samchain/econo-pairs-v1 huggingface dataset:
The prevention of excessive inflation and the alleviation of inflation fears is the best that a central bank can do to support long-term economic growth. As for money market liquidity and extraordinary crisis measures, they do not hinder the pursuance of the necessary interest rate policy. If it is necessary to continue fixed rate tender procedures with full allotment to guarantee the normal operation of the money market, it may also be a reasonable move when the monetary policy interest rates are already on the rise. In this case, one does not hinder the other. It must also be pointed out that contrary to the popular misbelief, general monetary growth in Europe has not been very rapid after the introduction of extraordinary measures. Recent data indicate that it amounts to only a couple of per cent a year, which is too little rather than too  2  BIS central bankers’ speeches  much. Meanwhile, extraordinary instruments in the market do not mean that the money market environment is too lenient, because the European central banks have performed monetary policy transactions to curb liquidity according to need. Naturally, if the arrangement principles of such tender procedures become obsolete, they should be reviewed immediately. The same principle applies to the impact of the state budget on monetary policy. The situation of the state budget undoubtedly has a great influence on economic developments and it plays a great role in the analysis of the economic situation.

And last, but not least, the leverage ratio could also play an additional role in mitigating bank’s and supervisor’s model risk and measurement error, providing a backstop to riskbased capital measures. Indeed, it could also play a role by itself by constraining leverage in the banking system. But a really crucial challenge is good calibration. Furthermore, there are difficult questions to be addressed regarding impact assessments: What is the meaning of “significant” when referring to the increase of the capital requirements? What is the best approach to capture outlier banks which are making savings through the use of aggressive modelling techniques? Is the impact going to be measured by categories of banks with similar profiles and business models? In this sense, in order to ensure that the analysis is based on the best quality data, the engagement of the industry is crucial, both through sharing its views by responding to consultation processes, and also by contributing with the best quality data to the quantitative impact study being conducted by the Basel Committee. To conclude, it is essential that the final design of the whole framework is consistent and that any potential interactions between different measures are properly evaluated. To conclude, I will say that it will be possible to design a framework that keeps the incentives for sound risk management and that eliminates unwarranted differences in risk weighted assets among banks, while avoiding any significant increase in the capital requirements for the global banking system. Thank you very much for your attention.
The best way to justify why a certain reporate path has been chosen is to compare the consequences of this path for inflation and the real economy with those of the alternatives. What does this mean in concrete terms? Well, it means that one must be able to show that the repo-rate path one prefers gives rise to the forecast for inflation and resource utilisation that best stabilises inflation around the target and resource utilisation around a normal level. It is as simple as that. Figure 2: Forecasts Figure 2 shows the forecasts for CPIF inflation (panel a), the output gap (panel b) and the hours-worked gap (panel c) for the main scenario and for the extended repo-rate path. The curves marked “Expected” show the forecast under the following assumptions: The extended-repo-rate path is announced in April. It is perceived as credible in the sense that the market from and including April expects an unchanged repo-rate path until the end of the fourth quarter of 2010. The curves marked “Unexpected” show the forecast under the following assumptions: The extended repo-rate path is not incorporated in market expectations and the market instead continues to believe in the main scenario’s repo-rate path. The market is taken by surprise in the third and fourth quarters of 2010 when the repo rate is left unchanged. We can see that the effects of an expected extended repo-rate path are greater than those of an unexpected extended repo-rate path.

