samchain/econo-pairs-v1 huggingface dataset:
After a period of very low inflation in 2004, inflation was on the rise through 2005. Thereafter, domestic inflation showed an unexpected drop in 2006. Lower electricity prices have contributed to a fall in total CPI inflation in 2007. Underlying inflation, i.e. inflation adjusted for tax changes and excluding energy products, was fairly stable for a long period at between 1 and 1½ per cent. Underlying inflation has edged up gradually since late summer 2006. The most recent figures indicate that underlying inflation is now approximately 1½ per cent. The Norwegian economy is expanding sharply after the strong upturn began in summer 2003. The upturn followed a period of slow growth from 1998 and a mild recession in 2002 and into 2003. Growth has been stronger than in the cyclical upturn in the mid-1990s. We have just reached the end of an unusually long period of economic growth. So far in the cyclical upturn, the mainland economy has grown by an average of just over 4 per cent annually. This year, growth appears to be over 5 per cent. Growth is very strong for such an advanced stage of the economic cycle. This is clear from a comparison with the upturns in the 1980s and 1990s. Unemployment has declined considerably and is now very low. The labour market is tight. Unemployment has not been as low since the latter half of the 1980s, and employment has risen faster this year than in living memory.

It is this estimate that underlies the plan drawn up by the Government and the Storting, referred to as the fiscal rule. The rule states that the Government is to spend, as an annual average through the business cycle, the expected return on the petroleum fund i.e. 4 per cent. Because of the high level of activity, the Government has proposed somewhat lower petroleum revenue spending next year than the 4 per cent of the Fund’s value at the beginning of the year. The proposed tax programme for next year will have a fairly neutral impact on economic activity. Proposed direct and indirect tax rates will generate approximately the same government revenues as last year’s tax rates had they been left unchanged. However, the overall central government budget will have a stimulatory effect. This is reflected in fairly strong nominal spending, which is higher than the rate of growth in mainland GDP that can normally be expected. Norges Bank’s interest rate setting is based on two main criteria for future interest rate developments. First, the interest rate is set with a view to stabilising inflation close to the target in the medium term. The horizon will depend on the shocks to which the economy is exposed and their effects on the path for inflation and the real economy ahead. Second, the interest rate path shall provide a reasonable balance between the path for inflation and the path for capacity utilisation.
Zambia already trades power within the SADC region, through the Southern African Power Pool (SAPP). In the mining sector, Zambia is already seeing investment in value addition to raw materials being driven by the opportunities available in regional markets as close as the Democratic Republic of Congo (DRC) and as far away as Egypt. How does Africa respond to the loss of fiscal space that has robbed the Government of critical resources needed to build their economies by investing in human capital and physical infrastructure projects such as roads, irrigation schemes, and power plants? First of all it is important to recognize the extraordinary response of the international community, especially through the G20 group of countries, in mobilizing resources to address both the liquidity needs of financial markets and the fiscal challenges faced by Governments. A significant amount of this support has been channeled through the multilateral financial institutions such as the IMF, World Bank, and the various Regional Development Banks, including our own African Development Bank (AfDB). The operating procedures and practices of these institutions have also been reformed to a significant degree – although it is true to say that it will take more time to change the organizational mindset and attitude of staff. In this regard, at the end of August and the beginning of September, Zambia received an SDR allocation amounting to $ 625 million that has augmented our reserves and provided a boost of confidence in our financial markets.

