samchain/econo-pairs-v1 huggingface dataset:
A negative figure implies output is below potential and a positive that it is above  In the opposite direction, growth could surprise on the upside, requiring monetary policy to be tightened by a little more, a little sooner than in the May conditioning path. For example, if business investment growth were to recover much more strongly than currently projected – perhaps because of improved in sentiment about progress on Brexit – then demand would grow well in excess of supply, pushing inflation above target throughout the forecast in the absence of tighter policy. 19  These scenarios illustrate how guidance, by revealing the MPC’s reaction function, allows people to anticipate how policy will adapt as the circumstances change. The Other Brexit Path Now consider a different Brexit path where the transition isn’t smooth and/or the final outcome is less open than the MPC’s conditioning assumption. The Bank is doing all it can to reduce the risks of the former. We are taking steps to reduce financial stability risks around Brexit, just as we did around the referendum when we engaged in extensive contingency planning with HM Treasury, foreign central banks, and private financial institutions. In particular, the FPC has identified the Brexit “cliff edge” risks and now publishes a quarterly checklist of progress towards their mitigation. Wherever it can, the Bank is reducing Brexit financial stability risks.

Their effectiveness has also been studied by assessing whether they have helped reduce the likelihood of a systemic crisis [BCBS (2010)], a bankruptcy of a bank or group of banks and debtor default [Galán y Lamas (2019)]. But only on limited occasions has there been a cost-benefit analysis of the application of these measures in terms of their effects on GDP. More recently, researchers have begun to assess the differential effects of activating as opposed to deactivating macroprudential instruments, since their impact may be asymmetrical [Jiménez et al. (2017)]. 14  A methodology has recently been developed which allows an integrated analysis of these aspects to be performed. Specifically, Adrian et al. (2019) has developed the concept of Growth at Risk, the aim of which is to analyse the impact of the instruments on the distribution of expected GDP growth at different horizons. In that way, the impact not only on a baseline scenario (the most likely, characterised by the 50th percentile of the distribution), but also on a tail scenario (derived from a hypothetical systemic crisis, 5th or 10th percentile) can be analysed. At the Banco de España we have used this methodology to analyse the impact on the effectiveness of different macroprudential instruments at the European level [see Galán (2020)].
11  In very crude terms, the supposition here has been that we can extrapolate from the quantity of coins found in modern times the number of moneyers and mints that were in operation in the thirteenth century. With this information, we can then work out how many coins each moneyer struck (the only coin in circulation at this time being the silver penny), and then calculate the total money supply. 12  Palmer, R. C. (1985), “The Economic and Cultural Impact of the Origins of Property: 1180–1220”, Law and History Review, 3 No. 2, Autumn, pages 375–396. 13  Bernanke, B, Gertler, M and Gilchrist, S (1996), “The financial accelerator and the flight to quality”, The Review of Economics and Statistics, Vol. LXXVIII, 1, February. 14  Latimer (ibid.). 15  It is perhaps for this reason – a thirteenth century manifestation of Gresham’s Law – that archaeological finds of coin hoards are often thought to contain suspiciously high proportions of freshly minted coins. 4  BIS central bankers’ speeches  2. Constitutional significance  In that context, Magna Carta was a desperate (and probably disingenuous) attempt at a peace treaty that failed almost immediately. Brokered by the Church, and issued by King John in June 1215, the Charter sought to placate the disgruntled barons. It is doubtful that John ever intended to uphold his side of the bargain, with all the constraints on his authority that this implied.

