samchain/econo-pairs-v1 huggingface dataset:
Már Guðmundsson: Iceland’s crisis and recovery and the crisis in the eurozone Address by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, in an international panel of bank governors on the European financial crisis and the Israeli economy, the Eli Hurvitz Conference on Economy and Society, Masada, Israel, 28 June 2012. *  *  *  Almost 90% of Iceland’s financial sector collapsed in the first week of October 2008, after its three private cross-border banks failed. In the panic that gripped global financial markets after the collapse of Lehman Brothers, these banks, like so many internationally active banks around the world, were faced with a wholesale run on their foreign currency liabilities and were therefore heading towards a default on those liabilities in the absence of lender-of-lastresort assistance in terms of foreign currency. However, given the size of the balance sheets involved (10 times GDP overall, with over two-thirds in foreign currency), it was impossible for the Icelandic authorities to provide this assistance on their own. Had the government made a full-scale attempt to save the banks, it would have been at serious risk of defaulting itself. The Icelandic banks’ failures were large by any criteria: the largest of them places 4th on the world list of corporate failures, and the three Icelandic banks combined rank 2nd, after Lehman. It was thus an event of systemic proportion in parts of Europe.

At that point, Iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005–2007 and a currency crisis in the first half of 2008. The banking collapse and the associated wealth loss and further currency depreciation only made the recession worse. Over the course of that autumn, two separate but interrelated sub-stories of the recent Icelandic saga were converging in a tragic grand finale. These are: 1. Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. 2. The rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”). Let us look a little bit closer at the second story. In just five years’ time, the Icelandic banking system expanded from a combined balance sheet of under 2 times GDP at the end of 2003 to almost 10 times GDP in mid-2008. Most of this expansion was cross-border, and a great deal of it had very little to do with Iceland, as both financing and investment took place abroad. There were indeed important domestic factors behind this expansion. One was the privatisation of the Icelandic banking system in the early 2000s, which was carried out in a manner that placed the country’s largest banks into the hands of risk-loving investment bankers and the ill-founded promotion of “financial centre Iceland”.
Several large Nordic bank conglomerates define the Nordic area as their home market, and have established, or plan to establish, branches in most Nordic countries. The largest Swedish and Danish banks have been the most active so far. A few of them, in contrast to other international banks established in Norway, have started to show an interest in the market for households and small and medium-sized enterprises. The strengthening of the position of Nordic banks in their home market may partly be perceived as a defensive strategy to keep out large global banks. The launching of a single currency in Europe may have been an important driving force. The euro is likely, at least in the short term, to be of greater consequence to the banking sector in euro countries than in Norway and other countries outside the euro area. The loss of income in some areas, such as currency trading, is greater for banks in the euro area, and the costs associated with adapting systems, etc. are also higher. In addition, cross-border competition is likely to intensify more between countries with a single currency than between euro countries and non-euro countries, although this is not certain. These factors point to a reduction in earnings for euro area banks. However, increased competition may in the longer term enhance the efficiency and competitiveness of banks. The introduction of the euro will also have a considerable influence on the development of securities markets in euro countries.

Local currency bonds are gaining the attention of foreign investors both from the perspectives of diversification and return enhancements, coupled with the optimism of appreciating Asian currencies. On the other hand, Asian bond markets are also growing as an increasingly attractive asset class for domestic borrowers as they steer clear from the international market. This indicates that the economies are increasingly relying on domestic demand and intraregional credit investments. Infrastructure financing, for instance, is also regaining importance in a number of Asian economies. The key is to have sufficiently deep and efficient markets to effectively channel the high bank liquidity and abundance of savings in Asia into regional investments. With the robust outlook in Asia, this will continue to underpin the need for investment opportunities to fuel the growth engine. Singapore, right in the heart of Asia, is poised to play a significant role as a gateway for global investors to access the Asian bond markets. We are also poised to serve as the centre for debt financing in the area of infrastructure, real estate and transportation related projects. Project sponsors are increasingly tapping our debt capital market in financing major infrastructure related projects in Asia. Since we started developing the REIT market in 2002, there are now 19 REITs and 1 property business trust listed on the SGX with an aggregate market capitalization of approximately $ billion. Issuance of Commercial MortgageBacked Securities (CMBS) remained strong on the back of a healthy REIT market.
Page 16 of 19  Figure 15 Sovereign rates' volatility, EM (1)  Exchange rate volatility, EM (1)  (basis points)  (annualized percent)  P25 - P75  25  Chile  Commodity exporters (2)  25  25  20  20  20  15  15  15  10  10  10  5  5  5  0  0  0  16  17  18  19  20 Nov.  16  17  18  19  20 Nov.  (1) EM includes Brazil, China, Colombia, Hungary, India, Indonesia, Malaysia, Mexico, Peru, Poland, Russia, and Turkey. (2) Includes Australia, Canada, New Zealand, and Norway. Source: Central Bank of Chile based on Bloomberg data. Figure 16 Uncertainty (*) (Dec.2018=100)  300  300 Chile  250 200  250 200  150  Global  150  100  100  50  50  0 18 Dec.18  0 19 Apr.19  19 Aug.19  19 Dec.19  (*) In both cases the Economic Policy Uncertainty (EPU) index is used. Sources: Bloomberg and CLAPES UC.

