samchain/econo-pairs-v1 huggingface dataset:
Low and stable inflation makes it easier for economic agents to distinguish changes in relative prices from changes in the general price level. Prices become a more accurate information vehicle. Alan Greenspan has defined price stability as “a situation in which households and businesses in making their saving and investment decisions can safely ignore the possibility of sustained, generalized price increases or decreases”. 5 This is the aim of monetary policy in all countries. When there is confidence in the inflation target, monetary policy can also contribute to stabilising output and employment. Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment in interest-rate setting. Past experience indicates that expectations as to future inflation remain stable even if inflation varies somewhat as long as the interest rate is used actively to curb the effects. Monetary policy cannot finetune economic developments, but it can prevent the largest effects from occurring when the economy is exposed to disturbances. In some situations, it may be appropriate to hedge against particularly unfavourable developments. If inflation deviates substantially from the target for a period, the interest rate will be set with a view to gradually returning it to the target, so that we avoid substantial variations in output and employment. Through the 1990s, inflation remained on the whole in the interval 1½ – 3½ per cent. Inflation has varied slightly more in the past few years.

The settlements in 2004 and 2005 resulted in moderate wage growth. There are now signs of higher local pay increases in some industries. Pay increments are probably rising in occupations where pay is directly linked to performance. Municipalities and public entities have recorded a sharp increase in revenues, and this may easily translate into higher labour costs. Nevertheless, the labour market is not so tight that there is a pronounced risk of a marked increase in wage growth in connection with the spring income settlement. Moreover, employee organisations have  6  4  Information from Norges Bank’s regional network, January-February 2006. BIS Review 10/2006  gained acceptance for important changes in labour legislation and regulations. This probably reduces the near-term risk of pay increases that weaken production. A characteristic of the wage formation process in Norway has been that fairly long periods of moderate nominal pay increases and rising employment have culminated in a sharp rise in cost inflation – often as a result of working hour reforms – and a decline in employment. Developments in labour costs and the wage settlements in 1974 and 1975, 1986 and 1987 and in the period between 1998 and 2002 laid the basis for a subsequent decline in output and employment. In our interest-rate setting, we must continuously assess how we should take account of the risk of another sharp rise in cost inflation when the labour market tightens.
If the consumers’ confidence with regard to the future were to decline, together with rising unemployment and a weak development in the stock markets, there was a great risk that activity in the US economy would be subdued. Companies often react to uncertainty with a “wait and see” policy, which means that they postpone investments. In addition, there was uncertainty as to whether the financial system could cope with the problems arising as a result of the devastation in New York. On top of this, certain sectors in the global economy would be hit directly, for instance, insurance companies, airlines, tourism, etc. All of this risked worsening the economic downturn both in the USA and in other countries. The role of a central bank in this type of situation is to contribute to creating confidence and promoting financial stability. It is then important to act quickly and resolutely. This may be considered to contradict the claim that it is important for the Riksbank to act predictably. However, for those who have observed the central banks’ actions on other occasions when problems in the financial system have arisen and confidence in the future has declined, such as in 1987 and 1998, it should be no surprise that central banks act to support the economy with a lower interest rate and greater supply of liquidity. This is to counteract a downward spiral in the global economy as the result of a decrease in the willingness to take risks.

In order to maintain the investment strategy over time, a good understanding and broad acceptance of this risk are essential. 1 NBIM Discussion Note 1/2016: The equity risk premium, NBIM Discussion Note 2/2016: Risk and return of  different asset allocations, NBIM Discussion Note 3/2016 (forthcoming): Global growth and equity returns, NBIM Discussion Note 4/2016 (forthcoming): Asset allocation with government revenues and spending commitments. 2 NBIM Discussion Note 1/2016: The equity risk premium. 3 See for example Campbell J.Y., C. Pfluger and L. M. Viceira (2015): Monetary Policy Drivers of Bond and Equity  Risks, Working Paper 14–031, Harvard Business School. 7/7  BIS central bankers' speeches
In this context, in addition to the intensive work on the CTC project that I have just described, the HKMA is also busily working on a number of other market development initiatives. One of such initiatives that I wish to highlight today is our effort seeking to modernise the legal framework and tax treatment to make it attractive for private equity funds to domicile in Hong Kong. The objective of this project is simple: to strengthen Hong Kong’s leading position as a private equity fund hub in Asia. 8. Market development is a never ending race. It is not enough for us to be making good progress and improvements every now and then. We must be able to improve and move faster than our peers if we wish to stay ahead of the game. 9. Now that I am talking about ‘brand’, it should be no surprise to you if I now return to the theme of my first choice, “culture and ethics”. Just like any luxury goods, a brand in the context of IFC entails quality and credibility. Quality requires technical competence in a wide range of financial services, such as FX, interest rate, credit, hedging, derivatives, ECM, DCM, asset management, private equity, etc. I think Hong Kong is in a good position in all these markets. We have done rather well in all these markets and should be able to further deepen and broaden them given the exceptional opportunities emerging from the internationalisation of RMB and the latest Belt and Road Initiative.

