samchain/econo-pairs-v1 huggingface dataset:
Percentage who paid for their most recent purchase in cash Per cent 40 35 30 25 20 15 10 5 0  2010  2012  2014  2016  2018  2020  Source: The Riksbank Figure 2. The financial sector in Sweden has increased in importance Financial assets in relation to GDP  16 14 12 10 8 6 4 2 0  80  85  90  95  00  05  10  15  20  Note. Total financial assets held by Swedish sectors according to Statistics Sweden’s national wealth data. Source: Statistics Sweden  29 [35]  Figure 3. Interest rates tend to even out between countries Per cent 20 15 10 5 0 -5  80  85  90  95  Sweden  00  05  10  Germany  15  20  USA  Note. Nominal interest rates for government bonds with a 10-year maturity. Sources: Macrobond and the Riksbank  Figure 4. Companies market financing on the increase Per cent of GDP. Quarterly data 80 60 40 20 0  95  00  05  10  15  20  Lending from MFI Issued securities  Note. Includes non-financial corporations’ securities borrowing in both Swedish kronor and foreign currency. MFIs (monetary financial institutions) include banks, mortgage institutions and finance companies. Sources: Statistics Sweden and the Riksbank  30 [35]  Figure 5.

The basic idea behind monetary theory is that money is essential because the economy is so large that we cannot rely on everyone always keeping their promises. Another way of expressing this is that there is no easy way of writing perfect contracts with everyone else in the economy. On a small scale we could explain it with an example. Pelle works as a teacher and he wants food. Anna works as a farmer and wants her children to go to school. If Anna could promise Pelle that he could have food when she harvests in the autumn, Pelle could teach the children all year and then receive food when Anna harvests. But if Anna’s children have already received their schooling, there is no incentive for her to give Pelle food afterwards. Anna and Pelle could, however, sign a contract that ensures they each keep their side of the agreement. If we imagine that this type of contract were to be signed with everyone from whom we want goods and services, we soon realise that it would become very complicated 2 Money is a broader concept than just cash. Most of the money in Sweden today is electronic money issued by  the banks. 3 See, for instance, Williamson and Wright (2010) or Lagos et al. (2,017). 3 [35]  to write all of these contracts, and that some form of further guarantee was needed to ensure the contracts were complied with.
The activities and practices at large, complex financial organizations are simply too intricate and evolve too quickly to be fully described ex ante in regulation. Banking supervision works in concert with regulation as the more flexible element of banking policy. Supervisory policy and standards can, and do, evolve over time to reflect the evolution in practice in the banking industry and in financial markets. Overall, supervisors are guided by the mandate to identify any practices or conditions at supervised firms that are a threat to the safety and soundness of those firms – and, of course, to ensure that the firms take all necessary steps to promptly remediate any such conditions. Critically, the definition of what constitutes “safe and sound” is not hard-coded into regulation, but is guided by the information and analysis done by supervisors and other Federal Reserve staff, such as economists, attorneys and market analysts. Supervisory expectations and standards are expressed through public guidance such as Supervision and Regulation Letters (SR Letters), publicly-posted examination manuals and other guidance. On a day-to-day basis, banking supervisors collect information on financial institutions through examinations and analysis. Examiners look at key aspects of a supervised firm’s businesses and risk management functions. They use this information to assess the adequacy of the firm’s systems and processes for identifying, measuring, monitoring and controlling risks at the firm and in the financial sector more generally. That said, the ultimate responsibility for risk identification and risk management remains with the supervised institution.

