samchain/econo-pairs-v1 huggingface dataset:
This is also an indication that changes in competitiveness over time depend on real economic factors and aspects of wage formation and cannot be controlled by monetary policy. Household demand will probably be the most important driving force in the Norwegian economy in the period ahead. Private consumption has a considerable impact on overall demand and activity and accounts for 60 per cent of mainland GDP. There are prospects of strong growth in private consumption. The interest rate reductions are contributing to strong growth in disposable income. When households’ interest-bearing debt is substantially larger than their interest-bearing assets, a fall in interest rates will reduce household interest expenses. The magnitude of this effect depends on the impact of the key rate on deposit and lending rates to households and on the proportion of the debt that is tied to floating rate loan agreements. If we base our assumptions on Norges Bank’s figures for household net lending for 2002, interest expenses could be reduced by NOK 12-15 billion on an annual basis. This corresponds to a rise in disposable income of just below 2 per cent. Because the fall in interest rates has occurred gradually through 2003, some of this effect will become evident in 2004 if interest rates remain low. Long-term interest rates are also historically low, enabling households to fix their borrowing rate for a few years at a level that is relatively low compared with the interest rate a few years ago.

The Government has included a further increase in the deficit, measured as above, in the National Budget for 2004. However, the budget balance figures are influenced by transactions that have little effect on demand. For 2003 and 2004 as a whole, fiscal policy will probably generate some stimulus to activity in the Norwegian economy. As cyclical developments will probably stabilise, our forecast is based on the technical assumption that the structural deficit will not increase in 2005 and 2006. This would also seem to be consistent with the practical application of the fiscal rule, cf. the discussion by the Ministry of Finance in the National Budget for 2004. According to the fiscal policy guideline, the use of petroleum revenues over the central government budget shall over time correspond to the expected real return on the Government Petroleum Fund. At the same time, fiscal policy shall contribute to smoothing fluctuations in output and employment. Since the introduction of the fiscal policy guideline in spring 2001, the scope for manoeuvre in fiscal policy has been reduced. The projection for the Petroleum Fund’s expected real return has been revised down substantially since the Revised National Budget for 2001. Wage growth in the years 1998-2003 indicates that the degree of labour shortages in all sectors of the labour market plays an important role in wage formation.
Third, the value of their fixedincome financial exposures (e.g. bonds, especially those with longer maturities) has declined. How different banks and financial systems position themselves against these risks, which has become an investor focal point, will determine how resilient they are. Thus, in an environment as uncertain as the current one, including in relation to the degree of future monetary policy tightening, banks ought to implement a prudent provisioning and capital planning policy, and carefully preserve their current levels of resilience. As part of this, banks should regularly adjust their own capital projections under different scenarios. Such scenarios should include prolonged periods of severe stress, including interest rate stress. Banks should also ensure good visibility of their near-term liquidity risks and have contingency plans to tackle these risks. And, of course, the legislative implementation of the outstanding Basel III standards in a full, timely and consistent manner in the EU is a critical step towards safeguarding the resilience of our banking system. In addition, allow me to stress the need to analyse in depth the recent developments from the public authorities’ perspective.

11.05.2023  The financial system: current situation and challenges IE University – Banco de España – Federal Reserve Bank of Saint Louis Conference: Current Challenges in Economics & Finance Madrid Pablo Hernández de Cos Governor  Thank you very much to the organisers for inviting me to this conference. Today, I will be addressing you in my capacity as Chair of the Advisory Technical Committee of the European Systemic Risk Board (ESRB),1 a role which brings a deep EU-oriented perspective, complementary to my regular responsibilities as Governor of the Banco de España and member of the Governing Council of the European Central Bank. The macrofinancial risk landscape and the banking sector The macrofinancial risk landscape has changed in recent months and continues to evolve. In a relatively short period of time we have moved from low inflation and low interest rates to persistent high inflation and rising interest rates. This shift poses new and enhanced risks to financial stability. To heighten awareness of these risks the ESRB adopted a Warning2 on vulnerabilities in the EU financial system in September 2022. This is the first general warning (i.e. addressed to all EU Member States) that has been issued by the ESRB since its establishment in 2010. Over the last seven months some economic developments have surprised to the upside, while some vulnerabilities timely identified in the Warning have come to the fore.
There was a strongly increasing trend in delinquency between 2004 and 2014, with measured delinquency rising from an overall rate of less than 10 percent in 2004 to 17 percent in 2014. The measured delinquency rate on student debt is currently the highest of any consumer debt product, although for most of the last decade credit card delinquency was even higher. Nonetheless, the measured delinquency rate is somewhat misleading, and the effective delinquency rate as we define below, on student debt is even higher. As noted above, in 2014 the measured delinquency rate among the 43 million borrowers was 17 percent. But many of the remaining 83 percent in fact were not paying down their loan balances. While 37 percent did reduce their balance from the previous quarter by at least one dollar, 13 percent of borrowers had the same balance as the previous quarter. A full 33 percent of borrowers actually saw an increase in their balance. In other words, 46 percent of borrowers were neither delinquent nor paying down their loans. Those borrowers whose balances did not decline are likely not yet in the repayment cycle, meaning that they were either still in school, in deferral, or in a forbearance period delaying their regular payments. This group may also include some borrowers who participate in income-based repayment plans and make only small payments, which are often insufficient to cover the accumulated interest.

