samchain/econo-pairs-v1 huggingface dataset:
Instead, it is claimed, it should have remained until now – and probably even longer – at the 0.25 per cent to which it was cut in July 2009. This assumption has then been used to calculate how much lower unemployment might have been if the Riksbank had not raised the repo rate.2 Of course, we can never know for certain what would have happened if we had acted differently. But what this argument appears to disregard is that when the Riksbank began to raise the repo rate in the middle of 2010, the situation was such that the Swedish economy had recovered surprisingly quickly from the crisis (see Figure 5). Growth was very fast, around 6 per cent for the first quarter when calculated as an annual rate, with a final outcome of more than 6 per cent for the year as a whole. Almost all indicators of economic activity were pointing upwards and the inflation rate was almost 2 per cent, in terms of the CPIF. The traditional reasons alone, without taking into account risks linked to household debt, gave a strong indication that it was time to begin increasing the repo rate. In addition, although lending to households had declined from double digits prior to the crisis, it was still increasing by 9 per cent, which was much faster than disposable incomes.

It would have sent rather strange signals if the Riksbank had in this situation declared that the repo rate would not be raised, but would remain at 0.25 per cent for several years to come. Apparently, despite the fact that Sweden recovered from the crisis fairly quickly, the repo rate should have been held at a crisis level. But even today, with the increases made since the crisis, there are some signs that households’ repo-rate expectations are below what can be considered a reasonable long-run level for mortgage rates (see Figure 6). The situation had certainly been much worse if the Riksbank had held on to a repo rate of 0.25 per cent for more than four years. I believe that it would have been very difficult to manage the expectations this would have created among households and on the credit and housing markets. In my world, such a policy is simply not realistic and must be disregarded as a meaningful comparison. It is therefore rather unfortunate, and somewhat surprising, that calculations of the number of “lost jobs” based on this assumption have had a relatively large impact on the debate.3 As far as I know, in the countries in similar situation to ours with regard to household debt and the housing market, such as Norway and Canada, there has been no corresponding debate about whether or not the policy rate should have remained at the level to which it was cut during the crisis.
Loose monetary policy, in turn, may reinforce the economic momentum that is already under way, further feed optimism and thus favour the build-up of financial imbalances. Empirical evidence indeed suggests that stock market booms usually coincide with atypically low inflation. The run-up to the dotcom bubble in the late 1990s provides one particularly vivid example of this pattern.6  3/5  BIS central bankers' speeches  There are two responses to these sorts of monetary policy pitfalls. First, an appropriate calibration of the monetary policy horizon. Modulating the horizon over which the central bank aims to achieve its price stability objective depending on the shocks hitting the economy is a principle of prudent monetary policy. A demand shock calls for a shorter policy horizon; a costpush shock calls for a longer one. Importantly, this principle holds only if inflation expectations remain firmly anchored. Second, the central bank can minimise the risk of mis-calibrating monetary policy if it broadens the scope of its analysis to an encompassing set of observables, including monetary and financial variables. This also allows policymakers to monitor signs of the emergence of financial imbalances and to calibrate a “leaning against the wind” approach to monetary policy. The effects of the ECB’s monetary policy on the economy and the financial system The monetary policy response to the crisis has been central in restoring the bank lending channel and ensuring very accommodative financing conditions, which has paved the way for the euro area’s recovery and continued expansion.