in the past ten years to the level of 48% of GDP in 2017. However, despite the positive trends, the need for further increase in the total domestic savings is evident, which is a common feature of the CESEE countries. Thus the IMF analysis of May 20163 mainly indicates "insufficient" domestic savings4 in CESEE countries, i.e. the average savings rate (as a difference between gross domestic product and consumption) of about 20% of GDP, which is lower than the current investment rate, lower than the estimated optimal rate of investment (25% of GDP), as well as the rate in countries with a relatively faster process of real convergence in the past (28% of GDP). The rate of total domestic savings is particularly low in 1/3  BIS central bankers' speeches  the SEE countries, where in 2017, on average, it is 17% of GDP, including in the Republic of Macedonia where it is close to the average in the region. The relatively low domestic savings are an obstacle for stronger investment support, partly explained by the fact that, even after more than 25 years from the beginning of the transition, the level of accumulated capital per capita in most CESEE5 countries is still relatively low, corresponding to about one-third of the levels in developed European economies. In RM the capital level per capita is lower than the average of the EU-28 countries, and it equals around 24%.
A substantial portion of the revenues from the sale of oil and gas is invested in foreign equities and bonds through the Government Petroleum Fund. As a result, short-term fluctuations in the oil price have less impact on the domestic use of petroleum revenues. In the last 20 years, fluctuations in the terms of trade  3  See for example Tom Bernhardsen and Øistein Røisland. ”Factors that influence the krone exchange rate”, Economic Bulletin no. 3/2000, November 2000. BIS Review 74/2001  5  have been three to four times greater for the Norwegian economy including the petroleum sector than for the mainland economy. The Petroleum Fund thus relieves pressure on the krone exchange rate. Changes in the krone exchange rate may also be due to interest rate changes. Higher interest rates normally make it more attractive to buy NOK-denominated assets and reduce NOK-denominated debt, leading to an appreciation of the krone. In contrast, a decrease in interest rates will normally result in lower demand for the krone and a weaker exchange rate. Experience shows that the interest rate only has this predictable effect on the krone exchange rate when it contributes to stabilising inflation. The exchange rate constitutes an important channel through which monetary policy operates. Changes in the exchange rate are both desirable and intended when they contribute to stabilising inflation. However, fluctuations in the exchange rate can also be a source of economic disturbances.

However, it is still interesting to adjust monthly inflation figures for temporary effects to determine whether developments are broadly in line with our projections. Norges Bank analyses and presents figures for consumer price inflation where the effects of some temporary factors are excluded. The chart shows developments since 1995 in the CPI, the CPI excluding the direct effects of changes in excise duties (CPIX) and the CPI excluding the direct effects of changes in excise duties and energy prices (CPIXE). As the chart shows, the CPIXE will normally be more stable than the CPI and the CPIX. This is because energy prices have historically been among the most volatile components of the CPI. Since energy prices have a substantial weight in the CPI, wide fluctuations in these prices will have an impact on the total CPI. However, measured since 1996, CPIXE inflation is not systematically lower or higher than CPI inflation. Substantial changes in inflation as a result of extraordinary swings in prices for certain products or changes in direct and indirect taxes may occur on occasion. The effects of such random and temporary factors on developments in consumer prices are analysed in the Inflation Report. Norges Bank's forecasts two-three years ahead may be perceived as projections for consumer price inflation excluding the direct effects of changes in interest rates, direct and indirect taxes and extraordinary temporary disturbances. However, there are seldom any reasons for substantial deviations between estimates for the total CPI and the other CPI measures in this context.
In the USA it has fallen in three consecutive months and in the euro area it fell to 2.1 per cent in November. In Sweden, inflation fell to 4.0 per cent in October, but our assessment is that it has fallen significantly in November here too (see Figure 11). Inflation is high but is declining rapidly One of the issues that we have had to take note of during the year has been the considerable fluctuation in the prices of food and energy. One of the reasons that we increased the interest rate in the period up to the autumn was to prevent the price increases that started on the world market spreading to other areas via price-setting and wage formation. During the year, I have argued that it did not appear to be especially likely that short-term increases in the prices of food and energy would push up wages by leading to demands for compensation for the price increases. The slowdown in growth and the weakening of the labour market are factors that weighed against such a scenario. There are also three-year agreements on large sections of the labour market that regulate agreed pay increases and these do not contain, as was the case in the 1970s and 1980s and is still the case in some other countries, price development guarantees that provide automatic compensation for price increases.

I would also like to make it clear that the views on wage formation that I express in this speech today are my own and are not necessarily shared by my colleagues on the Executive Board of the Riksbank. Wage formation in a longer perspective High wage increases and devaluations in the 1970s and 1980s I think that every one here would agree that wage formation has functioned better in the last fifteen years than in the 1970s and 1980s. One way of illustrating this is to compare the development of inflation in Sweden and Germany. In the 1960s, inflation was on average just over one percentage point higher in Sweden than in Germany. Following the breakdown of the Bretton Woods system in the early 1970s, inflation in Germany was seen as a nominal anchor for inflation in Sweden in that the Swedish krona was pegged to a currency basket dominated by the D-mark. This strategy did not work. During the 1970s and 1980s, inflation in Sweden was on average more than four percentage points higher than in Germany (see Figure 1). This is largely related to the development of labour costs in the two countries. Labour costs per produced unit – unit labour costs – increased much more rapidly in Sweden than in Germany during the 1970s and 1980s (see Figure 2). In order to increase the competitiveness of Swedish industry, the Swedish krona was devalued several times in the late 1970s and early 1980s.
As a general matter, however, the increase in the size of some institutions relative to some parts of our financial system necessarily magnifies the potential consequences of a mistake or an infrastructure failure in these institutions. They are sufficiently large that they have less room to maneuver in adjusting positions in response to changing risks without adversely affecting the markets as a whole. Increased concentration in some markets should reinforce the incentive the largest institutions and their counterparties have to manage risk with a greater degree of caution. Supervisors have a role here, too, providing additional reinforcement in those cases where private incentives do not seem to be generating appropriately judicious responses. A third challenge is the increased opportunity that exists today for risk and leverage to migrate to, and build up in, parts of the financial system that are not subject to direct supervision and regulation of their capital and leverage ratios. According to some estimates, assets under management at hedge funds have doubled, to $ billion, since 1998, as has the number of funds, which now stands at 6,000. We have no reliable overall measures of the degree of leverage in these institutions, though it is interesting to note that the intermediaries serving as prime brokers to hedge funds believe that overall leverage in these funds is lower than in early 1998.

