samchain/econo-pairs-v1 huggingface dataset:
Interest rate expectations for the next few years largely depend on the economic outlook and market expectations concerning monetary policy. In the long term, up to ten years, market participants are unlikely to have any particular expectations concerning cyclical fluctuations. The forward rate may then be interpreted as the sum of the expected real interest rate and expected inflation when the economy is in balance. Without limitations on capital movements, the real interest rate must be expected to develop approximately the same across countries over time. If there are no systematic differences in the risk premium between countries, differences in forward rates may be interpreted as differences in inflation expectations between countries. In the euro area, the inflation target is below, but close to 2 per cent. This results in an inflation differential of ½ - 1 percentage point against Norway. An investor must therefore have an interest rate in Norway that is ½ - 1 percentage point higher than in Germany in order to achieve the same expected real return in the two countries. Following the introduction of the inflation target, the difference between German and Norwegian forward rates was about 1 percentage point for a long time. So far in 2003, this differential has been somewhat lower. This interest rate differential indicates that the market is confident that we will achieve the inflation target. This line of reasoning can also be reversed. Given stable inflation expectations of 2½ per cent, i.e.

Prices and wages in the international economy But there are still areas of risk in the international context, associated mainly with the uncertainty over the course of US economic policy, with the imbalances building up in the Chinese economy and with the unfavourable data emanating from the United Kingdom, which is apparently beginning to feel the effects of its exit from the EU. In the euro area the solvency and profitability of the banking sector must be improved and the level of NPLs lowered, as they weaken the impact of the monetary impulses on productive activity. Furthermore, there are still no firm signs that inflation has moved onto a rising trajectory drawing it permanently closer to our objective of 2%. This can be seen in the measures of core inflation, which strip out the more volatile components of prices and which are sound indicators of the latent inflationary pressures in the economy. These measures of inflation have remained anchored around 1% over the last three years. Behind this inflationary behaviour are, among other factors, highly contained wage growth in the euro area as a whole – and I insist, the euro area in its entirety – that contrasts with the improvement in employment. Compensation per employee has sustained increases of close to 1.2% since mid-2014, far below its historical average which is at slightly over 2%.
In 2007, the Kwacha appreciated against the major international currencies with the exception of the euro. Against the US dollar, the Kwacha appreciated by 7.2% compared with a depreciation of 20.7% in 2006. This was attributed largely to higher inflows of foreign exchange on the market due to increased export receipts, which largely reflected high copper prices and the continued participation of foreign portfolio investors in the domestic Government securities market. The depreciation of the Kwacha against the euro can be attributed to significant gains of the euro against the US dollar and other major currencies, supported mainly by relatively buoyant growth prospects in the euro area. 2  BIS Review 76/2008  2.5  Banking sector environment  The overall financial condition and performance of the banking sector has been satisfactory, as reflected in adequate capitalisation and most banks meeting their minimum regulatory capital requirements. With 13 commercial banks in operation comprised of both local and foreign, investment opportunities are immense. The Government through the Bank of Zambia continues to modernise the overall commercial banking environment, by endorsing various legislation to promote safe, sound and efficient operations and development of not only the banking sector but the financial system as a whole. This is evidenced by enhanced financial stability and the emergence of a number of financial institutions offering an array of financial services.

Currently, there are enormous business opportunities which still lie unexploited in Zambia in virtually all sectors of the economy. The overall economic growth in the economy would be enhanced underpinned on low and single digit inflation and relative stable exchange rate. With an enabling environment, the private sector would exploit their full potential. Hence, employment would increase and poverty reduction would be achieved. This would contribute to the achievement of MDGs and towards the attainment of the Vision 2030. 6  BIS Review 76/2008
In the case of the technology stock market boom, there was a surge in business investment in technology goods and services. In the subprime/structured finance boom, there was a surge in demand for housing as credit availability increased sharply. This surge in activity is important because it reinforces the notion that the innovation is indeed significant and that “this time is different.” Third, there is often a positive feedback mechanism that tends to reinforce the belief system that underpins the extreme valuations associated with the boom. Without this, the boom isn’t likely to persist for long or push valuations far above what is justified by the fundamentals. As a result, the asset price movements are unlikely to be big or broad enough to threaten financial and macroeconomic stability. During the technology stock boom there were a number of reinforcing mechanisms. One important reinforcing mechanism was the strong notion that those who got to the market with their new Internet innovations would achieve large first-mover advantages. This perception was due to the fact that successful Internet-based models could expect to achieve strong network effects, which created significant barriers to entry and the prospect of extraordinary profits. Amazon might be a good example of a company that (eventually) succeeded at this. In this environment, many firms – both well-established companies and start-ups – invested heavily in the new technology. The ensuing sharp rise in investment in technology equipment and software led in turn to rapid earnings growth, which helped (for a time) to sustain stratospheric valuations.

