samchain/econo-pairs-v1 huggingface dataset:
The last time petroleum investment showed a strong increase, in 1997/1998, the rise was considerably sharper than had been assumed. At the same time, the rest of the Norwegian economy was experiencing an upturn. The unexpected increase in petroleum investment contributed to substantially stronger-than-projected economic growth. If oil prices rise further or remain at the current high level for a long period, petroleum investment may again reinforce the cyclical upturn more than projected. Monetary policy The analyses in Inflation Report 2/05 are based on a baseline scenario where the key rate shadows forward interest rates up to 2007, and then rises somewhat more rapidly. The krone exchange rate is assumed to shadow the forward exchange rate, which remains broadly unchanged over the next three years. Capacity utilisation in the Norwegian economy is expected to increase this year and next and exceed its normal level. There are prospects that inflation will gradually pick up and be close to 2½ per cent at the three-year horizon. Since the publication of the June Inflation Report, prices for domestically produced consumer goods have risen slightly less than expected. At the same time, oil prices have been somewhat higher than assumed. Energy prices are pushing up consumer price inflation. 4/7  New information since the publication of the June Inflation Report does not provide grounds for changing the assessment of developments in the real economy.

This may involve a risk that capacity utilisation will remain high and that inflation will eventually overshoot the target. Household debt has increased at a faster pace than income over the past ten years. Norges Bank’s calculations indicate that debt growth may largely be due to the sharp rise in house prices in recent years. Higher house prices have a fairly prolonged effect on household debt growth. Even though the rise in house prices is expected to slow, credit growth will therefore remain high for a fairly long period. Given the assumptions underlying our projections, it is likely that debt will continue to grow at a faster pace than disposable income through the entire projection period. The household debt burden has increased over the past year and is now record high. The interest rate burden is, however, relatively low. A normalisation of interest rates will increase households’ net interest expenses, but according to the projections the interest burden will not be higher than it was at the end of the 1990s. Households will be vulnerable if unexpected disturbances result in higher-thanexpected interest rates. Challenges ahead Petroleum activities give us an economic base that is not available to many other countries. But it also presents us with many challenges. 5/7  First, our petroleum resources are part of our national wealth. When oil is extracted and sold, petroleum wealth is transformed into financial assets. This wealth belongs not only to our generation, but also to future generations.
The potential production frontier shows alternative combinations for the production of sheltered goods and goods exposed to international competition when labour and capital are used efficiently. Consumers prefer a combination of sheltered and traded goods. In equilibrium, the relative price of sheltered goods in terms of traded goods is the price that clears the markets. In this simple one-period model, the trade balance is zero. Furthermore, the relative price is equal to the real exchange rate. Introducing petroleum revenues, which can be seen as a cost-free foreign exchange gift, separates the consumption possibility frontier from potential production in mainland Norway. Consumers can increase their consumption of traded goods without producing more. However, with a higher income level, demand for sheltered goods also increases. In order to facilitate the transfer of resources, wages are bid up and prices for sheltered goods increase. Consequently, the real exchange rate appreciates. The new equilibrium implies that consumption and production of sheltered goods have risen. Production of traded goods has declined, while the consumption of these goods has increased due to the foreign exchange gift. Structural changes – i.e. the transfer of resources from production of exposed to sheltered goods – are amplified when petroleum revenue spending increases substantially. And the challenges resulting from these structural changes would be amplified if petroleum revenue spending varied from one period to another.

