samchain/econo-pairs-v1 huggingface dataset:
These two decisions hopefully give some indication of where the Central Bank considers that it currently stands in the battle against inflation. This battle is a priority and there is no doubt that a successful outcome is very much in the national interest, not least for young people who have taken on heavy liabilities to secure themselves short-term or long-term housing. Household debt with the deposit money banks has surged in Iceland in recent years. However, debt service as a proportion of income has not grown, due to the more favourable credit terms now available, as well as rising incomes. Loan delinquency is still minimal. Both these indicators are very positive. However, this does not alter the Central Bank’s concerns about excessive borrowing, or at least very precarious borrowing, which could make the foreseeable economic contraction very tough for indebted households, and in some cases insurmountable. In such conditions, rising inflation could deal many households a heavy blow. Some people have responded to Iceland’s relatively high interest rates and price indexation by switching their debts to foreign currencies, but the benefits could prove short-lived if the króna  2  BIS Review 34/2007  depreciates. A depreciation would be instantly reflected in repayments on these foreign loans. Its impact on domestic indexed borrowing would be less and come later. At the last annual meeting, it was pointed out that the Central Bank had strongly encouraged financial institutions to curtail their credit growth at that time which, in the Bank’s view, had gone beyond all reasonable bounds.

And it should have credibility by ensuring swift and effective mechanisms for addressing complaints on breaches and the ability of the profession to act against errant members. In Malaysia, avenues for customers to address disputes with insurance brokers are being enhanced with establishment of a Financial Ombudsman Scheme that will include insurance and takaful brokers as members of the Scheme in the later part of this year. In closing, the insurance broking sector finds itself today at the threshold of an exciting, but also challenging, new era in which solutions of the past are unlikely to be adequate for the demands of the future. The stakes are higher, and the time is ripe for insurance broking in this region to do its part to contribute to sustainable growth. Thank you very much and I wish you all very constructive and enlightening discussions ahead. 4  BIS central bankers’ speeches
35 The financial conditions in the large and dominant currency areas, such as the dollar and the euro, are spread to the rest of the world via the free movement of capital irrespective of floating exchange rates. Floating exchange rates cannot therefore isolate an economy from the global financial cycle. This can, of course, lead to problems for some countries during certain periods. It can, for example, lead to inflated or rapidly falling financial asset prices, posing considerable risks to the financial system and macroeconomic growth. Interest rates are currently determined to a large extent directly or indirectly by the conditions on the global financial markets. This makes it more difficult for central banks in individual countries to affect the domestic economy. Moreover, the large capital flows can have undesirable effects on the exchange rate. This reduces the room for manoeuvre for domestic economic policy in countries like Sweden – small, open economies with a large financial sector. 36 A current example of monetary policy abroad placing certain restrictions on domestic policy is that in the situation we have – where inflation has undershot the target for several years – a dramatic and sudden appreciation of the Swedish krona could be problematic. It is therefore important that the Riksbank’s policy relates to policy developments abroad, particularly in the euro area. A significantly higher interest rate in Sweden would not only risk holding back inflation under the target and entrenching it on a low level but also risk leading to much lower growth in Sweden.

Sweden was also affected and the Riksbank decided to provide liquidity to Swedish institutions. The Riksbank’s balance sheet exploded, from SEK 212 billion at the end of 2007 to, at its peak, SEK 763 billion in the summer of 2009. In my opinion, the measures have overall been necessary due to the extraordinary circumstances. They have, however, created major challenges which central banks must now come to grips with. Central bank support can increase risk-taking Society’s safety net, in the form of measures such as giving banks ELA, means that we can counteract the risk of problems in one bank developing into a widespread systemic crisis. The Lender of last resort function could therefore be seen as a form of insurance. But just like all other types of insurance, this one can also have a negative impact on the beneficiaries’ risk behaviour if there isn’t a sufficient level of excess in the system. There has been an obvious risk of the expansion of the safety net that occurred during the crisis leading to greater risk-taking and thereby increasing the probability of the safety net needing to be used in the future. To counteract this, it has been necessary to increase both the excess and resilience in the financial system.
Supervisors in countries that have gotten a head start on the issue can thereby provide the benefit of their experience to those who are starting later. Those supervisors getting a late start have a need for tools of this type. The Joint Year 2000 Council will also be working with the members of our External Consultative Committee, particularly the Global 2000 Coordinating Group, to build on this effort and develop a Y2K self-assessment tool that could be used broadly by the financial industry in countries around the world. We also intend to develop additional papers on a variety of Y2K topics that might be of interest to the global financial supervisory community. At this point, I am sure that members of the Committee have questions regarding the state of Y2K preparations in various parts of the world. I think that it is fair to say that most believe a spectrum exists, with the United States at one end of the spectrum, and emerging market and undeveloped countries at the other end. There are likely exceptions of course; some developed  BIS Review 56/1998  -7-  countries are probably less far along than they should be. Some emerging market countries, on the other hand, appear to be quite advanced in their preparations. Overall, however, there is still not nearly enough concrete, comparable information on the preparations of individual institutions to be able to make any confident statements about the state of global preparations in any detail.

