samchain/econo-pairs-v1 huggingface dataset:
The real exchange rate measured in terms of developments in relative prices is an expression of the Norwegian krone’s purchasing power. The real exchange rate has fluctuated considerably over time and has deviated substantially from the average level since 1970 over longer periods. Nevertheless, there has been a tendency for the real exchange rate to revert to this level. Relative prices in a common currency are now approximately 2 per cent lower than the average since 1970.4 Relative labour costs in a common currency are approximately 3.5 per cent higher than the historical average. As mentioned, high wage growth over a period of several years starting in 1998 eroded the competitiveness of the Norwegian business sector. Even though the krone has depreciated since 2002, the competitiveness of Norwegian companies is still fairly weak due to the high cost level. The nominal krone exchange rate has now reverted to around the level prevailing in the mid-1990s, while labour costs in manufacturing have risen considerably more than among our trading partners in the same period. Asymmetric cyclical developments Cyclical developments in Norway and other countries have been divergent. This was most pronounced in the 1980s when we had a strong upturn while Europe was in a recession. Even though business cycles have gradually become somewhat more synchronised, there is still a time lag. While the global turnaround took place in 2000, with a subsequent reduction in interest rates abroad, the Norwegian economy continued to show a high level of activity.

Following the monetary policy meeting on 11 August, the Executive Board stated that with the prospect of continued low inflation for a period ahead, wide deviations from projected economic developments would be required before the interest rate should be increased. The Executive Board also stated that uncertainty concerning the effects of previous monetary policy easing and the unusually low interest rate imply, on the other hand, that we should exercise caution with regard to further interest rate reductions. 6  BIS Review 47/2004
Domestically, the SNB will work hand in hand with the Federal Banking Commission (FBC). The SNB will focus on systemic issues, while the FBC - our bank supervisor - will deal with institutional aspects. This job-sharing is based on the premise that each authority will be able to make use of its comparative advantage. Internationally, market developments foster cross-border cooperation between oversight authorities. For instance, institutions such as Sega Intersettle (SIS) through “The Settlement Network” are heavily involved in the current reshaping of Europe’s financial market infrastructure. However, as the legal reform is not yet in place, there are many open questions as to what exactly the modus vivendi of the oversight function should look like. We will address them step by step in a pragmatic way. Many issues such as the set-up of mechanisms for information sharing, the need for on-site examinations, or the disclosure of oversight proceedings have still to be discussed and clarified. We are in the process of defining basic principles and implementation tools pertaining to our new oversight responsibilities. 8  The Payments Risk Committee was established by the Fed New York in 1993 as a means to integrate the input of leading US commercial banks in discussing and implementing recommendations for improving the quality of risk management in payment and securities settlement systems. 6  BIS Review 37/2002  Conclusion I would like to conclude my speech with a fundamental remark.

In particular, governments need to foster innovation by providing the right framework to encourage experimentation and risk-taking in new and growing sectors, and to support the transition to new jobs for people working in “sunset” sectors. In parallel, they need to ensure that the conditions are in place to direct investment towards the technologies and sectors of the future. 2/4  BIS central bankers' speeches  This requires sufficient financing. The European Commission estimates that the investment needs for delivering the digital transformation as well as the green transition will be at least € trillion over the next two years.2 But in a number of countries – Italy among them – mobilising investment requires above all a business-friendly economic environment, with efficient and agile public and private services, adequate physical and digital infrastructures, a well-functioning judicial system and a strong financial sector. If such actions are taken, this crisis can engender a period of positive transformation. It offers an opportunity to policymakers to take a decisive step forward towards more inclusive, greener and more digital growth.
In particular, the cooling in the housing market points towards weaker growth than expected next year. The picture of the euro area and other parts of the world is that developments have rather been slightly stronger than we assessed in June. Back in June, we envisaged fairly high growth in Sweden over the coming years. The statistics received since then confirm that the economy is growing at a good rate. Household consumption and housing investment have grown more rapidly than expected. However, both the number of persons employed and the number of hours worked have been lower than expected. This reflects the fact that productivity growth has been surprisingly high again. Companies have thus been able to increase production without needing to take on so many new employees. Most indications are nevertheless that the labour market will continue to improve. Generally high lending and the fact that household indebtedness and house prices are continuing to rise rapidly support the picture of strong demand. Rapid increases in energy prices have contributed to inflation being higher than the Riksbank’s forecast over the summer. However, the oil price has fallen during the autumn, although it is as usual difficult to know whether this trend will continue. The oil price, like other energy prices, has a tendency to fluctuate considerably. There has been a recent downward adjustment in expectations of future energy prices. BIS Review 96/2006  1  The strong productivity growth will contribute to unit labour costs being low this year.

