samchain/econo-pairs-v1 huggingface dataset:
Some progress has also been made in using these models to help design and calibrate postcrisis regulatory policy. As one example, epidemiological models have been used to understand and calibrate regulatory capital standards for the largest, most interconnected banks – the so-called “super-spreaders” (Craig et al (2014)). They have also been used to understand the impact of central clearing of derivatives contracts, instabilities in payments systems and policies which set minimum collateral haircuts on securities financing transactions (Haldane (2009)). Rather less attention so far, however, has been placed on using complexity theory to understand the overall architecture of public policy – how the various pieces of the policy jigsaw fit together as a whole. This is a potentially promising avenue. The financial crisis has led to a fundamental reshaping of the macro-financial policy architecture. In some areas, regulatory foundations have been fortified – for example, in the micro-prudential regulation of individual financial firms. In others, a whole new layer of policy has been added – for example, in macro-prudential regulation to safeguard the financial system as a whole (Hanson, Kashyap and Stein (2010)). This new policy architecture is largely untried, untested and unmodelled. This has spawned a whole raft of new, largely untouched, public policy questions. Why do we need both the micro- and macro-prudential policy layers? How do these regulatory layers interact with each other and with monetary policy? And how do these policies interact at a global level? Answering these questions is a research agenda in its own right.

In the US, estimates suggest it was broadly equivalent in scale to banking in the run-up to the crisis. At a global level, non-bank intermediation is currently estimated at around $ trillion, around half of the assets of the global banking system. Because many of these entities sit outside of the regulatory perimeter, data on their exposures and interactions is thin on the ground. But work in the US to map these interactions suggests they too are dense and complex (Pozsar et al (2010)). Chart 8 presents a stylised map of the shadow banking sector and its interaction with the banking sector. These interactions are highly complex and multi-layered. (c)  Complexity of macro-financial interactions  The links and interactions between the financial sector and the wider economy are, in some respects, even less well mapped than the shadow banking sector. They, too, have evolved significantly over recent decades in scale and complexity. As an example of that evolution, Chart 9 looks at a representation of the flow of funds between various sectors in the UK – companies, households, the rest of the world and government. It also shows the role of the financial sector in intermediating these flows of funds between ultimate asset-owners (shown at the top) and liability-holders (shown at the bottom). The intermediation sector is further decomposed into banking and “other” financial intermediaries such as pension, hedge and other funds and insurance companies. The Bank of England’s is also shown.
These countries’ governments are more concerned that their banks have framework conditions at least as favourable as competitors from other countries. This attitude leads to a competition to weaken the requirements as far as possible. The minimum requirements will not be lower than the level all the major countries will agree to. Given such minimum requirements, there is every reason to set stricter national rules. The Norwegian authorities have been doing this for a number of years, including requiring banks to hold more pure equity than most other countries have done. Banks object that higher capital standards make it more expensive to operate and will make borrowing more expensive for households and enterprises, in addition to reducing the competitiveness of Norwegian banks. But that a bank should be at a competitive disadvantage if it is not allowed to be as financially weak as another bank is hard to take seriously. This line of thinking presupposes that the government will bail out the banks. But we should not accept this supposition. Higher capital ratios will make banks less risky for shareholders, creditors and the government. Less risk means that banks’ creditors will require a lower interest rate. 48 In addition to higher permanent capital standards and other structural measures, it is also appropriate to use discretionary measures when systemic risk increases above normal. Under Basel III, higher capital requirements for banks can be required in the event of rising lending growth and surging property prices, see Chart 4. But other measures are also possible.

