samchain/econo-pairs-v1 huggingface dataset:
But a distinctive feature of the policy is that it should be responsive to economic and financial conditions. The primary aim is to ensure that the financial system should be sufficiently robust that it doesn’t act to amplify economic cycles, by increasing the supply of credit in good times and curtailing it in downswings. And if it’s to react in this way macro-prudential policy needs to be flexible over time. This raises the question of its interaction with monetary policy. In moderating financial risks macro-prudential policy could in principle affect activity and inflation, for which the MPC is held responsible. Conversely, if changes in interest rates affect asset prices and credit markets, they may have an impact on financial stability. And if both policies affect both objectives, how should they then be used? Is it right that official interest rates should be set only with inflation in mind, leaving financial stability to prudential policy alone – or should the burden be shared in some way, in which case decisions might better be set by a single committee or somehow co-ordinated across the two? When policy co-ordination matters: There are many examples of these issues in the economics literature. While the details are often case-specific, there are basically two sets of conditions that tend to favour coordination. One is that there are material cross-policy spillovers: A’s actions have to have a significant effect on B’s objectives (or vice-versa). Without these, it makes no difference whether two policies are set jointly or separately.

Yes, there could occasionally be instances when policies would be better co-ordinated (although these are rarer and less grievous than many suppose). But there’s also a risk that a single committee might be incentivised to pay more attention to the more verifiable elements of its remit – the cyclical stability of growth and inflation – than to the less obvious achievement of financial stability. Conclusion In public debate, politicians often extol the virtues of “joined-up” policymaking. Policies set by one body might affect another’s objectives and people should be aware of such interactions. In some instances, where the interactions are sufficiently strong, it can be desirable to merge the two bodies into one. But if you try pushing that argument to its logical limit – to ensure we internalise all possible spillovers let’s just have one body determining every aspect of public policy – I think we’d all have misgivings with the outcome. Apart from anything else the policymaking process would be far too complicated to hold any one bit of it to account and the all-powerful policymaker would naturally tend to focus on the more verifiable tasks. A bit like the man who loses his keys in the park but looks for them under the streetlamp “because that’s where the light is” the attention of policy would be directed to the most observable objectives. Perhaps we collectively fell foul of this trap, in some ways, ahead of the crisis.
Consequently, during 2005–2008 the NBR did not refrain from making discreet forex market interventions by purchasing considerable amounts of foreign currency so as to preclude the fast overappreciation of the leu, which was likely to cause a dangerous erosion of the Romanian economy’s external competitiveness and to lead to a fall in inflation, yet in an unsustainable manner. At this juncture, I should bring to the fore other arguments in favour of a managed float policy for the Romanian currency. The major reason underlying the NBR’s purchases of foreign  10  BIS Review 5/2010  currency consisted in the fact that the leu strengthened in both nominal and real terms, concurrently with an extremely loose wage policy in 2006 and especially in 2007. During those years, pay rises overtook productivity gains, thus reducing the previously accumulated competitiveness gains and contributing definitely to the worsening of the balance of payments current account. Another argument I would like to point out is of a precautionary nature. As it has been noticed in practice, the end of cycles of synchronous large capital inflows coincide with somewhat abrupt depreciation episodes, which can be avoided provided sufficient reserves are available. The pro-cyclical conduct of fiscal policy that added to the vulnerabilities associated with the widening of the current account deficit during 2004–2008 also underpinned the NBR’s purchases of foreign currency. In principle, fiscal policy may either cushion or magnify the undesired effects of large capital inflows.

