samchain/econo-pairs-v1 huggingface dataset:
At the same time, it is important to remember that the integration of China and India into the global economy will not only lead to a large increase in the supply of cheap goods and services; these countries will also contribute substantial demand for goods and services from the industrialised world. It is therefore no simple matter to assess the long-term significance of China and India for global price pressure. The integration of low-wage countries into the global economy through large-scale investment in export-driven growth is not a new phenomenon; another example is Japan, which developed in a similar manner after the Second World War. However, the size of China and India means that the adaptation process could be much more profound and prolonged this time. Moreover, this adaptation will occur in a global environment that is much more open and exposed to competition than has previously been the case. As yet, only a small percentage of the firms in the United States and the EU, including Sweden, have moved their production to countries like China, India and the new EU members in eastern and central Europe. Large differences in labour costs in particular mean that this redistribution of production capacity can be expected to continue in the near future. This development is supported by modern IT and by falling prices for international telecommunications.

Potential growth will then be at a higher level. On the other hand, increased demand from countries such as China and India combined with a synchronised economic upturn could contribute to the global output gap being closed more rapidly than we at present assume. In this case, inflation could rise earlier than anticipated. The major question is, of course, whether the low international price pressure will endure, and, if so, how long. One factor indicating that the developments we see now are a more lasting phenomenon is the combination of more independent central banks with inflation-targeting and increased global competition. In addition, rapidly-growing low-wage countries like India and China still have some way to go before they are completely integrated into the global economy. Events that could radically alter the picture are, for instance, increased protectionism and introversion, extensive armed conflicts and irresponsible fiscal policy. Protectionism may lie close to hand as a response to increasingly troublesome competition and difficulties in adapting national labour markets and production patterns, which is indicated, for instance, by the present US debate prior to the presidential elections. However, there is little that now indicates that these factors could grow sufficiently to outweigh the trend towards increased integration and globalisation. The conclusion is therefore that the low-inflation economy appears to have become established, although we cannot take it for granted. What consequences will this have for monetary policy in the future? Monetary policy in a low-inflation economy The target for monetary policy is price stability.
So far, however, it is difficult to draw any conclusions except that uncertainty has increased. The Norwegian economy is operating at capacity limits and there are few if any available resources in the labour market. Unemployment has declined throughout the country. Unemployment in Western Norway, which increased marginally last year, has returned to its previous level. Unemployment has risen slightly again in Eastern Norway. This reflects lower employment in private services that may be a result of a slight downturn in the ICT industries and retail trade. The Government’s Long-Term programme for 2002-2005, which was approved by the Storting in June 2001, states: "Considerable emphasis must be placed on stabilising fluctuations in the economy in order to ensure appropriate capacity utilisation and low unemployment. Petroleum revenues will gradually be phased into the economy, approximately in step with the expected real return of the Petroleum Fund." Fiscal policy will contribute to stimulating activity in the economy because of the increase in spending of oil revenues. The new guidelines imply that the non-oil deficit will increase in the years ahead. This will provide a substantial fiscal stimulus every year. Summary The tragic events in the US on 11 September will contribute to a further dampening of activity in the American, Asian and European economies. It is too early to predict the long-term effects. Reactions in financial markets have been pronounced. Share prices have fallen sharply. The U.S. dollar has depreciated. Currencies of other economies such as Sweden have depreciated.

Svein Gjedrem: Monetary policy and the outlook for the Norwegian economy Address by Mr Svein Gjedrem, Governor of the Norges Bank, at a meeting of Sparebanken Nord-Norge, Tromsø, 25 September 2001. Please note that the text below may differ slightly from the actual presentation Summary and charts. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 19 September. *  *  *  Norway’s economic policy is based on new guidelines for fiscal and monetary policy. The new guidelines were published by the Government on 29 March 2001 in connection with the presentation of the Government’s Long-Term Programme. The inflation target for monetary policy came into force immediately. The guidelines for fiscal policy were discussed in the Storting in June and were approved by a majority. Monetary policy is oriented towards low and stable inflation. The inflation target is set at 2½ per cent. In general, the direct effects on consumer prices resulting from changes in interest rates, taxes, excise duties and extraordinary temporary disturbances shall not be taken into account. In the 1990s, monetary policy gradually moved further away from the fixed-exchange-rate regime which was practiced from 1986 to 1992. Low and stable inflation is the best contribution monetary policy can make to growth, prosperity and income distribution. In the long term, monetary policy has little effect on the real economy. Low and stable inflation can, however, provide fertile ground for stability and growth.
Svante Öberg: My views on the Riksbank and financial stability Speech by Mr Svante Öberg, First Deputy Governor of the Sveriges Riksbank, at a meeting with the Swedish Bankers’ Association, Stockholm, 7 June 2011. *  *  *  My term of office as Deputy Governor of the Riksbank is drawing to a close and I have announced that I will not be available for a new period of office. After almost six years on the Executive Board of the Riksbank, it feels natural for me to now reflect on the experiences we have had and what these may mean for the future. Earlier in the spring, I presented my view of the Riksbank and monetary policy. And now it is the turn of our other important main task, namely financial stability. In particular, there are three issues I would like to argue for:   The Riksbank and Finansinspektionen (the Swedish Financial Supervisory Authority) should be merged    The Governor’s role should be strengthened    The Riksbank should have a sufficient foreign currency reserve. I will begin my speech by looking back on the years prior to the most recent financial crisis, the risks we saw – and the ones we didn’t see. I will continue by describing the financial crisis and the measures we adopted during the crisis. I will then address the future and the work that is underway as regards reforming the framework of the financial sector.

