samchain/econo-pairs-v1 huggingface dataset:
The shift may be in the order of one-half of a percentage point. This is the change that lies behind the common, but not entirely certain, estimate that nowadays the Swedish economy can maintain an annual growth rate between 2% and 2.5%. But Swedish data do not yet provide any definite evidence of an improvement in productivity, and hence in potential growth, that corresponds to what has happened in America. It does seem likely, however, that the rapid advances in information technology will also have a major impact on future production and distribution processes in Sweden. Sweden is well to the fore in Internet applications. Still, when and to what extent these factors will affect growth in general is not yet clear. But even though appreciable general economic consequences cannot be discerned at present, the tendencies are worth considering. Some parallels can perhaps be drawn with the situation over a century ago, when Sweden was being transformed fairly rapidly from a poor European country into a dynamic and strongly expanding industrialised economy. There are also lessons to be learned from developments in recent decades. Monetary policy’s task well defined The current monetary policy conclusion is unequivocal and there seems to be broad agreement about the task that monetary policy faces. So today I should like to discuss developments in the Swedish economy in a wider perspective that is not an immediate concern for monetary policy but may have to be considered some time after the turn of the millennium.

Internet compared with railways Simplifying somewhat, the advent of the Internet can be compared with the era of railroad construction in Sweden in the second half of the nineteenth century. In the initial phase there was a boom for those who constructed the railways and manufactured rolling stock. In the closing decade of the century Swedish firms began to produce locomotives; previously BIS Review 118/1999  2  that had been the preserve of British manufacturers. The Swedish firms took over the domestic market and were even able to export their products. Much the same happened with the manufacture of passenger carriages and goods wagons. Today we can see similar developments in the IT industry. Besides the giant, Ericsson, Sweden has many different IT enterprises. But growth is still being driven not so much by users of the new communication facilities as by the production of new possibilities. To continue with the comparison, in the next phase people started to travel by rail. A journey from Stockholm to Gothenburg admittedly took 11 hours and 45 minutes in 1865, but that was nothing compared with a horse-drawn carriage. Travelling became quicker and more efficient; people gained new impressions and learned new things. Sweden became smaller. Today we travel on the Internet by gathering information simply and efficiently from all over the world, largely for the price of a local telephone call. Millions of people in all parts of the world are indeed using this facility and in that sense the world has now become smaller.
I will also offer my opinion on how other economic policy should make a consistent contribution, so that we can chart a course through these uncertain times towards prosperity and opportunity. 1. Euro area: situation and outlook A succession of adverse shocks, including that triggered by Russia's invasion of Ukraine, have rocked the global and, naturally, the European economy. Indeed, given our geographical proximity to the war zone, our close trade and financial ties to Russia and our high dependence on fossil fuel imports from that country, the euro area economy has been one of the hardest hit by the war. The war has sent the prices of energy and other commodities soaring. As these are products that the euro area does not have at its disposal and needs to import, this has led to a significant deterioration in our terms of trade of around 2 percentage points (pp) of (nominal) GDP to 2022 Q3. Moreover, this shock has unfolded amid sky-rocketing global inflation, which has reached levels not seen in several decades and is prompting sharp falls in real income. The reasons behind the rise in inflation are manifold and combine supply and demandside factors, whose weights differ depending on the geographical area in question. In  1/8  BIS - Central bankers' speeches  the case of the euro area, higher energy and food prices have added to the effect of other supply-side factors related in particular to supply-chain disruptions.

