samchain/econo-pairs-v1 huggingface dataset:
In its conduct of monetary policy, Norges Bank places emphasis on satisfying the fundamental preconditions for exchange rate stability against the euro: Instruments must be oriented with a view to reducing price and cost inflation to the level aimed at by the European Central Bank (ECB). At the same time, monetary policy must not in itself contribute to deflationary recessions as this may weaken confidence in the krone. The Regulation’s requirement with regard to returning the krone exchange rate to its initial range may - if stretched - imply too strong an element of parity policy. For example, in a scenario with a sharp and prolonged fall in oil prices, the krone exchange rate may remain outside the initial range for a longer period. If Norges Bank responds by raising interest rates in order to force the krone back to its initial range, monetary policy could trigger a recession of a type that will undermine confidence in the krone. Similarly, after an appreciation a situation may arise whereby interest rates must be set at such a low level to return the krone exchange rate to the initial range that this results in higher inflation. The basis for exchange rate stability is weakened in both cases. Hence, Norges Bank cannot with open eyes orient policy instruments in such a way that they fuel inflation or lead to a deflationary recession.

The economic downturn and unemployment which often follow when the bubble bursts will primarily affect the most vulnerable segment of the labour force and have very negative distributional effects. Monetary policy cannot and shall not steer price developments in the housing market or other asset markets, but a monetary policy that inspires confidence will curb wealth effects because the potential for the emergence of bubbles is reduced. Nominal stability is the best contribution monetary policy can make to the distribution of income and wealth. Interplay between economic policy components - the role of monetary policy The basis for achieving stable economic growth is created through a successful interplay between the various components of economic policy, ie between fiscal policy, monetary policy, the system for income settlements and other measures aimed at improving the functioning of the economy - often referred to as structural policy. The Norwegian economy is vulnerable to abrupt shifts in the global economy. We cannot fully shield ourselves against external shocks, but we can curb the effects to ensure that economic developments are optimal in the long term. Fiscal policy in Norway has had an important role in stabilising demand and production. The Petroleum Fund shelters the mainland economy from the effects of oil price fluctuations to some extent. Developments in the real economy are of importance to price and cost inflation and hence for Norges Bank’s setting of interest rates.
Compared with the June Report, only minor revisions have been made to GDP growth in Sweden up to 2002. Neither has the inflation forecast been altered more than marginally. That future inflation is not higher, even though the economic upswing is continuing and the forecast horizon has been shifted ahead, is partly a consequence of the amount of unutilised resources now being considered to be somewhat larger. Wage increases are judged to be somewhat lower, accompanied by marginally higher productivity growth. In the short run, however, inflation is expected to be somewhat higher than forecast in June, mainly because the oil price is higher and the exchange rate somewhat weaker. While the oil price and exchange rate assessments have been revised in the light of developments in the summer and early autumn, the forecast of inflation one to two years ahead still counts on a successive appreciation of the krona and a gradual fall in the price of oil. However, the uncertainty is considerable. A higher oil price and a weaker exchange rate could lead to inflation rising more rapidly than assumed in the main scenario. The assumption of a somewhat lower rate of wage increases is supported by, for example, wage outcomes to date this year as well as inflation expectations that are relatively low and stable. Still, there is considered to be some risk, albeit relatively small, of a development of wages that is considerably stronger, for example as a result of negotiators’ demands for parity and compensation.

