samchain/econo-pairs-v1 huggingface dataset:
Another very important change was the creation of a fiscal policy framework with an amended budget process. This framework and the new process aimed to get a grip on the evolution of public expenditures while also leading  1  The Economic Commission (1993). 2  A debate about this had been taking place for a while at that point. The Swedish Centre for Business and Policy Studies (SNS) had been advocating a so-called norm-based stabilisation policy since 1985, see Heikensten and Vredin (2012) for an overview. BIS central bankers’ speeches  1  to an average surplus in terms of net lending. The overall aim was to ensure that fiscal policy would have the desired long-term orientation. Flexible inflation targeting preferable – but improvements not ruled out But even though these and other changes have made the Swedish economy more reliable and resilient to shocks, we too have been affected by the events of the past few years. The global financial crisis and surprisingly low inflation have meant that a number of previously accepted truths have begun to be called into question, and led to a debate about whether the economic policy framework developed prior to the financial crisis should be modified or potentially even replaced. My view here is completely clear: it is important for us to think very carefully before we make any comprehensive changes to the Swedish economic policy frameworks.

Eva Srejber: Inflation targeting and bubbles Speech by Ms Eva Srejber, Second Deputy Governor of Sveriges Riksbank, at the Adam Smith seminars, Paris, 9 July 2002. *  *  *  Since the mid-1990s, inflation has stabilised at very low levels in the industrial nations. From an average inflation rate of 6 per cent during the period 1975 to 1994, the rate of price increase has been slightly below 2 per cent over the past 6 years. This entails a return to the same low inflation rate as prior to 1970. Inflation has also been reduced considerably in most other countries in, for instance, Asia and Latin America. There are many factors that have contributed to this. Firstly, price stability has become an explicit objective for monetary policy in many countries. An increasing number of central banks are orienting their monetary policy towards a fixed inflation target. This includes the Riksbank, which, after the fixed exchange rate was abandoned in November 1992, established an inflation target of 2 per cent with a deviation interval of plus/minus one percentage point. The orientation of monetary policy has in many countries been supported by a fiscal policy aimed at budget consolidation. Independence for the central banks in Europe, convergence criteria for EMU membership, the stability pact in Europe and the ban on financing budget deficits through printing new banknotes are all examples of measures that have helped increase confidence in the price stability target. Increased competition in the wake of globalisation has probably also subdued inflation temporarily.
4  Haughwout, Andrew, Richard Peach, and Joe Tracy. 2008. “Juvenile Delinquent Mortgages: Bad Credit or Bad Economy.”, Journal of Urban Economics, 64, no. 2 (September): 246–57. 4  BIS Review 41/2010  As delinquency and foreclosure rates rose, structured finance products backed by riskier mortgage loans performed particularly poorly. The securitization market for non-conforming mortgages collapsed. Credit availability tightened as underwriting practices became much more restrictive, even for plain vanilla mortgages. The cascading effect of the sharp increase in mortgage delinquencies and the resulting steep decline in the market value of mortgage assets was a key contributing factor to the financial crisis. As the financial crisis intensified and the economic outlook deteriorated, equity prices eventually declined by 50 percent from their late 2007 peak before bottoming out about one year ago. But while the value of real estate and equities plunged, the debt incurred to acquire those assets remained, leaving households very highly leveraged. According to the Flow of Funds Accounts, the ratio of household liabilities to net worth rose from around 20 percent to nearly 30 percent in just three years (Chart 11). The result was a sharp decline in desired investment relative to saving. The number of housing starts plunged, commercial real estate investment fell and households cut back on their spending as their net worth plummeted. The economy slumped into what is now called the “Great Recession”.

