samchain/econo-pairs-v1 huggingface dataset:
In this process, Spain has become a sort of case study. In fact, the underlying fundamentals of the Spanish economy were not as solid as they seemed: product and labour markets suffered from structural rigidities and the expansionary cycle was underpinned by an intense increase in credit and an overexpansion in housing, even taking into account the increasing demand generated by immigration and tourism. Between 1999 and 2007, the weight of housing investment in Spanish GDP doubled to above 12%, one of the highest on record among advanced economies. To a significant extent the financing of this housing boom came from core European countries, intermediated by their financial institutions, and resulted in a rapidly increasing external indebtedness of our private sector. BIS central bankers’ speeches  1  The corresponding widening current account deficit was not only a signal of robust internal demand; it also reflected a gradual, but substantial, loss of competitiveness. The large increase in employment – 5,5 millions between 1999 and 2007 (a 37% increase) many of them immigrants – generated in the construction and other labour intensive sectors, interacted with the dysfunctions of the labour market, leading to very low productivity gains and increases in relative labour costs, also in the more competitive sectors of our economy. Additionally, the housing boom and the economic expansion gave rise to an extraordinary increase in public revenues, providing for a significant increase in government expenditure.

The circumstances in the Eurozone -and particularly in some member countries, Spain among them – would make it rather artificial for me to skip in my address to you tonight, the hard issues we are facing in Europe. But I’ll try, at least, not to be too long. When this series of Seminars started a decade ago, things among the countries gathered here today were very different. Latin America was going through yet another episode of regional financial stress – in the aftermath of the Argentinean crisis – and the euro area was still benefiting of the smooth start of the euro and the brilliant prospects offered by the Monetary Union. At present, the euro area is entangled in a serious crisis, whose roots – with hindsight – were already taking hold by 2002. The strong push towards economic and financial integration that accompanied the process of accession and the setting up of EMU triggered a period of intense economic convergence among member countries. This was especially the case in countries such as Spain, which had joined the project starting from real income levels below those of the main economies of the area. However, this process went hand in hand with the accumulation of imbalances at the domestic and European levels. The deep integration of European capital markets – one of the most remarkable features of the Monetary Union – resulted in a large availability of financing to those economies whose prospects were perceived as brighter.
But unless we can maintain and foster mutual trust as we implement the reforms, we will not succeed in, on the one hand, maintaining an integrated global financial sector and, on the other, ensuring it is proof to frequent destabilising crises. The Washington G20 at the end of 2008 was of course followed by the Spring 2009 London G20 Summit in which I was privileged to play a part. At that deepest part of the global recession great contrast was made between the success of the G20 in 2009 and the failed London Economic Conference in 1933 in the depths of the great depression. It will be for the historians to judge, but I hope they will find that the world has done a great deal better this time around in managing a very deep and searing economic and financial crisis. The international regulatory reform effort is a hugely important part of that. It has already made the system safer. And I hope if I am invited back in five years’ time, at the end of my term at the Bank of England, I will be able to demonstrate that we have fully secured the objectives set at that first meeting of G20 global leaders in Washington. BIS central bankers’ speeches  7

Øystein Olsen: Management of the Government Pension Fund Global Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 30 October 2020. * * * Please note that the text below may differ from the actual statement. The Government Pension Fund Global (GPFG) and the fiscal rule have long been important pillars of economic policy in Norway, as the past year has clearly illustrated. It has been necessary to draw on the GPFG to finance the extra costs related to managing the Covid-19 pandemic. At the same time, wide swings in international equity prices have led to substantial volatility in the return on the GPFG. Norges Bank manages the GPFG with the objective of achieving the highest possible return over time within the mandate defined by the Ministry of Finance. The GPFG is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. The GPFG has a diversified portfolio of investments all over the world. This allows us to reap the gains from an upturn wherever it may occur and shields us from negative events in individual markets. However, we cannot protect ourselves from broad-based global downturns, as shown by the developments in the GPFG through 2019 and 2020.
BIS Review 130/2008  3  Work is now underway in the Paris financial centre to prepare the implementation of the new internationally accepted accounting rules. This framework will enable our banks to increase their solvency ratios and their capitalisation. Did they really need this? I think it is important to make a clear distinction between two situations. The first concerns the specific case of DEXIA, which was hit by its exposure to US monoline risks, and for which the recapitalisation with public funds was absolutely necessary. The second regards all the other French banks, without exception, whose own funds are sufficient both in terms of prudential requirements and in comparison with standards and situations in other developed countries. For our banks, and in contrast with other countries, the aim of public recapitalisation is not to make up for any faults or weaknesses, but to anticipate potential problems. We are experiencing exceptional circumstances in which even the most financially sound and profitable banks, as in the case of French banks, are not certain to find the necessary resources on the market. As long as this uncertainty persists, we have to protect our credit system from hazards and preserve its role in the financing of the economy. The macroeconomic outlook Major worries have recently surfaced in public opinion and among analysts concerning the economic consequences of the crisis. I understand these worries, but I do not totally share them. In the short term, I must admit, the outlook is unfavourable.