William C Dudley: Supervising large, complex financial institutions – defining objectives and measuring effectiveness Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Conference on “Supervising Large, Complex Financial Institutions: Defining Objectives and Measuring Effectiveness”, Federal Reserve Bank of New York, New York City, 18 March 2016. *  *  *  Welcome. It is great to see all of you here today to discuss the objectives and measurement of supervision for large, complex financial institutions. Nearly eight years have passed since the financial crisis hit, pushing the financial system and the U.S. economy to the brink, and leaving scars that are still evident today. The hardships of the financial crisis are unfortunately still open wounds for too many people, especially those who lost their jobs, homes or businesses, or those who struggled with the sharp fall in value of their homes and with staying current on their debts and bills. Understanding what went wrong and how to avoid severe financial crises in the future is, I am sure, an issue foremost in the minds of all the distinguished speakers here today, and I am no exception. Before continuing, let me indicate that what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.
A distinct message that we intend to remain outside the euro area for the foreseeable future would probably weaken our influence in the European Union still more. Our partners in Europe would then be less interested in allowing for our positions on other matters as well. The monetary union is, after all, one of the Community’s most central integration projects. On the other hand, the economic consequences of Sweden still having a flexible exchange rate should not be exaggerated, at least in the short run. Basically, the development of the exchange rate and interest rates depends on how we manage Sweden’s economy relative to the euro area. If we succeed in making our economic policy credible, the costs of remaining outside for some years should not be unduly high. But our decision not to participate does mean that we need to be extra clear in demonstrating our determination to implement a sound economic policy, focused on sustained growth with low inflation and high employment. There are no easy short cuts, even in the short run. That Sweden, as a euro outsider with a flexible exchange rate, will have to live with exchange rate fluctuations is evident from events last autumn. We know from international experience that  BIS Review 9/1999  –3–  floating exchange rates do in fact float. Not even good economic fundamentals suffice to ensure stability in financial markets. Here we have a price for being outside the monetary union.

The exchange rate The exchange rate is an important but elusive item in assessments of inflation. Last autumn, the main assessment was that the krona would become successively stronger as the financial turbulence subsided and relatively more importance was attached to the favourable economic fundamentals, which include low inflation and a growing surplus on public finances. Recently, moreover, it seems that such a process has begun. Signals of a move by Sweden towards the monetary union may perhaps have acted as a catalyst here. The new political signals about the handling of the EMU issue have brought the question of the krona’s equilibrium level to the fore. Participation in the euro area means that at some stage the krona’s exchange rate with the euro will have to be locked. In the discussion that will then be held with colleagues in Europe, the actual decision will be a matter for the Government. The Riksbank, however, is responsible for choosing the conversion rate we find reasonable on Sweden’s behalf. Meanwhile, we must bear in mind that we are dealing with negotiations between Sweden and the other EU member states, so it may be inadvisable to get tied down in matters of detail at an early stage. The Riksbank has made it clear on numerous occasions that it considers the krona to be undervalued. Much of the debate on this issue has stemmed from an article on the krona’s equilibrium exchange rate that was published early in 1996 in our Quarterly Review.
All that happens in a central bank’s balance sheet is the creation of a liability item in the form of “currency liability” and an asset item representing the asset the bank has acquired. This would make both assets and liabilities to rise simultaneously. This extraordinary power is being enjoyed by a central bank due its functioning as the monetary authority of a country. However, the community has given such a power to a central bank with a non-violable obligation attached to that power: the responsible use of the discretionary power vested with it. There are two reasons why a central bank should use its discretionary power of issuing currency responsibly. 1  This is valid even when the financial system stability has been made either a core objective or an ancillary objective of a central bank. BIS Review 58/2009  1  First, the issue of currency over and above the needs of the society will expand the nominal aggregate demand creating an excess demand for goods and services. Since the aggregate supply is inflexible to meet this demand in the short run, the excess demand will put pressure for prices to rise. If this continues year after year, it generates inflation, reducing the wealth of people in real terms and creating a series of adverse consequences that hinder the long term growth. Second, in an open economy which most countries have today, the rise in the aggregate demand could partly be met out of imports.

The next sign will be the depletion of the capital base. In the current paper money systems with no backing of gold or foreign currency holdings, capital funds in a central bank serves to back the domestic asset creation. If the capital funds which are non-monetary liabilities are equal to the domestic assets (a hundred percent cover), then all monetary liabilities are backed by gross foreign assets similar to a currency board. Therefore, the auditors should look for the ratio of capital funds to domestic assets and if the ratio is above 100%, they could be complacent. However, the risk factor emerges if the ratio falls. The auditors should alert the central bank management and come to arrangement with it, to prevent its further depletion. If the ratio falls closer to 15%, the level prescribed in many central bank legislations as the minimum requirement, the auditors should issue a red alert to central bank managements. When the ratio falls below 15%, then, it is a matter of national emergency and urgent measures need be introduced to re-capitalise a central bank. The third sign is the actual losses made by central banks due to larger out-payments. The fourth sign is the necessity for issuing currency to finance a central bank’s affairs, since it amounts to inflating the economy to meet a central bank’s expenses. Conclusion The auditors of a modern central bank should play a different role today.
We are particularly focused on your feedback in areas where our proposals will impact those products and services that are central to the mutual business model, like both owner occupied and buy to let mortgages. The consultation closed in late March. We are considering all the feedback received which will inform our final policies and approach to implementation, which we will look to communicate in due course. Strong and Simple Alongside that process and aligned with my earlier comments about tailoring rules to UK circumstances where appropriate, we are investing in our Strong and Simple project. Through this we will create a simplified prudential framework for domestically focused nonsystemic banks and building societies that is, when compared to the standards that apply today, more proportionate, easier to understand and less costly to implement. But importantly that simplified framework also has to be strong, by which I mean maintaining overall resilience which is equivalent to what we have today. Events in the global banking sector in recent months have clearly demonstrated why the ‘simple’ needs to be accompanied by the ‘strong’. As the target population of firms for the first layer of the framework is smaller domestic firms providing savings and lending products in the UK, many building societies are likely to be eligible to take advantage of the simplifications. Our Basel 3.1 consultation paper set out some proposed revisions to the scope of the first layer, including to address feedback on the definition of domestic exposures.