26 At a minimum, when taken together with survey indicators that continue to point to solid pay growth for new recruits, recent data give welcome reassurance that the risks associated with a deflationary mindset in the labour market have likely fallen significantly. Further positive wage developments should be supported by a continued tightening in the labour market. Job-to-job flows remain around post-crisis highs and the ratio of vacancies to unemployment is now back to its pre-crisis average. However, what matters for inflation is not wage growth in isolation but wage growth relative to productivity. Put simply, firms are less likely to raise their prices if higher wages reflect more output per hour worked. Along with faster wage growth, there have been signs of faster productivity growth since the turn of the year. This may well mean firms’ unit labour costs have not picked up quite to the degree we had expected in our May Inflation Report. It’s too early to be definitive. Weighing past disappointments and recent indications of a pick-up, it is prudent to recognise that two-sided risks to productivity growth remain. What is clear is that to return inflation to target, growth in labour costs must pick up further from their current rate of less than one per cent. The extent needed depends on what is happening to other costs.
It is nevertheless relevant to raise the question as to whether monetary policy in general has been too expansionary. I would, however, point out that monetary policy must be evaluated in relation to the decision-making basis that existed at the time the decisions were made. Given the decision-making basis prevailing in 1999, it seemed likely that the Norwegian economy would experience a growth pause and that price and cost inflation would fall. Moreover, the international financial market was fragile as a result of the many financial crises the previous year. As new information gradually pointed to higher growth in Norway and internationally, coupled with the prospect of higher-than-expected price and cost inflation, we raised the interest rate. It may be that the combination of the decline in interest rates in 1999 and the brighter international growth outlook, partly reflected in higher oil prices, had an impact on expectations formation that we underestimated. Today, the krone exchange rate is approximately in the initial range, while inflation is higher than the level aimed at by the ECB. However, the interest rate is oriented towards bringing price and cost inflation down towards this level. If price and cost inflation remains too high, this will translate into a weak and unstable krone exchange rate sooner or later. 12  BIS Review 7/2001  Conclusion In the conduct of monetary policy we have two objectives. First, we have a long-term perspective where building confidence and credibility is important for ensuring nominal stability.

In its conduct of monetary policy, Norges Bank focuses on the fundamental preconditions for achieving exchange rate stability against the euro. First, price and cost inflation must be brought down towards the corresponding aim for inflation for the European Central Bank (ECB). At the same time, monetary policy must not in itself contribute to deflationary recessions as this could undermine confidence in the krone. There are few significant differences between Norway's actual response pattern and that of countries with explicit inflation targets. Price and cost inflation must be steered towards that aimed at by the ECB. However, in Norway fiscal policy has traditionally had an important role in stabilisation policy. This has reduced the burden on monetary policy. In addition, the Norwegian wage determination system has probably contributed in periods to dampening the impact of shocks hitting the economy. Monetary policy influences price and cost inflation with a time lag of perhaps one to three years. In consequence, projections for price and cost inflation with a horizon of a couple of years play an important part in the setting of interest rates. From the time interest rate decisions are taken until the interest rate has an impact on prices and costs, various types of disturbance occur which influence price and cost inflation. Thus it is not possible to maintain full control over developments in prices and costs. Actual price and cost developments normally deviate somewhat from earlier projections.
For example, the cost of capital remains low and cash flows are high. Third, there is plenty of room for further gains in residential investment. Housing starts have been running at an annual pace of only about one million so far this year. This is low relative to both the rate of household formation that one would expect given underlying demographics and the rate of job formation. Moreover, continued improvement in mortgage  1  2  Jonathan McCarthy, Richard Peach, Paolo Pesenti and Joseph Tracy assisted in preparing these remarks. BIS central bankers’ speeches  credit availability should support the demand for new housing. Household credit worthiness is improving as the scars of the financial crisis heal, and underwriting standards may be relaxed somewhat in response to the excellent performance of recent mortgage vintages. Fourth, household finances generally are in good shape with debt service burdens at historically low levels. Nonetheless, household borrowing has been rising only very slowly, and the personal saving rate is somewhat elevated relative to what one would expect given the level of household net worth relative to income. This suggests that if households become more confident about their finances, consumer spending should grow at least as fast as income growth over the remainder of the year. But, I can’t be completely confident about this forecast. After all, several times during this expansion we have been fooled by sharp rises in the growth rate that appeared to presage a sustained pickup, but that subsequently proved fleeting.