Before I conclude, let me again stress that the development of more inclusive financial sectors is an important objective, and as policymakers we need to pursue this without compromising on the prudential standards that sustain confidence in the financial system. Branchless banking has tremendous potential to increase the outreach of financial services provided the different players and regulators are able to work within common regulatory framework. And finally that we must adopt a collaborative stance in pursuing this important global agenda which can make a real difference for the millions of people that remain caught in poverty. 4  BIS Review 162/2009  On behalf of Bank Negara Malaysia I would also like to thank our principal facilitators for the workshop from the Consultative Group to Assist the Poor, the subject matter experts from World Bank, the representatives from Maxis Communications Malaysia and Global Exchange of Philippines, and the representative from Group Speciale Mobile Association who joins us from London. I also welcome the participation of the Alliance for Financial Inclusion in this Forum, and we look forward to working with all of you on developing more inclusive financial sectors in the Asian region. Finally, I would like to thank all the participants who have come in from all over Asia to support this Forum. I wish you a fruitful forum and hope that you will form valuable professional relationships during this event. BIS Review 162/2009  5
For instance, there are studies based on general equilibrium models indicating that the contribution of capital to productivity growth is  3  Forsling & Lindström (2004)  4  See, for example, Stiroh (2001) and Jorgenson et al (2006). 5  Bernanke (2005)  BIS Review 61/2007  3  underestimated in growth accounting. 6 If we avoid such underestimations the residual item declines. Our knowledge has increased. And it is important for us at the Riksbank to increase our knowledge of the development of productivity and of what might explain it. One of the current projects at the Riksbank aims to obtain greater knowledge of how IT investment, reorganisation and further education together affect productivity. Better statistics lead to better analysis I would like to conclude this section with a few words on the considerable significance of economic statistics for being able to analyse productivity and the driving factors behind it. The previous US central bank governor, Alan Greenspan, was famous for his ability to take in large volumes of statistics. He became legendary when in the mid-1990s he was the first to predict that productivity growth in the United States would strengthen as a result of increased use of IT. This led to the central bank being able to conduct a more expansionary monetary policy for a period, without inflation rising. A few years ago I carried out an examination of economic statistics. My conclusions then were that these needed to be improved in four areas.

In the long 1 run, this will be offset by a corresponding depreciation of the krone. The international rise in prices for manufactured goods is lower than for services – around 1 per cent. The inflation target of 2½ per cent implies a depreciation of the Norwegian krone of around ½ per cent in the long term, because the target has been set somewhat higher than our trading partners’ inflation target. This means that goods prices measured in Norwegian krone must be expected to rise by about 1½ per cent in the long term. With wage growth of 4 - 4½ per cent, productivity growth in manufacturing must be about 2½ - 3 per cent to maintain profitability. For services, price inflation can be somewhat higher, about 3 – 3½ per cent, and productivity gains correspondingly lower. The size of the exposed sector will be affected by the portion of petroleum revenues that is absorbed into the Norwegian economy. In the long run, monetary policy cannot influence overall employment or its distribution across industries. Historically, employment in the internationally exposed sector has declined in waves. The sharpest declines in manufacturing employment were observed in the years between 1977 and 1984 and from 1987 to 1992. Both periods were preceded by a considerable deterioration in cost competitiveness in manufacturing. There is a risk of a new period of decline in manufacturing. The restructuring in manufacturing may take place rapidly. Competitiveness has deteriorated by about 10 per cent since 1996.
There are two factors which could explain this apparent resilience. The first is the atypical buffers for consumption that households have available in the current environment. They are still benefiting from sizeable fiscal policy support to shield them from rising energy prices, amounting to around € billion in 2022 and 2023, and they still have around € billion in excess savings built up during the pandemic. [9] The second factor is the reduced sensitivity of the labour market to slowing growth, which is supporting labour income and households’ employment expectations. Faced with labour shortages, firms are responding to weaker demand first by hoarding labour – that is, by further reducing hours worked rather than by cutting jobs. And now, with energy prices falling and wages rising, household disposable incomes are set to increase. This was reflected – before the recent financial market tensions arose – in our projections for a stronger  recovery this year. So, for inflationary pressures to ease, it is important that our monetary policy works robustly in the restrictive direction. And that process is only starting to take effect now. The first leg of the monetary transmission process – from policy measures to financing and monetary conditions – is already having a substantial impact. The cost of borrowing is increasing steeply, and loan dynamics look to be contracting faster than during previous hiking cycles. Credit growth to firms has dropped markedly since the third quarter of last year.

