samchain/econo-pairs-v1 huggingface dataset:
The necessary reforms would have to include changing the public finance structure to address the ageing problem, overly generous social security systems, etc. These are problems shared by all European countries, and are politically quite hard to resolve. The consolidation of public budgets to a sustainable position is thus one of the key challenges for some accession countries (as well as for the present EU members). This is all the more true because upon EU accession the Stability and Growth Pact will also become relevant to the new member states. This is something that has not been fully realised and appreciated yet, at least in the Czech Republic. It will be very interesting to hear the experience of the other accession countries. There are many more aspects to the accession debate. These include balance-of-payments developments and exchange rate issues; the role of structural policies in achieving the optimumcurrency-area criteria; the role of fiscal and income policies in fulfilling the Maastricht criteria both on  2  BIS Review 17/2003  inflation and on exchange rate stability; financial sector reforms and developments, including their implications for monetary transmission; and so on. I could spend much longer discussing these matters, as well as focusing more deeply on the issues that I have already mentioned. Nonetheless, I do not want to prejudice our debate by volunteering my own opinions at the very beginning of this conference.

The central bank monitors not only the absolute value of forex reserves, but also the derived indicators: foreign currency reserves expressed in months of imports of goods and services and the ratio of forex reserves to short-term debt remained unchanged or improved (Chart 8). Chart 8  Foreign exchange reserves with the NBR: derived indicators months  10 8  times official foreign exchange reserves - months of goodsand-services imports official foreign exchange reserves/ST external debt (right-side scale)  10 8  6  6  4  4  2  2  0 0 Jan.05 Jul.05 Jan.06 Jul.06 Jan.07 Jul.07 Jan.08 Jul.08 Jan.09 Jul.09 Source: National Bank of Romania, National Institute of Statistics  Thirdly, the magnitude and the timing of forex market interventions were also related to money market liquidity management, given that public deficit was financed, over certain periods, by resorting chiefly to the funds released under the arrangement signed with the EU, the IMF and other international financial institutions. The NBR provided banks with liquidity  12  BIS Review 5/2010  by way of open-market operations (Chart 9), while in the prior years, amid excess liquidity due to massive capital inflows, the central bank held the position of a net debtor position visà-vis the banking system. The rationale behind the forex market intervention in the abovementioned context was the attempt to fend off temporary reversals in the NBR’s creditor position vis-à-vis the banking system, which could have jeopardised the monetary policy transmission mechanism.
This added significantly to the recessionary forces that were already at play in the Icelandic economy as the macroeconomic imbalances created in 2005–2007 subsided. But here again, it is still an open question what is due to what, i.e., what is the specific contribution of the banking collapse over and above an international recession and a domestic macroeconomic adjustment? The fact of the matter is that the contraction in 2009 has proven smaller than originally predicted, with the fall in GDP now expected to be around 7½–8%, as opposed to the 10% forecasted earlier in the year, and unemployment still around 8%. Conditions are expected to deteriorate further in the first half of this year, however, with unemployment peaking at around 10%. But who knows? Maybe the economy will prove more resilient and will surprise once again on the upside. It is clear from these numbers that, in terms of the macroeconomic impact of the international financial and economic crisis, Iceland is not at the top of the league. There are probably several explanations for this. Automatic fiscal stabilisers were allowed to work more or less freely in 2009, with fiscal consolidation taking hold this year. Last year, Icelanders were allowed early withdrawal from their third-pillar pension funds, to the tune of 1½% of GDP, 2  BIS Review 9/2010  which is equivalent to a fiscal stimulus. The financial restructuring of corporations and households has been delayed and, although this is detrimental for medium-term recovery, it has postponed some of the pain.

