samchain/econo-pairs-v1 huggingface dataset:
Handling the political problems to do with a consistent, long-term approach to stabilisation policy is considerably more complicated. In practice it seems to be mainly a matter of ensuring that budget policy sticks to the rules in upward phases, both in order to secure reserves for down-turns and to avoid overheating, with its negative effects on wage formation, costs and so on. One possibility that has featured in the public discussion would be to extend the function of the Economic Council, for instance by formulating opinions about the formation of policy on behalf of the Riksdag (Sweden’s parliament). At a general level I can see no crucial objection to this; one more voice in the public discussion can do no harm. But as soon as one goes further than that, difficult issues arise. Time does not permit a long discussion of this question, which is not all that central. I just want to say that it touches on aspects of democracy that are likely to become even more tangible in that, if Sweden adopts the euro, monetary policy will be conducted well beyond our borders. The difficulties are compounded in that in questions such as these – taxes, cyclical activity, the direction of fiscal policy – the distinction between knowledge and values tends to be indistinct. To exemplify this I can cite a discussion I had two years ago with representatives of the Ministry of Finance.

The announcements following the recent G20 Summit and the associated announcements of the Financial Stability Board reflect the international economic regulatory cooperation that will set the agenda for the conventional standard setting bodies to put in place a framework to strengthen the international regulatory standards. It will also form the basis by which assessments will be made by multilateral agencies such as the IMF. It is therefore important for there to be engagement with the prudential standard setting entities for Islamic finance, not only to raise awareness of whether the new standards being introduced can be applied to Islamic finance and whether modifications need to be made but there could also be possible consequences that are unintended. Equally important is for there to be recognition of the standards that have been issued for Islamic finance specifically by the Islamic Financial Services Board. As a growing component of the international financial system, it becomes important for the interface and engagement with the international standard setting entities to take place given the common interest of global financial stability. Let me conclude my remarks. While the inherent strengths of Islamic finance have contributed to its viability and resilience, going forward into the future, the foundations for its sustainability as a competitive form of financial intermediation will continue to be strengthened.
Már Guðmundsson: Recent economic and financial developments in Iceland Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the 52nd Annual General Meeting of the Central Bank of Iceland, Reykjavík 21 March 2013. *  *  *  Madame Prime Minister; Ministers; Madame Chairman; Directors and Ambassadors; Ladies and Gentlemen: As we convene for the 52nd Annual General Meeting of the Central Bank of Iceland, the domestic economic recovery that began in mid-2010 continues, although it has slowed down in recent months. At least to a degree, the slowdown is due to developments internationally. The margin of spare capacity in the economy continues to narrow. Inflation has proven more persistent than previously hoped, however. Early on, wage increases far in excess of productivity growth played a leading role in raising inflation well above the inflation target, but since last autumn the weakening of the króna, triggered by deteriorating terms of trade and a heavy foreign debt service burden, has played a greater part. Monetary policy responded to these developments with interest rate increases beginning in August 2011. The Bank’s interest rates have been unchanged since November, however, and intervention in the foreign exchange market has supported the exchange rate in the recent term, thereby supporting the monetary policy goal of bringing inflation back to target. Global output growth lost pace in 2012, but to differing degrees in various regions. There was a contraction in the euro area and marginal growth in the UK and elsewhere in Europe.

But none of this changes the fact that we must lift the controls as soon as it is safe to do so, both because of the economic cost of retaining them and because of Iceland’s international obligations. In my speech a year ago, I said that this was one of the most complex tasks facing the Icelandic authorities at the time. That has not changed. A prerequisite for success is that we base our efforts on the best possible analysis of the problem and the potential solutions to it. Until now, the controls have been viewed as providing shelter during the  BIS central bankers’ speeches  3  resolution of the balance of payments problems caused by the collapse of the financial system. If all non-residents’ potentially volatile claims on residents were paid in a short period of time, Iceland would pay down foreign debt much more rapidly than is desirable. If worse comes to worst, the deleveraging could amount to roughly half Iceland’s GDP in relatively few years. Under such circumstances, the króna would depreciate significantly, at least over a considerable period of time, the banks’ liquidity would be weakened, and public sector finances would do likewise. Domestic and foreign Treasury financing would be much more difficult and expensive to come by. But is this analysis correct? Is Iceland faced with a balance of payments and refinancing problem rather than a debt sustainability problem?
Finally, if you look at the structure of financial markets on both sides of the Atlantic, you may note the difference between the “bank-based” system of finance on the European continent and the “market-based” system in the United States. Although there seems to be a trend away from banks towards non-bank financing in the euro area, reinforced by the introduction of the euro, banks still play a dominant role in providing financial services in the euro area. Domestic credit as a share of domestic output accounts for 130% in the euro area, compared with 80% in the United States. Correspondingly, stock and debt markets are much smaller in the euro area than in the United States. While the shares of euro area debt securities and stock market capitalisation relative to GDP remain clearly below 100% (91% and 63% respectively), the figures for the United States are in both cases well above 150% (155% and 172% respectively). This brings me to the use of the euro as an international currency in the global financial system. The role of the euro as an international currency Given the weight of the euro area in the world economy and the legacy of the former national currencies, which have been replaced by the euro, it is no surprise that the euro is the second most widely used currency behind the US dollar. A number of observers have argued that one of the main motivations behind Economic and Monetary Union (EMU) was the development of the euro as a major international currency.

