samchain/econo-pairs-v1 huggingface dataset:
Source: Norges Bank SG 16. januar 2003  BIS Review 2/2003  7  Forward interest rates Norway, Germany and the US 7.0  7.0 6.0  6.0  Norway  5.0  5.0  4.0  4.0  Germany 3.0  3.0  US  2.0  2.0  1.0 1.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013  Source: Norges Bank SG 16. januar 2003  Real exchange rate (TWI/relative CPI) 90  90  95  95  100  100 1970 - 2001  105  105  110  110  115  115 1971  1975  1979  1983  1987  1991  1995  1999  Source: Norges Bank SG 16. januar 2003  Purchasing power parity Norway and Germany. Relative prices and exchange rate  200  Consumer prices  100  200  100 Krone exchange rate  50  1970  50  1975  1980  1985  1990  1995  2000  Sources: Statistics Norway and Norges Bank SG 16. januar 2003  8  BIS Review 2/2003  Sweden's real exchange rate and relative GDP compared with the euro area. Quarterly figures.

How does monetary policy function? Monetary policy affects the economy through a number of channels. Let us make a stylised review of what happens if the central bank raises the key interest rate. In the short and medium term, this will result in a rise in the real interest rate. Normally, the exchange rate will also be strengthened. Prices for imported goods are an important part of the consumer price index (CPI). An appreciation of the krone reduces prices for imported goods measured in NOK. This is often called the “direct exchange rate channel to inflation”. The rise in real interest rates reduces consumption and investment demand. This is the “real interest rate channel to aggregate demand”. With a stronger exchange rate, domestically produced goods and services will be relatively more expensive than competing foreign products. Demand for domestically produced goods will decline. This is the “exchange-rate channel to aggregate demand”. The reduction in aggregate demand will in turn cause a reduction in price inflation. This is the “demand channel to inflation”. Price inflation and wage inflation are both affected by changes in inflation expectations. Some firms set prices for several periods. In wage formation, expected price changes will figure prominently in the calculation of expected future real wages. When monetary policy is credible, expectations regarding future inflation will be dampened by a rise in the interest rate. A change in expectations will in itself contribute to curbing future price inflation. Thus, the expectations channel amplifies the effect of monetary policy.
We recognise the challenges firms are currently facing in acquiring good quality data for these purposes but as data becomes more readily available we expect firms to be able to further develop their risk management and scenario analysis capabilities. The longer-term nature of the threat of climate change is demonstrated by the decades-long time horizons of the scenarios covered by the Bank’s recent Climate Biennial Exploratory Scenario, the results of which were published in May. Although it did not include any international firms, I would like to highlight two of the key lessons from the exercise, which Sam Woods also discussed in his recent speech. [4] The first lesson is that, over time, climate risks will become a persistent drag on firms’ profitability, perhaps in the region of 10-15% annually, particularly if they don’t manage them effectively. The second lesson is that how and when we transition makes a big difference to the costs the financial sector will incur. These costs will be substantially lower if firms take early, orderly action. Taken together, all of this should provide a strong incentive for firms to be ambitious in how they embed the management of climate-related financial risks[5] and meet the PRA’s broader expectations set out in Supervisory Statement 3/19. [6] So in that context, investment banks should take recent disruptions in commodities or supply chains as a sign of things to come, and get used to managing those because in the new world they might well become more frequent. End So let me conclude.

So your CEOs may need to start making different types of phone calls. The financial sector can also work together on the development of extreme and multidimensional systemic stress scenarios, and assessing the impact of shocks from one firm to another. We are arguably now still in the foothills of this new digital era. Ahead of that, international banks must frontload the implementation of operational resilience policy. Surely a mere sliver of the earnings of the last decade should be more than enough to cover that investment. And boards must make sure they understand the risks from new technology and that operational resilience becomes part of the fabric of their decision making. This means, before entering materially into crypto assets, adopting Artificial Intelligence (AI), introducing the cloud; or entering third-party relationships, international banks active in the UK must complete their operational resilience homework. So that they are prepared for this new tide. Towards waters in which safe havens will probably be quite sought after and attractive – so there is an opportunity here for banks and their franchise. Page 7  Climate The two issues I have discussed so far, namely how the new world might threaten firms’ financial and operational resilience, obviously have the potential to crystallise in the very near future. The last issue I will touch on today may appear to some as somewhat longer-term, but it is fast approaching and will change the environment we operate in. That is climate change.
Nor can I see, as economic activity has improved, any weighty reasons for making monetary policy more expansionary by reducing the repo rate even further. The adopted line, with a repo rate of 0.25 per cent that is expected to remain unchanged for several quarters, represents a very expansionary monetary policy. My view is that this policy should only be changed if inflation and/or the economic situation change considerably compared to our current forecasts. Concluding remarks I have now shared with you some of my experiences during my early months as a member of the Executive Board of the Riksbank. I realised already when I accepted the job that it would not be easy. However, the fact that monetary policy decision-making is not as straightforward as it appears in theory only serves to make the job even more exciting. A well-balanced monetary policy presupposes that we arrive at a reasonable balance between achieving the inflation target and stabilising the real economy. A reasonable balance requires in turn that we can effectively measure how much inflation deviates from the target and how resource utilisation relates to its normal level. We have fairly good measures of inflation, although it has been a problem recently that our main measure of inflation, the CPI, is so highly affected by our own repo rate decisions through their effects on housing costs. Consequently, at our most recent monetary policy meetings we have almost exclusively focused on alternative measures from which housing costs are excluded.