The mission of the Joint Year 2000 Council has four parts: First, to ensure a high level of attention on the Y2K computer challenge within the global financial supervisory community; second, to share information on regulatory and supervisory strategies and approaches; third, to discuss possible contingency measures; and fourth, to serve as a point of contact with national and international private-sector initiatives. After their meetings on May 8-9, 1998, the G-7 finance ministers called on the Joint Year 2000 Council and its Sponsoring Organizations to monitor the Y2K-related work in the financial industry worldwide and to take all possible steps to encourage readiness. The Council has met twice since being formed in early April and plans to meet frequently, almost monthly, between now and January, 2000. At our first meeting, we organized our work projects and approved our mission statement. At our second meeting, we met for the first time with an External Consultative Committee consisting of international public-sector and private-sector organizations. Meeting with this External Consultative Committee is intended to enhance the degree of information sharing and the raising of awareness on different aspects of the Year 2000 problem by both public and private sectors within the global financial markets.
The short-term interest rate fell while more subdued inflation prospects and a flight to "safe" investments caused a drop in long-term rates as well. The low interest rates together with the search for safe investments spread to other asset markets. The price of gold increased, and there was a rise in housing prices in several countries as households took advantage of the low level of interest rates to boost their housing consumption. The rising property prices counteracted the fall in the value of households' financial assets. This in turn has led to households in several countries continuing to increase their indebtedness, particularly to finance housing. However, these historically large changes in the asset and debt markets have thus far proceeded smoothly. In spite of the fact that we have seen the biggest decline in share prices since the 1930s, the largest suspension of national debt payments in history (Argentina), the biggest corporate bankruptcies (Enron, WorldCom), one major terrorist attack and a wave of small ones, the financial markets have been strong enough to handle this. Risk diversification and the emergence of new financial derivatives are two explanations for the preserved stability in the financial system. While developments in the real economy have been affected by the balance sheet and income statement adjustments, the business cycle bottomed out at a higher level of growth than was feared, given the considerable imbalances that existed at the height of the bubble in 2000.

The economy is now undergoing a slow recovery, driven by the normal cyclical course of events but subdued by balance sheet adjustments and geopolitical uncertainty. Balance sheet adjustments will continue, however, as there are still substantial savings imbalances between different regions of the world. At the same time, the risk of war has caused flight to safer assets and thereby resulted in low interest rates. Recently, there has been an improvement in earnings and a slight fall in credit spreads. Nevertheless, the effects of asset price adjustments on pension funds, life insurance companies and non-financial enterprises are still been felt through various parts of the economy. Should the economy follow a debt cycle in the future, there is also a risk that the currently low interest rates will lead to the implementation of projects that would be unprofitable at normal rate levels. How has housing finance in Sweden been affected in recent years by internationalisation, regulatory changes and balance sheet adjustments? Developments in the Swedish asset and debt markets have largely been the same as those abroad. Shares and commercial property have declined in value since 2000. Investment in residential property and prices of permanent single-family dwellings have risen by 8 and 15 per cent respectively for the past two years. Prices of tenant-owner apartments have also increased.
If Bank Rate is increased, monetary conditions are being tightened; and conditions are being loosened if Bank Rate is cut. There are a few important simplifying assumptions being made here – assumptions whose validity in current circumstances is doubtful. In the first place, that view of the world implicitly assumes that the equilibrium real rate is stable over time, whereas in fact it will move about. 6 Sometimes the central bank will need to change its policy rate simply in order to maintain unchanged monetary conditions (as proxied in the literature by r minus r star). In the same vein, if near-term inflation expectations rise or fall, our nominal policy rate may need to change just to leave the actual short real rate unchanged. In other words, we can fix only one thing – the short nominal rate – but what any particular level of Bank Rate means for monetary conditions will depend on short-run inflation expectations and on the equilibrium real rate needed to balance the economy. Both will likely have changed materially in the face of the cost and credit shocks. What our Bank Rate will mean for monetary conditions will depend on how it relates to the panoply of other interest rates on financial contracts. In fully efficient markets, the risk-free  6  See Neiss, K and Nelson, E (2001) “The real interest rate as an inflation indicator”, Bank of England Working Paper No 130.

