samchain/econo-pairs-v1 huggingface dataset:
If we look far enough ahead, however, we will be able to cover a smaller share of our imports using current petroleum revenues and drawings on the Petroleum Fund. Competitiveness will then have to be improved.5 In March 2004, the nominal krone exchange rate was at its weakest level since summer 2001.6 Since spring 2004, the krone has appreciated. The appreciation of the krone through 2004 was undesirable because it delayed the pick-up in inflation. It also came as somewhat unexpected. The krone was partly influenced by persistenly low international interest rates. In retrospect, it would also appear that high prices for oil and gas and other export goods have contributed to a fairly strong krone. Higher oil prices entail higher current-account surpluses and higher income for oil companies and the state. Oil companies’ additional income and surpluses will largely be channelled abroad. The additional petroleum revenues accruing to the state will essentially be invested abroad through the Government Petroleum Fund. The capital outflows through the oil companies and the Government Petroleum Fund contribute both to keeping down the value of the krone and to stabilising it. Even though surpluses deriving from petroleum activity are largely invested abroad, more oil money has been put into circulation in the Norwegian economy than earlier. Petroleum investment show a pronounced increase this year. Moreover, government petroleum revenue spending has increased in recent years. There are indications that the oil cash flows into the Norwegian economy may diminish in the period ahead.

Secondly, banks should strengthen their capital and the liabilities susceptible to be used in the event of bail-ins in order to face on an optimal footing the regulatory challenges still pending, particularly in respect of resolution. Thirdly, the financial sector should strive in particular to enhance its reputation and to introduce measures mitigating the risk of misconduct. Fourthly, banks should address the challenge of increasing their profitability, although this cannot be at the expense of an undue easing of lending standards. Finally, and clearly not least importantly, the new technological environment, while a major challenge for the sector (in particular because of the emergence of new competitors and services), is also an opportunity that Spanish banks should take advantage of. Allow me to conclude by pointing out that, with a view to furthering the current growth phase and entrenching the Spanish economy’s potential, it is essential in my opinion to harness the still-favourable cyclical juncture to create budgetary space ahead of future recessions and introduce reforms to take over from the expansionary demand-side policies of recent years. It is likewise vital to address the challenges the banking sector has still to face, such as the reduction in non-earning assets, the improvement of its capital structure and profitability, the strengthening of its reputation and the optimal harnessing of technological developments.
This requires many steps, including systemic risk oversight and solving the so-called too-big-to-fail problem. In this respect, we need to think hard about what we can do to prevent the type of speculative bubbles that occurred from causing so much damage in the future. In particular, are there macro prudential tools that the Federal Reserve and other regulators can use to limit leverage and speculation and thus prevent the type of asset price booms and busts that have proved so troublesome? Second, we need viable exit strategies from this recent period of monetary and fiscal policy stimulus. On the monetary policy side, we have been working hard to ensure that we have the tools in place so that we can be effective in tightening monetary policy when the time is right, even with an enlarged balance sheet. Third, we need a rebalancing of global economic growth. That means a smaller share of consumption relative to GDP in the United States and offsetting shifts in Asia. Circumstances have improved considerably from what they were a year ago. But job creation is still much too slow and we have much to do on the regulatory side to make our financial system more resilient and robust. Thank you very much for your kind attention. I would be happy to take a few questions. 5  Financial Market Turmoil: The Federal Reserve and the Challenges Ahead, William C. Dudley. Federal Reserve Bank of New York, March 6, 2010.