3/8  BIS - Central bankers' speeches  An equally important aspect of the current monetary policy response relates to the existing high level of uncertainty, which affects both the nature of the shocks and their persistence, and how our measures will ultimately influence inflation throughout the monetary policy transmission channel. In light of this, firms' and workers' long-term inflation expectations are key to defining the optimal response. If the expectations remain firmly anchored to the target, as there is full confidence in the ECB's commitment to getting inflation back to its target, the monetary policy response could be less forceful. Conversely, if they rise above the target, monetary policy will have to act more forcefully. As I mentioned earlier, inflation surged in the euro area and has gradually proven more persistent and spread to a higher number of goods and services in the consumption basket. This has led to successive upward revisions to projected inflation, including the medium-term projections. In tandem, second-round effects via wages or mark-ups have been moderate, but the greater persistence of inflation has increased the risks of a deanchoring of medium-term inflation expectations. Against this backdrop, the ECB's response has been to tighten monetary policy, combining gradualism and forcefulness in an effort to keep inflation expectations anchored. The normalisation of our monetary policy began in late 2021 with the announcement that net asset purchases would cease by the end of the first half of 2022.
In this context, it was particularly important that the European Central Bank (ECB) initiated very large asset purchases, which led, for example at the end of February and beginning of March 2015, to the krona appreciating strongly against the euro. Against this background, it has been particularly important to follow the ECB’s actions and it is probably in this light that we should consider the fairly common claim in the Swedish debate that “the Riksbank is forced to follow in the ECB’s footsteps”. However, this is a special case in many ways. When we start to approach a situation in which we feel more certain that the inflation target is again well-anchored among economic agents, we will be able to take a more tolerant attitude towards the development of the exchange rate. This means that it will again become possible to conduct monetary policy with a greater degree of freedom. In situations in which confidence in the inflation target has to be defended, it is not only autonomy that is temporarily weakened, in the sense I have just described. This also applies to the possibility of conducting a flexible inflation-targeting policy, which is to say taking account of factors other than inflation. This also reduces the degree of freedom for monetary policy, compared with a situation in which confidence in the target is completely solid.

The successful accomplishment of the main objective for maintaining price stability and the objective for safeguarding the financial system stability required improving all business processes within the institution, both the ones related directly to the legal duties of the Bank and those related to supporting aspects. During 2013, human and financial resources of the Bank of Albania focused on the qualitative development and improvement of these processes and their approximation with European practices. I would like to present them in brief. 4. Other activities of the Bank of Albania  The Bank of Albania has started a project to review the collection and processing of statistics according to Eurostat requirements, and has completed the technological infrastructure to automate and process reporting. This process is in a testing phase and is expected to be functional within this year. The Bank of Albania has continued cooperation with the World Bank to improve the reserve portfolio management system. Drawing on the experience of other countries for the administration of the crisis in the euro area, the respective regulation was revised to establish buffering and monitoring mechanisms against the materialisation of investment risks. The regulatory framework for the issue and control of banknotes and coins was amended, setting the standards for banknotes fit for circulation, and strengthening the monitoring of their protection against counterfeiting. In 2013, the laboratory for analysing banknotes suspected as counterfeit was made functional. Its instruments employ state-ofthe-art technology, hence fulfilling one of Albania’s obligations arising from the SAA.
We are currently awaiting the official figure, but project that the economy in the second half of 2014 to have grown by 1.7%, which translates into an annual growth of 0.8% for 2014. (Slide 1) Prospect for 2015 and projections As for 2015, we project that the Thai economy will continue to recover at an annual growth rate of 4%. Let me briefly highlight a few key points underlying this projection. First, we anticipate that the growth momentum is carried forward from last year’s second half. The economy should show stronger signs of recovery. Private consumption, investment and government spending will be the main drivers of growth. Lower oil prices certainly have also given consumers a hand in the recovery process. Exports are also expected to grow, but at a slower pace than we have seen in the past. Second, our estimate of exports is conservative. We project merchandise exports to grow mere 1% this year compared to 3–4 % expected by the market. Demand growth from our trading partners is still slowly recovering, especially in the euro zone and Japan. While the US economy is picking up its growth momentum, the risk of global growth and lower commodity prices has undermined many Asian countries’ exports including ours. With regard to exports of services, particularly the tourism sector, things are however somewhat brighter. With tentative signs of improvement, we project tourism to grow approximately 10% compared to last year. Third, there are critical assumptions in this projection, which hinges on government spending.