Furthermore, some areas of the financial system are still not yet adequately covered by regulation, for example leverage in the non-bank financial sector. In my remarks today, I would like to elaborate on the interaction between monetary policy and macroprudential policy. I will first review the conceptual framework for monetary policy and financial stability and then look at how, at this stage of the cycle, macroprudential policy and monetary policy can best complement each other in the pursuit of their respective objectives. Monetary policy and financial stability Price stability and financial stability are tightly interconnected and mutually reinforcing; in the longer-term, each is a necessary – but not sufficient – condition for the other. Price stability contributes to the efficient allocation of resources in the real economy, thereby supporting longterm growth. A stronger and more stable macroeconomic environment contributes to healthy household and business balance sheets, thereby fostering financial stability. However, history abounds with cases where financial vulnerabilities were built up in good times, while market participants overly discounted the likelihood of adverse shocks. Financial instability is basically the result of market failures, which should be addressed by regulation (covering the time and cross-section dimensions of financial stability). Deficient regulation can lead to excessive leverage and maturity transformation, which may in turn result in funding fragilities and systemic vulnerability.
This achievement should be saluted as citizens of both  BIS Review 15/2009  1  countries will now be able to pay for goods originating from the other country with the currency of that country, hence eliminating the need for currency conversions by citizens. Distinguished Ladies and Gentlemen, this agreement is also a step towards further strengthening trade and financial cooperation between the two countries. It provides the legal basis for commercial banks, bureaux de change and other financial institutions to freely accept each country’s currency and repatriate it through the banking system with full accountability. The agreement will not only enhance trade cooperation but will also increase cooperation between our two central banks. Furthermore, the agreement provides a platform for sharing information on the bank notes in use by the two central banks. This information exchange initiative should not only end at central banks, but be extended to all economic entities that will use and benefit from this development, especially our hard working farmers who should be paid genuine currencies when they sell their produce. Once again, Governor, let me thank you most sincerely for initiating this agreement. Indeed, the signing of this agreement is a testament of the cordial relationship that has existed between Mozambique and Zambia since the days of the liberation struggle. I must add here that, for us, it marks a key milestone towards enhancing regional integration and macroeconomic convergence. As you are aware, Governor, this is our main goal as member countries of the Southern Africa Development Community.

Caleb M Fundanga: Repatriation of bank notes between Zambia and Mozambique Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Agreement on Repatriation of Bank Notes between the Bank of Mozambique and the Bank of Zambia, Lusaka, 4 February 2009. *  *  *  • Your Excellency, the High Commissioner; • Governor Ernesto Gouveia Gove, Governor of the Bank of Mozambique; • Members of the Mozambican delegation; • Bank of Zambia staff present; • Distinguished Invited Guests; • Ladies and gentlemen: May I begin by extending a warm welcome to Governor Gove and members of the Mozambique delegation to Zambia in general and to this signing ceremony of the Agreement on the Repatriation of Bank Notes between the Bank of Mozambique and the Bank of Zambia, in particular. Governor, the existence of an extensive border between Mozambique and Zambia has resulted in significant cross-border trade as evidenced by the movement of people, goods and currencies across the border thereby strengthening our shared identity and background as Africans. I must however, hasten to mention that, the cross border trade has hitherto been hindered by the need for traders from both sides of the border to convert funds into United States Dollars and then convert funds back into the other currency when purchasing goods or services. By so doing, cross-border traders incur foreign exchange losses as well as other conversion costs in the process.
Their aggregated profit, down 36% compared with 2010 to 14 billion euro was substantially higher than the 2008 and 2009 level, and this allowed them to significantly bolster their own funds and to continue financing the French economy. The ACP’s vigilance has been decisive in helping the banks to maintain a satisfactory liquidity and solvency situation. In 2011, the ACP conducted 136 on-site inspections; the risk profiles of 700 institutions were analysed according to a harmonised procedure with, notably, a sustained pace of meetings with the senior managers and heads of the main business  BIS central bankers’ speeches  1  lines, thereby allowing the ACP to draw up detailed maps of the main risks to which they are exposed. During 2011, the two principal dimensions of prudential supervision – monitoring credit institution liquidity and solvency – required particular vigilance by the ACP. Credit institutions’ liquidity levels were monitored more closely, particularly in its dollar resources dimension; this is an area where the rationale behind the ACP’s being placed under the aegis of the Banque de France – which is responsible for central bank refinancing – is clearly demonstrated. By ensuring that the adequate risk provisioning, the reduction of management’s and market participants’ compensation and the allocation of the bulk of profits to strengthen own funds, the ACP has managed to ensure – over the longer term – the solvency of the French banking sector. Today, all the major banking groups have Core Tier 1 own funds ratios above 9%.

