samchain/econo-pairs-v1 huggingface dataset:
A technological innovation could thus motivate a large rise in share prices. However, history shows that investors are often over-optimistic regarding future profits and that share prices rise more than is later proved to be motivated. Financial bubbles can also be created by imperfections in the financial markets. Bonus systems designed to enable brokers to benefit when the stock market rises, while others have to bear the costs of a fall in share prices, are examples of this type of imperfection. If households increase their consumption as a result of exaggerated increases in the value of shares and property, it could lead to the build-up of large real and financial imbalances. Companies can increase their investments as a result of lower financing costs on a risk capital market with over-valued share prices, but also because a rise in the value of the companies' assets increases their credit ratings. At the same time, financing consumption, investment, property and financial assets through loans will lead to an excessive credit boom. The liquidity created when the banks increase their lending can further push up asset prices. When the bubble bursts and asset prices fall, it could lead to heavily indebted households and companies increasing their savings considerably and to a fall in consumption and investment. A decline in demand would reduce companies’ profits and increase the number of bankruptcies. Bankruptcies lead to losses in the banks, while the value of the assets taken as collateral for loans would decline.

Large shocks to the functioning of the financial system would also reduce the effectiveness of monetary policy, as the transmission mechanism is affected by the efficiency of the capital supply and the mediation of payments. The fact that there are close links between the central banks' two tasks becomes particularly evident when the effects of financial bubbles are discussed. An important part of the process leading up to large imbalances is credit granting by the banks. The fact that households and companies demand loans for increased consumption and investment when asset prices are rising is one thing, but it also requires that the banks increase their supply of loans. If the banks have well-developed risk systems, and rules and supervision are designed to motivate the banks to utilise them, the risk of exaggerated lending will be reduced. The way that capital adequacy rules are designed and applied is of great significance. The new capital adequacy rules, Basel 2, are aimed at reflecting to a greater extent than now the risks the banks actually take. However, valuating credit risks over a whole economic cycle is very difficult. The indications are that both internal credit risk models and credit rating agencies tend to underestimate credit risks during an upturn in economic activity and to overestimate them during a downturn. There is thus a risk that the banks will tend to strengthen the fluctuations in economic activity, even with the new capital adequacy rules.
News conference  Berne, 16 June 2022 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg In my remarks today, I will present the key findings from the new Financial Stability Report, published this morning by the Swiss National Bank. Economic environment In the period between the publication of the last Financial Stability Report and the end of 2021, economic and financial conditions for the Swiss banking system remained favourable. GDP has returned to, or even exceeded, pre-crisis levels in most countries and unemployment rates have receded globally. Corporate ratings have improved and credit quality has remained high. However, these conditions have recently become more challenging, due to both the war in Ukraine and rising inflation around the world. As my colleague Thomas Jordan has explained, the SNB’s baseline scenario assumes that the impact of the war in Ukraine on domestic economic activity and inflation will be temporary and moderate. However, the economic outlook is subject to very high uncertainty regarding the development of financial and monetary conditions as well as economic activity. This environment presents various risks for financial stability. First, the deviation between market prices for residential real estate and the price level that can be explained by fundamental factors, such as income and rents, has continued to increase in many countries, including Switzerland. Second, stock valuations in some markets remain high despite recent corrections. Third, sovereign and corporate debt levels rose significantly during the coronavirus pandemic.

