samchain/econo-pairs-v1 huggingface dataset:
Where a country has transparently been pursuing an unsustainable macro-economic policy, most people find it easy to accept that that country should bear the burden and adjust, painful though that may be. Many people find this harder to accept where, as in the present case, conventional macro-economic policies had, for the most part, been relatively responsible. There were certainly adjustments to macro-economic policy that needed to be made - a more flexible exchange rate regime in some cases, for example, or a somewhat tighter overall macro-economic stance, with perhaps some adjustment between fiscal and monetary policy. And, once the capital outflow had started, macro-economic adjustment had to be harsher than might otherwise have been necessary, in order to re-establish confidence. But there are real dangers in extreme market movements or in excessively severe macro-economic adjustment to contain them. The political and social consequences are all too apparent in parts of Asia; but even without that there is a danger of a vicious circle of domestic default and systemic financial weakness in the affected country. And that could have seriously adverse implications - in terms of both financial and economic knock-on-effects - for the global economy. That, essentially, is why it may be in the self-interest of the international community to attempt to mitigate the market and macro-economic adjustment pressures by providing financial support.

It is still not wholly clear - to me at least - quite why the storm struck suddenly when it did. Most crises of this sort have their origins in some evident macro-economic policy failure. At least in hindsight there are usually fairly clear tell-tale signs of expanding fiscal deficits and/or lax monetary policies, classically accompanied by evidence of imbalance in the form of accelerating inflation or a rapidly deteriorating balance of payments. There were such signs, perhaps most notably in Thailand; but they were not for the most part particularly pronounced in Asia. Some of you perhaps understand better than I do why the initial infection proved to be so contagious. It was after all your money! In fact through the first half of the 1990’s, and in some cases for much longer, the countries in question had been remarkably successful. They attracted, by their very success, huge inflows of capital from the rest of the world, where yields had fallen, in the hope of achieving higher returns. There is no question that this capital inflow made a very big contribution to the remarkable economic expansion in Asia and hence to the global economy; but with the benefit of hindsight, the accelerating scale of the inflow, and particularly the forms that it took, became an important part of the problem. It was not all in the end productively employed.
I should make clear that, as put, I would not go along with this completely. It would all depend on whether medium-term inflation expectations were well anchored. So long as they were, the central bank would have a wider choice than a one-item menu of having, putting it crudely, to generate a material downturn in the short term to contain inflation; or, symmetrically, a boomlet to raise inflation. Another possible choice might be to tighten (loosen) modestly but for longer, allowing inflation to return to target over a longer  2  BIS Review 2/2007  horizon; and if the policy maker explained the considerations behind the likely path of policy, price and wage setters might act in a way that helped to bring inflation back to target5. Acting aggressively without need could endanger the political economy foundations of any central bank’s authority. It has to be a judgment based on the particular circumstances. In terms of my central theme this evening, this is a world in which monetary regimes truly are better, but in which policy makers are having to face some fresh challenges. Asset pricing uncertainties If central bankers see possible interruptions to the Great Stability, there is arguably conflicting evidence as to whether financial markets are giving it insufficient weight or – at the opposite pole – taking stability for granted.

It must be cautioned that the true equity risk premium is unobservable, and so estimates may well be wide of the mark. But there is a possible story, related to changes in the global distribution and management of savings. The managers of the now massive official foreign exchange reserves in Asia have a clear preference for fixed-income securities, both absolutely and relative to say the US household sector. And in the West, defined-benefit pension fund trustees and managers have been placing greater weight on matching the duration of their quasi-fixed income liabilities with holdings of bonds. In both cases, there may have been a de facto shift in global demand from equities to fixed-income securities of various kinds. That would tend to alter relative risk premia9. All told, this seems to reduce the candidate explanations for Rogoff’s puzzle. For equities, fluctuations in equity risk premia may have been a factor, driven by the dotcom/telecom fad and shifts in global investor preferences. For financial assets more generally, perhaps the best provisional view is that volatility in asset returns may have been elevated for a while by the effect on prices of the reductions in default-free rates, term premia and credit-risk premia associated with the Great Stability. As well as adding to volatility temporarily, that will also have raised ex post returns, in which case it would be important that market participants did not act on the basis that they were easily sustainable.
This could in turn result in lower demand and lower commodity prices. High oil prices have mixed effects on the Norwegian economy. Lower demand abroad will have a negative impact on parts of the Norwegian economy. At the same time, domestic demand is normally stimulated by higher petroleum investment. The balance in the Norwegian foreign exchange market will not be affected to any appreciable extent. So far, the effects of high oil prices on developments in the real economy have been relatively limited. Credit developments in the past year have given ambiguous signals to our interest-rate setting. Growth in household debt is high. Enterprises have been reducing their debt for some time, but developments over the past months may suggest that this trend has been reversed. Norwegian enterprises and households borrow primarily at variable rates. Loans with no form of fixed rate agreement account for over 80 per cent of the value of loans to the household and enterprise sector. The current interest rate level is very low. Long-term investments cannot be made based on the assumption that this interest rate level will persist. According to money market expectations, the interest rate will eventually stabilise at close to 5½ per cent. This interest rate, plus a premium for banks’ margins, provides a more realistic indication of the interest rate level that will apply over the loan’s life than the variable interest rates prevailing today. Growth in the Norwegian economy is now solid. It appears that growth will also be high in 2005.