The current situation in the Swedish economy In the June Inflation Report we envisaged continuing good international economic activity. We assessed that growth would remain high in Asia, which has developed strongly in recent years. The strong growth in China is one explanation for the upswing in Asia. The expansion in China has contributed, for instance, to the recovery we now see in Japan. At the same time, the US economy has remained an important driving force behind the world economy as a result of its size. In the euro area, however, developments have been weaker, but we saw clear signs of an improvement in the forecast we published in June. At the same time as growth in demand in the world economy has been strong, price pressures have been held back. Although oil and other commodities have become significantly more expensive for consumers, the general price increases have been relatively small on the whole. One explanation for this is probably the stiffer international competition. Another is that monetary policy in many countries is now aimed at low inflation. The strong global economic activity has been beneficial for developments in Sweden. The Swedish economy has shown high growth rates in recent years. Despite this, inflation has also been low here in Sweden. This is mainly because import prices excluding oil have not risen and strong productivity growth has held down cost pressures. New data received since June shows that the international economic prospects still appear favourable. However, the signals from the US economy are slightly mixed.
Some are also calling for a government of national unity… I am simply suggesting that joint action by consensus would be the best approach to take for the Spanish economy. It is up to the elected representatives to decide on whether or not the best approach, within a framework of understanding, is to make an explicit pact or establish a certain type of government. What conditions are required to reach an understanding of this nature? I think the important thing is to establish a framework of mutual trust and loyalty between the government and the opposition; and that is a two-way street. Banks are in a difficult position: at a time when they still have not restored their business models after years of low interest rates, the current scenario has again been prolonged indefinitely. How do you think this will affect the sector? 3/4  BIS central bankers' speeches  The banking sector is facing this situation from a much more robust position than ten years ago. It is true that it has profitability issues and the deep recession will affect its bottom line. But there are no solvency problems. The financial markets experienced some problems during the initial days of this crisis, but they were not caused by the banking sector. The situation has to a certain extent returned to normal, although not completely, while prices have partially recovered and volatility has eased.

Minister Calviño has now stated that Spain should not resort to using it and that, in any case, she only believes it is an option if conditionality is extremely low… Before this crisis, Spain was growing, it was competitive, its debt-to-GDP ratio was below 100%, its government deficit was 2.6% and its unemployment rate stood at 14%. Currently it has been able to obtain the funding it requires on the markets, it is not experiencing any difficulties, and the spread against the German bund is 110 basis points. Let’s hope that Spain can maintain this relatively comfortable position. Italy is not in the same position; could that be why it is adopting a more combative stance? I don’t want to start making those kinds of comparisons. Let’s come back to Spain then. There is talk of making a political pact, like the Moncloa Pacts of 1977. What’s your opinion? Are you in favour of pacts? I think we must always be in favour of political pacts during extraordinary times such as these. Although a comparison with the 1977 Moncloa Pacts is perhaps not possible. At that time, Spain was not a member of the EU and the euro did not exist. The main goal was to reduce inflation and change the income policy. Today, there is a deep recession that will have a very severe impact on the public finances and which will require a huge effort to get the economy back to normal. This is the most serious economic situation since the Civil War.
After just over four years of existence, the SSM today constitutes a unique and efficient model, based on the application of the EU Single Rulebook (under the direction of the European Banking Authority – EBA), close cooperation between the ECB and national authorities on all levels (ECB Supervisory Board, Joint Supervisory Teams, on-site inspections teams), and the principles of subsidiarity and proportionality (the ECB directly supervises 119 of the largest banking groups while all other institutions are supervised through national authorities). The SSM represents a major institutional step forward and the initial results are real. Banking supervision practices have been harmonised upwards and are now aligned with the highest international standards (for example, the methodology for the supervisory review and evaluation process or SREP). Europe’s banking industry is today significantly more robust than before the crisis: the biggest banks’ CET1 ratio has increased by more than 3 percentage points since 2014 (from 11.3% to 14.6% at end-2017) and their balance sheets have largely been cleaned up (through a reduction in the NPL ratio from 7.6% to 4.9% over the same period). The industry’s resilience was confirmed in the stress tests organised by the ECB and EBA in 2018, which simulated the impact of financial shocks on the solvency of the largest banks: in an 5/7  BIS central bankers' speeches  adverse scenario, the average CET1 ratio for the sample would come out at 9.9% – or 1 percentage point higher than in the previous exercise in 2016.

