samchain/econo-pairs-v1 huggingface dataset:
Let me name a few – 1) sovereign is no longer risk-free, 2) we are taught to value economies of scale but are now confronted with the too-big-to-exist problem and 3) banks should no longer be only international in life but also in death as crises are more and more systemic given the growing interconnectedness. Spillover and contagion were witnessed in 1997 where the turbulence spread from Thailand to South East Asia and to Russia, China and Brazil, as it was a decade later in 2007 where the crisis widened from US and EU to the rest of the world. Imagine the pace of the spread of crisis in the next 10 years in 2017 – where crises would grow in size and speed beyond the management capacity of a single nation, real collective action is called for. Most importantly, we have to be forward-looking and well prepared. As crises are prone to occur more frequently with larger spillover, reform must be continued during normal times. It is imperative that the public is on board and support the reform effort to raise the competitiveness of the country, and minimize vulnerabilities or imbalances that may be triggered by external factors through no fault of their own. Ladies and gentlemen, Let me conclude by offering an observation that in 2002, five years after 1997 crisis, Asian economies had fully recovered, in particular, Thailand was able to repay the IMF package some two years ahead of the schedule.

The ERPB was instrumental in the development of the SEPA instant credit transfer scheme, which is now live, with over 1,000 providers participating. Those instant payments have been achieved without legislation, with the ECB instead facilitating dialogue and consensus between market actors. Moreover, that scheme will soon be complemented by the ECB’s new Target Instant Payment Settlement service, which is set to go live this November, providing a real-time, high-end platform for payment service innovation. The challenge for Europe Progress towards an integrated market for payments has not been without its problems. Europe still does not have an integrated, standardised card payment network, with the vision of being able to use any card at any payment terminal in Europe having yet to be realised. Europe’s largest card payment networks are still not interoperable. For example, Germany’s Girocard and France’s Cartes Bancaires account for a substantial number of card payments in the euro area’s two largest economies. However, owing to significant technical differences, a supposed lack of a business case and an absence of political will, these two networks remain separate – as do most other national card schemes. As a consequence, it is more convenient to use non-European cards when travelling across Europe. Although some standardisation work has been carried out via the European Cards Stakeholders Group, Europe still does not have its own Europe-wide card scheme, so we remain fully reliant on non-European schemes when making cross-border card payments. Although they provide a valued service, those schemes raise certain questions from a governance perspective.
While the current account has consistently been in surpluses and external debt falling steadily, public debt has also been declining substantially from roughly 57 to 50 percent of GDP over the past three quarters. Not only so, the unemployment rate continues to fall, and headline inflation is just slightly above 2 percent. As a result, international credit rating agencies have indicated positive views on the economy, citing improved growth with stability as the key reason for a number of sovereign and bank upgrades in recent months. With these upbeat sentiments, let me now share with you my assessment of the economy. I will begin by evaluating some aspects of the economy’s current performance and then move on to future prospects as well as the remaining challenges. Ladies and gentlemen, In the initial period when the economy was struggling hard to emerge from the crisis, it was exports that had provided a cyclical stimulus in shoring up aggregate demand. At that time, other engines of growth, namely, private consumption and investment, were unable to contribute much because the business sector was saddled with heavy debt burden, people were losing jobs, and machines were left idle as a legacy of over-investment in the prior years. But thanks to the fiscal stimulus, the economy eventually began to turn around within about two years after 1997. For the past years, however, things have been looking up.

However, the severe impact was quickly over by the end of the quarter, and external income from services started to return to normalcy by July. For August, the number of foreign tourists indicated positive year-on-year growth, and the service account was in strong surplus for the second consecutive month. Favorable conditions for the export of goods and improving environment for the export of services have allowed for a continued current account surplus and a reduction in external obligations. Steady external debt repayments, both by the public and private sectors, have resulted in a remarkable decline in the external debt stock, from the peak of 112 billion US dollars in June 1997 to only 52 billion US dollars at the end of July 2003. Even with the last portion of loan prepayment to the IMF two months ago, it is good news that our international reserves position continues to remain at a comfortable level of 39 billion US dollars. Looking ahead, barring any unusual market developments, export should do well for the rest of this year. We have already seen in recent months sizeable raw material import in preparation for export at end year. Beyond that, the momentum is likely to benefit from encouraging signs of economic improvement in the US and Japan. Ladies and gentlemen, The other important engine of growth in this recovery has been private consumption.
The economy grew by over 4 per cent last year. The situation on the labour market continues to improve and unemployment is falling. Inflation has also begun to rise, albeit from low levels. The very expansionary monetary policy in recent years has contributed to this healthy development. However, risks have built up in the Swedish economy –financial imbalances – such as the growth of household debt. As regards monetary policy, my conclusions are that our policy of flexible inflation targeting has largely worked well. New experiences and research suggest that there are a few things  BIS central bankers’ speeches  1  that we should perhaps modify in order for it all to work even better. I will go into more detail about the things I am referring to. As regards financial stability, a much more major rethink is required. In Sweden, there are major flaws with vague mandates, unclear processes and inefficiency in the work to create a more robust financial system, all of which threaten financial stability in the long run. Issues concerning both monetary policy and financial stability have been and remain the cornerstones of central bank operations. To explain this, and at the same time describe the extent of the challenges facing central banks today, I would like to begin my presentation with what historically has been the basic function of central banks, namely to provide a country with a standardised product for the exchange of goods and services – money.

