samchain/econo-pairs-v1 huggingface dataset:
Just as the press requires us to use clear language in a transparent, timely and fast communication, we must also stress the importance of the media in the economic agents behavior. We certainly do not ask you to restrict or limit the information, nothing could be further from the spirit of free speech we adhere to, but we do request you to be rigorous in your reporting. Overinterpretation of decisions made by the Bank or overemphasis of transient economic indicators that do not mark a trend are situations that regularly influence public sentiments and even behavior. It only remains to me to recommend professional rigor and an adequate appreciation of the evolution of the economy, which are the same demands we at the Bank make upon ourselves. Chile requires a specialized press that looks at economic events through the perspective of time and avoids being led away by sensations or climates. The economy progresses in long, slow cycles even though the day-to-day events may at times overwhelm us. We have seen tremendous progress in the Chilean economic press. The specialized journalists have played an outstanding role in contributing to a better informed society, better equipped for decision-making. As in all fields, there is always room for further improvement. From our side, we are always available to contribute to explaining or advising on complex phenomena.

It states that the Bank communicates with the public by way of official notices and publications, minutes, previously announced public conferences, interviews or public declarations made by board members. It also says that the Governor is directly responsible for all the information the Bank puts out, except for whatever the individual board members might publish or say in public. At the same time, the policy rules that the Bank must publish all information or resolution relevant to the market as soon as it has been validated, thus obliging itself to give out all market-sensitive information as quickly as possible. Whenever a board member or Bank executive gives a talk with information that could be relevant for the market, it is published on the website. Any public presentation given by the Governor is posted on the web as soon as they begin so that the general public has access to the information at the same time as those present. In my own case, and so that there is no discrimination between those who attend the presentation and those who do not, I leave a written text of my speech which is not an easy task to do, but ensures providing a precise message. For you as journalists, this is useful to your work and contributes to avoiding the use of the old excuse “I was misinterpreted”, which may occur, but in most cases is the fault  4  See Blinder and others (2008) for more details on communication in central banks and relevant references.
10  BIS central bankers’ speeches  Figure 9 Commodity prices  (index, 01/01/2007=100) 300  300  250  250  200  200  150  150  100  100  50  50  0  0 07  08 Copper  09 WTI oil  10  Agricultural products (*)  11 Gold  (*) Using the Godman Sachs aggregate index. Sources: Central Bank of Chile and Bloomberg. Figure 10 Nominal interest rates on Central Bank of Chile bonds (*) (percent) 6.50  6.50  6.25  6.25  6.00  6.00  5.75  5.75  5.50  5.50  5.25  5.25  5.00  5.00  4.75  4.75  Jun.11  BCP-2  Jul.11  BCP-5  Ago.11 BCP-10  (*) Dotted vertical line marks date of publication of June 2011's Monetary Policy Report. Source: Central Bank of Chile.

The common objective of all these efforts is to identify possible measures for improving the safety, efficiency and integrity of the regional payment systems. 7.4 The most demanding factor, common to all, is the rapidly changing global payment system infrastructure that is challenging the existence of domestic and regional payment systems, which are lagging behind. Given the increasing sophistication of cross-border transactions, the need to mitigate risks involved in using outmoded infrastructure has to be given priority. The SAARC payment system development strategy should therefore be designed to cater not only to the region’s present needs, but also its future demands. 8. How does the SAARC Payments Initiative work? 8.1 Let me briefly set out the proposed institutional structure of the SAARC Payments Initiative. 8.2 By consensus, Hon. Governors of the SAARC central banks requested the Central Bank of Sri Lanka to take the lead in this effort. We are happy to be the catalyst and promoter, but hope that at an appropriate time, this Initiative will be driven by the other SAARC member central banks. In consultation with the SAARC Governors, we have already appointed a SAARC Payments Council (SPC), which is composed of the chairpersons of the National Payments Councils (NPCs) in each of the SAARC member countries or by senior officials appointed by the Governors of central banks in countries which do not have NPCs.
All I can add today is that a gradual process is no longer sufficient. The seriousness of the situation requires the adoption forthwith of a reform that draws our labour market closer to the levels of job flexibility and security prevailing in most European countries. Reform of our labour institutions is very necessary for many reasons. First, to put an end to the personal and family drama that unemployment entails. But also to help reduce the budget deficit. Indeed a more efficient labour market, that gave us unemployment rates similar to those of other countries, would permit the costs of unemployment – which in Spain amount to around 4% of GDP – to be reduced, and would increase government receipts from income and consumption taxes without tax rates having to be raised. A reduction in unemployment and an increase in employment are also very important for the banking system. First, because high rates of unemployment eventually lead to higher default rates. Second, because a reduction in unemployment is essential to reverse a trend that is having very serious effects on banks, namely the fall in solvent demand for credit. That said, at present, owing to the worsening of the sovereign crisis, supply-side factors are also contributing to the decrease in lending to households and firms which, as usual in this type of situation, affects small and medium-sized firms disproportionately.