That is exactly why we put credit risk at the top of our list of Supervisory Priorities11 for UK deposit takers in our annual letter to CEOs in January. What do we expect mutuals to do? As I noted at the start, your services are instrumental in supporting UK households and businesses. It’s in all our interests that this is maintained, both to the members who rely on your services and also to support the resilience of the broader economy. But it is also vitally important that the risks of doing so are managed prudently. Whilst the mutual sector generally has a good track record of doing this, it is important that firms continue to enhance the way they manage risk. Aligned with this, we’ve seen the most proactive firms taking steps that include: • •  • •  • • •  Using early warning indicator frameworks that highlight emerging risks in portfolios at an earlier stage than more traditional, backward-looking credit metrics. Reviewing credit risk management frameworks to ensure they remain appropriate, with robust governance and controls around credit and affordability assessments. Reviewing lending criteria to ensure they remain prudent and sustainable. Assessing concentration risks in their portfolio. This is especially important for firm-specific concentrations, for example in the type or location of their customer base. Regularly analysing whether the levels of credit loss provisions are sufficient and ensuring these are recognised in a timely manner.
This might arise from the rise of the robots, artificial intelligence, Big Data, the Internet of Things and the like. Because of its impact on future living standards, the winner of this secular struggle – stagnation versus innovation – carries enormous societal implications. A second issue, every bit as topical and important, concerns the distribution of gains in living standards. Specifically, there has been mounting concern over a number of years about rising levels of within-country 5  inequality across a number of countries. Candidate explanations for this widening dispersion in fortunes include failings in the educational system, the impact of technology and globalisation, anti-competitive practices and weaknesses in corporate governance. 6  Both of these great debates – innovation versus stagnation, the widening dispersion of income and opportunity across society – have a causative link to productivity. A household’s income depends largely on wages and these wages depend, in turn, on the productivity of the company at which households work. So falling productivity growth among firms, and widening dispersion of productivity across firms, could in theory have contributed to stagnant household incomes and widening dispersion in these incomes. To be clear up front, I do not have a simple explanation, much less an oven-ready solution, for these productivity puzzles. My aims here are more modest – to draw together some of the available data on productivity to shed light on the puzzles.

Svein Gjedrem: The monetary policy response to the economic outlook Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Mjøs regional business seminar, Hamar, 21 May 2003. The address is based on previous speeches and on the assessments presented at Norges Bank’s press conference following the monetary policy meeting on 30 April. Please note that the text below may differ slightly from the actual presentation. The Charts in pdf can be found on the Norges Bank’s website. *  *  *  The operational objective of monetary policy as defined by the Government is inflation of close to 2½ per cent over time. Norges Bank sets the interest rate so that future inflation will be equal to the inflation target of 2½ per cent. The interest rate reductions last winter and this spring were a response to changes in the inflation outlook as a result of slower global economic growth and a sharp decline in international interest rates. In addition, the Norwegian business sector is feeling the effects of the high Norwegian cost level. Growth in domestic demand has also slowed. Household purchasing power has been reduced as a result of higher electricity prices. The weak prospects at home and abroad are in turn having an impact on the Norwegian labour market and the outlook for wage growth and inflation in the years ahead. Even though the krone has depreciated this year, it is still fairly strong, contributing to a fall in prices for imported goods and services.
The baseline scenario reflects those events that are believed to be the most likely to occur with the information at hand at the closing of this Report. There are risk scenarios, however, which if materialized, may reshape the macroeconomic environment and, therefore, may modify the course of monetary policy. On this opportunity, having evaluated the alternative scenarios, the Board estimates that the risk balance is downward biased for output and unbiased for inflation. Abroad, one first risk has to do with the behavior of emerging economies, especially China. The latter risk has been present in several Reports already and has recently been exacerbated because of growing doubts posed by the fragility of the Chinese financial system and the overall increase in the risk perception of the emerging world. In particular, adeterioration in the Chinese economy would have first-order effects on Chile and the group of emerging economies, spreading through both real and financial channels. Of particular importance is its impact on the prices of commodities, including copper, as well as on the growth of other important trading partners. Moreover, it cannot be ruled out that the vulnerabilities that some emerging economies have accumulated may generate new episodes of volatility It is also possible for the recovery process in the U.S. to end up being stronger than expected. The timing of its effects shows different signs.