However, the very fact that interest rates must – eventually – rise again implies that credit expansion based on low interest rates cannot be viewed as a shift to a permanent higher credit level. At higher interest rates, credit demand will decline once again. To the extent that the credit expansion was driven by miscalculations on credit affordability, this may even lead to a crisis. 3.4. Behavioral biases  The latter remark leads to a fourth potential explanation, that is, credit expansion driven by behavioral biases. As highlighted by Hyman Minsky7, the credit cycle appears to be driven by “waves of optimistic and pessimistic sentiment”8. In an upswing, expectations about future developments may turn erratically exuberant. Observing a long period of price increases, investors tend to believe that new circumstances justify the perpetuation of the upward trend and act on this belief. Overconfident lenders and borrowers are increasingly ready to take higher risks. Ever increasing prices become a necessary condition to enable borrowers to service their debts. Then the tide turns. A few investors fail to meet their obligations, confidence crumbles, asset prices stop increasing or begin to fall and optimism turns into a wave of pessimism. Clearly, credit expansion driven by such erratic beliefs is a cyclical phenomenon and no viable explanation for a sustainable increase in the credit-to-GDP ratio. As we have seen, there are various potential explanations for an increase in the credit-toGDP ratio, some suggesting a permanent, structural increase in this ratio, others hinting at a temporary, cyclical upswing.
To the extent that the UK’s industry may be relatively efficient and competitive, we may even have fewer people engaged at this end of the business than some other countries. While in 2003 the share of Gross Value Added from financial intermediation was a little higher for the UK than for France, Japan or Germany (5%, 7% and 4% respectively) there was not that big a gap and the figures for the US were about the same as the UK (8.5%). It is London’s position in the wholesale and international markets that is special and it is harder to get a handle on that. A recent estimate put the total number employed in “City” jobs at around 320,000. 4 There are other significant European centres in Paris and Frankfurt and, within the UK, in Edinburgh for instance. But London is estimated to have 75% of UK's wholesale financial jobs and to be the largest European centre for wholesale finance with 35% of the jobs (up from 30% in 2000). So by this measure those working in “City” represent a little more than 1% of the UK workforce. While this is estimated to be twice the equivalent proportion for Germany and three times that of France, we should not get it out of perspective. The economic geography of financial centres Geographical concentrations, clusters, are common in many industries. In some cases they reflect the availability of raw materials or power sources. Elsewhere the underlying reasons are not so obvious.

And within that the notional amount of credit derivatives traded in London multiplied by more than 100 between 1997 and 2006. While the US remains the main centre of the hedge fund sector, at the latest count twelve of the world’s largest 50 hedge funds were based in London, as against only three in 2002. London has a share of nearly 80% of the European based hedge fund market, up from around 70% in 2002. The UK private equity market has been another prominent area of growth recently. UK private equity funds raised in 2005 were over £ billion, around twice the size of the previous peak in 2001, with the UK private equity industry accounting for over 50% of the total European market. The drivers of the City’s recent growth In part the City’s recent growth reflects – as it did a century ago – a rapid growth in international trade and financial liberalisation. Globalisation has brought an expansion of world imports by 180% since 1990 compared with an 80% increase in world GDP. Progressive upgradings of a number of emerging economies have broadened and deepened international links. Higher savings in the emerging Asian economies, in particular, have combined with demographic change in the West to increase demand for long-term savings instruments and a fall in their yields. 10 All these trends taken together have led to a period since 2002 of unusually high returns for holders of many financial assets and the explosive growth in new products and markets.
Exports continue to grow, deflation has moderated, and unemployment appears to have peaked. Less easy to quantify is the change in mood, although it is, as I have said, shown to some extent in the activities in the markets, as well as in consumer spending. What is, I think, clear to every observer, however cynical, is that there has been, among all sectors of the community, a marked and quite sudden turnaround, from pessimism bordering on despair to a cheerful if cautious optimism. This comes as a huge relief after the gloom and despondency of the second quarter. Important initiatives, such as CEPA and the relaxation of restrictions on individual travellers from the Mainland, have undoubtedly helped to stimulate confidence. So too have the general - though by no means conclusive - signals that the world economy is also in better shape. It is also very likely that the recent surge in markets and the gradual growth in economic activity are part of a longer-term trend, going on for at least a year now, in which there have been underlying improvements in the Hong Kong economy. Deflation, under the discipline of the Link, has made Hong Kong more competitive: it is now a less expensive city in which to do business or take a holiday. The real effective exchange rate for the Hong Kong dollar - which is a true measure of the competitiveness of an economy - has declined by 24% over the past five years.

