samchain/econo-pairs-v1 huggingface dataset:
Due to this distinctive feature of the Icelandic financial system, even the short-term benefits to households and business from a more accommodative monetary stance could prove to be minimal or even negative. However, a tight fiscal policy can contribute to a softer landing. Buoyant demand and soaring business profits have generated revenues for the Treasury this year far in excess of forecasts. A similar position could be on the cards in 2006. It is vital for both central and local government authorities to respond to this boost in revenues not by easing their restraint on the expenditure side, but rather by planning to achieve increased surpluses, which appears to be the aim behind the budget currently before Parliament. As announced recently, a change will be made to monetary policy implementation whereby interest decisions will be made on six fixed, preannounced dates next year. Three will coincide with the publication of Monetary Bulletin. On all these dates, the Board of Governors will announce its decision at a press conference, irrespective of whether the policy rate is changed or not, together with supporting arguments. This change will make monetary policy even more transparent. The Central Bank can thereby be said to have increased its formal interest rate decision dates from four to six, because the publication dates for Monetary Bulletin were already recognised as such in effect. Nonetheless, the Board of Governors can of course decide to change interest rates in between the preannounced dates if this is considered justified.

A current example are bad loans, or to use a more technical term, non-performing loans, NPLs for short. Banks in the euro area carry a total of € billion in such loans on their balance sheets. And this is an issue. Having large stocks of NPLs on their balance sheets prevents banks from doing their job. They have a hard time financing our economy. ECB internal research has shown that banks with high stocks of NPLs indeed lend less than others. It is thus important that banks resolve their NPLs quickly and decisively. And this is not just for the sake of the economy and the greater good. Failing to deal with NPLs also hurts the banks themselves. High levels of NPLs require constant attention. And this takes time and energy. So getting rid of NPLs would enable managers and staff to use their time more productively. They could improve business models, shore up profits and make their bank more resilient. So, failing to deal with NPLs hurts the economy and of course it hurts the banks. That’s why we consider NPLs a top priority. Getting rid of NPLs by restructuring, working out or selling them requires a joint effort by banks, politicians and supervisors. Banks have to put in place the right strategies and execute them. Politicians have to improve the judicial and legal systems to allow a swift resolution of NPLs. And we supervisors? Well, last year we published guidance on how to deal with NPLs.
It was feared that, in order to keep the exchange rate stable, the National Bank would be forced to shadow the policy of the ECB, and, with a lower exchange rate risk, that the interest rate differential between Swiss franc and euro investments would gradually narrow. This has not occurred : both shortterm and long-term interest rates in Switzerland are still around 2 and 1.5 percentage points respectively below those applying in the euro area. We can continue to pursue an independent monetary course. Conclusion Against the background of the persistent weakness of the international economy, Switzerland is stuck in a rut as well. In the past few months we have had to revise our forecasts downwards on a number of occasions, most recently in last week’s quarterly monetary policy situation assessment. For this year as a whole we are forecasting that real GDP will stagnate. Even this modest projection presupposes that the economy will pick up in the second half-year. There are still considerable risks in this regard. The exchange rate remains also a significant downside risk. Although the geopolitical situation has eased since the end of the war in Iraq, it cannot be ruled out that the franc will come under renewed upward pressure as a safe haven currency. In the present context of business stagnation, the recent correction in the exchange rate of the franc against the euro has brought our currency back to a more realistic level, which is good news for our export industry.

