samchain/econo-pairs-v1 huggingface dataset:
Agricultural prices are set in negotiations between the agricultural organisations and the state (...) In these circumstances, it is almost meaningless to talk about the central bank’s special responsibility for inflation.”39 The diminished role of the institution, which persisted well into the 1980s, must be seen in the light of mixed experiences with par policy, ambitious aims of micromanaging the economy, and the conviction that lower unemployment could be achieved by accepting higher inflation.40 At the same time, major imbalances were building up in the economy. Fiscal policy, in conjunction with credit regulation and tight political control of business investment gradually undermined the monetary system as an institution. Later in the 1970s, these problems came to the surface. Growth declined, inflation surged and unemployment rose sharply. I should add that these problems were not confined to Norway. In 1971 the Bretton Woods system collapsed. Two year later the first oil price shock occurred. At the beginning of the 1980s, the problems in the Norwegian economy had reached a pinnacle. In May 1986, the Brundtland government decided to devalue the Norwegian krone by 10 percent. As was usual on such occasions, it was said that this would be the “last time”. Less usual was that it actually was the last time. Gro Harlem Brundtland, Gunnar Berge and Bjørn Skogstad Aamo had come to a decision. Devaluation policy was consigned to the past.

In 2006, the real GDP (at current prices) grew by 12.4 percent and by 4.2 percent (at constant prices). It is expected that strong growth rates will be maintained in the medium term. This will contribute to increasing the production capacity of the national economy and have a positive impact on all its sectors. International credit rating agencies have raised the credit rating of the Kingdom to advanced grades, and commended the efficiency and soundness of the national economy and the economic reform programs. This climate has made domestic and international investors more interested to participate in and benefit from the various investment opportunities in the Saudi economy. The banking system in the Kingdom has exercised a vital role in boosting the national economy. It has made great progress, using the latest technologies and various banking products, under a supervisory system keen to meet domestic requirements and legislation as well as international standards. The contribution of the banking sector to housing finance is expected to increase as soon as the real estate mortgage law is enacted. It is worth mentioning that the size of real estate finance provided by commercial banks reached Rls 13.4 billion at the end of the second quarter  BIS Review 14/2007  1  of 2006. SAMA has permitted a number of banks to offer products for real estate financing. Banks are constantly working to develop innovative products to meet the needs of the housing market.
Like many other organisations facing major change in its core business, the Fund will need to be sure that everything it values and rewards is tuned to support its new priorities. Conclusion Over the past fifteen years, the Great Inflation that followed the end of the Bretton Woods system has been replaced by the Great Stability. Globalisation has brought great benefits, but it is creating major challenges for policy makers. How will such issues be handled in future? The Fund certainly has the potential to act as an authoritative medium for international monetary collaboration, providing its surveillance activities are re-focused on external stability and the big global issues. The Managing Director’s current reform agenda is on the right lines. But the Fund’s effectiveness in promoting international monetary stability will depend critically on the organisation’s stature as a trusted and respected source of dispassionate analysis and impartial advice. And it will rest above all on the willingness of its members – large as well as small - to use it as their instrument to improve the quality of their own policy making. BIS Review 103/2006  7  Equipping the Fund with its own version of Hawk-Eye will not be enough. In the end it will be down to them – or more accurately, us.

