samchain/econo-pairs-v1 huggingface dataset:
If public investments, which, sooner or later, may still need to be made, can be financed at a historically low cost, this would seem like a good opportunity to implement them. Ultimately, fiscal policy aims to increase the well-being of citizens. The development of deficits and public debt may be the means to achieve this, but it is not obvious from an economic point of view that it should be seen as an end in itself. A comparison with monetary policy can be made here: the target is formulated in terms of the outcome, that is, mainly how well the inflation target has been achieved, rather than the means, that is, the monetary policy tools. I think it would be useful if we were to start thinking more along these lines in fiscal policy as well.14 The conclusion of this reasoning is not that public borrowing is never problematic. For example, if the policy becomes too extensive or if it is not sufficiently explained and followed up, investors may nevertheless begin to fear that the government will not be able to manage its debt and may therefore demand a higher risk compensation for lending. This, in turn, may make the commitments even more difficult to meet – there is a risk that we will find ourselves in a bad equilibrium, expressed in economic terms.

This symmetry means that both negative and positive deviations from the target are equally undesirable. The ECB too points out that the marked decline in the equilibrium real interest rate has meant that the effective lower bound for nominal interest rates is likely to limit monetary policy more often. It also emphasises that one consequence of this is that strong or sustained monetary policy measures are needed when the interest rate is close to the lower bound to avoid negative deviations from the inflation target becoming permanent. It also notes that the new strategy may mean that inflation periodically will be above the target, but, unlike the Federal Reserve, it has chosen not to introduce an average target.7  Mutual dependence We have thus seen that a prerequisite for fiscal policy and monetary policy to be effective is that they have a stable long-term foundation. For fiscal policy, there must be confidence that public debt is stable over the long term and, for monetary policy, there must be confidence that the central bank can keep inflation low and stable. In order for monetary policy to be able to use the policy rate to counteract economic downturns and increased unemployment, it is also necessary for average inflation not to be too low.
For instance, in some net systems several settlements occur throughout the day, often in conjunction with various forms of exposure limits and collective guarantee arrangements. Certain gross systems have solved liquidity problems with new queuing solutions (algorithms), often in combination with new forms of central bank loans (primarily against security). We thus see some convergence towards a new type of clearing and settlement system: “secure” net systems or “optimised” gross systems. This does not mean a reduction in the risk-reduction measures placed on such systems; if anything, the minimum requirements have become stricter. And, fourth, there is a greater consensus on the (international) standards that must be met by the payment systems. The Lamfalussy minimum standards are well known. They were drafted by a G10 committee at the beginning of the 1990s, and are minimum requirements intended to reduce the risk in large, international clearing and settlement systems. Gradually, they have also become standards for corresponding national systems. According to the Lamfalussy standards, payment systems should have a well-founded legal foundation, the risk should be known and understood, the division of responsibility and risk limits should be clearly defined, settlement should be completed - even if the largest participant experiences payment problems, and there should be publicly-disclosed admission criteria and satisfactory back-up routines. 1 2  RTGS = real-time gross settlement. If the banks practise early crediting (based on queuing information) the credit risk will also arise in a gross system.

Many of Norges Bank’s activities within this area are linked to our role as issuer of banknotes and coins; these activities are a public service, and costs are covered by the central bank. However, Norges Bank is also often in competition with others when it performs a number of other payment system services for banks and the postal system, which incur either no charges or no cost-covering charges for these services. This practice is currently under internal evaluation at the Bank. Consequently, we must anticipate that pricing for processing cash will approach full cost over time. It will be interesting to see if this has any affect on the public’s use of cash. 3.2. Interbank systems (clearing and settlement systems)  I would now like to look more closely at risk and efficiency in interbank systems and, particularly, at our standing internationally. 3.2.1. We have made a fair amount of progress  The establishment of NICS and NBO8 provided us with a modern clearing and settlement system in Norway, which we managed to implement at approximately the same time as the G10 countries and the EU. Our systems have certain positive properties, such as the possibility of releasing a gridlock situation in gross settlement (in NBO) and centralised information on banks’ liquidity (in NICS). Our central bank lending arrangements are generally similar to those found in other countries, where it is commonplace for collateral to be furnished for all loans in the central bank.
It does however claim that there is a discrepancy between word and deed that raises questions regarding what status the stabilisation of the real economy really has in relation to stabilising inflation. I should perhaps underline here that this criticism, as I understand it, does not say that there has been greater clarity in countries that do not have specific targets for inflation. In my opinion, the assertion that the communication of inflation-targeting central banks generally tends to focus a lot more on the stabilisation of inflation than of the real economy is essentially correct. Inflation forecasts undeniably have the leading role in the reports published by these central banks, and it is usually on the basis of these forecasts that the banks explain their policy decisions. So why have central banks that pursue a flexible inflation targeting policy chosen to concentrate on inflation in their communication and often been rather vague as regards how they look upon the trade-off between stabilising inflation and stabilising the real economy? One important explanation, which I already have touched upon, is probably that many of the economies that have adopted inflation targeting policies were previously beset with high, sharply fluctuating inflation. The task, accordingly, was to create broad understanding and credibility for a new policy focused on price stability.

