samchain/econo-pairs-v1 huggingface dataset:
It is our view that there is a need for further improvement of the current precautionary facilities to make them more suitable in providing countries with preventive financial assistance to face capital account crises. In this context, the discussion of this morning gave the Fund’s staff useful elements to consider on the design of more effective financial instruments to limit contagion from shocks in the global financial market. But not only the Fund’s financing instruments should be explored. The Fund should have a dialogue and a permanent association with private financial markets around the world to promote and eventually participate in the creation of new financial instruments that provide liquidity support at times of stress. This is an integral part of the process of managing systemic risks to macroeconomic and financial stability, which we referred to previously. From this standpoint, the Fund could contribute to alleviating the impact of existing externalities in global financial markets by creating new knowledge relating to the design of new market instruments, valuation methodologies, benchmarks and indices, for instance. This is especially important for countries that have made lots of progress in addressing their main weaknesses both on policies and the development of their intuitional framework. After almost twenty years since the debt crisis of the eighties, a good part of the Latin-American countries have repaid their obligations with the Fund.

We experienced an economic contraction for five consecutive quarters and property prices plunged by more than 60%. Many families found themselves trapped in “negative equity”, and the unemployment rate was above 8%. Hong Kong began to recover in 2003 after six years’ hard struggle. I am sure that this experience is still fresh in our memory. 4. Japan is another good example. It enjoyed rapid economic development after World War II, quickly becoming a powerful industrial nation. During the late 80’s when its stock and property markets were booming, a huge bubble was created, which we only realised afterwards. Few people spotted the emergence of a bubble at the time, and the extraordinary and irrational exuberance was interpreted as the “Japanese miracle”. We all know now that what a disaster this “Japanese miracle” was for its people. Twenty years on, the Nikkei Index still hovers around the 10,000 level, only a quarter of its peak of 39,000, while the average residential land price in six major cities is equivalent to only a third of its level two decades  BIS Review 167/2009  1  ago. Of course, there are other structural problems that have prevented a Japanese recovery for such a long period. 5. The current global financial crisis was caused by the bursting of the property bubble in the US, which left many financial institutions under stress.
Public occupational pension schemes seem to enjoy slightly stronger constitutional protection than national insurance pensions, but the Supreme Court has  14  ROBEK – register of all municipal and county authorities subject to approval pursuant to Section 60 of the Local Government Act. 15  See discussion in Appendix 5 to the Report of the Pension Commission (NOU 2004:1). 8  BIS Review 123/2010  repeatedly stressed the authorities’ need for freedom of action when it comes to making changes to pension schemes. The Norwegian national insurance scheme is a pay-as-you-go system. This means that a given year’s pension payments from the scheme are covered by government budget revenues that year. When the national insurance scheme was introduced in 1967, a fund was established to provide for an expected reduction in private saving. However, pensions were still included in the central government budget at an early stage and financed by current tax revenues. Transfers to the National Insurance Fund were soon discontinued. Nevertheless, confidence in the pension system has actually remained intact, reflected in a low level of household saving, primarily through home investment. Perhaps there is some element of miscalculation here. A fall in value may occur if many homeowners free up housing capital to cushion old age. (See Chart: Government Pension Fund Global.) It was only when transfers to the Petroleum Fund were introduced in 1996 that funds were accumulated that could also be used to cover future pension payments.

Organisational changes to address the challenge of financial innovation The role of regulators and supervisors is to contribute to harnessing in full the benefits of innovation while maintaining risks within reasonable and socially acceptable limits. As you can imagine, this is no easy task and requires the authorities themselves to undertake internal transformation processes so as to be able to appropriately meet these challenges. As a result of this need, the Banco de España has in recent years assigned growing resources to monitoring and analysing financial innovation. The first step was the creation, in February 2017, of an internal group with representatives from different business areas within our central bank to gain a cross-departmental view of the phenomenon and to promote coordination among these different areas. One year on, we have deemed it necessary to take a further step, assigning specific resources to the analysis of financial innovation. To do this, a new Associate Directorate General was created last March. This new area pursues three major aims: (i) to understand the dimension of the changes taking place, (ii) to analyse the consequences of the new developments, and (iii) to provide for coordination and contact with the market and the other authorities involved, including those from other jurisdictions since, in short, financial technological innovation is a global phenomenon. The ultimate aim is to develop an overview of the main features and challenges facing financial services-providers.
The FOMC’s current approach entails a much clearer delineation of the roles of the federal funds rate and the balance sheet, breaking the link that appeared in the spring of 2013: the association between a reduction in the balance sheet and a shock to expectations for the federal funds rate. As shown on Panel 5, even with the active discussion of balance sheet normalization in the March and May 2017 FOMC meeting minutes, market participants attributed very little of the movement in longer-term rates to communication from the FOMC regarding potential changes in their reinvestment policy. It’s also possible that it is especially important for the FOMC to act in a gradual and predictable way at times when investor response to Federal Reserve announcements might not be expected to follow predictions that come from economic models that assume rationality, perfect information, expectations for continuously optimal policymaking, and so on. George Soros’s theory of reflexivity might be instructive here. Soros’s framework is based on two propositions: fallibility, which means that market participants’ views of the world can never perfectly correspond to the actual state of affairs; and reflexivity, which means that these imperfect views can influence the situation through the actions of those who hold those views.25 In other words, perception might not correspond to reality, but perception can influence reality.

