samchain/econo-pairs-v1 huggingface dataset:
Norges Bank agreed with the Ministry of Finance, referring to the effect on competition. 13  See “Can the authorities manage crises in the financial system?” by the Governor Stefan Ingves, Sveriges Riksbank, www.riksbank.se. 14  In the crisis simulation exercise in autumn 2007, all the Nordic countries participated. In addition, the Baltic central banks were observers. 6  BIS Review 110/2008  demanding. Perhaps above all, the exercises show that we must double our efforts to prevent any further crises in the Nordic banking system. It is also possible that the authorities' hands are tied to a further extent that during the Nordic banking crisis under the EU rules on state aid. It is my impression that the rules are practiced in a way that limits the scope for recovering government funds. If this is the case, government will be more reluctant to intervene in the event of a crisis. Norway has a generous guarantee scheme. Deposits are guaranteed up to NOK 2 million per depositor per bank – an amount that is substantially higher than the statutory minimum of EUR 20 000 in the EU, i.e. about NOK 160 000. Of the other Nordic countries, Denmark has the highest amount at around NOK 325 000. In the UK, the amount has recently been raised to a good NOK 350 000, and a further increase to about NOK 500 000 has been proposed. Other EU countries generally have lower guaranteed amounts.

Notwithstanding some recent signs of improvement in the economic outlook, it is premature to declare the financial crisis over. From today’s perspective, the need for enhanced credit support remains. Therefore, for the time being central bank liquidity is likely to remain abundant. This does not mean, however, that the broader concept of liquidity in terms of monetary aggregates grows strongly. And it is this broader concept, not central bank liquidity itself, which is related to inflationary pressures over the medium term. Of course, central bank credit and broader monetary aggregates are linked over time. In a modern banking system, and in normal circumstances, central bank credit is largely used by banks – in the form of required reserves – to create bank credit, and expand deposits and broad money aggregates. So, an increased provision of central bank credit can lead – more or less automatically – to an increase in broad money. In current conditions, that link has been weakened, however. Today, banks – in the aggregate – tend to hold part of the central bank credit that they obtain in our refinancing operations not as a reserve against an expansion of loans and deposits, but in the form of  8  BIS Review 103/2009  excess reserves deposited with the Eurosystem. This attenuates the automatic link between the provision of central bank liquidity and broad money. And, as a consequence, it attenuates the inflationary potential of the Eurosystem’s outstanding credit to banks.
However, for the sake of clarity, I also intend to now run through some of the important information that has been received since the monetary policy meeting on 12 February. However, I will not be saying anything about what the new information means to future interest rate developments. This is something that we Executive Board members will have to decide at our next monetary policy meeting. The material for the February decision In the Monetary Policy Report published in February an account is given of the way in which the majority of the Executive Board view the prospects for inflation and development of the real economy in Sweden and abroad during the coming years. The monetary policy considerations are also shown and the assessments are based on the forecast for the repo rate described in the report. The main scenario of the report forecasts continued high cost pressures in the Swedish economy and weaker economic growth both abroad and in Sweden, albeit still good. It can be added that the forecast had changed only marginally since the December Monetary Policy Update. Growth in the United States and the euro area is expected to be considerably lower than last year and also lower than the trend development. Even in the world as a whole growth is expected to slow but remain good since emerging markets such as China and India are expected to continue to grow at a rapid rate.