10  BIS Review 9/2010  •  Key proposals (e.g., the De Larosière and Turner reports) 11 do not go far enough and do not measure up to the Icelandic experience (wrongly seen as primarily a supervisory failure, which it was only in part). •  Do we need a system of FX swap lines or an FX liquidity pool to provide insurance against a run on cross-border banking (as we have domestically through central bank liquidity provisions and LOLR)? •  The crisis showed that, when all is said and done, “banks are international in life, but national in death!” 12 Will reforms change this, or will we regress? The question remains open. Concluding remarks I told you in the beginning that this is a complex saga with many twists. I have only covered a small part of it. However, be sure that there is more to come. I am currently reading a newly published biography of Snorri Sturluson. 13 He and other Icelanders wrote about events that occurred here in Norway and Iceland, in some cases more than two centuries earlier. We might thus be writing about the Icelandic financial crisis for centuries as well! If history is any judge, then we are probably better at it than we were this time at managing, regulating and supervising a cross-border banking system. For the sake of all of us, let us at least hope so. Thank you very much. 11  De Larosiére, Jacques (chair), (2009).
The deleveraging by banks was, in particular, felt in 2009, following the actions by banks in the United States to strengthen their capital positions, and more recently by banks in the Europe to meet the new capital adequacy requirements. In view of the challenging conditions for capital raising, this is being achieved, in part, by asset reduction, either by asset sales, in particular in performing economies, or the withdrawal of credit lines. These operations not only have implications on asset prices but on currency movements, as funds from the asset disposal are remitted back to the home country. The reversal of capital flows following such deleveraging is thus accompanied by a correction in asset prices and depreciation in the currencies. For emerging economies, the more developed and liberalised the financial markets, the more significant will be the impact of such activities, and the greater will be the amplitude of the volatility in the asset prices and currency movements. Global policy spillovers have also been transmitted to the real economy through trade and investment flows. The world economy, including emerging economies, benefitted immensely from the fiscal stimulus that supported the economic recovery. However, as the deterioration in fiscal sustainability became a concern, the effects of the pull-back in public expenditure on growth have contributed to slowing world trade and cross-border investment activity. Emerging economies, in particular in Asia, have seen the export sector slow significantly.

Thirdly, as concerns over the security of corporate and government bonds grew, the premia investors have had to pay against bond defaults have increased very significantly. The perceived decrease in the creditworthiness of key European companies and Western European sovereign bonds was highlighted by the very sharp rise of several benchmark credit default swap (CDS) indices for these markets.1 The foreign exchange market has been of particular concern to the SNB, as the Swiss franc’s safe haven properties and the growing dearth of alternative “safe” assets led to massive movements in our currency, which required the SNB to act. In early August, the real effective exchange rate of the Swiss franc peaked at an estimated level of almost 40% above its post-1990 long-term average.2 The extent of this deviation was very rare, in historic terms, as the previous high point, at the end of 1995, was only 12% above the same long-term average. Since the introduction of the euro in 1999, the volatility of the EUR/CHF exchange rate has averaged approximately 5%.3 In August it rose to almost 30%. As chart 1 shows, three of the largest ever daily negative movements in the EUR/CHF exchange rate also occurred in this period. Since the introduction of the minimum exchange  1  The Markit iTraxx Europe Index, for example, which is composed of 125 investment grade entities from six sectors (auto, consumer, energy, financial, industrial and TMT), more than doubled between July and September.
Lorenzo Bini Smaghi: Presentation of the book entitled “L’acqua e la spugna” by Franco Bruni Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the Center for American Studies, Rome, 24 June 2009. *  *  *  Above all, I should like to thank the Center for American Studies for inviting me to present this book by Franco Bruni; a book which is a real pleasure to present because it actually shows to be untrue what many have claimed recently, namely that the economists did not foresee the crisis and that they did not send out the alarm signals. Some economists, such as Franco Bruni, had been pointing out the imbalances accumulating on the financial markets for a long time, and, whilst they may not have anticipated the full extent of the crisis, they did, for sure, signal the risks. Franco Bruni’s book is a book well worth reading, because it helps us understand how the science of economics, is, at the end of the day, linked to common sense, and also that the “new paradigms”, which are increasingly cited to justify events that cannot be easily explained, should be questioned. If you base your own judgements on sound analytical grounds, albeit unsophisticated – and the book has the great advantage of also being accessible to non-specialists in economics – you can get to grips with the general trends, at least in the medium term.

