samchain/econo-pairs-v1 huggingface dataset:
If the real interest rate is low, even bad investments appear to be profitable and the banks' credit assessment process will not function properly. A large number of borrowers will then experience unsatisfactory profitability, particularly if the interest rate then increases slightly, and will be unable to pay their loans. The bad experiences from the time before and during the crisis led to the Riksbank later being given a very independent role to determine the key interest rate within the framework for monetary policy. Parliament set the objective for what should be achieved, namely price stability. The Riksbank then specified this as an inflation target, whereby the inflation rate would normally be within an interval of 1 to 3 per cent a year. Interest rate decisions are made by the Executive Board of the Riksbank, which is intended to ensure that there can be no external influence. The predictable and independent interest rate policy means that the banks and other financial agents have been given a firm foundation on which to base their risk assessments, which reduces their risks of suffering unexpected losses. Avoiding being wise after the event It is dangerous to use regulations to limit competition in the banking sector. Almost forty years of regulations had led our banks to almost entirely lose one field of competence they must have to accomplish their task to society – to assess credit risks and allocate credit where it can have the most positive effect on economic developments.

High inflation and rapidly rising wages meant that Swedish competitiveness was at a low level when international economic activity began to weaken in the early 1990s. At the same time, the Government made it clear that the fixed exchange rate should be defended at any cost. It was an untenable situation. Gradually, confidence in the Swedish krona deteriorated and this forced the Riksbank to raise interest rates to counteract the capital outflows. As inflation at the same time fell substantially – from 10% to 2% within the course of two years – real interest rates also rose substantially, from 1.5% to 8% between 1991 and 1992. The Swedish economy experienced a real interest rate shock. This led to the property bubble bursting, which was a serious problem for the banks, as a large part of their lending had property as collateral. In some areas property prices fell by up to 60 per cent over an 18-month period. During autumn 1992 confidence in the Swedish krona declined further. Despite the Riksbank setting the interest rate at 500 per cent over a weekend, it proved impossible to stop the speculative capital flows and on 19 November 1992 Sweden was forced to abandon the fixed exchange rate regime. This was a further blow to the banks. Many of the borrowers who had borrowed in foreign currency had their income or assets in Swedish krona and when the krona fell they experienced problems in paying their loans.
My interpretation is that both Swedish and German interest rates have been low because risk premiums have been under pressure and difficult to determine, which has made it difficult to interpret the interest rate levels as an expression of monetary policy expectations. However, the risk premiums largely cancel each other out when interest rate differentials are studied and they therefore manage to indicate shifts in the relative monetary policy expectations rather well. This interpretation thus means that monetary policy expectations in Sweden have shifted upwards relative to those in the euro area, which in turn reflects the fact that the Swedish economy has developed surprisingly strongly in comparison with the economy in the euro area. The link between the krona exchange rate and interest rate differentials should therefore not be over-interpreted. For example, the krona has strengthened more than motivated by the increased in the interest rate differential. This could be because the krona weakened dramatically during the crisis and had not still not fully recovered at the beginning of the summer. Since then, the krona has continued to appreciate as the willingness to invest in krona assets has increased. BIS central bankers’ speeches  5  It is important to note that the analysis above refers to the development of the krona in the past and says little about how the krona will develop in the future. Interest rate differentials primarily influence the krona exchange rate when they change because the market agents revise their view of interest rates in Sweden or abroad.

