samchain/econo-pairs-v1 huggingface dataset:
Hume and Sentance (2009) also provide an analysis of how global economic trends fostered the global credit boom of the mid-2000s. BIS central bankers’ speeches  9  Chart 9 – UK output and inflation since 1997 Annual percentage change in real GDP and consumer prices 6 4 2 0 -2 GDP growth  -4  CPI inflation -6 -8 1997  1999  2001  2003  2005  2007  2009  2011  Source: ONS One reaction to my analysis could be that we have to accept a lot more volatility in growth and inflation, and simply grin and bear it. To some extent this will be true if the global shocks are big enough and very sudden, as we discovered in late 2008 and early 2009 when we felt the full force of the global financial crisis. But even in these circumstances, monetary policy played an important role in stabilising the economy and heading off a downward spiral in demand and the associated deflationary threat. In the decade before the recent global turbulence, there were also significant fluctuations in the international climate, including the impact of the Asian Crisis, the “dotcom” boom and bust in the US, and global geo-political turbulence in the early 2000s. In response to these fluctuations, the MPC did respond by adjusting monetary policy and succeeded in keeping UK growth steady and inflation low and stable, as Chart 9 shows, albeit in a more benign global environment than we have seen recently.

The good news however is that despite this and other serious challenges, the country was able to maintain macroeconomic stability at a reasonable level. The balance of payments recorded a surplus; the exchange rate, which in the years 2001 to 2004 had depreciated by approximately 5.9 per cent per annum, depreciated by only 5.2 per cent during 2006; a comfortable level of reserves was maintained; Government revenue and fiscal deficit targets were achieved as planned; the outstanding Government debt to GDP ratio declined; investor confidence remained high; a remarkable increase was seen in foreign direct investments (FDI) and for the first time, the yearly FDI exceeded US dollars 500 million; foreign portfolio inflows into the Stock Market increased substantially; the share indices recorded its highest ever levels; the government was able to mobilise around US dollars 1.2 billion in loans and grants from bilateral and multilateral donors and commercial sources. But we have to admit that not everything was rosy. There were a few down-sides and draw-backs too. Inflation began to rise since April due to higher than expected monetary expansion, some revisions to administered prices and escalating vegetable prices. In response, a tight monetary policy stance was adopted to curtail high growth in monetary and credit aggregates and it is likely that such measures would lead to the moderation of the rising inflationary pressures, and reflect a downward trend from April 2007 onwards.
In accordance with the goal of stability and its role as guardian of the currency, the CB has as a permanent objective the maintenance of a sound financial system. The quest for excellence in supervisory standards, in line with the best international practices, is a permanent challenge for the CB. In this respect, it is important that the modernization process be sped up in the supervision and regulation areas, with the aim of solidifying the Country’s position in risk management and the  prevention of banking crises. There are many examples of severe financial system crises in emerging countries which led to significant losses of income and production, with disastrous impacts on society. Brazil may face challenges but will work to avoid crises. Banking supervision and the set of prudential rules play a major role in this process. In the short run, important challenges include the improvement of methods to evaluate the quality of financial system information, and the implementation of the new Credit Risk Center, which aims at enhancing the effectiveness of off-site supervision. In the long run, we will seek to enhance supervisory transparency and the implementation of the new Basel capital accord, without forgetting the issues related to supervisory autonomy and legal protection for supervisors. I am committed to maintaining rigorous supervision procedures, because this is the only way to assure the stability of the system. But it is also important for inspections to have a beginning, a development and an end.

Moreover, there must be additional efforts to induce the entities in charge of clearing and settlement services to become more effective, as well as to popularize the use of electronic payment instruments, which will gradually reduce the use of paper instruments. The area of financial system regulation and organization will increasingly be focused on the following aspects: •  improvement of prudential rules and practices, aiming at maintaining the soundness of the financial system as a whole;  •  improvement of the analysis of several authorization processes related to financial institutions and alike;  •  creation and improvement of financial instruments and activities, including those intended to broaden and cheapen credit;  •  adoption of international standards and practices. Additionally, it is a priority to improve the regulation of mechanisms that broaden the population's access to the financial system, as in the case of “banking correspondents,” credit cooperatives, and credit concessions to small and micro firms. I would also like to acknowledge the employees of the Central Bank for their competence, “esprit de corps” and qualification. I have a human resources goal of qualifying and offering even more opportunities for this outstanding group of public servants. I thank President Luis Inácio Lula da Silva and Minister Palocci for their confidence in myself.
Banking is a knowledge-intensive, skills-based and relationship-rich industry. In an increasingly complex and a more liberalised environment, the competitiveness of banking institutions will depend critically on the quality of human intellectual capital and the extent to which the industry is able to leverage on these talents. To compete effectively, banking institutions need professionals with the requisite skills and expertise not only at the strategic and management level, but also at the technical and operational level. Successful institutions will be the ones which accord high priority to effective placements, rewards, retention and most importantly, lifelong learning and the continuous enhancement of human capital. Lifelong learning is becoming increasingly important in this knowledge-based economy where knowledge and skills need to be continuously updated and upgraded. At the macro-level, the breadth and depth of skills of the entire financial services workforce will increasingly be the defining factor in determining the success in building a more efficient, effective and dynamic financial sector. The availability of appropriately trained and competent human resources is a critical factor key to support the performance of the industry. In essence, continuous strengthening of intellectual resources and capabilities must be made to create a larger pool of talents and high calibre professionals in the banking and finance industry. Competence and skills development have always been an area of focus, but it will be even more important as we prepare our workforce for a more challenging environment, one that is more competitive and more complex.

