samchain/econo-pairs-v1 huggingface dataset:
There are those who claim that natural resources are bad for a country’s development. They find that the abundance of natural resources has been associated with a poor growth performance. This finding leads them to the conclusion – a wrong one in my view – that natural resources are hazardous to a country’s development. As I will be asserting over this presentation, natural resources are a blessing, but their abundance in a scenario of institutional and economic weakness may turn it into a curse. I will also comment that, in the case of Chile, solid bases have been in place to take advantage of the copper industry, very different from what occurred with nitrate in the early twentieth century. I will begin with a review of the international evidence on the relationship between natural resources and growth, to then focus on Chile’s specific case and the relationship between abundance in our mining resources and our development. Then I will talk briefly about the current economic scenario and how copper price fluctuations are no longer a source of instability, as used to be the case in the past or still is in some large commodity exporters. This is attributed to the significant advances we have made in our foreign exchange, fiscal, and monetary policies. The importance of this cannot be overemphasized, because said progress in macroeconomic policies has allowed us to implement unprecedented expansionary policies that should help Chile to overcome successfully the international crisis that hit the world at large in recent months.

As we all know, there was a “golden era” for nitrate between the years 1880 and 1930, where thanks to our resources and the external demand, Chile increased strongly its international trade, obtained large amounts of fiscal resources and was able to take a leap forward. Our economy’s nitrate dependence is visible in the proportion of fiscal resources that came from this sector (figure 4). This is the typical case where high earnings coming from natural resources create incentives to reduce the other taxes, placing the economy in great fiscal vulnerability, as it later occurred. Thus, when the golden era ended, the public external debt skyrocketed (from 28% of GDP in 1929 to 221% in 1932) and the economy suffered a severe contraction (figure 5), which was also fostered by the Great Depression. We can also see the negative effects of natural resource dependence if we compare the behaviors of nitrate, copper, and output. The fluctuations of nitrate output value had an enormous effect on GDP, with a correlation of 0.66 (figure 6). This is quite different nowadays, with a correlation between growth in copper output value and GDP of 0.05 (figure 7). Summing up, the review of the international evidence allow us to state that our abundant copper has been a positive contribution to the Chilean economic growth and welfare, which is reinforced by institutional and economic strengths that prevent the distortions that natural resource abundance could have on the economy.
What we need to do as supervisors is to make sure that global banks have adequate risk management capabilities, sufficient loss-absorbing capital, and are subject to intensive and coordinated supervision, so that we are able to contain the systemic risk they pose without curtailing their contribution to economic growth worldwide. We have nothing to fear from global banks which are well-managed, well-capitalised and well-supervised by home and host authorities. What we should do is prevent the emergence of badly managed, badly-disciplined banks, whatever their geographical dimension, as they can expose our financial systems to important risks. I hope that this humble contribution provides food for thought. As I said at the beginning of my intervention, I do not have all of the answers. But I do think that we can and should learn lessons from all experiences, both positive and negative. My words reflect the experience that we have had with our global banks in the last three years. But of course, past successes are not, per se, a guarantee of future success. Sophocles wrote in one of his tragedies that “we cannot call a mortal being happy until he’s passed beyond life free from pain”. Following the same principle of precaution, neither supervisors nor credit institutions should succumb to the temptation of unfounded optimism about the future. This is the reason why we will continue pushing for a very intense supervisory process for these global institutions and we will ensure that they are complying with the highest standards in any field.

The expansion of global banks through subsidiaries provides for this deep involvement of the local supervisor. This may be a more effective – and therefore safer – arrangement, as it provides for a double layer of supervision, by both home and local supervisors. Moreover, from the group’s perspective, the combination of decentralized management and strong controls at the parent company creates as well a double layer of control within the group. This can have a drawback in terms of higher costs but some international active banks have demonstrated that it can be compatible with a good efficiency ratio. The subsidiaries model is one way of approaching this issue, but I am very conscious that it is not the only one. Nor is it suitable for all banks. It depends on many factors, including the type of business conducted by the institution – retail, investment banking etc. So let me be clear that I am not prescribing this model, and that I do not think it is the answer in all circumstances. But it is a factor that makes certain international groups less dangerous for the rest of the system in terms of their likely impact in case of difficulties. In other cases, the institutions concerned may also be able to argue that they have other controls, or business models, in place which reduce their risks. The validity of all reasonable approaches should be explored. In this context, let me mention here the work underway in the FSB and BCBS to deal with the global SIFIs issue.
In developed countries, economic growth was lower as a result of measures taken to consolidate public finances and withdrawal of fiscal stimulus. On the other hand, emerging economies maintained higher growth rates, expanding their demand for raw materials and consumption goods, thus adding global inflation pressures. BIS central bankers’ speeches  1  Economic growth is expected to continue in 2011, but uncertainties remain high. Global macroeconomic misbalancing, which appeared in high levels of trade deficit for some of the developed countries, may materialise in shocks to main currencies exchange rate and free trade exchanges worldwide. In addition, concerns over public debt and fiscal stability levels for some of the euro area countries continue to affect the sensitivity of financial markets and their tolerance to risk. Regardless of latest growing tendencies, the balance of inflation pressures is considered to be in check for the current year as well, as a result of continued existence of non-utilised capacities. Keeping free movement of people and capital at world levels, taking timely corrective measures on public debt situation, as well as creating effective mechanisms to prevent and buffer financial crisis effects at local level, will be important challenges for policymakers. On the other hand, monetary policy of main central banks will continue to be cautious, introducing an appropriate monetary stimulus into the economy in order to promote economic activity without affecting the actual and projected inflation levels. The Albanian economy recorded a positive growth during the third quarter.