Real disposable income in the United States, for example, has risen roughly 4% a year over the past two years. In addition, there has been considerable vigor in household demand. Indeed, the question is whether household demand is growing too quickly. In constant dollar terms, consumer spending grew more than 5% in 1999, the fastest rate since the mid-1980s. Housing has also been surprisingly strong, due to the best affordability conditions in a generation. In fact, the home ownership rate reached a record 67% in the second half of 1999. A number of commentators have expressed concerns that the United States cannot sustain these current measures of prosperity. To support their view, they point to the declines in recent years in personal saving rates. 1  BIS Review 29/2000  However, these declines in personal saving rates may be misleading in that they may be due in some respects to technical measurement issues, such as the exclusion of realized capital gains from the income and saving data. More relevant is the fact that household credit quality has not deteriorated over the past several years. On the contrary, it appears to be improving. Delinquency rates on mortgages and consumer installment debt have been falling, as have the number of new bankruptcies reported. Driving these positive trends, to be sure, has been strong growth in employment and income. At the same time, I cannot suggest that the Phillips curve - which holds that there is a predictable trade-off between achieving price stability and employment gains - is dead.
For the United States, we predict a relatively good growth rate (for a developed country), this year and in the following years (Figure 5). GDP is expected to increase by an average annual rate of just below 3 per cent for the years 2010–2012. Growth is expected to be slower for the euro area. The annual growth rate in the euro area is expected to amount to just below 2 per cent for the years 2010–2012. Although GDP growth is now underway and is expected to continue during the forecast period in both the United States and the euro area, it will be a long time until GDP returns to pre-recession levels. This means that resource utilisation will be low for an extended period of time. This applies not least to the labour market, which normally lags behind the development of GDP. In turn, this will restrain price and wage developments abroad for the next few years. I will return to this issue later on. There is also considerable uncertainty about the strength of the recovery. The upturn in the period immediately ahead will partly be driven by temporary factors such as the effects of highly expansionary fiscal and monetary policies and an inventory cycle. There is therefore a risk that growth will be dampened again when the stimulating effect of these temporary factors declines. Experiences from previous financial crises, as reported by Reinhart and Rogoff, the International Monetary Fund (IMF) and others, also indicate that the recovery following a financial crisis will be drawn out.

Transitional measures do not distort the solvency reality: they are designed to ensure a smooth transition to the new regime, avoiding disruptions in the market and allowing a certain period for companies to fully recognise the impact on old books of contracts that have been underwritten in a different regulatory framework’’. 2 I agree. For the benefit of investors, let me be crystal clear: when we consider whether or not firms are in a position to pay dividends, one of the main quantitative yardsticks we will use is capital levels after the benefit of transitionals. Now, investors taking a close interest may be concerned about the capital strain firms using the TDTP may face as the transitional benefit unwinds over 16 years. They are right to have an eye to that, but I would like to point out that there will be some off-setting benefit in the form of the release of the risk margin as the back book rolls off – it will be up to firms to set out this picture for analysts and investors, but it is the net adjustment we should be focussed on. For transitional measures to achieve their purpose there needs to be a shared understanding on some of the important practical details about how they will operate.
The Supervisory Capital Assessment Program (SCAP) in early 2009 identified and addressed the potential capital shortfalls of the major U.S. bank holding companies in a stressed scenario. The SCAP forced the banks to recapitalize either through the use of private funds or the injection of government convertible preferred equity from the TARP program. However, our policy approach was far from perfect. Comparing actual growth to the growth projections by FOMC participants in the Summary of Economic Projections shows that we were consistently too optimistic about growth over the 2009–2012 period. As a result, with the benefit of hindsight, we did not provide enough stimulus. Perhaps, if we had paid more attention to the persistent divergence between growth forecasts and outturns in Japan in the 1990s, we might have been more skeptical about the prospects for a strong economic recovery, even with a more aggressive monetary policy regime. Also, we could have done better in communicating our intentions and goals. We put too much emphasis, too early, on the exit. At an earlier stage, we should have put greater emphasis on our commitment to use all our tools to the fullest extent possible for as long as needed to achieve our dual mandate objectives. Our policies also had a “start-stop” aspect to them that may have undercut their effectiveness. For example, until September 2012, our large-scale asset programs generally specified the total size of the program, with a purchase rate and an expected ending date.