Stefan Ingves: Time to rethink – inside the head of a central bank governor Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, to the Swedish Economic Association, Stockholm School of Economics, Stockholm, 6 April 2016. *  *  *  I would like to thank several of my colleagues who have contributed to this speech: Mikael Apel, Maria Bergsten, Charlotta Edler, Pernilla Meyersson, Johan Molin, Christina Nordh-Berntsson, Cecilia Roos-Isaksson, Marianne Sterner, Gabriel Söderberg, Anders Vredin and Anna-Lena Wretman. New challenges – new choices The Riksbank is – like other central banks – in a position where strategies and regulatory frameworks are being scrutinised and questioned more intensively than at any time over the past twenty years. The experiences of the latest financial crisis suggest politicians and central bank economists must be prepared to try new approaches. Today, I intend to discuss the challenges and questions facing central banks the world over. How should monetary policy be conducted? What consideration should be given to real and financial variables, in addition to the inflation target? What role should central banks have as regards financial stability and supervision? How is this role changing as a result of new innovations in payments and in the financial system more generally? What factors affect how independent central banks should be and how political oversight and influence should be exercised? Many central banks the world over are facing a similar set of problems.
21 I have previously discussed the financial risks that occur on the Riksbank’s balance sheet when we have large bond holdings. 22 These risks in combination with the Riksbank’s weak earning capacity constitute an argument in favour of a smaller balance sheet in the long run. This is the best way of safeguarding the Riksbank’s future capacity to fund its own operations and conduct an independent monetary policy. 23  Reasonable for the Riksbank’s balance sheet to shrink in the long run The Riksbank’s balance sheet has grown rapidly in recent years, partly because we have purchased government bonds for monetary policy purposes, and partly because the foreign exchange reserve has been strengthened. In other countries, arguments have been put forward indicating that central banks should perhaps continue to hold large bond holdings even in the future when monetary policy has been normalised. In my opinion, these arguments are of limited relevance to Sweden and the Riksbank. On the other hand, there are arguments indicating that the Riksbank should mitigate its financial risk by winding down most of its bond holdings when monetary policy is normalized. My assessment is that the best way of winding down the bond holdings with as little market influence as possible is to hold the bonds in the portfolio until they mature. Over the next decade, the Riksbank’s bond holdings will then develop approximately as shown in Figure 6. The repo rate and the rate path will thus be the main monetary policy tools when monetary policy has been normalized.