5  The path was not entirely untrodden: in the 1990s, Japan was facing weak growth and the threat of deflation in the wake of its asset price crash, even though the Bank of Japan (BoJ) had slashed rates to zero. The BoJ thus started to experiment with unconventional monetary policy measures. 2  BIS central bankers’ speeches  certain period of time. Both of these tools are intended to lower long-term borrowing rates and, through that channel, to stimulate economic activity. The SNB is a bit of a special case. In summer 2011, Switzerland was confronted with an excessive appreciation of the Swiss franc as a result of the euro area crisis, an appreciation that continued to the point where it posed a serious threat to price stability. As a result, we resorted to a range of unconventional tools to increase Swiss franc liquidity and – eventually – introduced an exchange rate floor of 1.20 Swiss franc per euro in September 2011. So, are central banks doing too much in terms of unconventional policy? The answer is – again – “no”, but less categorically than in the case of conventional policies. On the one hand, being the only ones left to react to weak economies and high unemployment forced many central banks to take further action – action that was justified by their mandates. On the other hand, the jury is still out on the overall assessment of unconventional policies.
It remains as strong as ever. Despite the difficult conditions and the unusual challenges that have characterized the last two years, all important monetary policy decisions have been reached by consensus, a consensus which emerged from in-depth and intensive analyses and discussions. The current course of Swiss monetary policy, particularly the decision to introduce a minimum exchange rate, is the result of a deep-rooted consensus of this kind. The SNB will thus continue to enforce the minimum rate with the utmost determination and remains prepared to buy foreign currency in unlimited quantities. The Swiss franc is still highly valued, but it should depreciate further in the future. Let me now return to my topic. I will start by presenting general pre-crisis assessments of the state of monetary policy and will then examine how central banks’ policies may have contributed to the financial crisis. After considering these issues, I will be in position to assess the alternative courses of action available to central banks in general, and the SNB in particular, to derive principles for a future in which financial and price stability are better reconciled with one another. I. The Great Moderation: a success of monetary policy? Let me start by considering the state of many developed economies, to include Switzerland, before the onset of the crisis. In contrast with the episodes of high inflation which prevailed in the 1970’s, rates of inflation were subsequently stable and low for some twenty years.

Jean-Pierre Danthine: Reconciling price and financial stability Speech by Mr Jean-Pierre Danthine, Member of the Governing Board of the Swiss National Bank, at the University of Zurich, Zurich, 24 January 2012. *  *  *  I would like to thank Pierre Monnin, Anna Faber and Adriel Jost for their invaluable support in drafting this paper. I also thank Rita Kobel, Peter Kuster, Reto Nyfeller, Dewet Moser and Angelo Ranaldo for their insightful comments. It is a great pleasure for me to be with you today at the University of Zurich to discuss an issue that the recent financial crisis has exposed as a major challenge to central banks; namely how they can best contribute to ensuring financial stability while pursuing price stability as a primary mandate.1 Before I do this, however, let me say a few words on another dimension of stability: institutional stability. As you are all aware, the Swiss National Bank (SNB) recently experienced an unfortunate event which has few, if any, historical precedents. On a personal level, I deeply regret the resignation of Philipp Hildebrand, under whose leadership the SNB steered Swiss monetary policy over the last two years. On an institutional level, however, I would like to stress that the SNB’s institutional strength is the result of teamwork, not only between the board members, but across the Bank as a whole. The SNB’s culture is one of excellence and of service. It is the product of a long history and many generations of leaders.
As you know, I never comment on what my colleagues have said. On the basis of our decision, which was taken by the Governing Council with an overwhelming majority, I would like to emphasise the following points. First, we are totally independent of governments and pressure groups of any kind. It is not by chance that we have guaranteed price stability, but by taking decisions which have pleased neither governments nor lobby groups. Second, our mandate is price stability. From 1999 to the present we have delivered average annual inflation of 1.98% for 330 million European citizens. We are unswervingly committed to price stability. Third, we re-absorb all of the liquidity that is injected through our interventions. We are not printing money and there is no change to monetary policy. Fourth, the aim of our interventions is to enable certain markets to function more normally, in order to ensure the correct transmission of our monetary policy, which is unchanged. Fifth, we have taken note of the decision by governments not only to strictly comply with their undertakings to reduce deficits, but also, on the part of a number of them, to step up their budgetary consolidation efforts. For us, this is absolutely of the essence. BIS Review 76/2010  3  Does the situation of the Spanish banks concern you? I have no particular comments at this stage. On the international level, prudential supervision by the Banco de España has always been regarded as rigorous, particularly with its concept of dynamic provisioning.