Along with thanking this support, we promise to maintain the same motivation, proactivity, and cooperation in the next stage, precisely because there is still so much that remains to be done. Thank you. Page 9 of 19  Figure 1 Mobility (1) (moving seven-day average)  20  20  0  0 Europe (3) U.S.  -20  -20 Latin Am. (2)  -40  -40 Chile  -60 -80 25-Feb.  -60 -80  26-Apr. 26-Jun. 26-Aug.  26-Oct.  (1) Average of the categories stores and leisure, supermarkets and pharmacies, transport stations and workplaces. (2) Simple average of Argentina, Brazil, Mexico, Colombia and Peru. (3) Simple average of Germany, Spain, France, Italy and United Kingdom. Source: Covid-19 Community Mobility Reports, Google. Figure 2 GDP, selected economies (variación anual, porcentaje)  1Q.2020  2Q.2020  3Q.2020  5  5  0  0  -5  -5  -10  -10  -15  -15  -20  -20 U.S.  Eurozone  China  Latina Am. (*)  Chile  (*)Weighted average at PPP for Argentina, Brazil, Colombia, Mexico and Peru according to the World Economic Outlook (WEO, October 2020). For Argentina, the figure for Q3.2020 is the average of the annual variations of the EMAE for July, August and September. Sources: Central Bank of Chile, Bloomberg, and International Monetary Fund.
This exception allows an independent institution outside the normal process of democratic and political accountability to be entrusted with authority for monetary policy only under the condition that it has a clearly defined mandate allowing the public to hold it accountable for the performance of the technical tasks assigned to it by the legislator. The clearer and narrower the mandate of a central bank is, the easier it is for the citizens to monitor its performance. [16] In the case of the ECB’s monetary policy, the Treaty sets out, in very clear terms, that the primary objective of the ECB is to maintain price stability. Also, the permissible rate of inflation is quantified by the ECB through the Harmonised Index of Consumer Prices (HICP), which is easy to understand and is updated at frequent intervals. [17] On the other hand, with the conferral of new functions and tasks on the ECB, multiple objectives may arise, which may obstruct the accountability process and, ultimately, compromise the democratic legitimacy of central bank independence. Since the independence granted to a central bank is an exception to the general rule that public administration should be subject to scrutiny and oversight by democratically elected institutions, the scope of a central bank’s independence should be interpreted narrowly and may not be automatically extended to other policy areas.

It is therefore, critical that improvements are made in the quality of real estate sector data to enhance analysis and policy response to developments in this sector. There is no doubt that the rate of inflation is still too high in Zambia compared to some of our neighbours, like Tanzania, Botswana, and Mozambique. However, I wish to assure you that lower rates of inflation are within reach given Government commitment to fiscal discipline and macroeconomic stability. It is a well established that high inflation (that is, above ten percent) is a cost to economic activities. This happens through: 1. Increased investment costs. High and persistent inflation adversely affects savings mobilization in the economy because savers would opt to hedge against inflation. Ultimately, this leads to a reduction in the availability of loanable funds and investments. In addition, high inflation is normally associated with high interest rates and high interest rates inhibit borrowing for investment purposes, thereby slowing down economic growth and the development process;  2. Rising prices erode the public and investors’ confidence in the economy and contribute to rapid exchange rate depreciation. This leads to currency substitution or dollarisation, which in turn, reduces the effectiveness of monetary policy;  3. Rising prices also undermine the country’s external competitiveness, which may lead to a decline in export earnings, thus, worsening the balance of payments position of the country; and  4. Rising prices entrench poverty through the erosion of peoples’ incomes, particularly those on fixed incomes.
I believe that long run success and real independence of monetary policy is gained in the well functioning of this simultaneous relationship. Albanian Constitution and the current Bank of Albania Law grants the responsibility of monetary policy design and implementation exclusively and without equivoque to the Bank of Albania. We believe that such legal framework and Albanian society aspirations and commitment toward Maastricht criteria’s of convergence provide essential assurance for future compliance of monetary and fiscal policy. C.  Financial market efficiency  Albania is a small open economy and relatively highly euroized. In general the financial markets are characterized by low trade volumes and interest rate volatility. This situation represents a high concentration in assets and liabilities in the banking system as well as a very limited supply of financial instruments in domestic currency. In this respect, we have been very aggressive to prepare and introduce a new set of rules for operational framework. The new regulation aims to increase the efficiency of the inter-bank borrowing market, it targets thinking on the margin behavior of the banks by reducing the frequency of treasury bills auctions, rearranging required reserves regulation and introducing a prime rate. Our objective is to have this package operative by the beginning of 2008. D.  Financial stability  This process has progressed with the increase of the banking activity. However I have to admit that increase and consolidation of the banking activity is accompanied by a rapid growth of credit to economy.

