samchain/econo-pairs-v1 huggingface dataset:
7 [13]  situation in recent years has probably made it more attractive to participate in the labour force. Monetary policy cannot solve structural challenges with greater labour supply Higher labour supply is basically positive as it should lead to higher employment in the long term – which is beneficial not least in light of the challenges we face as regards a greying population. Higher labour force participation in the long term raises the economy’s output potential, which means that the wheels can turn more quickly without the risk of overheating and rising prices, which monetary policy ultimately needs to subdue. But a prerequisite for this positive effect is that the increased labour supply also leads to higher employment. As it takes time for the labour market to adapt to rapidly increasing supply, it is likely that the increase will, in part, result in higher unemployment in the near term. High demand in the economy can facilitate the adjustment. But the extent to which greater labour supply leads to higher employment in the longer term is determined by how the labour market works and by the matching of job-seekers to vacancies. This is particularly true of groups with a vulnerable position on the labour market, for example persons born outside Europe. We have had a strong labour market in recent years and not only the labour force but also employment are now on a historically high level. The expansionary monetary policy has contributed to this development.

To get an idea how long ago that was, 1984 was the year I finished college. The labor market has also improved dramatically and is now very strong. Over the past 12 months through January, the economy added over 6-1/2 million jobs. The unemployment rate has fallen from the pandemic peak of 14.7 percent to just 4 percent today. In fact, there are many more job openings now than there are people looking for work. Another clear sign of the hot labor market is that wages rose sharply last year, especially for lower-paid jobs. Inflation I mentioned earlier that the Federal Reserve has two goals: maximum employment and price stability. The very strong labor market is great news in terms of achieving maximum employment. However, we have seen inflation rise to a level that’s far too high. Ten years ago, the FOMC set a longer-run goal of 2 percent inflation—that is, prices rising 2 percent per year on average.1 From 2012 through 2020, inflation averaged below this 2 percent goal. But the inflation rate started rising sharply in 2021. The Fed’s preferred price measure, the personal consumption expenditures (PCE) price index, rose 5-3/4 percent last year, its highest reading since the early 1980s. This sudden, sharp rise in prices reflects a unique set of circumstances that has driven supply and demand out of balance. For those of you who have studied economics, you will not be surprised that I ascribe this rise in inflation to demand outpacing supply.
As for interest rates,  BIS Review 11/2007  1  going forward, it is not yet certain whether the US long rates would need to rise in order to facilitate the financing of the US current account deficit. This would depend essentially on the relative ease with which the US deficit can be financed. So, I think we need to watch these developments closely because financial markets can adjust much more rapidly than the real side of the economy. Turning to the Thai economy. Last year, the economy showed considerable resilience, notwithstanding many adverse shocks affecting it, especially the higher oil price and political uncertainties at home. Growth, estimated at about 5 percent last year by the market, is satisfactory while the second round effects of the oil price increase on inflation were well contained. Overall, the economy's fundamentals remain sound with economic stability intact. Last year, monetary policy in Thailand was focused on limiting the second round effects of the oil price increase on inflation. That focus I think was well met. Policy rate has been held steady from midyear last year, and since then, inflation pressure looks to be moderating. Latest data show a further consolidation of inflation in December. So, under the current softening trend, baring no surprises on the oil price, there is also a possibility that, in Thailand too, inflation could be less of a policy concern this year. Under this scenario, therefore, there could be greater room for monetary policy to aim for a balance between growth and inflation.