This is because either the desired policy rate is sufficiently below the ELB or the central bank has committed to keep 3/5  BIS central bankers' speeches  interest rates unchanged through forward guidance. However, conflicts of objectives between fiscal and monetary policies may arise in the future. The ongoing accumulation of public debt and the large expansion of central banks’ balance sheets increase the likelihood of such conflicts. On the one hand, large fiscal stimuli for too long may lead to concerns about debt sustainability and, via the expectation of future fiscal tightening, offsetting the favorable effects on output and inflation. On the other hand, central banks should keep the risks taken in their balance sheets under control to avoid threatening their own independence. Indeed, low inflation today is not a guarantee that it will remain low forever. They must keep a sound balance sheet with adequate capital in order to keep full control of their monetary stance all along the road. The key question is then how to reconcile the benefits of a mutual reinforcement of monetary policy and fiscal policy in the short-term with the challenges of keeping inflation under control and public debt to sustainable levels in the long-term. There is no magic answer to this question but I will try to sketch here some basic principles that are in my opinion ingredients of a sound policymix recipe: 1. Each authority should be guided by and stick to its mandate.
2  BIS Review 94/2010  As for the banking system, we have built up sufficient bank capital, partly benefited from our prudent risk management. Our supervision developments have also come a long way. With intensive and continuous legal and regulatory reforms since the 1997 Asian crisis, our financial system is now resilient and in a good position to support growth. On this note, let me also say that the Bank of Thailand holds regular meetings with representatives from both Thai and Foreign Banks Associations, as well as meetings with their top management to discuss current issues and policy implications. This dialogue helps us to continuously strengthen risk management such that the financial system will remain in a strong position to serve the real economy efficiently. Third, thanks partly to export diversification over the years, Thai export is now recovering strongly despite a considerable shock to trades. A decade ago, Thailand relied mostly on G3 countries as our export market, but now, ASEAN market as well as BRIC (i.e., Brazil, Russia, India, and China) and other new destinations are emerging strongly and help diversify risk from the G3 countries. We also did not get much impact from the European debt crisis since our exports to PIIGS countries (i.e., Portugal, Ireland, Italy, Greece, and Spain) account for only 1.8 percent of total exports. Despite an impressive export growth now, Thailand needs to become more resilient against greater competition by an increasing number of emerging markets.