I believe structural reforms together with macroeconomic stability, fiscal discipline and prudent monetary policies will create the necessary economic environment to achieve and maintain sustainable growth rates and price stability in the future. Thank you. BIS Review 79/2008  3
Given a marked increase in credit rationing in capital markets and bank lending, the conventionally measured short-term riskfree real rate may not be the same summary statistic of monetary conditions as before the turmoil. It is currently necessary to undertake a richer analysis of monetary and credit conditions, which had been the broad theme of my earlier paper. But those remarks about money and credit were nested within a broadly common approach to the transmission mechanism and policy. To recap, the MPC’s more collective statements make us free to do our duty in revealing our individual thoughts without creating a misleading perception of cacophony when it is not really there. The challenge for central banks with different decision-taking structures would seem to be the opposite: (i) how to allow a range of views to be explored seriously so as to avoid intellectual or analytical inertia – or how to let in fresh air; and (ii) in terms of communications, how to demonstrate that there is true debate without individual pronouncements being confused with the collective pronouncements on policy made typically by the Chair. I think forecasts are central to this. And I would encourage Alan Blinder and his collaborators to extend their work on the production and role of forecasts in the decision-making of different central banks; and how the communication of forecasts interacts with the communication of other elements of the policy process.

This means that, in addition to clarifying our own thoughts, we are up to a point in the business of persuasion. Ours is not a system of postal voting. It is a system of listening to and learning from each other. Second, with qualifications, some of the MPC’s communications are relatively more collective. In particular, our communications on a broadly shared ‘model’ of how the economy works, and our forecasts of the outlook for growth and inflation. In 1998, the (then) Committee published a paper on the Monetary Transmission Mechanism; and, in a 2007 paper to the Treasury Select Committee of Parliament, we described our view of material changes in the workings of the economy during the Committee’s first ten years. Both were agreed, collegiate-like documents, while not committing every member to every proposition. Much the same can be said of our quarterly forecasts and Inflation Reports, which play a central role in the MPC’s system. Our forecasts are the projections of the policymakers not the supporting analytical staff. It is striking that the ‘individualistic’ MPC publishes a common forecast, whereas the somewhat more-collegial FOMC has long published information (the central tendency and range) about the forecasts of its individual members (without the names). The FOMC’s approach allows the range of central projections to be transparent. It is  3  See Tucker, P M W, ‘Reflections on operating inflation targeting’, speech at the Graduate School of Business, University of Chicago, July 2006, Bank of England Quarterly Bulletin Q2 2006, pp 212-224.
I wouldn’t want to meet the eyes of the European citizens and tell them that we knew this could happen, but we were too busy to do anything about it. Some different avenues have been outlined in the ongoing international discussion. So far, the focus for discussions in the EU has primarily been on crisis prevention in the form of regulatory reform and different organisational structures of supervision. However, similar options do exist both in the context of crisis management and in the subsequent resolution of the crisis. One of the solutions suggested is to let the home country take a leading position more firmly. In this case, the home country supervisor is responsible for the supervision of the overall group and in a crisis the home country authorities has the responsibility for managing and solving the crisis for the bank as a whole. With increasing emphasis on consolidated supervision, this seems to be where Europe is heading presently. It addresses the problem primarily from the cross-border bank’s perspective of minimising the regulatory burden. This is, of course, valuable but does not solve all problems. With the new Capital Requirements Directive, the consolidating supervisor of a banking group will have, for example, the principal responsibility for validating and approving the credit risk models in the entire bank, including its subsidiaries. But in most cases, the rules to be used are expected to be settled in negotiations between the supervisors.

