samchain/econo-pairs-v1 huggingface dataset:
We can have governance of the global financial system even though we do not have global government. Governance can mean legislation, regulation and the institutions of government. But it also encompasses broader frameworks of standards, norms and conventions, international organisations and agreements that fall short of hard law. Indeed, in a world of nation states and national legislatures and governments, it is on these broader frameworks that we need to depend for the governance of financial globalisation, and the management of cross border risk. This challenge is not of course confined to the financial sector. International governance structures are required in many economic and non-economic spheres. But since the liberation of global capital flows and liberalisation of international financial markets which began 50 years ago, financial authorities in multiple jurisdictions have sought together to build the necessary governance frameworks to enable the benefits of financial globalisation while managing the risks. The first Basel Banking Accords of the early 1980s were motivated by the need to ensure that banks involved in cross border services were made subject by their home authorities to minimum standards. In other words, to ensure that the benefits of cross border flows were accompanied by assurance on the risks that might be imported. Financial globalisation accelerated through the last decade of the last century and up until the great financial crisis. External financial assets and liabilities increased from 60% of GDP in the 1980s to 400% of GDP in 2008.

Svein Gjedrem: Perspectives on the role and effects of monetary policy Introduction by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), for the Holden Committee of Experts assessing the challenges facing the exposed sector, Oslo, 16 January 2003. *  *  *  Introduction The primary objective of monetary policy is to ensure nominal stability. There were wide fluctuations in the Norwegian economy in the 1970s and 1980s. Economic developments were marked by high and variable inflation. Inflation rose gradually and it took a long time before it fell. The absence of a nominal anchor was one of the main reasons behind these pronounced swings in the Norwegian economy. With a policy of low interest rates and devaluations, inflation took root. Nominal interest rates were kept at a low level even though inflation and the value of tax-deductible interest expenditure rose. Frequent devaluations from 1976 were not able to prevent a decline in the manufacturing sector. On the contrary, they proved to be self-reinforcing. The wide fluctuations culminated in a credit boom in the mid-1980s, followed by a deep recession and high unemployment towards the end of the 1980s. From the mid-1980s, during and after the credit bubble, it was recognised that a substantial revision in economic policy would be necessary and that the problems created by inflation had to be taken seriously. The exchange rate was chosen as the nominal anchor. A deterioration in competitiveness due to high wage growth would no longer be rectified by means of devaluations.
Monetary policy has, of course, been highly stimulatory here and in other advanced economies since the financial crisis. Not only are policy rates close to their zero lower bound, but the Bank of England, US Federal Reserve and Bank of Japan have all engaged in large-scale asset purchases of government debt and selected private assets, paid for by an expansion in bank reserves – what is commonly referred to as “quantitative easing” . And while their open market purchases have typically been sterilised, the ECB’s policy of full allotment in the provision of liquidity means its balance sheet too has expanded substantially in size (see Chart 6). Quantitative easing is often described as “printing money” but this is somewhat misleading, as it conjures up images of Friedman’s monetary helicopter – of which I will say more in a moment. Rather, in our case it swaps one liability of the state – gilts – for another – claims on the Bank of England in the form of commercial bank reserves. When we buy a gilt from the private sector, say a pension or hedge fund, we credit the seller’s bank account with the appropriate amount, while their bank simultaneously acquires a claim on us in the form of an increase in its reserve account. These reserves bear interest at Bank Rate. As far as a bank is concerned, reserves are a very close substitute for holdings of short-term safe assets, such as Treasury Bills.