On average, the inflation rate amounted to just under 2 per cent a year during the period 1993-2002, and the budget balance was turned around from a deficit of 12 per cent of GDP in 1993 to a surplus of 4 per cent in 2001. Real wages increased on average by 2 per cent a year, which can be compared with the stagnant or even declining real wages in the 1970s and 1980s. At the same time, unemployment was halved from 8 per cent in 1993 to the current figure of 4 per cent. Thus, the Swedish economy is currently in a much better condition than it was 10 years ago. However, there are many indications that it may become more difficult to combine a good growth rate with a low inflation rate in future. At present there is no unutilised capacity in the economy as there was directly following the crisis at the beginning of the 1990s. It also appears as though the labour supply will grow at a slow rate in the near future as a result both of demographic reasons and of a high rate of absence due to sickness. This impairs the opportunities for growth in the Swedish economy. It could also mean that, when the economy shows an upswing, the Riksbank will be forced to conduct a tighter monetary policy to prevent tension arising between supply and demand on the labour market.
In the pre-crisis period the growth of securitization was accompanied by a growing reliance on short-term funds raised in wholesale markets to finance securities and activities essential  1  I note that the set of issues relating to wholesale funding are closely related to the challenge of ending “too big to fail” I discussed in a November 15, 2012, speech (see www.newyorkfed.org/newsevents/speeches/ 2012/dud121115.html). The more stable the sources of funding, the more resilient each firm would be, and the less the failure of any one firm would disrupt the provision of credit to the economy. 2  Banking groups retained a prominent role in credit supply via nonbank affiliates outside the commercial bank. BIS central bankers’ speeches  1  to securitization. This ranged from the use of repo3 funding to finance inventories of securities held for market-making4 purposes to the issuance of asset-backed commercial paper by conduits5 created to acquire and hold securities. The increased use of short-term wholesale finance was driven both by demand and supply factors. On the demand side, it was more profitable to use shorter-term funds to finance longer-term assets. On the supply side, such funding was plentiful because it was viewed as safe and because of the growing institutionalization of savings with corporations and institutional investors in need of deposit-like products in which to place their cash balances. After all, the funds were only exposed for a short period of time, and in the case of repo, secured by collateral.

15  For a more detailed discussion, see “The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market”. www.newyorkfed.org/research/staff_reports/sr564.pdf  BIS central bankers’ speeches  7  rather than rely on their ability to get out ahead of small retail investors when trouble materializes. The larger question Reforming the tri-party repo system and the money market mutual fund industry is essential and would make the financial system significantly more stable. But even after such reforms, we would still have a system in which a very significant share of financial intermediation activity vital to the economy takes place in markets and through institutions that have no direct access to an effective lender of last resort backstop.16 The financial crisis clearly demonstrated that we can no longer assume that in periods of stress banks will be willing to access lender of last resort loans and on-lend to the nonbank financial sector at sufficient scale to stabilize the system of market-based financial intermediation, as happened in earlier periods such as the commercial paper crisis in the mid-1970s. The financing needs outside the commercial banks may be too large relative to the capacity of the banking system, banks may be reluctant to lend to competitors, be concerned about their own liquidity and funding needs, or simply be deterred by elevated counterparty risk. We need to consider whether our current architecture is satisfactory.
Likewise, in the medium and long term, additional resources could be given to specialist courts to expedite the resolution of these processes. As regards firms with inviable business models, the path should be smoothed for their orderly exit from the market. The swift resolution of these processes will prove conducive to the structural adjustment of the economy and the reallocation of resources to more productive firms. Fourth, our aim should be to prevent the current crisis from causing severe damage to our financial system. In the context of the uneven and uncertain recovery I have described, we cannot rule out the possibility that the risks identified may materialise or that their impact and persistence may be greater than expected. In this respect, the response by banks to the possible materialisation of these risks must be pan-European, given the commitment to the banking union. In this response, the completion of the banking union and the launch of a fully pooled European deposit guarantee scheme would contribute decisively to ensuring euro area financial stability. Moreover, it is essential to analyse to what extent European bank resolution and liquidation regulations are appropriate for a hypothetical systemic crisis, or the possible role of asset management companies in the event of serious impairment of European financial institutions’ balance sheets. Lastly, from a more medium-term perspective, other structural policies may smooth change in the composition of firms’ debt so as to give greater preponderance to capital.