SPEECH DATE:  10 November 2016  SPEAKER:  Governor Stefan Ingves  VENUE:  The Swedish Bankers’ Association bank meeting, Grand Hôtel, Stockholm  SVERI GES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel. +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Necessary reforms for a more stable financial sector Crises are expensive and should be avoided When financial crises afflict us it becomes obvious to all how much damage they cause. Unfortunately, this insight is often temporary, as it is easy – even a human survival instinct – to forget problems and leave them behind us. As a representative of the Basel Committee I therefore see it as an important task to remind you of how costly financial crises are to the national economy and how important it is that we have robust regulatory frameworks that reduce both the cost of crises and the probability that they will occur. Although we often see a return in the growth rate of the economy, crises usually lead to a permanent fall in GDP, which takes a very long time to recover from. Even today, almost 10 years after the financial crisis broke out, many countries are struggling with low growth, high unemployment and low inflation. In several cases they also have high sovereign debt. And in the case of Sweden, there is no other event since the Second World War that has affected Swedish GDP as negatively as financial crises.
At the macro level, they have been used to simulate and reproduce the way stars produce energy, using a nuclear fusion reactor here on Earth, an approach that has the potential to provide clean energy for billions of years (Turrell (2013)). Simulating the processes powering stars is modest by comparison with ABMs which aim to model the entire universe. In 1985, one of the first comprehensive computational models of the universe was published, with over 32,000 particles representing known matter (Davis et al (1985)). As estimates put the number of 80  protons and neutrons in the Universe at 10 , this ABM was impressively parsimonious (Penrose (1999)). These models have generated important insights, including the role of “dark matter” in the evolution of galaxies. Not all applications of ABMs are, however, large in scale and universal in application. A 1987 paper called “Why the Brazil Nuts Are on Top” used an ABM with agents of different physical sizes to explain how mixed nuts segregate over time when shaken, with Brazil nuts generally rising to the surface (Rosato et al (1987)). This research was not as nuts as it sounds. It has since found real-world applications in industries such as pharmaceuticals and manufacturing. 14  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  14  Figure 6: Segregation of nuts  Figure 7: The universe  Source: Sae Rpss (CC-BY-SA-3.0). Nuts (image available here). Source: NASA Headquarters - Greatest Images of NASA (NASA-HQ-GRIN) (public domain). Spiral galaxy in the constellation Coma Berenices (image available here).

But our system is also remarkable for the magnitude of the costs, the incidence of those costs across the economy, the number of uninsured, and our poor performance on health outcomes even compared with less wealthy economies. To cite just one example, infant mortality rates in the United States are more than two times the level in Japan. In a world in which economic performance depends increasingly on flexibility and adaptability to change, we probably need to move to a system in which a change in employer or profession does not carry the substantial uncertainty it does today about how one will provide for one’s health and that of one’s family. This seems fundamental to the willingness of Americans to support the level of openness to trade and to change that is an essential part of our present and our future. A defining feature of the American economy has been our embrace of the market, and the recognition that market forces are, in general, the most effective way of allocating resources. But markets cannot solve all problems, and government policy plays an important role in how well markets function. The test of policy is not just in the incentives we create for competition and innovation, but also in the clarity and stability offered by the regulatory framework and in the quality of public goods that governments deliver.
The benefits are quite evident and I will not therefore dwell on this issue other than to mention the need perhaps to consider the removal of legal or other inhibitions to information exchange and sharing amongst central banks. Confidentiality provisions in domestic legislation may need to be suitably adapted in this context. 50. Let me quickly turn to resource provision. Here we can distinguish between the provision of liquidity and the provision of credit. On the provision of liquidity, I have mentioned the network of bilateral repurchase agreements of US Treasury securities amongst EMEAP central banks. But, as has been pointed out, the contagious nature of Asian monetary problems is such that when one of us is short of liquid foreign reserves, others may be in the same boat. It may be beneficial therefore if the network could be cast wider, involving possibly non-Asian economies also holding substantial foreign reserves in US Treasuries. There is of course the New York Fed itself, as the custodian of the paper and the settlement agency of US dollar cash balances, which could play a supportive role in providing the service required. Yet another possibility is for the network of bilateral repurchase agreements to be multilateralized into a much more liquid pool, which could further be institutionalized so as also to facilitate, perhaps with leveraged arrangements, monetary co-operation through the provision of credit. 51.

This has the intended effect of encouraging firms to shift from a compliance focus to developing a deeper understanding of the risk drivers in their business. In turn, conversations between management and the board, and between insurers and supervisors, have moved to focus on how key risks are being controlled rather than on whether particular rules have been breached. This reflects our expectation that boards, supported by the audit and risk committees, must monitor changes to their risk profiles and actively review risk strategies and internal controls in the light of those changes. An area in which Bank Negara Malaysia is currently seeking to better understand industry practice is with respect to the interactions between the audit and risk committees of the board. Audit committees have a clear interest in risk management within their organisations. Most internal audits adopt a risk-based approach to auditing which requires an understanding of material risks within the organisation. Audit committees also obtain independent assurance from internal audit on the effectiveness of risk management processes within the organisation and this requires a reasonably deep knowledge of risk management. Conversely, risk committees must consider the quality of internal controls, including financial reporting practices, which are an important part of any risk management framework. The Walker Review of corporate governance in the financial industry acknowledged an important link between these two functions. In Malaysia, we have moved ahead of many countries in requiring an organisational separation of the audit and risk committees in order to encourage an enhanced focus on audit and risk.
These projects are: •  a review of the standardised (credit and operational risk) approaches to capital adequacy, which need to be re-examined in light of calls for greater simplicity and comparability in the regulatory framework as well as the desire to reduce the reliance on credit rating agencies if possible; and  •  an examination of the need for a capital framework for interest rate risk in the banking book, particularly given the desire to limit arbitrage opportunities between the trading and banking books. These last two projects are still at an embryonic stage, so I cannot say too much about what they might entail at this point in time, but they will be the last pieces in what has essentially been a complete overhaul of the regulatory framework since the financial crisis. Monitoring and reinforcing implementation of Basel regulatory standards As I have already said, the establishment of the implementation monitoring programme has been a high priority for the Committee; it is critical to the successful delivery of the benefits of the agreed reforms. Starting from scratch at the beginning of 2012, a comprehensive assessment framework has been developed that is growing in its acceptance and credibility, and I am pleased to report that the Committee now has dedicated capacity in the area of implementation work. The implementation framework is being continuously strengthened through a lessonslearned process.