Moreover, faster consumption growth is not a given. It will depend, in part, on the pace of employment and wage growth. A downside risk is that wage growth remains subdued, which would undercut consumer spending. And, the trade sector looks likely to remain a drag on growth over the remainder of the year. Although the dollar has depreciated slightly on a broad trade-weighted basis recently, it still is more than 10 percent higher than it was a year ago. Despite the sharp slowdown in growth evident during the first half of the year, we have seen continued job gains and further falls in unemployment so far this year. Consequently, we still seem to be making progress toward our objective of maximum employment in a context of price stability. Today’s payroll and household employment reports indicate that this progress continued into May. Even with a weak month in March, job gains this year have been averaging almost 220,000 per month. The gain in May was even stronger at 280,000 and was widespread across industries. Although the 12-month change in average hourly earnings is still low at 2.3 percent, it is a bit higher than we have seen in recent years. At the same time, there is still some ways to go. The unemployment rate has changed little in the past four months at about 5½ percent, with the levels of part-time workers for economic reasons, and longduration unemployed, remaining elevated.
Nonetheless, it is difficult to identify how much of this decline is due to a lower external stimulus, how much is accounted for by a natural slowdown in each economy, and what part is explained by particular events. All these elements add up to a situation in which, although the external scenario is not worsening, the belief that risks have disappeared is far off. It is possible to think that the likelihood of extreme scenarios is low, but, in my opinion, it is still there. More challenges for monetary policy As already mentioned, the change in how the global panorama was perceived led many emerging economies to change their views on their future economic policies. This made them halt their processes of lowering expansiveness and/or made them resume impulse. However, the new change of mood brought about by the greater calm of the beginning of the year, coupled with geopolitical factors, has again put us in a dilemma. On one hand, probably as a result of the recent memory of the late 2008 and early 2009 global confidence crisis, most economic authorities quickly set up a close monitoring system and prepared a batch of instruments to implement a quick offsetting of the adverse effects of a global crisis. However, time has shown that the effects of the crisis of the Eurozone area have been fairly limited so far. Financial markets have suffered the biggest impacts, but trade, output and employment have not been greatly affected.

Between August and October, probably on the peak moments of the last financial turbulences in the developed world, many central banks stopped the process of interest rate raises, and many also changed the direction of changes in their monetary policies to more expansive ones. In Chile, after raising MPR by 200 basis points during the first half of 2011 and stating that there were still some increases to be made, in August we moved towards a neutral stance. In October, considering the envisaged consequences of the deterioration of the international scenario, we announced that we would increase monetary impulse if we foresaw that this situation could have a negative impact on our economy. Thus, in January of this year we lowered the MPR by 25 basis points. Now we have announced that new monetary policy actions will depend both on our assessment of the effects of the international scenario on the domestic economy as well as on the evolution of the domestic economy itself. Allow me to present you our vision of what is going on in the world and how it will affect us. Particularly, to do so from a monetary policy perspective. The current international scenario The onset of 2012 has surprised us with a considerably calmer state of affairs than we expected a few months ago. The Eurozone situation is far from being solved. There are many challenges ahead, among them increasing productivity in many peripheral economies. Nonetheless, significant progress has been made.
Norges Bank’s mandate states the following: "Monetary policy shall be aimed at stability in the Norwegian krone’s national and international value, contributing to stable expectations concerning exchange rate developments. At the same time, monetary policy shall underpin fiscal policy by contributing to stable developments in output and employment.” "Norges Bank’s implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time.” The first paragraph of the mandate sets forth its intentions. The last paragraph specifies what Norges Bank is required to do. The first sentence in the mandate refers to the value of the krone. Stability in  5  For a more detailed discussion, see PSG memo prepared by Røisland and Sveen, Norges Bank’s Research Department: PSG memo No. 7, 2002. 6  See Akram, Qaisar Farooq (2000): “When does the oil price affect the Norwegian exchange rate?” Working Paper 2000/08, Norges Bank. 7  See Akram, Qaisar Farooq (2002): “PPP in the medium run despite oil shocks: The case of Norway.” Working Paper 2002/04, Norges Bank. BIS Review 2/2003  5  the internal value of the krone implies that inflation must be low and stable. The sentence also states that monetary policy shall be aimed at stability in the external value of the krone. The krone exchange rate fluctuates from day to day, from week to week, and from month to month.