The level of solvency had increased, in terms of CET1 capital, from € billion in December 2007 to € billion in December 2019, up by slightly over 35%. This rise in capital entailed  1  From the 2008 peak to March 2020, the number of employees fell by 48% and branches by 35%. 1  a notable increase in loss-absorption capacity. Indeed, almost half of all capital took the form of buffers above the minimum regulatory level, which can be released should it prove necessary.2 In comparative terms, the CET 1 ratio of the main Spanish deposit institutions stood below the European average, while their leverage ratio is slightly above. This is because Spanish banks’ asset risk weightings are higher, basically as a result of a more intensive use of the standardised approach to risk management. The drive spread to the entire non-financial private sector in Spain, the deleveraging of which from 2010 to 2019 (almost 30 pp of GDP for the household debt ratio and 45 pp of GDP for firms’ debt level) has contributed to it being better positioned to tackle the strong shock to activity imposed by the pandemic. One way of illustrating this resilience are the stress tests we supervisors regularly conduct. This is the case of the FLESB (Forward Looking Exercise on Spanish Banks), conducted annually by the Banco de España. Its latest aggregate results were published in our autumn Financial Stability Report.
Others, facing more severe liquidity pressures, may seek to undertake voluntary rescheduling or rollover of debt by bringing together all or some of their major creditors, as in the cases of Korea and Brazil. Those facing unsustainable debt positions may seek to negotiate market-based write-downs of their debt, as in the cases of Ukraine, Pakistan and Ecuador. And in yet another set of cases, a country may find it necessary to impose a temporary timeout on payments to all creditors, to give themselves some breathing space to address macroeconomic or co-ordination problems. The decision on exercising any of these options must rest with the debtor country. The role of the official sector is to ensure that the full menu of financing options is made known and available to the debtor, from which it then chooses. This menu should include both the easier options – such as raising new private sector money – as well as the harder ones – such as suspending payments. Each of these options is backstopped by limits on IMF lending, so that the "pure bail-out" option is heavily circumscribed. Indeed, it is this backstop which helps provide the incentive for creditors and debtors to seek alternative, market-based solutions sooner. The IMF should stand ready to assist countries, whichever of these options debtors choose to exercise, provided the appropriate prior conditions are satisfied.

The expansion of private capital flows was gradual, and, until about ten years ago, was primarily concentrated on flows among the developed economies. It is only in the past ten years that the explosion of private capital flows to emerging market economies has taken place. Data from the World Bank suggest that annual capital flows to emerging markets were less than $ bn in the early 1970s, rising to around $ bn in the late 1990s. At their peak, capital flows to emerging markets were around 5% of those countries' GDP. Unfortunately, capital flows on this scale can reverse themselves as suddenly as they appear. The result of such sudden and large reversals of short-term capital flows has been a series of international financial crises, in Mexico in 1994-95, Asia in 1997-98, Brazil in 1998-99, and, more recently in Turkey and Argentina. The frequency and scale of these crises, if they were to continue, would be a serious impediment to the evolution of the international capital market. Unless we can both reduce the frequency and severity of such crises, and improve our techniques of crisis resolution, then the demonstrators against globalisation will be provided with unnecessary ammunition. The costs of recent crises have been large. Between 1996 and 1998, the reversal of private capital flows to the five Asian countries primarily affected (Indonesia, Korea, Malaysia, the Philippines and Thailand) was almost $ bn, equivalent to about 15% of the pre-crisis level of GDP.
Today, I will also share some of our developing views on the form that regulation and supervision may take in light of our work on Solvency II reform. This reform is expected to have implications for all insurers but is particularly important for annuity writers given the areas under consideration. I would like to start by thanking those of you here today who have been providing both input and feedback on the areas for Solvency II reform. The UK life insurance sector is vital to the security of millions of policyholders’ income, and important to the wider economy via its long-term investment; so the direction that the industry and its regulation takes matters. Your engagement is an essential part of making the right choices as we reform the regulation of the UK life sector. Regulation is unsurprisingly one of my Rs today; but first I’ll recap on the growth of the BPA sector in recent years and its potential trajectory. Then I will talk about the foundations  Page 3  for sustainable growth on which regulation needs to be based. So let me begin with what the BPA market looks like today and how we got here. Bulk Pension Annuity market developments Starting with growth, Chart 1 of the slides (in the Annex) shows the growth in the BPA market over the last decade or so, highlighting that insurers have taken on around £ of pension scheme liabilities over that period.