The Islamic banking industry now accounts for 16.7% of total assets in the industry. Similar trends can be observed in the growth of deposits that have reached RM180.4 billion, an increase of 27.7% during this period while, total financing has also increased by 24.5% to RM143.4 billion. This growth has also accompanied by an increase in the number of full-fledged Islamic banking branches. From January to September this year, 93 new branches were opened thereby enhancing the outreach of Islamic financial products and services. BIS Review 146/2008  1  Another area that has seen significant growth is in the Sukuk market. The Malaysian sukuk market has expanded significantly with an average annual growth rate of 22 per cent since 2001. Despite the current market conditions that have affected the volume of new bonds and Sukuk issuance, the Islamic capital market has continued to structure innovative Islamic financial instruments. By the first half of 2008, the composition of the more innovative Sukuk Musharakah had increased to 84% as compared to 58% of the total sukuk issuance in 2007. In addition, several new Islamic financial products have been introduced including residential mortgage backed securities, Commodity Murabahah deposit products, commodity based financing, credit card based on ujrah , as well as, structured products based on Musharakah, Mudarabah and Ijarah. Malaysia has acquired a unique market space for driving Shariah-based innovation by combining the depth of knowledge with the drive for innovation.
The relationship between the Bank and banking sector was no longer one of equals, though the Bank’s approach did not alter course overnight. The Bank of England Act 1946 subsequently granted the Bank a range of powers, including the ability to issue directions to firms. A further legislative development – the Companies Act 1948 – conferred privileged status on some institutions (recognised banks or discount companies) which resulted in the Bank granting 7  exemptions to these institutions by virtue of their status as a bank . For the first time, we see evidence of some differentiation of treatment between banks and regular companies. 8  Meanwhile, the Accepting Houses Committee – a collection of merchant banks with accounts at the Bank – had by this point grown in stature as an association that represented banks of good standing with the implicit 9  backing of the central bank . During the 1950s, and in exchange for the extension of this privileged status, the banks accepted a measure of consultation in order to reassure the Bank that their name was still good. This often took the form of a monthly meeting with the Governor to discuss the firm’s balance sheet, and it was in this setting that the Bank formed an idea of the level of hidden reserves (or excess capital in modern parlance), something that would otherwise go undisclosed in the firm’s public accounts.

