samchain/econo-pairs-v1 huggingface dataset:
First, the inability to enforce commitment, because monetary arrangements can always be changed in the absence of an outside enforcer, means that no such  3  Torsten Persson and Guido Tabellini (1999) argue that if it takes sufficient time for a government to tear up contracts designed to eliminate the inflation bias (longer than the duration of nominal contracts) promises not to inflate can be credible. 4  Svensson (2002) takes the same view of McCallum (1995) in his comments on Stokey (2002), thus: “…to my knowledge neither McCallum nor anyone else has presented a model where ‘just do it’ is an equilibrium outcome.”[p4]. 5  “The institutional structure of monetary union forms the basis for public trust in the euro and rests on two pillars: the stabilityoriented monetary constitution enshrined in the Maastricht treaty, and the stability and growth pact. Both pillars are being undermined, leaving European monetary union in a very grave predicament”. (Ernst Welteke, The Times, 4 December 2003). 6  Daron Acemoglu (2003) argues that inefficient policies can occur in a democracy because those in political power cannot commit to maintaining the policies that are required to achieve efficient outcomes. In other words, the Coase theorem does not apply at the level of society as a whole. BIS Review 5/2004  3  arrangement is sacrosanct for all time.

BIS Review 5/2004  5  while the peg was being defended, they were soon lowered to more sustainable levels. The expectations that had been built into forward exchange rates were proved correct. Chart 1: Exchange rates and monetary policy in Brazil, Jan 1998-Dec 1999 50  $  Per cent  0  45 40 35  0.5 Spot exchange rate (rhs)  Overnight interest rate (lhs)  30 25  1 1.5  20 15 10 5  Implied forward exchange rate (rhs)  0 Jan-98 May-98 Sep-98  2 2.5 3  Jan-99 May-99 Sep-99  Source: JP Morgan and Banco Central do Brasil  In the literature on target zones for exchange rates, it is assumed that raising interest rates is a successful method for supporting the exchange rate because of uncovered interest parity. But this ignores the possibility that raising interest rates to defend a fixed exchange-rate regime will simply call into question the durability of the regime itself and raise the probability that the peg or target zone will be abandoned. In such circumstances an increase in interest rates may lead to a fall in the exchange rate. A second example of the same phenomenon is the pressure on sterling during 1992 and its forced departure from the Exchange Rate Mechanism on 16 September of that year.
Also ‘clipping’, that is, shaving off part of the material, was fairly widespread. This led to a phenomenon that many years later became known as Gresham’s law. It says that in commerce ‘bad coins’ drive out ‘good coins’ as the latter are kept for saving purposes. Mistrust in the coin system, or even its entire breakdown, was often the unhappy consequence. Another issue was the plethora of mints that continued to grow in number as technology spread. Fast forward, and at the mid-medieval period it had become fashionable for every European kingdom and principality to issue its own coins. With production costs lower than the coins’ value, this was a useful source of income to finance the frequent wars at the time. But with multiple coins drifting around and uncertainty about their true value, it was essentially a mess. However, where there is chaos innovative minds see opportunities. During the 12th century, in the northern part of Italy, a new type of institution emerged. These specialised in exchanging foreign coins for local ones, not unlike present day foreign exchange dealers. This reduced the problem with the many coins causing much confusion. Even more advanced, some of the new institutions started to swap coins for bills of exchange that could be used in local trade. 3 [15]  The medieval coin-exchange providers brought banking to Europe, it is often said. Initially, they only handled deposits, as charging interest was viewed as usury by the powerful church.

