samchain/econo-pairs-v1 huggingface dataset:
Consumer price inflation among a number of our trading partners is high as a result of rising energy prices, but the increase in prices for other goods and services remains moderate. Continued solid growth among our trading partners is in prospect. As global capacity utilisation increases to a more normal level, demand for Norwegian exports might remain buoyant. More export enterprises are facing capacity constraints. Export growth in the years ahead will probably occur in industries such as the engineering and shipbuilding industries. Production growth is now high in these sectors, and employment is rising after declining for several years. High growth in the global economy has also pushed up prices for non-oil commodities. Rising commodity prices and buoyant activity in markets that are important for Norway have generated growth impulses to the Norwegian economy. Since May this year, commodity prices have varied widely, but on the whole edged up since end-June. International equity markets have stabilised since the turbulence in May, and have edged up since the previous monetary policy meeting. The benchmark index on the Oslo Stock Exchange is now at a good 12 per cent higher than at the beginning of the year. Interest rates are still low among many of our trading partners, in spite of the increases in several countries as a result of rising energy prices and higher consumer price inflation.

High electricity prices may lead to a pick-up in CPI inflation through 2006. However, the rate of increase in energy prices is still expected to slow as from spring next year. A fall in energy prices may curb CPI inflation as from 2007. The rise in prices for non-energy goods has been moderate in recent years. Price impulses from imported consumer goods have been particularly weak. Their contribution to inflation has been negative virtually every year since the mid-1990s, partly reflecting increased trade, a shift in imports  2  BIS Review 92/2006  towards low-cost countries and a substantial improvement in distribution efficiency in Norway. Price impulses from imported consumer goods are expected to continue to exert downward pressure on inflation in the period ahead, albeit to a lesser extent than in previous years. The rise in prices for domestically produced goods and services pushed up CPI inflation until this year, but since the beginning of the year this measure of inflation has edged down again. The 12-month rise in prices for goods and services produced in Norway, excluding energy, was 1.1 per cent in August, 0.2 per cent lower than in July. This is the lowest domestic inflation rate witnessed since autumn 2004. The reduction in day-care rates in January this year has pushed down domestic inflation by an estimated 0.3 per cent over the past year. The rise in prices has been lower than expected for both goods and services.
Not only do we have some better data in hand, but also the fiscal drag, which has been holding the economy back, is likely to abate considerably over the next few years at the same time that the fundamental underpinnings of the economy are improving. The first thing to note is that federal fiscal policy in 2013 has been unusually contractionary. At the beginning of the year the payroll tax cut expired while tax rates on higher income households were raised, a series of taxes associated with the Affordable Care Act took effect, and spending was reduced due to the sequester and the gradual winding down of foreign military operations. According to the Congressional Budget Office, the cyclicallyadjusted or full-employment budget balance increased by roughly 1 ¾ percentage points of GDP in fiscal year 2013. Over the past 50 years there have been only two other episodes of fiscal contraction of this order of magnitude, and both of those occurred when the unemployment rate was substantially lower than it has been of late. Under current law, the amount of federal fiscal restraint will decline in 2014 and then decline further in 2015. At the same time, the sustained contraction in spending and employment by state and local governments appears to be over.

This outturn was attributed to the decline in both annual food and non-food inflation. BIS Review 57/2010  1  In the external sector, Zambia’s external position showed remarkable improvement as reflected in the build-up of gross international reserves to 5.1 months of import cover in 2009 from 2.1 months of import cover in 2008. Zambia’s overall balance of payment position is expected to remain favourable in 2010 due to the rebound of copper prices on the international market as well as the expected increase in copper production as some mines increase production to full capacity and the resumption of production at some mines. The rebound in the international price of copper in the second half of 2009 and the return of foreign portfolio flows resulted in an appreciation of the exchange rate of the Kwacha by 4% at the end of the year. However, fiscal performance in 2009 was weak, mainly due to the global economic crisis, which reduced domestic revenues. Despite this, Government remained within the programmed domestic financing for the year. Ladies and Gentlemen, the financial sector has remained resilient despite the adverse effects of the recent global financial crisis. Currently, the Zambian financial sector is characterised by high liquidity levels, reflecting tighter lending standards in the wake of the lessons from the global financial crisis leading to marked decline in private sector lending. As a result, the demand for the relatively risk free Government securities has increased causing a decline in yield rates on Government securities.
In particular, economic outcomes are sensitive to the way people behave under uncertainty, and to their beliefs about the past, present and future. Perceptions of uncertainty affect behaviour. If enough people are uncertain about their future job prospects and save more as a precaution, that may lead firms to cut employment, so increasing the chance that jobs are indeed lost. But uncertainty about whether it will rain today does not change the weather. Beliefs adapt over time in response to changes in the environment; and this in turn affect show economic systems behave. Because the surrounding environment can affect economic decision-making, there are probably few genuinely “deep” (and, therefore, stable) parameters  3  This particular example is fortuitous for earth science and biology, since it helps us date rocks and the fossils they contain and chart continental drift, based on the history of changes in the magnetic field of the earth. BIS Review 36/2010  3  or relationships in economics. In contrast, in many settings in the physical sciences there are stable “rules of the game” (e.g. the laws of gravity are as good an approximation one day as the next). The study of decision making under uncertainty has a distinguished ancestry in economics. Frank Knight (1921) wrote about the difference between risk (where frequencies could be used to calculate probabilities) and uncertainty (where there was no objective basis on which to derive probabilities).