Thomas Jordan: Monetary policy and financial markets – what may we expect in 2008? Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the Messe Fonds 2008, Zurich, 31 January 2008. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The problems linked to the US housing and mortgage market dominated international financial markets in 2007. Despite the difficulties on the financial markets in the second half of the year, the global economy was robust last year. For 2008, the outlook for global economic growth has deteriorated and become more uncertain. The turbulence in the financial sector led to a considerable increase in risk premiums in 2007. In the past few years, these premiums had been very low, and even after the recent increase they remain modest by historic standards. Due to the higher level of economic uncertainty in 2008, the process of adjustment in risk premiums looks set to continue in various markets. From the current standpoint, the Swiss National Bank anticipates a somewhat slower pace of growth for Switzerland in 2008, although the economy should remain robust. However, the risks have increased in the recent period. As a result of the oil price hikes, inflation in Switzerland is likely to rise above 2% in the first half of 2008. Despite raised stock exchange volatility, the SNB does not judge that any additional actions are necessary at present.
The uncertainties associated with such reactions make it very difficult for policy-makers to calibrate the appropriate budgetary path. There is a risk of a cliff effect, beyond which market participants tend to loose confidence in the ability of sovereign states to repay their debts and regain it only after a very long and painful adjustment. The contagion effects we observed last spring suggest that this risk should not be underestimated, raising a series of issues that have not yet been considered in  1  Leeper, E., “Monetary Science, Fiscal Alchemy”, presented at the Economic Policy Symposium organised by the Reserve Bank of Kansas City, August 26–28 2010. BIS Review 126/2010  1  full, even in the literature. What kind of scenarios could develop if the sovereign debts of several advanced economies are no longer perceived as risk-free assets? How do financial markets work in the absence of a risk-free rate? Second, the asymmetric distribution of public debt across the world economy has important implications for the adjustment of global imbalances. On the one hand, there is the risk that the protracted and excessive public and external indebtedness of advanced economies could ultimately prove to be – once again – unsustainable. On the other, if debtor countries adjust internal imbalances and lift national savings, who will assume the role of consumer of last resort once played by the United States? This is an oft-posed question in international policy debates. Let me address these two issues in reverse order.

The regional tradition is poor, of little inheritance in institutions, market rule and behaviour, and financial intermediation. However, today, about 15 years after the big collapse of the communist regime it seems that South East European Countries (SEEC) have been engaged in an irreversible process of their stabilization and integration with the rest of Europe. 2  BIS Review 44/2005
Although synchronised movements in bond rates is unsurprising given the high degree of substitutability between relatively safe sovereign bonds, synchronisation at the short end of the yield curve is not warranted if cyclical positions differ. Such concerns prompted the Monetary Policy Committee of the Bank of England and the Governing Council of the European Central Bank to push back against the recent upward movements in the short end of the yield curve in our respective policy statements in July. The MPC took this further at our latest meeting by offering explicit forward guidance on the future path of policy rates and asset purchases. The guidance is similar to that already adopted by the Federal Open Market Committee, but differing in details that reflect the different position of the UK economy. In particular, we signalled our intention not to countenance tightening policy until unemployment has fallen to at least 7%. In addition, while our guidance is subject to two price stability overrides similar to those of the Fed relating to internal and external  BIS central bankers’ speeches  3  measures of inflation expectations, we have also added a financial stability override determined by our Financial Policy Committee. This guidance is intended primarily to clarify our reaction function and thus make policy more effective, rather than to inject additional stimulus by pre-committing to a time-inconsistent “lower for longer” policy path in the manner of Woodford (2012).

But when the reaction function is well understood, market interest rates will instead respond earlier as the economic data unfolds. Although there are benefits to the market more accurately anticipating a given policy decision, because the data are likely to evolve in an imperfectly predictable fashion, so will market interest rates and asset prices. In sum, then, exit will be challenging, both for the central banks in the countries withdrawing stimulus and those in other countries that will be affected by the international spillovers. But we do have the luxury of knowing that it will come eventually and can plan for it appropriately. And when it does come, it should be against the background of a markedly better economic outlook in the advanced economies. That itself would be a most welcome change. Thank you! References Committee on International Economic Policy and Reform (2011). Rethinking Central Banking, Brookings Institute, Washington DC. Fratzscher, Marcel, Marco Lo Duca and Roland Straub (2013). “On the International Spillovers of US Quantitative Easing”, European Central Bank Working Paper #1557. King, Mervyn (2009). Speech to Confederation of British Industry, Nottingham, 20 January. He, Dong and Robert McCauley (2013). “Transmitting Global Liquidity to East Asia: Policy Rates, Bond Yields, Currencies and Dollar Credit”, mimeo, Bank for International Settlements. Moore, Jeffrey, Sunwoo Nam, Myeongguk Suh, and Alexander Tepper, (2013). “Estimating the Impacts of the U.S. LSAPs on Emerging Market Economies’ Local Currency Bond Markets”, Federal Reserve Bank of New York Staff Report #595. 4  BIS central bankers’ speeches  Neely, Christopher (2010).
As I looked at the faces of the students gathered in that vast auditorium, I could see in their eyes a reflection of the gloom and doom of the time. Here is what I told these young investors that dark morning: “… the current economic and financial predicament represents a potential gold mine rather than a minefield. Historically, great investors have made their money by climbing a wall of worry rather than letting a woeful consensus cow them. … Your job as investors is … to ferret out from the generalmarket malaise good financial and business operators whose franchises and prospects are overdiscounted at current prices. Were I you … I would be licking my chops at the opportunities that always abound in times of adversity. … There are a lot of dollar bills that can be found in the debris of the current markets that can be picked up for nickels and dimes.” Of course, I would not mention this today had I been wrong! Currently, the right hand side of the balance sheet of most any well-managed market-traded business is chock-full of restructured, cheap debt and leaner common stock, while the left side is bulging with surplus cash. The S&P closed yesterday at 1,819, the Nasdaq at 4,113 and the Dow at 16,258 – a plateau over two times above the valley into which they had descended in 2009. And, again, there are the signs of conspicuous consumption I mentioned earlier that reflect a fully robust stock market.

