samchain/econo-pairs-v1 huggingface dataset:
Also in most ten-year periods, investing in US equities has been profitable, with the exception of the depression in the 1930s and the last half of the 1970s. Equity returns have been negative after ten years only in the years between 1928 and 1938, in other words on equity investments made the year before the 1929 stock market crash. It may also be worth noting that equities purchased during recessions - such as in the mid-1930s and mid-1970s - brought solid returns ten years later. The picture is the same for most other countries. Since short-term fluctuations in equity prices are difficult to predict, it may be a sound strategy to keep the share of equities constant over time. This means buying a relatively large volume of equities when prices are low, and buying a smaller volume - or selling - when prices are high. This is the strategy applied by the Petroleum Fund. Let us now revert to the Norwegian economy and Norwegian economic policy. The revision of economic policy in March 2001 can to some extent be said to be a consequence of our oil economy. The new guidelines have also changed the interaction between the different components of economic policy. Fiscal policy will now have an expansionary effect. In order to prevent pressure from becoming too strong, monetary policy has to be tighter than would otherwise have been the case. Monetary policy has therefore been given a clearer role in stabilising economic developments.

This can be illustrated by the following example: If a perception that oil has made us so wealthy that we can to some extent relax leads to a reduction in annual productivity growth of a quarter percentage point, i.e. a reduction in trend GDP growth from the current level of about 2 per cent to 1¾ per cent, the income base would be reduced by more than the entire return on petroleum wealth. Societies that suddenly gain access to wealth deriving from natural resources have a tendency to spend the money and then fall into decline. A very clear example of this can be found in Spain already in the 1660s. The colonisation of South and Central America gave this country access to a wealth of natural resources, and to gold. Spain chose to spend a large portion of the windfalls on luxury and war. The attitude to working that this led to did not make it easy for these countries to get back on their feet again when the gold came to an end. Many countries have had similar experiences in more recent times. The expression “Dutch disease” comes from the turn of events in the Dutch economy in the 1970s and 1980s after the revenues from the large gas finds in the Groningen field were used to finance strong growth in public spending. When the gas revenues declined, economic growth came to a halt and economy policy had to be tightened.
Having never previously been this low, it is inevitably uncertain how the economy will respond when interest rates do begin to rise. Various surveys have sought to shed light on how UK homeowners may fare. For example, the Bank’s NMG survey from 2012 found that a one percentage point rise in interest rates could result in almost half a million households with a mortgage needing to take corrective measures. This rises to a million households for a two percentage point rise. A more timely guide may come from recent US experience. In the middle of last year, longterm US interest rates rose by around one percentage point on the expectation of a tapering in US monetary policy – the so-called “taper tantrum”. This had a striking impact on the US housing market, with housing sales 7% lower than a year ago and residential investment falling in each of the last few quarters. This raises the possibility of borrowers reacting more sharply to rate rises now than in the past. Hence the enigma. Tackling uncertainty Although it is a touch depressing that our knowledge of the economy is this imperfect, the Bank is making a renewed investment in research and data which will, over time, hopefully help to reduce these uncertainties. Back in 1987, Michael Fish famously failed to forewarn about an incoming storm, which then caused havoc in parts of Southern England. The finger of blame was pointed squarely at the UK Meteorological Office.

If there are adverse side-effects, then an alternative drug can be called upon – macro-prudential policies. These are an important new addition to the central bank armoury. When risks are localised – say in the UK housing market – macro-prudential measures can act like a targeted lightning strike. The Bank’s Financial Policy Committee (FPC) is discussing these risks. I will not, tonight, steal their lightning. But if risk-taking becomes broadly-based, a broadly-based response may at some stage be appropriate – a rumble of thunder rather than a strike of lightning. The case for doing so is stronger, the greater the chances of an asymmetric asset price response – a sharp snapback in volatility and asset prices – which could imperil recovery.9 The MPC’s guidance gives monetary policy a role as a last line of defence if macro-prudential actions cannot contain these risks. As they evolve, the MPC and FPC will need to assess these risks carefully. The monetary policy stance Faced with these uncertainties, what would be a prudent course for monetary policy in the period ahead? The first thing to say is that there is consensus across the MPC on three key elements of our monetary strategy: that any rate rise need not be immediate, that when rate rises come they are intended to be gradual and that interest rates in the medium-term are likely to be somewhat lower than their historical average. This message appears to have largely been understood by financial markets.
Paul Tucker: Money and credit, twelve months on Speech by Mr Paul Tucker, Executive Director and Member of the Monetary Policy Committee of the Bank of England, at the Money, Macro and Finance Research Group 40th Annual Conference, Birkbeck College, London, 12 September 2008. *  *  *  As many people have said, this is a challenging time for policymakers. But the real challenge is for households and firms in the real world who are having to navigate the fallout from the extraordinary combination of financial and commodity shocks rippling through the world economy. Our job as policymakers is to make that process as smooth as it can be over the medium term. And having our eye on the medium term means we must ensure that the gains of the past ten-to-fifteen years in stabilising inflation are not frittered away. In confronting that task, policymakers are having both to make big picture judgments about the balance of forces buffeting the UK economy; and to apply areas of economic theory that stretch the frontiers of existing research. So, in joining your research conference this morning, I want to sketch, broadly, what the current conjuncture suggests, from the policymaker’s perspective, should feature in the future research agenda of monetary economists. The current conjuncture, and policy By way of establishing the context, I will begin with the Bank of England’s most recent economic forecast. In August, the Monetary Policy Committee published our latest projections for output growth and inflation.