SPEECH DATE:  13/04/2018  SPEAKER:  Martin Flodén  VENUE:  Swedish House of Finance  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  The Riksbank's balance sheet: How large should it be in the future? * Prior to the financial crisis, the Riksbank had a balance sheet of about SEK 200 billion. It now amounts to SEK 870 billion. The balance sheet has thus risen from 6 per cent to 20 per cent of GDP (see figure 1). This recent growth in the balance sheet is an experience we share with many other central banks. It is primarily a result of central banks having complemented low interest rate policy with asset purchases in order to make monetary policy even more expansionary. This expansionary monetary policy has had an impact and helped strengthen the economy as well as push up inflation to levels that are compatible with the inflation target. In Sweden, we are therefore approaching a situation where the monetary policy expansion can start to be tapered and the interest rate and balance sheet can start to be normalised. But what will monetary policy actually look like in a future “normal situation”? This is currently a subject of intense discussion among many central banks and other agents. Analyses by the Riksbank and others indicate that average interest rates in the future will be lower than what was deemed normal in the decades before the financial crisis.
Against this backdrop we have, at the Banco de España, monitored different indicators during the crisis that measure the presence of systemic tensions in financial markets, which prove useful for identifying the start of a systemic crisis. These indicators showed, in fact, a very pronounced increase in the opening months of the pandemic, but an improvement subsequently. In any event, our benchmark indicator in the current situation has been the output gap, i.e. the difference between the actual and potential level of output, which reflects the persistence of the impact of the crisis on GDP. This output gap has stood at very negative level since the crisis began; accordingly, given that the objective of macroprudential policy is to act countercyclically, it does not seem reasonable to activate the macroprudential instruments, despite the fact that the credit-to-GDP gap may be above 2 pp. At the European and global level – in different agencies such as the ECB, ESRB, EBA, BCBS and FSB, among others – various coordinated decisions in this economic policy area have been taken. One notable example was the introduction of recommendations for restrictions on the distribution of dividends by banks and on variable remuneration. Their uniform application to all banks, by financial system sector and country, conferred a significant macroprudential dimension on this action, by contributing to preserve the capital of banks 17  as a whole.

As I mentioned, a composite indicator of all these metrics is what enables us to construct systemic significance scores that are used as a reference to determine the calibration of the percentage of the capital buffer required of each systemic institution. Some of these indicators may also prove useful in determining the activation of the SRB. The effectiveness of macroprudential tools The degree of complexity entailed by any impact analysis of economic policy measures increases in the case of macroprudential instruments. This is due to several factors. First, experience of their use is still very limited. Further, given that their objective is multidimensional, different metrics must be considered to evaluate them. Moreover, the necessary cost-benefit analysis of the measures poses complications. While the costs of activating the tools are immediate (e.g. in terms of reduction in the growth of credit and of GDP), the benefits arise in the long term and are very difficult to verify (e.g. they are derived from having avoided a systemic crisis). In practice, the effectiveness of macroprudential instruments has been tested in many ways; e.g. by analysing whether they significantly impact developments in credit, house prices, banks’ interconnectedness, the composition of their credit portfolio, etc. [see, for instance, Jordá et al. (2021)]. That is to say, analysis is made of the impact on the indicators used to measure developments in systemic risk.
I get immense value from their insights, whether it’s the challenges they face in filling positions, their plans for capital investments, or how global developments are influencing their decisions. These discussions provide a huge amount of detail and texture to the economic picture. One of the great strengths of the Federal Reserve System is our extensive networks of contacts in our communities, and we share what we learn from these conversations when we meet at the FOMC. Being "data dependent" means taking this holistic view when thinking about the economy and monetary policy. Not all of these types of data draw headlines the way shifts in the stock market do, but together they provide a much richer and more complete depiction of what’s happening. And they also tell me whether the signals we’re getting from the markets are reflected in the economy as a whole. 2018 Tailwinds In thinking about where the economy is heading, it’s worth reflecting on where we were 12 months ago. At the start of last year the message I was getting—from business leaders, economic data, and the markets—was one of overwhelming positivity. This reflected three tailwinds: strong global 2/4  BIS central bankers' speeches  growth, fiscal stimulus, and quite accommodative financial conditions. Each of these was giving the economy an extra boost. Indeed, these tailwinds provided even more of a boost over most of 2018 than forecasters had anticipated. Fast forward 12 months and indicators in Europe and Asia point to less optimism about global growth.

