samchain/econo-pairs-v1 huggingface dataset:
The average level of such quantities is determined by other factors, such as demography, competition and tax policies, research and development and education and training. There are therefore good reasons why monetary policy should focus on inflation and have an inflation target. Flexible inflation targeting policy A strict interpretation of the possibilities of monetary policy can easily be perceived as being that central banks can only affect inflation. However, although monetary policy can not affect the average level of real factors, this does not mean that it is ineffectual in stabilising  BIS Review 111/2009  1  fluctuations in these factors. I mean by this that monetary policy can contribute to the stabilisation of resource utilisation at a normal level. In practice, central banks with an inflation target conduct what is called flexible inflation targeting. This flexibility means that – alongside the long-term inflation target – the central banks also strive to ensure that fluctuations in both inflation and the real economy are kept at a reasonable level. Striking the right balance between these factors is what the Riksbank calls a well-balanced monetary policy. The flexibility of inflation targeting becomes particularly important in situations where a conflict arises between the objective of reaching the inflation target and the objective of stabilising the real economy. In some situations, the inflation target calls for a certain type of monetary policy while resource utilisation calls for another. One example of this is the situation that prevailed during most of 2008, the year before I joined the Executive Board.

This is reflected by the fact that risk premiums on the interbank market, for example the TED and basis spreads, have fallen to levels close to those that applied before the outbreak of the  4  BIS Review 111/2009  financial crisis in both Sweden and abroad (see Figure 1). The stock market has also recovered strongly. Swedish companies have gradually found it easier to find funding on the international capital markets. But the situation is still strained. The interest rates offered to Swedish companies are high in comparison to the interest rates for government securities, that is the credit spreads are still high. In addition, corporate demand for export guarantees is much higher at present than has been the case previously. This indicates that the funding situation of the companies is still strained. International economic activity show signs of recovery Since the monetary policy meeting in July, signs have emerged of a slowdown in the economic downturn abroad. In some countries, there are now even signs of a recovery. This can be seen, for example, if we look at world trade, which has now begun to stabilise following the collapse at the start of the year (see Figure 2). Both outcomes and indicators of future economic growth have stabilised or shown an upturn in most regions. In Asia, in particular, growth has clearly picked up during the second quarter of this year (see Figure 3). This is because domestic demand in China has increased, which in turn stimulates exports in the Asian countries.
A raise in the interest rate in this type of situation, where over-optimism was rife and both inflation and interest rates were low, could have meant that investors, property buyers and credit institutions would have acted rather more cautiously than if the interest rate had remained unchanged at a low rate and thus at least subdued the price bubble somewhat. The costs to society of waiting too long to change the direction for monetary policy can be high if imbalances are allowed to grow and the fall in production can be drastic when the imbalances are corrected. It is therefore important that monetary policy should act in a preventive manner and that great vigilance is exercised with regard to the temperature of the entire economy, both the real and the financial parts. Let us return, after this outlook, to our own, calmer circumstances. Low, stable inflation expectations cannot be used in all situations as an argument in favour of retaining monetary policy unchanged. It could be possible that the expectations are based on the general public assuming that the Riksbank will act if and when required. The fact that inflation expectations remain stable could then reflect expectations of future monetary policy. If these expectations are not fulfilled, then inflation expectations, and later on the rate of price increase, will rise. The example from Japan also shows that it is not certain that inflationary pressure will be visible in CPI inflation; sometimes price pressure is first seen in other prices than consumer prices.