Øystein Olsen: The conduct of monetary policy Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 29 May 2012. *  *  *  Please note that the text below may differ from the actual presentation. The statement is based on Norges Bank’s Annual Report for 2011, Monetary Policy Report 1/12 and the Executive Board’s assessments in the period to the monetary policy meeting on 10 May. I would like to thank the Chairman of the Committee and thank you for this opportunity to report on the conduct of monetary policy in connection with the Storting’s deliberations on the Government’s Financial Market Report. My statement here today is based on the Bank’s Annual Report, but also on the Executive Board’s assessments for the period to the most recent monetary policy meeting and new information. Norges Bank’s conduct of monetary policy is oriented towards low and stable inflation. The operational target of monetary policy is consumer price inflation of close to 2.5 per cent over time. At the same time, monetary policy shall contribute to stabilising developments in output and employment. When I was here last year, the key policy rate had just been raised to 2.25 per cent. Inflation was low at around 1¼ per cent, but there were prospects that growth in advanced economies was recovering and that both capacity utilisation and inflation in Norway would pick up.
If we are to fulfil our legal mandate to ensure price stability while taking due account of the development of the economy, we have to implement expansionary measures in such circumstances, in order to counter the strong franc. In the current environment of very low interest rates worldwide, it is not possible to steer monetary conditions exclusively via the interest rate channel. In addition to the negative interest rate (–0.75%), the SNB influences monetary conditions by intervening directly on the foreign exchange market as necessary. The goal of this policy is to reduce pressure on the currency and to make Swiss franc investments less attractive. Our foreign exchange market interventions do not amount to a mercantilist policy at the expense of Switzerland’s trading partners or a beggar-thy-neighbour strategy; rather, this policy provides the SNB with a necessary instrument for ensuring price stability and for fulfilling its mandate. What would happen if we were to interpret the current account surplus as an indicator of the Swiss franc tending to be too weak, or of the economy growing strongly, without taking these particularly Swiss circumstances into account? We would misjudge the risks to price stability and economic development, with which we have repeatedly been confronted in the recent past. And we would not make any appreciable reduction to the current account surplus, even if the franc were stronger. Allow me to illustrate this point with a simple chart.

How can the persistent current account surplus, textbook economic theory and the SNB’s own assessment be reconciled? Is the surplus in Switzerland perhaps even the result of a monetary policy designed to deliberately push down the exchange rate in order to boost exports? 1 International debate about certain countries’ current account surpluses and unfair exchange rate policy has intensified in recent years. In this context, Switzerland has been on the US Treasury’s ‘monitoring list’ since 2016, although it is not designated a ‘currency manipulator’ in the associated report as it does not meet all the relevant criteria. However, Switzerland is being specially monitored. We are maintaining a constructive dialogue on this matter with the responsible government agencies in the US. Foreign authorities and international organisations recognise Switzerland’s special position, and appreciate the rationale for the SNB’s monetary policy measures. According to the latest External Sector Report of the International Monetary Fund (IMF) of July 2017, Switzerland’s current account is in line with macroeconomic conditions, and its monetary and fiscal policy is considered appropriate. Yet, international debate about current account surpluses and deficits has at times been heated and not always objective. Some observers have repeatedly denounced Switzerland for its persistent surplus. As criticism has focused on the SNB’s monetary policy, I am naturally keen to give you my analysis of the situation. Before we get into the details, let me outline the crux of my argument.
Under the fourth option (the reduction of risk-weighted assets), it is the volume of credit made available by banks that is directly and adversely affected, moderating once again consumption and investment, and asset prices. Logically, the reduction in or release of these requirements would have the opposite consequences. Depending on the intensity of the increase in capital adopted, and on the economic environment into which it is introduced, banks might choose one or another option, or a combination thereof. For example, the empirical evidence suggests that banks resort to the first three options especially in expansions, when available liquidity and financing are abundant and, in general, when risks are being built up. The fourth option is chosen especially in recessions, crises or situations in which systemic risk is materialising. 5  For didactic purposes, it is assumed that banks decide to hold their management capital buffers – i.e. those additional to those required and which they can retain voluntarily – unchanged. 8  Consequently, the activation of capital tools in phases in which risks are accumulating will influence credit institutions especially via the increase in the cost of lending. By contrast, the deactivation of these tools when systemic risk is materialising or being mitigated might help sustain the supply of credit by banks. When these tools are used to tackle the time dimension of systemic risk, they are normally applied countercyclically to the entire banking system.