In many countries, the key to this success has been inflation targeting. Although the main reason for introducing inflation targeting in many cases - not least Sweden’s - has been frustration over the previous regime and economic performance, it has subsequently proved to work so well that it now stands out as an interesting option also for already well-functioning economies. This is demonstrated in particular by the current debate regarding a possible introduction of inflation targeting in the United States, where the economic performance in recent decades has been remarkably good and monetary policy successful. But first, before I go into a problem that currently feels significant for us at the Riksbank and that I also think is central to the discussion in the United States and elsewhere - the balance between concerns for output stability and inflation stability - allow me to say a few words about my fundamental views regarding inflation targeting policies. Unsurprisingly, I see considerable advantages of having an explicit, symmetric inflation target. It is also my impression that this view enjoys considerable support in the academic literature, an assertion, however, that no assembly is better placed to question than this one. The clear framework encompassing an inflation target, published forecasts and a specified target horizon has generally worked well as a guide for policy. There have been communication problems here and there, but it is not obvious that the situation would have been much better under a different regime.
Our purchases of mortgage bonds reduce the credit risk premiums on them and also support credit granting more general in the economy. If this market were to cease functioning, it would affect both the impact of monetary policy and the stability on the financial markets. Counteract disruptions to monetary policy due to liquidity shortage 47 Loans on the interbank market are usually given without collateral. 48 This means that if anyone becomes uncertain about the counterparty's creditworthiness, it may have significance for their willingness to enter into transactions with the party. If the interbank market is not functioning, it becomes more difficult for the policy rate to have an impact on other interest rates, as the banks find it more difficult to pass on a change in the policy rate to other interest rates. Moreover, the supply of credit in general is affected negatively. A large balance sheet means that there is a surplus of money in the banks’ accounts with the Riksbank, the accounts they use for payments between one another. The banks thus become less dependent on the interbank market and the risk of disruptions to the monetary policy impact and the supply of credit becomes less. Reduce the banks’ unwillingness (stigma) to borrow from the Riksbank 49 If the Riksbank is to be able to supply liquidity to the banks in a financial crisis, the banks must also be willing to borrow.

At present, cross-border payments are often slower and more expensive than domestic payments. 13 There is therefore a large-scale international cooperation within the frameworks for the G20, FSB and BIS to improve international payments. Although Sweden is not a member of the G20, we play an active role in this work, and one of the working groups is led by First Deputy Governor Cecilia Skingsley. In addition to this, the Riksbank is also working more locally on making it easier for Swedish households and companies that want to make cross-currency payments. We have begun to investigate, together with the ECB, whether it would also be possible to use the TIPS platform for cross-currency payments. As I mentioned earlier, the Riksbank will have its RIX-INST service for instant payments in SEK there. If we succeed with this type of standardisation, it might also work as an example for other countries and regions to follow. Another change that is under way in Sweden in particular, is the continuing decline in the use of cash. According to the Riksbank’s most recent survey, less than one in ten purchases in Sweden is made with cash now, see Figure 1, and last year Swish was for the first time used more than cash. 12 The Riksbank has signed an agreement with the ECB on the settlement of Swedish krona in TIPS. For further information on this, see link on Riksbank's website. 13 This applies primarily to payments outside of the EU. For an arithmetical example, see the report Payments in Sweden.
Stress tests have thus contributed to an increased resilience of the financial system: (i) Stress tests shore up banks’ capital positions by serving as a basis for calculating additional capital requirements (“Pillar 2 Guidance” or P2G); (ii) the publication of individual stress test results, which is accompanied by the disclosure of individual bank data, ensures transparency and enhances market discipline; (iii) regular stress test exercises under the aegis of the supervisory authority encourage banks to develop their internal risk management processes and information tools. 3/7  BIS central bankers' speeches  The comparison over time of the aggregate results of the stress tests conducted by the EBA and the ECB testifies to the increased soundness of European banks. In the event of an adverse scenario, the 2018 stress test showed that the banks’ solvency ratio would be 9.9%, i.e. 100 basis points higher than the level obtained by the stress test conducted in 2016. However, we must be careful not to become complacent: risks are increasing and, while some recent events have confirmed the relevance of the instruments deployed (see in particular the H2O incident), the fact that they ultimately proved benign does not mean that in a stressed market environment the outcome would not be less favourable. It is therefore vital to continue to shore up the resilience of the financial system  2. We should not take it for granted that the financial system has been sufficiently reinforced 2.1 VULNERABILITIES ARE EVOLVING AN INCREASING  Global macroeconomic risks have increased markedly.