Finally, I will take up the three issues I have just mentioned and explain the reasons for my views on these issues. For the sake of clarity, let me also add that the opinions I will be expressing in this speech are my own. They are not necessarily shared by my colleagues in the Executive Board of the Riksbank. The years prior to the financial crisis When I first arrived at the Riksbank, I did not suspect that we were about to experience one of the worst international financial crises of our times. I had been through two previous crises. The first of these was the deep recession at the end of the 1970s and start of the 1980s, when, through a series of devaluations, Sweden attempted to restore the competitiveness it had lost due to the severe price and wage inflation of the 1970s. The second was the crisis we experienced at the start of the 1990s. This was a fairly typical financial crisis, starting with the deregulation of the credit market and leading to a banking crisis, a deep recession and large public finance deficits. The Riksbank had built up its analytical capacity Its experiences in the Swedish banking crisis at the start of the 1990s had led the Riksbank to build up its analytical capacity before my time at the bank started. In 1997, the Riksbank started to publish a Financial Stability Report twice per year.
Indeed, there is a strong case for basing asset valuations more systemically on the characteristics of banks’ liabilities, as well as their assets. 9  4  Giffords and Mainelli (2009). BIS central bankers’ speeches  Third, the maturity mismatch on banks’ balance sheets generates an inherent fragility. This makes assessments of “going concern” by the auditing profession problematic. A run on a bank with short-duration liabilities could call into question a going concern assessment in very short order. The situation is made worse by the fact that, at present, the options open to auditors when summarising a firm’s going concern status are effectively binary: either issue a “clean” report or not. For auditors, this can be an invidious choice. A clean verdict runs the risk of that judgement being quickly invalidated if maturity mismatches are exposed by a liquidity run. But anything other than a clean report might itself provoke that very run and hence become self-fulfilling. A more graduated, less binary, approach to classifying banks’ accounts may be needed if auditors are to avoid finding themselves stuck between the devil and the deep blue sea. Conclusion To date, accounting rules for banks have bent with the financial stability wind in ways which have amplified investor and regulatory uncertainty. To lean against the prevailing wind, accounting rules for banks may need to recognise more explicitly their differences. It is, after all, precisely these differences that justify separate regulatory and resolution regimes for banks.

2/2  BIS central bankers' speeches
Flexible inflation targeting  The Riksbank and all the other inflation-targeting central banks conduct flexible inflation targeting rather than strict inflation targeting. Flexible inflation targeting means that monetary policy aims at stabilizing both inflation around the inflation target and the real economy, whereas strict inflation targeting aims at stabilizing inflation only, without regard to the stability of the real economy, what Mervyn King (1997) has described as being an “inflation nutter”. By stabilizing the real economy I mean stabilizing resource utilization around a normal level, keeping in mind that monetary policy cannot affect the long-term level of resource utilization. Because of the time lags between monetary-policy actions and their effect on inflation and the real economy, effective flexible inflation targeting has to rely on forecasts of inflation and the real economy. Flexible inflation targeting can be described as “forecast targeting”: The central bank chooses a policy-rate path so that the forecast of inflation and resource utilization “looks good.” By a forecast that looks good I mean a forecast either in which inflation is already on target and resource utilization is already normal, or in which inflation is approaching the target and resource utilization is approaching a normal level at an appropriate pace. More precisely, it means a forecast for inflation and resource utilization that as effectively as possible stabilizes inflation around the inflation target and resource utilization around its normal level.

