samchain/econo-pairs-v1 huggingface dataset:
Hopefully, it will be possible to achieve an equivalent level of openness and clarity in the matter of time-varying regulations. One possibility could be to develop some kind of rule of action based on assessments regarding, for example, credit growth. Such a rule would thus provide information on whether the “regulatory controls” needed to be shifted upwards or downwards. Inspired by the Taylor rule that is well-known within monetary policy, the arguments in the regulation could be formed of the non-time varying regulations ( z ), a measure of actual credit volume in relation to a level deemed sustainable over the long term l t  l t , and the output gap:    4    Dynamic provisioning is, in principle, a rule in which banks make specific and general provisions when times are good for later use in less favourable periods. These provisions are rule-based and are built upon credit stocks and credit flows calibrated by data on average historical loan losses to different sectors. BIS Review 68/2010  11  z t  z z , lt  lt , y t  y t ,... . I would like to emphasise that this is intended as an illustration of a so-far quite loose conception, rather than a concrete proposal. However, it is a useful illustration, not least because it indicates the comprehensive development work that will be required before anything practically applicable can result.

This is still a somewhat high number, given the country’s population, and above all, the similarity of products banks are offering. Further mergers and acquisitions may have a positive impact on cost management, which will in turn make it easier for economies of scale to be achieved. On the other hand, domestic mergers and acquisitions are unlikely to involve a cutback in foreign ownership. Enhanced cooperation amongst regulators and supervisors from home and host supervisors is thus essential to the continuing stability of the system. BIS central bankers’ speeches  1  Yet there exists no precise definition what international regulatory cooperation is. Most of the time, it brings to mind the system of committees and working groups meeting in Basel, at the Bank for International Settlements. The international regulations which are the outcome of the Basel system, comprise among other documents, Basel III, the bold new guidelines at the core of which is the concept of risk-weight; some assets are riskier than others and this should be reflected in the percentage of capital that should be held against them. For credit risk, this riskiness is taken to depend on the obligor, i.e. it is taken that savers and investors are almost inherently more averse to obligations of some entities than to obligations of other entities. This approach is not new, but an enhancement of the existing Basel I and Basel II infrastructure.
Jan F Qvigstad: On institutions – fundamentals of confidence and trust Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 12 November 2013. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in drawing up this speech, in particular from Mike Bordo, Arne Jon Isachsen, John Llewllyn and Anders Vredin outside Norges Bank, and from Norges Bank staff; Øyvind Eitrheim, Amund Holmsen, Marie Norum Lerbak, Inka Rogne, Øystein Sjølie, Birger Vikøren and Jan Fredrik Øksendal. I would also like to thank Helle Snellingen for the translation into English. Institutions The concept institution has many meanings. For example, there is an important distinction between its meaning as an abstract concept and as a concrete one. The judicial system in Norway is an institution in an abstract sense, while the Supreme Court is concrete. The Norwegian Opera & Ballet is a concrete cultural institution within our more abstract cultural heritage. In my own field, the monetary system is abstract whereas Norges Bank is concrete.

These principles also summarise the six speeches I have given at the Academy of Science and Letters: a good institution keeps promises, makes good decisions, practices transparency as a governance principle, and learns from its own history and manages its cultural heritage. And the threads are gathered here. Today’s speech seeks to encompass all the themes in one frame. The lessons learned from Norges Bank’s first 200 years and the criteria I just cited are useful both in Norges Bank’s daily work and in making longer-term assessments. I would argue that these general principles apply to other institutions too, whether legal, cultural or educational. Decisions that are made in these institutions determine whether a country’s citizens can live a life of freedom and prosperity. The first measure is transparency. The Bank must expose itself to criticism by publishing the analyses behind its decisions. It must also be open about budgets and expenditure. The second measure is an international anchor. The Bank must be part of the international network of central banks and academic communities to compare itself with others, not only with itself. Erik Brofoss was perhaps a governor who was most concerned with issues other than central banking tasks. But it was he who laid the foundation for the “long recovery”- perhaps without realising the extent to which his pioneering efforts would bear forth. Brofoss believed that the young economists at the Bank had to go out into the world and learn.
As a result the response of inflation is relatively muted. It still rises, thanks to the weaker exchange rate. But it does so by only 0.5% points, significantly less than we’ve seen over the past year or so. With output declining and inflation close to target it’s not clear the MPC would have wanted to raise interest rates. The point that comes across, for me, is that inflation would be lower had effective expectations of the implications of Brexit, across different parts of the economy, been more uniform. Let me be clear. I’m not saying one side or the other – households and financial markets – is “wrong” or “right”. We don’t yet know. My points are rather (i) that for as long as we don’t know the ultimate Brexit outcome, it’s understandable that expectations should differ and (ii) that the particular difference we’ve seen since the referendum, with the foreign exchange market more pessimistic than the real economy, has been inflationary, and the gap in expectations has therefore been an important contributor to the recent rise in inflation and therefore interest rates. A corollary is that at least until Brexit actually happens, its significance for inflation and interest rates derives not so much from the process itself but from whether those expectations move closer together or further apart. However it occurs, whether via a stronger exchange rate or weaker consumption, a degree of reconciliation would tend to lower inflationary pressure. Further divergence would do the opposite.