In light of this, businessmen and the press started to become concerned about the potentially higher unemployment, which exacerbated confidence further. Turning to economic stability, inflation pressure has dissipated starting August 2008. Headline and core inflation rates, which were at 9.2 and 3.7 percent respectively at their peaks in July 2008, fell to 0.4 and 1.8 percent at the end of the year. As for the financial sector, our banking system is healthy in terms of profitability and capital base. I will return to touch on the financial sector later on. Economic stability on the external front is also very strong. For 2008, the current account recorded a small deficit of 0.2 billion US dollar. Our international reserves amounted to 111 billion US dollar, which is 4 times of short-term external debt. The exchange rate remains competitive and stable. For 2008, the capital account recorded an overall surplus of 12.8 billion US dollar, of which foreign direct investment or FDI was 9.9 billion US dollar. FDI from Europe accounted for about 11 percent of total FDI. Excellencies, For the prospect of the Thai economy this year, the Bank of Thailand sees a growth rate of 02.0 percent and 2.0-4.0 percent next year. I wish to emphasize that the growth performance depends not only on how fast the global economy recovers, but also on how fast confidence within the country could possibly pick up, which will help ensure the recovery of domestic demand.
And it will focus on improving how we communicate, both internally and externally. We want all our colleagues to feel empowered to raise issues promptly, to challenge and to voice any concerns they have. These initiatives will help us build the trust that is crucial to delivering our mission. And they will help us merit that trust by making us more effective. The Bank will learn the lessons of these unfortunate events and apply those lessons to reinforce what’s best in banking and the Bank of England. 14  For details of recent Court reports see: http://www.bankofengland.co.uk/about/Pages/ieo/default.aspx. Additionally, see Grabiner, “Bank of England Foreign Exchange Market Investigation”, 2014, at: www.bankofengland.co.uk/publications/Documents/news/2014/grabiner.pdf 8  All speeches are available online at www.bankofengland.co.uk/speeches  8

Low level of domestic savings in the Turkish economy, significant share of advanced economies in our exports, sensitivity of our exports to global economic cycles and deterioration in expectations of the private sector have caused a sharp slowdown in economic activity. However this contraction did not last long and Turkey has become one of the countries that have rapidly recovered from global turmoil. In other words, unlike previous crises, the Turkish economy has resisted global turbulence well owing to its structural transformation and policy implementations that have been underway since 2001. The main reasons for this resistance are the resilience gained from the implementation of a floating exchange rate regime, the robust structure of our banking system, counter-cyclical monetary policy implemented before and during the crisis and the room for maneuver provided to public finance by the fiscal discipline observed in the pre-crisis period. These factors, coupled with the subduing effects of the crisis, have promoted an earlier and stronger recovery in the Turkish economy, compared to that of the global economy. Accordingly, since the height of the crisis, by mid-2009 Turkey’s GDP and industrial production have increased by 11 percent and 21 percent, respectively, while the unemployment rate has dropped by approximately 3 percentage points. Although the level of production is still below its pre-crisis level, we expect that it will exceed this level in 2010. Meanwhile, we envisage that it will take an extended period for the labor market to recover.
If the ECB is bound by the law, it would also have to ensure continuous progress in enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change. Moreover, it would have to ensure that its policies on adaptation are coherent with and supportive of other such policies in the Union. [5] That is quite a full plate. So, is the ECB bound by the Climate Law? There are definitely indications that it is. The Climate Law is addressed to “relevant Union institutions and the Member States”. In the European Anti-Fraud Office (OLAF) judgment[6], the European Court of Justice made it clear that, in principle, the ECB is bound by all regulations which bind the Union. There is no distinction to be made between the different institutions, bodies, offices and agencies. All are equal under the law, so to say. However, the word “relevant” is ambiguous. Does it refer to any institution, where relevant? That would mean that every EU institution should comply with the Climate Law, whenever it develops policy or takes action relevant to the objective of the law. Or does it refer only to those institutions with competence to create policy relevant to achieving the objective of the Climate Law? The ECB would be directly bound by the law under the first interpretation but not under the second. The Climate Law is not crystal clear on this point. It does not define “relevant institution”.

We are also aware of the important role that the Development Bank of Zambia and others institutions that provide long term finance can play in this process. It is for this reason that the Bank of Zambia monitors the performance of these institutions to ensure that  2  BIS Review 53/2010  they are financially viable to be able to play this important role. Rather than thinking of Government recapitalising these institutions, we should think more in terms of developing the capital markets to enable these institutions raise resources for long term financing from the private sector. On the issue of the foreign exchange market, I wish to emphasise that we have a flexible exchange rate regime that has served us well after doing away with exchange controls in the early 90s. The exchange rate of the Kwacha against other international currencies has enjoyed relative stability since 2003 when the interbank foreign exchange market system (IFEM) was introduced. With this system, the Bank of Zambia intervenes in the market mainly to smoothen fluctuations and to build international reserves. The exchange rate is expected to be driven by economic fundamentals such as the terms of trade. An attempt to fix the exchange rate would have disastrous effects especially when the fundamentals suggest that the rate should depreciate as this would wipe out all the reserves we have struggled to build over the recent past.
And monetary policy will, of course, continue to be critical, but monetary policy alone cannot provide the elements of the framework necessary to provide an environment for innovation and long-term decisions that will be so vital for future growth. Economic policy, in general, needs to be more forward looking in providing a longer-term framework for stability. On the fiscal policy front, demographic changes confront governments around the world with exceptionally difficult choices. For the United States, these challenges are less acute than for many of the major economies, but they are still formidable in their scale and complexity. Even for the near term - for the period before the increase in number of retirees starts to have a major impact on Social Security and Medicare expenditures - we are running an unsustainably large fiscal deficit. Despite the recent improvements in revenues, the expected trajectory for the fiscal deficit will mean that federal government debt will continue to rise as a share of GDP. The restoration of fiscal rules - such as those that require new tax cuts or expenditure programs to be funded with offsetting policy measures - will help reduce the risk of further deterioration. However, they need to be complemented by a consensus on policy changes that will produce smaller future deficits.