One important lesson from the financial crisis is that financial factors may have a very strong and deteriorating effect on the transmission mechanism, making standard interest-rate policy much less effective. This motivates more research on how to incorporate financial factors in the standard models of the transmission mechanism used by central banks, and a rapidly increasing volume of such research is now being produced by academic and central-bank researchers and presented at an increasing number of conferences on financial factors and monetary policy. Important questions include how potential output and neutral real interest rates are affected by financial factors and financial distortions (Curdia and Woodford 2009, Walsh 2009), and what impact financial factors have on the general equilibrium effects of  6  BIS Review 112/2009  alternative policy-rate paths on inflation and resource utilization forecasts. 11 Before such extensions to the modelling framework are operational, policymakers and staff have to improvise and apply unusual amounts of judgment on the effects of the financial crisis on the transmission mechanism. Even with much better analytical foundations concerning the role of financial factors in the transmission mechanism, there will of course, as always, be considerable scope for the application of good judgment in monetary policy.
So we are still some way from having a stable international regime within which to operate. Third, policy changes take time to have their effect. Indeed, the experience of monetary policy over the past few years demonstrates the need for patience. As well as addressing the issues around policy coordination, I hope I have also drawn your attention today to some aspects of how the PRA and its Board work. These are not secrets, and there is a wealth of information already published. But prudential supervision tends not to attract the same public attention as monetary policy unless something goes wrong. The work of the PRA and its Board is nevertheless a vital and distinct part of the new system and we need to be as open and transparent about our role, policies and operating procedures as we can be. 8  BIS central bankers’ speeches

Prasarn Trairatvorakul: Towards a multi-polar currency and reserve system Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the High-Level Conference on the International Monetary System, Zurich, 10 May 2011. *  *  *  Governor Hildebrand, Managing Director Strauss-Kahn, Distinguished Speakers, Ladies and Gentlemen, 1. I would like to thank the co-hosts, the Swiss National Bank and the International Monetary Fund, for inviting me to speak at this high-level conference. So far in this session, we have listened to a number of insightful presentations by well-known speakers. To avoid repeating what has been said, I will try to frame my talk from the perspective of a small emerging market economy. My focus will be on the three problematic issues facing emerging market economies and the current international monetary system, and how we may think of what needs to be done to put our international monetary system on a more sustainable path. 2. Let me start with the first issue. As of now, excess global liquidity generated under the current international monetary system is complicating the conduct of macroeconomic policy in many emerging market economies. Although the expansion of the global economy has strengthened in the past few quarters, economic cycles and thus monetary policy stance among various regions greatly differ. This has been widely regarded as a key push factor for international capital flows into emerging markets.
Experimental research over the past 50 years, by psychologists and neurologists, has taught us a great deal both about the determinants of patience and how it affects behaviour. This can perhaps provide insights into some of the historical drivers of a more patient, and hence higher growth, society. One important driver of patience is income and wealth. The lower income, the more impatient is human decision-making. 37 Why? Because surviving on limited means absorbs huge amounts of cognitive energy. 38 It causes a neurological focus on the near-term. This myopic thinking has been found in everything from under-saving for retirement to over-borrowing from pay-day lenders. In developing countries, it may help explain poverty traps. 39 During the Malthusian era, much of the population operated at close to subsistence income levels. If experimental evidence is any guide, that is likely to have generated an acute sense of societal short-termism. This may have manifested itself in, for example, a failure to invest in physical and human capital, retarding growth. Poverty and impatience would have been self-reinforcing, in a Malthusian poverty trap. The raising of incomes above subsistence levels which occurred after 1800 will have reversed that cycle. It will have boosted patience and laid the foundations for higher saving and investment and, ultimately, growth. In other words, after the Industrial Revolution patience may have created its own virtuous reward, endogenous growth style. Technological innovation has also been found to influence patience.