As regards Swiss bank regulations, it is primarily the risks emanating from developments in the real estate and mortgage markets which are presently the focus of public interest. However, the most decisive factor for the long-term importance of the Swiss banking centre is the alleviation of the TBTF issue. Only if this can be done, will it be possible to provide a home to international banks in Switzerland in the long term. Thus, regulatory efforts to contain the TBTF issue convincingly in Switzerland are extremely important. With the Swiss TBTF legislation, which is currently being implemented, we are making good progress in this respect. The package of legislation rests on two pillars. First, systemically important banks are subject to significantly higher capital and liquidity requirements with a progressive component. Second, arrangements must be made to ensure that systemically important banks are resolvable in a crisis, so that it is not necessary to resort to public funds. If these measures are implemented in full, incentives to take on excessive risk will be substantially reduced. This will diminish the likelihood of a crisis, as well as the costs to the taxpayer, should a crisis nevertheless occur. At the same time, the measures help to strengthen domestic competition, because they reduce the implicit subsidies to the TBTF banks. However, we have not yet achieved our objective.
Fatos Ibrahimi: Banking system reforms, accomplishments and challenges in Albania Speech by Mr Fatos Ibrahimi, Deputy Governor of the Bank of Albania, at the Ninth CEI Summit Economic Forum “Fostering reforms and innovations for sustainable growth”,a Ministry of Economy, Trade and Energy, Central European Initiative, Tirana, 23 November 2006. *  *  *  Distinguished participants, Allow me to express my pleasure for participating in this forum and for the opportunity to present some of the main developments that have taken place in one of the most important fields of the Albanian economy, the banking system. My presentation will focus on two issues: First, the main steps followed by the reform in the banking area, presenting the problems related to commercial banks, omitting monetary aspects. Secondly, the current situation of the banking system and some of the main problems it is faced with, which need solution over the short-term and medium-term period. The banking system reform was part of the structural reforms undertaken by the Albanian authorities after 1992, which aimed at macroeconomic stability and Albanian economy transformation into a market economy, by privatizing the economy and creating financial and social protection institutions. The banking system transformation in Albania followed the same path as in other former socialist countries. The first important phase started with the passing from the one-tier banking system into a two-tier system, in which the former Albanian State Bank was divided into two banks, with a qualitatively distinguished activity from each-other.

OECD (2019), PISA 2018 Results (Volume I): What Students Know and Can Do, PISA, OECD Publishing, Paris xii Borne, E., Rencontres des cadres dirigeants de l'État, speech , 17 May 2023. xiii Villeroy de Galhau, F., « Comment la France et l’Europe vont vaincre l’inflation », Letter to the President of the French Republic, April 2023. xiv Cour des comptes, La DGFiP, dix ans après la fusion, 20 June 2018. xv Baromètre - Institut-Paul-Delouvrier 2022 xvi Banque de France, Annual Report 2022, 22 March 2023. xvii Le sursaut, Vers une nouvelle croissance pour la France, working group chaired by Michel Camdessus, 2004. xviii Rapport de la Commission pour la libération de la croissance française, 23 January 2008. xix Conseil d’Etat, Simplification et qualité du droit, annual review, 25 September 2016. xx DITP, Baromètre BVA de la complexité administrative et de la confiance en l’administration par évènement de vie, 24 May 2023. xxi Commitment No. 3 of the 7th Interministerial Committee for the transformation of public services of 9 May 2023. xxii Cour des comptes, La décentralisation 40 ans après, Public Annual Report 2023. i  ii
In such a context, what should we do to return to normality? Economic theory provides a set of conditions to be fulfilled for a market to function efficiently: full information, enforceable property rights and contracts, absence of externalities just to mention the most important ones. In times of stress, these conditions are not fulfilled. But they are hardly met in normal times either. Moving from one situation, to the other, does not necessarily involve a huge economic shock. Small changes in economic sentiment or “animal spirit” may bring financial markets to a point of near collapse. The past ten years are a striking case in point. The development of securitisation was initially perceived as improving welfare through better risk management and allocation. Overall, it was seen as a move towards more complete and efficient markets. The crisis has shown that this was not necessarily the case: the process was plagued by information asymmetries and moral hazard, and created high risk concentration on a limited number of counterparties, It also lead to the build-up of financial imbalances which proved unsustainable. In those conditions, a minor change may suffice to trigger a financial market collapse. It is difficult to rationalise such an outcome unless it is the result of some kind of coordination between economic agents on a bad equilibrium. Some contributions presented here mentioned strategic complementarities, an explanation which cannot be completely ruled out. Indeed, it seems that the driving force behind the massive securitisation era was, for most participants, regulatory arbitrage.