For instance, the interest rate influences the general public’s decisions regarding investment and consumption. A higher interest rate normally means that growth in demand is slightly subdued, which is assumed to entail that the amount of free resources in the economy increases slightly in the long term. The effects on demand often come after a few quarters and thus also subdue price increases at an even later stage. A change in the interest rate also affects the exchange rate. An increase means that the return on assets in the home country’s currency is slightly higher. This also means that expectations of growth and inflation are subdued somewhat relative to developments in the rest of the world, which according to the textbook can contribute to a slightly stronger exchange rate. If the krona appreciates, it becomes slightly cheaper to import to Sweden, which can be assumed to lead to import prices on input and consumer goods increasing at a slower rate. A stronger krona also subdues global demand for Swedish export goods, which helps subdue growth in demand. On the other hand, if there is little confidence in the country’s economic policy, an increase in the interest rate risks resulting in a weaker exchange rate rather than the reverse, because confidence in growth is low. Monetary policy can also affect price developments via households’ and companies’ expectations of future inflation. In this context it is important to point out that there are a number of different measures  BIS Review 13/2002  1  of inflation expectations.
These trends will also be affected by initiatives taken by the Government to transform the economy in this next decade into a high value-added, high-income economy, the greater leverage on the advances of technology and the acceleration of the pace of regional financial integration in Asia. The Malaysian financial system enters this new environment from a position of strength. The successful implementation of the first Financial Sector Masterplan in this recent decade has produced a financial system that is well positioned to respond to the new imperatives of the decade before us. Our financial institutions are well capitalised with strong buffers and improved risk management and governance practices. Significant efficiency gains have also  BIS central bankers’ speeches  1  reduced intermediation costs in an environment of greater competition. This is largely arising from the cumulative efforts to building strong institutions, the development of the financial infrastructure, and the strengthening of the regulatory and supervisory framework. This decade has also seen the enactment of wide ranging legislation that has given greater certainty and predictability in the financial system. This includes the Central Bank of Malaysia Act 2009 and the Financial Services Act expected to be tabled in Parliament in 2012 has strengthened the legal framework for the financial sector. It will also enhance the Bank’s capacity to manage risks from financial intermediation activities that occur outside the banking system and provide enhanced powers for timely intervention actions.

The enhanced intermediation during this decade has benefitted access to financing, particularly for small and medium enterprises, has also improved, both in volume and efficiency. By leveraging on the distribution networks of commercial banks, enhanced product and risk management capabilities, access to financing by this sector has increased at an annual rate of almost 20% since 2005. The financial infrastructure in Malaysia has also been significantly strengthened. Malaysia has an effective financial safety net that includes a comprehensive deposit insurance system and institutional arrangements that provide avenues for advisory, redress and rehabilitation. Innovations in payment systems and instruments as well as infrastructure for the issuance, trading and settlement of debt securities and the access improved market information has contributed to greater efficiency and has also enhanced the overall price discovery process. To support our liberalisation measures our payment infrastructure has also been enhanced to support cross-border trade settlements in local currency and cross-border liquidity support arrangements for financial institutions. Today, Malaysia also has a deep and vibrant bond market which is the largest in South East Asia, and a comprehensive Islamic financial system that is recognised as among the most advanced in the world. The bond market comprising of the conventional and sukuk market has trebled in size, providing businesses with alternative access to financing solutions including in multicurrency to meet a diverse range of risk and maturity preferences.
And the banking system, with much stronger capital and liquidity reserves, continued to lend – supported by new schemes such as the CCFF, built from scratch in record time. In designing our interventions, we have been careful to demarcate clearly between our respective institutional responsibilities: the MPC took the decisions on asset purchases; the Treasury bore the financial risk on lending to corporates; and we reminded financial markets that any usage of the Ways & Means account would be temporary and short term. In light of those actions, and similar steps by other central banks globally, core markets are today stable and well-functioning. That is no small achievement. But it is far too soon to take a lap of honour, even on the narrow stage I have occupied today. Financial markets could come under strain again, if there is another leg to the global infection cycle, or if economic data come out persistently worse than expected. And even if – as hoped – we escape that, the sheer scale of our interventions means we must, in time, ask ourselves hard questions about the financial markets we  14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14  rely upon, and their potential to amplify the sort of ‘dash for cash’ we saw in March and April.