Improving the state of the labor market, removing rigid labor market regulations, reducing the tax wedge, and more importantly enhancing the human capital through education reforms are essential to accelerate the growth rate of the economy on a sustainable basis. Second, Turkey is a net commodity importer in contrast to Latin American countries and South Africa. We need to import in excess of 35 billion USD worth of oil and natural gas each year, almost 5% of our GDP. Looking at the composition of the foreign trade, you can see that our imports are mainly commodities and intermediate goods, whereas industrial goods cover more than 90% of our total exports. Therefore, promoting Turkey's competitiveness is the key to her future success. 2  BIS Review 32/2008  Third, high domestic savings rate, which is high in emerging countries in Asia, is quite low in Turkey. It is around 20%. We need to attract foreign savings to finance investments. It is not surprising to observe a strong and direct positive relationship in Turkey between growth rate and current account deficit. Of course, the upward trend in energy prices has also contributed to the widening of the current account deficit to 5.8% in 2007. The current account deficit is a structural problem and a source of vulnerability. However, Turkey did not have difficulty in its financing in the last 6 years. In fact, the quality of foreign capital flows has improved sharply.
If it were possible to eliminate or reduce at least one source of unpredictability, wouldn’t that be a good thing? And since the MPC is in control of interest rates why can’t it just tell us what it’s going to do? The problem is that we can’t be sure. Interest rates are not an end in themselves. They’re a means of meeting our objectives: the stabilisation of inflation over the medium term and, subject to that, the stabilisation of economic activity. And because there are lots of unpredictable shocks hitting the economy, things that would otherwise (and often do) move output and inflation around, the appropriate path of interest rates is necessarily unpredictable as well. The skipper of a boat, adapting to a skittish wind, and interested in making the journey as smooth as possible, may have perfect control of the tiller. But that doesn’t mean she can tell you exactly which position it will be in at every point in the future. That will depend on the direction of the wind at the time. It’s not that monetary authorities are unconcerned about expectations of future interest rates. Quite the opposite: these expectations are central to the transmission of policy. We directly determine only one particular – and very short-term – interest rate (what commercial banks get paid on their overnight deposits, or “reserves”, at the central bank). But demand and spending depend more on longer-term interest rates. In the UK, around half of corporate borrowing has a maturity of three years or more.

So even a relatively small effect of this sort can have a material impact on the credibility, and therefore the power, of the guidance (the dotted line in Chart 5). The solid blue line presumes that there’s some mechanism – some Odyssean mast to which you could tie yourself – ensuring that the cost of breaking the promise is always greater than the temptation to do so. Chart 5. Commitment policy loses much of its power if it isn’t fully credible  Results from a simulation of a small macroeconomic model under alternative assumptions about monetary policy and the average distance to the lower bound. Macroeconomic volatility is measured using a simple “loss function” that weights the variance of inflation and the output gap. The y-axis shows the square root of the loss function, scaled to 1 for the case of commitment policy with an average distance to the lower bound of 5pp. Sources: See Appendix for further details. In practice, it’s hard to see that there is one. The importance of maintaining reputation obviously helps. There’s a cost to breaking one’s word. But that mightn’t be enough, especially if your promise seeks to constrain not just your future self but your successor as well. That obstacle is all the greater if, as in the UK, policy decisions are made not by collective consensus but by democratic vote. Each member of the MPC member is individually accountable for his or her vote. It’s part of the UK’s constitution that “no parliament can bind its successor”[16].
New technology, new participants, new regulations and more globalisation have made this fairly complicated subject matter even more challenging to keep up with. Norges Bank has a statutory responsibility for promoting an efficient payment system. This responsibility becomes even more demanding when the systems change rapidly. The focus of my address here today will be on Norges Bank’s responsibility as distinct from the responsibility of the market participants and, in particular, that of the banks. However, before I embark upon this I will provide an assessment of risk and efficiency in the Norwegian payment system. I would like to begin with four observations on risk and efficiency in the payment system: 2. Observations  First, payment system risk is closely linked to the organisation of payment services (legal agreements, time of payment, etc.) Central banks have been particularly concerned with risk in large value transfer systems, or systems for clearing and settlement of payments between banks. These systems are located at the top of the so-called payment pyramid.