References International Monetary Fund, "The Managing Director’s Report on Implementing the Fund’s MediumTerm Strategy", April 2006, Washington DC, available at http://www.imf.org/external/np/pp/eng/2006/040506.pdf Mervyn King, "Reform of the International Monetary Fund", speech at the Indian Council for Research on International Economic Relations in New Delhi, India, February 2006, available at http://www.bankofengland.co.uk/publications/speeches/2006/speech267.pdf Independent Evaluation Office of the IMF, "An Evaluation of the IMF's Multilateral Surveillance", February 2006, Washington DC, available at http://www.imf.org/external/np/ieo/2006/ms/eng/pdf/report.pdf International Monetary Fund, “World Economic Outlook”, September 2006 and others, available at http://www.imf.org/external/pubs/ft/weo/2006/02/index.htm  8  BIS Review 103/2006
The latter refer rather to the impact on financial and real assets of the regulatory, fiscal and technological changes that could take place in the transition towards a more sustainable economy. It is fair to say that, at this stage, both regulators and financial sector participants have relatively little knowledge about their exposure to these risks. However, the large number of public and private sector initiatives in place is likely to accelerate this learning process in the near term. For instance, as a member of the Network for Greening the Financial System (NGFS), which comprises more than 50 central banks around the world, the Banco de España is actively contributing to raising awareness in the industry about climate-related risks, increasing data availability and developing the necessary analytical tools for a rigorous  9  assessment of the impact that these risks could have, not only on the Spanish financial sector as a whole, but also on the solvency of individual entities. Insofar as these risks are properly accounted for, not only the financial sector will be in a better position to cope with the consequences of climate change but, through the proper pricing of these risks, it will help to efficiently channel the resources needed to make the economy more sustainable. -  ESG principles: governance and legal risks  I would like to conclude this broad description of the risks to global finance stability with some words on the risks related to governance failures.

The rankings are based on nominations submitted by large and small communities from around the world that take into account indicators developed by the forum. The award goes to communities or regions with a documented strategy for creating a local prosperity and inclusion using broadband and information technology to attract leading-edge businesses, stimulate job creation, build skills, generate economic growth, and improve the delivery of government services. 5  European Commission. 2007. Report from the Commission - Convergence Report 2007 on Malta, COM(2007) 258 final, p.7. BIS Review 14/2008  3  generate more value. The ongoing improvement in the quality of the infrastructure and other facilities available to investors has induced many foreign investors to locate, or expand existing operations, in Malta and thus take advantage of market access and cost-saving opportunities created by Malta’s status, first as an EU Member State and eventually also as a euro area member. This is reflected in the FDI figures when expressed in terms of additions to the capital stock in any one year. Since 2003, for example, the ratio of FDI inflows to gross capital formation was on average 83%, compared to 14% in the EU25. In manufacturing alone, since the first year of EU membership a total of 127 new projects or expansions with foreign participation have been approved, with an estimated potential value equivalent to 1% of nominal GDP. 6 The role of the Central Bank of Malta The Central Bank of Malta has been present at every stage of Malta’s journey to the euro.
BIS Review 141/2007  3  The way in which central banks conduct monetary policy has also had an important impact on the increasing attention central banks give to financial stability. As you know, it has become best practice for central banks to conduct monetary policy with the aim to achieve a more or less clearly defined inflation target. 11 In the process, monetary policy has become closely linked to price stability, defined by a given headline or core inflation measure. To prevent too narrow a focus and to avoid having to ignore relevant developments outside the immediate realm of inflation measured by CPI or core inflation measures, focusing on financial stability potentially constitutes an important additional leg for monetary policy to stand on. Obviously this is a vast and complicated subject. I have no doubt that much research will be devoted to the question of the role of financial stability in formulating monetary policy in the years to come. 12 In the banking industry, the consolidation process of recent years has produced some very large and often highly complex financial institutions with truly global reach. They are often “systemically relevant”. In other words, problems at one of these institutions can potentially have a detrimental impact on the entire financial system which, in turn, could cause great economic dislocation. As a consequence, these institutions are deemed by many to be “too big to fail”. In essence, the market assumes that such institutions would likely be bailed out in the event of a severe crisis.