It was therefore sometimes perceived as unclear which expectations we meant when we commented on whether market expectations were reasonable. This gave rise to some criticism for unclear communication in 2005 and 2006. Using our own forecast for the repo rate removes the risk of being misunderstood for this reason. Experiences so far of our own interest rate path My impression is that the comments on the new system of publishing our own path for the repo rate have largely been positive, although there has also been some criticism. With regard to our concrete forecasts for the repo rate, the discussion has become livelier and we have heard more criticism. On the two occasions so far when we have presented a new assessment the monetary policy decision to raise the interest rate to 0.25 percentage points has indeed been anticipated and hardly been questioned. But our forecasts regarding future developments have surprised some market agents. 2  BIS Review 112/2007  The Riksbank’s forecast was a surprise in February The path for the repo rate that we presented in February was lower than the expectations that could be detected in the market pricing at that time. It was also lower than the average of the interest rate forecasts made by other forecasters. However, there were considerable differences between the different market analysts. Some had views relatively close to ours, while others differed substantially.
European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 10 June 2010. *  *  *  Ladies and gentlemen, Mr Constâncio, the new Vice-President of the ECB, and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting, which was also attended by Commissioner Rehn. Based on its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. Taking into account all the new information which has become available since our meeting on 6 May 2010, we continue to expect price developments to remain moderate over the policyrelevant medium-term horizon. Global inflationary pressures may persist, while domestic price pressures are expected to remain low. The latest information has also confirmed that the economic recovery in the euro area continued in the first half of 2010, but quarterly growth rates are likely to be rather uneven. Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth.

Looking ahead, we expect the euro area economy to grow at a moderate pace, in an environment of continued tensions in some financial market segments and of unusually high uncertainty. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. As regards fiscal policies, the Governing Council welcomes the recent decision by euro area countries to formally establish a European Financial Stability Facility. This needs to be accompanied by decisive action at the level of governments. It is essential that all countries stick to their commitments to correct high budget deficits and government debt and reduce fiscal vulnerability. To this end, the concrete adjustment measures needed to achieve the budgetary targets should be fully specified. All countries must ensure that confidence in the sustainability of public finances is guaranteed.
Chart 1 Price-based and quantity-based composite indicators of financial integration (Quarterly data; price-based indicator: first quarter of 1995 to fourth quarter of 2020; quantity-based indicator: first quarter of 1999 to third quarter of 2020)  Sources: ECB and ECB calculations Notes: The price-based composite indicator aggregates ten indicators for money, bond, equity and retail banking markets, while the quantity-based composite indicator aggregates five indicators for the same market segments except retail banking. The indicators are bounded between zero (full fragmentation) and one (full integration). Increases in the indicators signal greater financial integration. From January 2018 onwards the behaviour of the pricebased indicator may have changed due to the transition in the money market component from EONIA to the € OMT stands for Outright Monetary Transactions.. For a detailed description of the indicators and their input data, see Hoffmann, P., Kremer, M. and Zaharia, S. (2019), “Financial integration in Europe through the lens of composite indicators”, Working Paper Series, No 2319, ECB, September. The challenges of climate change This higher vulnerability occurs at a time when the financial system faces emerging risks related to climate change – a common shock faced by us all, albeit one with potentially asymmetric impacts on different sectors and regions of the euro area. [5] On aggregate, euro area bank exposures to the most carbon-intensive sectors, such as mining, are relatively contained. However, the concentration of carbon-intensive industries and activities can differ across countries.

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As I have said on previous occasions, the greatest cause for concern at present should not be predicting exactly when positive quarter-on-quarter growth will resume, but rather determining to what extent the Spanish economy is ready – or not – to move into a long phase of robust growth. During the last upturn, the Spanish economy built up some significant imbalances, such as the excessive weight of real estate activities, a swollen external deficit, a relative loss of competitiveness, and high corporate and household debt. Over the course of the crisis, some of these imbalances have begun to be corrected, but others are still significantly holding back a pickup in growth. With the crisis, these pre-existing structural problems have been compounded by an increase in unemployment to levels far higher than those of any other developed countries and by the sharp deterioration in public finances. These are now undoubtedly the two main problems affecting our economy. To embark on a sustainable economic recovery, the imbalances built up by the Spanish economy before and during the crisis must be reversed. Job destruction must be halted and unemployment absorbed. And, further, an ambitious plan must be devised and set in place to cut the budget deficit, to redress the financial position of the private sector and, in sum, to mitigate all those structural shortcomings that are currently weighing on the recovery and contributing to reducing the growth potential with which our economy will face the new expansionary cycle.

