samchain/econo-pairs-v1 huggingface dataset:
The example of Germany's economic history in the 60 years since the Second World War, which may very briefly be described as 40 years of vigorous expansion and almost 20 years of sluggishness, should be food for thought when extracting all the strong and favourable aspects of decentralisation and avoiding those phenomena entailing risks to the efficient working of the economy, on which any lasting improvement in well-being ultimately hinges. Finally, another policy area to which great heed should be paid when seeking to sustain healthy public finances in the medium and long run is that of Social Security. Admittedly, the forecasts available denote a lack of major problems in the Social Security system in the coming years; however, looking further ahead, it is clear that if changes are not made, the system may become a considerable deadweight holding back growth in the Spanish economy. When the long-term consequences are taken properly into account, it is fairly clear that the sooner Social Security reform begins, the less costly it will be. Or stated the other way round, if Social Security reform continues to be delayed, we may find ourselves faced with a truly dangerous dilemma: either changes are undertaken that will have to be more drastic and may be traumatic in some respect, or otherwise growth in the Spanish economy will be seriously impaired. In sum, on viewing recent developments in the Spanish economy we can draw a positive assessment that should not disregard the accompanying imbalances.

Promoting an environment that is more conducive to both the creation and closure of companies would be a very effective means of modernising the Spanish economy, since it could provide the measures of flexibility and adaptability that are needed to compete amid the pressures generated by globalisation and to boost the incorporation of technological and managerial innovations. But of all the structural policies, the most important is undoubtedly education. As I have said, the educational and training drives of the past decades are largely responsible for the results achieved by the Spanish economy, and improving education and training today is, once again, pivotal to our future growth. When assessing the functioning of the economy, we often refer to differentials with other peer economies in terms of inflation, productivity and many other variables. And it is right to do so since, against a backdrop of international openness and integration, relative behaviour and, in short, competitiveness are essential for the continuous improvement of well-being. However, the most serious gap between Spain and the other major industrialised countries is in the field of education. True, we have improved in this area in recent years. The proportion of the population aged 25-64 with a secondary education has risen from 24% in 1992 to 48% in 2005. But we have yet to reach 50% when the figure is 83% in Germany, 72% in the United Kingdom, 66% in France and over 80% in the Nordic countries.
While monetary policy is guided by a quantified inflation target, the target of macroprudential policy comprises several different dimensions. For example, macroprudential policies can be about reducing and preventing excessive credit growth, reducing liquidity risks and maturity mismatches in the banking system, and increasing the financial infrastructure’s resilience to shocks. In all cases, it is hard to formulate a simple and clear target. Evaluating macroprudential policy decisions and holding the decision makers to account is therefore harder. It is therefore important to make sure the democratic control of macroprudential policy is guaranteed and regularly safeguarded. However, this can occur by developing the structures of democratic follow-up and control of the Riksbank that are already in place, chiefly through the General Council of the Riksbank. We can also benefit from what we have learned from how monetary policy is monitored, for instance through the publication of reports, minutes and regular questioning in the Parliamentary Committee on Finance. 9  Riksbanken (2013) Remissyttrande om betänkandet Att förebygga och hantera finansiella kriser (SOU 2013:6), DNR 2013-234-STA. 10  The recommendation regarding national macroprudential policy mandates issued by the European Systemic Risk Board (ESRB) in December 2011 states that the EU countries should give one authority or one council the responsibility of implementing macroprudential policies.