During the crisis we and other central banks have been forced to undertake a much wider range of actions than we would normally contemplate, lending against a broader range of collateral and for longer tenors than usual, and intervening in markets where we do not usually operate. While many of the new facilities were invented on the hoof as the crisis unfolded and should become redundant once normality returns, they will nevertheless remain in the emergency toolkit in case of future need. 2  This uses Basel I risk weights, though it seems unlikely that measures of risk-weighted assets calculated under the Basel II or III rules would have performed that much better. 4  BIS central bankers’ speeches  But once the immediate crisis has past, how can central banks foster the recovery? There is now ample evidence (IMF, 2009; Reinhart and Rogoff, 2009) suggesting recoveries after recessions associated with financial crises are typically much more drawn out than those after “normal” recessions. For instance, a study by the IMF of 122 post-war recessions across 21 countries finds that, on average, output surpasses its pre-crisis peak around a year after the start of a “normal” recession. But that average period rises to 2½ years following financial crises. And the mean level of output across the 15 recessions associated with financial crises is still some 6% below a continuation of the pre-crisis trend some seven years after the onset of the crisis (though there is considerable heterogeneity in individual country experience, as Chart 3 shows).
Figure 2: Gross O fficial Re se rve s 3,000  USD mn  2,500 2,000 1,500 1,000  2006P  2005  2004  2003  2002  2001  2000  500  It is useful to recollect that since moving to the “Floating exchange rate” regime in 2001, the gross official reserves have continued to increase except in 2004 when the country was hit by the sudden increase in oil prices. As of now, the gross official reserves have been sufficient to meet about 3 months of average imports in the recent years despite the rising expenditure on oil imports. We also note that according to the overall policy vision announced in the “Mahinda Chintana”, the Government’s commitment to reduce the budget deficit to a sustainable level in the medium term has been made clear. In that context, the fact that the total revenue during the first nine months of 2006 increased, and thereby led to an improved Revenue/GDP ratio is laudable. In addition, it was noted  BIS Review8/2007  3  that several measures were introduced by the Government to rationalise recurrent expenditure, especially adjusting domestic fuel prices to reduce the burden on the Government. Nevertheless, the Government has had to resort to borrowings from the banking sector to meet shortfalls in the face of many challenges, and in order to avoid such a situation in the future, it would be highly desirable to further improve the Revenue generation and collection process in 2007 and beyond.

The key policy instrument used in this endeavour is the establishment of policy interest rates for borrowing (Repurchase Rate) and for lending (Reverse Repurchase Rate) that operates through the Bank’s Open Market Operations. The Central Bank conducts Open Market Operations to keep the level of Reserve money in the system at an appropriate level, while it uses the Statutory Reserve Ratio (SRR) on commercial bank deposit liabilities to further support the monetary policy. Financial System Stability, the other core objective of the Central Bank, is achieved through the regulation and supervision of financial institutions, the overseeing of the financial infrastructure which includes critical payment and settlement systems, as well as keeping a close watch on the financial markets as a whole. To achieve this objective, the Central Bank employs a series of prudential and regulatory measures. In addition to the core objectives, the Central Bank provides policy advice to the Government and vital state sector enterprises to strengthen macroeconomic stability and to enhance growth prospects. The Bank also undertakes several agency and ancillary functions, which include managing the Foreign Reserves of the country, Public Debt and Employees’ Provident Fund (EPF). Further, the Central Bank plays a key role in broadening the financial infrastructure and strengthening the small, medium and microfinance sectors in the country. 2. Outline of today's statement  The policy statement presented today for the year 2007 and beyond focuses on several areas.
And no system should be static, since regulation will need to evolve alongside the business. Will these reforms prevent future financial crises? Almost certainly not. Financial crises have been around for thousands of years (we know that the Romans had them for example) and can be caused by all sorts of unexpected, unpredictable events, including natural catastrophes. We have to assume there will be crises in future. But what the reforms should have done is made the financial system, and its component parts, much more resilient in the face of shocks. Fewer firms should fail, fewer still in a disorderly fashion. Financial instability is therefore less likely and hence there should be greater continuity of financial services. And in consequence of a more resilient financial sector, the wider economy should be able to better withstand shocks with less detrimental effects on unemployment, output or price changes. Has too big to fail been ended? Not yet. The policies being put in place should, however, take us a considerable way towards that objective. It will certainly be a lot easier to handle a major financial firm failure once they are in force. It should be much less likely that public money is required to underpin financial stability in future. Has there been over regulation? The honest answer is: quite possibly, but no one can be sure. This question has many aspects – have there been some reforms that are unnecessary given others?