Both regimes may be prone to fluctuations in interest rates in response to shocks, but with inflation targeting, which requires a flexible exchange rate even if managed to a degree, the central bank has a measure of discretion in the magnitude and timing of its response, whereas, with a fixed rate, defensive reactions must be more immediate and may hence be potentially sharper. Hong Kong context Recent criticisms of Hong Kong's currency board have focused mainly on two aspects - the implications for the competitiveness of Hong Kong vis-a-vis other economies and the problems of living with falling price levels. The remainder of this paper is directed mostly at these issues. Competitiveness Changes in competitiveness are typically measured by comparing movements in some appropriate measure of costs or prices at home and abroad, and adjusting for shifts in exchange rates. The  BIS Review 17/2002  1  1  measure of competitiveness thus produced is commonly referred to as the real exchange rate. A 2 stronger real rate means higher relative prices and therefore implies weaker competitiveness. I detect two common misconceptions about the real exchange rate. Influencing the real rate The first is the belief that the real rate is amenable to control by the central bank or government and that the chosen regime for the nominal exchange rate is therefore an important determinant of the real rate. Let me explain what I believe to be some flaws in this view.
Page 7  Table 1: Changes in Global R* from structural and empirical models Structural model  Baseline Range  1985–2015  -1.9  (-3.3, -1.1)  Productivity growth -0.9  (-1.2, -0.3)  Population growth  -0.1  (-0.5, -0.0)  Longevity  -1.0  (-1.8, -0.8)  Empirical model  Median  5%–95%  1985–2015  -1.9  (-2.4, -1.3)  Of which:  Note: For the structural model, the table reports the estimate of Global R* in the baseline simulation, together with the minimum and maximum across the sensitivity tests. For the empirical model, the table reports the median estimates of Global R* together with the 95 percent posterior intervals. Source: Cesa-Bianchi et al. (2022). Table 1 shows that, in the structural model, Global R* falls markedly between 1985 and 2015. The total decline of 1.9 percentage points is driven by the response to the five global trends mentioned earlier. [9] The baseline structural model simulation matches the median change over the same period from the statistical model in the earlier chart (reported in the last row of the table), though both are subject to a wide range of uncertainty. [10] With respect to the main drivers of this decline, two factors – population ageing and a slowdown in productivity growth – play the largest roles in explaining the dynamics of Global R*. The productivity growth slowdown across advanced economies has been discussed extensively in existing work.

Indeed, there has been a strong trend in the composition of investment by firms, moving away from physical capital, such as buildings and machinery, towards what is called intangible capital, such as research and development, software, databases and branding. Measuring investment in intangible assets is challenging. So, although national accounts methodologies are continually improving, existing approaches might be missing part of firms’ investment. That would result in an over-estimation of the observed return on capital and, in turn, the wedge. [21] This issue can be partly addressed using newly-available data covering a broader range of intangible assets that are currently not included in the national accounts. These data can be used to construct more comprehensive measures of net investment rates and the wedge between the return on capital and risk-free rates. Adjusting for intangibles, by re-running the regressions on a measure of the wedge constructed using the new data, reduces the size of the missing-investment puzzle as shown in Chart 8. It  Page 13  shows the deviation of the observed investment rate from the rate predicted by its estimated historical relationship with the wedge: what I have identified as the puzzle. The chart compares this deviation when the historical relationship is estimated using two alternative data sources. The orange line shows the case when unadjusted data are used and the blue line shows the case when the relationship is estimated using data adjusted for intangibles. When the adjusted data are used, the gap is smaller throughout the period and almost disappears in recent years.
The case of Citibank which is on the verge of selling Salomon Smith Barney illustrates this trend. As far as governance and risk management are concerned, major improvements are needed, and I think, are on their way. It is certainly true that regulation needs adjustments and that a more macro-financial angle is requested in order to avoid, for example, procyclicality. However, the first responsibility lies with financial institutions themselves that did not develop enough scrutiny in risks analysis, were too much focused on short terms profits, did not integrate the cost of risks premium and liquidity, and in some circumstances, did not fully understand the likely financial consequences of their behaviour. Therefore, strong improvement is needed in terms of risk management and governance at the highest level of financial institutions. In terms of disclosure and communication policy, the crisis showed the importance of transparency. Financial institutions made a lot of efforts in this respect in recent months. They should continue to do so. Authorities will monitor progress on that matter. Public and private strategic improvements will help overcome the financial crisis. Beyond that, there is a growing consensus around the need for a fundamental review of the  BIS Review 9/2009  3  foundations of financial regulation. Heads of States of the G20 have mandated changes in that matter and set principles to that purpose. The crisis has also rekindled concerns about the structure of supervision.