Faced with a world that is changing faster than any of us could have imagined, we need to be both focused on our goal and robust in our strategy to achieve it. 1. Lagarde, C. (2022), “Monetary policy in a high inflation environment: commitment and clarity”, lecture organised by Eesti Pank and dedicated to Professor Ragnar Nurkse, Tallinn, 4 November. 2. This is visible, for example, if one compares the persistent and common component of inflation (PCCI) and the PCCI excluding energy. The former has been declining strongly since the summer of last year, whereas the PCCI excluding energy has only stabilised. 3. For an explanation on different measures of underlying inflation, see Ehrmann, M., Ferrucci, G., Lenza, M. and O’Brien, D. (2018), “Measures of underlying inflation for the euro area”, Economic Bulletin, Issue 4, ECB and ECB (2021), “Inflation measurement and its assessment in the ECB’s monetary policy strategy review” Occasional Paper Series, No 265, September. 4. Germany, France, Italy, Spain, the Netherlands, Austria and Greece. 5. Defined as those items in the core inflation basket for which wages account for more than 40% of input costs. 6. According to the labour force survey, the labour force has increased by 2.2 million since the start of last year and remains well above pre-pandemic levels, due to the rising participation of foreign workers (+1.3 million), women and older workers. 7. Employment growth in the public sector has accounted for about half of total employment growth since the end of 2019. 8.
A quite short time horizon means that substantial changes in the interest rate are required in order to achieve the objective. Such substantial changes may in turn result both in monetary policy appearing abrupt and in undesirable and significant fluctuations in growth and employment. In contrast a very long time horizon will bring greater short-term stability to growth and employment, but at the same time lead to considerable fluctuations in inflation. These fluctuations may weaken confidence in the price stability policy and lead to higher instrumental rates over time. Here monetary policy is obviously faced with a balancing problem. The more credible the policy is, the more room there is to manoeuvre in practice. There may be reasons for completely abstaining from reacting to certain inflationary impulses of a one-time nature. An example of such “one-time inflation” is indirect tax hikes. If price disruptions are judged to have merely temporary effects on inflation and do not affect expectations of future inflation, it would imply unnecessary real economic instability to prevent the price increases from having an impact on the consumer price index. Question 6: Doesn’t the Riksbank itself “talk up” inflation? Now and then the criticism is made that the Riksbank stresses the risks of inflation in the economy and is thereby guilty of “talking up” inflation.