That’s why I think it was the right thing to remove a degree of monetary accommodation. And while things might change – they always do – we will continue to act in a way that ensures stable inflation over the medium term while still providing what support we can to jobs and economic activity. Thank you. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  References Beaudry, P. and Portier, F. (2006), ‘Stock prices, news, and economic fluctuations’, American Economic Review, Vol. 96, No. 4. Broadbent, B. (2012), ‘Productivity and the allocation of resources’, Speech given at Durham Business School, available at http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2012/speech599.pdf Broadbent, B. (2017), ‘Brexit and the pound’, Speech given at Imperial College, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech969.pdf. Carroll, C. (2001), “A theory of the consumption function, with and without liquidity constraints”, Journal of Economic Perspectives, Vol. 15, No. 3. Deaton, A. (1992), Understanding consumption, Oxford University Press, Oxford. Di Pace, F., King, P. and Theodoridis K. (2017), ‘Assessing the effects of supple side news in a DSGE model estimated for the UK’, mimeo. Kamber, G., Theodoridis, K. and Thoenissen, C. (2017), ‘News-driven business cycles in small open economies, Journal of International Economics, Vol. 105. Kurmann, A. and Otrok, C. (2013), ‘News shocks and the slope of the term structure of interest rates’, American Economic Review, Vol. 103, No. 6. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15
Over time, our economies have become closely intertwined from a trade and financial standpoint. In situations of shared shocks such as this, there are even stronger reasons for acting in unison. In any event, it should be borne in mind that although the pandemic has spread to all countries in the euro area, its intensity across the board is uneven. The degree of economic exposure to the effects of the containment measures also varies, for example as a result of different productive structures. Nor must we forget that the starting position of each country in facing this crisis, in terms of public debt, of budget deficit and, therefore, of fiscal space and public finances vulnerability, also differed. The result is that the economic impact of the pandemic, both in the short and medium term, will be mixed across countries. Given the degree of integration achieved in the euro area, an adverse performance in one country will have negative consequences, in terms of activity and employment, for others. Pooled action to ensure that all European countries can tackle the crisis in comparable conditions would shorten its duration, protect the productive system and sustain the reality of our shared European destiny. 30  Several European initiatives have so far been adopted in response to the crisis. However, broadly speaking, the volume of these measures has been too modest, and they have not been the most suitable for organising a common fiscal response.