Hence the successive waves of depreciations of structured products, imposed by accounting rules, with these depreciations in turn fuelling doubts about counterparty risks and solvency, liquidity constraints and further falls in asset prices. The second reality is that recent financial innovation served mainly to increase leverage in the system. Signs of this are many. Banks’ balance sheets became overstretched. Off-balance sheet vehicles without any equity proliferated. Monoline insurers guaranteed volumes of  BIS Review 9/2009  1  structured products way beyond what their equity position could bear. As you know, leverage works both ways. It amplifies gains as well as losses. Amplified gains took the form of the US property boom. Amplified losses are with us now. The whole deleveraging process still underway has meant, since its start, that financial institutions unable to raise capital had to suffer very considerable depreciations on some products, which in some instance wiped out their net worth, bringing them to failure. Against this background, what about French banks? Of course, they are not immune to the crisis. Direct or indirect exposures to toxic assets implied that they too had to record writedowns; sometimes substantial ones. The liquidity shortage is also hurting and the prolonged market disruptions have raised their refinancing costs. That said, our banks are sound and robust and still exhibit high solvency ratios, above minimum prudential requirements. Overall, they remain profitable. This is so not least because they benefit from regular sources of income.
Broader explanation of the reasons for passing this decision is the following: 1)  Negative effects of the world crisis over the world economy continue to grow. The latest IMF projections point out that the world growth will switch towards the negative zone thus in 2009 world’s GDP will drop between -0.5 and -1.0 percent. This will represent the first negative GDP growth rate within last 60 years. The reduction of the world’s GDP below the potential, together with the downward trends of food and energy prices, by themselves not only eliminate the inflationary pressures, but also create deflationary risks, especially in the developed economies. Unfortunately, continuous revisions of the projections of the world‘s growth are further towards deeper recession. In the less developed economies, including ours, the external sector risks appear as most essential, where the large reduction of the external demand as well as the lower inflows and/or larger net foreign capital outflows create serious pressures over the value of national currencies. 2)  Macedonian economy, as we stated, is under a strong influence by the global macroeconomic developments. As almost everywhere in the world in our case as well the inflationary pressures fade and the economic growth decelerates because of the reduced external demand, contracted and more expensive financing sources and increased negative expectations of economic agents. The external sector imposes itself as a main problem of our macroeconomic policy.

Second, the objective of the IMF should be to find ways of making the least costly fiscal adjustment in terms of growth, while strengthening its recommendations on the prevention of this type of shock. This brings me to focus on the second type of objectives: the objectives of prevention and better resilience to terms of trade shocks. The first priority to improve prevention and resilience is to create sufficient countercyclical fiscal leeway, by limiting public debt, or even by accumulating budgetary reserves. In this regard, controlling the public payroll, which is the most dynamic item of expenditure in times of growth in many poor and vulnerable countries, as well as improving the efficiency of public spending, are essential. Consideration should also be given to setting up fiscal rules on the basis of deficits excluding commodity-related receipts, adopting stricter debt ceilings for the public sector and creating an adequate savings buffer for countercyclical purposes, taking into account the scale and length of commodity price cycles. In countries exporting non-renewable commodities, in particular oil, this savings buffer must be even more substantial since it must aim to cover not only the decline in the value of receipts but also part of the decline in the value of reserves. The second priority concerns the diversification of the economy. Industrial policies based on sectoral subsidies or tax expenditures are not viable in the event of a fall in commodity prices and make the policy of diversification pro cyclical.
The answer is not necessarily a binary “yes” or “no” outcome each time but involves a review of whether there are sufficient safeguards and conflict-mitigants incorporated into the exchange’s governance, organisation structure and including its reward and recognition system in relation to the SRO function. 20. I will highlight our recent review in the three areas of listing, member supervision and market surveillance. Much work has been done to enhance the exchange’s role around listings. We believe that SGX – as the only securities exchange in Singapore – remains an appropriate listing authority. SGX has raised its admission criteria, and enhanced the governance process by setting up three new independent listings committees to complement SGX’s listing and disciplinary processes. The committees comprise a diverse mix of reputable, independent and experienced individuals to represent both investor and public interest. We believe these are  BIS central bankers’ speeches  3  positive developments and we should allow these committees to carry out their respective oversight functions. 21. However, we have also determined that there is scope to recalibrate the responsibilities of the exchange vis-à-vis the MAS in the areas of member supervision and market surveillance. The impetus for such a recalibration is not because we think that there is material or potential conflict-of-interest risk. Rather, as Singapore’s financial landscape features more than one exchange, it is not efficient to have each exchange carry out similar supervisory roles of common members. Member supervision 22.