The current account deficit decreased at 6.7% of the GDP in 2018, from 7.5% in the previous year. Its improvement reflected to a large extent the increase in the tourism-related activity. Budget deficit and public debt continued to record a downward trend, reflecting both the consolidation path of the fiscal policy and the economic growth as well as the exchange rate appreciation. The main banking sector soundness indicators, in particular liquidity, profitability and capitalisation, remain at satisfactory levels. Against this backdrop, annual inflation averaged 2.0%, remaining unchanged from 2017 and below our 3% target. Inflation stood stable owing to two effects of opposite directions. The buildup in domestic inflationary pressures, generated by the rise in employment, wages and production costs was offset by the rapid appreciation of the domestic currency over the first half of the year. The exchange rate appreciation was a decelerating factor for achieving the inflation target. The exchange rate has moved along a slight appreciation path over the last three years, driven by fundamental factors that dictate its behaviour such as: improvement of the balance of trade exchanges with abroad, high levels of foreign direct investments, and reduction of risk premia in domestic financial markets. Yet, beyond these effects, the exchange rate was subject to certain shocks in the first half of 2018.
The conduct of monetary policy in Sweden is also being developed and specified in the light of new experiences. Moreover, the ECB’s target is formulated in such a way that the level of ambition can be varied. It is perfectly possible, for example, to strive for inflation around 1 per cent when inflation in the rest of the world is low and to accept a higher rate when the external situation is less favourable. Historically, inflation in Germany over the past two decades has averaged 2 to 2.5 per cent and the rate in the European Union in the 1990s has averaged 3.4 per cent, as against an average of 3.7 per cent in Sweden. A common feature of the two monetary policy strategies is their focus on the medium term. The Riksbank has expressed this in such statements as that policy is to be assessed in an annual perspective and that its full impact occurs after twelve to twenty-four months. Moreover, the Riksbank has clarified how transitory effects on inflation are to be treated. A deviation from the inflation target on a single occasion will not lead either the Riksbank or the ECB to adjust interest rates abruptly in order to achieve a rapid return to the target. Adjustments are to be gradual, which implies smaller fluctuations in the interest rate and thereby also in production and employment. Communication and evaluation So far the ECB has chosen not to publish the assessment of inflation on which the single monetary policy is founded.

For some economies that were more affected by the recent financial market turmoil, they have also taken credible policies to address domestic imbalances and have been successful in restoring investors’ confidence so far. Nevertheless, we cannot afford to be complacent as what we had experienced in the past year was probably a prelude to, rather than the end of, a period of heightened market volatility. The sentiment of global financial markets has turned more sanguine recently amid expectation of prolonged low interest rates in the US. However, the pace of monetary normalisation in the US is very much uncertain and data dependent. With a large part of the cumulated capital inflows to Asia since 2009 still in the region, it is possible that regional economies with domestic vulnerabilities built up during the period of ultra-loose global monetary conditions could experience sharp corrections when capital flows ultimately reverse. It is therefore imperative that regional economies should make use of the current breathing space to put their own house in order, take credible measures to reduce macroeconomic and financial imbalances, step up surveillance and ready contingency plans and liquidity backstops such as the use of foreign reserves and bilateral/multilateral swap lines to mitigate systemic risk in the financial systems when the need arises. A sharp reversal of capital flows could deal a severe blow to low-income countries, as reduced private capital, exports and remittance could have a disproportionally large impact on their less diversified economic structure.
Industry and commerce has proved extremely effective in creating new jobs to offset, and more than offset, jobs lost as the business environment has changed. What is particularly notable about this impressive growth in output and employment is that it has been sustained over a period of years and, importantly, there is every prospect that we can continue to sustain it looking ahead. This element of sustainability is, above all, what translates periods of strong output and rising employment into permanent improvements in living standards. Sustainability means having in place a framework to provide a basis of stability on which the economy can continue to grow. Alongside the stable framework the government has put in place for fiscal policy, the Bank of England’s contribution to stability is to deliver price stability - specifically, to meet the low inflation target the government has set of 2½% on the RPIX. Perhaps the most encouraging feature of the strong economic performance I have described is that it has been achieved consistently with low inflation, and it is through maintaining that commitment to low inflation that we can best ensure that the economy continues to grow over time in line with its potential. Against the background of this encouraging overall picture, we face two main areas of uncertainty at present. The first is the impact of the strong exchange rate for sterling. The strength of sterling in recent years has impacted on virtually all areas of the economy - agriculture and some service industries as much as manufacturing.