We should rather consider these two currencies as travel companions: they share the same objective - a sound macroeconomic development - and follow the same road towards price stability. It is up to their relative fitness to see whether they will continue hand in hand. BIS Review 17/2000  4
Could our road system cope with trucks hauling containers all over the territory? And is this what we want for Hong Kong? 5. In fact, Hong Kong’s position as an intermediate trading hub for Mainland China’s external trade has become more prominent over the past decades. In 1979, our trade intermediation activities (including logistics industry) accounted for about 15% of GDP and rose to 20% in 1990. Since China’s accession to the World Trade Organisation in 2001, direct competition from the Mainland has increased, but the pie has also grown much bigger. The total trade volume of the Mainland surged from $ billion in 2001 to $ trillion in 2013. And, while the percentage of trade being directly processed in Hong Kong has been trending downwards (from 30% to 10%) during the same period, the value of goods has risen  BIS central bankers’ speeches  1  sharply from $ billion to more than $ billion. Taking into account the fastgrowing offshore trade, the total value of trade in goods handled by Hong Kong would jump from some $ billion to $ billion during the same period. This shows that the trade creation effect is much greater than the diversion effect. Hong Kong’s trade intermediation activities (including logistics industry) amounted to $ billion in 2012, accounting for 25% of our GDP and employing 770,000 workers (21% of the total workforce).

Since 2010, it has run a programme to purchase government securities of countries in difficulty in order to support the market, ease pressure on interest rates and thus improve the efficiency of the transmission of its monetary policy to the real economy. In addition, cooperation between the world’s major central banks was stepped up, in particular for the provision of foreign currency liquidity. The rescue packages put in place for Portugal and Ireland are working well. Ireland in particular has considerably reduced its deficit, and implemented very extensive economic structural reforms approved by a broad political and social consensus. It is ahead on the execution of the programme and has even already returned to a path of growth. In Greece, unfortunately, the situation is less rosy. For several months, it has appeared that Greece would not manage to meet its targets for reforms and deficit reduction. This has exacerbated market concerns. To resolve this situation, the Heads of State or Government of the euro area and the IMF worked towards an agreement that was reached on 21 July 2011. This agreement allowed for major progress: –  First, it agreed to support a new rescue programme for Greece, better suited to its situation, with lower interest rates and extended maturities;  –  Second, it included, on an exceptional basis and solely for Greece, a voluntary contribution of the private sector to write down the country’s debt and enable it to recover;  –  Lastly, it considerably bolstered the EFSF’s scope of action.
This practical convergence means that there is now little steam behind the question of the relative merits of the two approaches to the target, or mandate, for central banks. 6  A number of commentators have questioned the wisdom of flexible inflation targeting. For example, Eichengreen et al (2011) and Barker (2012). The first of those asserts that “the traditional separation, in which monetary policy targets price stability and regulatory policies target financial stability, and the two sets of policies operate largely independently of each other, is no longer tenable” (op. cit. p. 5). 7  The most complete analysis of the New Keynesian model as applied to monetary policy is Woodford (2003). It is no accident that in official circles the most serious questioning of the foundations of inflation targeting emanates from the Bank of Japan (BoJ) and the Bank of International Settlements (BIS). The “lost decade” has prompted an interesting series of speeches by the BoJ’s governor, Masaaki Shirakawa. And the BIS, freed from day-to-day involvement with the setting of interest rates, has long argued that monetary policy and financial policy cannot be considered separately. BIS central bankers’ speeches  3  In this, by now conventional, framework, the proper objective of monetary policy is to minimise the variability of inflation around the target rate and the variability of output (or employment) around a sustainable path consistent with stable inflation. 8 Such an objective means that the central bank is effectively choosing a trade-off between the volatility of inflation and the volatility of output.