Despite the slight correction during the year, current account deficit remains high and one of the weaknesses of the Albanian economy. The Bank of Albania considers that the prioritized handling of the current account deficit requires the formulation of policies supportive to the long-term growth of savings in Albania, as well as measures to encourage production in those branches or industries that result competitive in the international markets. Trade balance narrowing was affected by the concurrent annual decline of exports and imports by 18 and 9 percent, respectively. The difficult situation in our neighbouring countries has been also reflected in the decline of remittances, which contracted 6.5 percent in annual terms, while their share to GDP was 9 percent. Capital and financial account surplus reduced substantially over the course of 2009, dropping by 35.6 percent compared to 2008. This performance owes to a large extent to the low increase in foreign direct investment and the reduction of private foreign borrowing. Unlike the previous two years when capital and financial account covered over 100 percent of the current deficit, in 2009 it financed only 77 percent. Total foreign inflows, albeit downward, were almost sufficient to cover this deficit in 2009. The country’s foreign reserve remained at similar levels as in 2008, sufficient to cover 4.2 months of imports of goods and services. 4  BIS Review 78/2010  The contraction of foreign inflows exerted depreciating pressure on the exchange rate, particularly in the first half of 2009.
This means that banks can lend money at a lower cost than would otherwise be the case. They can thus boost the expansion of credit in the economy without taking any significant risks themselves. This is something that we have actually seen in recent years – lending to Swedish households has increased at a worryingly high rate. I believe that the introduction of a ceiling for how much the banks can lend without increasing their equity is a reasonable measure to prevent an excessive provision of credit. 8  BIS central bankers’ speeches  New standards for the banks’ liquidity management As I mentioned at the beginning, the financial crisis has also given us reasons to consider more direct and specific liquidity regulations. Consequently, the Basel Committee has drawn up entirely new standards for how banks should manage their liquidity. They have drawn up two quantitative measurements; the Liquidity Coverage Ratio and the Net Stable Funding Ratio, and will also impose considerably stricter requirements on the banks to report their liquidity risks. The Liquidity Coverage Ratio focuses on the banks’ liquidity buffers. The banks must hold liquidity reserves that are sufficiently large and sufficiently liquid to cope with a 30-day stressed cash outflow. The rules for what constitutes liquid assets are strict. At least 60 per cent of the reserves must consist of government securities, the rest can be made up of highquality, liquid mortgage and corporate bonds. The second measurement, the Net Stable Funding Ratio, is a structural measurement focusing on the banks’ funding models.

During the upturn that preceded the crisis, when risks were low, banks were able to expand their balance sheets and present good capital adequacy figures, despite the fact that they held relatively little capital. When the downturn then began and the risks increased, more capital was required to reach the stipulated minimum level of capital. With the increase in risks and the loss of confidence between the banks, the markets’ capital adequacy requirements also increased. In order to meet these requirements, banks in many countries were forced to reduce their balance sheets. This led to a fall in lending to companies and private individuals. This in turn triggered a downward spiral with a fall in demand and in investment capacity, which reinforced the downturn in global economic activity. When you list the problems in this way it becomes pretty clear that we need to revise the existing regulations. The Basel Committee has done a lot of hard work to correct these shortcomings and I welcome their proposals on a new international regulatory framework for banks. Basel III – what is new? Basel III comprises global minimum regulations and aims to strengthen the banks’ ability to manage losses and reduce the probability of new financial crises. To achieve this, the banks will be required to hold more and better-quality capital. An important task for the decisionmakers involved has thus been to increase the international capital adequacy requirements But Basel III is not just about capital.
So you would be right to take all forecasts – including our own – with a large pinch of salt. But the MPC has to take a view, when it sets interest rates. My aim tonight will be to share some of that thinking with you. Financial market developments Let me start with the problems in global financial markets. Over the course of the summer, growing arrears in the US sub prime mortgage market triggered a global loss of confidence in the valuation of securities backed by bundles of mortgages and other loans. How could a relatively limited problem – confined to the bottom end of the US housing market – spark a global financial crisis? It’s a good question. The short answer goes as follows. Investors had come to rely too heavily on the ability of rating agencies to value what had become exceedingly complex financial instruments. The realisation that their faith had been misplaced cast doubt on the value of a wider class of asset backed securities. Many of these were embedded in ever more complex, highly leveraged, investment vehicles. This set the stage for a period of turmoil in international money and credit markets which has now been through several phases, and may go through several more. At its heart, the problem is one of uncertainty. First, there is great uncertainty about the eventual size of losses from defaults on US sub prime mortgages that the global financial system will have to absorb.