The Bank of England and Public Policy: 1941 -1958, Cambridge, Cambridge University Press, 1992, p.750 10 A short-term debt instrument issued by a company that is guaranteed by a commercial bank, often used to facilitate trade. 11 Fforde, p.755 8  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  And yet, as in the 1890 Barings episode, you can see in this activity elements which persist in supervision today. For instance, while I do not wish to offer any formal comment on the state of Mark Carney’s eyebrows, in my experience a meeting with Mark is always a useful way to focus the mind. It is worth remarking that during this period there was a genuine window of opportunity to extend the 12  boundaries of banking supervision undertaken by the Bank and legislate accordingly . However, after a year’s negotiation, it came to nothing and instead of a Banking Act 1957, the banking sector would have to wait until 1979 before the Bank involved itself more formally in the affairs of firms and, crucially, on a statutory basis. In the period up to the 1970s, there had been ‘no recent case of depositors losing their money. There was little public interest in the subject and there had been no troubles that might have led to a demand for the 13  Bank’s help’ . This set of circumstances changed abruptly when the secondary banking crisis engulfed the City in the period 1973-5.
The Global  Financial Crisis led to a loss of economic activity equivalent to around £ per person in the UK, based on the net present value of the shortfall in income since 2007 compared to its pre-2007 trend(Brazier 2019). 2 For  example, Acemoglu and Zilibotti (1997), Arestis and Demetriades (1997), and Beck and Levine (2004) provide evidence that the financial sector has a positive role on economic growth. 3 The ‘efficient market hypothesis’ was popularised by Fama (1970). Complete markets were theorised by Arrow  and Debreu (1954). 4 For example, markets could be inefficient due to information asymmetries, transaction costs, market  psychology, sticky prices, monopolistic competition, or credit constraints. 5 Drehmann et al. (2012) and Lang et al. (2020) highlight the importance of cyclical risk for financial stability. 6 Glasserman and Young (2015) and Acemoglu et al. (2015) discuss the risk of contagion in the financial system. 7 Woods (2022) discusses alternative approaches to buffer usability. 8 6/7  BIS central bankers' speeches  8 See Bank of England (2021). 9 See Chatterjee (2022) for a comparison of the UK financial conditions index for the GFC and Covid. 10 Lloyd et al. (2021) shows that foreign shocks are a key driver of domestic macroeconomic tail risks. Bluwstein et  al. (2020) also show that global factors can predict financial crises. 11 See Czech et al. (2021). 12 Bank of England (2021) provides more details on vulnerabilities associated with market-based finance and  liquidity mismatch in open-ended funds, in particular.

4  BIS Review 73/2007  or possibly because of, the fact that the monetary authorities were explicitly targeting the monetary aggregates as a means of controlling inflation. Part of the explanation of the divergence was that the 1980s were a period of rapid financial innovation following the removal of exchange controls and of pricing, income and dividend policies. This changed the amount of money people were willing to hold for a given amount of money spending (which in economics is known as the velocity of circulation). So the increase in money growth did not lead to a pick up in inflation. Even so the acceleration of monetary growth at the end of the 1980s did foreshadow the upturn of inflation at the end of the Lawson boom. The chart shows that since 1992 the rates of growth in broad money and inflation have diverged again and that broad money growth has picked up sharply since 2003. A key question is whether this reflects a further spurt in financial innovation or is telling us that we should expect increasing growth of money spending and inflation. There are good grounds for attributing part of the increase to structural changes in the financial markets which have led “other financial companies” (OFCs) to hold more deposits with the banks for a given level of economic activity. 8 It is within this OFCs sector that the growth in money has been the most rapid (Chart 12).
There has already been progress with privatisation, especially in the hydrocarbon industry. There are plans to restructure and privatise over 500 state enterprises during the next five years, and to commercialise - or “autonomise” - Iran’s state-owned banking system. Trade and foreign investment are being encouraged by the extension of Iran’s free-trade zones. And new legislation is expected soon to simplify and clarify the Law for the Encouragement and Protection of Foreign Investment. These are all clearly positive steps. Iran is, of course, OPEC’s second largest producer and has the second largest reserves of gas in the world. It has benefited from the recent rise in oil prices and is playing a positive role in promoting the stability of the oil market. President Khatami recently noted that OPEC may need to raise output in proportion to the increase in global oil demand to stabilise prices. The government has taken positive steps to encourage foreign investment in the petroleum sector. For example, they have facilitated foreign participation in contracts to redevelop oil fields, and they have also signed an agreement with a consortium of nine leading international oil and gas companies to study Iran’s potential as an exporter of gas. The government is, moreover, actively seeking to cushion the economy from future fluctuations in the oil price.