The Board of Governors’ policy statement said the following: “If the decrease does not reverse, it is clear that inflation will rise sharply, and persistent inflation will be imminent if nothing is done, with the accompanying upward spiral of prices, wages, and exchange rates against foreign currencies. The depreciation of the króna in recent weeks is also harmful to the balance sheets of indebted households and companies and undermines the stability of the financial system over the long term. Thus it is critical that the depreciation of the króna be reversed as soon as possible.” The market’s response to the Board of Governors’ decision was favourable, and that is well, but at this point it is not possible to assert whether this decision will generate the results the Board of Governors intended. The next edition of Monetary Bulletin, the Bank’s principal publication on economic issues, is in the final preparatory stages and will be published on April 10. It will include an appraisal and forecasts by the Bank’s experts as regards the current economic climate and the likely developments in the near future. Because this next issue of Monetary Bulletin is forthcoming in such a short time, I have chosen not to discuss current issues at length today, though it was tempting to do so. The media discourse on the size of Iceland’s foreign reserves and the strength of the Central Bank and the Icelandic government is often misleading.
Over that period, the Taylor rule suggested US monetary policy was looser than could be explained by inflation and output alone. Whether by coincidence or causality, what happened next in US credit markets was dramatic. Chart 3 plots the ratio of US credit-to-GDP, relative to its long run trend, over the same period – the “credit gap”. This indicator has a special significance from a regulatory perspective because it will act as a guideline path for the setting of the CCB once Basel III comes into effect. The US credit gap rose steadily from around 2001 up until 2008. Relative to its long-run trend, credit-to-GDP reached a peak of over 10 percentage points. By historical standards, this is a huge credit boom. We can now ask ourselves the counter-factual question, how different might the world have looked had macro-prudential policy been available to assist monetary policy? Answering this question rigorously would require that we re-run the paths of policy, the economy and the financial system over this period – a full counter-factual simulation. That is beyond the scope of this paper. As a shorthand, we can still do something simple but nevertheless informative about the way the world might have looked. This is done by simply redrawing the path of US banks’ capital ratios on the assumption that the CCB had been in place. In particular, we can use the Basel III calibration of the link between the CCB and the credit gap to simulate a hypothetical path for US banks’ capital ratios.