In particular, the definitions of capital must not be watered down and risk-weighted asset calculations must be done in a consistent manner around the world. An identical portfolio of assets should generate a comparable amount of risk-weighted assets regardless of the country in which the bank’s home office is domiciled. With respect to standards for financial market infrastructures, the Principles for Financial Market Infrastructures, which were published last month, are an important step forward. These principles establish the minimum standard for important FMIs around the world. But the establishment of these standards is just the first step. National authorities now need to ensure that their domestic regulatory regimes embody these principles, and these national regimes have to be credibly assessed for ongoing conformance to the new standards. Global standards for financial market infrastructures are necessary if we are to build a safe global system of central counterparty clearinghouse (CCPs) infrastructures though which to clear standardized over-the-counter derivatives trades around the world. For national regulators to be comfortable with such an arrangement there has to be an appropriate level of information exchange and cooperative oversight, and the Principles explicitly mandate this. Although cross-border information exchange and cooperative oversight are certainly not new – the coordination of currency settlement around the world through CLS is one important example – the model has to be further developed and adopted more broadly across a wider range of important global financial market infrastructures.
In the event of excess liquidity, banks will be able to lend New Turkish Lira to the Central Bank at the Central Bank’s borrowing rate without any limit. (ii)  The current implementation of the Late Liquidity Window Facility will continue. Banks will borrow from the Central Bank against collateral, and lend to the Central Bank without any limit between 4:00 p.m. – 5:00 p.m. and on the last working day of the required reserve provision between 4:00 p.m. – 5:15 p.m.  (iii)  In case of a temporary or permanent liquidity shortage, the Central Bank will continue to execute its liquidity management mainly through one-week repo auctions. During the periods when the Central Bank does not apply a technical interest rate cut, the Central Bank will announce the amount of repo auction for the day of liquidity shortage on Reuters’ “CBTF” page at 10:00 a.m. As long as no extraordinary fluctuations are observed in the markets, the Central Bank, while determining the amount of the auctions, will endeavor to maintain the average auction interest rate as close as possible to the borrowing rate of the Central Bank announced for intraday transactions. (iv)  Weekly repo auctions will be held at 11:00 a.m. and the results will be announced on Reuters’ CBTG page no later than at 11:30 a.m. as much as possible. The traditional method will be used in auctions; in other words, successful bidders will be evaluated with their own interest rates.

It finds that the buffers created by dynamic provisioning somewhat  1  Dirk Schoenmaker (2011) “The financial trilemma” in Economic Letters, 111, pp. 57–9. BIS central bankers’ speeches  3  contracted credit availability in good times and helped expand it in bad times. The reason these provisions were insufficient to stop the credit boom was that they needed to be applied more evenly and aggressively.2 The second change is related to decision-making. As a European decision-maker, the SSM will be able, if needed, to apply prudential measures to banks in both borrowing and lending countries. This is important because, to the extent that macro-prudential measures mitigate credit booms by raising banks’ cost of equity, this effect can be offset if there are large inflows from abroad that lower banks’ cost of debt. Indeed, one can suppose that this was an additional reason that dynamic provisioning in Spain was not enough to avert the credit boom and the housing bubble. The ECB’s comprehensive assessment of the main European banks Taken together, I am confident that these institutional and macro-prudential changes will help strengthen financial governance in the euro area. We will have the right supervisory powers at the right level of action – the European level. Before we start actually our supervisory tasks we will conduct a comprehensive assessment of the significant banks in the euro area. This assessment will consist of three elements.
Financial crisis management: the role and instruments of central bank policy  Let me start by making two general points concerning the role of central banks in safeguarding financial stability and the instruments that can be employed to this end. The first point is that the role and actions of central banks, in promoting financial stability must be compatible with the policy framework guiding the achievement of the primary objective of price stability. Financial stability and price stability are, in general, complementary goals and conditions that are mutually reinforcing. But there can be occasions when the constellation of shocks affecting the economy and the dynamics of market processes may pose challenges or policy trade-offs for central banks aiming at the preservation of price and the safeguarding of financial stability. The second point concerns the available policy instruments and the actual measures taken by central banks when dealing with the financial crisis: The tools include (i) liquidity provision and management; (ii) the key monetary policy interest rates; and (iii) credit support measures aimed at enhancing the functioning of credit markets. The use of these policy instruments, and the timing of their use, depend on the potential relationship between (i) the prospects for price stability and (ii) the size of financial market stresses and associated systemic risks. It also depends upon the economy’s financial structure. For example, the extent to which the financing of the economy relies on the banking system and on the capital market has implications for the relative reliance on different policy tools.