Like the SSM, the SRM is based on a common regulatory framework (the BRRD Directive and the SRM regulation), and is structured around a Single Resolution Board and joint resolution teams. Although the SSM and the SRM have both been successful in managing the first bank liquidations or resolutions (i.e. those concerning the Veneto banks and Banco Popular), the second pillar still has to be finalised. Achieving this goal is essential, both to prevent the contagion of banking crises and to ensure the continuity of critical banking functions. In this regard, France has worked hard for the creation of a common backstop, the main features of which were decided just a few months ago. Three issues still need to be addressed however: the duration of the credit lines provided by the backstop; the creation of a rapid decision-making process in the event of an emergency; and the provision of liquidity to banks in resolution. Once these matters have been resolved, we can hope, and at the Banque de France it is our firm belief, that a pragmatic compromise can be found on the third pillar – the deposit guarantee scheme. c. … and building a Capital Markets Union to create a true Financing Union Evidently, financial integration is not just about achieving banking union. Ensuring the balanced and sustainable financing of the economy also implies deeper integration of capital markets, which fosters greater geographical diversification in savings and meets corporate firms’ financing needs – notably equity financing.
As you know, he was born in Europe but passed away in America – and it’s probably no coincidence. Accordingly, I would like to elaborate on three potential “candidates” as explanations for Europe’s lag: the first two – our social model and our macroeconomic policies – would be Keynesian failures and the third one – our lack of innovation – is on the Schumpeterian side. To put it in a nutshell, I don’t believe in the first two explanations, but I believe in the third one. Hence, Europe ultimately needs to gather together its two sons, to reconcile Keynes and Schumpeter. Page 5 sur 14 A. Our social model? A frequent explanation for Europe’s lag seeks to lay the blame with our common social model. In my view, this is not convincing. On the contrary. Look at the Nordic economies. They have a high ratio of social spending as a percentage of GDP (28% in Denmark, 25% in Sweden, 29% in Finland, well above the OECD average of 20%), and nevertheless their economic performances is better : for instance, the unemployment rate was 5.1% in Denmark, 6.8% in Sweden and 6.7% in Finland in 2019 (before the outbreak of the Covid crisis), which is well below the euro area average (7.6%). Sweden and the Netherlands successfully gave birth to “decacorns” such as Spotify and Adyen, etc.

In particular, the takeover of innovative start-ups should give rise to a revamping of the concepts used by the Commission. Money: To bridge the innovation gap and help our start-ups grow, we need to better mobilise our financial resources thanks to a genuine “Financing Union  Page 13 sur 14 for Investment and Innovation”. Europe is facing an unacceptable paradox : we have the world's largest pool of domestic savings – with the household saving rate hitting an all-time high in 2020 – but since the 2008 financial crisis, investment has been declining, especially in southern and eastern Europe xiv:  And the equity financing of non-financial firm’s is underdeveloped compared to the United States: it only represents 76% of euro area GDP, versus 176% in the United States:  Page 14 sur 14 In the current context of the Covid crisis, consolidating the Capital Markets Union is even more essential to complement public measures and support the economy. There is still too much fragmentation. Tangible solutions are in the pipeline such as new regulatory measures to help companies raise funds rapidly on markets in the context of Covid-19. Further efforts should also be made in the areas of pan-European venture capital, market supervision or companies’ data transparencyxv. ***  In conclusion, I would like to mention a more “cultural” cause of our European lag: let us call it a confidence gap.
For example, I have said on behalf of the Bank of England7 that in principle the Bank, as the UK’s resolution authority, would be prepared to step aside and allow UK subsidiaries of the big US financial groups to be resolved as part of a group-wide resolution led by the US authorities. To take this further, the Bank of England needs to set out the conditions that would need to be met in practice for it to deliver on its “in principle policy”. Second, the UK needs the US authorities to make a reciprocal “in principle statement” about their being prepared to step back to facilitate a UK-led top-down whole-group resolution of UK groups with a presence in the US. That cannot, in my view, wait very long after the EU’s Resolution Directive is passed. And, third, similar commitments need to be made between other pairs of countries – particularly the major jurisdictions in which the headquarters of global systemically important financial institutions are domiciled. On that, I can tell you that progress in this field is not limited to the US and UK. Separately, some technical impediments need to be removed. Perhaps most obviously for this audience, the standard market agreements for derivatives and repos need to be amended so that putting a firm into resolution or the exercise of a resolution power is not an event of default. If necessary, there will have to be regulatory changes to induce or require this. That too is on the FSB’s agenda for the next year.