The PRA is therefore keen to continue to work with Boards to consider important questions around: Which of the incentives for management encourage the sustainable performance of the business over the long term; and which may favour shorter term? What could happen in the future and how resilient is the business to these risks? How easily could the business transfer from open to closed status if this became necessary? On what terms could the liabilities be transferred to a third party in a range of different market conditions? We have observed over the relatively short time Solvency II has been in force, that investment strategies for annuity business have been influenced by the up-front MA benefit that certain assets attract. The Prudent Person Principle[2] is part of our rules around investment and we expect Boards to challenge, approve and control the continuing appropriateness of the investment strategy. Risk management Moving from the challenges that Boards face in respect of BPA business to risk management challenges associated with investing for the long-term. Here success is about achieving a sustainable balance between investing safely for the long-term whilst also taking opportunities to diversify asset holdings, including into assets that have wider benefits for the economy as a whole. The PRA recognises that the increasingly diverse range of features associated with MA assets may have a significant bearing on the level of risk and uncertainty around the future long-term business plan.
Inflation prospects The average inflation rate in 2003 was roughly as we had forecast at the beginning of the year, although the composition was different. At the beginning of 2003, electricity and oil prices were soaring and inflation was above 3 per cent. We forecast this to be a temporary situation and that energy prices would fall again. This has also been the case, but on the whole consumer prices for energy have increased more than we anticipated. Nevertheless, inflation has fallen to the level we expected, as price pressure in the rest of the economy was weaker than we had assumed. One important reason for this is a larger-than-expected fall in prices of imported goods. This in turn was connected with the appreciation of the krona and the weaker economic activity in Europe. The strong productivity growth in the business sector probably also contributed. Now, as we look ahead, it is important that the more lasting effects on inflation from the business cycle are distinguished from price fluctuations caused by disturbances in the energy markets and other more temporary factors. Monetary policy The views on inflation prospects, which in turn are based on the economic situation, employment, productivity and wage developments, held by the Riksbank and other analysts have not differed  BIS Review 7/2004  3  significantly. However, even minor differences between forecasts can lead to differing conclusions with regard to monetary policy.

Of course, this does not prevent differing opinions being held, both within the Riksbank and by external analysts, as to how the repo rate should be managed in order to maintain price stability. Monetary policy is based on how the inflation rate is expected to develop in the near future, primarily 1-2 years ahead. There are two reasons for this. The first is that monetary policy measures make their full impact on inflation during this time horizon. Thus, the Riksbank has little possibility to counteract shocks that affect inflation in the short term, but it can conduct a well-balanced monetary policy to ensure that inflation is maintained around an average rate of 2 per cent a couple of years ahead. The second argument in favour of forward-looking monetary policy is that this provides scope for taking into account developments in the real economy. If the repo rate were to be changed continually to try to bring inflation back to the target level as quickly as possible every time a shock occurred, it could lead to considerable, and undesirable, fluctuations in interest rates, production and employment. During the years that monetary policy has employed an inflation targeting strategy, we have developed a clear analytical framework for our work. The Riksbank has developed a simple rule to make monetary policy more easily comprehensible and to create stability when making monetary policy decisions.
Meantime, public spending climbed significantly, largely as a result of the increase in unemployment benefits and in the interest burden, but also as a result of spending on pensions and on government consumption. A further expression of the rapid deterioration in the deficit was the most substantial rise in public debt as a proportion of GDP. The first conclusion that may be drawn from this analysis, and one which is very relevant for understanding our present difficulties, is that the budget deficit arising with the crisis was eminently structural. That is to say, it was not only due to the downward cycle, or to the temporary discretionary measures with no lasting effect on public finances. In any event, the outcome has been that the public debt/GDP ratio has not stopped growing since 2007, and  BIS central bankers’ speeches  3  we will end the current year 2012 with a level close to 85%: i.e. an increase of almost 50 pp of GDP over a period of only five years, which in itself is an indicator of the seriousness of our crisis. Reducing the budget deficit from its 2009 peak is proving anything but easy. Indeed, the correction made in 2010 and 2011 was very scant, and was of course less than that initially planned and desired. The budgetary adjustment is being made in highly adverse economic and financial circumstances, compounded by the impact in the short run of the austerity measures on economic activity.

SPEECH DATE:  3 April 2020  SPEAKER:  Governor of the Riksbank Stefan Ingves  VENUE:  www.riksbank.se  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 measures to mitigate the effects of the corona crisis on the economy These last three weeks have been some of the most dramatic Sweden has experienced in modern times. On 10 March, we told the Parliamentary Committee on Finance that the assessments described in the Monetary Policy Report from February had become entirely irrelevant.1 We already knew then that the Swedish economy would be affected by the coronavirus. What we did not know, however, was the force and extent of the impact. Our message then was that the Riksbank was ready to act to mitigate the negative effects on the economy. Since then, we have spoken to both companies and banks, and we have implemented a number of measures. Today, I’d like to talk about what we have done and how the measures are contributing to the ongoing economic crisis management effort. “Everything has changed in two weeks” “Everything has changed in two weeks” This was one of the quotes from the companies we have interviewed on account of the corona pandemic2. The fact is that the situation is changing so rapidly that it is difficult to form an idea of exactly how bad things are in the economy.
In Sweden this usually takes place in the early summer and the delegation stays for a week and visits during this period the Riksbank, the Ministry of Finance, Finansinspektionen [the Swedish financial supervisory authority], the social partners and other central economic participants to obtain a picture of the economic state of the country. This leads to a report that is discussed in the IMF board. In some cases, the IMF has a very practical involvement in countries. Many central banks in developing countries have been established with the assistance of the IMF. An example that is close to hand is the establishment of a central bank in Kosovo. The same applies to introductions of new currencies, or the introduction of new exchange rate regimes. The IMF also trains officials from national central banks and ministries of finance as part of the work of spreading knowledge. BIS Review 78/2000  4  An increasingly important part of its activity concerns creating common rules of play within different areas that affect financial stability. Many of these are in the form of general minimum standards and recommendations, for instance, in bank supervision, financial statistics, transparency and foreign exchange reserve management. By encouraging countries to meet these, countries reinforce their institutional framework, at the same time as increased standardisation makes it easier for everyone to be cognisant of systems in different countries. Not least, this assists investors to make risk assessments.