At the same time, this will be the best contribution the euro area can make in terms of promoting strong, sustainable and balanced growth in the world. The cyclical recovery in the euro area is largely supported by developments in private consumption, and more recently also investment. Real GDP rose by 0.3%, quarter on quarter, in the second half of last year. Recent data provide some mixed signals as regards the near-term outlook. While hard data show some improvement in January and February, survey data for the first quarter are consistent with a somewhat weaker growth momentum. Nonetheless, the economic recovery in the euro area is projected to proceed at a moderate pace. Domestic demand should be further supported by the ECB’s monetary policy measures, continued employment gains, the low price of oil and a slightly expansionary fiscal stance. The risks to this growth outlook remain on the downside, however, and relate mainly to the heightened uncertainties regarding developments in the global economy. Headline inflation has remained low and its profile continues to be shaped by the path of energy inflation. In addition the recent partial unwinding of the past depreciation in the external value of the euro reduces the upward price pressure from the external side. Looking ahead, inflation in the euro area is likely to display slightly negative rates in the coming months before picking up later in 2016.
This surcharge amounts to additional loss-absorbing capital of between 1.0% and 2.5% of riskweighted assets, with the specific requirement depending on the degree to which an institution is systemically important. Second, it introduces a countercyclical buffer ranging between 0.0% and 2.5% of total risk-weighted assets, to increase the system’s resilience to cyclical systemic risk. This buffer can be temporarily imposed when credit growth is judged  1  Cf. for instance Borio, C. (2012) or Schularick, M. and Taylor, A. (2012). BIS central bankers’ speeches  1  excessive. These new rules are being phased in over several years and will come into full effect in 2019.2 Regulation in Switzerland: Framework and progress so far Switzerland is well advanced in the process of introducing a new regulatory approach in line with this international framework. There was, and still is, an urgent need to proceed faster and to go beyond the global minimum standards. First, the size of Switzerland’s two major banks, Credit Suisse and UBS, relative to GDP is very large by international standards (8:1 in 2007 and 4:1 today). It is worth recalling that, back in October 2008, in order to prevent a breakdown of our financial system, the Swiss authorities had to take measures to strengthen UBS, putting a large amount of public funds – up to USD 60 billion – at considerable risk. Despite the favourable turn of events since then, we have to take all means necessary to avoid such a situation in the future.

Virtually all of the net credit growth since then has been from the bond markets. In tandem, the assets under management have risen by 60% globally and 80% in the EU. These trends will continue as the Capital Markets Union is developed. The ESRB is currently contributing in two ways to more resilient capital markets. First, it is promoting a shared understanding of the fundamental drivers of market liquidity. Second, it is gathering consistent information on the nature and size of the risks associated with market-based finance. The ESRB has unique powers in this regard given its ability to collect information from financial participants from across the EU.1 The ESRB is currently surveying market makers and asset managers as part of a broader study into the risks from a reduction in market liquidity. This work should be completed by mid-2016. The survey will draw out the implications for liquidity conditions, including whether openended funds have liquidity sufficient to meet redemptions in the event of market stress. 1  2  Of course, the ESRB must exercise this power with care and precision. And the case for doing so must be compelling. But the rapid growth of market-based finance satisfies these tests. BIS central bankers’ speeches  In a similar survey of 143 investment funds, the Bank of England found that, in aggregate, these funds expected to be able to liquidate in one day roughly three times estimated dollar corporate bond market turnover; clearly a fallacy of composition. The ESRB survey will provide a valuable wider perspective.
In this context it is also interesting to look at inflation expectations; have they been affected much by the fact that we sometimes have missed the target or that we on average have been slightly below it? (Chart 4.) Even though inflation expectations can be measured in different ways, the overall picture is clear. From around 1996-97 expectations have been fairly well in line with the target a couple of years ahead. Sometimes, of course, they have moved according to the actual inflation rate, but they have not been much above or below the target for any appreciable length of time. This is a much better performance than most expected when the monetary policy regime was changed in the early 1990s, and many doubted that we would attain the low, stable inflation that we actually have achieved. Allow me to make a comment in this context. Sometimes, it is claimed that the Riksbank acts asymmetrically, being more focused on avoiding exceeding the target than falling short. However, this view is not supported by measurements of inflation expectations: economic agents do not believe that we have a “secret agenda”. Instead, they believe that we try to do exactly what we are doing: trying our best to achieve inflation of 2 per cent and a stable economic performance in Sweden. Reasons for target deviations So what has caused the target deviations in the past ten years?