21 I have previously discussed the financial risks that occur on the Riksbank’s balance sheet when we have large bond holdings. 22 These risks in combination with the Riksbank’s weak earning capacity constitute an argument in favour of a smaller balance sheet in the long run. This is the best way of safeguarding the Riksbank’s future capacity to fund its own operations and conduct an independent monetary policy. 23  Reasonable for the Riksbank’s balance sheet to shrink in the long run The Riksbank’s balance sheet has grown rapidly in recent years, partly because we have purchased government bonds for monetary policy purposes, and partly because the foreign exchange reserve has been strengthened. In other countries, arguments have been put forward indicating that central banks should perhaps continue to hold large bond holdings even in the future when monetary policy has been normalised. In my opinion, these arguments are of limited relevance to Sweden and the Riksbank. On the other hand, there are arguments indicating that the Riksbank should mitigate its financial risk by winding down most of its bond holdings when monetary policy is normalized. My assessment is that the best way of winding down the bond holdings with as little market influence as possible is to hold the bonds in the portfolio until they mature. Over the next decade, the Riksbank’s bond holdings will then develop approximately as shown in Figure 6. The repo rate and the rate path will thus be the main monetary policy tools when monetary policy has been normalized.
The recent price increases of agricultural products should make it easier for the EU to make some concessions on the Common Agricultural Policy, in order to eliminate the subsidies which tend to distort international prices. This would be an advantage for European producers and consumers alike. Regarding currencies, it is important to continue talking with those countries which still peg their currencies to the US dollar, although their economies show a higher growth rate and a strongly positive balance of payments. Pegging to the US dollar slows down the adjustment of global imbalances. A speeding-up of the appreciation of the exchange rate of the yuan visà-vis the US dollar as well as the euro would be in the interest not only of the international community, but of China itself. In the past 12 months, the exchange rate of the Chinese  BIS Review 61/2008  5  currency has gained approximately 9% vis-à-vis the US dollar, while losing about 3% vis-àvis the euro. Only in the past months have markets experienced the inverse process, with the yuan gaining also against the euro. The appreciation of the yuan would allow China to effectively counteract internal inflationary pressures and to reduce the balance of payments surplus, which fuels the accumulation of global imbalances. The increase in food prices should ease fears that an appreciation of the yuan could penalise the income of rural areas, which are still quite sizeable.