Jean-Pierre Roth: The economic situation – la vie en rose? Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at a meeting with representatives of Ticino industry, Centro di studi bancari, Vezia, 28 November 2006. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is true that our exports continue to benefit from a buoyant global economy, that areas of concern such as the volatility of oil prices or the possibility of a significant and lasting downturn in the US economy have partially receded, and that the current economic recovery has led to an improvement in the labour market without endangering price stability. Is this la vie en rose (living life through rosetinted spectacles)? A brief outline of the situation in the national and international economies is given, indicating that the overall perspective remains favourable. It concludes with a concise evaluation of the risks, showing that the current euphoria may conceal significant risks that we must not lose sight of. BIS Review 116/2006  1
Banking sector Under the consolidation programme, the bigger banks in the sector are permitted to benefit largely from organic growth while the mid-tier banks are expected to strengthen their financial viability and grow through consolidation. As larger banks grow, it will be difficult for smaller banks to remain competitive, and therefore, small banks are encouraged to merge with strong partners. The outcome of the consolidation in the banking sector is expected to result in a sector where at least 5 Sri Lankan banks will have assets of over Rs. 1 trillion with a stronger regional presence by 2016, while domestic banks, which hold assets less than Rs.100 billion now will have to increase their asset base above Rs.100 billion through consolidation by 2016. Further, as the Sri Lankan economy’s investment ratio is expected to be maintained at over 30 per cent of GDP, there will be an increasing demand for investments within the country. However, the 2 banks with development banking focus in Sri Lanka, namely, the National Development Bank PLC and DFCC Bank with DFCC Vardana Bank Ltd., are still not as big as the economy requires them to be to cater to the current and future needs of the economy. Therefore, these 3 banks will be merged so that the resulting entity would be large enough to comfortably raise long-term capital from domestic as well as international markets and cater to the growing demand for investments by both the private and public sectors.

As we strive to reach these new milestones, our current macroeconomic indicators are bound to undergo a massive transformation. As a part of this transformation, the greater challenge would be to make Sri Lanka a popular, emerging financial centre in the region, where setting up a financial hub in Sri Lanka would be a key task. To strengthen and expand the dynamism, the financial sector will have to possess technology-leveraged financial services to improve operational efficiency while diversifying funding sources by tapping the international capital markets to mitigate risks and improve cost efficiency. Further, expanding delivery channels and business networks beyond domestic territories, enabling them to grow and exploit opportunities while addressing external vulnerabilities and spillovers are also essential. Meanwhile, a stronger capital base, a high quality pool of human capital and a high level of corporate governance to meet the enhanced regulatory framework are required in the financial system to steer the country towards attaining a sustained growth. To facilitate accomplishing this task, it was identified that the financial sector of the country has to be strengthened and stabilised further by implementing an appropriate set of policies in a timely manner. Reason 2: Necessity of maintaining stability in the local financial system amidst the growing complexity in the global financial system Ladies and gentlemen, we all accept that a stable financial system is a crucial element for a conducive business environment supportive of sustained economic growth.
Second, to facilitate market adoption, MAS also started publishing, on a daily basis, Compounded SORA rates for 1-month, 3-month and 6-month tenors, and a SORA Index.7 These provide market participants with a standardised and simplified way of obtaining compounded rates for any given tenor, and can easily be referenced in new SORA products of different maturities, to suit the needs of different customers. Third, to provide a market-based pricing reference for SORA cash products, and spur hedging activities through the SORA derivatives market, MAS has broadened our suite of money market instruments by issuing floating rate notes based on SORA (MAS SORA FRN). We are encouraged that the first two MAS SORA FRN auctions were met with strong market demand. Fourth, to facilitate price discovery in a nascent SORA derivatives market, MAS established in June, a daily auction process for SORA Overnight Indexed Swaps (or OIS) and SOR-SORA Basis Swaps up to 5-years in tenor. These are the key instruments for developing the SORA derivatives market and for facilitating a transition from SOR derivatives. Going forward, MAS will extend the auction tenors, and  make available this process to the wider interdealer market. 11 But MAS’ efforts alone are not enough to achieve a successful transition from SOR to SORA. The financial industry and its stakeholders have a critical role to play, given that you are the ultimate end-users.