Legislation to enable the IBC proposals was passed in 20138. The benefits from separation are several. Retail deposits tend to be a cheap source of funding. In part that is because retail deposits are protected up to a limit by statutory guarantee – so they tend be safe, and sticky. Banks that have a range of activities would have an interest in using cheap, protected retail funding to engage in its most risky activities – for which direct funding is likely to be much more expensive. Furthermore, historically, banks with large retail activities have also been viewed by credit rating agencies to have a large degree of implicit government support thus making their public debt issuance cheaper as well. The funding advantage from being seen to be “too big to fail” has been estimated from a range of studies to be equivalent to a subsidy on the scale of hundreds of billions of dollars globally,9 encouraging and enabling greater risk-taking by firms than true costs of funding would justify. Separation also means that the structure of firms is simplified and hence they would be easier to resolve if necessary. The EU more generally is still deciding on its precise approach to structural reform, although the Liikanen report (2012) took a slightly different approach from the IBC.
In many areas, we have identified the necessary tasks only in general terms. Progress in figuring out the details and the implementation path and how to coordinate the efforts on a cross-border basis is more limited. I would particularly highlight the cross-border coordination problem – regulatory oversight is national, but many financial firms and infrastructures operate on a global basis. Effective reform requires mutually consistent global standards – and while international cooperation to date has been good on many fronts, progress is uneven, and the devil is in the details of implementation. We need all national authorities to resist the temptation to favor domestic financial interests over the interest of achieving a true level playing field globally. And we should resist the urge to favor locally controlled infrastructures where global solutions would better advance the collective financial stability interest. Instead we should work to ensure fair access to global infrastructures. Also, it is important that national regulators have access to data and a role in the regulatory oversight of such global infrastructures when that is relevant to their own national financial stability agendas. In the United States, I think we have made more progress in bolstering the resilience of our banking institutions than we have on the other tracks. There are two elements to this. The first element is the increase in capital that has already occurred. The major U.S. banking institutions are much better capitalized today than they were in the fall of 2008.

One industry that reports a very solid first half year is the fish farming industry. This industry is particularly important in Hordaland, which alternates with Nordland in being the county that produces the most farmed fish. Prices for fresh farmed salmon rose sharply at the beginning of the year, generating solid earnings in the industry. Prices have fallen somewhat since June but are still higher than they have been in recent years and far higher than unit productions costs. Our contacts in region South-West also report that the market outlook for the next six months is favourable in all sectors. Service industries are most optimistic about growth. In this year’s highestgrowth industries, oil and gas and building and construction, growth is expected to be slightly lower. Most sectors expect an increase in investment. In the local government and hospital sectors, the investment level remains relatively stable. Employment is rising in most sectors in this region. Seven of ten enterprises report that labour shortages are limiting their possibilities for expansion. The situation is particularly demanding for manufacturing and building and construction, as well as for some parts of the public sector. More than half of the contacts plan to increase their workforce during the next three months. The labour market is tightening further in the region. This is reflected in falling unemployment and rising wage growth. A number of sectors now expect higher annual wage growth in 2006 than indicated in the previous round of interviews.
10 They must also put measures in place to ensure that they will remain able to act in the event of a crisis and that the bank can be restructured or wound down in an orderly fashion. This second set of measures thus reduces the risks stemming from systemically important banks in that it strengthens the crisis resilience of such institutions while also enabling a restructuring or orderly wind-down. 5 6  7  8  9  10  The ratio of capital to total assets is known as the Leverage Ratio. The financial crisis showed that it is not only the amount of capital that is important, but also its quality. Basel III therefore also raised capital quality requirements. In particular, the regulation ensures that eligible capital can already be used to absorb losses before insolvency proceedings are initiated. This is the only way that such capital can act as a buffer and counter the threat of the bank having to cease operations. The international regulatory framework has also put in place further measures to reduce systemic risks in the banking sector. For example, the risk of contagion within the banking sector is to be reduced through more consistent measurement and control of concentrations of exposure to specific counterparties (e.g. other banks). The procyclicality of regulation is also addressed – in phases of excessive lending the regulator can set a countercyclical capital buffer. This increases the capital requirements for banks during upswings, releasing the capital again in downturns.