It’s not sprinting as fast as you can for 100 meters until the finish line. If you told me today to run a full marathon tomorrow, I could not make it. But, if you gave me time to prepare and get fit, I would be in the run. Monetary policy Let me now devote the last few minutes of my talk to update you about our monetary policy. Throughout the last couple of years, the Monetary Policy Committee has maintained an accommodative policy stance to support the economy. Mindful of downside risks to growth, the Committee carefully adjusted the degree of policy accommodation to ensure sufficient support to domestic demand and to shore up confidence. Since May 2013, the policy rate was cut three times, as lower risks to domestic financial stability and subdued inflation opened room for monetary easing. Nonetheless, since the interest rate has been low for a prolonged period, we continue to be vigilant in monitoring any risks to financial stability. (Slide 6) Ladies and Gentlemen This year marks the 15th anniversary of Bank of Thailand’s adopting of the “flexible inflation targeting’ monetary policy framework. Thus far, this framework has served us well and resulted in a satisfactory record of price stability, which is a remarkable improvement from previous decades. (Slide 7) The headline inflation rates were on average 2.6% since 2000 under inflation-targeting, while they were more than 4% prior to that (15 years during 1985–1999).
This interconnection, if broken down in its simplest form, has two possible outcomes that relate to financial stability. First outcome, the transmission mechanism of conventional monetary policy includes the ways interest rates directly influence the supply for credit for house purchases and indirectly influence the real economy through house prices3. In the history of conventional monetary policy decisions, the ECB, at times, responded to the presence of excessive credit in order to safeguard its price stability objective. In its August 2006 decision to increase interest rates, the ECB stated that the "stimulative impact of the low level of interest rates in the euro area has been an important factor behind the tendency for money and credit growth to strengthen". In the period of quantitative easing, monetary policy tools expanded to include, among others, targeted operations to stimulate bank lending to the real economy4. These are  2/3  BIS - Central bankers' speeches  linked to a threshold of the banks' loans to non-financial corporations and households. By recognising the impact this tool would have on housing prices, housing loans have been excluded from the this threshold. Given that monetary policy affects real estate developments, the role of macroprudential policy becomes important in addressing idiosyncratic vulnerabilities and as such the independence of macroprudential policy should be safeguarded, especially in a monetary union. The Second outcome is that, an increase in interest rates will increase the monthly loan payments.

Constantinos Herodotou: Recent developments in housing markets and related policy challenges Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the HL conference organised by the NBB, Nicosia, 18 February 2022. *** The target of macroprudential policy is to mitigate threats to financial stability, by reducing vulnerabilities and promoting the resilience of the financial system. In order to achieve its goal, the macroprudential toolbox has been designed to include two broad categories of measures. First category, authorities can use Borrowed Based Measures, such as limits on the Loan-to-Value ratio, which strengthen the resilience of borrowers against potential vulnerabilities and limit demand for credit. The second category are the Capital Based Measures, such as higher risk-weights on specific exposures, which strengthen the resilience of credit institutions, by increasing available buffers that can be released in case of adverse developments1. One of the macroprudential risks authorities face stems from the overheating of the residential market. The fact that not all euro area countries receive relevant warnings and recommendations by the ESRB is an indication that the Residential Market in the euro area is characterised by heterogeneity. In the upper right quartile of the chart, we find a number of countries that registered an accumulated increase in residential property prices of at least 25% in the last three years. Other countries have recorded accumulated growth as low as 5%.
First, last February, concerns surrounding a faster-than-expected tightening of monetary policy in the US triggered a major stock market sell-off and a corresponding volatility spike (green curve). Then, in May, political uncertainty in Italy led to a considerable widening of the yield spread between German and Italian 10-year bonds (blue curve). Demand for various asset classes regarded as safe havens, such as the Swiss franc, increased. Finally, in August, we witnessed a huge sell-off of certain emerging market currencies and an increase in their volatility (yellow curve). Fears of global contagion resulted in the franc appreciating strongly. It remains a safe-haven currency during periods of high uncertainty. Indeed, an analysis of the options market confirms that the Swiss franc was in demand as a safe-haven currency during the three events described above. Risk reversal shows that during these events, participants were prepared to pay a higher premium to hedge against losses resulting from a steep appreciation of the Swiss franc vis-à-vis the euro than against a depreciation. As we can see from chart 5, three-month risk reversal for the EURCHF pair was significantly negative. Even today, risk reversal is still well below zero, indicating that the situation on the foreign exchange market remains generally fragile. And now I would like to hand back to Andréa Maechler. As we have just seen, without this kind of in-depth analysis as a supplement to traditional macroeconomic analysis, it would not be possible for us to capture the complexity of markets simply and comprehensibly.

