samchain/econo-pairs-v1 huggingface dataset:
Simulations using the Bank’s main forecasting model suggest that the Bank’s monetary policy measures raised the level of GDP by around 8% relative to trend and lowered unemployment by 4 percentage points at their peak. Without this action, real wages would have been 8% lower, or around £ per worker per year, and 1.5 million more people would have been out of work. In short, monetary policy has been highly effective. 12  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  12  Financial outcomes So monetary policy has been highly effective in doing its job, but what have been the distributional effects on financial outcomes? Has monetary policy robbed savers to pay borrowers? Has the MPC been Robin Hood in reverse? In a word, no. Chart 15: … as have all income quintiles  Chart 14: The poorest have gained the most while all wealth quintiles have gained since 2006-8… Lowest wealth Second lowest wealth Middle wealth Second highest wealth Highest wealth  Total net wealth (% change since 2006-8) 60  Lowest income Second-lowest income Middle income Second-highest income Highest income  % change since 2006 12 10  50 8 40  6 4  30  2  20  0 10  -2 -4  0 2006-8 2008-10 2010-12 2012-14 Source: Wealth and Assets Survey (WAS, ONS) and Bank Calculations. 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Family Resources Survey (FRS) and Bank Calculations. Income deflated by the consumption deflator.

Last year the previous Riigikogu issued the central bank with a clearer mandate than ever before for macroprudential supervision in Estonia, and we have started to act on this mandate. Macroprudential supervision aims to increase the resilience of the banks and the rest of the financial system to systemic problems and to restrain the accumulation of major risks. •  The first measure introduced by Eesti Pank was the requirement for commercial banks to hold a 2% systemic risk buffer. The systemic risk buffer is needed to manage the banking risks that are specific to a small and open economy. The introduction of the buffer did not imply any major changes for the banks operating in Estonia, as their capitalisation levels were already above that required. The measure was a precautionary step by the central bank to guard against possible risks in the future. •  The second step was taken three months ago when requirements for housing loans were applied to the commercial banks by the central bank with the aim of pre-  BIS central bankers’ speeches  3  empting possible credit booms in the future. The requirements do not have any noticeable effect on the loan market as things stand, as the banks are in any case currently acting conservatively. Both of these measures are precautionary steps taken against any significant future increase in the risks in the real estate market should competing banks start to take on excessive risk.
Budget cuts will only lead to lower growth, higher unemployment and larger deficits. I see no contradiction between fiscal consolidation and sustainable growth. In fact, the one is a pre-condition for the other. I do not deny that there are negative demand effects in the short-term. But for the longer-term, sound fiscal policies are essential to lower borrowing costs and encourage investment. Moreover, in those countries experiencing severe sovereign debt tensions, fiscal consolidation is unavoidable to maintain market access. That said, there is clearly a need to take measures to strengthen the growth potential of the euro area’s economies. These measures also need to have effect in the short-term so as to soften the short-term impact of fiscal consolidation. Recognising this, the European Council on 28–29 June agreed on a “Compact for Growth and Jobs”. This Compact aims to free up to 120 billion euro for growth and investment, representing roughly 1% of euro area GDP. This comprises a 60 billion euro increase in the lending capacity of the European Investment Bank; 55 billion through the reallocation of structural funds to growth-enhancing measures; and 4.5 billion of investment financing through a “project bond” pilot phase. On top of that, the European Council took a number of measures to improve the functioning of the Single Market and facilitate adjustment within monetary union. The single market in services will be completed, which is expected to yield economic gains of up to 330 billion euro.