4  BIS Review 77/2009  Observed inflation June 2009 2006 Q1  Inflation  2007 Q2  Q3  Q4  Q1  2008 Q2  Q3  Q4  Q1  2009 Q2  Q3  Q4  Q1  Q2  Q3  2006  2007  2008  1.1  0.7  2.5  Q4  1.23 1.33 1.22 0.46 0.09 0.52 0.63 1.68 2.50 2.70 3.00 1.60 0.00  Inflation forecast of March 2009 with Libor at 0.25% and of June 2009 with Libor at 0.25% 2009 Q1  Forecast March 2009, Libor at 0.25% Forecast June 2009, Libor at 0.25%  BIS Review 77/2009  2010 Q2  Q3  Q4  Q1  2011 Q2  Q3  Q4  Q1  2012 Q2  Q3  Q4  Q1  0.10 -0.86 -0.98 -0.43 0.09 0.19 0.13 0.01 -0.05 -0.04 0.10 0.25  -0.74 -0.83 -0.28 0.55 0.50 0.40 0.26 0.16 0.17 0.31 0.46 0.65  Q2  Q3  2009  2010  2011  -0.5  0.1  0.1  -0.5  0.4  0.3  Q4  5
What are the consequences of the introduction of the euro on the Swiss franc and on the effectiveness of Swiss monetary policy? And what are the effects of this new international monetary order on countries outside the dollar-euro block more generally? I will try to provide some insights on these questions today. First, I will present the change in monetary framework due to the introduction of the euro. Then I will enumerate the main fears that we originally had regarding the effects of that transformation, and our experience with the new environment over the past 5 years. Finally, I will share some lessons on the influence of the introduction of the euro for the international monetary system and for the autonomy of Swiss monetary policy. 1. A new international framework  January 1, 1999, constituted a true revolution for Europe. Many observers argue that the introduction of the euro represents the major postwar stage in European integration. They are right. The Maastricht Treaty, by removing national currencies and defining budgetary rules, lead to an important transfer of power from national capitals to European institutions. The French franc, the Italian lira, and the German mark were all symbols of national identity. The euro is now playing an integrating role in  BIS Review 32/2004  1  people’s minds. In this regard too, the new currency brings a revolutionary dimension. Is it not the case that national currencies were almost always and everywhere brought about by fundamental political changes?

In the past, the Swiss franc was overreacting to the dollar’s fluctuations, so that the pain of an appreciation of our currency relative to the greenback was exacerbated by a simultaneous appreciation of the Swiss franc relative to the German mark. This double whammy effect, attributed to the narrowness of the Swiss franc market, was highly penalizing for our export sector. Since the introduction of the euro however, this pattern is no longer observed. Thus, the evolution of the Swiss franc sticks closer to our economic fundamentals. I will address this issue more extensively later on and argue that this trend can be generalized to apply to other currencies as well. (b)  The euro as a means of payment  Those who thought that the euro would make the Swiss franc obsolete as a means of payment were also mistaken. True, our ATM machines have been adapted to provide euro banknotes, so that it is now possible to pay in euro almost everywhere in Switzerland. Yet, despite these efforts, the demand for euro notes is still weak and those notes do not circulate any more extensively than French francs, Italian lira and German marks used to. In truth, it may well be that the expenses incurred to transform all those ATM machines ended up being a misallocation of resources. In stores and restaurants, prices denominated in euros are usually not very attractive. Obviously, small shop and cafe owners are not thrilled by the idea of accepting cash payments in euros.
Thus, the central bank can use the amounts and modalities of its liquidity provision to the banking sector to influence prices in the money market and other markets for relevant assets. By easing the pressure to abrupt deleveraging, the central bank can reduce the likelihood of a credit crunch and adverse spiralling dynamics, thereby addressing downside risks to price stability. It should be kept in mind however, that monetary policy can exert mitigating effects, but cannot solve the underlying problems, often of a structural nature. In addition, the creation of abundant liquidity can in itself create side effects that need to be carefully monitored. First, there is a risk of distorting the incentives to carry out the necessary adjustment by favouring evergreening of loans and “zombie-bank”-type dynamics. This would represent a continued source of uncertainty about banks’ exposures to non-performing loans, about the possible implicit liabilities faced by governments and ultimately a drag to economic growth. Second, large liquidity-providing repo operations increase asset encumbrance in the banking sector. Banks tie certain types of collateral with the central bank, and these assets are no longer available to the bank for other types of transactions. And this increases banks’ difficulties to issue unsecured bonds and thus can worsen their access to private sources of refinancing. The ECB’s measures during the financial crisis Let me now turn to the concrete measures that the Eurosystem has undertaken during the crisis.