This is partly because the listings function is the more visible part of the SRO to investors and listed companies. But in fact, the SRO function is much broader. Besides functioning as a listing authority, the SGX’s SRO role also encompasses a market surveillance function to uphold the integrity of the market, and a member supervision function to ensure participants’ adherence to trading and clearing rules. 14. So removing the SRO function from the SGX – as some have suggested – could mean that the exchange will not need to undertake market surveillance; nor to regulate members for compliance with rules of the exchange. Others have suggested removing only the listing authority function from SGX. But the flip side is that this risks losing the synergy of its regulatory function with its other roles pertaining to the development of a viable and credible marketplace; and creates ambiguity as to who oversees proper conduct of listed companies – the separate listing authority or the exchange. 2  BIS central bankers’ speeches  15. It is worth noting that SGX’s SRO function is neither a new invention nor “uniquely Singapore”. Exchange self-regulation has a long history in financial markets and in many established markets. Most, if not all exchanges globally, perform a varying range of SRO functions.
Many markets have only a small number of companies competing, partly because production requires large investments or because there are other barriers to establishment on the market. Nor are there unlimited entrepreneurial skills. It is costly for consumers to obtain information, which means that no one has total information. On this type of market, prices deviate from marginal costs and not all consumers meet the same price levels. Similar products can fetch different prices because they have different brand names or are sold in different regions. These companies will normally make a profit. Companies that operate on a market with imperfect competition also tend to be less cost-conscious. In a market with imperfect competition, price changes involve a more long drawn out process. The effect of changes in marginal costs also depends on factors such as demand and the initial profit margin. Most empirical studies indicate that tougher competition (measured as the degree of company concentration) leads to a more rapid price adjustment after a shock, but there are also studies that 1  Sara Tägtström, of the Monetary Policy Department, has contributed to the writing of this speech. BIS Review 25/2002  1  2  have reached the opposite conclusion. In a market with imperfect competition, expectations play an important role. If companies believe that a change in marginal costs is only temporary, they will be less likely to allow it to affect their prices, while more permanent changes will have a quicker impact.

[17] The experience from these two crisis episodes shows that central bank liquidity provision can stimulate market functioning and lower money market rate dispersion. [18] During the pandemic, this was also clearly visible, as exemplified by the impact of our measures on term money market and commercial paper rates. [19]  After 2015, excess liquidity was primarily driven by the Eurosystem’s large-scale asset purchases. Although excess liquidity reached new highs with the implementation of asset purchases and financial stress remained at relatively low levels, the dispersion index rose substantially in 2015 and 2016. One factor that could cause such a rise is an uneven distribution of excess liquidity across countries or across banks and non-banks, similar to what had happened in US money markets in September 2019. [20] However, in recent years, the divergence across overnight money market rates was primarily driven by repo rates secured by high-quality collateral. Research suggests that this increase in the dispersion index can be linked to scarcity effects, as asset purchases and the increased regulatory demand for safe government bonds withdrew collateral assets from the financial system. [21] To alleviate these scarcity effects, the Eurosystem introduced the securities lending programme in April 2015. However, the programme was initially only sparsely used. Only when the ECB introduced the cashcollateral option in December 2016, securities lending increased and contributed to lowering the dispersion of money market rates, thus supporting monetary policy transmission (Slide 7).
As I indicated earlier, that represents a significant boost to real disposable income for households. How much this energy windfall boosts consumption will depend, though, on how much is spent versus saved. Turning to the negatives, the support to growth from rapidly rising U.S. oil production almost certainly will fade away. U.S. oil production has been rising rapidly for several years, due largely to new technology that has expanded the amount of oil that can be recovered from existing wells and that has facilitated shale oil production by fracking. Now, with prices dramatically lower, U.S. oil exploration and drilling activity is falling off very sharply. This will exert a meaningful drag on economic activity. Another significant shock is the nearly 15 percent appreciation of the exchange value of the dollar since mid-2014. Such an appreciation makes U.S. exports more expensive and imports more competitive. My staff’s analysis concludes that an appreciation of this magnitude would, all else equal, reduce real GDP growth by about 0.6 percentage point over this year. Turning to inflation, the data continue to come in below the FOMC’s objective of a 2 percent annualized rate for the personal consumption expenditures (PCE) deflator. The twelve-month change of the total PCE deflator was 0.3 percent in February, with the core PCE deflator at 1.4 percent. Despite this, my expectation is that inflation will begin to firm later this year. In particular, most of the impact from the decline in energy prices that has weighed down overall inflation is likely over.

Emerging markets in Asia and Latin America are now showing fairly good growth, while growth in the industrial nations in Europe and North America remains low. The fact that different parts of the world economy are developing fairly differently creates problems that have significance for monetary policy. The low short-term interest rates and good access to liquidity in Europe and North America make it attractive to borrow in the short term to invest in assets with a high expected yield. There have been reports of large capital inflows to several of the emerging markets. These inflows tend to push up asset prices – for instance, house prices and share prices – in several Asian countries. At the same time, the experiences gained from the financial crisis over the past year and during the Asian crisis of the 1990s indicate that these flows can change direction abruptly, which creates a risk of substantial falls in asset prices in the future. It is difficult to say what the consequences of the capital flows we are now seeing will be for the development of the world economy in the period ahead, but there is a risk that imbalances will be generated. Development in the economies that are now growing fairly quickly may be affected in the future either by tendencies towards asset bubbles or appreciating currencies, which would have a negative impact on their competitiveness.