In this context, the conflicting schools of thought, for example, the Keynesian and monetarists, serve no purpose. Those who did not understand the crisis were those who, in some way or another, were trapped in simplified models without understanding that these models are the starting and not the finishing points of an analytical path aimed at understanding reality. On the one hand, those who have made the neo-Keynesian models extreme, excluding money and the financial markets, have made the search for model elegance an end in itself, without understanding that it does not actually help to explain reality. This may seem absurd nowadays, but at a conference organised by the European Central Bank, in the autumn of 2006, to explain its own monetary policy strategy – a strategy in which money and the financial markets play an important role – the majority of academics, above all on the other side of the Atlantic, played down the usefulness of taking money and financial markets into account in economic models. In the more sophisticated neo-Keynesian models, they managed to completely get rid of money! Consequently, monetary policy could also get rid of money, and focus only on the interest rate as the variable representative of the equilibrium on the money and financial markets. With such models, it was sufficient to align the interest rate with the equilibrium level, or the so-called “neutral” level, in order to ensure a monetary policy in line with the general equilibrium.
The framework has been applied unchanged to all countries since 2010. But enhanced surveillance is not a programme and does not entail conditionality – I assume this is exactly why the government accepted it! It therefore does not comply with our framework. 2/4  BIS central bankers' speeches  That being said, the lifting of the waiver was a “non-event” for banks, as one Greek bank CEO recently pointed out. Greek banks have broadened their market financing and successfully shifted parts of their financing from monetary policy operations onto the interbank repo market. The significant increase in deposits during the summer months helped as well. Overall, bank liquidity has been continuously improving. It is important that this trend is further supported in the period ahead. Is the Greek debt sustainable according to the ECB? We were wondering, if you consider it sustainable, why you couldn’t have included the Greek bonds in the public sector purchase programme (PSPP – also known as QE) for at least a few weeks after the Eurogroup decision on debt measures, when the waiver was still in force. Are you going to publish the ECB’s debt sustainability analysis? The agreement reached by the Eurogroup on 22 June was a significant step towards restoring debt sustainability, especially over the medium term (that is, until the end of the deferral period). In the long term, we welcome the Eurogroup’s readiness to consider further debt measures if there are adverse developments. Indeed, downside risks to both macroeconomic and fiscal assumptions remain sizeable.

As for the PSPP, Greek government bonds lost their eligibility on 21 August when the programme ended. At that point, the Eurogroup’s debt measures had still not been ratified. In any case, purchases would have been very limited over such a short period. Is there any chance that Greek bonds could be included at some point in the future in the reinvestment phase of the PSPP? How many years do you think the reinvestment of maturing securities will last? Without a programme, Greek government bonds are now treated like any other bonds for the purpose of ECB eligibility. Once they regain investment grade status they could be included in all ECB programmes, subject to a Governing Council decision. As you know, we intend to reinvest the principal payments from maturing securities purchased under the asset purchase programme (APP) for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. The government seems to have put on hold, for the time being, plans to return to the markets. Do you think that Greece has now regained full access to international capital markets? Do you think it should wait until after the elections to go back to the markets? Greece’s market access conditions have clearly improved compared with one year ago.
Let’s hope that trends that now appear to be leading us in the wrong direction can change course. Thank you for your attention. 1 Based on GDP at market rates. 2 Nordhaus, W. D. (2018): Speech delivered at the Nobel Banquet in Stockholm, 10 December 2018. 3 Blomgren, A. et al (2015) “Industribyggerne 2015” . IRIS Report 2015/031 (Norwegian only). 4 World Bank “Ease of doing business index”. data.worldbank.org/indicator/IC.BUS.EASE.XQ  6/6  BIS central bankers' speeches