Relative to money spending, central bank money supply is at its highest levels in the 15-year history of the European Central Bank, the 100-year history of the US Federal Reserve, the 131-year history of the Bank of Japan and the 319-year history of the Bank of England. Accompanying these monetary policy changes has been a marked shift in regulatory philosophy. Since the crisis, financial regulation has become explicitly macro-prudential [Morris and Shin, 2008; Bank of England, 2011; Hanson et al, 2011]. This is an expression much-used, but generally little-understood. In a nutshell, it means that policymakers have begun using prudential means to meet macro-economic ends. Those macro-economic ends include tempering swings in credit and leverage – the classic credit cycle. The credit cycle is a long-established feature of the financial landscape [Aikman et al, 2014]. Chart 1 shows its pattern in the UK over the past 130 years or so. The credit cycle is every bit as regular as the business cycle. But it differs from the business cycle in two critical respects: its amplitude is at least twice as large and its duration at least twice as long. Both are important for the design of macro-prudential policy regimes. The larger amplitude of the credit cycle is one reason why credit booms have, more often than not historically, resulted in banking crises (Table 1). Because financial crises cause large and long-lived disruption to the economy, this suggests a strong empirical link between credit cycles and macroeconomic destabilisation.
In a world of very low interest rates, monetary policy cannot be the only game in town – and we should not pretend it can be. In particular, we urgently need to press ahead with structural reforms to improve long-run economic growth, which will consequently lift equilibrium interest rates. In my view it is much better to provide monetary policy with greater room with a process that increases output and wealth than by ones that increase social costs. At the same time, fiscal policy needs to become more effective at complementing monetary policy in managing cyclical fluctuations. In the current euro area context that means those countries with fiscal space should use it better, and going forward fiscal rules should be more rigorously enforced so that countries enter downturns with greater ability to carry out active stabilisation and invest into education and innovation, to name but a few. For individual jurisdictions the exact policy mix will of course differ. In some cases the emphasis 6/7  BIS central bankers' speeches  may be on increasing public investment, in others on more growth-friendly tax policy. Likewise structural reforms that aim at raising productivity have to be tailored towards domestic priorities. But given the common nature of the challenges for central banks, all countries would benefit from prioritising it. And the positive spill-overs will clearly be larger if all act in unison.

For example, there may arise situations in which the taxpayers in one country may be faced with the prospect of essentially bailing out the depositors of a branch in another country through their national deposit guarantee scheme. Incidentally, there is a recent example from my own country (although, technically, it concerns a bail-out under the investor compensation scheme rather than the deposit guarantee scheme). After a long and complicated investigation the Swedish Deposit Guarantee Board decided around two weeks ago to commence payments to a group of mostly Italian investors that were the unfortunate clients of the hair-raisingly ill-managed securities company CTA, which went bankrupt in 2004. Fortunately, CTA was not one of the bigger players – in fact I had never heard of it before it became an item for the Deposit Guarantee Board – and the fund will be able to cover the payments to the approximately 1 200 clients, amounting to around € million in total. However, if a larger institution had gone bust, the fund alone would not necessarily have been able bail out the investors. All deposit guarantee schemes – as well as investor compensation schemes – are typically underfunded and are not able to cope with failures in large cross-border financial institutions. In such events, additional government funding will be needed.
Már Guðmundsson: Monetary policy Keynote address by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at a breakfast meeting of the Iceland Chamber of Commerce, 4 November 2011. *  *  *  The Iceland Chamber of Commerce has a long-standing tradition of holding a breakfast meeting like this one on economic developments and prospects and monetary policy, following the publication of the Central Bank’s autumn forecast. As before, I would like to thank the Chamber of Commerce for this initiative, as there is a great need for informed discourse on monetary matters. In my speech a year ago, I discussed the progress made in stabilising the economy as is evidenced by the underlying current account surplus, the stable and subsequently strengthening currency, and inflation that was rapidly approaching the Central Bank’s inflation target. I mentioned, however, that robust recovery had not yet taken hold. It seemed to me then that the recovery had begun, and this has since been corroborated. At that time, GDP was projected to grow by just over 2% in 2011 – which was not considered terribly strong in view of the slack in the economy. I was concerned as well about the low level of investment and the prospect of weak export growth in spite of a very low real exchange rate. The inflation outlook seemed much better, though, due to a rising exchange rate and the slack in the economy.

For instance, structural factors such as slowing of crop yield growth, fast population growth and higher income elasticity for food in developing countries would continue to support higher food prices. Policy markers would therefore need to pay attention to these developments in calibrating the appropriate degree of monetary tightening. 7. Thirdly, there is also a need to diversify the sources of growth for the region, in order to generate sustainable growth and redress global imbalance. In this regard, it is worthnoting some encouraging developments that are underway in the region. The first one is the deepening intraregional trade and increasing orientation towards domestic consumption. The robust economic growth of the regional economies over the past year has mainly been propelled by strong domestic demand, while the contribution from net exports was either small or negative. In fact, the aggregate trade balance of the region has been gradually declining since 2007, and if intra-regional trade is excluded, it has declined notably from about 4% of the regional GDP in mid-2007 to less than 2% at end-2010, the lowest in more than a decade. This gradual change in trade pattern, with regional economies shifting their export markets from deficit countries like the US to surplus countries in the region, has also been contributing to global rebalancing. 8. We also should not overlook the positive attributes of capital flows. While challenging to manage, capital inflows present important opportunities for boosting broaderbased growth. The key is to channel the capital flows into good uses, and particularly towards productive investments.