The support included a soft loan and the write-down of a loan. The measures were part of a broader bank rescue package. The Ministry of Finance immediately submitted a report to the Storting (Report No. 24 (1989–90) where the Ministry of Finance wrote”..The write-down of loans from the central bank may […] represent an active use of central government funds that should be deliberated in the Storting in advance”. The Standing Committee on Finance and Economic Affairs endorsed this view and the resolution received final approval only after the Storting had deliberated the matter. This delimitation of Norges Bank’s tasks is important. Norges Bank shall not provide grants or capital to the banks. During the financial crisis in August 2008, the banks’ short-term and medium-term funding seized up. Norges Bank provided short-term loans as is customary and natural for a central bank. At the same time, we took the initiative to put in place the swap arrangement, whereby banks could exchange covered bonds (OMFs) for government securities. This went through the government’s balance sheet and not that of the central  44  See Chart 1 in Karsten Gerdrup (2004): “Norges Bank’ role in the event of liquidity crises in the financial sector.” Economic Bulletin no. 2/2005. 45  For a discussion, see Tore Jørgen Hanisch, Espen Søilen and Gunhild Ecklund (1999):”Norsk økonomisk politikk i det 20. århundret. Verdivalg i en åpne økonomi”. [Norwegian economic policy and politics in the 20th century.
Unemployment has remained low. Chart2: Norges Bank’s key policy rate The key policy rate is lower than what can be considered to be a normal level. Norway is a small, open economy. Exceptionally low interest rates abroad influence the key policy rate in Norway. At the same time, there is still a considerable difference between the key policy rate and the interest rates facing households and enterprises. Banks’ lending margins are not particularly low as their lending margins are high. Chart3: Key rates abroad Low interest rates and unconventional monetary policy internationally reflect a continued low activity levels and high unemployment. In some countries, particularly in Europe, inflation has also shown a considerably decline. Policy rates are still close to zero in many countries and both the European Central Bank (ECB) and Sveriges Riksbank cut rates last year. Leading central banks have taken new steps to provide markets with forward guidance, with the aim of signalling low interest rates for a long period ahead. In today’s situation, the forward guidance is intended to signal low interest rates for an extended period of time in order to sustain inflation and boost growth. Other unconventional monetary policy actions are also in use. With large-scale securities purchases, the central banks in the US, the UK and Japan have sought to reduce long-term interest rates and thereby funding costs for firms and households. The provision of liquidity has also led to higher equity and securities prices.

The requirement will apply from 30 June 2015. The purpose of the countercyclical capital buffer is to enhance banks’ resilience to periods of large losses. The buffer rate will be increased when financial balances are building up or have built up over a period. In the event of an economic downturn and large bank losses, the buffer rate can be reduced, with a view to mitigating the procyclical effects of an undesired tightening of bank lending. The buffer is not an instrument in the ordinary management of business cycles. Changes in capital requirements may nonetheless influence banking behaviour and hence economic developments. Banks can satisfy increased capital requirements in several ways. They can raise equity from their owners and some banks have already done so. Should banks choose to increase their lending margins or restrict lending by other means, this will have an impact on economic activity and inflation. New capital requirements may therefore influence the conduct of monetary policy. While increased capital requirements will strengthen banks’ solidity and may mitigate the build-up of imbalances, we cannot proceed under the assumption that new regulations will eliminate the risk of financial instability. A robust monetary policy will therefore continue to take into account the risk of a build-up of financial imbalances. At the same time, monetary policy must not be overburdened. When assessing the monetary policy trade-offs, the primary objective of monetary policy must remain low and stable inflation. We will not lose sight of the inflation target.
When the monthly allocations to the Petroleum Fund are larger than the foreign exchange transfers from Petoro (SDFI), Norges Bank will purchase foreign exchange in the market to cover the difference. The Ministry of Finance determines the amount of the monthly transfers to the Petroleum Fund on the basis of its estimates in the National Budgets and the Revised National Budgets. The Ministry may also adjust the amount on the basis of new information concerning, for example, developments in oil prices. Given the current high level of oil prices, purchases in the next few months will probably be considerably larger than they have been during the summer. Norges Bank has not defined a target for the exchange rate. Nevertheless, developments in the krone are of considerable importance to interest-rate setting because the exchange rate influences inflation and output. Portfolio investments may easily dominate movements in the krone exchange rate in the short term. Themes in foreign exchange markets shift. In periods, investor focus on stock returns feeds through to exchange rate movements. During periods of political and economic unrest, investors may choose individual currencies as a safe haven - often the Swiss franc. The Norwegian krone was probably also perceived as a safe haven when oil prices rose in the autumn of 2002 as a result of the uncertainty concerning a possible war in Iraq. In the period from March to May 2003 and throughout the autumn, the krone showed a tendency to appreciate.