Consequently, the banking sector’s liquidity, in excess since 2002, declined gradually during 2015 to reach dinar billion 1833 by the end of the year (a decline of 33 percent), after relative stability in 2014 (dinar billion 2731 by end 2014). With a milder recession in the hydrocarbon sector in 2014 and an upturn as of 2015, economic activity strengthened during these two years despite the external shock. Growth was 3.8 percent and 3.9 percent respectively (2.8 percent in 2013) and inflation rose from 2.9 percent in 2014 to 4.8 percent in 2015. To face the external shock and the resulting drop in fiscal oil revenue, the Government initiated a programme of spending rationalisation in 2015, notably through the prioritisation of investment projects. In 2016 fiscal consolidation further included a relatively low reduction in current expenditure (-3.3 percent) and a more substantial reduction in capital spending (-16 percent), totalling a 9 percent reduction in public spending. Furthermore, the 2016 budget includes an upward adjustment of the tax on energy products (petroleum, diesel, electricity and gas). This is aiming at reducing public finances’ vulnerability to oil price decline and lies within the strategic objective of ensuring medium term fiscal sustainability. Moving ahead, the gradual fiscal adjustment should also rely on increasing non-hydrocarbon revenue. 2.
Ethical choices in an open economy], Høyskoleforlaget, and Fritz Hodne and Ola Honningdal Grytten (2002): “Norsk økonomi i det 20. århundret” [The Norwegian economy in the 20th century], Fagbokforlaget. 14  BIS Review 154/2010  bank. The central bank did not provide long-term loans on a large scale. 46 This distinguishes the management of the financial crisis in Norway from a number of other countries in that we are of the view that it is appropriate for such medium-term financing – as in the case of solvency support – to be provided by the government and not Norges Bank, if the situation has reached a point where this is necessary. 47 The measure is given a broad democratic grounding through government and Storting deliberations. This approach also serves to counter the kind of criticism that was levelled at Norges Bank when it provided funding for banks in the mid-1980s. Financial imbalances ordinarily build up over a long period before they trigger a crisis. Internationally, measures intended to prevent systemic risks in the financial sector are usually referred to as macroprudential policy. The government authorities should primarily use structural measures to dampen selfintensifying forces behind credit growth and rising property prices. The most important measure will be to increase banks’ capital requirements. The international minimum standard for banking regulation will be strengthened under the forthcoming Basel III framework. However, we note that some countries do not wish to subject their banks to stringent standards.

BIS Review 154/2010  7  Today’s economic policy frameworks are partly a reflection of the experiences of the 1970s and 1980s, both in other countries and in Norway. The Bretton Woods system collapsed when the US deficit-financed the Vietnam War and extensive welfare reforms, while interest rates were kept low. The gold standard had to be abandoned, inflation rose and an oil price shock was triggered. A shortfall in production and unemployment followed in its wake. Norway imported high inflation, and domestic inflation was also amplified by galloping wages and a series of krone devaluations. High inflation undermined the regulation of the credit market. We had had a low nominal interest rate for a long period – several decades – but inflation had also been moderate. From the end of the 1960s, this changed. The real interest rate became highly negative. In addition, galloping wages drove incomes into higher tax brackets, resulting in higher marginal taxation, and the after-tax real interest rate became even more negative. The regulation of credit was not able to stem the tide of credit demand that ensued. The Norwegian money market became more closely integrated with a growing Eurodollar market at that time. This was partly because oil companies had to exchange their US dollar revenues into NOK for tax payment purposes. The regulatory regime was imploding.
The central bank mandate of financial stability is less clearly defined particularly in circumstances in which the supervisory function does not reside in the central bank. The majority of central banks in emerging economies in Asia, however, has the responsibility of the supervisory function although for three of the region’s major economies – Japan, China and Korea, this function resides in a separate agency. Even for central banks that has the responsibility of the supervisory function, the specific outcomes to be achieved are less clearly defined compared to the mandate for price stability. In Malaysia, our new Central Bank Act of 2009 has defined this mandate in terms of the risks to financial stability – that is,  BIS Review 155/2010  1  the risk of the disruption to financial intermediation, the risk of disruption to the orderly functioning of financial markets and the risk of loss of confidence in the financial system. Common to most central banks in emerging economies is the mandate to develop the financial system. Given the stage of development of financial systems in emerging economies, this is an important mandate not only to enhance the financial intermediation process in the economy but also for the purposes of facilitating the mandate of monetary and financial stability. This mandate has involved institutional building, financial market development and the strengthening of the financial infrastructure including that of the payment systems and the legislative framework.