We can conclude from the results that the activation of the countercyclical buffer in financial cycle upturns gives rise to an easing in credit and GDP growth under the baseline scenario, but, above all, it significantly reduces the severity of the decline in GDP in an economic crisis situation. Moreover, the probability of crises occurring diminishes. These effects would occur with a lag of around two years. The release of the CCyB in crisis periods would mitigate the adverse effects on economic growth, both under the baseline scenario and at the extreme percentile. And, furthermore, its impact would be immediate. 15  In the case of the tools that fall on borrowers, their activation in financial cycle upturns would have similar effects to those of the CCyB. The main difference is that their effects are more immediate: i.e. around one year as opposed to the two years mentioned in the case of the CCyB. This suggests an order for the activation of the different instruments under normal circumstances: the tools that increase banks’ capital requirements should be activated first and, if the risks identified do not abate, the second instruments should then be activated. According to this same evidence, it is found that the release of the macroprudential instruments that fall on borrowers in crisis periods does not significantly impact GDP growth expectations or their distribution. This is perhaps due to the fact that, habitually, it is the banks themselves that restrict these lending standards in contractionary phases.
Apart from the fact that this would reduce the risk of a new international crisis, it would mean that a larger part of global demand would come from those countries that currently have a surplus, for example China, and a smaller part from the United States. It is difficult to know, however, what impact this would have on the demand for Swedish export goods. To the extent that Chinese households and companies demand different types of goods than households and companies in the United States, this largely depends on whether Swedish companies are flexible enough to adapt their production to meet changes in the pattern of demand. The Asian countries that have surpluses are a long way from Sweden and geo-graphical distance is a factor that has a clear negative link to the propensity of countries to trade with each other. 26 However, there are countries with substantial surpluses that are close to Sweden, for example Germany. It is therefore not obvious what the overall impact would be on the demand for Swedish exports if there was a general reduction in current account surpluses and deficits. It is also conceivable that the United States would import more investment goods if its current account deficit decreased, as this would probably entail an expansion of the export-oriented industrial sector at the expense of the more domestically-oriented service sector. This in turn would entail an increased demand for the type of industrial goods that Sweden exports quite a lot of.

Dimitar Radev: Addressing underlying issues of cross-border investment in the EU Publication by Mr Dimitar Radev, Governor of the Bulgarian National Bank, in "Views The EUROFI Magazine". The magazine were disseminated during The Eurofi High Level Seminar 2017 before ECOFIN, Malta, 5-7 April 2017. * * * We are witnessing a downward shift in cross-border investment in the EU, while the EU current account moved to positive territory in recent years. The savings-investment mismatches, therefore, are at the heart of the conundrum we face in developing the cross-border investment in the EU. Several initiatives to address this issue have been launched, including the Investment Plan for Europe, and the European Long-term Investment Fund. A large-scale new initiative is the establishment of the Capital Markets Union intended to further enhance the mobilization of capital and its channeling to companies and infrastructure projects offering new opportunities for savers and investors across the EU. A few other initiatives are under consideration, including the creation of a European Savings Investment Fund. However, the results of all initiatives have been mixed so far, and cross-border investment is stagnating. Before moving forward we need to better understand the underlying factors behind recent developments. The current initiatives look technically sound, but the lack of sufficient progress in their implementation reveals a number of remaining underlying issues. These include: (i) the unfinished agenda with regard to banking and financial integration; (ii) slow progress in real convergence; and (iii) limited availability of adequate infrastructure and innovation projects.
Before I move on to my personal reflections on the situation in the Swedish economy, I would like to say that I make the same assessment of the economic outlook in Sweden as that made by the majority of the members of the Executive Board at the latest monetary policy meeting. This assessment is that there will be relative low inflationary pressures and slow growth in the period ahead. It was expected that the Swedish economy would slow down at the end of last year, but the slowdown was more severe than we believed it would be. In the December forecast the Riksbank predicted that growth would decline and that there was some probability of a further repo-rate cut in February. In February, our assessment was that the slowdown in growth in late 2011 had been even more severe. This was because the indicators for exports, among other things, suggested this. I therefore voted with the majority to cut the repo rate by a further 0.25 percentage points. Since then, we have learned that the outcome for GDP growth in the last quarter of 2011 was even worse than we expected at the time of the monetary policy meeting in February. This is largely because exports were even weaker than expected. However, we have also received outcomes for foreign trade in January which indicate that exports strengthened again after the turn of the year.