Here is a rather pungent quote from a note he sent out on Jan. 2: “…QE [quantitative easing] puts beer goggles on investors by creating a line of sight where everything looks good…” For those of you unfamiliar with the term “beer goggles”, the Urban Dictionary defines it as “the effect that alcohol … has in rendering a person who one would ordinarily regard as unattractive as … alluring”. This audience might substitute “wine” or “martini” or “margarita” for “beer” to make it more age-appropriate, but the effect is the same: Things often look better when one is under the influence of free-flowing liquidity. This is one reason why William McChesney Martin, the longest-serving Fed chairman in our institution’s 100-year history, famously said that the Fed’s job is to take away the punchbowl just as the party gets going.2 … and the eye of the needle The other eye catcher for me was a cartoon in the Jan. 6 issue of The New Yorker. Sitting in a room are two businessmen who are apparently conversant with the New Testament’s book of Matthew. One says to the other, “We need either bigger needles or smaller camels”. Today, I want to muse aloud about whether QE has indeed put beer goggles on investors and whether we, the Fed, can pass the camel of massive quantitative easing through the eye of the needle of normalizing monetary policy without creating havoc. Free and abundant money changes perspective Boockvar is right.
In view of this situation, central banks have responded by further easing monetary conditions. In the case of the European Central Bank (ECB), at our September meeting we resolved to launch a package of measures which included cutting the deposit facility interest rate by 10 basis points (bp) to -0.50%, strengthening forward guidance on interest rates and improving the financing conditions of quarterly targeted longer-term refinancing operations (TLTRO-III). We also decided to resume net purchases under the asset purchase programme at a monthly pace of € billion as from 1 November and without a defined time limit. Our analysis indicates that this package of monetary policy measures provides a substantial monetary stimulus which will help to further ease the conditions of lending to households  2/29  and firms and thus assist the economic recovery of the euro area and, consequently, the sustained convergence of inflation towards our medium-term target. In any event, from the financial stability standpoint, the downward revision of the growth and inflation outlook and the resultant higher expectation that interest rates will remain very low, or will even be negative for a further period pose challenges of at least two types for credit institutions. First, this macroeconomic context will represent a challenge for deposit institutions to recoup levels of profitability more in line with the cost of capital. Indeed, in the last few months market expectations for growth of bank profits have declined.

Fifth, we cannot overlook the potential role of international diversification, as shown by the part it has played in some of the largest Spanish banks in the last decade. Thus, over that period, the Spanish banking sector has increased its international exposure by 45%, while banks in countries such as Germany, France and Italy have reduced their international exposure by 38%, 16% and 15%, respectively. Despite the risks associated with business in emerging market economies, international diversification of banking business, especially when focused on retail business and organised in a decentralised manner, brings important benefits, in terms of greater diversity of business models and revenue sources, as was seen during the last crisis. In addition,  18/29  there is evidence that the lower the level of synchrony between the economic and financial cycles of the countries in which banks operate, the greater these benefits.5 In this respect a profound reflection at the European and the international level on the regulatory treatment of diversification in the banking business may be appropriate, so that, in conjunction with the greater complexity it may entail, some of its beneficial effects on banks’ risk profiles may be afforded better recognition. Sixth, nor should we overlook the importance of operational risk being correctly managed by banks. Operational risk accounts for 9.3% of the risk-weighted assets of Spanish deposit institutions by volume, slightly below the European average (10.5%). In any event, we know on past experience that the deterioration in solvency associated with an operational risk event can be high.
Should this be the case, it may not be necessary to increase the repo rate as rapidly. An alternative scenario in February’s Monetary Policy Report examines this possibility. But let me clearly emphasise that the Riksbank has no target for the level of the exchange rate. Monetary policy is governed by the inflation target, even if the exchange rate is an important determining factor for inflation. Secondly, as I mentioned, commodity prices have increased very steeply over the last year (see Slide 11). To a certain extent, although far from completely, this price rise has been counteracted by the appreciation of the krona. If commodity prices increase as a result of rising demand, this price increase will probably be more permanent than one resulting from supply shocks – that is factors obstructing output. 5 It seems likely that the strong economic development of the emerging economies – with increased demand for intermediate goods as a result – can largely explain the increase of commodity prices over the last year. The very recent unease in North Africa has contributed to rising oil prices and has more of the character of a supply shock. All in all, the increase of commodity prices may have greater contagion effects on prices in the rest of the economy than we have estimated. Thirdly: even if unemployment has decreased over the last year, it is still relatively high. Despite this, a certain degree of labour shortages can already be discerned in several sectors.