Assessing whether these developments are in fact delivering concrete gains requires cool heads and careful judgment. My own view is one of pragmatic optimism. There are promising portents, but relatively little concrete evidence as yet, of the UK achieving the improvements in productivity that have so benefited the US economy in recent years. That does not mean that it will not happen here. But it does mean that we need to be both vigilant to avoid the pitfall of anticipating the gains before they arrive, and alert to capitalising on them if and when they begin to come through. Overall, then, the prospect we face is an immensely encouraging one. We need to remain vigilant, but, provided we take no risks with the progress we have made in recent years in maintaining low inflation, the prospect is for continuing growth overall on a basis that can be sustained into the medium term. For the Bank of England, our first, and continuing priority, has to be to continue to deliver the stable monetary framework - of interest rates directed at maintaining low inflation - as a platform on which commerce and industry throughout the country can continue to build their business and generate the sustained growth in output and employment that will provide permanent improvements in living standards. BIS Review 62/2000  2
12  BIS Review 16/2009  A number of countries have had their credit rating downgraded and have lost their economic room for manoeuvre, obliging them to seek support from neighbouring countries and the IMF. In the euro area, a number of states with high debt or large deficits are paying dearly for their credit. In monetary policy, the interest rate weapon is being deployed to the full. In the US, Japan and Switzerland, the interest rate is close to zero. But the instruments that are benefiting the economy now may weaken the growth potential further ahead. Large budget deficits must be reduced over time and growth in government debt preferably scaled back. Households may begin to save more in order to be prepared for higher taxes or lower state benefits in the future. This will weaken the current and future effect of the measures now being implemented. Governments that have provided capital injections or loans to banks and firms are relieving owners of risk. This may foster the idea that the government will also pick up the tab next time. Risk may then again be priced too low, leading to a new round of debt accumulation. Norway is more fortunate than most. Government finances are sound, with substantial net wealth and a trade surplus. Unlike many other countries, our banks have not overexpanded. The level of activity in the Norwegian economy was high without expectations of higher inflation when the downturn occurred. Inflation was low and stable.

This is also reflected by the growth figures of the EU and single Member States. According to Eesti Pank's spring forecast, this year's economic downturn in Estonia will be around 12%. Estonian economy may start to recover towards the end of 2009, albeit the resumption of growth is very much dependent on the state of economies of our main trading partners. In 2011, Estonia's economic growth should recover to almost 5%. I would like to stress that Estonia has undergone considerable economic adjustment, which started already at the end of 2007 and several risk factors are withdrawing rapidly. Estonia's current account – the spread between savings and investment – is practically in balance. Thus, the financing of the economy's current expenditure is ensured by current income. Any external current financing needs will be covered by official EU funds. The correction of labour market and the rapid decline in inflation are just as important. The sharp increase in prices and wages following Estonia's accession to the EU is over. Price level in Estonia will decrease moderately both this and next year. This is an important factor supporting productivity growth in the economy. Let me now turn to euro adoption. The clear perspective of joining the euro area increases markedly Estonia's credibility and serves as the main factor supporting our economy in the near future.
Let me begin my discussion on how to achieve that by looking at the current trend towards bank downsizing in the euro area. The trend towards downsizing banks Financing of the real economy in the euro area has historically taken place through banks. The euro area therefore requires and has a large banking sector. The aggregate balance sheet of euro area banks is around 270% of GDP, whereas in the US, where capital markets are deeper, it is only around 70% of GDP. The euro area banking sector, however, expanded rapidly in the years before the crisis from already high levels. From the start of the expansion in 2005 to its peak in 2012, banks assets increased by more than 60 percentage points of GDP. This was associated with the development of unsustainable bank business models. Banks relied too much on debt to finance their lending, and that debt depended too much on wholesale market funding and too little on deposits. The crisis has brought those business models to an end and triggered a process of structural change in the banking sector. European banks have entered a period of secular deleveraging and restructuring. Bank balance sheets declined by around 20 percentage points of GDP in 2013 alone. Loan-to-deposit ratios fell from 142% in the first quarter of 2008 to 117% at the end of last year, and I expect these ratios to continue to fall. Credit growth has consequently been very weak.

Yves Mersch: Finance in an environment of downsizing banks Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Shanghai Forum 2014 “Asia Transforms: Identifying New Dynamics”, Shanghai, 24 May 2014. *  *  *  Ladies and gentlemen, Thank you very much for inviting me to speak today. Europe and Asia have an increasingly symbiotic relationship. In 2013 total EU trade with Asia reached € trillion, almost double the value recorded a decade ago and representing over one-third of total EU trade. At the same time, the EU accounted for almost 30% of Asian trade last year, far ahead of any other trading partner, including the United States. The EU is also a major investor in Asia, and vice versa. Around 20% of EU outward investment goes to Asia, while 20% of inward investment originates in the region. In other words, the economic situation in Europe today has important consequences for the growth trajectory of Asia – and this is a relationship that will likely only increase in strength in the future. I would therefore like to use my remarks to discuss developments in Europe as part of the growth equation for Asia. Asian policy-makers know best the domestic challenges that face them and the types of solutions that are needed. The European situation is no doubt a complex one, but if there is a common factor in the crisis and its persistence, it is the difficulties of the euro area banking sector.
BankingInfo is a 10-year programme, and over time, the plan is to cover a greater range of banking products and services. Consumer associations can contribute to this process. Consumer associations play an important role in disseminating and educating consumers on their rights and responsibilities. Through your direct contact with consumers, you can in the education process encourage reference to the one-stop information center established for this purpose and highlighting the importance and benefits of becoming financially literate. The wide network and access to consumers, the consumer associations also represent an important source of reference to improve the programme. Through this process, I am sure that the programme will become an important and beneficial source of information on banking matters for consumers. As part of the consumer protection infrastructure, it is also planned that the scope of issues which can be mediated by the Banking Mediation Bureau be expanded. The guidelines on minimum standards on product disclosure, including prescribing and adopting standard terms and definitions are now being reviewed. These initiatives will ensure avenues to seek redress at reasonable costs be further strengthened while transparency in the financial marketplace will be improved. The Banking Mediation Bureau (BMB), was established almost eight years ago. It is timely that a review is carried out in terms of its role as well as the scope of its activities.