William C Dudley: Lessons at the zero bound – the Japanese and US experience Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Committee on the Global Financial System (CGFS), at the Japan Society, New York City, 21 May 2013. *  *  *  It is a pleasure to have the opportunity to speak today at the Japan Society.1 Our countries have very close relations and this is particularly true at the central banker level. I just got back from the BIS last week where I had a chance to spend some time with Governor Kuroda. Today, I will discuss the challenge that we both have been working to solve – how best to conduct monetary policy when short-term interest rates are already pinned close to zero, but the economy is still operating well below its potential. This has required considerable learning. After all, until Japan’s experience began in the 1990s, no major country had actually faced this problem since the Great Depression of the 1930s. As the first nation to experience the zero bound in modern times, Japan was an early pioneer in developing unconventional tools and strategies. Its experiences, both good and bad, along with lessons from other periods such as the Great Depression, have helped to inform the policies adopted by the United States (U.S.) and other nations in recent years.
During the financial crisis, this spread rose and fell with changes in investors’ perception of bank credit risk. In contrast, its recent moves are related to money market fund reform: term rates rose considerably as prime money market funds both shrunk in size and reduced their maturities to remain highly liquid, and have recently come back a bit as the market has stabilized and markets have adapted to the new industry structure. Shown in (Figure 15) are customer-to-dealer versus dealer-to-dealer Treasury repo rates. The customer-to-dealer market consists primarily of cash investors like money market funds lending to dealers, while the dealer-to-dealer market reflects dealers lending amongst themselves.31 The 8 / 13  BIS central bankers' speeches  spread between these two rates is thus a proxy for the cost dealers with ready access to cashinvestor financing charge to act as intermediaries between these two markets. Since all the lending is secured by Treasuries, this intermediation entails very modest risk. U.S. versus currency-hedged 3-month interest rates, as reflected by foreign exchange basis swaps, are shown in (Figure 16). U.S. and foreign money markets are linked together by a dealer-intermediated foreign exchange derivatives market, which allows firms to essentially convert money market loans and borrowings from one currency into another. A dealer that intermediates this spread can be thought of conceptually as making a secured loan, in which it lends out dollars and takes in foreign currency cash as collateral.

The current account surplus is projected at 2% of GDP by the end of the forecast horizon and could easily be eroded by a surge in demand and/or lower export revenues. 2  Chart 1  As Chart 2 shows, both private consumption growth and rising house prices are due mainly to increased real incomes and households’ improved financial position. This differs greatly from the situation in pre-crisis Iceland, where increased household leverage played a leading role, but as can be seen in the chart on the right, lending to households has not increased in real terms since 2012. Chart 2  The fact that inflation has been low in recent years despite steep rises in wages and house prices stems primarily from two things: on the one hand, positive supply shocks in the form of strong export growth and improved terms of trade, which have pushed the exchange rate of the króna upwards, and on the other hand, price deflation in international goods trade. Import prices have therefore fallen steeply in krónur terms, as can be seen at the left in Chart 3. What would happen when this imported deflation turned around was always a source of concern. Such a development now appears to be on the horizon, as can be seen in the chart. But fortunately, the rise in unit labour costs seems to be losing pace, as can be seen in the chart at the centre, and house prices appear to have 3  peaked.
Jonsson, Magnus and Goran Katinic (2017), “Is the Swedish monetary policy in line with the Taylor rule?”, Economic Commentaries 2017:4, Sveriges Riksbank. Jonsson, Magnus and Emelie Theobald (2019), “A changed labour market – effects on prices and wages, the Phillips curve and the Beveridge curve”, under publication in Sveriges Riksbank Economic Review. Keynes, John Maynard (1930), “Economic possibilities for our grandchildren”, chapter in Essays in Persuasion. Kjellberg, Anders (2018), “Kollektivavtalens täckningsgrad samt organisationsgraden hos arbetsgivarförbund och fackförbund” (The coverage ratio of collective agreements and degree of unionisation among employers’ confederations 23 [24]  and trade unions), Studies in Social Policy, Industrial Relations, Working Life and Mobility Research Reports 2018:1. McLeay, Michael and Silvana Tenreyro (2018), “Optimal inflation and the identification of the Phillips curve”, CEPR Discussion Paper 12981, Centre for Economic Policy Research. Mojon, Benoit and Xavier Ragot (2019), “Can an ageing workforce explain low inflation?”, BIS Working Papers 776. Leontief, Wassily (1952), “Machines and man”, Scientific American. Lindé, Jesper and Mathias Trabandt (2019), “Resolving the Missing Deflation Puzzle”, mimeo. Olli Segendorf, Åsa and Emelie Theobald (2019), “Can immigration resolve the problem of an ageing population?”, under publication in Sveriges Riksbank Economic Review. Powell, H. Jerome (2018), ”Monetary policy in a changing economy”, Changing Market Structure and Implications for Monetary Policy, symposium organised with the support of the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. Söderström, Ulf (2002), “Monetary policy with uncertain parameters”, Scandinavian Journal of Economics, 104, 125–145.