In this environment, the focus of our policies has shifted towards building the foundations to transition into a high value-added, high income economy. The recently announced New Economic Model is intended to further accelerate Malaysia’s development to realize these goals by 2020. The broad thrust of the strategies is to provide an enabling environment that will generate an economy that is characterised by high productivity, efficiency and innovation with the private sector that is the main driver of growth. Given Malaysia’s proven record of economic flexibility for more than five decades, the strategy is also to transition to new areas of comparative advantage to sustain our growth momentum. As a Central Bank, our attention has focused on ensuring the successful transformation of the Malaysian financial system that will facilitate our national economic development agenda. An important aspect of this transformation is the advancement of Islamic finance as an integral part of the overall financial system in Malaysia that is fast becoming an international Islamic financial centre. Islamic finance has continued to demonstrate its resilience against the background of the current challenging international financial environment. The sustained and largely uninterrupted expansion of the global growth in Islamic finance has drawn significant international interest. The interest in Islamic finance is no longer just from Muslim nations but also from non Muslim communities. Financial centers such as London, France, Hong Kong and Singapore are increasing their efforts to enhance the development of Islamic Finance in their financial centers.
Beyond this, at a time when savers seem to be turning towards more liquid products, how can the industry cater for savers’ longer-term financing needs and for the financing requirements of other economic agents? Should these needs and requirements be taken into consideration in the way financial products are marketed? This will be the theme of our second session. III. Lastly, what role should regulators play? Regulators carefully monitor changes in household savings patterns and the marketing conditions of financial products. 2  BIS central bankers’ speeches  The evolution of household savings decisions can impact the soundness of financial institutions. In fact, any sharp switch from one form of saving to another can potentially destabilise the financial system and therefore the economy as a whole. The same is true for badly calibrated financial products that can have negative consequences on the profitability of institutions, especially when the remuneration of the product clearly deviates from prevailing market interest rates. As regards product marketing, it is, I repeat, a key factor in consumer confidence, particularly with respect to longer-term investments which play such an important economic role. The ACP and the AMF will make sure that these longer-term investment opportunities are preserved and, in this context, the development of aggressive and abusive sales practices is not acceptable. More generally, we will ensure that credit institutions and insurance entities behave prudently in their quest to gather client resources and rigorously in their respect of consumer protection laws.

Twelve joint missions were conducted in entities distributing life insurance contracts and financial products; the common actions also concerned operators offering leveraged transactions on the Forex market and the processing of complaints throughout the financial sector. In 2012, joint missions will continue to focus on the different players involved in the marketing of insurance contracts, particularly among portfolio management companies, banks and distribution platforms. This joint work proves, if proof is needed, the shared determination of the two authorities to place consumer interests at the heart of the regulatory framework governing different financial products. Indeed, by their very nature, certain subject areas automatically imply collaboration between the two bodies. This is the case for example of household savings. While the financial markets are a natural target for these savings, in the vast majority of cases, retail investors can only access these markets via the services offered by financial institutions and insurance entities. The crisis we have experienced these last four years has had a profound impact on the economy of our country and of the world, affecting as much the financial markets, banks and insurance companies as the savings behaviour of households. To understand the changes that the crisis has induced and to take appropriate action in the best conditions, the ACP and the AMF need to work together and be attentive to the views of experts and practitioners.
There is need for deeper collaboration between the public and the private sectors to position Thailand as an anchor or a hub for the region. Strategies for the private sector to ensure a durable growth strategy can best be summarized in terms of three moves; Move up, Move out and Move in. 1. Let me elaborate further. “Move Up” is a reminder for our firms and enterprises to raise their productivity to support the competitiveness of the Thai economy and in preparation for the upcoming economic integration. Moving up the value chain will enable us to differentiate our products, enhance its value, and to enable us to command the margins for our trade. Competing through cheap prices is no longer a viable and sustainable model, both for the firms themselves and for the resource-constraint economy. Our labour force is in much need of productivity upgrades through relevant education, training and apprenticeship. Although these are long drawn processes, the rewards and returns for the economy is more durable. Increasingly, we are seeing large Thai corporates working in close cooperation with the education bodies, in the recruitment and training, to ensure the necessary and relevant supply of skills for their businesses. 2  BIS central bankers’ speeches  2. The next strategy is “Move out” beyond the boundaries and the comfort of one’s own home market. Thai corporates can no longer wait for the transfer of knowledge and technology through FDI. They need to venture abroad to secure the resources, know how, franchise value or distribution channels.