We have to make sure that when achieving the nominal criteria a substantial progress in real convergence will have been achieved as well. Thus, in my presentation today I thought that, by giving an analysis of the Romanian economy’s path to the adoption of the European single currency, it is adequate to focus not only on nominal convergence, a topic which I have repeatedly approached, but also on several issues pertaining to real economic convergence. Or, this means, in a plain language, to put in place the conditions necessary for a rapid, sound and sustainable economic growth. The large disparities between the performance of the Romanian economy and that of European Union countries compel us to do that. In this context, allow me to approach a topic less debated during public meetings in our country, but which is deeply linked to the capacity of the Romanian economy to maintain a rapid and sustainable growth. It is all about the general problems relative to structural reforms and, in particular, about labour market flexibility, the imperative need for this to come into line with the most modern practices applied in successful countries, by taking into account both the realities of the Romanian economy, and the requirements of competition on an increasingly demanding international market. At first glance, there are few connections between the changeover to the euro and labour market flexibility. In fact, the connection is strong, even essential, I would say.
6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  Chart 2: ECB forward guidance has helped to anchor forward interest rates through the euro area recovery Introduced rates guidance  Linked forward guidance to APP  Euro Fwd 1y rate Euro Deposit Facility Rate  Per cent  Extended by 6 months to end 2019 Date based guidance to summer 2019  0.6  Extended by 6 months to first half of 2020  0.4 0.2 0.0 -0.2 -0.4 -0.6  2013  2014  2015  2016  2017  2018  2019  2020  The ECB has also innovated with guidance on its asset purchase programme. In the September 2014 press conference the President said that the aim of policy was to steer the balance sheet towards its size at the beginning of 2012. This guidance was important to dispel any doubts about the ECB’s ability to deliver. The Bank of England introduced guidance in 2013 in order to secure the nascent recovery while granting the MPC the flexibility to learn more about the rapidly changing supply capacity of the economy. When the longawaited UK recovery began to take hold, even though inflation had been persistently above target, there remained a significant but highly uncertain margin of spare capacity in the economy and it was unclear whether productivity growth would pick up. We felt that guidance was essential to help clarify our reaction function so that stakeholders could learn alongside the MPC.

Among these initiatives, we are joining with the Consumer Council in their consumer awareness campaigns. Another very important initiative I’d like to highlight, is our work with the Securities and Futures Commission to establish an Investor Education Centre (IEC). The HKMA will supplement this with additional consumer education independent of the IEC, focusing on areas such as banking products and services, as well as other investment products that may not be covered by the IEC. “The role of the consumer” So, as well as good practice among financial institutions, financial authorities also have an important role to play in enhancing consumer protection and education. But focusing on just those two groups leaves out possibly the most important group of all – the consumers themselves, to whom I will devote my remaining remarks. One of the things on which the global financial crisis cast a cold light was the implicit cost to households – and indeed to society and financial markets – of low levels of financial literacy. Financial literacy is increasingly recognised as an important individual life skill that people need to thrive in a modern economy like Hong Kong. Without it, consumers can be at risk of mis-buying and bank employees are themselves at a higher risk of mis-selling. For example, one of the hallmarks of our financial sector in this city is the universal banking regime that allows banks to offer basic services as well as a wide range of financial products.
Because of the stagnation in the 1990s, inflation has been particularly low in Europe in recent years. Norway, on the other hand, experienced a long period of economic expansion in the 1990s. Since 1997, price inflation in Norway has been higher than in euro area countries, which is reflected in the higher level of interest rates in Norway compared with the euro area. The effects of monetary policy In theory, Norges Bank has two monetary policy instruments: the interest rate and exchange market interventions. However, in Norges Bank’s experience, extensive and sustained exchange market interventions to influence the exchange rate have yielded poor results. Interventions can often lead to game situations where market operators perceive the central bank’s attempt to influence the exchange rate as an interesting opportunity to make a profit. Events in autumn 1992, at the start of 1997 and autumn 1998 show that exchange market interventions cannot stem the pressure on the krone. Norges Bank does not want to intervene in such a way that these game situations arise. However, the Bank may use interventions to a limited extent if the krone exchange rate moves substantially out of line with what we consider to be reasonable based on fundamentals or in the event of exceptional short-term volatility in thin markets. In such situations, there is less risk of ending up in a game situation against exchange market operators.

1  BIS Review 92/2000  The objective of monetary policy Norway has a tradition of having a fixed or stable exchange rate, although we cannot say that we have had a high degree of continuity in monetary policy. On the contrary. In the 1970s and 1980s, the economy lacked a nominal anchor. Interest rates were low in nominal terms and they were politically  determined. Frequent devaluations were used to redress the negative effects of high price and wage inflation on competitiveness. The average rate of increase in prices between 1973 and 1987 was almost 10%. The value of the Norwegian krone against the German mark was nearly halved from 1973 to 1987. We paid about 2 kroner for a mark in 1973 and close to 4 kroner in 1987. The low interest rate and devaluation policy collapsed in the mid-1980s. Following a shift, which can now perhaps be said to have occurred in 1986, monetary policy has created nominal stability. Through the 1990s inflation in Norway was on a par with the level elsewhere in Europe. At the same time, the value of the krone against European currencies is about the same today as it was in the early 1990s. The exchange rate against the German mark is still around 4 kroner. BIS Review 92/2000  2  Norway abandoned a fixed exchange rate system in 1992 in the wake of heavy speculation against the krone during the period of turbulence in European foreign exchange markets.