The knowledge gained from this certainly benefitted the series of organisational transformation we undertook at Bank Negara Malaysia to enhance our organisational effectiveness. As this BIS meeting is taking place in Asia, allow me to take the opportunity to say something about our region. While Asia has not been immune to the turbulence and the upheavals taking place in the different parts of the world, the region has been able to rise to the challenge and each time has demonstrated the ability to experience a swift rebound. Factors that have contributed to this resilience is not so much what we have done in response to the developments but it is what we have done previously that prepared us to weather these developments. These factors in varying degrees have included undertaking rebalancing and structural adjustments of our economies, economic and financial reforms, the development of our financial systems, pursuing greater fiscal discipline, building a more extensive policy tool kits, building buffers during the good times and advancing regional integration and cooperation. BIS central bankers’ speeches  1  For most of the region, following these efforts, our more diversified economies have become less vulnerable to economic shocks, our more diversified and developed financial systems have been better able to absorb and intermediate the financial turmoil and turbulence, while the financial reforms have also increased our flexibility and produced better price and exchange rate adjustments. Those with sound macroeconomic fundamentals including more sustainable fiscal positions also had the policy space to manage the implications of these challenging developments.
A sharp pick-up in the rate of growth of the money supply in 1995 provided an early indication that demand growth was likely to accelerate. And money supply growth has remained strong throughout the whole of the past year. Faster growth of consumer spending became evident in the first half of 1996 and has been sustained. And from the middle of last year this began to feed through into output - which was initially held back, and is possibly still being affected by a run-down of stocks. Now the fact is that no-one can tell you with any great confidence just when the increase in demand is likely to begin to create economic imbalance and spill over into rising inflation. But we can be reasonably certain that money supply growth at around 9-10% a year, as we have seen it now since the beginning of last year, and growth in consumer spending at nearly 4% a year, as we have seen over the last year, cannot be sustained for long consistently with the Government’s inflation target in the medium term. And there are signs in the recently more rapid tightening of the labour market and in the gathering recovery in the housing market, for example, that demand may be strengthening. BIS Review 5/1997  -2-  That, essentially, is why the Bank has been arguing that we will need at some early stage a modest pre-emptive tightening of monetary policy.

When we confronted a similar dilemma in the 1980s, the domestic expansion was allowed for some time to continue unchecked, but in the end we were driven to bring it to a jarring halt. I do not suggest for a moment that we are anywhere close to that situation now. Our aim is precisely to avoid that. But that experience does illustrate that, in the final analysis, there could be real dangers in allowing justified concern about the exchange rate to deflect us for too long from moving gradually to moderate the upswing. I emphasise the words “gradually” and “moderate”. The choice ultimately in this situation is not whether or not; it is sooner or later, less or more. BIS Review 5/1997  -3-  Our present dilemma - and it is a real dilemma - serves to illuminate the debate about the economics pros and cons of European Monetary Union, and the difficult decisions that will face all EU countries in little over a year from now. On the one hand, the real attractions - to manufacturers in particular - of exchange rate fixity within the euro area, are amply apparent. On the other hand, our dilemma - and we are not alone in this dilemma within Europe - points up the problem that would arise if the single European monetary policy - the single interest rates - does not meet the domestic monetary policy needs of all the euro-member countries.
We cannot, and should not aspire to a zero-risk solution, but we do need to be prepared to take measures to restore confidence if things do go wrong. 11. Public policy response - process  The first area of public policy response concerns how we handle our day to day activities. These have to be sharpened and broadened to oversee this more complex environment: a real life challenge for all of us here in London. Given our position as a major international financial centre the stability of the system could be impacted by any significant storms from elsewhere. 6  BIS Review 5/2004  Perhaps I can say a few words about what this means to us at the Bank of England. Responsibility for the overall stability of the financial system as a whole means we undertake activities ranging from behavioural research to oversight of payment and settlement systems; from involvement in standard setting to implementing infrastructural change. To do this efficiently means, as our Governor Mervyn King recently reminded us, that we have to see the wood for the trees. The challenge is where you draw the line. This entails a prioritisation process to decide on the extent and degree of potential threats - and also a “sunset” approach where we subject each area of work to regular review to assess progress and continued relevance. There are a number of, interconnected, areas of work.