However, when interest rates are  2  BIS central bankers’ speeches  already very low, a decline in the Euribor is associated with a reduction in the interest margin (the price effect exceeds the quantity effect) as banks have less capacity to pass through the reduction in interest rates to retail deposits owing to their proximity to the zero-rate level. It is possible that these non-linearities may be exacerbated when interest rates move into negative territory. Chart 2  That said, there are also factors that mitigate the impact of low interest rates on results. In particular, low interest rate levels contribute to reducing loan loss provisions, insofar as they are conducive to a decline in non-performing loans. This mitigating effect is particularly significant in Spain, owing to the prevalence of assets with floating rates on bank balance sheets. 2.2  Non-performing loans  The second factor weighing down on bank profitability is the still-high level of non-productive assets on the balance sheets of banks located in specific countries, despite the continuing downtrend we have observed for some time. As can be seen in Chart 3, in some instances the NPL ratio exceeded levels of 15% in mid-2015. With its ratio at approximately 7%2, Spain stands only slightly above the euro area average, thanks to the reduction witnessed in the past two years.
Low interest rates have contributed to a relatively sharp rise in household demand throughout the upturn. At the same time, solid global growth has led to increased demand for many Norwegian export goods and high prices. Fixed investment in the petroleum sector has increased sharply, resulting in growing demand for goods and services supplied by mainland enterprises. Mainland fixed investment has also picked up gradually. So far in the economic upturn, the mainland economy has grown by an average of about 3.5 per cent quarterly, measured as an annualised rate. The output gap is a measure that expresses our assessment of total capacity utilisation in the economy. The output gap is defined as the percentage difference between actual output and potential output. Potential output indicates the level of output that is consistent with price and cost stability. The estimate for the output gap is uncertain partly because the level of potential output is unobservable. Since official statistics on overall activity in the economy are not available immediately and are subsequently revised, the level of actual output will be uncertain. In assessing the size of the output gap, technical calculations are compared with other information about capacity utilisation in the economy. As more information has come to light, the output gap has been revised downwards for 2005, but at the same time the growth rate towards the end of the year is estimated to be higher. Output has increased more rapidly than potential output for 2-3 years.

But there is a need also to reduce vulnerability by building bigger, deeper, more robust and diversified capital markets. While the interesting subject of monetary integration, which would provide a long-term solution, has been receiving some nascent attention, efforts to enhance the efficiency of financial intermediation within the region should be stepped up. Asia as a whole is one of the largest exporters of capital and, at the same time, also one of the largest recipients of foreign direct investment and foreign portfolio investment. The underlying process of capital flows associated with this roundabout phenomenon involves much greater financial volatility and instability for the region than the situation where a greater proportion of savings in the region could more readily find their way into investments in the region. This underscores the importance of greater efforts to enhance the efficiency of financial intermediation within the region. Indeed, capital market reform is high on the agenda of most Asian economies. There has also been considerable progress in the diversification of financial intermediation channels, specifically in the development of the bond market. At the end of last year, the amount of domestic bonds outstanding in eight economies1 that we have surveyed was equivalent to 47 percent of the combined GDP, more  1  Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. BIS Review 30/2004  1  than double the 20 percent at the end of 1995. Over that eight-year period, the bond market’s share in total financing grew from 11 percent to 19 percent.
23 These measures appear to have contributed both to the rapid subsidence of SARS-related fears and uncertainties among the general public and to containing the spread of the disease. Since April 2004, there have been no reported cases of SARS. The global information infrastructure of GOARN is widely acknowledged as having helped nip the SARS crisis in the bud. There are important lessons here for the financial system. At present, risk measurement in financial systems is atomistic. Risks are evaluated node by node. In a network, this approach gives little sense of risks to the nodes, much less to the overall system. It risks leaving policymakers navigating in dense fog when assessing the dynamics of the financial system following failure. The market repercussions of Lehman’s failure were in part the result of such restricted visibility. What more might be done to prevent a repeat? Part of the answer lies in improved data, part in improved analysis of that data, and part in improved communication of the results. On data, in some real-world physical networks, data is collected on virtually all nodes and links. For example, in modelling the US electricity grid, data are collected on all major power stations (nodes) and power lines (links). 24 As these total 14,000 and 20,000 respectively, this is a large-dimension network. Data from physical networks such as the power grid are relatively easy to collect. For many other large-dimension networks, sampling techniques are typically required. These typically take one of three forms: node sampling; link sampling; and “snowball” sampling.

This can happen if the households expect a permanently lower level of public expenditure in the future and thus also a lower level of taxation. In such a situation, budget consolidation would lead to an increase in private consumption and production. How applicable this hypothesis is to the current situation in the United States and Europe is being widely discussed by economists at the moment. My assessment is that it is more likely that the expected cutbacks will have a negative impact on growth. 2  BIS central bankers’ speeches  Trade links When a slowdown hits major economies like the United States and Europe it leads to a reduction in world trade as a whole. Figure 1 shows that world trade has developed relatively weakly in 2011, which has had a negative effect on Swedish exports. Figure 1 Development of world trade Index, 2000=100  Note. The index series is calculated on the basis of global import and export volumes. Source: CBP Netherlands Bureau for Economic Policy Analysis  A fall in demand on large markets has both direct and indirect effects on Swedish exports. Let’s look, for example, at the trade links between Sweden and the United States. A slowdown in the US economy spreads directly to Sweden in the form of reduced demand for Swedish exports. There is also an indirect effect in the sense that a slowdown in the United States leads to a reduced demand for goods and services from, for example, Asia.