  03  05  07  09  Source: Statistics Sweden and the Riksbank  Figure 4. Inflation was in line with the forecast but… Annual percentage change  4  4 UND1X  3  3  2  2  1  1  0  0  -1 jun-02  jun-03  jun-04  jun-05  jun-06  Note. The broken line refers to the Riksbank’s forecast in MPR 2007:2. BIS Review 111/2007  jun-07  jun-08  jun-09  -1 jun-10  Sources: Statistics Sweden and the Riksbank  7  Figure 5.

Thus, after a decade of persistently low inflation and difficulties of central banks in reaching inflation targets, last year this trend reversed and we have been witnessing a return of inflation across almost all economies. About half of the emerging economies have inflation higher than 7%, which is the highest share in the last two decades. In North Macedonia, as a highly open and import dependent economy, inflation has reached 8.8%. Although supply shocks tend to be temporary and usually limited to price changes of a limited number of consumption items, the recent data points that price shock may be more persistent and more broadly based than initially anticipated. For example, in emerging economies, more than half of the items of the consumption basket have high inflation, including services that tend to have more persistent effect. More persistent and broad-based price changes may lead to "backward-looking" inflationary expectations, as was the case before 1990, affecting the wage-setting process. In fact, the latest Consumer Survey of the EC indicates that inflation expectations in most of the CESEE economies have already picked up. So, how temporary and how strong the effects can be? According to the latest IMF forecast, the current crisis may result in higher global inflation by 3.6 p.p. with stronger effect in emerging economies, where it is estimated to average close to 9%. In a regional context, expectations go up to 8.0%.
In this connection, I shall first briefly review the situation of the banking sector, focusing thereafter on the challenges banks will have to face in the short and medium term. I shall conclude with some brief thoughts on the ECB’s new supervisory framework. 1. Recent developments in the banking sector  In recent years, and in response to the financial crisis, banks have substantially improved their solvency levels, largely as a result of the new regulatory and supervisory requirements. At SSM-supervised banks, in the last year alone their highest-quality (i.e. CET1) capital increased on average by 70 bp, from 12.7% in 2014 to 13.4% in 20151. In the case of Spanish banks, whose starting levels were somewhat lower, the increase exceeded 80 bp, making for an average of 12.5% of CET1 at end-2015. The profitability of the banking business, however, remains at low levels and, in any event, far off the double-digit figures seen before the crisis. Among SSM banks as a whole, the return on equity (ROE) in 2015 was slightly below 5%, whereas in Spain, in consolidated terms, it was scarcely 5.6%. Admittedly, it is unusual for the return on capital to stand in most euro area countries at levels below the average cost of capital, on estimates made by the Banco de España. In the case of Spanish banks, estimates of the cost of capital stood at 6.8% in December 2015, drawing close to levels of 8% in early 2016, as a result of the period of instability observed in financial markets.

In fact, the spill-over effects transmitted from one region of the world to another via interest rates, exchange rates and equity prices, for instance, can be mitigated through closer regional integration. By reducing the relative degree of economic and financial openness of the regions concerned, such integration can be an effective instrument to shield them from external shocks, thereby obviating the need for trade or capital restrictions. The European experience shows that regional integration can be beneficial in this respect. The euro area weathered well the economic slowdown and financial market uncertainties arising from the series of balance of payments crises seen between 1997 and 1999. Likewise, provided that the current economic slowdown in the United States does not develop into a hard landing, the euro area is expected to record in 2001 above-potential growth for the second year in a row. To be sure, sheltering domestic economies from external shocks was not the primary consideration of European integration when it was initiated almost 50 years ago. Nor were the creation of the euro and the setting-up of the European Central Bank (ECB) objectives at that time. These are, in fact, only the latest developments in a long process of regional integration that started and is continuing with a strong political commitment.
Although substantial progress has been made, many households still need to rebuild their net worth following the housing bust. More than 20 percent of homeowners with a mortgage are “underwater” – meaning they owe more on their home than it can be sold for. •  Fiscal drag. State and local governments have been cutting spending for over two and half years and federal government spending is also contracting. While fiscal consolidation is essential over the medium to long term, spending cuts reduce demand and are a drag on near-term growth. •  Risks relating to Europe. The crisis in the euro area has reduced the demand for U.S. exports and weighed on financial markets. •  Fiscal uncertainty at home. Families and firms face elevated uncertainty relating to future taxes and government spending, in particular from the so-called “fiscal cliff” –  4  BIS central bankers’ speeches  the prospect of sharp increases in taxes and cuts in spending at the start of 2013 if Congress and the White House cannot agree on an alternative fiscal plan. Given the signs of improvement in some of these areas, including the slow but steady progress in healing balance sheets and restoring the supply of credit, I anticipate that the pace of economic growth will gradually pick up, supported by very low interest rates. But heading into the FOMC meeting last week, I judged that, if we did not ease monetary policy further, the pace of improvement would be unacceptably slow.