With the benefit of hindsight, I do not think that anybody would now consider that we should have started in any other way than by requiring assets be written down, and then at a later stage, requiring recapitalisation. Balance sheet restatement is not just “one” possible formula for restructuring, but rather a vital ingredient of all restructuring processes. Finally, I understand but do not share the view of those who see a danger in forcing institutions to increase transparency in the midst of a crisis. I am convinced that, in the present situation of general distrust in the markets, suspicion is always much worse than reality, however problematic that may be. Admittedly, despite increased transparency, doubts persist as to the extent to which our banks have cleaned up their balance sheets. And although write-downs have been very intense, unsatisfactory economic performance might make further efforts along these lines necessary in future. Be that as it may, let me conclude by reiterating that such is the speed of change in the economic environment in Spain, Europe and the world in recent months, and even in the last few weeks, that it would be a grave error to establish rigid criteria that rule out the possibility of incorporating fresh financial restructuring tools, if changing circumstances mean that they are required in order to achieve the final goal. That can be none other than to have a set of solid credit institutions ready to effectively meet the solvent demand of Spanish households and firms for funds.
In other words the policy rate is normally adjusted so that inflation 1-2 years ahead, taking into account the balance of risks, is in line with the target. The Riksbank introduced the current regime of a floating exchange rate and inflation target in 1993, after a number of decades with a fixed exchange rate. The new regime has meant a new way of working whereby we attempt, with the aid of monetary policy, to adjust economic growth to what the inflation target allows. A common analogy is that the economy is like a car with certain characteristics that enable it to drive at certain speeds but not at others. In that case we in the Executive Board are the driver, using the policy rate to accelerate or slow down. If the car is going too fast, its tyres will start to overheat and we risk driving off the road, i.e. prices will rise and we have to raise the policy rate to slow down. Conversely, when the car is going too slowly we accelerate by lowering the policy rate. In reality the analogy with a car is somewhat misleading. First, it is difficult to know exactly the speed at which the economy is actually growing. The statistics that we use when forecasting economic growth contain errors, do not provide a comprehensive picture of the economic situation and furthermore are produced with a lag. Another problem is the difficulty in knowing exactly how long it takes before a rate adjustment has the desired effect.

One source of concern for both the United States and the world as a whole is the large deficits in the US economy. In the third quarter last year the current account deficit totalled USD 165 billion, or around 6 per cent of GDP. Data for November show that the deficit has continued to grow, reaching a new record high of just over USD 60 billion. This may result in changes in interest rates and exchange rates that could have considerable consequences for world trade. A large share, or about 40 per cent, of Sweden’s exports go to the euro area, and as a result economic developments there are especially important for us. The recovery in the euro area economy is going slowly. Growth in the third quarter was lower than expected. Available indicators for the fourth quarter provide a mixed picture. Germany, which is an important market for Swedish products, is showing some signs of an improvement. After several years of extensive cutbacks there should be a pent-up need among firms to invest. At the same time exports are being dampened by the euro’s rise against mainly the dollar. BIS Review 10/2005  1  The economic situation in Sweden As regards Sweden the Riksbank has been positive in the past year in its outlook on economic developments. International demand has increased faster than anticipated, with above all exports of services proving unexpectedly robust. Economic policy is also contributing to the relatively bright growth prospects.
Lars Heikensten: Economic recovery with low inflationary pressure Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at a meeting at Residenset Härnösand, 15 March 2004. *  *  *  Allow me to begin by thanking you for your invitation to today’s meeting. In order to get an idea of economic developments in different areas of Sweden and to explain how the Riksbank works, I pay regular visits to various parts of the country. The items on the agenda for today’s visit include a talk at Mid Sweden University on how the Riksbank works, a visit to SCA and a discussion with county representatives about developments in business and the labour market in Västernorrland. At this lunch, I intend to give my views on the economic situation and monetary policy. Before going into the economic assessment itself, however, I would like to say a few words about the Riksbank’s work methods. One of the Riksbank’s objectives is to maintain price stability. We have decided to define this as 2 per cent inflation as measured by the consumer price index, with a tolerance range of plus/minus 1 percentage point. Monetary policy is conducted on the basis of a forecast of inflation over primarily the coming two years. If the forecast in this perspective indicates that inflation will be lower than 2 per cent, the repo rate should normally be cut and vice versa.