José De Gregorio: Workshop on financial markets and monetary policy Opening remarks by Mr José De Gregorio, Governor of the Central Bank of Chile, at the Workshop on Financial Markets and Monetary Policy, Santiago, 6 August 2010. *  *  *  On behalf of the Central Bank of Chile I would like to welcome you all to this workshop on the interactions between financial markets and monetary policy. We have put together a very interesting group of papers that are surely at the forefront of research in this area. The episodes that started to unfold during the second half of 2008 reminded us once more of the central importance of financial markets for the functioning of the economy. As the crisis progressed and policy makers tried to mount a response that could mitigate the effects on the real economy, understanding which actions would have the bigger impact at the smallest possible cost become a key priority. At the same time, gauging how the traditional policy actions would affect the economy in a scenario of deep disarray of financial markets also become an important priority in Central Banks and Treasury Departments around the world. The collection of papers that will be presented here today try to illuminate different features of the policy dilemmas I just mentioned. They are then a very welcome contribution. To some extent economists lacked a clear theoretical framework to understand the role of financial markets as both an originator and propagator of shocks when the crisis started.
First, the financial crises are both deeper and more prolonged than other economic downturns. We see that the fall in GDP is larger and it takes longer for it to return to the pre-crisis level than in a normal downturn. Second, the more rapid credit growth has been before the crisis, the more pronounced is the downturn. Norges Bank has also examined whether credit growth, together with other variables, has shown a systematic pattern ahead of financial crises. Pronounced credit growth has often coincided with a rapid rise in real estate prices and a higher share of bank lending financed by wholesale funding. These variables are included in the set of key indicators on which Norges Bank bases its advice to the Ministry of Finance concerning the countercyclical capital buffer for banks. The analysis is based on data for 16 OECD countries covering the period from 1970 to 2013. 2 As the dating of financial crises is uncertain, the dates of the financial crises have been set based on international studies. The dataset covers a total of 27 crises, of which 11 are associated with the financial crisis in 2008. 1  Jordá, Oscar, Moritz Schularick and Alan M. Taylor (2013): “When Credit Bites Back”, Journal of Money, Credit and Banking, 2013, 45 (2), 3–28. 2  The analysis will be documented in a forthcoming Norges Bank Staff Memo by Anundsen et al. (2014).

For simplification, we assume that there are only two possible financial market states: either normal and calm times or a financial stress situation. The consequences of the stress will depend on the level of the financial imbalances. As I indicated earlier, experience shows that a downturn will generally be more pronounced, the more financial imbalances have developed in advance. The imbalances also increase the likelihood of a stress situation. Within this framework, monetary policy can influence the risk in the financial system. Increased risk of instability engenders lower expected future economic activity. When the  6  6  Janet L. Yellen (2014): “Monetary Policy and Financial Stability”, (2. July 2014). BIS central bankers’ speeches  central bank assesses the future path of inflation and output, it has an incentive to dampen the build-up of financial imbalances. Let me illustrate by means of this framework how a central bank can contribute to a smoother path for inflation, output and employment over time when it takes into account that financial imbalances may develop. Chart: Financial stress does not arise As a point of departure, let us look at a situation that is not unlike the one experienced in recent years: External interest rates fall and there are prospects that they will remain low for a long period. The decline in external interest rates results in a widening of the differential between Norwegian and external interest rates, leading to an appreciation of the krone exchange rate.