In the operational aspect, a change of form of our objective in June served to a better orientation of banking system refinancing with liquidity, resulting in a liquidity premium reduction in the system and a better orientation of interest rates in the inter-bank market. Financial markets were more relaxed with their risk premium gradually falling. Interest rate in the primary market continued its dropping tendency since a year ago, as a reflection to the moderate demand of the fiscal sector for funding and the good liquidity situation of the banking system. Moreover, the reduction of the key rate was followed, to a satisfactory degree, by [falling] interest rates in deposits and loans in Lekë, hence enabling a good introduction of monetary policy decisions into the economy. Beyond a better transmission of monetary policy decisions on interest rates of financial markets during the second half, the Bank of Albania deems that their introduction into the real economy remains incomplete. Referring to developments in lending to the economy during the second half, loans to the private sector, on average, increased with same pace as during the first half. Annual lending growth in November amounted to 10.1% almost commensurate with the level at the end of the first half. Slower increase of loans to the private sector gave a low contribution to money supply expansion in the economy, reconfirming controlled inflation pressures by the domestic economy.
He knows that he is not guaranteed a solid return in the long term, even if the fund is marketed as part of the renewable energy economy. The financial sector has to adapt to climate risk, but does not have effective tools to address the climate issue. It is doubtful whether defining emissions from sectors or individual businesses as unethical will make a difference. The responsibility for measures to combat global warming must rest with the authorities. The solution lies in economic instruments that promote structural change. STRUCTURAL CHANGE GENERATES GROWTH A shift in consumption patterns and production methods towards lower emissions will reduce demand for fossil fuels. This can influence oil and gas activities in Norway. We have always known that oil and gas activities will be phased out sooner or later. Oil and gas are non-renewable resources. A stricter global climate policy may mean that this will occur sooner than foreseen earlier. But Norwegian oil and gas production will remain profitable for quite some time. The supply of clean energy is still limited. Today, coal accounts for a large share of global energy demand. Demand for natural gas may increase as countries move towards a greener economy. In Germany, phasing out coal faster than planned is being discussed. Norwegian gas can play an important role in a transition phase (Chart 7). Chart 7 Important role for Norwegian gas. Annual production. Standard cubic metre of oil equivalents. In millions.

When demand subsequently waned as a result of a deterioration in household finances, at the same time as real interest rates rose and the supply of housing - both new and old - increased, prices fell again. Even substantial price movements can have natural explanations and do not have to be due to unrealistic expectations that are first raised and then dashed. Households have continued to borrow from banks and mortgage institutions throughout the economic decline, which is not the normal pattern of behaviour, but this is of course due to low interest rates. Their debt burden has grown and raised questions about whether we are heading back towards an  2  BIS Review 38/2003  imbalance that sooner or later will have to be corrected. However, I myself do not believe that household debt per se constitutes any immediate source of concern. Households' debt ratio, i.e. debt as a percentage of income, is just over 110 per cent. However, as a result of the historically low interest rates, it appears that households' debt-servicing costs will continue to be manageable. The interest ratio, i.e. households' debt-servicing costs in relation to disposable income, is today barely 5 per cent. The situation for Swedish households is therefore considerably more favourable than at the end of the 1980s and beginning of the 1990s.
The number of website hits has increased markedly since publication of our first layered Inflation Report in November last year. Recently, we have tried to pinpoint more precisely the benefits of layered communication in boosting the public’s understanding and trust. This involved conducting a so-called “randomised control trial” on two groups – a group of experts (students studying economics at university) and a group of non-experts. 10  Both  groups were randomly split with some given layered, and others un-layered, Bank of England content from the Inflation Report. This enabled a direct assessment of the impact of layering on understanding and trust. It would have been a tad disappointing if layering had had no impact. And thank heavens for small mercies that, for both the expert and non-expert groups, layering boosted reported trust and understanding scores. What was more interesting was by how much layering seemed to help. In our sample, the boost to understanding of the economy and monetary policy that came from layering the Inflation Report was larger  8 9 10  Haldane and Turrell (2017). Haldane (2017b). Haldane and McMahon (forthcoming). 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  than the boost to understanding that came from having studied for an advanced degree in economics. That’s a depressing statistic for those of us who have studied economics, but great news for everyone else. (b) Educational Programme A second strand of the Bank’s engagement strategy is education.