But, as the months have passed, firms have been registering a greater sensitivity to tighter financial conditions. The lags between the incidence of the financial shock last summer and its impact on spending in the economy have been fairly drawn out. It is striking that through the autumn and perhaps even into the spring, a number of commentators thought this was essentially a problem for Wall Street not Main Street. We need more research to help understand those lags, and whether the credit shock has been more potent for its coinciding with the climb in commodity prices. 11  David Miles has recently made a broadly similar point in “The cost of bank debt: rethinking the neutral rate”. 12  I owe this point to Mervyn King. 13  See Curdia V, and Woodford and M (2008), “Credit Frictions and Optimal Monetary Policy”, a paper discussed at the BIS Annual Conference in June 2008. 6  BIS Review 112/2008  That assessment has informed my view that slack will accumulate, leaning against – but not eliminating – the current upside risks to inflation. Indeed, the best gauge of our view of monetary and credit conditions is to be found in our periodic forecasts for growth and inflation. Nominal trends A hazard, given the current paradigm in monetary economics, is that its all too easy for policymakers to fall into the habit of never mentioning anything nominal – apart from inflation expectations.
July monetary policy report Continued recovery in the world economy as a whole… We pointed out in the July Monetary Policy Report that growth in the world as a whole was good. The forecast was that GDP growth in the coming years would be just over 4 per cent a year, which is higher than the historical average. The emerging economies, including the BRIC countries (Brazil, Russia, India and China), acted as motor (see Figure 1). We also noted that inflation was relatively high in many countries, but that energy and commodity prices in the world market, which rose substantially last year and had pushed up inflation, had levelled off or fallen slightly this year (see Figure 2). …but the recovery in the United States and euro area is sluggish However, the international outlook was divided. The recovery in the United States and the euro area was expected to be slow (see Figure 3). GDP growth in the United States was expected to be just over 2 per cent this year and to only gradually return to more normal levels of around 3 per cent. Unemployment had fallen only marginally from the peak levels noted in the most acute phase of the financial crisis. The impact of energy and commodity prices on inflation had been surprisingly large in the United States, which had led to inflation being relatively high (see Figure 4).

And it is this tradition that has enabled the Banco de España to continue promoting economic history research. Many of these figures were my predecessors as governors or directors general of what was then known as the Research Department. 3/5  Others, who collaborated with them, then went on, in many cases, to pursue brilliant careers in academia and research. Indeed, some are here with us today. For the sake of brevity, and so as not to run the risk of missing anybody out, I will not mention in detail those who continued the work of the pioneers Mariano Rubio, Ángel Madroñero and Joan Sardà back in the 1960s. As a tribute to their work and following in their wake, I shall, without being exhaustive, set out some of the projects that our Bank currently has under way or on the drawing board in terms of promoting economic history studies. Firstly, the Banco de España regularly organises conferences focusing on the discussion of aspects relating to economic history. This year, for example, on the occasion of the sixtieth anniversary of the Stabilisation Plan, the Banco de España will, next October, be organising a conference in Barcelona focusing on the analysis of the Plan. It will likewise pay tribute to the figure of Joan Sardà. I trust you will be able to join us at this conference. Also, since 2015 the Bank has organised annually a top-level international economic history conference aimed at academia.
In looking for the origins of the crisis, one also observes instances of fiscal indiscipline, which caused problems at the Euro area level. In some member states, as for example in the case of Greece, EU funds were not put to proper use and in some cases ended up imposing a burden on future government finances. In my previous appointment at the European Court of Auditors, where I was responsible for coordinating the overall audit report on the spending of the EU budget, in almost every report  1  See L. Bini Smaghi, “Eurozone, European crisis and policy responses”, Goldman Sachs Global Macro Conference – Asia 2011, 22 February 2011. BIS central bankers’ speeches  1  during my six-year term, Greece was invariably singled out because of its problems and serious deficiencies in the spending of EU funds. Greece often had to pay back to the EU budget funds that it badly needed. It is evident that such weaknesses in the administrative and political structure put an unnecessary burden on Greece’s fiscal position. A recent study describes the first nine years of the euro, between 1999 and 2007 (that is, the pre-crisis period), as “ ‘wasted good times’ during which the foundations were laid for the present crisis … Almost as soon as the euro had been introduced, consolidation fatigue set in”.2 Moreover, governance at the EU level was weak. The application of the corrective arm of the Stability and Growth Pact was softened through intervention at the political level in 2003.