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• What does China economic slowdown and its current adjustment means for capital markets and for the quest of renminbi internationalization? • Should and can the systematically important countries “internalize” their spillovers effects to mitigate negative external impacts?” I organize my points around the three functions of an IMS – liquidity, confidence and adjustment. On liquidity function, there are two areas that we require significant improvement on the current IMS. The first is related to excessive liquidity during normal times. What are the appropriate policies to curb excessive capital flows? The IMF’s approach advocates that recipient countries should implement the capital flow management measures and use macro-prudential tools. Hence, there is an asymmetric treatment of countries as source countries are not expected to do much if not at all. There is of course room for a symmetric treatment. The Holy Grail may exist in the IMF’s articles of agreement as it states in Section 1 that “each member shall seek to promote stability… by fostering a monetary system that does not tend to produce erratic disruptions”. The second is about the existence of safety nets providing liquidity during financial stress times. Again, the optimal provision of liquidity is the main issue. To what extent it should be divided among global, regional and local sources. It is a classic efficiency versus moral hazard problem. Changes in governance structure of the global safety net providing IOs have a potential to alleviate this problem.

Inflation targeting was introduced, the Monetary Policy Committee created and we benefitted from a sustained period of low and stable inflation. But as you know, this period of Great Stability came to an abrupt end with the largest financial crisis for at least a generation. Output fell like a stone and inflation was buffeted by a series of price level shocks. I want to continue this theme of reflection in my comments tonight. However, with 2010 drawing to a close, I will restrict my observations to events over the past year – and what they may herald for the future – rather than your entire 21 years. A progress report for 2010. This has certainly been a busy year. The UK economy continued along the road to recovery. A new coalition Government was formed and set in train what is planned to be the largest fiscal consolidation of the post-war period. The Government also announced a major reform of the structure of financial regulation, assigning considerable new responsibilities to the Bank of England. These events have taken place against a backdrop of strong global recovery, but one in which some countries, most notably within the euro area, continue to face acute fiscal and banking pressures, and large imbalances between surplus and deficit countries persist across the globe. You will be relieved to hear that I do not intend to consider all of these developments tonight. Instead, my progress report will focus on two key issues.
While I firmly believe it is up to history to judge as to whether I have been successful or not in discharging my responsibilities as Governor, I also believe that even at this late stage, it may be useful for those critics to reflect on the profile  BIS central bankers’ speeches  13  that John Exter had in mind for the position of Governor when drafting the MLA, and then perhaps consider, whether or not, I fitted the envisaged profile! In that background, I am inclined to believe that the education, training, and professional skills imparted by the Institute of Chartered Accountants of Sri Lanka, had a major role in my being appointed to this pivotal position as the Governor of the Central Bank of Sri Lanka. Therefore, please permit me to officially and publicly thank the Institute of Chartered Accountants of Sri Lanka for the tremendous impact that the Institute has had on my academic and professional career, in addition to the singular honour you bestowed on me this evening, by inviting me to deliver this prestigious Oration. Conclusion – running between the wickets! Mr. Chairman, let me now conclude, with a little story. About 6 months ago, a journalist friend asked me to explain the official relationship between the Governor and the Secretary, Treasury. In response, I gave him a long lecture for about half an hour, like what I have done today! While listening to me, I could see that he was quite restless, and somewhat bored.

So, I was not surprised when he remarked that he was not sure as to how he can explain all what I had said to him, to ordinary people, as my explanation seemed too technical and high-flown. He then told me, “Governor, Can you please explain what you just said to me, in layman’s language?” This was my reply to that challenging question: “To score runs in a cricket match, when one batsman strikes the ball, both batsmen have to run, each to their opposite ends. When the second batsman strikes the ball, once again, both batsmen have to run, each to their opposite ends. That is how the team will be able to accumulate its runs. For an effective partnership to be built, both batsmen have to diligently run for each other’s strikes. In the same way, for an economic partnership of the country to succeed, it is vital that there is a clear understanding between the Governor and the Secretary, Treasury. And, each time the Governor strikes, both the Governor and the Secretary have to run, and when the Secretary strikes, both the Governor and the Secretary have to run once again. That is the type of relationship that has to exist between the Governor and the Secretary to the Treasury.” My journalist friend’s eyes brightened and his boredom vanished. The expression on his face indicated to me that he had finally understood what this complex relationship is all about.
Of the 19 banks, nine were sufficiently capitalized to meet the minimum capital ratios under stress conditions, while ten had a combined capital shortfall of $ billion. The banks with a capital shortfall were expected to provide detailed capital plans that included raising additional capital – by measures such as restricting payouts, raising new equity, selling assets, or utilizing capital available from the U.S. Treasury. Banks both with and without shortfalls aggressively sold assets and raised additional capital, resulting in a very significant recapitalization of the 19 banks over a relatively short period of time – as is apparent in the figures shown earlier. Stress testing and discretionary capital distributions Now I would like to mention the role of other stress testing in decisions to pursue, and approve, the resumption of discretionary capital distributions. The SCAP was designed to estimate how banks would perform under stress conditions. However, the economic assumptions and the impact of those economic assumptions on financial institutions were by definition educated estimates of potential outcomes. By the end of 2010, many banks were noting that they had substantially recapitalized and in some cases were now well above regulatory minimums – and thus would like to resume or increase stock buybacks or dividend payments. To evaluate the requests by banks to increase dividend payments, U.S. bank supervisors pursued an exercise known as the Comprehensive Capital Analysis and Review (CCAR), and stress testing was one component of that broader exercise.