Weaker institutional and regulatory frameworks have added up to make these economies historically associated with increased cyclical vulnerabilities. The procyclicality of bank credit and debt-driven fiscal expansions, together with more rigid exchange rate regimes, contributed in the past to amplify external shocks, making exposure to changes in external financial conditions a relevant driver of overall economic activity. Because of these vulnerabilities, EMEs are often considered a risky-asset class. As such, investment flows pour into them when global conditions improve and risk-on is the mood in the market—be it through international banking linkages or direct portfolio flows. Domestic asset prices surge more vigorously in response to these flows due to limited financial market depth, strengthening the market value of firms’ collateral and further contributing to the buildup of vulnerabilities. Two factors have been especially critical in the past. First, the so called “original sin”, whereby EMEs—especially governments—fund themselves in foreign currency, creating foreign exchange (FX) mismatches in balance sheets of the government, banks, or corporations. Second, procyclical fiscal and monetary policies that amplify external shocks. In such cases, even a mild external shock can push economies to the brink of recession. ∗  I thank the comments and suggestions in preparing this note to Elías Albagli, Miguel Fuentes, and Carlos Medel. 1  In short, domestic weaknesses interact with global financial attitudes in a dangerous mix that has historically proven to be highly destabilizing for EMEs, compared to AEs.
Employment has continued to grow and total hours worked exceed pre-pandemic levels. At the same time, the average number of hours worked remains somewhat below its pre-pandemic level and its recovery has stalled since mid-2022. As the energy crisis fades, governments should roll back the related support measures promptly and in a concerted manner to avoid driving up medium-term inflationary pressures, which would call for a stronger monetary policy response. Fiscal policies should be oriented towards making our economy more productive and gradually bringing down high public debt. Policies to enhance the euro area's supply capacity, especially in the energy sector, can also help reduce price pressures in the medium term. In this regard, we welcome the publication of the European Commission's legislative proposals for the reform of the EU's economic governance framework, which should be concluded soon. Inflation According to Eurostat's flash estimate, inflation was 7.0 per cent in April, after having dropped from 8.5 per cent in February to 6.9 per cent in March. While base effects led to some increase in energy price inflation, from -0.9 per cent in March to 2.5 per cent in April, the rate stands far below those recorded after the start of Russia's war against Ukraine. Food price inflation remains elevated, however, standing at 13.6 per cent in April, after 15.5 per cent in March. Price pressures remain strong. Inflation excluding energy and food was 5.6 per cent in April, having edged down slightly compared with March to return to its February level.

Low price and wage inflation Not everyone benefits from a more closely integrated global economy and new technology. In many countries, the competition for low-skilled jobs has intensified, depressing wages for these workers. On the other hand, technological advances have pushed up demand for high-skilled labour for which there is a wage premium. The result is wider wage gaps. The income distribution between labour and capital has also changed. It had long been a widely-held view among economists that the labour share of GDP would remain fairly constant over time. Keynes described the stability of the labour share as “one of the most surprising, yet best-established, facts in the whole range of economic statistics”.6 Yet since 1980, corporate profits have risen faster than wages (Chart 6). 6 Keynes, J.M (1939): "Relative Movements of Real Wages and Output", The Economic Journal 49 (193), pp 34–51. 6  Norges Bank  Chart 6 Labour share. Labour costs as a share of GDP. 1) Selected advanced economies. Percent 55  55  54  54  53  53  52  52  51  51  50 1978  1983  1988  1993  1998  2003  2008  2013  Economic perspectives 15 february 2018  50 2018  1) Belgium, Denmark, Finland, France, Germany (data for West Germany before 1992), Ireland, Italy, Japan, Netherlands, Portugal, Spain, South Korea, Sweden, Switzerland, the UK and the US. GDP−weighted average.
In any case, the problem with the exchange rate choice was not the decision to let the rate adjust, but the decision to resist it and the role that played in magnifying the bubble, and thereby the subsequent damage from the fall. Given where we are today, and what we know about the relative merits of flexible and fixed exchange rate regimes, what is the likely evolution of the current monetary system going forward? A few concluding observations. First, I think it is unlikely that we will see a substantial move toward monetary integration involving the major emerging market economies, in Asia or in the Western Hemisphere. As the economist Peter  2  BIS Review 44/2007  Kenen writes in his latest book, it is difficult today to envisage a substantial reduction in national currencies though the emergence of large regional monetary unions where they do not already exist. Within Europe, we may yet see a further enlargement of the euro area. There may be other circumstances in which individual economies can derive benefit from a currency board system or from dollarization or euroization. Countries trying to emerge from a period of high inflation may in the future, as they have in the past, adopt a fixed exchange rate as a nominal external anchor for a disinflation strategy. These seem likely to be exceptions, however, to a general move toward more flexible exchange rate regimes.