Mr Latter gives an overview of the current monetary policy stance of Hong Kong Address by Mr Tony Latter, a Deputy Chief Executive of the Hong Kong Monetary Authority, at the CLSA Investors’ Forum in Hong Kong on 17 May 1999. I should like to say a few words about the present stance of monetary policy in Hong Kong and its relation to the broader state of the economy. Hong Kong has a fixed exchange rate against the US dollar. The pros and cons continue to be a focus of debate in some quarters, but I don’t intend to dig over that ground yet again today. Suffice it to say that over the past fifteen years Hong Kong has enjoyed, on balance, remarkable prosperity. I happen to think that the visible and trusted monetary discipline of the exchange rate link has been a decisive contributory factor to that prosperity. Of course, one cannot deny that there is some association between the strength of the exchange rate and the level of interest rates on the one hand, and the current recession on the other, but I would caution against adopting too short-term a horizon when drawing conclusions, and I would also suggest that some of the adjustment which we have experienced - for example in property prices - was both necessary and somewhat overdue.
And  BIS Review 54/2006  3  yet, because of the unique circumstances over the past two to three years, it has provided more information about the near-term path for monetary policy than has been the practice of many of our counterparts. These differences in approaches to communication do not seem to reflect fundamental differences in perceptions of the degree or nature of uncertainty. The proponents of the regimes with the most explicit forecasts and greater disclosure about the future path of interest rates do not claim to have greater confidence in their ability to forecast. They do express, however, greater comfort with some of the potentially adverse consequences of such approaches, the tendency, for example, for observers to gravitate toward the central tendency of the forecast and to look past the uncertainty bands and qualifications. And they express less concern that these approaches to communication will end up limiting the flexibility of central banks to react as circumstances change without inducing damaging volatility into markets. And so, even as central banks have moved in varying degrees toward greater clarity about their goals, forecasts and policy decisions, they have also moved to being more explicit about uncertainty and about the need for flexibility in how policy should adjust over time. This reflects an evolving appreciation that there are limits to transparency.

Transparency in monetary policy cannot mean that the central bank conveys more confidence in the outlook for growth and inflation than it can reasonably have, and it cannot provide more assurance about the likely future course of policy than it actually has. This seems self evident. And yet as central banks have moved to communicating more and disclosing more about monetary policy, transparency in monetary policy has been associated with rising expectations for clarity about the path of target interest rates over time. It might seem desirable in an ideal state of the world for expectations in financial markets about the future course of policy to closely track in real time those of the central bank. But given the degree of uncertainty that surrounds monetary policy making, this is unlikely to be possible, except in special circumstances. There will be circumstances when it is appropriate for the central bank to send a signal about the target rate that extends well beyond the immediate horizon. These circumstances are not likely to arise frequently, and will be appropriate in particular conditions when the benefits afforded by the effect on expectations clearly outweigh the cost imposed by the loss to flexibility. Central banks should be clear about what they are trying to achieve. They should be open with the knowledge and insight they possess. And they should provide the public with clarity where it is attainable.