Initially, liquidity was added through the traditional discount window, and later through a wide range of new liquidity facilities that were developed. Up until the Lehman bankruptcy, the FOMC provided this liquidity without expanding the size of its balance sheet (Chart 13). As the crisis intensified following the Lehman bankruptcy, the FOMC significantly escalated its support for the economy. The FOMC could not provide additional support to the economy in the traditional manner by reducing the fed funds rate since the policy rate was already at zero. Instead, the FOMC initiated the Large-Scale Asset Purchase (LSAP) program. The objective was to ease financial market conditions to provide more support to the economy. Central bank purchases of assets raise the price and therefore lower the yield on these assets. These purchases crowd out some investors who shift their purchases to other assets, which lowers the yields on these assets, as well. In this way, financial market conditions are eased more generally. A consequence of the LSAP program was a rapid expansion of the central bank’s balance sheet. The combined monetary and fiscal support for the economy helped to arrest the decline in economic activity. As final sales began to stabilize, firms were able to manage down their inventories. The aggregate inventory-to-sales ratio rapidly declined to its pre-recession level (Chart 14). With their excess inventory worked off, firms needed to meet demand by increasing production. Aggregate industrial production rebounded – especially for durable goods (Chart 15).
Consequently, joint action is the most effective means of ensuring that the economic effects of the pandemic are overcome within a short period and at a lower cost for each and every country, particularly in a situation like the current one in which, although the crisis is global, its effects on the various economies are asymmetric.7 Admittedly, we do not have the instruments to address the effects of this crisis satisfactorily at European level. Ideally, the EU would have an appropriate institutional framework for addressing the asymmetric effect of economic shocks (for example, by launching a permanent macroeconomic stabilisation capacity for the common budget, a cyclical stabilisation function or panEuropean unemployment insurance). That said, in the absence of these instruments, the European recovery fund is an alternative that may satisfy some of these needs in a reasonably adequate manner. It could also (and would ideally) be the seed for the European institutional framework that we are currently missing. The fund will be financed on the capital markets, with the European Commission borrowing, on behalf of the Union, an amount of up to € billion between 2021 and 2026. According to the preliminary estimates available, the maximum volume of funds that Spain might 6  Appearance before the Parliamentary Economic Affairs and Digital Transformation Committee and Appearance before the Parliamentary Committee for the Economic and Social Reconstruction of Spain after COVID-19 (Congress of Deputies) 7  See Ó. Arce, I. Kataryniuk, P. Marín and J. J. Pérez (2020), Thoughts on the design of a European recovery fund.

Sabine Lautenschläger: One year of SSM Speech by Ms Sabine Lautenschläger, Member of the Executive Board of the European Central Bank, at an international conference on “One year of SSM effective and efficient supervision in a volatile world?”, organised by the Institute of Law and Finance, Frankfurt am Main, 2 November 2015. *  *  *  Ladies and Gentlemen, Let me thank the organisers of this conference, and especially Professor Schneider, for their kind invitation. I very much welcome this opportunity to share our experience of one year Single Supervisory Mechanism, in particular as our first year anniversary is only two days ahead of us. Back in November 2014, in a speech for the start of the Single Supervisory Mechanism (SSM), I compared the new system, the SSM, to an athlete at the start of his career. We only had a short period of training before going into our first competition. Today, almost one year later, we have gained experience and won some contests. Let me mention some figures to give you some insight into the sport we practice: The SSM directly supervises 122 banking groups. From January 2016 onwards this number will increase to 130. The balance sheets of these banks count for 25 trillion euro in assets and 82% of the banking business done in the euro area. Overall, the ECB issued more than 1.200 supervisory decisions last year; our planning cycle for the first year included more than 8.000 activities.