World growth is slowing and is overshadowed by major uncertainties. According to the latest forecasts, world GDP should expand by 3.0% in 2019, down from 3.8% growth last year (IMF), largely as a result of the slowdown in emerging countries, especially China, and to a lesser extent in certain advanced economies. In the euro area, our forecasts are for 1.1% growth in 2019, down from 1.9% in 2018. The main uncertainties weighing on growth are the risks of an escalation in protectionist measures and of a no-deal Brexit which could lead to a tightening of financial conditions in Europe. The rising tendency in macroeconomic risk is helping to maintain and reinforce accommodative monetary policies, as well as the “low-for-long” direction of and expectations for interest rates. This low interest rate environment is fuelling an increase in household and corporate debt, in both advanced and emerging economies. In France, private sector debt reached 132.3% of GDP at end-2018 (+45 percentage points since 2000). Household debt has risen by 8 percentage points of GDP since the end of the crisis (59.8% of GDP). In Europe, bank profitability is coming under increasing pressure from a number of risks: The first of these is the maintenance of a low interest rate environment for a long time. This is not just the fault of the central banks: an accommodative monetary policy is justified in light of the euro area’s economic situation; but beyond this, low long rates also reflect a structural weakness in growth.
Broad money grew more than twice as rapidly in the first fifteen years of inflation targeting (when there was no QE) than in the decade or so after the financial crisis (when there was lots). And average inflation, in both periods, was close to 2%. This definitely does not mean that these indicators are somehow intrinsically unhelpful or misleading. Apart from anything else – and this is a more general point, relevant for other variables too – the act of targeting inflation is likely to reduce its correlation with just about every leading indicator (those things, at least, to which policy has a chance to react, given the lags involved). There might be several indicators that would have told you something about future inflation had monetary policy failed to react to them. But because in practice policy does just that, using and then offsetting that information, what’s left will inevitably be less well correlated[17] with inflation. In the case of broad money, and at least with the benefit of hindsight, it’s not that difficult to explain  Page 29  “what’s left” in these historical data. For a long period of time, right the way through from the early 1980s to the financial crisis over a quarter of a century later, household wealth rose (relative to income) and, because banks increasingly paid interest on their deposits, it became increasingly attractive to hold financial assets in that form.

Under this process, the system of burden-sharing among the national and mutualised funds will be gradually adjusted until the national compartments disappear completely around January 2025. The complex agreement reached has yet to be accepted by the European Parliament, so there is still uncertainty as to the final design of the mechanism. Moreover, the capabilities of the mechanism will foreseeably be limited at first, since the single resolution fund is constrained by its modest size and reduced mutualisation. Furthermore, for the time being, the agreement does not include common public mechanisms for the resolution of vulnerable banks after the available private funds have all been used up. 4  BIS central bankers’ speeches  In this respect, although the new resolution rules reduce the foreseeable scope of the required external funds, provision should be made for public financial support at EU level to ensure the orderly resolution of systemic banks if necessary. For example, following the example of the US, we could consider an arrangement in which the European Stability Mechanism could provide the resources needed to the common resolution fund with a charge to future contributions from the industry. Otherwise, the single resolution mechanism would, at least in the short-to-medium term, foreseeably be insufficient to prevent banking crises from continuing to be resolved with a charge to national funds, whether public or private. That said, the agreement reached should by no means be underrated.
The main explanation is perhaps that interest rates abroad were lower than in Sweden. Borrowing in a foreign currency was perceived to be cheaper. While some households and firms may have wondered why and found that the higher Swedish rates were simply a risk premium to cover the possibility of a future devaluation, the consequences of this analysis were generally ignored (a devaluation would have increased the amount of a loan expressed in Swedish kronor, making the burden of repayment heavier). The fixed exchange rate policy was perceived as credible, at least by these borrowers. They were lulled, or lulled themselves, into thinking that the exchange risk, even though it was occasioning higher interest rates than in the rest of the world, would be absorbed by the Riksbank. That meant they could try to benefit from the interest rate differential with impunity. As many of these foreign currency borrowers were players who could not afford loans in Swedish kronor, they had no margin when the liabilities became more costly after the krona’s fall and this accentuated the problems. 3  BIS Review 127/1999  What lessons can we learn? I have now identified three features of the Swedish crisis: rising asset prices, a strong expansion of credit and short-term borrowing in foreign currency. These three factors have in fact preceded almost all the financial crises that have hit various countries in the past decade. This does not apply to last autumn’s turbulence over the Russian suspension of payments and the LTCM hedge-fund problems.