But in view of persistently low external interest rates, such a policy would likely have resulted in a sharp appreciation of the Norwegian krone, and inflation and activity in the Norwegian economy would have fallen to too low a level. The weak external environment is thereby also contributing to keeping Norwegian interest rates low. With firmly anchored inflation expectations, Norges Bank can today give weight to stabilising economic developments when setting the interest rate. Inflation targeting has become more flexible. We have chosen to take a long-term approach to bringing inflation back up. But we will not lose sight of the inflation target. Should the outlook for inflation or growth weaken considerably, there will still be room for manoeuvre to counteract such developments through monetary policy. Monetary policy in the light of new banking sector regulation The financial crisis taught us some important lessons. First, the crisis illustrated that low and stable inflation is not sufficient to ensure financial stability. Second, the crisis clearly revealed shortcomings in the regulatory framework for banks. As a result, banking and financial regulation is now undergoing change worldwide. Regulation and supervision are the authorities’ most important instruments to prevent financial instability. In March, the Government presented a legislative proposal on new capital adequacy requirements for banks. The proposal is in line with the EU’s new regulatory framework. A key element in the new framework is capital buffers that banks will be required to hold in addition to the minimum requirement. This will increase banks’ loss-absorbing capacity.
Modelled on the Independent Evaluation Office of the IMF, we will create a unit to support this, with a director reporting to the Chairman of the Oversight Committee. It is not just our governance but also our commitment to transparency and openness that must be further enhanced. Transparency and openness are central not just to our legitimacy to perform these new tasks on behalf of the citizens of the United Kingdom. They are also central to our effectiveness in performing them. Just as Governor King described in his Mais Lecture 9 years ago, openness about what policy is seeking to achieve can make it more effective.21 In monetary policy, that helps to anchor inflation expectations and to support countercyclical movements in the policy setting. To that end, we have introduced forward guidance to reduce uncertainty about the way monetary policy will be set as the recovery gains pace. Our Inflation Report has evolved in the past year to contain more information about the key judgements underlying our forecasts and to widen the set of economic indicators for which we publish forecasts to include the labour market, components of GDP, the world economy and household incomes and saving. It will evolve further, including using our new organisational structure to draw stronger distinctions between staff and MPC forecasts. We will also review the case for releasing transcripts of our policy meetings after some years, and report publicly to the Oversight and Treasury Select Committees on the outcome of that review.

Thus, we see that the Libor cannot remain at 0.25% indefinitely. However, as our forecast also shows, it would not be advisable to increase the Libor now since the very weak inflation rates expected in 2010 (0.4%) and 2011 (0.3%) indicate that the deflation risk has not completely disappeared. We continue to use an inflation forecast to guide our decisions. In this way, we will ensure that the unconventional measures currently in force do not compromise medium and longterm price stability.
What is particularly interesting about Iraq is the link between expectations of a change in political regime and movements in currency values. Prior to the Gulf War in 1991 the Iraqi currency was the dinar. Following that war Iraq was divided into two parts that were politically, militarily and economically separate from each other: southern Iraq was under the control of Saddam Hussein and the enforcement of the northern no-fly-zone meant that northern Iraq became a de facto Kurdish protectorate. In the South, Saddam’s regime struggled to cope with UN sanctions, and resorted to printing money to finance growing fiscal deficits. Unable to import notes printed abroad because of sanctions, the regime printed low-quality notes in Iraq that  12  This quote appears on page 5 of the NBER working paper number 9808 (Cambridge, MA) version of their paper. At the time of writing, the Journal of Economic Perspectives version, which appears in the list of references, was still forthcoming. BIS Review 5/2004  7  bore Saddam’s image. In May 1993, the Central Bank of Iraq announced that the 25 dinar note, then the highest denomination note in circulation, would be withdrawn and replaced by a new locally printed note. These were known as ‘Saddam’ or ‘print’ (because of the offset litho print technology used) dinars. Citizens had three weeks to exchange old for new notes.