In order to avoid having crisis management being held up by conflicts of interests more than necessary, I am personally inclined to believe that a general key that is fixed once and for all is the preferred choice. Possible ways forward The title of this speech is a question: “Are we ready to deal with a cross-border banking crisis in Europe?” Regrettably, the answer is no! Before we can say we are anywhere near “ready”, we must deal with some serious challenges. In particular, we need to solve the problem of how to organise supervision, crisis management and crisis resolution for cross-border banks. Given the great complexity of the issue, achieving a practical solution will not be an easy task, and there is no altogether ideal solution. The amount of work that has already been set up for us on the European regulatory agenda is already quite staggering, which suggests that everything may not be achieved in the next few years. But we must not use this as an excuse for not starting to deal with these important issues. We can at least start the analytical process, take stock of the problems and examine the pros and cons of different solutions. The longer we wait to get this process started, the greater the risk that we’ll end up in a very serious mess. I, for one, certainly hope that we manage to have some solution in place before the next major financial disaster in Europe occurs.
They took advantage of a liberal regulatory environment, good credit ratings, and the unusually advantageous conditions on the global markets and expanded their operations at a rapid pace. The European regulatory framework made this possible. In many ways their activities resembled those of banks in other countries. Under normal market conditions, this posed no immediate problem. The banks could have funded their operations even under sub-optimal market conditions. Many were of the opinion that the Central Bank should build up very large foreign exchange reserves, even up to a multiple of GDP, in order to back up the financial system. Given the current account deficit on the balance of payments, this would only have been possible with massive foreign borrowing. It would never have transpired, for the simple reason that the Icelandic government would have been unable to borrow such a large amount. Its credit ratings would not have tolerated it, and lenders would have been difficult to find. As I have touched on, the banks responded to mounting difficulties in various ways. Kaupthing, for example, abandoned its plans to acquire the Dutch bank NIBC. All of the  6  BIS Review 22/2009  banks sold assets and discontinued various non-core operations; however, as the IMF mentioned in the previously cited Staff Report, it was not a seller’s market. In addition, the banks all reduced their lending and laid off staff.

Early in October, two Icelandic banks received sizeable margin calls from the ECB. The ECB demanded that they be met immediately, which would have driven the banks to collapse. The news of these margin calls spread widely. For reasons that were not explained, the ECB withdrew the margin calls at the last moment, in spite of the fact that the Central Bank of Iceland had been informed that such decisions by the ECB were irrevocable. In retrospect, perhaps the safest way to prevent the collapse of the Icelandic banks would have been, at the outset, to place more stringent limits on their operations than were placed on financial institutions in other EEA states; in other words, to deny them the rights conferred by the EEA Agreement. Had this been done, Iceland would not have been a full participant in the internal market of the European Union. I will leave it to others to answer the question of whether political support would have been forthcoming for the imposition of such restrictions on the banks at that time. On the other hand, in view of recent developments, it is obvious that the banks took advantage of extremely favourable conditions to expand more rapidly than was sustainable for the long term as things developed. Because of their relative size,  BIS Review 22/2009  7  the Icelandic banks were more vulnerable than many other businesses even to moderately adverse developments, not to mention the catastrophic events that have shaken the global financial environment in the past year.
His works have over the years touched on many aspects of money management as seen from the context of ordinary Malaysians, leaving us with memorable and lasting impressions not only on prudent financial behaviour, but on Malaysian life and society. Important lessons about savings, conserving and avoiding wastage are powerfully conveyed through the remarkably creative and entertaining visuals that we have all come to know and love. True to form, Datuk Lat’s creations are unparalleled in their ability to capture the hearts of Malaysians and through them, we are both educated and entertained. It is our honour to commemorate his works for such an important cause. Since 1999, 15 million copies of Buku Wang Saku have been circulated to more than 10,000 schools nationwide to be used in promoting good financial management habits which can make a profound difference in their future financial well-being. Indeed, being equipped with the knowledge, skills and tools to make sound financial decisions has never been more important in a generation where our young people have more money to spend, are presented with a wider spectrum of financial offerings and are exposed to greater temptations to take on debt. Financial education is therefore a vital life skill; one that must be developed from an early age. It was with this motivation that the Bank initiated a number of efforts to enhance the financial competence of Malaysians through a nationwide savings campaign that was launched in 1996.