The Albanian economy is estimated to have grown below its potential in 2012. Recent economic and monetary data confirm, overall, our earlier assessment for the presence of a negative output gap. On the demand side, economic growth was driven mainly by net exports growth, whereas domestic demand is estimated to have provided low contribution. Data on trade in goods during the fourth quarter show that exports increased 12% and imports fell 9.5%, year on year. Subsequently, the nominal trade deficit narrowed 20.1%, in annual terms, boosting aggregate demand in this quarter. On its side, domestic demand remains weak, due to consumers and businesses hesitation to consume and invest. Lending standards continue to be tight as banks are more prudent about lending. Budget expenditure fell about 0.3%, year on year, owing mainly to contracting capital expenditure. Collected revenue was also downward, eventually reducing the budget deficit by 1.2% compared to 2011. However, the fiscal policy was stimulating during the fourth quarter, materialising in 35% expansion of the budget deficit for this period. Though at low rates, public expenditure is expected to have positive contribution to economic activity in 2013. The monetary policy eased further in January, through the key interest rate cut to the record low of 3.75%. The easing was transmitted into the interbank market interest rates during February, while it is expected to be transmitted into other segments of the financial market. Low government demand for borrowing has exercised downward pressures on government securities yield.
Fro m the perspective o f the expo rt destinatio n, the rise in the ho me currency price is o ffset by the ho me currency’s depreciatio n. 20  Blo o m, N., Draca, M. and Reenen, J. van (2016). “Trade Induced Technical Change? The Impact o f Chinese Impo rts o n Inno vation, IT and Pro ductivity”. The R eview of Economic Studies , Vo l. 83, Issue 1, pp. 87-117 and Wo rk stream on glo balisatio n (2021). “The implications o f glo balisation fo r the ECB mo netary po licy strategy”. ECB Occasio nal Papers No . 263. 21  Amiti, M., Itshkhoki, O., and Konings, J. (2018). “International Shocks, Variable Markups and Do mestic Prices“. The Review o f Eco no mic Studies, February, 2019. 8  All in all, the main conclusion from current research is that, overall, the development of globalisation over the past few decades has led to disinflationary pressures in advanced economies, including the euro area. It has also increased the transmission of foreign shocks and contributed to a lower sensitivity of inflation to domestic factors. However, these effects are found to be quantitatively small. Looking ahead Should we expect symmetric effects from a deglobalisation process? I will argue that there are several reasons that prevent us from assuming that this process is going to be symmetric to the globalisation phase.

09.02.2023  (De)globalisation and economic policies in the European context Dialogue with the Governor on the Future of Globalisation/Cañada Blanch Centre for Contemporary Spanish Studies and London School of Economics and Political Science London Pablo Hernández de Cos Go verno r  Let me start by thanking Professor Andrés Rodríguez-Pose, the Cañada Blanch Centre for Contemporary Spanish Studies of the London School of Economics (LSE) and the LSE for their kind invitation, and for giving me the opportunity to hold this dialogue with you on a fascinating topic: the future of globalisation. The questions currently surrounding this topic are of the utmost importance for highly open and integrated economies, such as the euro area and the UK. The two extraordinary shocks that have recently hit the global economy, the Covid-19 pandemic and, above all, the Russian invasion of Ukraine, have disrupted global value chains and commodity markets, and generated an environment of heightened uncertainty and geopolitical tensions. Added to the past and present episodes of trade tensions between the US and China, among others, these shocks have prompted renewed questions regarding the future of globalisation and the increasing importance of geopolitical factors in shaping international economic relations. Although the globalisation of goods was slowing down even before the pandemic, concerns about the resilience of global value chains and the supply security of strategic products are now becoming more apparent in decisions made by firms and policy measures considered by governments.
Will it come about through a sharp correction in the dollar and, if so, what will the consequences be for the world economy? The majority of forecasters agree that the large deficits in the US are not sustainable. It’s true that the weakened dollar is expected to be able to lead to a certain stabilisation of the current account, but since the US imports around 1.5 times more than it exports there would have to be a sharp reduction in imports or an even steeper rise in exports for the deficit to be able to narrow. At the same time, demand in the US has to a great extent been the engine for the world economy in recent years. Expansionary economic policy has contributed to this and also resulted in a very large saving deficit. The inflow of capital to the US has stemmed, among other things, from Asian central banks’ purchases of US government securities. China has recently accounted for about one-third of the US external borrowing requirement. In that way, both China and Japan have built up substantial dollar reserves. The logic behind this loss-making activity (if the dollar continues to fall in value) is that it enables Japan and China to maintain low values for their own currencies, thus facilitating continued exports to the US and other countries. For China the substantial exports translate into jobs and incomes in an economy where a very high percentage of the population still live in the conditions of a developing country.

In somewhat simplified terms there are two different ways to describe monetary policy based on inflation targeting: The first is to employ a simple monetary policy rule whereby the policy rate is set as a function of the current inflation rate and the output gap, which is a measure of the difference between actual and potential output and reflects resource utilisation in the economy.1 When the output gap is negative, actual output is lower than potential output, which means that there are plenty of spare resources in the economy. In such a scenario price and wage increases are small and inflation is generally below target. When the output gap is positive the situation is the reverse: resources are overstretched and the excessive demand generates inflationary pressures in the economy. So according to the rule the policy rate should be raised if growth is above its potential rate and inflation is higher than the inflation target, and vice versa in the reverse situation. When actual and potential output are the same the economy is in balance and inflation is normally in line with the target, provided that policy is credible. A common argument in favour of conducting monetary policy in this way is that the central bank’s knowledge of how the economy functions is too limited for a forecast-based monetary policy to be formulated in a good enough way. Incorrect forecasts can also burden the central bank with credibility problems, which is one reason to prefer a simple rule.