Thus although the fiscal imbalance is narrowing and returning back to the levels stipulated by the Maastricht Treaty a strong case can be made for continued caution in Malta’s fiscal policy and for further measures that would help to ensure the achievement of the government’s targets. With a government debt ratio at around 69% in 2010 and 2011, it has become even more important to bring down this ratio at a faster pace (Chart 3). 3  J. C. Trichet, “Remarks at the farewell event”, Frankfurt am Main, 19 October 2011, p. 3. BIS central bankers’ speeches  3  Moreover, despite the weak external environment the economy continues to grow at a sustained rate and, as I referred to earlier, it is considerably easier to undertake further consolidation at a time of ongoing economic growth. Reductions in the deficit ratio would also leave more room for manoeuvrability on the fiscal side in the event of an economic slowdown without breaching the European rules. 4  BIS central bankers’ speeches  The least painful way to reduce the ratio of the deficit to the GDP is through economic growth. In turn faster growth can be achieved through improvements in productivity. In this respect, consensus needs to be reached on steps that can be taken with minimal social disruption to reduce the threat to, and ultimately enhance, the country’s international competitiveness. Competitiveness depends partly on developments in productivity and wages.
One is with a major bank, which has agreed to stock a proportion of its ATMs with £ and examine what affect this change would have on its cash business. The results to date suggest that the business case for stocking some ATMs with £ is stronger than previously thought. At the same time, we have carried out a second pilot study. This has been focused on the business case for major retailers ordering more £ to use as change. A major supermarket chain has conducted a trial which involves supplying more £ to many of its stores. Again, the results appear to have been a success. Using more £ as change has appeared to slightly speed up the overall processing of payments at the checkout and appears to be well received by customers. I am very grateful to HSBC and Sainsbury’s for their help with these two pilots. In the New Year I hope and expect that we will take these examples to other financial institutions and major retailers to make the case for a change of policy towards issuing £ This is important because my assessment is that there is a good deal of aversion among the commercial sector to change in this area. Yet our evidence suggests that the public wants more of them and of a better quality. To achieve that objective we need to see more £ dispensed from ATMs and by retailers in change.

With the results of these two pilot exercises, I think we have the evidence to press the case for raising the dispense of £ and we will do this alongside reviewing our distribution scheme to ensure that the incentives for note distribution are properly aligned across the denominations. 8  BIS Review 162/2009  The story of the £ illustrates the growing importance of denominational mix in our note distribution policy. We want to work with the commercial sector to ensure that the public’s demand for a balanced denominational mix of notes is met. In conclusion, notes are a big business for central banks. They are high profile in the eye of the public. There is an apparent paradox in that the value of notes in circulation has been rising year after year at the same time that evidence suggests that the use of notes to pay for transactions is declining. I have offered some explanations for this paradox which highlight that banknotes are also a store of value since they are central bank money. But at the same time the objectives of our central bank distribution scheme have grown in number to embrace the physical quality of notes in circulation and the denominational mix. The last of these – denominational mix – poses the biggest challenge, but in the UK I believe we now have evidence to support the business case for ATM and retailer dispense of £ And, finally, I am sometimes asked why this matters to the Bank of England?