Thomas Jordan: Why a strong education system must be an important concern for the Swiss National Bank Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the opening ceremony of the Faculty of Economics and Management at the University of Lucerne, Lucerne, 6 September 2016. *  *  *  The complete speech can be found in German on the Swiss National Bank’s website (http://www.snb.ch/). A strong education system is a cornerstone for a country’s prosperity. Switzerland has a federally structured, flexible, high-quality education system. It stands out for its focus on the goal of employability, which is particularly reflected in the dual vocational training system that is closely aligned to the real needs of companies. The education system contributes to an innovative, flexible and robust Swiss economy which – given structural and technological changes – can continue to be successful in future. The labour market would not work nearly as well without solid education, and the culture of stability would be less well-anchored in society. These strengths allow the Swiss National Bank (SNB) to conduct a monetary policy geared toward long-term stability. Attractive universities are an important component of a good education system. The SNB maintains an intensive exchange of information and ideas with academia, with the focus on topics relevant to central bank policy. For it can only fulfil its mandate optimally if the relevant research results flow adequately into the decision-making process.
Monetary policy decisions usually include a statement of bias, ie the probability that the next change in interest rates will be an increase or a reduction. At the same time as the press release, a press conference is held at which a more detailed account of the background for the decision is given. BIS Review 105/2000  14  15  BIS Review 105/2000  On 20 September this year, Norges Bank decided to increase its key interest rate, the deposit rate, by 0.25 percentage point to 7%. This has brought the overall increase in interest rates this year to 1.5 percentage points. This has happened in a climate of interest rate rises in other countries and a relatively weak effective krone exchange rate. Moreover, the past year has seen increased risk that price and cost inflation may remain considerably higher in Norway than in other European countries. Norges Bank had no choice but to counter this, in order to satisfy the fundamental preconditions for exchange rate stability. This is why the Bank has raised its key rates. I would like to conclude by once again thanking you for inviting me to give this account of the basis for Norwegian monetary policy. References: Akram, Q F (2000): “PPP despite real shocks: An empirical analysis of the Norwegian real exchange rate”. Working paper 2000/7, Norges Bank, Oslo.

I would also like to emphasise that our management of the risk of an adverse development in house prices and household indebtedness does not in any way mean that we consider that these aspects  3  See also Tucker, P., (2006), "Reflections on operating inflation targeting”, Bank of England Quarterly Bulletin: Summer 2006. 4  BIS Review 84/2006  have greater relevance for what is regarded as desirable monetary policy than, for instance, the situation in the labour market. From time to time situations will arise where we will need to take into account, in a different way than the usual, the risks of adverse economic developments that are difficult to quantify. Recently this has been house prices and household indebtedness, but in the future it could be other variables. This is an important dimension of the flexibility in our inflation-targeting policy. The current situation Let me conclude with a few comments on our most recent monetary policy decision. A more detailed account is provided in the separate minutes of the monetary policy meeting, which were published the day before yesterday. We chose at our monetary policy meeting on 29 August to raise the repo rate by 0.25 percentage points. Now that we have chosen to conduct less expansionary monetary policy, this is because we have made the assessment that it is necessary to avoid inflation being above target a couple of years ahead, while at the same time it contributes to a balanced development in the real economy.
The effects can come from a series of deregulations that affect different stages of price formation for a variety of goods and services. So even if it were feasible, I believe that working with a narrow price index would have more drawbacks than advantages. We must accept instead that all economic activities pose difficulties that stem from the impossibility of predicting the future exactly. When it comes to evaluating monetary policy, it is better to accept certain deviations from a relevant target than to have a target than can only be fulfilled because it has been defined so narrowly as to be hardly relevant. This particular aspect is also highly important and valid in other situations to do with the evaluation of monetary policy. There needs to be a widespread awareness both of what monetary policy is actually capable of achieving and of the choices that continually have to be made. Otherwise it will be difficult to achieve a comprehensive evaluation. All this is, of course, a matter of learning. But sometimes there is too great temptation to score a cheap point in the public discussion by accusing the central bank of acting too late or ‘missing’ the target. The point I want to make on this topic is that an inflation targeting monetary policy normally functions satisfactorily even in situations that are characterised by price effects from deregulations. Monetary policy may not be capable of fully countering every change in the general price level, including more or less transitory effects on the rate of inflation.