First, in light of the changing global financial landscape and regulatory environment, continuing to strengthen the financial system is an important agenda for both the authorities and the financial sector. The financial system must remain focused on risk management, as well as be competitive and responsive to customers’ demand for access, and more variety of products and services. Such a financial system is necessary to efficiently support and grow with the economy. Second, given the changing structure of the Thai population, fiscal reform is vital to address the ageing society. At the moment, only one-sixth of the labor force is in the tax base. Tax revenue thus accounts for only 16 percent of GDP, half of that of developed countries. So improving the tax restructure is one of the priorities to be addressed to enhance fiscal sustainability as well as overall social welfare of the country. Third, we need to continue to elevate Thailand’s competitiveness by enhancing our productivity, both in industries and agriculture. Productivity gain in agriculture, which accounts for the majority of population, in particular, will also help increase farm income and reduce poverty. Improvement in productivity, of course, involves a whole range of issues from more effective training, education, investment in research and development, to infrastructure investment – all of which require long-term commitment of both the public and private sectors. Ladies and Gentlemen, I am pleased to say that these medium-term priorities are well-recognized by both the authorities and the private sector.
I should hasten to add that not everyone has shared equally in this otherwise strong economy. The unevenness of the recovery is evident in my travels around the Second District, where, for example, the economic recovery in upstate New York continues to lag the nation as a whole. So, while the national economy is in good shape, longer-run economic challenges have meant that not all Americans have benefited from the improvement in the economy. Beyond supporting a strong overall economy, monetary policy has limited reach into these issues, which are best addressed through other means, such as investments in education, workforce development, and economic development. Three Stages of Monetary Policy Normalization In thinking about the outlook for monetary policy, it’s useful to remember how we got to where we are today. The financial crisis and the Great Recession led the FOMC to lower the federal funds rate target to near zero and to keep it there for seven years. This lengthy spell at zero reflected the long shadow of the crisis—evident in the subsequent subdued growth rate and inflation rate —and the need for the economy to convalesce after enormous trauma. With the unemployment rate still very high and inflation low, the Federal Reserve embarked on a long journey through terra incognita of unconventional monetary policy actions, including large-scale asset purchases and forward guidance on the future path of interest rates. We weren’t alone: Indeed, some central banks across the globe went even further down the road of unconventional policies.

As this new era of RMB internationalisation has just begun, we still have a long, long way to go as the offshore RMB markets continue to grow and mature, while the capital account controls in Mainland China are being gradually relaxed or lifted. In the early stages of this new era, the primary task of Hong Kong is to develop the CNH market and at the same time work with other financial centres such as Sydney, London or Paris to grow the pie, leading to win-win outcomes. As we move into the more mature stages of the internationalisation of RMB, the available policy headroom should be quite ample for the markets to flourish. At that time, the 2nd and 3rd elements of PIPs, i.e. Infrastructure and People/Products, would matter a great deal more if Hong Kong wishes to retain its competitive edge over the others. It will be up to our industry, financial firms and market practitioners to out compete the other centres in terms of product innovation and distribution of various financial products and services that best serve the needs of their clients. I am sure that the TMA, with the support of its members and the financial industry, will continue to play a leading role in developing the professionalism of the practitioners and in facilitating product innovation. Thank you. BIS central bankers’ speeches  3  4  BIS central bankers’ speeches  BIS central bankers’ speeches  5  6  BIS central bankers’ speeches
It is still not wholly clear - to me at least - quite why the storm struck suddenly when it did. Most crises of this sort have their origins in some evident macro-economic policy failure. At least in hindsight there are usually fairly clear tell-tale signs of expanding fiscal deficits and/or lax monetary policies, classically accompanied by evidence of imbalance in the form of accelerating inflation or a rapidly deteriorating balance of payments. There were such signs, perhaps most notably in Thailand; but they were not for the most part particularly pronounced in Asia. Some of you perhaps understand better than I do why the initial infection proved to be so contagious. It was after all your money! In fact through the first half of the 1990’s, and in some cases for much longer, the countries in question had been remarkably successful. They attracted, by their very success, huge inflows of capital from the rest of the world, where yields had fallen, in the hope of achieving higher returns. There is no question that this capital inflow made a very big contribution to the remarkable economic expansion in Asia and hence to the global economy; but with the benefit of hindsight, the accelerating scale of the inflow, and particularly the forms that it took, became an important part of the problem. It was not all in the end productively employed.

But, given the extent of the loss of confidence in the Asian case, organising private financial support meant in practice persuading existing creditors that their assets would be better protected if they were prepared to leave them in place, especially if other major private creditors agreed to do the same, and if official support were made available in parallel. But in this case, too, difficult judgements have to be made. There is a danger that, if private creditors have in effect to be coerced into staying put, they will immediately cut their positions elsewhere, while they still could, thereby adding to the international contagion. In fact, in the critically important case - because of its size - of Korea, the promise of massive official support failed to restore market confidence. And when it became apparent that the official bilateral financing was in practice available only as the very last resort we - again with the central banks as the immediate intermediaries - had to turn to the commercial bank lenders in the major creditor countries and persuade them to extend the maturity of their loans. Like most U-turns, it was a dangerous moment. But the banks’ constructive response went a long way to stabilising the immediate situation in relation to Korea - and thereby to the region as a whole. The creditor banks are also now in negotiation with Indonesia’s bank and commercial non-bank debtors.
The primary difference between Norway and countries which have chosen to base their monetary policy regime on an inflation target is to be found in the interaction between monetary policy and fiscal policy. The role of the Petroleum Fund The Norwegian economy is small and open. Fluctuations in oil prices and oil revenues pose a considerable challenge to Norwegian economic policy. The Government Petroleum Fund plays an important role in stabilising developments in the mainland economy. A large portion of the central government’s oil and gas revenues is invested abroad through the Petroleum Fund. Balance in the Norwegian krone market is maintained by investing foreign exchange earnings abroad, thereby curbing the effect of fluctuations in oil prices on the krone exchange rate. Some of the petroleum revenues are used to finance central government budget expenditure. The portion used by oil companies in Norway, partly to finance investment, also has an effect on the mainland economy. The portion of central government oil revenues that is not used domestically is credited to the Petroleum Fund’s account in Norges Bank. Norges Bank acquires foreign exchange equivalent to the allocation to the Petroleum Fund. Foreign exchange earnings from the state’s direct financial interest in oil activities (SDFI) are transferred directly to Norges Bank, while the remainder is purchased in the market. The Petroleum Fund’s capital, as well as the return on this capital, is invested abroad.