To improve labour mobility within Europe, an EU-wide recruitment tool will be developed and measures taken to strengthen the portability of pension rights and the recognition of professional qualifications. This strategy confirms an important evolution in the thinking of European policymakers. They are acknowledging that the smooth operation of the single currency requires flexible markets for goods, services, and labour. They are aiming to maximise the gains of the world’s largest single market, rather than acting as 27 national markets. And they are exploiting EU funds as a tool to support aggregate EU growth, rather than for quid pro quos between Member States. Reaping the full gains from economic integration in Europe, combined with structural reforms at the national level, will help lay the foundations for more sustained growth going forward. 3. Future of EMU  Some observers, of course, question whether such a forward-looking perspective is relevant. This is due to the third criticism I outlined: the belief that economic and monetary union cannot work due to institutional flaws. In the view of these critics, the euro area is too decentralised, too diverse and too disunited to function as a single currency area. They conclude that its survival cannot be guaranteed. Clearly, there is an institutional gap in the euro area. In the aggregate, the euro area enjoys better fundamentals than the U.S. or Japan, and yet it is viewed as a much more risky place to invest.
And third, have structural changes in the world economy, such as the globalisation of capital, production and labour, made the job of central banks easier? I will deal with all three questions today, but particularly with the effects of globalisation. I will focus mainly on labour market aspects, taking the immigration we have seen in Spain in recent years as an example of the positive effects that globalisation can have on inflation. What is behind the recent success of central banks’ in combating inflation? Recent studies have given the credit for reducing the high inflation of the '70s and early '80s to the central banks’ better knowledge of the economy. In my view, these studies have got it right. We have to admit that, at least in some countries, monetary policy didn’t do all it could in the '70s to contain the oil shock-induced inflation of that time. Perhaps at that time, central banks lacked understanding of how supply shocks affect the output gap, as well as of the role of inflation expectations, and how these relate to monetary policy actions. But I don’t think that insufficient knowledge of the economy was the only factor explaining the rise in inflation during those years. Indeed, political will – or rather a lack of political will – could have been even more important. Germany is a good counter-example here, as a recent paper by Stephen Cechetti and others shows.

In the discussion over the correct relation of economic policy to the bubbles building up on the asset market, there is a dominant conviction that the supervisory policy is a much better response. For this very reason, supervision over financial markets should be independent of politicians, as it may turn out necessary to take up actions aimed at limiting the rate of building up of the speculative bubble at a time when it is not convenient for politicians, considering the elections cycle. New challenges for regulators/supervisors Globalization of financial markets changes the operation conditions of financial institutions by opening new development opportunities for them, but also by creating new types of risk for the stability of the financial systems. Globalization creates new opportunities in the area of risk management, including but not limited to the most important banking risk, i.e. the credit risk. Development of new risk transfer instruments (credit derivatives and securitisation) and increase in the number of their purchasers enable more effective use of banks’ capital. New instruments, however, pose some threats. 40 Both market participants and markets supervisors indicate the issues of progressive complexity of derivatives, and difficulties in complete understanding and estimating the risk related thereto. 41 Difficulty in evaluating risk flow directions and lack of basic data on some unregulated financial institutions, which are becoming increasingly active on the derivatives market, are also a problem. What I mean here are in particular the hedge funds, which manage increasing funds.
The first three relate to macroeconomic imbalances that could cause a further widening of the current account deficit, higher external debt and a depreciation of the króna. Vulnerability on these counts is no less than a year ago, and higher global interest rates and premia could have widespread repercussions. On the other hand, much of the uncertainty about the banks’ access to financing has been dispelled and they have built up ample liquid reserves. Under such conditions, the focus shifts to asset quality. The second table highlights factors that contribute to financial system resilience. The most noteworthy development is the banks’ stronger position in the form of ample liquidity and capital adequacy ratios which are very acceptable and historically high. On the whole, the Central Bank’s finding is that the financial system is broadly sound. It is equipped to withstand shocks to the economy and financial markets, to mediate credit and payments, and to redistribute risks appropriately. In other words, it is capable of performing its function in an orderly and efficient way. Iceland’s banking system meets the demands made of it and performs well on stress tests conducted by the Central Bank and FME. BIS Review 41/2007  3  Table 1 Main vulnerabilities Risk  Explanation  Exchange rate developments  Macroeconomic imbalances are pronounced. The current account deficit poses the risk of a depreciation of the króna. Shifts in carry trades and other exposures could catalyse a sudden turnaround. The FX market relies on three market makers and is still relatively thin.