I don’t mean it would be completely smooth right now; it would be smoother in a year or so as more progress is made. But in extremis, it could be done now. That surely is a massive signal to bankers and markets. Europe has not yet reached the same point, but contrary to some commentary is not far behind. The necessary legislative regime is close to completion. In contrast to the US, however, many of the largest European – including UK – banking groups will need to reorganise in order to make themselves susceptible to either Single Point of Entry or Multiple Point of Entry resolution. That brings me to my second point. (2)  The Single Point of Entry versus Multiple Point of Entry resolution strategy distinction may be the most important innovation in banking policy in decades  We will learn to speak of banks and dealers as either “SPE groups” or “MPE groups”. Some technical developments don’t matter hugely. This one does. A lot will follow from it, as I will sketch in a moment. But first I should recap the difference between SPE and MPE resolution strategies. A single-point-of-entry or SPE resolution works downwards from the group’s top company – most simply, a pure holding company (Holdco). Losses in subsidiaries are first transferred up to Holdco. If Holdco is bankrupt as a result, the group needs resolving. The “bailin” tool is applied to Holdco, with the equity being written off and bonds converted as necessary into equity to recapitalise the group.
Yet at the same time, the Bank was poorly placed in the early stages of the crisis to launch well-structured liquidity assistance rapidly, either to the market as a whole or to individual firms. It lacked the information to evaluate firms’ solvency. And, where LOLR was required, it lacked well-defined pricing or maturity schedules, pre-arranged legal documentation or – most importantly of all – a clear ex ante understanding of the amount and quality of suitable collateral on banks’ balance sheets against which it could lend. Prudential supervision has now returned to the Bank, facilitating a more coordinated approach to financial crisis management, horizon scanning and proactive contingency planning, and improving the Bank’s ability to evaluate solvency ahead of any LOLR. And the bulk of the Bank’s liquidity insurance toolkit has progressively been made public since the height of the crisis. The Sterling Monetary Framework (SMF) now contains a range of facilities with documented price, maturity and quantity schedules, including a regular auction-based marketwide Indexed Long-Term Repo facility, a bilateral on-demand Discount Window Facility and a discretionary Contingent Term Repo Facility. All of these facilities can be used against a wide range of eligible collateral, including securities and raw loans. But this collateral must normally be “pre-positioned” with the Bank so that it can be credit assessed, priced and haircut well before any need to use it arises, rather than in the heat of a crisis.

So the risk of central banks having “too little” scope to carry out LOLR is real. At the same time, the public has a legitimate interest in avoiding “too much” LOLR. We cannot afford for financial institutions to view liquidity support as a substitute for prudent financial management: central banks must not be “lenders of first resort”. And lending to institutions that are in need of capital rather than liquidity is the wrong solution. Given the uncertainties involved, neither outcome can be avoided with certainty. But it is right to seek robust safeguards against them. BIS central bankers’ speeches  1  A well-designed LOLR framework must therefore get the balance right between lending “too little” and “too much”: –  To help avoid “too little” LOLR, central banks must be given clear responsibilities and the tools and powers needed to carry them out, including the ability to lend to individual institutions, covertly if necessary to maintain financial stability. –  To help avoid “too much” LOLR, central banks must have strong risk management, be ring-fenced from special interests (in public or private sectors), have a clear public mandate specifying their scope for action, and be subject to strong transparency and accountability requirements. There are powerful parallels between these design challenges, and those for monetary policy. Like monetary policy, LOLR is vitally important to an economy’s health, but involves intrinsically complex, technical judgments – including the solvency or otherwise of potential borrowers, the pricing, scale and maturity of loans, and the appropriate collateral.