2  BIS Review 82/2007  advantage of all the opportunities offered by new technologies, including ICT, and by the new division of labour initiated by globalisation. Restructuring of the productive sector and reengineering of the production processes appear to be more difficult in a less flexible economy like the European one, implying a negative influence on productivity. The structural characteristics of the US economy – a more flexible labour market, a higher degree of competition in product markets and lower barriers to entry for new firms – were more conducive to exploiting the opportunities provided by new technologies. It remains relatively easy to understand that the absence of sufficient flexibility in Europe and in the Euro area has not permitted us to take advantage of the new opportunities that were offered and therefore that Europe has not benefited from an increase in labour productivity (and in total factor productivity) like the United States. What remains hard to explain, is that not only labour productivity growth in Europe did not accelerate but that it slowed down significantly, by more than what would be accounted for by increasing employment in the unskilled segment of the labour market. A conjecture that seems to me important to test is whether in periods of very rapid technological and structural transformations not only less flexible economies are not taking advantage of the situation but they might paradoxically behave less properly than in more “normal” times.
11  All speeches are available online at www.bankofengland.co.uk/speeches  11  One can make the point, albeit with an absurdly extreme example, by imagining that the only thing a sceptical outside observer can see is whether or not there has actually been such a problem. We’re interested in how long it would take, possessing only this information, to conclude that the likelihood of such an event had changed. The precise answer depends on what one means by “conclude” and how sure the observer is of her prior belief12. But imagine, for illustration, that after a relatively long period with several such episodes, our observer’s best guess is that the per-annum chances of a serious problem in the financial system are 8% – she expects it to happen only once every 12½ years, on average (I’m thinking of something less severe and less infrequent than the “once-in-a-century” financial crisis of 2008). What she doesn’t know is that, thanks to some beneficial piece of prudential legislation, the  Chart 9: Learning about rare events takes a long time  likelihood has actually fallen to 4% a year. Chart 9 shows how her estimate of the probability is likely to evolve over time. Because these events are rare this happens only very slowly.

Whether for market counterparties, central banks or backstop providers, lending decisions are much easier to contemplate where solvency is assured in the operating entities that need funding. Work in FSB to date has concentrated on what is necessary to stabilise G-SIBs at the point of entry to resolution, whether changes to firms to make them resolvable - like TLAC and operational continuity requirements - or to market contracts and conventions - like the ISDA Protocol or access to FMIs. But bail-in is not the end of the task. It is a prelude to whatever reorganisation is necessary to restore a firm to viability or to wind it down. Importantly though bail-in buys the time for that process to be orderly. Post bail-in restructuring runs as a thread through some of the other initiatives I have mentioned. It is part of the operational continuity principles. And, as part of the access to FMI work we are keen to investigate how easy it would be in resolution to dismantle the quasiFMI functions – payment services, clearing and custody – provided by G-SIBs to clients, financial and non-financial. However easy or difficult it is to transfer or wind-down services provided by a G-SIB, clients may have contingency providers themselves or may want to rely on the portability of their positions to move. If they are to move we need to find a way for that to happen in an orderly way. Post bail-in restructuring is also where ring-fencing of UK banks fits in.
Thanks to our policy, banks could count on an ongoing access to foreign currency balances. These measures can all be seen as an expansion of our regular open market operations with banks. In consonance with this tradition, our non-standard policy was first and foremost aimed at expanding that form of credit in volume and maturity. In July this year, we started to 2  BIS Review 150/2009  purchase securities outright as a vehicle for introducing further credit support. We intervened directly in the longer-maturity segments of financial markets by buying covered bonds issued by banks. When presenting this decision, I stressed that we were very much in the continuity of our open market operations, because we still had in front of us both the signature of the commercial bank issuing the bonds and the underlying asset itself. Let me focus more closely on covered bonds for a moment, as they are important for the euro area – and for Spain. Covered bonds are an attractive source of funding for banks because they have long-term maturities. They help control and rebalance the maturity mismatch between assets and liabilities in banks’ balance sheets. But they are attractive instruments of finance for investors as well. Unlike asset-backed securities, covered bonds do not involve a transfer of credit risk from the issuer to the investor. Credit risk stays with the originator, preserving the incentives for prudent evaluation and monitoring.

Consumption needs to be less dependent on perceived wealth gains, and investment to be more diversified, well beyond the construction sector. This will make participation rates more sustained. For what concerns the Spanish financial sector, it has long been a source of strength and national pride for this country. In many respects, Spain can be a leading example for global financial reform. I will say more on this later in my talk. Spain’s financial system has proved resilient to the shock in the early stage of the crisis. Supported by prudent regulation and supervision, the banking system in this country has built dynamic provisioning cushions during good times. And the traditional role of banking, founded on long-term relationships with customers, has largely been preserved. Looking forward, this is an important asset. But a solid future calls for some areas of adjustment in the way the financial industry behaves. The exceptional support of public policies will, at some point, have to be withdrawn. Private sector confidence in the future will need to replace policy intervention as the main spur of growth. The Asociación de Mercados Financieros and its members are an important link in the chain through which confidence will build and transmit to your customers. The obvious prescription for a sustainable return to stability is for many of you to simply look back at your past of prudent and sound management.