Davíð Oddsson: The commercial banks are more resilient Opening statement by Mr Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, on behalf of the Board of Governors at a Press Conference on the occasion of the publication of the Bank’s Financial Stability 2007, 25 April 2007. *  *  *  In its analysis published in Financial Stability at the beginning of May 2006, the Central Bank of Iceland’s finding was that the financial system was broadly sound, but more challenging waters lay ahead. Two main causes of concern were identified: macroeconomic imbalances and uncertainty about the commercial banks’ refinancing of their foreign borrowing. Refinancing was successfully completed. However, macroeconomic imbalances increased. A year ago the focus was on short-term risks on the liabilities side of the financial companies’ balance sheets, but now it has shifted more to the long-term asset quality. The most pressing economic policy task is to restore stability. The conclusion of large investments in the aluminium and power sectors will automatically reduce imbalances, but other adjustment has been slower than expected. Increased foreign debt service has delayed the unwinding of the current account deficit, which will hardly be brought down to a sustainable level without a substantial contraction in demand. The latest forecast in Monetary Bulletin in March 2007 indicates that such a contraction lies ahead, as growth of investment and private consumption slows down.
A minority of regimes, of which Hong Kong is one, focus on a stable external value of the currency - in Hong Kong's case through the particular mechanism and discipline of the currency board. The more externally oriented an economy is, the greater is the weight which may need to be attached to exchange rate stability within the overall concept of monetary stability. There are various pros and cons of each approach. Inflation targeting is less precise, in that it is necessarily based on forward projections, and verifiable indicators of success are only available after a timelag. It also requires a reasonably accurate forecasting process, which may be simpler to realise in a relatively closed than in a highly open economy. Nevertheless, experience of several countries shows that inflation targeting is capable of delivering good results. An obvious advantage of a fixed-rate regime is that compliance can be monitored very directly and unambiguously in real time; and, in the currency board version, the regime operates by automatic mechanisms rather than by the discretion of a central bank. It may, however, result in a less stable inflation rate, although, assuming that monetary policy in the country of the anchor currency is conducted responsibly, extremes of hyper-inflation or deflation will be avoided.

It therefore has a vital interest in strongly opposing protectionist tendencies. The best way it can do so is to set a good example and to be prepared to be even more open to trade. The international community of states can counter protectionism by advocating that weaknesses in the current trading system be remedied. On the one hand, the countries involved must make sure that those losing out on account of free trade are better integrated, thus increasing acceptance for economic openness and international trade. This can be achieved by promoting labour mobility and expanding the opportunities for training and continued professional development. Countries that cushion the blow of the adjustment costs of structural change arising from international trade in this manner tend to have a more positive attitude towards free trade. On the other hand, it must also be ensured that, within the international trading system, the same rules apply to all participants and are globally adhered to. The rules-based multilateral system represented by the World Trade Organization (WTO) must therefore continue to form the backbone of international trade. The system must be rules-based since only clear rules can ensure a stable, predictable environment and thus institutional security. Hence a multilateral approach is important because this is the only way to ensure all countries play by the same rules, irrespective of their size or economic strength. A trading system such as this creates a level playing field for all participants, which is essential in particular for small countries like Switzerland.
115  11  110  10  105  9  100  8  95  7  90  6  85  5  80  4  75  3 2000  70 2003  2006  2009  2012  2015  2018  1) Figures for 2019 are based on the projections in Monetary Policy Report 4/19. Sources: Norwegian Technical Calculation Committee for Wage Settlements (TBU), Statistics Norway and Norges Bank  Despite a more than 15 percent reduction in labour costs in a common currency since 2014, the tradable sector has shown fairly weak growth, as reflected in recent trade balance developments. The non-oil trade deficit has continued to widen, which must be seen in the light of the decline in oil service exports owing to the sharp fall in global offshore oil investment. Seafood exports have recently set new records in krone terms, but exports have remained flat for several years in volume terms, partly because of salmon lice problems. Capacity constraints have also hampered exports of metals and other capital-intensive manufactured goods. Profitability has clearly improved, but a considerable increase in production requires substantial investment, and it is only in the past few years that manufacturing investment has shown a pronounced pick-up. The large foreign assets that we have accumulated mean that we can run a trade deficit when oil and gas revenues eventually decline.