Consequently, the current overall situation of the Swiss economy remains difficult despite the many rays of hope with regard to the economic cycle. Also, the danger of deflation does not yet seem to have been entirely averted. We have not yet reached the moment for a change of direction in monetary policy in Switzerland. After analysing the available economic data and forecasts and taking various risk considerations into account, there is no need for the SNB to take monetary policy action at present. The SNB can afford to adopt a holding stance. However, this holding stance should not be mistaken for inactivity. The SNB continues its firm implementation of an extremely expansionary monetary policy and the unconventional measures launched on 12 March 2009. The Swiss franc money market is still being provided with a generous and flexible supply of liquidity, interest rates remain low, Swiss franc bonds are still being purchased to dampen the level of risk premiums on the Swiss franc bond market as and when needed and the appreciation of the Swiss franc will continue to be prevented. BIS Review 27/2009  1
In the economic literature of recent years most of the references to the problem of global imbalances concern the phenomena described above. Therefore, for the purposes of this speech, I shall assume that whenever global imbalances are mentioned, the term will mean a joint occurrence of the following factors:  2  Ricardo Husmann, Federico Sturzenegger “Global imbalances or bad accounting? The missing dark matter in the wealth of nations”, Harvard University working paper, January 2006. 3  W. Buiter “Dark Matter or Cold Fusion”, Goldman Sachs Global Economics Paper, January 2006. 4  K.Lansing “Spendthrift Nation”, Federal Reserve Bank San Francisco Economic Letter, November 2005. 5  According to World Economic Outlook published by the IMF in September 2005, the forecasted US current account deficit will amount to USD 759 billion in 2005 and will increase to USD 805 billion in 2006. Both values correspond to 6.1% of the forecasted GDP. Some forecasts by investments banks, however, indicate an increase in the forecasted current account deficit to 6.5% of the GDP in 2005 and to 7-8% of the GDP in 2006 and 2007. 6  An extensive discussion of the real property market can be found in A. Ahearne et al. „House Prices and Monetary Policy: A Cross Country Study”, Fed Board of Governors, International Finance Discussion Papers, September 2005.

They make threats, even though Member States have taken strong and positive decisions. Rating agencies behave as if nothing had happened. It may seem that agencies are no longer a useful guide for investors. Would you say that their judgments are based on political criteria? Indeed, in the arguments they develop, there are more political arguments than economic ones. Credit agencies have downgraded the ratings of three large French banks. Are our banks undercapitalised? No, they are very well capitalised, in particular compared to their European and US counterparts. The importance of this downgrade should not be overstated especially since rating agencies have recently downgraded most large banks in developed countries. There is no doubt that the capital buffers of our banks are largely adequate in relation to levels in the global banking system. It is true that we are asking them to enhance their soundness in order to meet the new regulatory requirements that have been agreed at the European and global level. Banks are doing this through their own resources and needless to say without State aid. That is why I have no concerns about the French banking system. Should banks’ customers, companies and individuals, fear a credit crunch? No, and the figures bear it out. French banks’ lending activities remain very robust: up 8% for mortgage lending, up 5.6% for corporate lending and up 5.1% for lending to SMEs. It is precisely their retail banking business that makes them sound and profitable.
Thankfully, Marvin, along with others, helped lay the intellectual groundwork and created the vocabulary for us to work through some of the most significant issues facing central banks. His work is a true emblem of how researchers play a vital role in informing and shaping the policy discussion. I look forward to the upcoming conversation. Thank you. 1 Jeffrey C. Fuhrer and Mark S. Sniderman, Conference Summary, Journal of Money, Credit and Banking, Volume  32, Number 4, Part 2, pp. 845–69, November 2000. 2 Marvin Goodfriend, Overcoming the Zero Bound on Interest Rate Policy, Journal of Money, Credit and Banking,  Volume 32, Number 4, Part 2, pp. 1007–35, November 2000. 3 Board of Governors of the Federal Reserve System, Transcript of the Federal Open Market Committee Meeting  and presentation materials, January 29–30, 2002. 2/2  BIS central bankers' speeches

They have reduced their budget deficits, pushed down their inflation rates to less than 2%, and brought their growth rates close to 3%. Favourable global economic conditions made it possible to create an environment suitable for the proper functioning of the system. Meanwhile, the European Monetary Institute completed the necessary preparations for launching the ECB, and transferred its responsibilities to that Bank at the beginning of July 1998. At its founding, there was a broad consensus that the ECB should be independent. There were continuing discussions about its main target, however, and even though this question seems to be resolved, sometimes it still appears on the agenda. The main point being discussed is that while price stability is specifically mentioned in the constitutional agreement as an objective of the ECB, the role of the growth and economic stability objectives is less clear. It is generally agreed that the primary task of central banks should be price stability, but some still argue that the price stability objective should not conflict but should cooperate with the growth and stability objectives. Others insist that since the existence of price stability brings about high employment and sustainable growth in the medium and long term, there is no conflict between the growth and price stability objectives. I believe that the ECB’s present policies, based on all these discussions, aim at price stability as its primary task, with sustainable growth and low unemployment as major objectives.