In my view, the role is quite straightforward: it is to sustain a monetary and banking environment that is conducive to resolving the economic and fiscal problems that face our community - not just in the public sector, but also in businesses and households. This is not the passive, static role that it may seem, as the maintenance of a rule-based monetary system in the form of the Link misleadingly suggests. Indeed, there is the scope - and often the need - for an active and imaginative use of financial, supervisory, communication and other skills. The degree of openness and the relatively small size of Hong Kong's financial system, against the background of globalisation, mean that the maintenance of monetary and banking stability is a particularly difficult task. There is also the requirement, implicit in the Basic Law, to look ahead, and in particular, to develop the financial infrastructure that will secure Hong Kong's position as an international financial centre and provide it with the means to build on that position. And there are other important tasks, such as seeking to help the Government in its efforts to contain the fiscal deficit by achieving a favourable return on the fiscal reserves deposited with the Exchange Fund - subject always to meeting the other investment objectives of the Fund. All of these tasks present challenges to keep me and my colleagues busy enough. But there have also been suggestions that the HKMA should take further steps to help stimulate growth.
Some investors may also have misinterpreted the risk dimensions covered by a rating. Against this background there is probably scope to improve the information content of ratings and to make the monitoring process more transparent. It also needs to be investigated further to what extent conflicts of interest may have arisen for rating agencies in their credit risk assessment of structured credit instruments. Several international fora are currently looking at those issues. Fourth, the turmoil has revealed some challenges for the liquidity management of banks. BIS Review 137/2007  1  Banks, including those in continental Europe, have increasingly relied on secured funding, both via securitisation and off-balance sheet vehicles. This has rendered them more vulnerable to a sudden disruption of structured credit markets. Let me recall that the regulatory framework requires EU banks to have policies and procedures for the measurement and management of net funding positions on an ongoing and forward-looking basis and have in place contingency funding plans. In this context, recent events have demonstrated that banks need to further strengthen their liquidity risk stress-tests, encompassing for example scenarios such as a protracted closure of a broad range of securitisation markets and the drawing of contingent liquidity obligations by commercial paper programmes. Moreover, those elements should also be incorporated into their contingency funding plans. The ECB, together with the ESCB Banking Supervision Committee, is carrying out work on this important topic.

The four firms met at the Federal Reserve at 7:00 p.m. A draft term sheet was reviewed which provided detail with respect to the consortium approach. The terms and conditions were debated, altered in some places, and ultimately refined so that the four firms could present it to a wider group. Although Federal Reserve officials were present at the meeting, we did not participate in the discussion about terms and conditions. At about 8:30 p.m., a meeting of a wider group involving 13 firms began. Meanwhile, some representatives of the Core Group called Long-Term Capital to discuss the terms and conditions of the consortium approach. Federal Reserve officials did not participate in any conversations with Long-Term Capital regarding the terms and conditions. In the meeting with the wider group, Peter Fisher explained the importance of avoiding a disorderly close-out of Long-Term Capital’s positions. He also underscored the desirability of parallel efforts to resolve the problem. It was agreed that the group would reconvene at 10:00 a.m. the following morning. It was clear to everyone that time was of the essence. I returned to New York from London around midnight. During the early morning hours, I called various foreign central bank officials to inform them of the situation. At about 9:30 a.m. my colleagues and I met with the Core Group to review the status of the situation.
Instead, one equation for households (H) and one for firms (F) are needed: lending itH  it   tH ( ztH ) ,  itFlending  it   tF ( ztF ) . If we suspect that a bubble is building up in one of the two markets, measures can be aimed at just that market. This is not possible with the policy rate, as there only exists one policy rate in the economy. In other words, both equations have the same “lever”. Regulations or charges can also be adjusted on the basis of the aggregated credit growth and, in this case, the effect would be rather like an interest rate increase. However, with regulations, it is also possible to aim measures in a specific direction and only increase the interest rate margin for the market in which credit growth is deemed to constitute a problem. This strategy allows us to avoid tightening credit growth for the other sector which does not form a risk, which – all other things being equal – reduces the costs of leaning against the wind. One condition for the implementation of such targeted measures is, of course, that the rules governing when action is to be taken are based on developments in the individual sectors. Of course, the time-varied application of such regulation would not be unproblematic. As in the case of leaning with the policy rate, any imbalance must be identified at a sufficiently early stage.

Thomas Jordan: Financial stability developments of relevance Introductory remarks by Mr Thomas Jordan, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Berne, 15 December 2011. *  *  *  In my introductory remarks today, I would like to look at the most important developments in the area of financial stability that have taken place since the publication of our most recent Financial Stability Report in June of this year. Our latest analysis reaffirms the need for action which we had already identified back then. Firstly, in view of the high level of risk associated with the current global economic environment, the big banks must – to the extent possible – push quickly ahead with the expansion of their loss-absorbing capital base. Secondly, given the medium-term risks in the real estate market, which are particularly affecting domestically focused banks, it is vital that an effective macroprudential policy framework be developed. International developments of relevance for financial stability The global economic and financial conditions which affect the stability of the Swiss financial system worsened in the second half of 2011. As my colleague, Philipp Hildebrand, has already mentioned, the outlook for global growth is currently subdued. A major reason for this is the sovereign debt crisis which has been building up in peripheral euro area countries for the last two years or so and is now threatening to spill over into the core countries of the euro area.
In this latter context banks have traditionally played a key role in financing the corporate and household sectors, earning their return by gathering information about, and assessing and monitoring, the creditworthiness of private sector borrowers, especially those who do not or cannot cost-effectively provide the comprehensive, public, information that would allow them to access the capital markets. Much of the banks’ lending, while nominally at short-term, for example in the form of callable overdrafts, is in practice illiquid and non-marketable. So a further  BIS Review 13/1997  -2-  distinctive characteristic of banks is that they typically function with a mismatch between their highly liquid liabilities and their less liquid, non-marketable, assets. There is no need, I think, to labour the importance to the economy as a whole of these distinctive banking functions, or the damage that would be caused if the banks’ role - as the repository of liquidity, as the core payments mechanism, and as the principal source of finance to at least a large part of the economy - were seriously interrupted. That in itself helps to explain the public interest in the effective functioning of the banking system, or why banks collectively have been regarded as special. But beyond that, the distinctive banking characteristics that I have described, of liquid liabilities and less liquid assets, give rise to special needs. Given the banks’ role in the payments system they may need late access to liquidity to square their positions vis-à-vis each other after executing payments instructions on behalf of their customers.