However, of course the Riksbank does not react in a mechanical manner to a measured change in inflation expectations. The Riksbank currently monitors a number of indicators of future inflation developments and, responses to its surveys about inflation expectations are just one of many. By way of conclusion there is reason to call attention to the fact that inflation expectations to an ever greater degree are being guided by the inflation objective and not by our or others’ discussions of the risks of inflation. The signs of this are clear. The expected inflation has crept down markedly and has now been stabilised in the vicinity of the objective for most of the groups currently monitored by the Riksbank. This is a profoundly positive development, which actually facilitates the monetary policy task. (Diagram 4.
MONETARY POLICY REPORT PRESENTATION BEFORE THE FINANCE COMMISSION OF THE HONORABLE SENATE OF THE REPUBLIC  Mario Marcel Governor Central Bank of Chile 10 June 2019   The June 2019 Monetary Policy Report can be found on http://www.bcentral.cl. I. Introduction  Mr President of the Senate’s Finance Commission, senator Ricardo Lagos-Weber, Senators members of this Commission, ladies, gentlemen, I am grateful for your invitation to present the vision of the Board of the Central Bank of Chile on recent macroeconomic developments, outlook and monetary policy implications. This vision is detailed in our June 2019 Monetary Policy Report released this morning. Its contents also provide the background for the decision adopted by the Board in its monetary policy meeting of last Friday. There we decided unanimously to reduce the Monetary Policy Rate (MPR) by 50 basis points, taking it to 2.5%. Key in this decision was our evaluation that the monetary policy had to be recalibrated, because the delivered impulse was not enough to ensure the timely convergence of inflation to the 3% target in light of the new CPI figures and the new estimates for the activity gap and the neutral monetary policy rate. The vision that the macroeconomic scenario could need a different monetary impulse began to be forged in the March Monetary Policy Report, when the measurement of inflation with the new Consumer Price Index (CPI) showed us an increase in prices significantly smaller tan with the previous figures, postponing for about a year its convergence to the 3% target.

In this judgment, the initial fall in productivity is combined with Page 3 of 18  the increase in the labor force and the expected lags in the adequacy of the capital stock in response to this phenomenon. The updating of potential growth, together with the performance of the economy in the first quarter, drive the activity gap level (-0.7 percentage points) to be wider than previously considered (Figure 6). It is important to note that, with respect to last December, the estimated level of the activity gap is greater in the beginning—the first quarter of 2019—, but also throughout the projection horizon. Although first-quarter activity figures play a role in the former, in the latter the fundamental factor is the potential growth update. The baseline scenario assumes that the gap will gradually close along the projection horizon, although at a slower pace than previously expected due to the magnitude of the adaptation process that the economy will have to go through in the face of the migratory shock. II.5. The neutral MPR About the neutral policy rate, I think a couple of conceptual clarifications are in order. The neutral MPR is defined as the rate that is consistent with a GDP in its equilibrium (trend) level and an inflation rate in the 3% target. All this, once the effects of transitory shocks in the economy have dissipated.
This task has, for example, been the reason for the crisis measures that the Riksbank has taken since the autumn. However, we need to discuss whether situations can arise in which flexible inflation targeting conflicts with the aim of promoting financial stability. If so, should interest-rate policy be modified or is it more appropriate to use other instruments to, for example, counteract the development of financial bubbles? I have no ready answers to these questions today. They partly relate to the question of the causes of the current financial crisis. Has monetary policy contributed to the crisis through low interest rates or do the causes lie in entirely different factors, such as global imbalances and/or inadequate regulation and supervision of the financial markets? The analysis of the causes of the crisis has begun, but it is still far too soon to draw any clear conclusions about the contribution of different factors. The current economic situation But what are the prospects for the economy in the period ahead and what challenges are we facing now? The financial crisis reinforced the international economic downturn. It is therefore natural to expect that a recovery will only come when the situation on the international financial markets has normalised. Stabilisation of the financial sector The situation on the financial markets has continued to improve during the summer.

Now, however, my induction period has been marked by the extraordinary conditions that currently govern monetary policy: a financial crisis that has still not really come to an end, a very dramatic economic downturn and a repo rate that is close to zero. It has definitely not been a gentle settling-in period! Today, I intend to tell you a little about these early experiences and to explain how I view the monetary policy considerations that are relevant in the current economic situation. I will also say something about my view of monetary policy in the period ahead and to what extent we need to take factors other than inflation into account. Monetary policy in practice The inflation target lies at the centre of the Riksbank's monetary policy. The stated target is that the annual change in the consumer price index (CPI) should be 2 per cent. As far as the target for monetary policy is concerned there is no difference between theory and practice. Both theory and practice show that low and stable inflation creates favourable conditions for the development of the economy in the long term. There is also broad agreement between academics and central banks about the possibilities and limitations of monetary policy. We know that monetary policy can influence both the average level of inflation and how much it varies over time. Monetary policy can not, on the other hand, significantly affect the average level of real quantities such as production, employment and unemployment.