While theoretically feasible through issuance of central bank bills, large-scale sterilisation proves problematic in practice, especially in emerging economies, which are not always fully equipped with market-based policy instruments. In order to effectively control exuberant credit expansion, emerging economies have often had to recourse to large increases in reserve requirement ratios or even non-market policy instruments such as the rationing of credit. In a context in which credit and interest rates are largely administered, the fiscal cost of sterilisation can effectively be transferred to the banking sector, and ultimately to bank customers and stockholders; but that does not remove the opportunity costs of sterilisation for the private sector or the monetary risks of incomplete sterilisation. The bottom line is that in economies where largescale foreign asset accumulation needs to be sterilised, it is very likely that capital allocation efficiency will be reduced, especially if non-market instruments have to be used. Foreign reserves and international competition A second risk is that reserve hoarding may exacerbate trade competition and emphasise regional tensions. Emerging economies compete in their exports towards developed economies, as much as they compete with developed economies. As noted by Aizenman 4 “in a world with symmetric emerging markets competing in similar industries, competitive [reserve] hoarding tends to dissipate most competitive gains, leading to a “beggar-yourself” [outcome] and excessive hoarding”. By contrast “in an asymmetric world, an emerging market with low enough cost of sterilisation may win the hoarding war […] akin to the “beggar-thy-neighbor” outcome of asymmetric Tariff Wars”.
There are also open economy aspects to this issue, as it is hardly a coincidence that almost all countries applying some form of inflation targeting policy have chosen an inflation target of almost two per cent. It seems likely that any movement towards a higher inflation target should be the result of an international discussion in which Sweden will hardly be the country to go first. Make up strategies for better automatic stabilisation of shocks Another idea discussed is that of changing the central bank's targets so that a certain measure of history-dependency is built into the monetary policy strategy. For example, the US central bank has initiated a review of its monetary policy framework where one alternative being discussed intensively is a target for average inflation. 10 The idea is that the participants in the economy understand that, if a shock to the economy pushes inflation down, the central bank will, in the future, compensate (make up) for this by allowing slightly higher inflation later on. If prices are sluggish, there will not be such great incentive to cut prices as a response to the shock and inflation will therefore become higher. Such a monetary policy strategy could, therefore, theoretically give better automatic stabilisation of shocks and lead to less of a need to adjust the interest rate, something that is particularly interesting when the policy rate is close to its lower bound.

It is often difficult to distinguish between what is monetary policy and what is  8 [25]  financial stability policy, both in purely practical terms in the current situation, and on a more theoretical level. 8  Central banks supported market functioning The next group of problems is related to market functioning. Some markets for important securities can become so uncertain during a severe crisis that no private investor is prepared to buy these assets. Or else the uncertainty on the financial markets can lead to severe fluctuations in the compensation the financial agents require to invest in risky assets (risk premiums). This could in turn threaten the monetary policy transmission mechanism. This type of problem affected the very important US housing bonds during the financial crisis. To avoid a substantial credit crunch for US households, this market needed to keep functioning. During one period, therefore, the Federal Reserve purchased a very large share of the newly issued housing bonds, which had the desired effect – the market stabilised. Sometimes all it takes is for the central bank to make it clear that it will act if problems arise. The actual signal may then be enough to calm the market. Sometimes a facility will do the job. If the market is worried it will be difficult to temporarily convert an asset into liquidity on private markets (for instance through repos), the central bank’s facility may be sufficient to calm the situation.