Along with the reduced fiscal stimulus in 2012, they resulted in a weak aggregate demand and low economic growth during the first three quarters of the year. Despite the negative impact on economic growth rate, the financial and macroeconomic stability resulted stable. In spite of demand volatility and supply concerns, inflation resulted low and in check, reflecting, inter alia, good anchoring of public expectations around the 3% target. Fiscal balance sustainability, Albania’s improved external position, and sound real-sector and financial-sector balances in the economy further strengthened Albania’s economic and financial stability over this period. Average annual consumer price inflation resulted 2.7% in the third quarter of the year, increasing gradually along the year. Added contribution of prices for unprocessed food and non-food consumer goods mostly created this quarter’s annual inflation rate. On the other hand, prices of other basket items were stable and slightly volatile. The economic and monetary analyses confirm the presence of weak demand-induced inflationary pressures. Developments in the real sector of the economy conditioned the controlled price rise of domestic products. These tendencies have been reflected in the downward trend of core inflation and low non-traded inflation of the consumer price index basket. Consumer price performance continued to reflect the low pressures from other cost elements. In particular, import prices were low and given the relative exchange-rate stability, they transmitted low pressures from imported inflation. Following the economic contraction in the first quarter, Albanian economy fell by 2.0% y-o-y, in the second quarter.
This can be inferred, for example, from the responses of firms in the latest edition of the Banco de España’s Business Activity Survey (EBAE, by its Spanish initials), corresponding to the fourth quarter of 2021. According to the results of the survey, three-quarters of Spanish 4  Indeed, several simulation exercises carried out with the Banco de España’s macroeconomic models, show that, should second-round effects on inflation materialise as a result of significant wage rises or the maintenance of profit margins, the losses for the whole economy arising from a negative shock to the terms of trade would be much greater. 8  firms experienced a rise in their costs in this period as a result of higher input prices, while only 30% increased the prices of their products. Second, it is vital that any incomes agreement between workers and employers should facilitate the coordination of collective bargaining across its various areas, while avoiding measures to be implemented too broadly. In fact, taking into account the extraordinarily asymmetric impact of the current shocks on different groups of workers, businesses and sectors (which are themselves highly heterogeneous), it would be advisable to avoid solutions that will be excessively rigid for certain segments of activity and/or businesses.5  Third, it would also be desirable to avoid formulae that automatically link wages to past inflation or indexation clauses.6 If these clauses increase or become more prevalent the risk of a wage-price spiral will rise significantly.

As a result of this analysis, and having found it less necessary in the current setting than in the past to reinforce our accommodative monetary policy stance through net asset purchases, the ECB Governing Council decided that monthly net purchases under the Asset Purchase Programme (APP) would amount to € billion in April, € billion in May and € billion in June. This means reducing the monthly volumes for May and June compared with those agreed in December. We also agreed that the calibration of net purchases for the third quarter will depend on developments in, and our assessment of, the economic outlook. In parallel, given the current extraordinary uncertainty, we underlined the data-dependent nature of our decisions and increased flexibility and optionality in the use of instruments. First, we pointed out that we will adopt whatever measures are necessary to fulfil the ECB’s price stability mandate and to safeguard financial stability. This allows us to provide certainty to all economic agents about our commitment to these objectives during a particularly uncertain time. Second, we explicitly stated that, if in the coming months new data support the expectation that the medium-term inflation outlook will not weaken even after net asset purchases have stopped, we will end net asset purchases under the APP in Q3. However, should the medium-term inflation outlook change and should financing conditions be inconsistent with continued progress towards our 2% target, we stand ready to revise the net asset purchase plan in terms of both its amount and its duration.
The MPC has proved to be one of those rare “instantly invented precedents” that seem to have worked. It may not achieve the cult status of the Nine Worthies who, in the Middle Ages, inspired poetry, sculpture and stained glass windows. As one writer has remarked, “If one reviews the list of virtues that contemporaries found valuable in a knight - courtesy, loyalty, prowess, hardiness, largesse, and frankness - the Nine Worthies seem to meet the standard”. If that level of achievement is no more than an aspiration for its nine members, at least the MPC can claim a record of reasonable competence during its first five years. As Stephen Bayley remarked in 1986, “civilisations are remembered by their artefacts, not their bank-rates”.

On the Committee itself various suggestions have been made: to extend the terms of appointment of members of the MPC, to make those longer terms non-renewable, and to appoint people with more diverse backgrounds. By far the most fundamental of these suggestions is the proposal to appoint representatives of different industries or regions to the Committee, as opposed to monetary policy experts. That would change the nature of the debate and undermine the mutual confidence of members of the Committee in each other if it were felt that some were representing a specific interest group. With experience of the MPC, I think that this argument has come to be accepted. The proposal that the minutes of MPC meetings should include more description of individual views I discussed earlier. The Committee has been opposed to such a change for the reasons I gave. In its early days the Committee was sensitive to the view that the minutes, then published six weeks after the meeting, should be published earlier, and it shortened that lag to 13 days in October 1998. The forecast process has attracted much attention, and was discussed at length in the Kohn Report. Presenting the forecast in terms of a fan chart, in order to highlight the balance of risks to the outlook, has proved successful. But it has proved more difficult to explain the role of a projection conditioned on the assumption of constant official interest rates.