Rational behaviour at the level of an individual bank (and investor) can impose externalities on other players in the financial system through fire sales and financial contagion.1 This can set a self-sustained process in motion that ultimately brings the whole financial system to collapse. 1  See V. Acharya and S. Viswanathan, (2011) “Leverage, Moral Hazard and Liquidity”, Journal of Finance, Vol. 66, No 1; F. Allen and D. Gale, (2000) “Financial Contagion”, Journal of Political Economy, Vol. 108,  BIS central bankers’ speeches  1  Alternatively, if banks prefer to keep a certain portfolio of assets, they have to make an adjustment on the liability side. Banks can recapitalise by issuing equity, or there can be the activation of bail-in measures. Or banks can try to tap alternative sources of funding in case deleveraging pressures come from the inability to roll over existing liabilities. The mix of actions on the asset and liability side that banks may choose to take is not necessarily optimal from a welfare point of view. For instance, given the reluctance of shareholders to issue equity and dilute the value of their shares, banks may prefer to shed assets or cut lending rather than increase capital. This creates a role for authorities in trying to steer the process towards certain courses of action in which banks’ choices are better aligned with economic welfare.
A press conference is held after each monetary policy meeting, whether the interest rate is changed or not, where either the central bank governor or deputy governor presents the background for the decision and answers questions. The strategy documents, which are published at a later time, should serve to further clarify the tradeoffs and the rationale behind the decision. The Inflation Report contains our analyses of the economic situation and projections concerning developments in inflation and output in the next few years. These reports provide guidance for market participants and the general public concerning monetary policy in the period ahead. Thus far, Norges Bank has generally used two alternative technical assumptions concerning the interest rate in the Inflation Report: that the interest rate follows market expectations, represented by implied forward rates, or that the interest rate remains unchanged. We have often used both assumptions, but in the last Inflation Report, we only used forward rates. Based on the assumption that the interest rate and the krone exchange rate move in line with the forward interest rate and forward exchange rate respectively, our projection implied that inflation would return to target after two years. We interpreted this as an indication that the market’s interest rate expectations were consistent with achieving the inflation target at the two-year horizon. This type of assumption also provides an internal consistency between interest rate and exchange rate assumptions. There are also other possible interest rate assumptions, however.

How does the central bank relate to the fact that we do not know precisely how the world is or how it will be in the future?13 Alan Blinder, former Vice Chairman of the Board of Governors of the Federal Reserve and currently a professor at Princeton University, touches on this when he formulate the recipe for a successful monetary policy: 14 •  Step 1: Estimate how much you need to tighten or loosen monetary policy to “get it right.” Then do less. •  Step 2: Watch developments. •  Step 3a: If things work out about as expected, increase your tightening or loosening, toward where you thought it should be in the first place. •  Step 3b: If the economy seems to be evolving differently from what you expected, adjust policy accordingly. I have not doubt that a number of central banks will sympathise with this recipe. Norges Bank normally takes a gradual approach to interest rate setting due to uncertainty concerning economic developments, including the effects of previous changes in the interest rate. 13  See Frøyland, E. and Lønning, I. (2000): “The significance of uncertainty in monetary policy”, Economic Bulletin no. 4/2000 for a more detailed description of different types of uncertainty. 14  Blinder, A. (1998) “Central Banking in Theory and Practice”, MIT Press  BIS Review 6/2004  7  This principle is also supported by economic theory.