Thereafter, the MPC expected that inflation was more likely than not to fall back and be below target for a period [Slide 5]. You can see that the most likely outcome, shown in the darkest band, was for inflation to stay below the target at the end of the forecast period. But the MPC also saw upside risks to that projection, stemming from the possibility that the current high level of inflation might become embedded in inflation expectations, so making inflation itself more persistent. To make these risks easier to discern, the MPC also makes available charts of the cross section of the probability distribution at particular points on the forecast horizon, like the one shown in [Slide 6]. The upside risks mean that at the end of the forecast horizon, the MPC judged that inflation was as likely to be above the target as below it. We can see this in the chart, because the narrower bands towards the left hand side mean that the mass below the vertical line marking 2% is about the same as the mass above it. But why do we show our projections like this? Many other economic forecasters publish their forecast as a single, most likely outcome. In our view, this sort of forecast is not very informative, as the actual probability of it being correct is very close to zero. In contrast, the whole distribution contains much more information. What matters for policy is the entire distribution of outcomes.
The press conference is webcast live and usually broadcast on TV. People can subscribe to receive an SMS message about interest rate decisions, and Norges Bank was apparently the first central bank to publish its interest rate decisions on Twitter. International developments have made it prestigious for central banks to be as open as possible. But transparency cannot be a goal in itself. Our responsibility is to conduct an effective monetary policy in line with the objectives laid down by the political authorities. Transparency beyond that necessary to ensure democratic accountability is a goal derived from the main goal of conducting an optimal monetary policy. 18  Lars E. O. Svensson, Deputy Governor at Sveriges Riksbank, has argued that it is possible to evaluate monetary policy actions ex ante. See Lars E. O. Svensson (2009): “Policy Expectations and Policy Evaluations: The Role of Transparency and Communication”, address at the conference “Tio år med självständig Riksbank (Ten years with an independent Riksbank)” 11 September 2009. 19  See Nergiz Dincer and Barry Eichengreen (2009): “Central bank transparency: causes, consequences and updates”, NBER Working Paper 14791 and Petra M. Geraats (2009): “Trends in Monetary Policy Transparency”, in International Finance, 12, no. 2, pp. 235-268. 20  The new legal text establishes the so-called principle of free access to public records which provides public access to central and local government documents and the right to be present at sittings of the courts and of administrative bodies elected by the people.