According to the forecast of Statistics Sweden, the population will only increase by around 0.1-0.2% this year and during the first decade of the 21st century. With GDP growth of 3% and a population increase of around 0.7% a year, a rough measure of productivity is obtained which shows that it has increased on average by 2.3% per year during the 20th century as a whole. Nowadays, the figure is lower; most analysts estimate that trend productivity is under rather than over 2% per year, although there has been some improvement in recent years. The standard of living has accordingly not risen as quickly during the 1990s as it did during a number of earlier decades during the century. Figure 3. GDP per capita  3. GDP per inhabitant Average annual percentage change of GDP per inhabitant in 1990 prices in US dollars 4  3  2  1  0 1820-50 1850-70  1870-90 1890-10 1910-30 1930-50  Sweden  1950-70 1970-90  UK  In order to obtain an idea of developments in Sweden we can look at the United Kingdom. Sweden is considered to have become industrialised about hundred years after the UK. GDP per capita therefore grew more quickly in Britain than in Sweden during the first half of the 19th century. From 1870 onwards, however, the relationship between the two countries changed. Growth per capita became the same in both countries and after 1890 and up to 1970, Sweden took the lead.
First, a multilateral interbank exchange fee is being developed, which should solve the problem of “double charging” and, second, a “basic” service will be defined which should provide a level of guaranteed service and ensure transparent and attractive price conditions. In a progress report published this month, the Eurosystem has made several recommendations to achieve further improvements in the price level and quality of the cross-border payment services for both corporate and private customers. Without a doubt, we shall continue to monitor this process very closely in order to ensure further cost and efficiency benefits for euro area corporations and citizens. Conclusions I have outlined the factors that are the main determinants underlying the changing structure of the financial system in general and the banking sector in particular. Overall, the various elements of the banking sector show that it is likely that a number of banking activities will be affected by this change. The foreseen structural changes require the need for adjustment to be taken seriously by all participants in the financial system. This adjustment appears to have intensified in recent years, as there has been an increase in merger activity, an establishment of alliances and an introduction of new  5  BIS Review 83/2000  products and services, often based on modern information technology. The process of structural change embodies an element of risk, but if these risks are identified early and analysed carefully, then they can be duly taken into account.

By structural change, I mean not only domestic consolidation, but also increased cross-border cooperation and mergers. In short, the euro area banking sector is expected to look and behave more like the banking sector of a single economy in the future. Economies of scale and scope may have been changing in different areas of banking and may even have taken different directions. However, the general picture is that the banking industry needs to be in a position to adjust to a new reality. Indeed, since the introduction of the euro, a number of bank mergers in the euro area, including mergers between relatively large institutions, have been announced. Such “high-profile” mergers are likely to contribute towards an acceleration of the pace of both the consolidation and integration process of the banking systems in the euro area. The recent pattern of consolidation constitutes a continuation of a longer-term trend in the European banking industry, as is highlighted by the large decline in the number of credit institutions in the euro area countries over the past decade or so. In the mid-1980s, there were more than 11,000 credit  3  BIS Review 83/2000  institutions in the euro area countries, compared with around 7,500 now. This reflects a decrease of 3,500 credit institutions over 15 years, or an average annual decrease of around 230 institutions. The changeover to the single currency seems to have intensified the consolidation trend in the euro area banking sector.
Conclusion In today’s world, technological, financial and commercial interlinkages are so powerful that only the very largest countries are able to be independent and sovereign at the same time, and even they cannot do so entirely. For most other nation states, including the European countries, these two characteristics do not coincide. The European Union is the institutional framework that has allowed the Member States to be sovereign in many areas. It is a shared sovereignty, which is preferable to none at all. It is a complementary sovereignty to the one exercised by individual nation states in other areas. It is a sovereignty that Europeans like. The European Union has been a political success built within the international order that emerged after the Second World War. It has been a faithful interpreter of the values of freedom, peace and prosperity on which that order was founded. The European Union has been an economic success because it has provided an environment in which the energies of its citizens have created widespread and lasting prosperity founded on the Single Market and protected by the single currency. The last decade has dramatically highlighted the shortcomings of national policies and the need for cooperation to evolve both within the EU and beyond. A long global economic crisis, unprecedented migration flows and inequality exacerbated by large concentrations of wealth resulting from technological progress have given rise to rifts in a political and economic order that was thought to be set. Change is necessary, but there are different ways of bringing it about.

One prospect is that ageold ideas that have shaped most of our history are revived, such that the prosperity of some cannot be achieved without the poverty of others; international and supranational organisations lose their relevance as places for negotiating and finding compromise solutions; the affirmation of 7 / 10  BIS central bankers' speeches  the self, of the identity, becomes the first requirement of every policy. In such a world, freedom and peace become accessories which can be dispensed with as needed. But if we want these values to remain essential, fundamental, the path is a different one: adjusting existing institutions to change. This process of adjustment has so far encountered resistance because the inevitable national political difficulties always seemed to be above such need. This reluctance has resulted in uncertainty about the capacity of institutions to respond to events and has strengthened the voice of those who want to pull down these institutions. There should be no doubt: this adjustment will have to be as deep as the phenomena that revealed the fragility of the existing order, and as vast as the dimensions of a geopolitical order that is changing in a way that is not favourable for Europe. The European Union wanted to create a sovereign where there was not one. It is not surprising that in a world where every point of contact between the great powers is increasingly a point of friction, the external challenges to the existence of the European Union become increasingly threatening.
The Riksbank must take asset prices into consideration to the extent that they affect price stability or financial stability. These are the areas that the Riksbank is responsible for. The inflation target can be threatened if asset prices lead to households and businesses increasing their demand so much that the use of resources in the economy exceeds potential growth. At present, the use of resources in the Swedish economy is still low which creates space for a time for a higher increase in demand than would be sustainable in the long term. There is accordingly space for the stimulation that increasing share and property prices create and which is inter alia reflected in increased indebtedness in the household sector. In a somewhat longer perspective, however, household debts probably cannot increase at the rate we see today without this indicating a growth in consumption that is higher than permitted by the inflation target. The effect of asset prices on demand and inflationary pressure is, however, only one of many factors that affect the assessment of inflation and the conduct of monetary policy. This also applies for the assessment of financial stability. In general, it is moreover probably hardly possible or advisable to attempt to dampen an increase in share and property prices by monetary policy, even though it is possible to conceive of situations where the Riksbank would want to be able to do so on some future occasion, eg with a view to avoiding the risk of recession and falling prices.