20 Sorting out these unusual risk premia effects is crucial for conducting appropriate monetary policy and for communicating the monetary policy stance to the public and to market participants. 18  John B. Taylor, 1993, “Discretion versus Policy Rules in Practice”, Carnegie Rochester Conference Series on Public Policy 39, December, 195-214. 19  For a discussion of various types of the Taylor rule see Athanasios Orphanides, 2007, “Taylor Rules”, Finance and Economics Discussion Series 18. Federal Reserve Board. 20  Taylor, 1993, p. 198. 6  BIS Review 141/2007  3. Conclusion  Let me conclude by reiterating that much of the central banks' motivation for their involvement in financial stability is rooted in their role as providers of liquidity in general, and of emergency liquidity in particular. At the same time, it has to be recognized that central banks have a very limited arsenal of instruments to deal with crises situations. A change in the level of official target interest rate is in many ways a crude instrument that, in my view, is best deployed with a firm focus on trying to keep the economy where our statutory mandate tells us to keep it. This does not, of course, preclude a change in interest rates in the event of a crisis, but only to the extent that the risks from the crisis to the economy justify a change in policy. The current market turmoil is providing countless lessons to the industry as well as to the official sector.
For this reason, it is in my opinion important that a review is made of the total complex of regulations governing the functioning of the housing market, in order to allow it to function better. From the Riksbank’s point of view, a higher potential growth means that demand in Sweden can be higher at the same time as price stability can be maintained. The credit granting process If the housing market can become more flexible, it will enable new construction where housing is most needed. These new investments will need to be financed. It is therefore important to be aware of the professionalisation of the credit granting process that has occurred within the financial institutions following the bank crisis. This is reinforced by the new capital adequacy rules that are being worked out. The modern credit granting process focuses more on the individual borrower’s cash flows. This individualisation means that the interest paid will to a greater extent reflect the market’s valuation of the profitability of the individual object, e.g. a particular property. Does the banks’ setting of interest rates vary between different borrowers and credit objects? How is credit granted today? How do the banks assess a loan application? I shall not explain these processes in detail, but outline the most important elements. Credit granting is part of the banks’ core business. It involves mediating savings to borrowers. As managers of our savings, the banks have always needed to be able to assess, measure and manage the risks inherent in these operations.

The banks’ credit assessment procedure is not a static process. The major Swedish banks currently have well-functioning organisations, methods and systems for assessing loans and managing credit risk. Developments in financial theory and rapid advances in IT over the past decade have created new and improved conditions in this field, and the banks have made good use of this. As a borrower it is important to be aware that the individualisation in the modern credit granting process has also been taken up in the shaping of the new capital adequacy rules, where it will be possible to price loans more fairly. Why do we have capital adequacy rules? As the banks play such a central role in the payment system, and the costs of disturbances in the system and in the credit market would be very large and have to be borne not only by the borrowers and lenders, but by society as a whole, the banks have long been subject to scrutiny and oversight with regard to their risk-taking. Since 1988 we have had an international agreement, the Basel Accord on capital adequacy rules. This involves, in simple terms, regulations as to how much capital a bank must hold with regard to different borrower groups for each hundred krona it lends out. It is much more costly for the banks to finance themselves by holding their own capital than through borrowing, just as for other companies.
Table 1: Current estimate of the UK PMRR based on feedback to the Discussion Paper Estimate £ PMRR base  120 – 160  PMRR buffer  30 – 90  TOTAL PMRR  150 - 250  I should stress that there is no mechanical link between this figure and the quantity of gilts that the MPC will need to sell during QT: it does not for example mean that gilt sales must stop when reserves levels hit the PMRR. As I will come on to describe, the whole point of the balance sheet framework that we are proposing is that it will allow the size of the balance sheet to be determined independently from the quantity and composition of QE and QT. Adding back the current level of banknotes and other non-reserves liabilities to the PMRR, and assuming nothing else changes, suggests that a steady-state balance sheet after QT of £ (12-18% of GDP) would be needed to deliver the Bank’s monetary policy and financial stability policy objectives. That’s materially higher than pre-crisis levels. But it’s roughly half where we are today (Chart 10), and narrower than we’ve previously indicated, reflecting the more detailed information available from the Discussion Paper feedback.18 As one cross-check, the required reduction in reserves to get to the PMRR is proportionally similar to that estimated for the United States by the Federal Reserve19. 16  https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-201809.pdf and https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-201902.pdf 17 No attempt is made to estimate any potential future rate of return effect.