Favourable results Looking back at the ten or so years that have passed since the change of regime, I think that most would agree with me that the shift in policy has turned out well and that the new stabilisation policy regime has lived up to our hopes. Sweden has gone from having been a high-inflation economy with recurring cost crises, high interest rates and unstable economic performance, to being an economy with low, relatively stable price rises and wage increases that put real money in people’s pockets, and where the risk of overheating and subsequent recession has diminished markedly. In an international perspective, too, the Swedish economy has performed well in the past decade, in stark contrast to the 1970s and 1980s. The robust performance is evident if you compare developments in a number of central variables during the 1970s and 1980s with their developments under the new stabilisation policy regime. (Chart 1.) In the 1970s and 1980s the rate of price increases stood at just over 8 per cent a year, while the corresponding rate since 1995 has been just below 2 per cent. The lower inflation rate has not entailed weaker growth in output. On the contrary, GDP growth has averaged around a half percentage point higher a year under the new regime. Productivity growth has also been more robust. The higher  BIS Review 59/2004  1  economic growth and productivity has contributed to healthy growth in real wages.
On the domestic front, several years of subdued growth may have caused some underlying erosion that could compromise the economy’s ability to grow in the medium term. Deterioration of the labor market is particularly risky because it could weaken household consumption, which, by growing 2%-2.5% annually over the last three years has provided support for domestic demand and, ultimately, inflation. On the other hand, private investment may recover faster if export demand and expectations improve faster than expected. Longer-term perspectives 7  18. In 2012-2013 the Chilean economy was exposed to a substantial external shock given by the end of the commodities super cycle. However, contrary to past episodes, the economy did not fall into a recession. In fact, despite a substantial slow down, the signs of an economic contraction are not visible. Salaried employment slowed down but no massive layoffs have taken place. Companies saw their margins compressed by rising input costs and weak demand, but bankruptcies have not picked up. The demand for loans has weakened, but NPLs have remained stable. 19. The former is due to two major reasons. First, the macroeconomic policy framework has provided countercyclical support while allowing relative prices to adjust to the new circumstances via the exchange rate. Between mid-2013 and early 2016 the Chilean peso depreciated some 55%, putting some pressure on inflation, but the Central Bank kept monetary policy on a steady course until inflation decelerated from nearly 5% to less than 2% in less than a year. 20.

Figure 4 GDP  Non-natural resources GDP  (annual change, percent)  (annual change, percent)  8  8  8  Construction  6  6  6  Wholesale and retail trade  4  4  4  2  2  2  0  0  0  4  Rest  2  Personal services  8 6  Total 0  Manufacturing  -2 -2  -2 -4 14  15  Natural Resources 16  -2  Business services -4 -4  -4  14  15  16  Source: Central Bank of Chile. 3  7. On the expenditure side, domestic demand—excluding changes in inventories—also tended to decelerate throughout last year. Weakness was most evident in investment in construction and other works, which contracted by 4.9% in annual terms during the fourth quarter (average growth of 0.5% between the first and third quarters). 8. Private consumption, in line with its behavior in previous years, provided support to the economy, growing by more than 2% annually throughout 2016, on the basis of wage growth and a low unemployment. However, it should be noted that while consumption of nondurables and services has remained relatively stable, durable goods have recovered, partly due to the appreciation of the peso during the last year and the necessary replenishment of inventories following several years of weak growth and even contraction. Something similar is observed with gross fixed capital formation in machinery and equipment.
Sometimes, inflation has been a bit higher than expected, other times a bit lower. On balance, inflation has been very close to our 2 percent longer-run objective. BIS central bankers’ speeches  1  Although I have focused on the private forecasting record here, the FOMC participants’ forecasts show a similar pattern. It is on the growth side where there have been chronic, systematic misses. In my view, the primary reason for the poor performance of the U.S. economy over this period has been inadequate aggregate demand. There are several explanations for this. Although some were well-known earlier, others have only become more obvious as the recovery has unfolded. One reason is the nature of economic recoveries following financial crises. On that basis, the poor performance of the U.S. economy is not unusual – historical experience shows clearly that recoveries following financial crises typically are very slow and difficult.1 During the credit boom, finance is available on easy terms and the economy builds up excesses in terms of leverage and risk-taking. When the bust arrives, credit availability drops sharply and financial deleveraging occurs. Wealth falls sharply, precautionary liquidity demands increase, desired leverage drops further. In the U.S. case, there were some idiosyncratic elements, such as subprime lending and collateralized debt obligations. But, in the end, the U.S. experience included the major elements of most booms: Too much leverage, too little understanding of risk, too easy credit terms, and then a very sharp reversal.