However, when it comes to the size of financial markets, there are a couple of caveats that I wish to add. First, a larger and deeper financial system may attract increased capital flows, and consequently, lead to increased volatility of the exchange rate. Such volatility can be mitigated if the foreign exchange markets are also deep enough to absorb the variations in the demand and supply of foreign exchange. Exchange rate flexibility is necessary and having a healthy level of foreign exchange rate reserves is also helpful in times when there is significant volatility of capital flows. During the Asian Financial Crisis of 1997–98, net portfolio outflows were RM31 billion. During the 2008–09 financial crisis in the AEs, we experienced almost three times that much outflows without any significant disruption of domestic financial intermediation. The second caveat has to do with the question of whether a financial system can become too big whereby it becomes a drag on the economy. Based on research at the BIS and the IMF, this may indeed be the case. In July 2012, Stephen Cecchetti and Enisse Kharroubi of the BIS published a paper, where based on a study of 50 advanced and emerging countries from 1980–2009, they found that beyond a certain point, further growth of the financial system can actually reduce real growth by reducing productivity growth. Furthermore, a fast growing financial sector can also drag down productivity growth by pulling away scarce resources from the rest of the economy.
I’m going today to set out what new instruments we have in that little metal tray next to the “prudentist’s” chair, and what we plan to do with them, so that you can prepare yourselves. View from the chair The good news is that, despite the impact of Covid, our patients are generally alive and well. Looking across the banking and insurance sectors as a whole, capital and liquidity positions are strong and operational resilience has largely held up to Covid and cyber pressures. This is the result of the efforts that have been made by many people in financial services to get the industry onto a stronger footing following the 2008 crisis, as well as the fiscal, monetary and regulatory support provided in response to Covid by the authorities. This means that we have the luxury of sitting in the dentist’s chair, and not in the hospital. A number of things seem much more visible than last time we were here: on the back of the door, a charter of regulatory freedoms to try new approaches following our exit from the EU; on the wall in front of the chair, new ideas on diversity and inclusion; and on the ceiling hanging over it all, the storm clouds of climate change. Plus of course Solvency II, which is resistant to being included in any form of analogy.

In its November statement, the Monetary Policy Committee implied that the Bank’s nominal rates could remain unchanged in coming months if developments were in line with the forecast and no additional pay rises were negotiated during the wage settlement review early this year. This has been borne out so far, and the Committee kept rates unchanged at its December, February, and March meetings. At present, the Central Bank’s effective real interest rate is positive by just under 1%. Although it has risen by nearly 2 percentage points in the past year, it is still below the equilibrium real rate once the economy has recovered and the slack has disappeared. If the economic recovery maintains its pace in coming months, it will therefore be necessary to withdraw the accommodative monetary stance still further. The pace at which this happens depends on economic developments, and the degree to which this normalisation takes place through higher nominal Central Bank rates will depend on future developments in inflation. Towards the end of last year and in the past several weeks, the Central Bank has sold foreign currency in the interbank market. The Bank also announced that it had temporarily suspended its programme of weekly foreign currency purchases. These measures were approved at an extraordinary meeting of the Monetary Policy Committee in early January. The intervention measures amount to 7 b.kr., including 4 b.kr. this year. In comparison, the Bank was a net buyer of foreign currency in the amount of 60 b.kr.
Models and assessments complement one another Let me briefly describe the forecasting process at the Riksbank. 4 The Riksbank uses both models and expert assessments in its forecasting work. The picture of the forecasting process that I had before I came to the Riksbank was one where data are fed into complex models which then spit out forecasts. This is of course incorrect. The Riksbank works hard to spread the impressions we gain at the many international meetings we regularly attend. We also carry out our own company interviews to try to capture development tendencies before they become visible in the statistics. Models are necessary to put together the whole picture of the analysis and are often used to simulate what various risk scenarios might entail for inflation and monetary policy. But they do have their limitations and the analysis must also take into account information beyond what the models can handle. One model that is known outside of the Riksbank is Ramses, which is a variant of the dynamic stochastic general equilibrium models that have become popular in the central bank world. 5 Ramses is an internally consistent model of how the economy as a whole fits  3  By risk I mean here the weighing together of the probability that something will occur and the consequences of its occurrence. 4  For a more detailed description of the forecasting process, see the speech entitled “The monetary policy decision-making process” by Irma Rosenberg, June 2008.

But the consensus does not imply uniformity, and when making comparisons between regimes, it’s also important to control for the importance of the sector to the economy, the reliance consumers place on it, and the ability of firms to fail in an orderly way which causes the least damage to policyholders. Provided that the foundation of adequate policyholder protection remains in place, we believe there will be scope for making changes which meet the other objectives of the review. To make tailored change to the regime which better meet the needs of the UK market and the broader economy. Quantitative Impact Study In modern construction, modellers can render the proposed new building in 3D according to the architect’s plans. Even before the building work has begun, it is possible to have a sense of what the design looks like in practice and judge whether it will deliver on the original vision. In policymaking we also aspire to get a projection of the end result, but unfortunately we currently lack the required rendering software, so instead we have to rely on Impact Study exercises. These exercises are vital in giving us the detailed, accurate measurements we need. For this reason we, in agreement with HM Treasury, are planning a Quantitative Impact Study (QIS) for the Solvency II review. We intend to gather the data that will allow us to project the impact of a number of different possible designs; this will give confidence before the proposals are finalised that the ultimate designs will really work.