[1]  A global challenge for everybody There can be no doubt that broad-based action is urgently needed to mitigate climate change and its consequences. The primary responsibility for climate change policies clearly lies with governments. Under the European Green Deal, the EU has recently adopted a broad range of initiatives to accelerate the transition to a green economy. [2] But although governments have to lead the charge against climate change, the global and allencompassing nature of this historic challenge means that everybody has to consider how they can contribute. This applies in particular to policymakers, including central banks. [3] Global carbon pricing alone, while being seen by many economists as the key tool in addressing climate change, will not be sufficient to ensure a swift transition to a carbon-free economy. Financial markets play an essential part in funding this transition. This was one of the main messages of President Lagarde’s recent speech on a “green capital markets union”. [4] Recent evidence points to the crucial role of banks in funding energy-efficient investment projects. [5] Empirical studies also suggest that high equity investment underpins the transition by flexibly allocating funding to low-carbon sectors, as well  as by supporting green innovation in carbon-intensive sectors. [6] Finally, research indicates that green bond issuance by companies may be associated with an improvement in their environmental performance. [7]  However, environmental externalities due to missing or insufficient carbon pricing mechanisms continue to distort the pricing of climate risks by financial markets, thus decelerating the green transition.
However, in 1995 and early 1996, inflation expectations according to Aragon Fondkommission’s surveys were significantly above the target, which all else being equal increases inflation and requires a higher rate of unemployment to attain the target (Svensson 2012d). Inflation expectations do not become anchored around the target until the latter part of 1996. The period from 1997 and onwards is therefore more relevant for assessing target attainment and the real economic costs of falling below the target. 4  See, for example, Ingves (2012) and Per Jansson’s comments in the minutes of the monetary policy meeting held in October 2012 (Sveriges Riksbank 2012c, page 21). 5  Chapter 1, article 2 of the Sveriges Riksbank Act (SFS 1988:1385) states that “the objective of monetary policy is to maintain price stability”. According to the government bill (Swedish government 1997, page 1), that proposed the act also states that “as an authority under the Riksdag, the Riksbank, without prejudice to the inflation target, should furthermore support the goals of general economic policy with the aim to achieve sustainable growth and high employment”. High employment should be interpreted as the highest sustainable rate of employment. The idea behind the bill is hardly that there is any conflict between “sustainable growth” and “high employment”. See Svensson (2012b) for a further discussion of this. 6  It may be interesting to note in this context that the Riksbank has in principle the same mandate as the Federal Reserve.

Overall, given the acceptance of countercyclical approaches to macroprudential policy, I am sure that the panel discussion tomorrow on the Spanish countercyclical provisions experience will offer not just an interesting study in history, but also some lessons for the future. Without further ado, I am pleased to open this first Conference on Financial Stability giving the floor now to Rafael Repullo, director of CEMFI, who will chair the first session. Thank you for your attention. 5/5
Let us now examine the question of who is to pay for this “insurance”. So far, the Riksbank has done this, meaning that the taxpayers have had to foot the bill. The Riksbank pays its profit into the public treasury each year, and the smaller this profit is, the less the Riksbank contributes towards covering the state’s expenditure. But should the taxpayers really pay for the risk incurred by the banks when they borrow dollars? This is not the only thing that could be considered unfair. It also leads to risks becoming too high. As I mentioned earlier: when the costs for risk-taking are not carried by the party taking the risk, this usually leads to these risks becoming excessive from a macroeconomic perspective. The banks will borrow and lend more dollars that they would if they had to pay for the costs of managing the liquidity risk themselves. This cost is essentially an insurance premium, in which the banks are the  6  10  There are at least two other reasons for the Riksbank to maintain a currency reserve. One is to be able to fulfil Sweden’s commitments towards international bodies such as the International Monetary Fund (IMF), and the other is to be able to undertake interventions on the foreign exchange market when needed to influence the value of the Swedish krona. BIS central bankers’ speeches  insured party and in which the general public has so far paid the premium.

During the entire crisis, the Riksbank provided the banks with liquidity in Swedish kronor at fixed interest rates and, eventually, at variable interest rates via auctions1. However, the largest demand from the banks’ side was not in kronor but in dollars (the yellow area in the figure). This lending took place during the whole period from October 2008 to November 2009. The amount lent by the Riksbank peaked at USD 30 billion. And this is exactly where the problem lies. Every central bank can create liquidity in its own currency. The Riksbank can thus supply the Swedish financial system with all of the Swedish kronor it will ever need. But we can’t create dollars – only the US central bank can. So when  1  The extensive fixed-interest rate lending implemented during the later part of the crisis (the blue area in Figure 2) was largely motivated by monetary policy objectives. By this point, the Riksbank had already lowered the repo rate as far as was deemed possible (to a quarter of a percentage point), but deemed that further monetary policy stimulation was necessary. BIS central bankers’ speeches  3  the Riksbank is to lend dollars, we first have to obtain them. In principle, this can be done in two ways. The first option is to borrow them. For natural reasons, it is easiest and quickest to borrow from the central bank that actually produces dollars, namely the Federal Reserve. And, naturally, this presumes the Federal Reserve’s cooperation via a swap, for example.