Examples of such factors are, internationally determined raw material prices, changes in taxes and subsidies and interest expenses for housing. An increase in value-added tax would, for instance, temporarily lead to increases in CPI. To counteract such price increases, monetary policy would be forced to dampen the real demand in the economy regardless of the level of resource use in the economy. To avoid such unnecessary fluctuations in production, we disregard from factors which we assess only temporarily affect consumer prices, for example interest expenses, taxes and subsidies. The inflation target regime tested in a strong upswing! Before the economy had adapted to the new inflation target regime and inflationary expectations still remained at too high a level, it was not as evident that monetary policy in the short term could contribute to maintaining the growth of its long-term growth track. In order to bring inflation expectations down, higher interest rates were required and thus lower demand than if inflation expectations had immediately been adapted to the new regime. Although the economy is now approaching balance, all parts of the low inflation regime have still not been tested. During the entire 1990s, the use of resources has been under its long-term growth track. It is first during the few years to come that we will have a real test of how well the new regime has penetrated in Sweden. In earlier speeches, I have developed my ideas around the mode of functioning of the labour market.
Finally, I shall briefly discuss the current monetary policy situation. The value of low, stable inflation Let me begin by saying a few words about why a low inflation rate is desirable. Most people now agree that a high inflation rate is not good and has a negative effect on the functioning of the economy as a whole. A high, fluctuating inflation rate entails uncertainty for operators in an economy. This uncertainty obstructs decision-making with regard to prices, wages, consumption, production and investment. When inflation is high, nominal wage increases tend to be relatively meaningless, in other words, the amount in the wage packet is worth less because general prices are also increasing. If, for example, we look at real wage increases, which take into account inflation, these were almost non-existent in Sweden during the 1970s and 1980s. This is because the nominal wage increases pushed up prices, which resulted in recurring cost crises. This type of development affects companies’ competitiveness, production, investment and households’ purchasing power. High inflation also leads to arbitrary distribution of income and wealth. For instance, those who saved their money in bank accounts during the 1970s and 1980s, when inflation was high, saw their wealth decline in value, while those who instead borrowed money and bought, for example, property, made a profit as property prices then increased at roughly the same rate as inflation. The conclusion is that low, stable inflation is an important condition for an efficient economy.

During more recent decades, global inflation has declined. This is of course due to many factors. One is increased competition resulting from the deregulation of the financial and product markets as well as from the fact that previously closed economies are now integrated into the world economy. In Europe, the preparations for and introduction of the EMU contributed to a greater degree of price stability. In addition, the shift in economic policy in general has made a contribution, not least the introduction of inflation targets. In Sweden we chose the alternative of a flexible exchange rate combined with an explicit inflation target in 1993. Since then the inflation rate has gradually shifted down and appears to have stabilised at a low level. Inflation has been around 2 per cent a year on average since 1993, which can be compared with an average inflation rate of almost 8 per cent a year during the 1970s and 1980s. Everyone now understands that we are serious in our fight against inflation, which is important for the policy to succeed. There has been less fluctuation in the real economy than during the decades prior to the crisis in the early 1990s, and developments in both real growth and real wages have been significantly better. In addition to the introduction of an inflation target, the consolidation of central government finances and efficient wage formation have been important conditions behind this positive development. Where has this development taken us? The Riksbank’s tasks are stated explicitly in the Sveriges Riksbank Act.