Lucas Papademos: The role of the ECB in financial crisis management Speech by Mr Lucas Papademos, Vice-President of the European Central Bank, at the conference on “The cost of the financial crisis: Planning an exit strategy”, organised by the Bank of Greece and the Hellenic Observatory at the London School of Economics and Political Science, Athens, 27 May 2009. * I. *  *  Introduction  “Τα πάντα ρεῖ” (all is in flux) Heraclitus asserted about 2500 years ago. His aphorism is truly relevant to our understanding and assessment of the financial and economic developments over the past two years. The financial crisis has evolved over time, and so have the policies employed to counteract its impact as well as the public debate about its causes and consequences. A year ago, gatherings such as this one would have been dedicated to identifying the underlying sources and the other contributing factors of the turmoil in financial markets. Six months ago, as the crisis deepened and broadened after the collapse of Lehman Brothers, public policies and discussions concentrated on how to restore confidence in the banking system and deal with the significant weakening of economic activity worldwide. More recently, the attention has progressively focused on the new economic and financial landscape that is likely to emerge after the crisis, and on devising “exit strategies” from the extraordinary policies currently pursued.
The ATC has also been supported by the work of several working and expert groups. The ESRB’s work so far I hardly need to point out that the ESRB started in a very difficult period when systemic risks in Europe seemed to be greater than ever and when political and economic issues were tightly interconnected. Obviously, the work of the ESRB has largely focused on the immediate challenges of the current situation. But work is also taking place on more longterm structural challenges to the EU financial system. The vicious financial triangle At its June meeting, the ESRB concluded that the most serious threat to financial stability in the EU stems from the interplay between the vulnerabilities of public finances in certain EU member states and the banking system, with potential contagion effects across the Union and beyond. At the last meeting on September 21, the ESRB stated that the risk to stability has increased considerably. I think we can all agree with this conclusion. Over the summer, the weakening prospects for economic growth have further added to the difficulties. We now face a dangerous interplay between fragile public finances, weak banking sectors and low economic activity both at global and EU levels – the vicious financial triangle. It was right of the ESRB to put this issue at the very top of its agenda, in spite of its highly political content. Anything else would have  BIS central bankers’ speeches  5  seriously hurt the credibility of the ESRB.

Instead, it can issue warnings and recommendations to national authorities and to EU institutions. These warnings and recommendations can be either public or private. The effectiveness of its recommendations will depend on the attitude of the addressees to the “comply or explain” principle. This principle simply says that either you do as recommended or you explain why you have chosen not to comply. To work, it requires respect for the institution issuing the recommendations. BIS central bankers’ speeches  3  Figure 6 The structure of the ESRB  Secretariat (about 20 people)  ECB  General Board (65 members, 37 voting members)  Steering Committee (14 members)  Advisory Technical Committee (62 members)  Advisory Scientific Committee (16 members)  The ESRB is unique in that it brings together representatives from central banks and financial supervisory authorities from all 27 Member States, as well as representatives from the three European supervisory authorities and from the European Commission. However, this also makes the General Board a large body consisting of 65 members – 37 voting and 28 non-voting. Decisions are taken by simple majority, but a majority of two thirds is needed to adopt recommendations or to make a warning or recommendation public. The fact that ESRB decide by voting rather than by consensus is important, since blocking minorities can be avoided. The majority of voting rights are held by the national central banks (27 voting rights) while the national financial supervisory authorities have one non-voting representative per Member State in the General Board.
And in highly competitive goods and services markets, consumers’ benefits show up in the form of lower prices, rather than entirely in higher pay, with important, not yet fully understood, implications for the distribution of benefits in our economy. Let us not forget the financial and corporate side of this picture as well. There is no doubt that the banking system in the United States has been far stronger in the 1990s than it was in the previous two decades. At the same time, capital markets have deepened significantly. Expanded equity markets have served as important sources of finance for new businesses, while venture capital markets have provided increased access to risk capital. By some measures, new financing from these and related markets has tripled the flow of new equity capital to business in the last five years. Also important has been the increased liquidity of financial assets. Today, asset portfolios of loans and credit cards are easily transferable through securitization or outright sale. As a result, the corporate sector, too, has witnessed significant change over this past decade, with the formation of many new businesses and the transformation of many old ones. Many of the household names today were formed sometime in the last 25 years, while a number of the corporate giants of 25 years ago still in operation today have changed dramatically. To remain competitive, many have had to shed some business lines that no longer fit their overall strategies and to invest in new lines.

The regional tradition is poor, of little inheritance in institutions, market rule and behaviour, and financial intermediation. However, today, about 15 years after the big collapse of the communist regime it seems that South East European Countries (SEEC) have been engaged in an irreversible process of their stabilization and integration with the rest of Europe. 2  BIS Review 44/2005