Svein Gjedrem: Monetary policy and the krone exchange rate Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Annual Meeting of ACI Norge - The Financial Markets Association, Oslo, 26 August 2004. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 11 August, Inflation Report 2/04 and on previous speeches. The  Charts in pdf-format can be found on the Norges Bank’s website. *  *  *  In most countries, price stability, or low and stable inflation, is the objective of monetary policy. The historical experience of Norway and other countries shows that high and variable inflation results in considerable fluctuations in output and employment. In addition, a fall in the level of prices could easily accompany a period of decline. The first explicit inflation target was introduced in New Zealand in 1990. Canada followed in 1991, the UK in 1992, and Sweden and Australia in 1993. Norway introduced inflation targeting in the spring of 2001. Approximately 20 countries currently use inflation targeting in their monetary policy. In this context, I would like to mention that the central bank of Sweden was able to draw on its own experience from the 1930s when it sought to motivate and firmly establish inflation targeting during the 1990s. Admittedly, Sweden did not have an inflation target but a price target for monetary policy in the period 1931-1937.
[26]See Article 6 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC, OJ L 331, 15.12.2010, p. 12. [27]See Article 21(4) of Regulation (EU) No 1093/2010. [28]The Chair has a non-renewable term of office of five years (Article 26 (3) of the SSM Regulation) and may be dismissed from office following a special procedure by the appointing body – the Council - only in two specifically listed cases (Article 26 (4) of the SSM Regulation). [29]The Vice Chair is chosen among the members of the Executive Board and the independence safeguards for the Executive Board apply to her/him ( Article 26 (3) and (4) of SSM Regulation). [30]The rules for the ECB representatives in the Supervisory Board are not set out in the SSM Regulation but in the ECB  http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  Decision on the appointment of representatives of the ECB to the Supervisory Board (ECB/2014/4) where the appointing body – the ECB Governing Council – define a non-renewable term of office of five years (Article 1 (2)) and lists the only two specific cases under which they can be dismissed from office by the appointing authority.

With some exceptions, the principle of personal independence is not applicable to the members of the Supervisory Board. Is the principle of independence under Article 130 of the Treaty applicable to the ECB in its role in EFSF/ESM financial assistance programmes for a number of euro area Member States? Another question to examine is whether the principle of independence under the Treaty is applicable to the ECB in respect of its role in ESM/EFSF financial assistance programmes for certain Member States. With the financial and sovereign debt crisis, the Commission, on behalf of the ESM and the EFSF, and in liaison with the ECB, was given a number of specific tasks relating to the assessment of risks to the financial stability of the euro area as a whole or of its Member States, the assessment of whether a Member State’s debt is sustainable, the assessment of the financing needs of the Member State concerned, the  http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  negotiation of a memorandum of understanding (MoU) detailing the conditionality attached to financial assistance facilities of the ESM/EFSF for that Member State, and monitoring compliance with such conditionality. Where possible and appropriate, the Commission – in liaison with the ECB – was mandated to conduct these ESM/EFSF activities together with the International Monetary Fund.
A positive output gap indicates a level of activity that fuels pressures on economic resources and rising price and cost inflation. (See for example Frøyland and Nymoen (2000) and Olsen, Qvigstad and Røisland (2003) for more on the output gap.) The optimism spread to Norway, where equity prices also rose. The level of activity was very high in the securities market, among corporate lawyers, consultancies and in the ICT industry. High oil prices through most of the 1990s resulted in buoyant investment activity and growth in operating expenses in the petroleum sector. With substantial government tax revenues, expectations concerning the use of petroleum revenues also rose. It became increasingly challenging to keep pressures in the economy at bay by means of fiscal policy. The response to this challenge was the revision of economic policy in spring 2001. The most important policy change was the strategy for the phasing in of petroleum revenues – the so-called fiscal rule. An inflation target for monetary policy was introduced at the same time. The revision came after four years of strong economic expansion and high growth in labour costs, pressures to spend petroleum revenues and high household credit growth. Implementation of monetary policy • The interest rate is set so as to keep inflation at a low and stable level • Higher interest rates will reduce inflation by curbing demand and strengthening the krone. An interest rate reduction has the opposite effect. • The effects of interest rates on inflation may vary over time.