If, on a firm-by-firm basis, workers and managers decide to adjust their conditions to the changes in demand, the highest possible number of firms and jobs can be preserved. Furthermore, by improving productivity in those firms which will perceive the favourable change in the economic environment, the labour reform would enable workers’ wages to be improved and thus increase domestic demand without impairing the competitiveness of the economy. The list of necessary reforms in Spanish labour institutions is very long. But two of them are vital in order to judge the extent of the reform finally undertaken. The one to which most media attention is devoted is the issue of a permanent employment contract that does not deter those businesses which wish to create jobs. Although hiring is important, at this point in time I feel that it is particularly urgent to address the change which has to be made in collective bargaining. At this juncture it is of paramount importance that the trade unions and employers’ associations – which in complicated situations in the past have made telling contributions to the Spanish economy – should now let the workers and entrepreneurs of Spanish firms decide how they can best save their businesses, preserve their jobs and even expand their workforce. Quite another thing is that they may give guidelines or advice to firms in the negotiation of wages and other working conditions.
Despite all the European convergence and integration, financial systems in different EU member states still look and work very differently. Trying to administer them from a single centre according to a single set of rules might be like trying, say, to feed all the animals in a zoo with a single type of food. As an illustration: the recent ECFIN Retail Banking Survey says:   in Austria almost 100% of house purchasing loans feature variable interest rates, while in France the share is only about 10%.   countries differ substantially in the share of owner-occupied housing and therefore in the importance of the mortgage market;    they differ in how intensively they use electronic means of payment;    in the significance of building societies and credit unions;    in tax and other incentives that the government provides for certain types of financial transactions;    in the extent to which local banks trade in various non-plain vanilla products such as derivatives;    in the share of subsidiaries and branches of foreign financial institutions and, more generally, in ownership structure    in the loan-to-deposit ratio, which varies from roughly 70% in some countries to more than 200% in others;    in the degree of local market concentration;  etc. There are many more examples, some of them influenced by long-term developments, some by entrenched behavioural differences and habits.

There are several structural challenges facing the global economy. I want to elaborate on two key driving forces that will shape the medium-term outlook in both the advanced and emerging economies: deleveraging and monetary expansion. Deleveraging 8. Let me begin with deleveraging. From around 1990, debt levels began to rise rapidly in most advanced economies. Governments ran persistent fiscal deficits that were financed by borrowing. Total government debt in the OECD economies grew relentlessly, from 58% of GDP in 1990 to 98% in 2010. Households went on a consumption binge, financed by easy borrowings on the back of rising property prices and housing equity. Household debt in the developed economies also climbed, from 62% in 2000, to 76% in 2010. Deleveraging is the process by which this excessive debt is brought down to more sustainable levels. This will be long-drawn, only because the build-up of leverage took place over such a long period of time. Synchronised deleveraging in the US and EU 9. The deleveraging process that is unfolding across the advanced economies is taking place across three fronts:   Governments in the US and EU    Households in the US    Banks in the Eurozone  10. First, deleveraging by governments. The public finances of the US, UK, and the Eurozone, have substantially deteriorated, due to pre-crisis fiscal profligacy and post-crisis discretionary stimulus. These countries have now embarked on fiscal adjustment programmes to varying degrees, primarily through austerity measures.
In this sense, the implications are very similar to those described by Xavier Gabaix and Matteo Maggiori in their 2015 Quarterly Journal of Economics article, which states that the risk-bearing capacity of financial intermediaries provides a role for capital flows to affect the exchange rate.16 The difference is only that if asset purchases are understood by investors to be part of the reaction function of central banks, then the exchange rate can be expected to adjust before capital flows take place. This is certainly what we have seen in the euro area. This also means that we should treat more carefully findings in the event-study literature that assign most of the observed exchange rate change around central bank asset purchase announcements to the signalling channel.17 Given that intermediaries are forward-looking but constrained by their balance sheets, policy-induced exchange rate changes can also be expected to reflect expectations of future cross-border capital flows and their associated impact on the future supply of and demand for currency. In this sense, the debate also shares some similarities with a related strand of the literature, namely the transmission channels of sterilised foreign exchange interventions. The view that such interventions are effective mainly by signalling future policy intentions is frequently challenged by empirical evidence suggesting that portfolio rebalancing may have economically relevant effects.18 Of course, this does not mean that understanding the potential spillovers of central bank asset purchase programmes is enough to explain exchange rate movements.