On one hand, certain aspects of the application of current accounting rules for calculating credit risk are clarified. On the other, the aforementioned authorities have ruled that banks may effectively use the capital buffers available to absorb unexpected losses. Specifically, the aim of the clarification of the accounting rules is to prevent potentially temporary delays by borrowers in repaying their loans from receiving the same treatment as though what were involved was a lasting impairment in the quality of the loans. The latter would lead to an immediate and abrupt adjustment of credit ratings and, therefore, to an increase in the provisions required which, ultimately, would lead to a downward adjustment in the credit extended by banks. In exchange, it is necessary to prevent the wrongful use of this flexibility from leading to inappropriate accounting practices that translate into a delay in recognising the actual impairment of the quality of certain credit exposures. 27  In the second of the two areas mentioned, the Banco de España has conveyed to all the institutions it directly supervises the various measures introduced by the different macroand microprudential and resolution authorities to alleviate capital and liquidity requirements. Moreover, the Banco de España has recommended that banks under its supervision should temporarily eliminate dividend payouts and apply prudent criteria in the variable remuneration of their staff, so that they may channel the funds they generate towards reinforcing their capital positions.
12  Some US equity markets recently reached record highs, both the FTSE 250 and the S&P 500 have gained over 40% from their March lows, and sterling 3m and USD 3m LIBOR rates have come in 70bps and 81bps respectively from their crisis highs 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  I would at this stage identify a number of areas that will likely merit further consideration in a comprehensive, evidence based, analysis of how stress evolved over the initial phase of the COVID crisis and whether and how market dysfunction could have been prevented without huge central bank intervention. Market liquidity broke down very quickly in dealer intermediated corporate bond markets and EME asset markets. This, bluntly, was no great surprise. The potential illiquidity of these markets under stress has been well known to regulatory authorities and market participants for some time.13  These markets are now very large. The global stock of non-financial corporate bonds at the end of 2019 reached an all-time high of $ trillion, with the stock of emerging market corporate debt around $ We need to examine the extent to which their illiquidity contributed to pressure on asset prices and liquidity elsewhere, given the desire of many of the holders of these assets to shift their portfolios to more defensive positions and to increase cash holdings.

14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14
3  2  3  Cf. Committee on Payment and Settlement Systems (now Committee on Payments and Market Infrastructures, CPMI) and Technical Committee of the International Organization of Securities Commissions (IOSCO), ‘Principles for financial market infrastructures’, April 2012. The Federal Intermediated Securities Act (FISA) introduced in Switzerland in 2008 is a good example of a regulatory change – in this case designed to manage the transition to dematerialised securities at central depositories. Dematerialisation and the associated regulatory changes also significantly improved the efficiency and safety of repo settlement and hence of monetary policy implementation. Page 3/6  From centralisation to decentralisation – how far should it go? Until very recently, safety and efficiency were considered to be functions of centralisation. This trend is reflected in the evolution of central securities depositories 4 and in the emergence of cashless payment transactions. In Switzerland, centralised clearing houses in the 1940s and centralised data processing in the 1970s were waypoints on a journey of convergence. This development culminated in the creation of the centralised ‘Swiss Interbank Clearing’ (SIC) payment system in 1987. 5 Another – more recent – example is the settlement of OTC derivatives via central counterparties. 6 This centralisation process and related economies of scale both reduced costs and improved safety. However, with the arrival of the latest technologies, these third-party clearing and settlement services are increasingly seen as superfluous cost factors; the keywords here are ‘distributed ledger’ and ‘blockchain’. 7 The underlying technology promises first and foremost to reduce costs.

This is important not least for the subsequent discussions with the other EU countries. I have devoted a good deal of my time here to the question of an appropriate central rate and how this question can be addressed in principle. There are two points I want to underscore: •  Calculations of the real exchange rate, which provide a starting point for discussions about reasonable central rates, are highly uncertain. Different economic models yield different results but can still be used to arrive at an approximate interval. Our calculations consistently suggest that an appreciation from the present rate is motivated. However, as relative GDP, terms of trade and other explanatory factors vary over time, calculations today may give a somewhat different picture from the calculations that were made some years ago. •  When setting a rate it is also natural to consider the level that is appropriate in the medium term. In this context it is primarily a matter of ensuring a stable adaptation to ERM2 and EMU, which calls for an exchange rate that markets find credible. The conditions for achieving this are naturally better if economic development in Sweden is balanced, with stable prices, etc. An unduly weak rate implies a stimulus to the Swedish economy that soon has to be met with a tightening of fiscal policy. An unduly strong rate, on the other hand, may be too restrictive, with negative consequences for growth and employment in Sweden.
This lot are a bit more random and one can’t say their slightly drunken path for policy does much for the stability of anything in the economy, whether inflation, output or (most obviously) interest rates themselves. But it’s still sufficient to return inflation to target after two years. How is this possible? Fundamentally, it’s because monetary policy begins to affect inflation not just at but strictly within two years. The peak impact may take some time to build, in this model, and it also persists for some time beyond two years. But as long as policy has any effect at all on inflation before the two-year point, there’s an infinite variety of interest-rate paths that can prospectively get you to any given rate at that date. We could invent policies for Committees Xerxes, Yaphet and Zog and still not be done. 2  BIS central bankers’ speeches  Chart 1: Some policy simulations  Source: Bank calculations. This raises a legitimate question. If you can do something about it before then, and all you care about are deviations of inflation from the target – which in our remit “applies at all times” – why not try and eliminate them as soon as possible, like our monotheistic friends on Committee A? Shouldn’t the policy horizon simply be the shortest time delay between changes in interest rates and their impact on consumer prices? Well one problem is that one can’t be entirely sure about what that delay is.