As shown in the chart, the risk premium in capital markets on long-term credit to enterprises has increased. In addition, many international enterprises now have a poorer credit rating than earlier This has also affected borrowing in Norwegian companies, which now have to place greater emphasis on their customers’ ability to honour commitments. International financial and capital markets are characterised by uncertainty and unrest. This unrest is not found among economic agents in Norway. As long as oil prices are high, the Norwegian economy is fairly sheltered. Many central banks are now reducing their key rates. As our economy is affected to a lesser extent, the differential between short rates in Norway and abroad may widen. Monetary policy The long-term objective of monetary policy is to provide the Norwegian economy with a nominal anchor – domestic price stability, and thereby the basis for a stable krone. Nominal stability is the best contribution monetary policy can make to economic growth and prosperity. A nominal anchor is also a necessary precondition for stable financial markets and property markets. High inflation and wide swings in the exchange rate impair the function of prices as an information vehicle. This leads to booms followed by busts and an arbitrary redistribution of income and wealth. Inflation therefore poisons the economy. By linking movements in the krone to the euro, we have chosen to follow the same standard for nominal stability in the economy as set by the euro area countries.
Such attempts are likely to impart an excessive activism to policy-making, such that interest rate decisions add volatility to the economy rather than stabilise it. In adopting an appropriate medium-term orientation, monetary policy-makers are accorded an extra “degree of freedom” in setting the policy stance. There can be several paths of interest rates consistent with the maintenance of price stability over the longer run. At least in principle, the choice of a specific path can be used to support broader purposes, without prejudicing the outlook for price stability over the medium term. This has been recognised by the so-called flexible inflation targeting literature. 10 This framework explicitly foresees the use of monetary policy to smooth developments in economic activity over the business cycle, while anchoring longer-term inflation expectations at levels consistent with price stability. In principle, the flexibility accorded to policy-makers by the medium-term orientation of monetary policy could be used in other directions, such as to contain financial imbalances or limit asset price volatility. The feasibility and desirability of such alternative approaches rests crucially on how monetary policy actions are perceived to be transmitted to the economy in general, and the price level in particular – in other words, on the perception of the structure of the economy and the monetary policy transmission mechanism. 2. The monetary policy transmission mechanism  The desirability of flexible inflation targeting was established using the canonical New Keynesian model.

Notably, commodity prices in general – and that of oil in particular – rose rapidly in the face of strong demand from China as well as from Brazil, Russia and India. Policy-makers who focused on measures of core inflation that excluded energy prices neglected the latter effect. They may have formed an overly benign impression of the consequences of globalisation for price developments, and adopted an overly loose monetary policy as a result. Thus far, my discussion of the conjunctural assessment has focused on indicators motivated by the benchmark New Keynesian framework. But we need to include the financial sector. What indicators were missed by central banks prior to the crisis due to the neglect of financial factors? What additional indicators should be embodied in the conjunctural assessment? Monetary and credit aggregates can – and did – have a role to play. At least in part, the ECB’s oft-maligned monetary analysis was vindicated by the crisis. If central banks had taken the signals coming from strong monetary and credit growth in mid-decade more seriously, monetary policy decisions might have been better calibrated to contain the financial imbalances that ultimately led to the financial crisis. But recent events have also revealed weaknesses in traditional monetary indicators. Experience points to a need to deepen and broaden such analyses to take better account of the fundamental changes observed in the financial sector over recent decades. New aggregates and indicators need to be developed. 23 Work at the ECB is proceeding in this direction.