On the other hand, the outcome of last year’s wage settlement, and the debate that followed, indicate that the social partners have not yet internalised the monetary policy response pattern ensuing from 3 the mandate laid down by the Government and the Storting. Exchange rate developments The krone has appreciated considerably since summer 2000. There may be many reasons for this. Relationships in the foreign exchange market are unstable. There are nevertheless some fundamental forces that influence the krone exchange rate. The phasing in of petroleum revenues and the economic situation affect the exchange rate. In addition, the real exchange rate has a tendency to return to its normal level if there are substantial deviations over time. Moreover, the krone can be influenced by shifts and changes in wage formation, and the krone exchange rate can also be affected by external factors. Increased spending of petroleum revenues or expectations of increased use of petroleum revenues may lead to an appreciation of the krone. Increased use of petroleum revenues over the central government budget implies higher demand. The contest for economic resources will then result in a further scaling back of internationally exposed industries to make room for more sheltered activities. With low and stable inflation, this restructuring might take place as a result of a stronger krone exchange rate. Such exchange rate movements will typically come in waves. As petroleum revenues are being phased in, the real interest rate will tend to rise. The real exchange rate may appreciate, which means deterioration in competitiveness.
It is common to distinguish between two forms that provide different solutions for this: A defined-benefit pension scheme is an agreement to pay a specified benefit amount irrespective of the return on the premiums paid in. The benefit can be adjusted for inflation, wages or the like. Premium payments can be changed as a result of demographic changes such as higher life expectancy, but not as a result of lower returns. A fall in returns must be covered by the company or entity if they have their own pension funds. Pensioners are secure under municipal defined-benefit based pension schemes, while municipal service production must absorb the impact of lower returns. National Local Government Pension Fund - premiums and financial income 1994-2001. In billions of NOK  16 14 12  Net financial income  10  Premium income  8 6 4 2 0 -2  1994  1995  1996  1997  1998  1999  2000  2001  SG Kommunalbanken, 30.august 2002  In recent years, municipalities have noticed this additional burden as owners of the National Local Government Pension Fund. However, high returns restrained the rise in premium income towards the end of the 1990s. The alternative to a defined-benefit pension scheme is a defined-contribution pension scheme. The defined-contribution pension plan is a programme under which members decide how pension savings are invested. Future benefits depend on the return. It can be agreed that the pension payments are to be fixed.

As percentage of GDP, 2001 30 25 20 15 10 5 0 Ge  rm  any  No  rw a  y  F in  lan  d De  nm  ar k  F ra  nc e  Sw  ed e  n  UK  US  Sources : BIS/OECD SG Kommunalbanken, 30.august 2002  The turnover and issue volume in the market increased sharply up to the mid-1990s. However, Norwegian companies use the bond market on a far more limited scale than companies in comparable countries. Solid state finances also help to explain the limited size of the private bond market in Norway. A well functioning government bond market can stimulate the private segment of the debt securities market. In most countries, the state has a sizeable borrowing requirement, with a high level of debt. Even though its borrowing requirement is small, the Norwegian government also places emphasis on a well functioning bond market in its government debt policy. Government debt issues are confined to few and large standardised loans. This contributes to higher turnover in the secondary market and hence greater liquidity. With ample liquidity and low risk, government bond rates can serve as a benchmark for private bonds. Effective interest rates on government bonds and private bonds 5-10 year maturity. Per cent 9 8  9 8  Private bonds  7  7  6  6  5  Government bonds  4 Ja n .
If, for instance, the perception is that monetary policy has been conducted in the wrong way and led to a poor economic outcome, this will in my view make it more difficult to deal effectively with the risks linked to household debt when looking ahead. The reason for this is that I believe that monetary policy must play at least some role in this context. A fairly good development since the crisis So, how has the Swedish economy actually developed since the financial crisis broke out just over five years ago? The current debate gives rather mixed impressions, ranging from things having gone quite well to things having gone rather badly. If we look at the data, however, there is no doubt that Sweden has had a relatively good real economic development. We compare favourably to the countries we usually use as benchmarks (see Figure 1). Sweden is one of the relatively few countries where GDP per capita is higher now than it was prior to the crisis. The employment rate – the percentage of the working-age population in employment – has also held up well. Only few countries have had a better development with regard to both GDP and employment (that is, lying above and to the right of Sweden in Figure 1). Some stress that the development of unemployment has been less favourable. But here we must take into account that the labour force in Sweden has increased relatively substantially during the period (see Figure 2).

Private investment activity has also resumed following a period of excess capacity due to overinvestment prior to the Asian financial crisis. There are also plans for massive investment in infrastructure development in the region. While Asia has the internal capacity from its high savings to finance these investments, the resulting higher import demand that these investments will generate will contribute to the further unwinding of the global imbalances. This stronger domestic consumption and investment demand in Asia is also being supported by the strengthened and more developed financial systems. The relatively low level of leverage of the corporate sector and the continued access to financing support this trend. While regional economic integration has always been part of the Asian economic landscape, regional financial integration has been a more recent phenomenon. While regional financial integration will facilitate the already strong trade and investment linkages in the region, a more important aspect of financial integration for Asia is that it will facilitate a more efficient intermediation of funds within Asia. Asia’s more developed financial markets and continued initiatives to liberalise the financial sector will also strengthen inter-linkages with both the traditional financial markets and with new financial centres in other emerging economies. Going forward, products from Asian financial markets can be expected to increasingly assume greater importance as an asset class. It will thus increase the potential for the diversification of risks and contribute towards stability of the international financial system.