A structural change with rising productivity growth may be due to, for instance, a shift in technology. An interesting example is provided by the United States, where the relative price fall in connection with developments in computers and telecommunications in recent decades can serve as an illustration. During the process of adjusting to the new, higher growth path there are at least two, contrary effects that are relevant for monetary policy. One effect is an increase in demand. The impact of this on 2  For an interesting review of aspects of the adjustment process, see Meyer, L.H. (2000), "The Economic Outlook and the Challenges Facing Monetary Policy," Remarks at Washington University, St. Louis, Missouri. The Federal Reserve Board, October 19. BIS Review 30/2001  3  inflation will depend on how the increment to demand relates to the higher potential supply of goods and services. The other effect is a direct damper on inflation. It is often only the latter effect that is highlighted in the public debate. I should like to consider the two effects in turn. Demand rises in the form of higher investment and increased private consumption. The upswing for investment stems from expectations of a higher return on capital. Share prices rise, which facilitates capital procurement. The capital stock is adjusted towards a new level that is expected to match the new and higher rate of potential growth. Private consumption is stimulated via the wealth effects of higher share prices and expectations of higher future household income.
Europe has made some good progress in tackling this issue in recent years, in particular in harmonising the rules needed for the transparency and integrity of securities markets. Nonetheless, obstacles remain. One is legal uncertainty for cross-border holding and issuance of debt and equity securities – for example, different national definitions of securities ownership.7 Another is differences in national insolvency laws, which make it difficult for investors to properly evaluate the risks they assume when investing in securities in other jurisdictions. Still another is the transaction costs that investors face when engaging in cross-border securities trading due to divergent corporate governance and tax regimes.8 In other words, building a truly integrated capital market in Europe requires further efforts and new legislation extending far beyond Banking Union. It is essential that the progress we have made on the banking side does not cause us to lose reform momentum here. And this is not a case of politics directing markets; it is about policy creating the pre-conditions for markets function properly. Firm size The effects of location on access to finance are exacerbated by firm size. While firms are in general more credit-constrained in some jurisdictions than others, this phenomenon is particularly apparent for SMEs. For example, the percentage of financially constrained but viable SMEs – defined to be those with positive turnover in the last six months seeking a bank loan – varies from a minimum of 1% in Germany and Austria to a quarter of the total population in Spain and even a third in Portugal.

Between 2002 and 2010, 85% of total employment growth in the EU was attributable to SMEs, and SMEs have a much higher employment growth rate (1% annually) than large enterprises (0.5% a year). And within the SME class, most employment growth takes place within young firms9, for whom external financing is particularly important as they cannot draw much on internal funds. Recent research from the US has shown that these firms also tend to be more sensitive to changes in investment opportunities.10 So what is the solution here? There are many schemes underway in Europe to address this problem that I will not try and cover today. But one unifying theme that I see as critical is to better match the needs of SMEs with the funds of non-bank investors, thus providing more diversification for SMEs. One way in which non-banks provide this diversification is in terms of counter-cyclical access to credit. When banks contract credit, less risk-averse investors such as private debt funds or peer-to-peer lenders can fill the gap and thus help smooth the credit cycle. Another way is in terms of maturities. While regulatory changes have made commercial banks less willing to make long-term loans, some large institutional investors – for example pension funds and insurance companies – need assets with maturities and returns that match their liability profiles. SME lending can provide this, especially while long-term safe assets exhibit low rates of return.