To the extent that such policies can be anticipated by market participants, financial intermediaries could be expected to price in the resulting shift in the relative supply of and demand for currency before capital flows take place. As a consequence, international portfolio rebalancing considerations may, at times, drive a wedge between expected future short-term rates and the exchange rate. My remarks today are by no means conclusive and they are based on tentative evidence. But I hope that they provide impetus to further, more systematic research on a topic that is not only intriguing from an intellectual perspective, but also of significant relevance to policymakers in their efforts to improve the understanding of the transmission channels of non-standard monetary policy measures. Thank you for your attention. 1 See e.g. Fratzscher, M., M. Lo Duca and R. Straub (2016), “ECB Unconventional Monetary Policy: Market Impact  and International Spillovers”, IMF Economic Review, 64(1), pp. 36-74; Georgiadis, G. and J. Gräb (2016), “Global Financial Market Impact of the Announcement of the ECB’s Asset Purchase Programme”, Journal of Financial Stability, 26, pp. 257-265; Rajan, R. (2014), “Competitive monetary easing: is it yesterday once more?”, remarks at the Brookings Institution, Washington, D.C., April 10; and Bernanke, B.S. (2015), “Federal Reserve Policy in an International Context”, paper presented at the 16th Jacques Polak Annual Research Conference hosted by the International Monetary Fund, Washington, D.C., 5 and 6 November. 2 See Cœuré, B.
Measures which set an upper limit for individual household indebtedness can therefore be effective in terms of reducing the risk of weak macroeconomic growth, even though the effects of the total debt-to-income ratio would be limited. The Riksbank’s previous analysis has also shown that a debt-to-income limit (that is to say a limit for how large debt can be in relation to disposable income) could be an effective complement to the current loan-to-value limit. 16 This is due to the fact that incomes grow in a more stable way than housing prices. Whenever housing prices increase sharply, there is a risk that debts will continue to increase in relation to incomes if the only limitation is a loan-tovalue limit. A debt-to-income limit is also more effective in terms of preventing interest payments taking up too large a share of incomes in the future. So those are the measures we could take. But what would happen to household indebtedness if no further measures were taken? A few different scenarios for household indebtedness Normally, the Riksbank creates forecasts regarding household indebtedness three years ahead. Making an assessment any further ahead than this would involve considerable  16  See the article “Debt-to-income limit as a policy measure” in the Financial Stability Report 2015:1, and Alfelt, G., Lagerwall, B. and Ölcer, D. (2015) “An analysis of the debt ratio ceiling as a policy measure”, Economic Commentary no. 8, 2015. Sveriges Riksbank. BIS central bankers’ speeches  13  uncertainty.

Conclusion It is important for the Riksbank to analyse the housing market and household indebtedness, not least because they can have an impact on our ability to perform our tasks relating to price stability and financial stability. Our expansionary monetary policy aims to maintain confidence in the inflation target. Today I have pointed out that international monetary policy establishes a framework for Swedish monetary policy. Inflation is now moving in the right direction. However, one precondition for the success of our monetary policy strategy from a longerterm perspective is that we take measures elsewhere to reduce risks linked to the housing market and household indebtedness. Developments are definitely moving in the wrong direction! There are several potential risks for the real economy, financial stability and price stability, which are connected to household indebtedness and the housing market. I have attempted to shed some light on several of them today. The Swedish housing market could be likened to a “blind spot” in terms of economic policy. In its latest statement on Sweden’s economy, the IMF described the situation on the Swedish housing market as self-inflicted. 23 It is essentially each individual bank’s responsibility to ensure sound long-term credit lending. This is a central principle in a market-based system, and something which we should not forget in the debate about the housing market and household indebtedness. However, the authorities are responsible for taking action if developments threaten macroeconomic and financial stability. Sweden is lagging behind in this regard.