Even where national authorities had been created, there was uncertainty over the right way to assess risks, which instruments to use and how to calibrate interventions. Moreover, there was a real risk of inaction bias since the costs of macroprudential policy are visible and are felt immediately, but the benefits accrue over time and are difficult to quantify.5 Given this somewhat tentative start for macroprudential policy in Europe, substantial progress 1/4  BIS central bankers' speeches  has been made over the past eight years. Macroprudential authorities now exist in all but one Member State. The gaps in our framework and knowledge have slowly been filled through research and experience. The ESRB has played an integral part in this process.6 The framework has also helped to counter the risk of inaction bias. National macroprudential authorities have mandates and legal tools to act. At the European level, the ESRB also holds a mandate to monitor risks and vulnerabilities and has a number of legal instruments at its disposal. It can, for example, issue warnings if it has identified a significant risk to financial stability, as well as recommendations setting out remedial steps to be taken on an act-or-explain basis. National authorities have certainly demonstrated their willingness to use the tools at their disposal. Most EU countries currently have at least one measure in place to address risks in the residential property sector and half have measures to tackle risks in commercial real estate.
Accordingly, it is important to advance in the discussion of legislative initiatives that help to strengthen the banking system’s capitalization, in line with the efforts that other countries have made to converge with Basel III requirements (figure 17). In summary, although in this Financial Stability Report we conclude that there are no fundamental changes in our risk outlook, we do see that local agents’ financial strength has diminished steadily during the past few years due to weakening economic activity. Household and corporate debt has increased moderately but persistently, non-financial firms’ profitability has fallen together with the limited expansion of output—reducing their capacity to deal with greater financial expenses—and the banks’ profits and capitalization have dwindled. Although the lower interest rates have helped these developments not to translate into financial stress, the agents’ capacity to deal with an adverse external scenario is now lower than it was a few years ago, especially if such scenario causes further economic slowdown. In this context, it is very important that some of the trends of recent quarters, such as the lower growth in corporate debt and higher bank capitalization, consolidate. I would like to end this presentation—my first as the Governor of the Central Bank of Chile— by sharing some thoughts about the achievements and challenges facing the institution I have now begun to lead. Final thoughts Let me begin by stressing that I have been handed an institution that can show great strengths and unquestionable achievements.

Equally important are the risks associated with the circulation of banknotes and coins and the lesser value means of payment that are part of the day to day lives of every Chilean. The autonomy of the Central Bank also means that the quality of its institutional management is a special responsibility. Although it is not part of the State’s administration, it is equally owned by every Chilean, who rightfully demand an efficient use of their resources. To undertake all these tasks, it is important to recognize that trust in a central bank also rests on its prudence. An institution responsible for price stability and financial stability cannot afford to improvise or experiment. In this regard, it is important to acknowledge the potential, but also the limits of monetary policy. In particular, we must reaffirm that it does not have the capacity to affect the mediumterm trends of the economy and not even completely eliminate the cyclical variations that affect it. Our main contribution to the country’s development is, in line with the mandate of our Organic Law, to keep inflation low and stable, reducing economic volatility and financial risks, with the expectation that by reducing uncertainty we will facilitate investment, employment and consumption decisions that shorten the cycle. The right mix of prudence and determination is not easy to calibrate. Prudence is necessary to correctly assess the implications of changes in the economic environment, resisting the temptation to look for the easy way out, which can prove very costly in the medium term.
The system now processes over 4 million payments on average each month, representing roughly 1,000 billion euros daily, of which 43% are cross-border payments. These figures show a significant increase in the use of real-time gross settlements in the EU since the introduction of the euro;  •  the smooth functioning of the entire integrated organisation of the Eurosystem, in which the decision-making centre works in constant contact with the national central banks on the implementation of operations. The reasons for this achievement lie primarily with the in-depth preparatory work conducted over several years by the central banking community and private financial market operators. b/ Second, together with many other factors, this technical and operational success has contributed to the high credibility of the single monetary policy, which is guaranteed, inter alia, by the independence of the European Central Bank and of the national central banks. The Eurosystem has inherited the store of confidence that was built up over several decades by the national central banks in charge of the most reputable currencies. In France for example, the last  BIS Review 11/2001  1  opinion survey indicated that 80% of French citizens trust the Banque de France. And the level of confidence in Spain towards the Banco de Espana, or in the other countries participating in the euro area towards their respective NCB, is certainly as high. Moreover, and contrary to what is often said, the monetary union of Europe is not starting from scratch.