The ACP has put in place a system for monitoring advertising and contracts that enable it to analyse promotional material. By means of a survey conducted among over 300 institutions, the ACP also checked compliance with the provisions made by banks to facilitate banking mobility. In addition, in order to reinforce its activities at local level, the ACP works with the Banque de France branch network, which is mobilised to carry out inspections of insurance intermediaries. All of these actions have made it possible to identify good practices in the area of the marketing of banking and insurance products and five recommendations in the area of consumer protection were published during 2011. I may mention in particular the recommendation relating to the measures that insurance undertakings must implement to deal with conflicts of interest when consumers are offered unit-linked insurance policies composed of bonds and other debt securities from an issuer that is financially linked to the insurance undertaking. To conclude on this point, I will add that, although the legislation applicable to the revised sanctions procedure was only published in the middle of the year, the ACP began to exercise its power to impose sanctions with three decisions that mainly concern breaches in terms of internal control and anti-money laundering procedures. III)  2012 is a year of intense preparations for the forthcoming regulatory developments.
The recent moderation of the growth in loans to the private sector, particularly to non-financial corporations, supports this assessment. Turning to the second pillar, recent information has strengthened the evidence of a decline in inflationary pressure. The sluggishness of real GDP growth in the euro area was confirmed yesterday by Eurostat's first estimate, which indicates that quarter-on-quarter growth was 0.3% in the third quarter. This was towards the lower end of expectations. Recent euro area-wide survey data suggest that overall sentiment in the economy remains lacklustre, with business confidence improving somewhat but consumer confidence falling further. It is expected, therefore, that economic growth will also remain subdued in the coming months. This disappointing picture mainly reflects the persistently high degree of uncertainty. Geopolitical tensions with potential consequences for oil prices, developments in financial markets, the sluggish growth of the world economy and the persistence of global imbalances are all factors that weigh adversely on confidence. These factors also have negative effects on euro area consumption, investment and the labour markets. As it is hard to predict when this uncertainty will start to abate, it must be taken into account in the more medium-term outlook for growth. The subdued economic activity should limit potential upward risks to price stability and help to ease inflationary pressure. Let me elaborate on this. BIS Review 72/2002  1  First, when looking back, we recognise that inflation has been rather persistent despite the economic slowdown.

The assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2% in the course of 2003 and to remain in line with price stability thereafter. Our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. The most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. Falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. Moreover, we expect an improvement in world demand. This, and the low level of interest rates, should benefit investment. Let me point out that, with today's decision, the key ECB interest rates have reached a very low level by historical standards. The Governing Council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. The outlook for the euro area economy will also very much depend on visible progress in other policy areas. Regarding fiscal policies in the euro area, I would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of GDP and employment. Therefore, sound fiscal positions, as enshrined in the Treaty and further developed in the Stability and Growth Pact, are in the interest of all the Member States.
CPI and Growth) That Sweden in the 1970s and 1980s lost so much ground in terms of prosperity in relation to many other European countries is certainly due in part to the stabilisation policy then being conducted. Prices and wages were allowed to drive each other up, while budget policy was far too weak. Devaluation followed devaluation, with low investment and weak productivity growth as the result. BIS Review 14/1998  -2-  High inflation also leads to arbitrary changes in the distribution of income and wealth in society. Wages and profits normally rise at the same rate as inflation. The value of real estate and some financial investments rises even faster. At the same time nominal fixed interest rates and transfers lag behind. The high profits made by the owners of houses and co-operatives in the 1970s and 1980s occurred in practice at the expense of tenants and those with bank savings. Between 1971 and 1974, for example, house prices rose by 50 per cent and agricultural property by 80 per cent. In contrast those who had their savings in bonds or in the bank saw their assets shrink by about a third in real terms.