Therefore, they are subject to many risks that are similar to those confronted by conventional banks. In addition, Shari'a compliant banking has its own risks. In principle, there is a range of various activities through which Islamic banks can work in different ways that enable them to provide funds. These activities are adapted to meet the principles governing Islamic banking business, the most important of which is the principle of risk sharing. Therefore, there is an urgent need to identify, measure, manage, monitor and control such potential risks and mitigate them within the capacity and capital adequacy of the relevant bank. The most important challenges confronting Islamic banks are risks arising from financing formulas and Shari'a compliant banking, especially investment risks, method of applying "Basel II" proposals, capital market and financial derivatives risks. In addition, Islamic banks may bear a wide range of risks that differ, in nature, from those borne by commercial banks. In this connection, it is necessary to emphasize that the role entrusted to the supervisory authorities is to pursue a comprehensive control method based on risk assessment process and not to make any discrimination in a way that may suggest that Shari'a compliant banks are being rated differently or confronting larger risks.
Households that save in banks or invest in other forms of financial assets make funds available to others. Banks convert some households’ savings into loans for other households wishing to finance house purchases, for instance. If we look at the household sector as a whole, savings accounted for about five per cent of household disposable income in 2004,1 which has been the level of saving for the past few years. These are funds that are channelled to the business sector in Norway or abroad to finance investment there. There may be various reasons behind a decision to save. In many cases, the objective is to spread consumption evenly through the course of a lifetime. Another reason may be the desire to leave behind an inheritance. For most people, the level of income will fluctuate through life. Most of our income is earned while we are economically active. Once our working career is over, we will have little to live on if we have not set aside capital as we earn or have secured our retirement by some other means. A hundred years ago, a common way of “saving” for old age was to have a large number of children. A large family increased the probability of some of the children growing up and being able to support their parents when they were old. By looking after family property, and perhaps expanding it, subsequent generations could also be provided for.

The analyses in Inflation Report 2/05 are based on a baseline scenario where the key rate shadows forward interest rates up to 2007, and then rises somewhat more rapidly. The krone exchange rate is assumed to shadow the forward exchange rate, which remains broadly unchanged over the next three years. Private consumption accounts for just under 60 per cent of total demand in mainland Norway, and is an important channel through which monetary policy operates. Low real interest rates, solid growth in real disposable income and a continued sharp rise in house prices will result in high growth in private consumption again this year. Higher employment and somewhat higher wage growth will continue to contribute to growth in household demand in the period ahead. Household debt, however, has risen sharply. A gradual normalisation of interest rates will reduce growth in household disposable income. This suggests lower growth in consumption. We assume that households will choose to spread consumption over time, so that the saving ratio will continue to fall even if interest rates rise. Housing investment rose sharply last year. It appears that growth in residential construction will remain high this year, although the rate of growth is expected to slow somewhat through the year. Low interest rates may have contributed to moving forward some housing projects. A gradual normalisation of interest rates implies more moderate growth in housing investment. Developments in underlying demand for housing may also imply that residential construction will stabilise and gradually decline somewhat.
This is a high level, not just from a historical perspective but from an international one too. The Riksbank’s credit data on the stock of mortgage borrowers shows that households with mortgages had an average debt-to-income ratio of 338 per cent in September 2017, which is an increase of 36 percentage points compared to 2011. 10 The same data also shows that 31 per cent of households with mortgages (640,000 households) have a debt-to-income ratio exceeding 400 per cent and 13 per cent (260,000 households) have a debt-to-income ratio exceeding 600 per cent. Since 2011, debt-to-income ratios have increased in all income groups. This means that households are becoming more sensitive to several types of changed economic conditions, such as rising interest rates, falling housing prices and higher unemployment. Allowing this trend to continue is not compatible with taking responsibility for the Swedish economy. See, for example, Alter et al. (2018), Lombardi et al. (2017), Mian and Sufi (2018) or Emanuelsson et al. (2015) for a review of the literature. 7 See Sveriges Riksbank (2013). 8 Dermani et al. (2016). 9 Sveriges Riksbank (2019). 10 Blom and van Santen (2017). 6  3 [13]  The development of the housing market can affect confidence in the banks Another aspect of the Swedish housing market is that the banks, via their lending to both households and companies, are exposed to the property sector.

16 It becomes difficult to attract labour to the major cities when it is impossible to find a home for a reasonable price. 17 I am concerned about this social development, as it is creating problems for economic growth and economic distribution, and is increasing the likelihood of financial crises. It is of great importance that reforms are carried out to slow this development down. Measures affecting all mortgage borrowers are absent Like the Riksbank, Finansinspektionen has drawn attention to households’ high indebtedness and has taken measures to reduce the risks and increase resilience among households. This has also contributed towards slowing down price growth for housing, although this was not the primary purpose of the measures. 18 However, these macroprudential policy measures, such as a loan-to-value limit and amortisation requirements, are only aimed at new borrowers. Consequently, they mainly affect the conditions for the people I refer to as outsiders and, to some extent, could make it more difficult for them to enter the housing market. 19 On the other hand, there are few measures affecting the stock of already existing loans, which means that the new rules affect insiders and outsiders differently. In a study, the Riksbank has demonstrated that an amortisation requirement aimed at all borrowers could reduce household debt over the long run and that this would also mean a redistribution of resources from lenders to borrowers.