At the same time, economists are increasingly being given the opportunity to help governments design new policies and regulations2. And, in this respect, we should bear in mind that carefully designed scientific experiments have been an engine of economic, technological, and social progress. Social experiments have become crucial to ensure that governments implement policies with a proven record of success3, that are based on evidence and not on prejudice or intuition. We are now in a position to create a virtuous circle that begins with the allocation of resources to the compilation of data and the provision of access to them, continues with the evaluation of public policies, and ends with the application of the findings to the design of policies. However, unlike medical trials, social experiments – large-scale, publicly funded randomised controlled trials – have not become the gold standard for the evaluation of public policy interventions. 1  Einar, L. y Levin, J. (2014) "The data revolution and Economic Analysis", Working Paper 19035 National Bureau of Economic Research (NBER) 2  Duflo, E (2017)"The Economist as Plumber" Richard T. Ely Lecture, American Economic review: Papers and Proceedings 2017, 107(5):1-26 3  Heffetz, O y List, J (2021) "Who's afraid of evidence-based Policymaking?" Artefactual Field Experiments 00739, The Field Experiments Website 1  In many cases, critics argue that such experiments are inherently unfair. Ironically, this resistance to experimentation could eventually lead to less progress and even less fairness.
As in the case of the financial market turbulence of May 2006, the latest correction on the stock market has been negotiated without any major difficulties. The positive underlying sentiment in the markets and the appetite for high-risk investments remained for the most part unabated. Not least, this is probably attributable to the extensive investment requirements worldwide and the associated high level of liquidity on the part of the investors. This large requirement for high-risk investments originates from the dynamic growth rate that has prevailed for some time now, a high savings ratio worldwide, the globalisation and liberalisation of the financial markets as well as the increasingly professionalised asset management by private, government and institutional investors. The durability of the valuation of high-risk investments is extremely difficult to assess, since valuations depend on subjective expectations of future earnings, discount rates and volatilities. The latest turbulence is a salutary reminder of the risks, however. In the past, risk premiums at levels lower than ever recorded before, rapidly rising prices for many high-risk investment categories and hectic activity in the area of company acquisitions have been signs of developments that were not sustainable in the long run. Therefore, market participants should not allow themselves to be distracted by the short-lived nature of financial market setbacks so far and simply extrapolate the favourable market trends of the past few years into the future.

For the gold sales it was planning, the SNB was allocated a quota not claimed by other central banks that were party to the agreement of 2004. The SNB has chosen an approach for its gold sales that will avoid market unrest, with regular sales transactions. The Swiss National Bank holds currency reserves in the form of foreign currency and gold, thereby ensuring that it has room for manoeuvre in its monetary policy at all times. As a result of the sharp rise in the price of gold, the proportion of the currency reserves held as gold has increased by about a quarter since mid 2005, from 33% to the current level of 42%. The purpose of the SNB's gold sales is to rebalance the composition of currency reserves with respect to its monetary policy requirements. Moreover, by reducing its gold reserves and increasing its foreign exchange reserves, the overall risk on SNB assets will decline. Once the sales have been completed, the Swiss National Bank's gold holdings will amount to some 1,040 tonnes. 2. Swiss Interbank Clearing (SIC) to celebrate its 20th anniversary  Over the next few days, the Swiss Interbank Clearing System SIC will celebrate its 20th anniversary. In 1987, the introduction of the SIC payment system represented a revolution for Swiss payment transactions. SIC was one of the first payment systems in the world of the type known as Real Time Gross Settlement (RTGS).