We must try to make the best possible assessments of the amount of resources that will disappear more permanently as a result of  4  For a more detailed analysis of this connection, see Adolfson, M. and U. Söderström (2003), “How is the economy affected by the inflation target?” Economic Review 1, pp. 49-63, Sveriges Riksbank. http://www.riksbank.com/upload/Dokument_riksbank/Kat_publicerat/Artiklar_. PV/er03_1_artikel3.pdf. BIS Review 66/2009  7  the recession and of how quickly output can increase without causing inflation problems. Otherwise there is a risk that we will conduct an expansionary monetary policy for too long and thus risk inflation problems later on. One necessary condition for conducting effective monetary policy is that the financial system functions. Since last autumn the Riksbank has taken a number of measures to safeguard financial stability, in particular the extensive lending to the banks. We have recently decided to extend the eligible counterparties for our monetary policy operations and to offer the banks the opportunity to borrow from the Riksbank not merely at maturities of three months and six months, but also at twelve months. If economic developments should prove to be much worse than we are now predicting, there may be reason to proceed with more unconventional measures to support the economy. One possibility is to do as they have in a number of other countries and purchase government, mortgage and corporate bonds. We are currently examining the experiences of other countries and analysing the advantages and disadvantages of this type of measure.
International banking and finance – a new model for a new era While this debate will surely continue to unfold over the coming years, perhaps the more pertinent question is how we can evolve the model of international banking such that it becomes more desirable and beneficial for the needs of the future. It is worth considering a new model – one that is inherently more sustainable and inclusive. If I may postulate, the starting point is perhaps an honest appraisal that international banking ought to be much more than just a commercial decision. Beyond considerations of revenue, margins and returns, international banking should fundamentally be more attuned to and invested in the developmental journey of the host country. Existing and traditional considerations on profitability, while important, should not become a border that limits the potential of transforming international banking for the benefit of the future. Here, the mindset is not one of a “winner takes all”, but rather one where the benefits of development are equitably “shared by all”. This, again, resonates with the ‘ASEAN Way’ of greater shared prosperity and is perhaps a useful reference. There are at least three ways in which international banking can further this new model. Firstly, by actively identifying the economic needs of the host country and working to serve these needs. These include, for example, national infrastructure development needs, financing gaps for certain segments of society as well as adoption of productivity-enhancing technology by firms.

In a sense, the work is cut out for us, we need to distrust the status quo or we will continue to live in a decaying, sub-optimal and dysfunctional system, punctuated with frequent financial crisis. The needed reform will mean less disruptive capital flows, more robust financial safety nets and most relevant of all, greater impetus for diversification that will lead to greater resilience. Now is as good a time as any to begin. I wish all of you a productive dialogue. Thank you. 5/5  BIS central bankers' speeches
Mario Draghi: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, before the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 23 February 2019. * * *  Introduction Madam Chair, Honourable members of the Economic and Monetary Affairs Committee, Ladies and gentlemen, I would like to start by congratulating all of you on your election, and you, Madam Chair, on your recent appointment as Chair of this Committee. It is a pleasure to appear before this Committee in this new legislative term and before my term as ECB President comes to an end. The legitimacy of the ECB’s independence, as enshrined in the EU Treaties, crucially relies on our accountability. And the Treaties have conferred this Parliament with a central role in holding the ECB accountable. Hearings before this Committee play an essential role here. In my time as President, I have found them to be extremely beneficial. When I appeared before the ECON Committee for the first time, in December 2011, the euro area was rife with financial instability; it was falling into a second recession, which eventually led to sustained disinflation and, at times, heightened risks of outright deflation.1 The euro area has come a long way since the crisis, in part thanks to the support provided by the ECB’s monetary policy.

Another key difference compared with other advanced monetary unions like the United States is the lack of a central fiscal instrument to act countercyclically at the federal level. I fully acknowledge the political difficulties in building such an instrument in the euro area. Similar difficulties also exist when discussing the completion of the banking union and the establishment of a genuine capital markets union. At the same time, we should remain fully committed to the goal of achieving a genuine Economic and Monetary Union. Ignoring the need to fix the remaining institutional weaknesses of EMU would seriously damage what has already been achieved through the commitment and hard work of everyone involved. As I argued in this Committee eight years ago, we need to show “a clear trajectory for the future evolution” of EMU and thus frame the “expectations of both citizens and financial markets”. Allow me to take a longer-term perspective to draw the last lesson. While the euro area did not have a fiscal policy response comparable with that of other advanced economies, the ECB’s response was fully comparable with that of the other major central banks. Thanks to its independence, the ECB has been able to adapt its policy response and reaction function. Preserving this key asset will allow the ECB to adapt to future circumstances and ensure the effectiveness of its measures. This is all the more important considering that the desirability and relevance of central bank independence are increasingly being challenged around the world.