It is essential to realise that for the most part, the financial system is not an end in itself but a means to an end and the measure of the success of the financial system must relate to its success in accomplishing broader societal functions. Innovations in the financial system that help it perform these tasks better and at lower cost almost surely lead to increased societal well-being, and to the extent that our GDP measures capture these benefits, in higher measured growth. Notwithstanding the benefits of innovation, it is important to note that the opening up to new activities and products, particularly the expansion of the credit portfolio, brings in a myriad of new risks associated with the new activities. Studies have shown that increasing financial innovation and deepening of financial markets brings with it challenges and risks, which if not well addressed, can threaten the health of the financial system and may cause havoc to the stability of a financial system. 2  BIS central bankers’ speeches  4.0  The role of the Bank of Zambia in promoting innovation and competition  The Bank of Zambia (BoZ) acknowledges that a stable, sound and efficient financial sector has to be underpinned by infrastructure development. The BoZ achieves this by creating an enabling environment through the legal and regulatory frameworks that promote financial systems stability and development.
The agreement primarily contained important rules on the system of negotiating, such as rules to reduce the risk of periods with no agreement and to reduce the risk of conflicts breaking out. Similar bargaining agreements were signed between the parties in the central government, local and regional government sectors and for white collar workers in commerce. These agreements stipulated that industry should lead the way in wage agreements in relation to other sectors of the economy, an idea that originated in the EFO model designed by the Swedish Trade Union Confederation (LO), the Confederation of Swedish Enterprise 2 (SAF) and the Swedish Confederation of Professional Employees (TCO) at the end of the 1960s. There was also a development towards a more decentralised and individualised wage formation, which has had a subduing effect on wages. Many agreements gave the local social partners the freedom to determine and distribute the wage scope themselves. However, the local negotiating scope was often limited to some extent by block rules regarding the size of this scope and guarantees for a minimum wage increase for each individual. The 1998 bargaining rounds marked a break in trend with regard to the rate of wage increase. The annual nominal rate fell from approximately 8 per cent during the period 1970-1997 to around 3.5 per cent during the period 1998-2000. The outcome may be regarded as moderate taking into account the rapid recovery in the economy and the large increase in employment that took place during the period covered by the agreement.

In countries where the use of the euro as a medium of exchange is highly significant, such as the Central and Eastern European Countries, 60% to 80% of exports and imports were settled in euro. B  The euro contributes to the stabilization of exchange rate regimes and financial systems  The euro is an instrument for the diversification of foreign exchange reserves •  According to the latest available data from the Bank for International Settlements (BIS), the euro is the second reserve currency after the US dollar (19.7% of the total amount in 2003 compared with 63.8% for the dollar) but the share of the euro has increased significantly (it stood at 12.6% in 1999). This is an important factor of protection for many countries with regard to strong exchange rate fluctuations because it allows public investors to diversify their reserves assets. Moreover, it constitutes a stabilizing factor for the international monetary and financial system as a whole. The euro is a factor of stability for exchange rate regimes •  In 52 countries or territories, the euro serves as the anchor of exchange rate policies or as the sole reference currency or as part of a currency basket. This mainly concerns the countries that have trade or institutional arrangements with the euro area (acceding countries, accession countries, the Balkans, North Africa and the Franc zone). These exchange rate regimes are the result of unilateral decisions that do not involve the Eurosystem.