However, satisfaction of this demand brings us back to the problem of the market dynamics of globalisation, which, as we all learnt from bitter experience, can have very negative effects. In a discussion about bond market development in the region, it would be useful for us to remind ourselves what this problem is. The pattern of the flow of international funds in Asia has, for some time now and encouraged by financial liberalisation, been characterised by a two-way traffic of investment flows. In the one direction, there is the very substantial outflow to the industrialised economies, predominantly in the form of bond investments but equity investment also featured, and characterised by a large element of public funds. In the other direction, there is the inflow of private sector foreign funds, of more, or less, substantial magnitude, depending on the macroeconomic circumstances, in the form, relatively speaking, of much more equity related investments. This recycling of funds brought benefits and risks. The greater presence of foreign funds, mostly in institutional form, and managed and serviced by highly versatile foreign financial intermediaries, in domestic financial markets in the region, no doubt, promoted financial sector development. Indeed, the overall efficiency, including the level of sophistication, of financial intermediation in the region has been substantially enhanced, contributing to economic growth and development. But, as we have observed, it also presents considerable difficulty to monetary authorities in the region in the maintenance of monetary and financial stability.
5  For a more detailed description of macroprudential policy, see for instance C. Nordh-Berntsson and J. Molin (2012), “A Swedish framework for macroprudential policy”, Economic Review, no. 1, Sveriges Riksbank, and my colleague Karolina Ekholm’s speech “Macroprudential policy and clear communication contribute to financial stability,” published on 30 March 2012. BIS central bankers’ speeches  3  focus for macroprudential policy is the risks in the financial system as a whole (see Figure 9). The supervision of individual institutions is, of course, also important to the stability of the financial system, not least as financial institutions are regarded as “systemically important”. But to capture the build-up of risks that could threaten the stability of the financial system – what are known as systemic risks – it is not enough to keep an eye on individual institutions. One needs to supplement this with a systemic, or macro, perspective. Macroprudential policy also requires appropriate tools. Let me discuss some of the macroprudential tools that could be useful to specifically manage the risks linked to house prices and household debt.6 Countercyclical capital buffers are one of the most discussed tools, and are a part of the Basel III international regulatory framework.7 The idea is to vary the capital requirements made of the banks; when there is strong credit growth, the requirements will be increased, while they will be reduced during financial stress, when there is otherwise a risk of a credit crunch.

The trend of increasing debt among households, combined with a large share of mortgages at variable rates, may also have meant that households’ sensitivity to fluctuations in house prices and interest rates has increased over time. Several international studies imply that a high level of debt in itself can aggravate the negative effects of a fall in house prices on consumption.2 Since we published the inquiry into the risks in the Swedish housing market, house prices have levelled off, and household debt has increased at a slower rate. It is important to remember that this development is probably partly explained by the monetary policy conducted; for instance, the repo rate was raised in connection with the strong recovery after the financial crisis, and as I mentioned, we have taken into account the risks linked to household debt in our repo-rate decisions over the past year. Another possible reason for the slower developments is the mortgage cap, to which I will return later. As household debt in Sweden is still high, and higher than in many of the countries that have suffered major problems, I still consider the risks to be substantial (see Figure 5). 1  See, for instance, Sveriges Riksbank (2011), The Riksbank’s inquiry into risks in the Swedish housing market. 2  See, for instance, IMF (2012), World Economic Outlook, April, and also R. Glick and K.J. Lancing (2010), “Global Household Leverage, House Prices, and Consumption”, Federal Reserve Bank of San Francisco Economic Letter 1.
And it is reasonable to evaluate the costs and benefits of using all these different tools so that economic policy is as efficient and effective as possible for the economy as a whole. But how the various tools are used is a matter for those responsible for the different policy areas and as regards fiscal policy, it is of course the Riksdag and the Government that determine how and on what grounds it is to be conducted. Price stability still the basis for monetary policy In conclusion – the decade we are emerging from was characterised by crises and a deep, long-lasting recession. In that perspective, it is difficult not to describe the future as brighter – to refer back to the question which is the title of today’s seminar. As always, there are uncertainty factors, but the Riksbank’s assessment is that the economic outlook is still good both in Sweden and abroad. For monetary policy, it is a question of ensuring that inflation continues to develop in line with our inflation target. Monetary policy therefore needs to remain expansionary so that the strong economy can have an impact on inflation and so that the Swedish krona does not appreciate too rapidly. In the near term, we also need to be pay particular attention to current downside risks. When normalisation of monetary policy is under way, it will happen in an environment that is, in many ways, different from the one we have operated in over the last ten years.