We think we have an approach that can meet that challenge – but we need to keep testing that, with your help. The Bank of England balance sheet: theory and practice  To develop these points, let me start with some basics. The Bank of England’s balance sheet is special for one key reason – and that’s the nature of our liabilities. Central bank money – whether banknotes or central bank ‘reserves’ (deposits held with us by financial institutions) – provides the ultimate means of settlement for all sterling payments in the economy. And that gives our balance sheet a central role in supporting monetary and financial stability:  -  It supports financial stability by providing the reserves banks need to make payments to each other and help insure against bank runs;8 and  -  It underpins monetary stability because the interest rate we pay on reserves – known as Bank Rate – influences interest rates throughout the economy; and we can use reserves to conduct less conventional monetary policy, include asset purchases and term lending. This last point has of course been the primary driver of our balance sheet expansion over the past decade.
In an open economy, domestic demand changes can easily be satisfied through increased imports. As a consequence, domestic inflation may become less sensitive to the domestic output gap and more sensitive to global tensions on production capacities. 2  2  Notably put forward by Laurence Ball. BIS Review 103/2007  Finally, it is possible that (due to immigration and structural reforms) labour supply has become more elastic in many countries, and, as a consequence the cyclicality of wages (and prices) has been reduced. 3 Flatter Phillips curves may be a mixed blessing for Central Banks. In such circumstances, looking at actual and projected inflation may not be sufficient to detect incipient imbalances between supply and demand. In other words, inflation becomes less informative about the output gap. There is a risk, then, that imbalances are allowed to build up to a point where a stronger reaction may become necessary. To prevent that risk, Central Banks may want to look at information coming from a broader set of indicators, chosen because of their ability to detect, at an earlier stage, potential inflationary pressures. Obviously, monetary and credit aggregates for instance are good candidates for such a job. What role for money in monetary policy? As you may know, this is precisely what is done in the context of the Eurosystem’s two-pillar monetary policy strategy which assigns an important role to money. This structure is based on a particular premise and has one important implication.

Let me share with you my views on how the globalisation of financial markets and the concomitant emergence of a new monetary order have changed the playing field for international business, and on what roles you, the private sector, and we, the central banks, are now called to play. What is the new international monetary order? The globalisation of finance has led to important changes in the ways monetary authorities implement their policies. Over the last decades we have witnessed the reorganisation of the world monetary order, with choices polarised around two extremes: at one extreme the flexible exchange rate regimes such as the ones in the USA, the UK and in Switzerland, and at the other extreme very fixed regimes, such as the monetary union chosen by the countries belonging to the euro area. Pegs still exist, especially in Asia, but they are less numerous than in the past. Let me talk first about how different national monetary choices meet the challenges of financial globalisation. We have left behind us a time where international monetary relationships, based on the Bretton Woods system of fixed exchange rates, gave us a nice feeling of order and security. The keepers of that order were central banks, and their main job was to maintain the exchange rates for their currencies within a narrow band. International businesses, for their part, were free to plan ahead, unaware of nasty surprises emanating from sudden currency exchange disorders. And yet this world of apparent security collapsed.
So far as I can see, nothing much was done, internationally. We now have another chance. A new round of work is now underway in the BCBS to identify impediments or complications arising from national insolvency laws, resolution regimes, or supervisory practices. I would be amazed if that group does not identify some material issues, for the reasons I have discussed. If so, they should not be dismissed by the Top Brass, left to worry only middle-ranking technocrats, as seems to have happened nearly twenty years ago. Perhaps most important, in April, the Financial Stability Forum (now renamed the Financial Stability Board) issued Principles for Cross-Border Co-operation on Crisis Management. But what really matters is that they were endorsed by the G20 Heads of Government at their subsequent Summit. Which means that there is political endorsement for national authorities to dilute their narrow attachment to local interests, recognising that in globalised markets their interests will often best be served through co-operative solutions. Either that, or the structure of international banking may have to change. Given the starting point, the Principles are demanding. For each of the most important global banks, the aim is that home and host authorities (regulators and central banks) should work together to identify obstacles to effective management of crises. To that end, home authorities are charged with ensuring that firms are capable of supplying the information needed to manage a crisis.

But, of course, it would also entail lower risk for bank equity and bond investors, and surely it is risk-adjusted returns that matter. And it would also deliver lower risk to society more generally, which matters hugely. To be clear, we want banks and the financial sector more generally to thrive. The institution I come from believes in a market economy, in capitalism. The financial sector has played an enormous role in the development of modern economies. But a regime in which banks can thrive standing on your own feet would be a better market – for all of us. BIS Review 83/2009  9