The task of the capital markets is to channel capital to investment projects with a high return. If financial investors assess the return on investments in a particular country to be higher than in other countries, there is reason for the exchange rate to strengthen. One cannot rule out the possibility that this is exactly what happened in the USA. Whether the level of indebtedness, the deficit on the current account and the strong USD exchange rate comprise a significant risk of large fluctuations in growth and a threat to global financial stability in the near future depends to a great extent on whether the long-term growth in the US economy will develop much more weakly than was expected when decisions on loans and investment were made. And, as I mentioned earlier, the shaping of economic policy and improvements in regulatory frameworks and risk management systems should have reduced the uncertainty in investment and savings decisions and thereby also the risk of a build-up of large financial imbalances. However, it remains to be seen whether globalisation, IT and telecommunications technology and perhaps also more efficient financial markets have really created the potential for higher growth that lay behind the expectations that pushed up economic activity. So far, the economies have reacted fairly moderately to the shocks they have faced over the past year.
With the timely implementation of accommodative fiscal and monetary policies, the world economy has seen a quicker turnaround than originally expected. The most recent economic data indicate that the world economy has stabilized. This was shown by the fact that the recession has ended in several countries with positive quarter-on-quarter growths from the second quarter onward. More importantly, financial institutions that were the origins of the crisis have appeared to become much more stable, though not yet returned to normal. This was reflected by indexes measuring concerns on liquidity and credit risks in the financial  BIS Review 164/2009  1  market such as the 3-month Libor spread and the external debt market spread which have continued to adjust downward. For Thailand, the green shoots started to emerge in the second quarter, owing primarily to a pick-up in the world’s demand, large government’s stimulus packages, accommodative monetary policy and strong economic fundamentals. The recovery of the world economy has augured well for Thai exports as the sector has turned into an expansion of 5.3 percent in the third quarter. As a result, the manufacturing sector in the same quarter grew by 2.6 percent, while the capacity utilization rate rose from a low of 54.8 in the first quarter to reach 62.4 percent at the end of the third quarter. In addition, domestic demand has also been boosted by accommodative monetary policy and a rise in public spending, causing private consumption and investment to grow at 1.0 percent and 3.7 percent respectively in the third quarter.

As a result, the overall GDP growth for the quarter came in at 1.3 percent on a quarter-on-quarter basis. Ladies and Gentlemen, In 2010, the Thai economy is expected to stay on the course of a gradual recovery due to two important factors. First, the continued world recovery, and second the fiscal stimulus. Let me go into each of these briefly. First, the IMF and market consensus expect the world economy to return to positive growth next year, owing primarily to monetary and fiscal policies of the industrialized economies that are expected to remain accommodative. Emerging market economies including Asia are expected to rebound faster and stronger than developed economies. This is because Asia’s financial sectors were not directly affected by the current crisis. Brighter prospect for the global economy next year means our export sector can continue to be our main growth engine going forward. Secondly, the government spending under SP2 or the Strong Thai scheme will also continue to support the nascent recovery. As we are all aware, we cannot indefinitely rely on fiscal stimulus to keep the economy going so it is our hope that public spending will eventually crowd in private demand so that the recovery will continue after the stimulus tapers off. Now let me turn to the risks associated with this outlook. Despite several good signals, the recovery of the world economy is still subject to a number of downside risks.