This may encourage exploitation of the cumulative learning process in the scientific community as a whole, by which existing empirical models are improved or (eventually) overtaken by new and better ones.”See Steinar Juel, Krisztina Molnaad and Knut Røed (2008) “An Independent Review of Monetary Policymaking in Norway”, Centre for Monetary Economics BI, p. 44. BIS Review 140/2009  11  Because models are rough simplifications of reality, we must exercise considerable judgment when we use them. This is not always easy to document and explain. But, even though it may be difficult, it is not impossible and our aim is to improve in this area. The management of the Government Pension Fund – Global is another activity of Norges Bank where transparency is important. Among the world’s sovereign pension funds, Norway’s is one of the most transparent. International organisations refer to it as an example of best practice. In Norway, the Fund has been both applauded and criticised for its communication. The Fund’s annual report was one among six others nominated for the Farmand award for best annual report and website. However, the same report was also strongly criticised by the Norwegian journalist Per Egil Hegge for its impenetrable language. 54 We are working towards improving our communication of the Fund’s activity. The Fund’s ultimate owners are the Norwegian people and we must improve the communication of the main management principles to that target group. We are making continuous efforts to improve our quarterly reports and our annual report.
Why not have all EU countries commit themselves to establishing independent bodies with the responsibility of enhancing transparency by conducting independent forecasts of the countries’ deficits and providing recommendations on a regular basis? They would have only an advisory role and their authority would stem from impartiality and expertise. The subject of their recommendations would be the overall fiscal stance - neither the specifics nor indeed the political orientation of fiscal policy. The Excessive Deficit Protocol (EDP) states that member states shall ensure that national procedures in the budgetary area enable them to meet their obligations. It would therefore be in the spirit of the EDP to have EU countries commit themselves to establishing these kinds of bodies. At the very least, these independent bodies would be able to make more reliable and unbiased forecasts as a basis for EU recommendations. Such an arrangement would avoid having unreliable deficit figures before elections, only to “discover” the real state of accounts after the vote - such as has been the case in Portugal, France, Germany, and most spectacularly in Greece recently. By having a similar role as the Congressional Budget Office in the US, the bodies would ensure a reliable and unbiased “reality check” in times of fiscal profligacy.

Experience has taught me that every decision-making body needs a sheltered area away from the public where things may be imperfectly stated and seemingly irrefutable truths may be called into question. If such a sheltered domain is abolished, this will, in my view, have a negative effect on negotiating practices and the quality of decisions. Optimisation of ex ante transparency is, by its very nature, more critical. A clear and open commitment to a monetary policy goal is of central importance. Thus the central bank must state explicitly what it means by price stability, and it must also communicate how it assesses the long-term development of the target figure. Both elements serve to enhance - or even facilitate - the predictability of its policy and to reduce uncertainties. Conversely, it must be accepted in monetary policy that the precise way to the goal is fraught with considerable uncertainties and that therefore too much ex ante transparency can easily become counterproductive. In the context of our concept this applies in particular to the interest rate path to be followed. If a target range for the money market rate is published at a particular point in time, this steering intention remains valid “for the time being”. It is quite understandable that market participants should wish to know more: how long the interest rate target is to remain valid, and what interest rate steps are likely to follow. What they would prefer above all else is information on the planned interest rate path for several quarters.
The FSA under Hector Sants have been saying much the same thing, and it was what an earlier generation focused on most. It involves supervisors making judgments; and, no doubt, occasionally judgments that individual banks find unwelcome. They need to cover competence. But also the adequacy of liquidity portfolios and the reasonableness of asset valuations; over the decades too many banks around the world have failed after they reporting apparently healthy ratios. Not a new lesson. But a vital issue is whether we are ready, today, collectively to back an approach based on judgments rather than on enforcing a book of detailed rules? If we are to tolerate supervisors where necessary substituting their judgment for that of managers and boards, then commentators, appeal tribunals and even parliamentarians will need to give supervisors the benefit of the doubt occasionally. Of course, such judgments need to be grounded and reasoned. But we need to go further than this. Today, there is a realisation that it is not enough to look solely at individual firms atomistically. The resilience of the system in the face of seriously adverse disturbances – whether from the real economy or from within the financial system – depends heavily on common exposures and interconnectedness. In a way, this is another reremembering.

And they will fail in circumstances that, at least with – and possibly without – hindsight, could have been prevented. So it has been a mistake, over recent decades and in a number of countries, to claim to have a regulatory framework that is not premised on zero failures when we lacked a resolution regime that could cope with failures of even quite simple banks. In the UK, this was cruelly exposed in August 2007 when Northern Rock failed, denting confidence in UK mortgage banks generally. That is the backdrop to the suggestion, stressed by the Governor earlier this week, that the market should explore whether banks can raise contingent capital from private sector investors. Beyond that, we need an effective resolution regime. The UK does now have a decent resolution regime for small and medium-sized banks, which we used directly for the Dunfermline Building Society and indirectly in getting a few cases satisfactorily worked through. More important for today, it is the origin of the Bank pushing the “Living Wills” idea, which dovetailed with international conclusions about the horrendous problems of managing cross-border crises. The G20 heads of government have made it clear that something must be done about this. It is being pursued by the Financial Stability Board, a grouping of regulators, central bankers and finance ministry officials drawn from the G20 countries and a few other key centres.
No one thought that it should be abandoned. And we have received a few suggestions on how we should improve upon the operation of our system. We welcome these discussions which have sharpened our own thinking in the process of debate and analysis. Whilst one or two of these idea may have some psychological but possibly only short term value, they also carry considerable downside risks of undermining confidence in a well tried system. I am also pleased to say, therefore, that we have indeed been quite thorough in our monetary reform in the past ten years. (a) Role of interest rates 36. One school of thought promoted by a group of academics in Hong Kong with specific proposals for various schemes, which I must confess I have found difficult to appreciate, seems to be based on the notion that one could maintain stability in both the exchange rate and the interest rates at the same time. No matter how these schemes are dressed up, involving insurance products, guarantees, options or other fancy derivatives of one type or another, I fear that they have very little likelihood of success. Keeping interest rates artificially down when there is capital outflow amounts to providing cheap funding to those who are shorting the currency. It requires massive intervention in the forward market or a contingent commitment of foreign reserves that even those with very large foreign reserves would find the situation difficult to hold.