For a start we cannot directly observe or measure what is happening in an underlying sense on the supply side with any great precision. We may become aware of short-run shocks relatively promptly, and we are able to draw inferences from partial information over time. But we can't be confident we know just where the "target" is, and we will often need to approach it somewhat tentatively. And there are equally uncertainties on the demand side as to just what is happening currently, or even more as to what is likely to happen in the period ahead. Nor can we know at all exactly just what the size of the impact of monetary policy action will be, or the timescale over which it will have its full effect, in the particular circumstances of any given situation. It has often been said that monetary policy is more of an art than a precise science even though we all bring to bear as much economic science as we can muster. There are particular difficulties in interpreting movements in asset prices, including exchange rates, let alone seeking to manage them through monetary policy. And even if we have a view about the asset prices we might like to see in the broader context of our monetary policy objectives, it is often very hard to predict even the direction in which they might move, over even relatively long periods, in response to changes in interest rates.
In the days following the revelation, long-term interest rates rose by around 100 basis points and the sterling depreciated by almost 5 per cent against the dollar. One of the consequences of the rise in interest rates was that it brought to light major liquidity problems in a number of occupational pension funds. This prompted the Bank of England to act and after five days it announced that it would temporarily purchase long-term government bonds to the extent necessary to provide the required liquidity and thus calm the financial markets. This example illustrates how fiscal dominance can affect the central bank. The fiscal policy measures triggered financial market turmoil, which meant that the Bank of England felt it had to act to maintain the smooth functioning of the financial system. In other words, the fiscal measures "forced" the Bank of England to act in a way that it would not have done otherwise. Of course, it could have chosen not to react to the fiscal policy measures because monetary policy is operationally independent of fiscal policy. But that would not have protected either the financial system or the inflation target. I do not want to use this example to suggest that we in Sweden are currently at risk of fiscal dominance. The design of the fiscal policy framework means that the risk is small and we have a relatively low national debt, see Figure 4.

Lundvall, H. (2020) “What is driving the global trend towards lower real interest rates?”, Sveriges Riksbank Economic Review, 2020:1. Nessén, M. (2016), “Commentary: The case for unencumbering interest rate policy at the zero bound”, Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole 2016. Rajan, R. (2005), “Has financial development made the world riskier?”, in The Greenspan Era: Lessons for the Future, A symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. Final report of the Riksbank Committee (2020), "A new Sveriges Riksbank Act", SOU 2019:46. Smets, F. (2013), “Financial stability and monetary policy: How closely interlinked?”, Sveriges Riksbank Economic Review, 2013:3. Stein, J. (2013), ”Overheating in Credit Markets: Origins, Measurement and Policy Responses,” speech at the Board of Governors of the Federal Reserve System. Stock, J. and M. Watson (2002), “Has the business cycle changed and why?”, NBER Macroeconomics Annual, Vol. 17. Svensson, L. (2012), ”Utmaningar för Riksbanken − penningpolitik och finansiell stabilitet”, (Challenges for the Riksbank − monetary policy and financial stability), Ekonomisk debatt, no. 12. Svensson, L. (2014), “Inflation targeting and leaning against the wind”, International Journal of Central Banking, June 2014. Svensson, L. (2017), “Cost-benefit analysis of leaning against the wind”, Journal of Monetary Economics, Vol. 90. Woodford, M. (2012), “Monetary policy and financial stability”, Sveriges Riksbank Economic Review, 2012:1. 27 [30]  Figure 1. CPIF and CPIF excluding energy and forecasts Per cent  Note. Annual percentage change. Sources: Statistics Sweden and the Riksbank. Figure 2. Long-term inflation expectations Per cent  Note.