(3) In 2004, the foreign reserves stood at Euro 717 million, and in 2011 (April) they climbed to Euro 1 872 million, which is by 2.6 times more, and always ample to respond to the occasional imbalances in the foreign exchange market. (4) The crucial question would be: Was the banking system making enough credits i.e. was the National Bank disabling the “smooth” lending to the private sector, or was it the opposite? The figures speak for themselves! In the seven-year period from 1997 to 2003, the average annual credit growth equaled 11.6% and in the seven-year period from 2004 to 2010, it equaled 23.1%, which is by two times faster. The comparison between the credit growth and the GDP growth shows that in the 2004–2010 period, the nominal credit growth was by 3.12 times faster relative to the nominal GDP growth, while the credit real growth was by 5.7 times higher relative to the real GDP growth. Should this difference be even greater? (5) The banking system also improved substantially. It remained undamaged even during the Great Recession. i. The solvency remained high. The capital adequacy ratio was preserved to a very good level of 16.4%. The liquidity, after the worrying downward trend (2007, 2008 and early 2009), was reestablished, thanks to the undertaken measures, to a very solid level. In March 2009, the liquid assets constituted 20.2% of the total assets, and in December 2010 it made up 30.7%. The household deposit-liquid asset coverage ratio increased from 44.6% to 61.9%.
But looking at the comparison, I wonder what banks in the other euro area countries that have significantly reinforced their capital ratios will think. Moreover, unlike Spain, most of our peers have activated – or have announced the activation – of countercyclical capital buffers, which may partly explain the increase in their solvency ratios. 6/15  Dividend policy  It is worth remembering that the clearest route to strengthening capital is through the organic generation of reserves. That leads once again to highlighting the importance of profitability and, in relation to profits, of dividend policy. Each bank should give structure to this dividend policy, bearing in mind its present and future capital needs. As I have occasionally indicated, in my view dividend payments are excessively rigid. They have functioned more as a fixed remuneration than as a genuine, variable distribution of each year’s return. In this respect, one possibility used by banks at various times has been to use scrip dividends. These allow remuneration to the shareholder to take the form of the delivery of new issued shares, instead of cash. This policy enables the necessary remuneration of capital to be combined with the organic generation of capital, although it inevitably entails some dilution of earnings per share, as also occurs whenever there are capital increases. It is the responsibility of each bank to assess these aspects when setting its dividend policy.

At present, we base our forecasts on the development of the repo rate expected by the financial markets. Professors Giavazzi and Mishkin give several reasons why they advocate that the Riksbank should present its own interest rate forecasts. Perhaps the most important reason is that this would show most clearly what the Riksbank’s own expectations of future monetary policy are. This would make it easier for companies and households to plan for the future. This point of view is easy to agree with, and I have expressed similar thoughts myself in various speeches. We are currently considering and working on how this might be achieved. Compensating for earlier deviations from target As I mentioned to begin with, there are a couple of points where I do not agree entirely with the authors’ conclusions. One such point is how the Riksbank should act if inflation has been below, or above, target for a long period of time. Professors Giavazzi and Mishkin suggest that if inflation has been below target for a long period of time, monetary policy should partly compensate for this by being extra expansionary in the future. As I understand it, the background to this is the developments in recent years, when inflation has been below the target. Here it is worth pointing out that when inflation has been below target level for a long period of time, there have been good explanations for this. The most recent episode has mainly been due to the fact that productivity growth has been surprisingly high.