It reflects the banks’ loss of confidence in conducting transactions on an unsecured basis since the beginning of the financial crisis. This trend has not been reversed, as we can see from chart 6. Activity on the money market has shifted towards the secured segment – in Switzerland towards the repo market (shown in blue). Following the substantial injection of liquidity in the wake of the SNB’s interventions, activity in this segment has also declined. However, the sizeable liquidity surplus has not reduced volume to zero. In fact, the introduction of negative interest on sight deposit accounts at the SNB has prompted banks to arbitrage their exempted amounts. In addition, banks have continued to trade in repos, in order to exchange the corresponding collateral. Collateral management tends to gain in importance in response to ever-stricter regulation. Insurance companies are likewise active in the market, for liquidity management purposes. In this changing context, the money market has performed its role as a monetary policy transmission channel to the fullest extent. Following the introduction of a –0.75% negative interest rate on sight deposit accounts at the SNB at the beginning of 2015, the various money market interest rates rapidly moved into negative territory, as chart 7 shows. The decline also spread to yields on bond and credit markets. To ensure the smooth functioning of the capital market and the effective transmission of monetary policy regardless of the circumstances, the quality of the money market infrastructure plays a key role.
Luis M Linde: Key issues on today’s banking industry Closing speech by Mr Luis M Linde, Governor of the Bank of Spain, at the 6th Santander International Banking Conference, Madrid, 5 November 2013. *  *  *  I would like first to give my thanks to Banco de Santander for inviting me to take part in this final session of your 6th International Banking Conference, an excellent opportunity to review and assess key issues on today’s banking industry, which has to face, in the next few years, important regulatory and operational changes. I will comment on several elements of the new Basel III capital framework that remain contentious or are still open to discussion. Among those, the leverage ratio, the liquidity ratio and the very important issue of consistency in implementation. Then, I will move on to the Financial Stability Board’s work on resolution strategies and, finally, I will comment on the European Union Bank Recovery and Resolution Directive (BRRD), and one of the most important elements it contains, the bail-in tool. First, the leverage ratio, the ratio between Tier 1 capital and total balance-sheet and offbalance-sheet exposures not deducted from the calculation of Tier 1. This ratio is set, in principle, at a minimum of 3%. Its entry into force as an obligatory Pillar 1 ratio is foreseen to be in 2018. This new tool has been designed as a simple, transparent measure, not linked to risk, complementing and acting as a floor with respect to the risk-based minimum capital ratio.

The initial design of this ratio was too demanding and, perhaps, not realistic. 2015 for full implementation was clearly too early a date. Another controversial element was the definition of the “high-quality liquid assets” to be included in the numerator. However, after the review agreed by the Basel Committee in January, the ratio definition should be now fairly stable. It should be noted that, rather than a minimum ratio that has to be met at each point in time, such as the capital or the leverage ratios, what is involved with this new liquidity ratio is the setting up of “liquidity buffers” that can be used in times of need. Hence, although the minimum level is set at 100%, a bank could maintain a lower level at stressed times, but should inform the supervisor, in order to agree on a plan to restore the required minimum level. BIS central bankers’ speeches  1  As in the case of the leverage ratio, the short-term liquidity ratio does not come into force immediately. We are now – the present year and next – in an observation period that needs to be used for its fine tuning. At the end of this period, the ratio will be phased in from 2015 – when it will be required at the 60% level – to 2018, when it will fully apply. However, this timetable may be accelerated at national discretion.
Third, and instead, what matters more – not just for inflation itself but the cost of government debt as well – is the prevailing regime for monetary policy. The two can clearly interact: the monetary regime was abandoned in those wars partly because of the pressures from higher spending, and it was that de-linking from gold that allowed prices to rise in the first place. Equally, it was precisely because of the visibility and prominence of that measure, and the belief that it was likely to be temporary, that both the subsequent inflation and the rise in the cost of new government borrowing were contained to the degree they were. Conclusion Aggressive monetary easing by central banks, occurring as it has alongside very large government deficits, has raised fears in some quarters about “monetary finance”. These are misplaced. Certainly there’s nothing about the coincidence of the two in time that, in and of itself, constitutes monetary finance. If the rise in government debt is caused by a weak economy, something that would otherwise depress inflation, easing policy is exactly what an independent, inflation-targeting monetary authority should be doing. Theory tells you that, to stabilise inflation, policy needs to lean against swings in demand and UK history bears that out. It’s true that, if only for a while, easier money policy reduces the real cost of borrowing, for public and private sectors alike. That’s how it’s meant to work. The reduction in the cost of borrowing for the private sector stimulates demand and inflation.

Consequently, it would convert the tendency of the region to be negatively contaminated from global developments into an opportunity, a positive impact, in order to achieve high and stable economy growth in the long run. Thank you! BIS central bankers’ speeches  3