Although during the 2008 MMF run, investors also fled from prime to government MMFs, the characteristics of the run differed substantially: outflows were large but quickly reverted following the guarantee; they largely occurred across—and not within—fund families as investors became wary of particular counterparties; and investors moved to the safest sub-segment of the government MMF industry, that is, funds investing only in Treasuries and Treasury-backed repos. 19 These contrasts further illustrate a difference between investors’ demand for money-like assets in normal times, when regulation changes, and their demand for safety in non-normal times. Public sector provision of money-like assets There is a view that regulation and supervision alone are not sufficient to fully mitigate the financial stability risks associated with private maturity and liquidity transformation, and thus, the official sector should consider providing more money-like assets.20 The argument is that when the official sector increases its supply of money-like assets, it reduces the convenience yield on very short-term securities, thereby weakening the private sector’s incentives to create short-term runnable securities.21 Some recent market pricing helps to illustrate this characteristic.
At the same time, recent weeks have seen an appreciation of the dollar, which would be consistent with the expectations of further US interest rate rises, at a swifter pace than that in other economic areas. However, this appreciation might also be partly in response to a certain safe-haven effect, in a context in which certain risks appear to be rising, in particular in some emerging markets and areas subject to a high degree of political uncertainty. This latter factor is also contributing to heightening the uptrend in oil prices witnessed in recent months. The decline in activity observed in the euro area during the first three months of 2018, from 0.7% to 0.4% in terms of the GDP growth rate relative to the previous quarter, should be analysed with care. On one hand, it should be borne in mind that last year’s growth was particularly sharp (the highest since the start of the crisis, almost a decade ago); accordingly, it is reasonable to expect there should be some moderation. On the other, the as-yet very partial information available does not allow us to specify to what extent the change witnessed may have been due to transitory factors, relating to the weather and the high number of strikes in recent months in certain euro area countries, as opposed to other more durable factors. In any event, forecasts continue to suggest that the sustained rates of increase of euro area activity will continue in the coming months, albeit with a tendency to ease.

This means, in particular, that for some parts of the economy even being too late will feel as though it is too soon. What is certain is that the current expansionary monetary policy cannot be maintained indefinitely without incurring inflation risks. Therefore, households and firms should prepare themselves for a return, sometime in the future, to a world of higher interest rates, with exchange rates being guided by market forces. This is the normal state of affairs, and all concerned should shake off bad habits learned in extraordinary times and remember that they are ultimately responsible for the long-run viability of their decisions and operations. 2. Safer financial system: regulation  It is here that we have most to learn from recent events, and here that we must adapt. There is a lot that could be said. However, I will be modest and confine myself to putting forward three simple ideas that are becoming part of the general consensus, as outlined in the G20 and FSB agendas. Firstly, it should not be a game of us (the central banks, the regulators, the government) versus them (the banks or their managers, the financial sector). What is at stake is the design of an economic system that is efficient, compatible with the rules of a market economy and favourable to value creation. One essential lesson of the financial crisis is that the system was not properly designed.
We, as supervisor and central banker, will try to stay out of the way as much as possible, unless because of criminal activities or systemic risk concerns we have to jump in. The private sector seems to have done fairly well so far. To this end, I point out a recent creation of the Banker’s Roundtable, an organization composed of some of the largest United States banks, in organizing the Banking Industry Technology Secretariat (“BITS”). BIS Review 17/1997  -9-  BITS, as I understand it, is in the process of designing and implementing common technological standards for the inter-operability of systems linking banks and their customers, and is also hoping to act as a certification authority for its member banks for third-party system and software providers, to ensure that when an electronic or Internet banking transaction takes place, the bank’s name is the only name the customer ever sees. Similarly, a certified software or systems provider would agree that the customer’s payment information would stay with the bank and not the provider. I mention this not as an endorsement of BITS, but as an example of the type of innovation and cooperative or collaborative effort that can occur when the banking community realizes the enormous challenge and opportunity it has in the next few years. Central banks and bank supervisors must also be equal to these challenges. In order for us to fulfill our responsibilities, it will be necessary for the private sector financial institutions to keep educating and challenging us.

Minnesota Attorney General Hubert Humphrey III filed six lawsuits in 1995 against six companies accusing them of engaging in illegal business practices or running outright pyramid schemes over the Internet, although none of the six companies was based in Minnesota, and no Minnesota citizen ever came forward to complain about the companies. The fact that a Minnesota resident could have accessed the scams run by the companies, claimed Attorney General Humphrey, was sufficient to confer jurisdiction of his lawsuits in the Minnesota courts. Lest this argument sound wildly and improbably expansive, it should be noted that the “Internet access = jurisdiction” idea has already been accepted by some of the Federal district courts that have decided such cases, although it must also be noted that these courts’ decisions have been inconsistent, have all had slightly different facts, and have taken great pains to distinguish themselves from one another. New case law on the issue of jurisdiction conferred by Internet access is undoubtedly being made as we speak. At a minimum, then, banks offering services through the Internet should have signed contracts with electronic and Internet banking customers that specify to the courts where claims or disputes may be brought. Web-sites designed merely to advertise a bank’s financial services should be designed to be as controversy-free as possible, although that may be difficult without making the sites content-free as well. Banks should err on the side of caution until the jurisdictional issues have had more time to sort themselves out.