With floating exchange rates, the exchange rate may adapt to changes in growth prospects and changes in the terms of trade. Since the end of the 1990s the Swedish krona has depreciated against the Norwegian krone. During this period, Norway has experienced a considerable rise in prices for  2  Source: The Technical Reporting Committee on Income Settlements, Report no. 1, 2005, preliminary version. The estimates take account of both actual hourly wages and indirect costs. 3  Aftenposten, October 1982  2  BIS Review 15/2005  export products such as oil and aluminium, partly owing to high demand in China. Sweden, on the other hand, has been influenced by a slower rise in prices for goods such as ICT products. The close trade relations between Norway and Sweden are of benefit to both countries. Even if petroleum exports to Sweden rose sharply in the 1970s, Norway still ran a trade deficit with Sweden. We have needed goods from Sweden to build up our petroleum sector, and increased wealth has enabled us to increase goods imports from Sweden. Norway has thus maintained its import share of traditional goods from Sweden while our export share to Sweden has declined. Weaker business sector competitiveness in Norway in relation to that of Sweden is probably one important factor. Looking ahead, some of the features we have observed over the past 30 years may change. There is an imbalance between the cost level in Norway and in Sweden. The cost differential cannot be sustained in the longer term.
This new infrastructure will have a data vault, which will contain and protect all the Bank’s relevant information. Likewise,  7 The sole exception in the past 31 years was a brief period in 2008, when a capital increase of the Bank by the Treasury materialized, under  the Law of Fiscal Responsibility (Law No. 20,128). 9  we have continued to strengthen protection mechanisms against cyber-attacks, updating and incorporating controls aimed at reducing the risks of unauthorized access to systems and information leaks. As regards the purpose of the Bank’s work, we have been expediting the identification and implementation of opportunities in the field of advanced data utilization, using technologies such as machine learning and artificial intelligence, among others. We expect that this will have a positive impact on the community, such as having greater power to anticipate risks by generating alerts or using other data sources, thus strengthening the Bank’s functions. Meanwhile, we have been closely monitoring all the developments associated with digital payment methods. As part of this follow-up, our participation in research groups of multilateral institutions has been active 8. Meanwhile, we have been closely monitoring all the developments associated with digital payment methods. As part of this follow-up, our participation in research groups of multilateral institutions has been active, especially on digital money issued by central banks. The digital issuance of central bank money is gaining more space in the discussion agenda at different international organizations, and the repercussions of the current sanitary crisis are accelerating this debate even more.

In other words, central banks have to be prepared to adjust policy when past asset price increases could be a significant factor putting upward pressure on aggregate demand, as well as when past declines threaten to reduce output relative to potential. Although the potential case for adjusting policy applies in both directions, the implications for policy may differ. Because some asset prices may fall more abruptly than they rise, and because the effects of downward moves in asset prices on demand may be larger due to the greater negative impact of deflation on the net worth of borrowers—witness the United States in the 1930s or Japan in the 1990s, the case for adjusting monetary policy in response to negative asset price shocks is commonly considered more compelling than in the alternative context. But this does not mean that monetary policy should generally ignore the effects of increases and only respond to observed declines in asset prices. The test should be the size and circumstances of the asset price moves and their impact on the forecast relative to the central banks’ objectives, not the direction of the asset price move. Different considerations apply in the circumstances where the central bank is considering how a potential future move in asset prices may affect the forecast. These circumstances call for even greater caution and care.