In fact, the observation that bond yields fail to behave in accordance with the simple “expectations hypothesis” goes back much further, to Macaulay (1938). 4  Gabaix (2012). 6  BIS central bankers’ speeches  First, forward interest rates in the UK are very sensitive to news from the US, puzzlingly so. Chart 5 I’ve used before. It plots average responses of sterling yields, at two and ten-year maturities, to various bits of economic news. What’s most striking are the significant reactions to surprises in US payrolls releases. The UK is a relatively open economy, prone to shocks from elsewhere. As the largest economy in the world, the US is bound to exert an influence on our economy and the appropriate level of domestic interest rates. But it’s hard to imagine that one learns more about inflationary pressure in this country from changes in US employment than from those in the UK itself. What seems more likely is that that US employment releases have effects on risk appetite, and this then leads to a high degree of co-movement – relative to that in pure forecasts – between forward interest rates in the two currencies. Table 1, which gives the results of simple regressions of changes in UK interest rates on their US counterparts, suggests this might be a more general phenomenon. It shows that forward yields are much more closely correlated across the two markets than spot interest rates. This doesn’t disprove the expectations hypothesis.
It has two functions. First, it expresses in a precise manner the strategy chosen by the Ministry. Second, it is a basis for comparison for the active management of the Fund. The benchmark index is a global securities portfolio, specified down to percentage holdings of individual securities. The equity allocation is probably the most important decision in the composition of the benchmark index. The Petroleum Fund bases its choice on the fact that equities yield a higher expected rate of return than fixed-income investments. Equities account for 40 per cent of the Petroleum Fund’s strategic benchmark portfolio, and fixedincome instruments account for 60 per cent. In 2003, the equity portion of the benchmark consisting of securities listed in Europe was 50 per cent and the remaining 50 per cent in the Americas, Asia and Oceania. The Petroleum Fund’s average ownership in listed companies has increased. At end-2003, the average ownership interest in European companies, where the share is highest, was close to 0.5 per cent. Macroeconomic policy in Norway rests on two pillars; •  The Storting issued formal guidelines to limit over time the annual use of petroleum revenues to the expected real return on the Fund - estimated at 4 per cent annually. That means that the government will not spend the capital itself - but only the return. In that way, the capital is saved for future generations. •  Monetary policy is aimed at ensuring low and stable inflation.

This suggests that there is room for somewhat stronger growth in the economy without pressures on real resources emerging. The low inflation environment we have witnessed in Norway lately reflects global phenomena and trends. Globalisation, new technology and increased trade among countries are key forces affecting the Norwegian economy, in addition to exchange rate developments. A global financial market Cross-border capital flows have increased considerably in recent decades. Bond markets have moved more in tandem, particularly since the mid-1990s. This also applies to equity markets. Investors are increasingly spreading their investments across countries. They are diversifying risk, and seeking high returns. In parallel, governments, banks and companies are issuing more debt externally. Currency trading has increased markedly since the 1980s. This trend was reversed when the number of currencies was reduced due to the introduction of the euro. Large trading volumes enhance market liquidity. The growth in currency trading reflects an increase in portfolio investment, higher foreign direct investment and growth in world trade. The forward exchange and options market have expanded in recent years. A deeper market reduces transaction costs, and it is easier to find counterparties. This has provided companies with greater scope for hedging against foreign exchange risk. The use of instruments that reduce the risk associated with a floating krone is also increasing in Norway. A considerably larger portion of credit in other countries is now channelled via the bond market. Less risk is being accumulated in banking systems.