The initial lift from the fiscal stimulus will likely wane over the course of this year. And financial conditions have become less accommodative over the past several months. In addition, we are now seeing some emerging headwinds to growth from the partial government shutdown in the United States and elevated geopolitical uncertainties abroad. Other “data” confirm that the winds in our sails have calmed. The headlines have been about investors’ concerns around growth, which have contributed to volatility in markets. This is also showing through in surveys of households and businesses, who say that they are somewhat less confident about future economic prospects. For example, the latest Empire State Manufacturing Survey and New York Fed Business Leaders Survey both point to slowing growth in the region. And there is no doubt that my colleagues and I are hearing the same thing directly from our business and financial market contacts, who are more focused on the possibility of a weaker economic outlook this year.3 But let me be clear: a softer economic outlook doesn’t mean we should prepare for doom and gloom. On the contrary, it’s likely we’ll see GDP growth somewhere between 2 and 2½ percent this year. That’s a step down from 2018, but still consistent with a healthy, growing economy. Supporting a Strong Economy So, how should the Fed respond to an outlook of slowing growth and one that’s less certain than, say, this time last year? In a word: carefully.
General assurances were given that the central bank would provide liquidity support to sound financial institutions (including non-banks). However, the banks generally managed to keep their funding, and did not have to resort to the central bank to any extraordinary extent. Before GBIF injected capital into crisis-stricken banks, efforts were made to attract private investors. However, these efforts did not succeed. Experience shows that in times of recession and high uncertainty investors will be extremely reluctant to take on risk. Under these circumstances, the government was the only source available to support the financial system. In a way, the government became the “owner of last resort”. In light of the high level of uncertainty, the funding of the GBIF was regarded as expenses in the fiscal accounts, not as an investment. In retrospect, however, capital supplied by the government to the problem banks proved to yield a reasonable positive return. Hence, it might have been a profitable investment for private investors, although with a huge risk ex ante. To counteract the generally low supply of equity capital during the banking crisis, a separate Government Bank Investment Fund was set up. The Fund was intended to take part in equity emissions at (non-problem) banks on commercial terms. Certain other forms of general support to the banking industry were also provided. At its peak, the share of state ownership in the banking sector was close to 60 percent.

Unlike many other countries dealing with a banking crisis, Norway did not set up a separate asset management company - or “bad bank” - to handle problem loans. There were several reasons why we chose not to do this: •  In none of the problem banks in Norway was the ratio of non-performing loans considered to be of such magnitude that it would require so much attention from the management of the bank that it would distract them from their main goal - to bring the bank back to profitability. •  The banks themselves knew their borrowers best and had experience in working out defaulted loans. Handling such loans will always be part of a large bank’s business, and transferring employees with this expertise to a separate company might have left the banks more vulnerable when they encountered new problem loans. •  Setting up an asset management company and transferring bad loans from the banks would have required complicated accounting and legal work. In particular it would have been very difficult to find a fair price at which the loans should be transferred. •  The responsibility of handling the problem loans should remain with those who had the most to gain from a successful handling - the banks. •  Last but not the least; such an asset management company would have had to be financed by government money. Thus, more taxpayers’ money would have been put at risk.
It is important that the Riksdag, the Committee on Finance and external analysts can examine and evaluate monetary policy and assess whether the Executive Board has made the right decision and whether monetary policy is well balanced. As the Committee on Finance says in the comments mentioned above: “A flexible monetary policy requires, in the Committee’s view, a high degree of  8  Issues of the significance of asset prices for monetary policy and of the monetary policy conclusions to be drawn from the financial crisis are discussed further in Svensson (2009b, 2010b). See also Kohn (2009). 9  These issues are discussed further in Svensson (2010a). BIS Review 22/2010  9  transparency and that the Riksbank is very clear about why the various repo rate decisions have been made. This is also a prerequisite for the possibility to examine and evaluate monetary policy.” In order for the Riksbank to be able to be “very clear” about why the various repo rate decisions have been made, I believe it to be necessary to discuss and assess various possible monetary policy alternatives and their consequences for inflation and the real economy. A specific decision can best be justified by comparing it to the alternatives. It is thus a question of clarifying the reasonable and possible repo rate paths that exist and what consequences these alternatives paths have on the forecast for inflation and resource utilisation. Being able to measure and quantify target achievement is a major advantage.

Lars E O Svensson: Why a lower repo rate path? Speech by Prof Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at Umeå University, Umeå, 24 February 2010. *  *  *  The opinions expressed herein are my own and are not necessarily shared by other members of the Riksbank’s Executive Board or staff. I would like to thank Hans Dillén, Karolina Ekholm, Per Jansson, Pernilla Meyersson, Staffan Viotti and Svante Öberg for their valuable comments. Hanna Armelius has contributed to this speech. In this speech, I would like to explain why I entered a reservation the most recent monetary policy meeting and justify why I preferred a lower repo rate. I will also explain why I consider that mean squared gaps should be used, to a greater extent, as a measure of the extent to which monetary policy has succeeded in stabilising inflation around the inflation target and resource utilisation around a normal level. Such measures entail a new step towards a more transparent and systematic monetary policy. The Sveriges Riksbank Act and the preparatory work for it specify that monetary policy should be directed towards stabilising inflation around the inflation target and resource utilisation around a normal level. The lower repo rate path I advocated at the most recent monetary policy meeting would provide a better outcome for both inflation and resource utilisation, with both higher resource utilisation and CPIF inflation closer to the target.