This situation was rectified in 1988 through the so-called Accounting Arrangements which required the Hongkong and Shanghai Banking Corporation Limited, as the Management Bank of the Clearing House of Hong Kong Association of Banks, to maintain a clearing account with the then Monetary Affairs Branch of Government for the account of the Exchange Fund. Thus the monetary base was only clearly defined then. The Accounting Arrangements were subsequently replaced by another arrangement, on the occasion of the introduction of Real Time Gross Settlement for interbank transactions in Hong Kong BIS Review 19/1998  -6any change in the monetary base has to be matched by a corresponding change in the amount of US dollar reserves held by the HKMA, and the change brought about by the HKMA rather passively converting Hong Kong dollars in the monetary base into US dollar reserves and vice versa at much the initiative of the banks. 19. The advantage of such a requirement is that whenever there is capital outflow, which would take the form of the sale by the banks of Hong Kong dollars to the HKMA for US dollars at the fixed exchange rate, there will, on settlement of the deals, be a shrinkage of the clearing balance of the banking system. This will lead to Hong Kong dollar interest rates in the interbank market increasing. The greater the outflow, the larger will be the fall in the clearing balance of the banking system and the higher will be the interest rates in the interbank market.
As the member responsible for monetary policy preparations, I am in a position to influence discussions and decisions, apart from those at Board meetings, mainly as chairman of the internal monetary policy group that is made up of leading members of the Bank’s competent departments. Matters on the monetary policy agenda are discussed by this group on a continuous basis. In the light of that discussion, at Board meetings I also present proposals about the direction of policy. However, all the members of the group attend Board meetings and are able to present their own views. The arrangements we have chosen for internal discussions and preparations build on experiences at other central banks. A proposal for the approach we have used since autumn 1999 was drafted by some of us after talks with colleagues at the Bank of England, the Bundesbank and the Federal Reserve. There are some important differences, however. The officials who prepare the Board’s material are in a stronger position compared with other central banks. We ask them to produce a comprehensive assessment of inflation independently, whereas in the Bank of England, for instance, the counterpart to our Executive Board is involved in this work. And at neither the Bank of England nor the ECB are staff present at policy meetings. In other central banks, moreover, before the preparatory material is presented to the counterpart to our Executive Board, it has to be approved by the competent board member. So in all these respects our internal process is very open.

We have tried to avoid this, for instance by not arguing with each other in public. We have also refrained from evaluating colleagues’ arguments and proposals. Before choosing an approach to communication and transparency, we again tried to learn from other central banks. The main issue in the public debate seems to have been the minutes of our meetings. I believe the publication of minutes has advantages. The minutes provide a clear opening for the evaluation of what individual Board members contribute to the monetary policy discussion, besides facilitating the democratic control of and insight into our work. In my opinion, the arrangements we have chosen can promote a better understanding in society in general of the Riksbank’s policy and our deliberations. That is important not least in a small country where the discussion of stabilisation policy is not all that broad. 6  BIS Review 24/2001  Some conclusions Work on monetary policy has been arranged in ways that differ from country to country. This has to do with historical differences that stem from the society in which the policy is constructed. Scandinavian and Anglo-Saxon countries require a greater degree of openness, for example, than countries in Central Europe. The duration and acceptance of low-inflation policies also play a part. A reluctance to change a winning concept was no doubt an important reason why the Bundesbank continued to adhere to money supply targets in its communication for so long even though academic studies showed that in practice its policy was being guided by inflation forecasts.