1 3/4  BIS central bankers' speeches  1 ECB (2018), “Special feature A: Financial development, financial structure and growth: evidence fromEurope”,  Financial integration in Europe. 2 ECB (2016), “Special Feature A: Financial integration and risk sharing in a monetary union”, Financial  integration in Europe. 3 ECB Financial Stability Review, (2019), forthcoming, May. 4 European Commission (2019), “Capital Markets Union: progress on building a Single Market for capital for a  strong Economic and Monetary Union”, European Commission contribution to the European Council. 5 ECB (2018), “Special feature B: Integrating euro area corporate bond markets: benefits and potential financial  stability challenges”, Financial integration in Europe. 6 The ECB’s price-based composite indicator of financial integration shows a pronounced increase during 2017,  while quantity-based integration has stalled since 2015 (see Indicators of financial integration in the euro area). 4/4  BIS central bankers' speeches
However, the slackening in price trends is a result of many interacting factors that are partly connected with globalisation: –  Increased world trade and more operators lead to greater competition  –  Deregulation and privatisation will also mean that competition increases  –  A greater degree of specialisation and utilisation of comparative advantages (what is known as global labour reallocation) lead to increased productivity and efficiency  –  More production in typically low-wage countries leads to lower costs  All of this indicates that international price pressure should be lower during the coming years at a given point in the economic cycle. To gain a more comprehensive picture of the significance of the structural changes for prices, it may be useful to illustrate how they interact with other factors that might influence international price pressure, such as global demand and commodity prices. Over the past few years, international economic activity has been weak, which has probably contributed to the low rate of price increase. Until a year or so ago, commodity prices were also developing weakly, but since then a relatively large upturn has occurred, while manufacturing activity has improved and global demand has increased. Despite this, prices of manufactured goods have remained subdued.

Despite the fact that we left interest rates on hold again last week, we have certainly not gone to sleep!
A crucial part of this more intensive supervision is not just to look at the activities of the firm, but also much greater scrutiny of the quality of its governance and management. This includes a very thorough and careful assessment of the suitability of those who run regulated firms, as well as time spent looking at the Board as a whole to ensure that it has sufficient experience and character. For the largest firms, the PRA Board is involved in these judgments and in approving the appointments of the most senior staff. And, in marked contrast to the pre-crisis period, there is a much greater focus on a firm’s business model and the firm’s understanding of their vulnerabilities. This enables the supervisors to assess if there are risks posed to financial stability by the way that the firm chooses to conduct its business, or if indeed it is not viable. The aim is not that the supervisors should run firms. But they should not be shy to question if executives and boards have the right capabilities, if they understand the business model and the particular risks to which it is exposed and, overall, whether that business model can be operated successfully while managing the risks it entails. These three changes in the official landscape – macroprudential policy, more powerful international governance and more intensive supervision have shaped, and will continue to shape the world in which banks operate.