But there are signs that the matching of job-seekers to vacancies is not working well. The decrease in unemployment in recent years has, above all, been among those born in Sweden. For this group, unemployment is now on a very low level. Unemployment among those born abroad, on the other hand, has not decreased to the same extent and is significantly higher to begin with. A greater supply of foreign-born labour creates the conditions for long-term higher employment, but it is important that the labour market functions efficiently so that the supply of labour can be fully utilised. With a greying population, this will also become increasingly urgent as the demand for labour in areas such as health and social care rises. Despite the economic situation continuing to be strong and both the labour force and employment being expected to increase further in the future, it is the Riksbank’s assessment that unemployment is not expected to fall much more in the years ahead. So, to keep unemployment down – and above all to bring it down significantly below its current level – measures are needed within policy areas other than monetary policy. I do not mean by this that monetary policy has been exhausted. There is scope to make it even more expansionary if need be. But monetary policy cannot be expected to be able to solve structural problems on the labour market.
This, combined with a business model in which the loans were packaged, turned into securities and sold on the market, meant that the incentive for lenders to correctly assess and subsequently monitor the risks was very low, since they did not retain the risks of the loan. Not only were the advantages associated with a model of this kind – which allows the risk assumed by the institutions to be managed with greater flexibility – not correctly harnessed, but the model eventually gave rise to transactions in which institutions had no incentive to select borrowers correctly. They became mere intermediaries for the credit granted by the system, mere commission earners, interested solely in the volume of operations. Many institutions also made mistakes in their management systems, such as their staff remuneration arrangements. The remuneration of the managers of many institutions was linked to short-term profits, without any consideration of the levels of risk being assumed to obtain them. Other banks, especially in central and northern Europe, made mistakes not so much in their lending as in their securities investments, using very unrealistic, or unjustifiably optimistic, risk assessments. In a context of abundant liquidity at the international level, many financial institutions sought higher profits by investing in this type of complex instrument associated with the subprime segment as a mechanism to compensate for the fact that lending margins were narrower than in the past, relying excessively on the assessment of their credit quality by rating agencies.

In these circumstances, both money market investment funds and non-financial corporations withdrew from the market. The investment vehicles created to transfer the risk and keep it off bank balance sheets then saw their liquidity dry up and had to turn to the lines of credit committed by their sponsoring banks. This increased the amounts which banks had to borrow and forced them to turn to the central banks for financing from 9 August 2007. The tensions which characterised thereafter the functioning of the interbank and credit markets, despite attempts by the monetary authorities to restore normality, were symptomatic of a growing lack of confidence about the situation of financial institutions in the main developed economies. These misgivings were confirmed by the considerable losses of banks caused by these complex products linked to US subprime loans, which in many cases gave rise to the need to raise large amounts of capital. Nonetheless, although some credit institutions went bankrupt as a result of those investments and others were rescued, no systemic institution went under. Indeed, the rescue of Bear Stearns in March, with the US authorities supporting its acquisition by JP Morgan, sent a message that such failures would not be permitted. In that long year, the credit and interbank markets functioned with difficulty and liquidity disappeared from the primary and secondary securitisation market, against a background of growing lack of confidence and aversion to risk. This enormously hindered the wholesale funding of credit institutions.