As Bank of Zambia, we believe that the recent economic developments, such as, the attainment of single digit inflation for the first time in three decades in April 2006 and sustaining low-level inflation for nearly three consecutive quarters so far to November 2006 are supportive of this initiative. These developments also indicate that Zambia is able to rally foreign private capital to improve the domestic financing limitations and support efforts of encouraging faster economic growth, private sector investment and exploitation of the country’s huge potential in various sectors. Ladies and gentlemen, we also believe that events such as this complement the outcomes of Government’s economic reform agenda which in part is aimed at strengthening our country’s creditworthiness as demonstrated by the attainment of the enhanced Highly Indebted Poor Countries Initiative (HIPC) completion point in April 2005. Ladies and gentlemen, please allow me to elaborate. In order to strengthen and sustain our new status as a creditworthy economy following the attainment of the HIPC completion point, the Bank of Zambia, together with Government, is working on ensuring that our institutional arrangements are supportive of keeping the global investor audience, amongst others, informed about domestic economic developments transparently and on an ongoing basis. For instance, we believe that obtaining a formal sovereign credit rating would help us build part of the necessary institutional arrangements of keeping all stakeholders informed.
If it is a simple transfer of national investment funding already "in the pipeline", there will be no gain, and we would even run the risk of losses, in the case of a bad selection. Beyond this “recovery” side, a “repair” side should address growing solvency issues. The recent French proposal for a recovery fund foresees the possibility of setting up an equity fund either to inject capital into key companies, especially for those operating in European strategic value chains, as identified by the Commission in November 2019. Beyond that, several economists – including Elena Carletti, Professor of Finance at Bocconi University – have proposed the promising avenue of a temporary “European Pandemic Equity Fund,” iii which could be managed by the EIB. This could take the form of hybrid capital instruments, with no voting rights but a significant remuneration of the public investment, and a predetermined termination option for the firm. In addition, the Recovery Fund could consider a specific tool to buy-back some assets from banks. b/ A clarification of fiscal rules. The counterpart of financial solidarity is the responsibility of Member States. The current SGP [Stability and Growth Pact]  Page 9 sur 10 rules – are at once too complex and not credible enough. Obviously, there is a need to maintain fiscal rules – let me stress it, at the risk of unpopularity – but for them to evolve towards greater clarity and better ownership and compliance by Member States.

Facing the deep European Investment and growth gap, we need to implement major European investment programmes to bridge that gap while tackling common structural priorities such as the fight against climate change which must absolutely not become a collateral victim of the crisis, or digitalisation which will be even more than before the key driver of future productivity. 2/ Preserving the single market while “repairing” firms is our second common goal in the recovery phase. National governments did well in the acute phase, by taking emergency measures such as providing guarantees and liquidity support to their SMEs. But, as these measures will have to be prolonged and transformed into long-term solvency measures, national differences could create an “unlevel playing field“. A single market – which is in the interest of all Member States, starting with Germany – means common rules for corporates:  Page 7 sur 10 if not, our economies risk further divergence and that would be very unfortunate. The solvency of European business is our shared challenge, and calls for shared solutions. Focusing on these two objectives is more important than arguing about public debt. But let me, for the sake of consistency, propose two basic principles: Existing debts are and will remain the responsibility of national governments. Let us stop this fruitless debate about Eurobonds and the mutualisation of past debt. Fiscal consolidation will remain a national obligation – including in France –, but with appropriate timing in order to avoid the premature and procyclical tightening of public finances.