This, in conjunction with poor corporate governance ended up in large stocks of non-performing loans which, together with governments’ implicit guarantees, created a sizeable “contingent fiscal liability”;  í  the other main explanation views the self-fulfilling pessimism of international lenders as the root cause of the crisis. This analysis puts emphasis on panic and on herd behaviour of foreign investors and lenders. The crisis is the result of shortcomings in the international capital markets and their vulnerability to sudden changes in market sentiment. According to this view, the macroeconomic and microeconomic imbalances were not severe enough to warrant a financial crisis of the magnitude that took place in 1997 and 1998. I do not consider these two explanations as competing or conflicting but see them rather as complementary. In short, the first approach focuses on what is wrong in crisis countries, the second on what is wrong in international financial markets and international financial institutions that “govern” global finance. 1  BIS Review 81/1999  The severity of the Asian’s financial crisis, the speed with which it spread and the shortcomings of the international response have contributed to a wide-ranging debate on the basic rules and institutions that govern global finance. Recent efforts to improve the global financial architecture began at the Halifax Summit of the G7 leaders in 1995.
On the contrary, we closely follow developments in the housing market. Figure 4. House prices and lending to households, annual percentage change 16  16  12  12  8  8  4  4  0  0  -4  -4  -8  -8 House prices  -12  -12  Household lending  -16  -16 91  93  95  97  99  01  03  05  07  09  Source: Statistics Sweden  In the long term it is hardly sustainable that house prices should continue to rise as quickly as they have done since the mid-1990s (Figure 4). Since 1996 house prices have increased by around 8 per cent a year. But in the shorter term, our assessment is that there is no reason for the Riksbank to give greater consideration to house prices than we already do in our forecasts for the economy. Let me just add something that may not arise very often in the general debate on these issues. Although interest expenditure is one of the factors that has significance for the way house prices develop, the responsibility for sustainable growth with regard to lending and house prices is largely beyond the Riksbank’s control. Monetary policy can probably only function as a complement to effective regulation and supervision. And there are many factors that are important in ensuring a balanced development in the housing market.

The efforts seem to have already paid off – the year 2013 marked a turnaround in Romania’s economic development: economic growth of 3.5% driven mostly by robust export and industrial output on the supply side; a small current account deficit; historically low inflation; while the fiscal deficit was kept well below 3%. And I have every reason to believe that Romania will see further growth in the years to come. And that, unlike in the pre-crisis period, this time sustainability will be the name of the game, as hopefully we all have learned our lessons from our previous mistakes. As they say, no one really learns but from his own mistakes…  BIS central bankers’ speeches  1  Talking about sustainable economic growth, one needs to put things into perspective in order to ascertain whether the economy is on the right track. This means that short-term policies must be harmonised with the long-term vision and goals. Euro adoption could serve as such a long-term goal. And Romania has chosen to use it as an anchor. Let me say a few words about this subject. In the post-crisis period, all non-euro area EU countries in Central and Eastern Europe with floating exchange rate regimes (Czech Republic, Hungary, Poland and Romania), as well as Bulgaria, shifted to a wait-and-see approach as regards euro adoption, even though, in some of them, Maastricht criteria were already fulfilled or within reach.
In particular, we will be able to look across groups to ensure that they have adequate resources, even if risks are being transferred to group companies located in countries with different regulatory regimes, such as offshore centres. And we will be alert to regulatory arbitrage, such as where risk transfer through reinsurance is negated through sliding scale commissions. The financial crisis, and the post-crisis regulatory reform agenda, have taught us many lessons. The business models of insurers and banks are different, but those lessons have informed and will continue to inform how we manage the implementation of Solvency II. Perhaps most salient for this conference, is the difficult lessons we have learned from experience with insurers and banks when it comes to the use of internal models. Many of you in this room will be acutely aware of the demands of the Solvency II model approval process. This rigour has a purpose. Use of internal models can be an effective means of harnessing the better knowledge a firm has of its own risk profile to set risk-sensitive capital requirements. But there are limits to our ability to model capital requirements.

Particularly worrisome is the further increase of inactivity of women as the region faces shrinking working age population, due to the two factors: first, adverse demographics, and second, immigration. We all well know that the labor force is one of the key determinants of economic growth. There are empirical studies that show that higher inclusion of women can bring a number of benefits. And not only for women, but for the whole society. Higher inclusion of women is associated with 10% higher GDP growth in advanced economies and 30% in developing economies. Focusing more closely on the Western Balkans, a World Bank study estimates that 2/3  BIS central bankers' speeches  countries in the region each year lose on average 18% of their total GDP, due to the gender gaps in the labor market. And about two thirds of the cost of lost GDP or income in the society can be explained by the lower participation of women. Higher growth can stem not only from the higher quantity of labor force that we need in this new environment, but also, and even more importantly, from the new quality that it can bring on board from different skills and psychological virtues that women bring in, such as: higher risk aversion, thoroughness, pragmatism, empathy. Further, more diversified institutional environment tend to lead to more optimal and effective decision making. For example, Credit Suisse analysis finds that Fortune 500 companies with female representation perform better than those without.