Lars Heikensten: Six monetary policy issues  Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riksbank, at Umeå School of Business and Economics, in Umeå, on 7 November 2000. *  *  *  First a word of thanks for the invitation to visit Umeå and talk about monetary policy. The Swedish economy is developing favourably. Growth has been impressive in recent years, averaging around 3% in annual terms, and at present the rate may be even higher. This has contributed to a rapid reduction of unemployment and strongly rising employment. A look at the statistics shows that the present expansion of employment in Sweden is the fastest since the labour force surveys were first published in the early 1960s. And although growth has been strong, inflation has remained moderate. The explanations for the good circle in which our economy is now moving are not simple. But I do believe that one contributory factor is the realignment of economic policy that has been achieved in the past ten to fifteen years. This has involved deregulating the credit and foreign exchange markets, modifying components of the transfers system and paving the way for stronger competition. All this has helped to improve the workings of the economy. Another factor, perhaps the most important, has been economic policy’s commitment to stability, with price stability as a statutory objective and a successful consolidation of the public finances.
BIS Review 60/2006  1  Chart 1: World exports of goods and services, 1960-2002  USD billion 7 000  6 426.9  6 414.1  6 000 5 000 4 000  3 500.3  3 000 2 031.2  2 000  1 610.6  1 511.9 824.7  1 000 130.1 0  385.4  316.4 0  0  1960  1970  1980  1990  Exports of goods  2000  2002  Exports of services  Source: UNCTAD  Chart 2: Foreign Direct Investment USD billion 1 600  1393 1 400  1 201 1 200 1 000  824 711  800  651 647  600 400  209 243  200  13 14  55  54  0 1970  1980  1990  Inflows  2000  2001  2002  Outflows  Source: UNCTAD  2  BIS Review 60/2006  Table 1: Changes in national legal regulations regarding FDI, 1992-2002 1992  1995  1999  2002  Number of countries which introduced legal 43 changes regarding investments  64  63  70  Number of legal changes, of which:  79  112  140  248  - changes favouring FDI  79  106  131  235  - changes more restrictive for FDI  0  6  9  12  Source: UNCTAD  Along with an increase in the value of international trade, enterprises have become active participants of the FX market.

Things did not end well for Johan Palmstruch. There were no rules to limit the loans that could be issued by the bank, and Stockholms Banco’s loans far outstripped the value of the copper and silver held by the bank. Confidence in the banknotes began to evaporate, and their value fell. Demand to redeem the banknotes for copper and silver was high, but Stockholms Banco did not have enough metal to meet the demand, and Sweden experienced its first banking crisis. The bank was declared bankrupt and was liquidated. Johan Palmstruch was sentenced to death for irresponsible accounting. The death sentence was subsequently commuted, but Palmstruch had to spend the rest of his life in prison. Nonetheless, the Stockholms Banco crisis left a permanent legacy: in 1668, the authority to conduct banking operations was transferred to a bank that was later to become the Riksbank, under the direct control of the Swedish parliament, Riksdagen.1 The world’s first central bank was born.2  What is money? So what is money exactly? The simple answer is that money is a means of payment. It is also a universally recognised common unit of account. Money has therefore a key role in all financial transactions – it is a practical means of assigning value to goods and services and of settling trades. To perform these functions, money must have a fairly stable value. People will only accept money as payment if they believe it can be used again as a method of payment in the future.
13  Darrel Duffie (2010), How Big Banks Fail and What to Do about It, (Princeton: Princeton University Press). BIS central bankers’ speeches  5  My experiences as a central banker directly observing and trying to think of ways to counteract the panic that took hold of global financial markets in September 2008 also underscore that published statistics and market prices may at best tell part of the story of developments in financial markets and how they might be affecting the economy as a whole. These experiences highlight the need of policymakers for real time market intelligence and having staffs with operational experience and a solid grasp of market functioning to develop appropriate policy responses.14 Recall that in just over four weeks following the failure of Lehman Brothers the global financial system experienced a panic of unprecedented speed and destructive power. Observing the panic up close was a sobering lesson about how quickly a complex financial system can freeze up. Like the study of economic history, knowledge of nonlinear and complex dynamics is important to diagnose potential risks in the financial system. However, even more so than economic history, the study of complex biological or physical systems do not offer actual detailed prescriptions about how best to understand and regulate the current global financial system.

318 (New York: Federal Reserve Bank of New York, March) for a discussion of how adverse selection and asymmetric information along with poor incentives caused a lack of market discipline. 7  For further discussion of the efficient markets hypothesis and the crisis, see Eugene Fama’s blog, “Fama/French Forum” (shared with Kenneth French). In particular, see Eugene Fama and Kenneth French (2008), “Q&A: Market Turmoil” Fama/French Forum (Santa Monica: Dimensional Fund Advisors, December). 8  For a specific example of this phenomenon, see Richard Roll (1984), “Orange Juice and Weather” American Economic Review, vol. 74 (December), pp. 861–880. 4  BIS central bankers’ speeches  In normal times, the tension between efficient markets and actual developments is relieved by a series of these tweaked explanations without any substantial changes to underlying views. But as markets came under increasing stress it made the arbitrage and liquidity assumptions underlying efficient market explanations less tenable.9 Further, the signals generated in different markets started to disagree markedly. One of the basic quandaries at the start of the crisis was the differing perspectives from price developments in equity and fixed income markets. The fixed income and equity markets were giving very different signals about the outlook for the economy. Fixed income markets were indicating an abrupt slowdown in economic activity and through derivatives such as the ABX indices substantial credit losses on some of the newly issued structured products related to residential mortgages. The equity market in contrast reached a peak in October 2007 indicating little evidence of such a slowdown.