These would include reforming the treatment of debt under corporate income tax, and advances in the capital markets union project that would help provide for the integration and development of capital markets in the EU. The growth of equity markets can afford various benefits to the business sector and the economy in general. The resort to equity funding strengthens the soundness of firms’ balance sheets, given that a greater proportion of these capital instruments reduces firms’ vulnerability to adverse shocks such as an increase in interest rates or a decline in revenues.8  8  See, for example, A. Kraus and R. H. Litzenberger, (1973): “A State-Preference Model of Optimal Financial Leverage”, Journal of Finance. 28: 911–922. 8  Conclusions  I should like to conclude by pointing out that the COVID-19 pandemic has prompted an unprecedented economic contraction in Spain and in other economies. Non-financial corporations have been seriously affected, although the forceful measures adopted by the national and supranational economic authorities have prevented the materialisation of a wave of defaults stemming from short-term liquidity problems. However, some firms have seen their solvency impaired as a result of a decline in their revenues and an increase in their debt. The current phase of the crisis, marked by an incomplete and uneven economic recovery, warrants continuing public support to firms. Nonetheless, these policies should be adjusted so as to focus more on firms in sectors that continue to be severely affected by the crisis, and through means other than the accumulation of greater debt.
Monetary policy: achievements and challenges Már Guðmundsson, Governor of the Central Bank of Iceland. Monetary policy meeting of the Iceland Chamber of Commerce, held at Gamla Bíó in Reykjavík on 16 November 2017 Madame Chairman, honoured guests, Once again, we gather here at the Iceland Chamber of Commerce’s monetary policy meeting, which for years has been held after the Central Bank has published its autumn forecast and, in latter years, the Monetary Policy Committee’s interest rate decision. I would like to thank the Chamber of Commerce for continuing this tradition and for giving me the opportunity to talk to you about monetary policy. In my speech at this same meeting last year, I noted that the Icelandic economy had seldom been stronger, as we were experiencing the combined effects of robust GDP growth, full employment, large rises in real wages, below-target inflation, a current account surplus, a strong international investment position, and lower private sector debt than had been seen in years. At that time, we had also achieved a historical milestone in bringing inflation expectations back to target by most measures. The outlook was positive as well, with the prospect of continued strong GDP growth, a current account surplus, and target-level inflation throughout the forecast horizon. But there were concerns, too: the potential for overheating, the possible overvaluation of the króna, and the uncertainty about what would happen after the general liberalisation of the capital controls.

We should also reassess the scope of  13  See National Audit Office (NAO), Annual Audit Report by the Auditor General: Public Accounts 2008, December 2009. Examples of inefficiencies and improper practices range from 28,810 cases of social security contributions worth EUR 4.5 million being in arrears, to the number of hospital meals charged in one hospital consistently exceeding the number of in-house patients, to cases of payments to government suppliers not supported by VAT receipts. 14  The welfare gap, i.e. the difference between all items of expenditure and contributions made in terms of the Social Security Act, 1987 has more than doubled in the last five years to EUR381.2million in 2010. The cost of pensions and related benefits is estimated at EUR 564 million and that of free hospitalisation and community care EUR 306.5 million. See, Ministry of Finance, the Economy and Investment Financial Estimates 2010, p. 294. 6  BIS Review 156/2010  social benefits, to distinguish between those that truly help to combat poverty and social ills and others that are not so effective in achieving the desired outcomes. Finally, I believe the time has also come to consider how to strengthen the budget process, drawing on models tested successfully abroad. These typically involve fiscal rules providing for limits on supplementary budgets, multi-annual expenditure ceilings and more transparency in fiscal policy making, as well as an independent monitoring agency. The pursuit of fiscal sustainability along such lines requires a broad political consensus.
Low interest rates curb the decline in investment and make it easier for households to repay debt. The change in behaviour can nevertheless take time and we cannot expect consumers in the US and Europe to drive a new upturn. The public sector will eventually have to rein in expenditure and increase tax revenues to prevent debt from increasing. If growth in the global economy is to be sustained, public and private investment and consumption in China and other Asian countries will probably have to absorb a greater share of output in these countries. In many industrial countries, export prices have risen relative to import prices. Lower oil and commodity prices are easing the burden. But Norway’s terms of trade are deteriorating. Some of the gains of the past few years have now dissipated, and Norway’s disposable income might fall by close to 10 per cent in 2009. Norway will move down on the list of the world’s richest countries. (And perhaps this is not altogether a bad thing.) Norwegian firms are affected when households the world over buy fewer cars and furniture and fewer ships are built. Lower oil prices will probably also result in a fall in investment on the continental shelf in the years ahead. But let us not forget that petroleum prices are still higher than the industry dared hope just a few years ago. 10  BIS Review 16/2009  The competitiveness of the Norwegian business sector declined during the upturn.