Even over the next few years, while there are significant downside risks relating to the fiscal cliff and the eurozone, it is possible that the recovery could turn out stronger than expected. The underlying process of balance sheet repair is considerably advanced, housing is recovering and, as that occurs, our newly recalibrated monetary policy could gain additional traction. Thus, if uncertainties about the U.S. fiscal path and the future of the eurozone were resolved in a constructive manner, growth could pick up more vigorously than anticipated. 5  8  http://www.people-press.org/2011/11/03/section-6-generations-and-entitlements/  BIS central bankers’ speeches  This would be a wonderful outcome. The September FOMC statement noted: the Committee expects “that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the recovery strengthens”. Consistent with this, if we were to see some good news on growth I would not expect us to respond in a hasty manner. Only as we became confident that the recovery was securely established, would I expect our monetary policy stance to evolve to ensure that it remained appropriate to achievement of our objective: maximum sustainable employment in the context of price stability. Thank you for your kind attention. I would welcome a few questions.
“Balanced” growth also implies to facilitate the catching up of developing countries (and the taking off of the poorest). Drawing the lessons from the crisis, growth cannot be strong without being sustainable and cannot be sustainable if it is not balanced. The so-called “Framework for Strong, Sustainable and Balanced Growth” is the key mechanism by which G20 countries work together to achieve these objectives. With support from the IMF, G20 countries are going through a mutual assessment process by sharing their policy frameworks, programs and projections and assessing their consistency with the common objectives. This process will lead the G20 to recommend policy options to its members. Policy options obviously depend on national circumstances. Countries facing serious fiscal challenges need in particular to accelerate the pace of fiscal consolidation, while countries that have the capacity should expand domestic sources of growth and help cushion a decline in demand from other countries. Reforms of social safety nets will be essential in both cases and structural reforms of the product and labor markets will be key to foster stronger growth in the medium and long run. Policy options may also entail exchange rate adjustments consistent with smooth rebalancing. In search of global financial safety nets There is another side to rebalancing where finance matters. Starting with the Asian crisis of 1997–1998 and up until the global shortage of liquidity that took place in 2008, many emerging countries have experienced sudden stops of capital inflows on a recurrent basis.

Christian Noyer: G20 roadmap – how finance can help rebalance the world economy Introductory speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Paris Europlace Financial Forum, Paris, 6 July 2010. *  *  *  Before I start let me thank the organizers for inviting me to this conference: they have managed to put together an outstanding program and it is a great pleasure for me to exchange views with the other participants in this round table. I was asked to introduce the discussion on “G20 Roadmap: How Finance Can Help Rebalance the World Economy”. The title of this session contains some of the most important concepts on the current policy agenda: “finance”, “rebalancing the world economy” and “the G20 Roadmap”. Let me take them in turn. “Finance”, first. Since 2008, the world is going through the deepest financial crisis since the second World War, and hence never before has the word finance been so crucial in the policy agenda. This financial crisis has had very high real costs: real output, industrial production, trade flows, to name just a few key variables, have contracted markedly during the crisis. In addition, the fiscal positions and the public debt of many countries have also deteriorated markedly in the past two years. Yet, it is important to recall that these real and fiscal problems largely stem from the financial issues that plagued our economies in the past decade.
Monetary neutrality: why we can’t escape the hit to real incomes If you open an A-level economics textbook one of the first things you’ll see is something like Chart 4. The “AS” (aggregate supply) lines trace out the response of output and prices to a change in aggregate demand (represented by a shift in the “AD” line), for example from a change in the stance of monetary policy. Bank of England  Page 8  Chart 4: Monetary policy only affects real variables for a while  In the short run the supply curve is upward sloping (“SRAS”), so stronger demand can raise output as well as prices. This is more or less the relationship that A.W. Phillips had uncovered, using pre-WWI British data, in his 1958 paper2. But students are also taught that, over time, once prices adjust in full, there is no effect of monetary expansions on real output. The long-run Phillips curve – here labelled an aggregate supply (“LRAS”) relationship – is vertical. The idea that money is “neutral” – that it has no enduring impact on real output or incomes – goes all the way back to David Hume, in the mid-18th century. It also makes intuitive sense, I think. Most people would instinctively understand that one cannot permanently enrich a country simply by dolling out more banknotes. In the end, all that would do is to raise all prices and wages equiproportionately and nothing real would be affected.

While Malaysia will always be affected by such external developments, the strategy has been to have the flexibility to absorb and adjust and the strength to rapidly rebound. While each crisis or setback has been different, there are several common features that have allowed Malaysia to rapidly recover from such shocks. For each respective major shock confronting our economy, Malaysia has registered V-shaped recoveries. This has essentially reflected the flexibility of the economy to adjust and the early and comprehensive policy response. The ensuing periods were often marked by structural reforms and institutional development that were designed to rebuild the fundamentals of the economy, address the weaknesses and vulnerabilities and to forge new areas of growth. This has, decade after decade, resulted in vital changes in our economic structure, from being export-led to now being predominantly domestic demand-driven, and from being over-reliant on specific sectors to having a more diversified economic structure with the manufacturing and services sectors having now transitioned to higher value added activities. In essence, the structure of the economy has now become significantly more diversified in terms of sources of growth. While the export sector remains an integral component of our economy, domestic demand has now become the key driver of growth, anchored by strong private sector activity that now accounts for 70% of GDP. Underpinning the robust domestic demand is the sustained consumption spending and the revival of investment activity by the private sector.