At the very first gathering of economists to create the American Economic Association, in Saratoga in September 1885, Richard Ely showed that he had the makings of a good central banker when he said, “We acknowledge our ignorance, and if we claim superiority to others it is largely on the very humble ground that we know better what we do not know”. Or, in Hayek’s words, “It is high time we took our ignorance more seriously”. The inability to bind future generations means that institutions do not resemble an optimal timeinvariant design chosen from behind the “veil of ignorance”. They reflect, in Hayek’s words, “how nations in the darkness stumble upon institutions which are in fact the result of human actions, not the implementation of a human plan”.20 Suitably designed, though, monetary institutions can help to reduce the inefficiencies resulting from the time-consistency problem and can incorporate new ideas into a discretionary monetary strategy constrained by a mandate that has widespread support in the population as a whole. A central bank needs to explain to the population both what it knows and what it does not know. Such a framework of “constrained discretion” for central banks is far-removed from the world of 1930 when the Deputy Governor of the Bank of England explained to the Macmillan Committee that “it is a dangerous thing to start to give reasons”. In 1908 Congress set up the National Monetary Commission to report on “what changes are necessary or desirable in the monetary system of United States”.
Unfortunately, the tensions we have once again experienced in recent weeks are a powerful reminder that the crisis is still far from over and that our economy’s situation remains a particular cause for concern in Europe. And this despite the fact that since the start of the sovereign debt crisis, and more forcefully so in recent months, Spain has implemented major reforms. A frequently voiced criticism of the ECB’s 3-year LTROs is that such an extremely generous provision of liquidity will tend to mask the underlying problems of the most vulnerable financial systems, thereby weakening the thrust of governments’ reforms in this area. This has not, of course, been Spain’s experience. A glance at the measures adopted in Spain shows that the process to clean up, restructure and recapitalise the Spanish credit system has lost no momentum whatsoever. Rather, the opposite is true. Throughout last year and in the opening months of 2012 the process has been stepped up to adapt it to changing circumstances, marked by a growing deterioration in economic and funding conditions. After resolving the governance and ownership-structure problems affecting the system in the initial stages of the tensions, efforts have focused recently on further strengthening banks’ capital and provisions, thereby keeping up the pressure for the necessary restructuring of the sector. In a different sphere, a labour market reform has recently been approved which affects core aspects of this market’s workings. On one hand, its aim is to decentralise collective bargaining and increase firms’ internal flexibility.

Secondly, the great harmoniser between the real and nominal convergence are the structural reforms. The more reforms one has implemented, the less costly the disinflation is and the stronger the longer term economic growth. I would finish up with the main point. The strategy on behalf of the European Union should be not to delay the entry of the candidate countries into EMU but to encourage the candidates to complete structural reforms. The cost of disinflation would be lowered and the long term economic would be helped. This is a win-win strategy as it helps the candidates and ensures the existing EU members that the new members would be economically stable and dynamic. Thank you very much. 2  BIS Review 1/2002
It is nevertheless conceivable that in a situation where a very high rate of inflation is accompanied by sluggish economic growth, Norges Bank may decide to apply a somewhat longer time horizon than two years to reach the inflation target of 2½ per cent. The choice of monetary policy time horizon reflects the fact that there are real economic costs associated with bringing inflation rapidly back to the target. This horizon is thus an indirect expression of the trade-off between the objectives of, on the one hand, stable output, and on the other hand, low and stable inflation. Historical data for Norway and other countries show that interest rate changes affect aggregate demand fairly quickly. Using the RIMINI model, we have estimated the effects of a 1 percentage point increase in interest rates over a period of two years. The chart shows that, in isolation, an interest rate increase of this magnitude may reduce mainland GDP by ¾ -1 per cent after two years. The effect will depend on a number of factors, such as household loan debt and corporate profitability. Household and business expectations may also play a part in determining the impact of interest rates. The band in the chart illustrates some of this uncertainty as shown by our models. In practice, it is often difficult to determine how long the interest rate will be kept at high or low level.

This labour has to be recruited from the exposed sector, or through the natural increase in the labour force finding its way to the sheltered sector. Over time, the size of the internationally exposed sector will be affected by the portion of the petroleum revenues that is absorbed into the Norwegian economy. The size of the internationally exposed sector is independent of monetary policy. An appreciation of the krone may, nevertheless, affect the speed at which changes occur in the business and industry. To maintain balance in the Norwegian economy, the phasing in of petroleum revenues must be countered by a monetary policy stance that is tighter than it would otherwise have been. This may be accomplished by keeping interest rates higher than they would otherwise have been, or by an appreciation of the krone, or both. A clear monetary policy target is a necessary complement to the fiscal guideline with a view to ensuring reasonable macroeconomic stability. Monetary policy is oriented towards low and stable inflation. The inflation target is set at 2½ per cent. BIS Review 66/2002  1  If evidence suggests that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. Inflation in Norway is determined by both domestic and international inflationary impulses. Domestic inflationary impulses are influenced by the state of the Norwegian economy.