Conventional policy options at the zero lower bound Conventional macroeconomic theory states that, when interest rates are at the zero lower bound, monetary policy becomes ineffective and economic policy action should concentrate on fiscal measures. In slide 1, the depiction of the economy using the standard IS/LM model summarises this point of view. As you can see, the economic situation is represented in terms of two key variables, the interest rate and output (or GDP). Economic equilibrium is represented by the intersection of the IS and LM curves. The first corresponds to the interest rate and GDP levels that balance savings and investment and the second represents the combinations of these two variables, which equilibrate the demand and supply of money. Expansionary monetary policy corresponds to pulling the LM curve to the right. When interest rates are at the lower bound, however, the LM curve is horizontal. At this point, pulling a horizontal to the right has absolutely no impact on the intersection of the IS and LM curves, and therefore on the equilibrium level of output. Conventional monetary policy hence becomes ineffective. Intuitively, if interest rates are at the zero lower bound they cannot be lowered further, yet it is precisely by lowering interest rates that monetary policy can stabilise the real economy. By contrast, it is at the zero lower bound that the potential benefits of fiscal policy are most significant. As the same diagram suggests, it is precisely when the LM curve is flat that it becomes most appealing to use fiscal policy.
As I noted earlier this week, the biggest component of the journey to net-zero is the delivery of clear sector-level climate policy pathways by governments. Central banks cannot and should not try to fill any gaps in that space through their micro and macro-prudential actions - for example, we are not here to deliver carbon pricing. However, we should use these tools to fulfil our role over important areas such as those I am raising today. The final area I want to explore is the importance of central banks practicing what we preach by seeking to achieve best practice through our own operations. We hold ourselves to the same high standards that we expect of the firms we regulate. Consequently, we need to ensure that, wherever possible, our own financial operations, such as financial asset portfolios we hold, and our own physical operations, such as emissions from our buildings and printing banknotes, conform to best practice in the measurement, management and mitigation of climate risks. In line with this, I can confirm today that the Bank is committing to reduce emissions from our physical operations so they will be consistent with net-zero by 2050 at the latest. In the spirit of transparency, last year we published a TCFD aligned climate-related financial disclosure.8 The most challenging aspect of this report was the inclusion of analysis of the emissions associated with a monetary policy portfolio, a first for a central bank.

This helps spread lending capacity across the country, further contributing to balanced growth and a sustained economic expansion. Trade Good domestic policy cannot, on its own, guarantee balanced growth in an open economy like the UK’s. Our fortunes are also tied to those of our trading partners. In recent years those fortunes have been modest. Demand from the UK’s traditional markets, such as Europe, is a staggering 25% below a continuation of its pre-crisis trend. This is because the UK relies heavily on the slow-growing advanced economies (Chart 1). In contrast, the Commonwealth countries, which account for only a tenth of UK exports, have grown over three percentage points faster on average each year than our major trading partners between 2008–13. The need to diversify trade to faster-growing economies in the Commonwealth and emerging markets is clear. This will require both the continued initiative of UK businesses and a determined trade strategy. In short, we all need to be inspired by another great Scottish figure, David Hume. Hume brilliantly showed that free trade was beneficial to all; that it acquainted nations “with the pleasures of luxury, and the profits of commerce”, spurring them on “to further improvements in every branch of domestic and foreign trade.” 2 His ideas helped usher in the first great era of globalisation during the 19th century. In this wave, the British economy grew twice as fast as during the preceding century (Table 1).