samchain/econo-pairs-v1 huggingface dataset:
In common with other forecasters, the MPC has consistently been surprised by the weakness of wages, given the strong cyclical bounce in job creation. It has over-predicted the path of wages in recent years (Chart 29). There are a number of possible explanations for this wage weakness. One is that there is simply greater labour market slack in the economy than we have estimated. Another is that the narrowing of slack is having less impact on wage pressures than in the past – the slope of the so-called Phillips curve is flatter. There is international evidence of the Phillips curve having flattened over recent decades (IMF (2006, 2013), BIS (2014)). That might arise because technology has made it easier and cheaper than ever before to substitute labour for capital, man for machine. That is the very essence of the Second Machine Age hypothesis. It would manifest itself in weaker than expected wage growth and a secular fall in the labour share of income, both of which we have seen in a number of countries. The central projection in the November Inflation Report assumes the labour share reverts over time to its historical mean, with the fruits of productivity harvested by labour and capital in line with their historical shares. And because wages have lagged behind productivity for several years, this implies the labour share is currently at a cyclical low, but would be expected to mean-revert in the period ahead.

The outcome is obviously the major uncertainty surrounding the global economic prospect, and policymakers elsewhere can only monitor, continuously and very closely, the emerging evidence and react to that in the light of its likely impact on their own situation. The US slowdown comes at a particularly bad time for Japan which is already suffering from a combination of weak domestic demand – particularly consumer demand – and supply-side constraints reflecting pressures on the banking system, heavily burdened with non-performing loans, and an acknowledged need for restructuring parts of the non-financial sector. Japan has pretty well exhausted the scope for macro-economic stimulus. Successive fiscal packages focussed on public works, and a sustained period of attempted monetary expansion, at near-zero interest rates in the face of deflation, have failed to overcome a high rate of precautionary saving by an ageing population facing an uncertain economic future. The policy emphasis of the new Japanese administration appears to be shifting towards firmer action to bring about supply-side reform in the belief that this will help to engender greater confidence. The danger is that, to the extent that more aggressive restructuring  2  BIS Review 47/2001  results in bank ruptcies and higher unemployment in the short term, that in itself might tend to weaken consumer demand for a time before the benefits of the restructuring come through. I make no judgement about the prospects in Japan. You certainly are better placed to do that than I am!
In some business sectors, unemployment remains very high. Other sectors have been shielded. Interest rate cuts have given households more money to spend. At the same time, there were fewer opportunities for them to spend it. So while some have faced a precarious job situation, others have used the occasion to save. We see the same impact and uneven effects in a number of other advanced economies. 3  NORGES BANK  Chart 2 Many countries have been harder hit than Norway  ECONOMIC PERSPECTIVES 18 FEBRUARY 2021 Total COVID-19 deaths per 10 000  GDP growth, percent  UK Italy US Sweden Japan Norway 0  5  10  15  20  Souces: IMF, OECD, OurWorldInData.org, Statistics Norway and Norges Bank  Many countries have been hit harder than Norway – in terms of both economic and health effects (Chart 2). The differences reflect in part how quickly countries locked down and put a brake on the first wave of infection. The design of support measures, organisation of the health sector and structure of the economy have also played a decisive role. In countries with a rudimentary welfare system and a large informal sector, the pandemic has had serious consequences. Unfortunately, 2020 proved to be the year when the global poverty rate showed a renewed rise. THE WAY AHEAD Pandemics are watershed events that leave behind long-lasting scars. They have claimed a multitude of lives through history.

Yet as long as the crisis is ongoing, an expansionary monetary policy will be needed to stimulate the economy. This reduces the risk that unemployment becomes entrenched at a high level. At the same time, persistently low interest rates entail a risk of a build-up of financial imbalances. In Norway, rapidly rising house prices and further household debt accumulation pose a particular risk. Once there are clear signs that economic conditions are normalising, we will again seek to normalise the use of instruments – as we did after the financial crisis in 2008 and after the oil price fall in 2014. 11  SUBSTANTIAL TRANSFERS FROM THE GOVERNMENT PENSION FUND GLOBAL  NORGES BANK  The monetary policy stance in the period ahead will be influenced by the timing and means of fiscal policy normalisation. Here the authorities face a difficult balancing act. ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  On the one hand, the crisis is not yet over, and there is uncertainty regarding infection rates and the progress of vaccination. Against this background, the Storting (Norwegian parliament) has decided to extend the extraordinary support measures aimed at both individuals and businesses until September. At the same time, it is important that the support measures are scaled back as the situation becomes more normal. If these measures are extended too far into the future, we risk impeding necessary business restructuring. Workers may miss out on opportunities to seek new jobs, and unemployment may become entrenched at a higher level than prior to the crisis.
At the same time, the standard monetary policy action was judged as insufficient because, during the crisis and especially from 2010 the interest rate channel of the monetary policy transmission mechanism was impaired, initially because the interbank market was dysfunctional, then because the banking sector in some countries became itself dysfunctional and was unwilling or unable to perform its normal intermediation role. In response to this challenge, the ECB engaged in a sequence of non-standard measures to restore a proper transmission of the monetary policy impulses, including lending operations through a fixed rate tender procedure with full allotment, the provision of liquidity with longer maturity and an expansion of the set of assets that could serve as collateral for receiving central bank liquidity. As financial integration in the euro area was being severely eroded and banks largely retrenched within their national borders, the Eurosystem remained ready to provide liquidity at consistent and uniform conditions over the entire euro area, as it should be in any monetary union. As a further step to address the banks’ funding problems and financial fragmentation within the euro area, the Eurosystem started intervening directly in securities markets in order to correct severe mal-functioning of certain segments. The first action of this type was the Securities Markets Programme (SMP) launched in May 2010, followed by a purchase programme for bank-issued covered bonds started in October 2011, and finally the Outright Monetary Transactions (OMT) programme announced in September 2012 but so far not activated.

Note that a precondition for receiving financing from the ESM is to have fully ratified the fiscal compact, which creates a link between crisis prevention and resolution schemes. The involvement of the IMF in the financing schemes is not strictly required but is still highly desirable, also in view of the Fund’s analytical expertise in crisis resolution. I would also like to emphasise that the range of tools available to the ESM compares favourably with those available to the International Monetary Fund (IMF). Hence with the ESM the euro area has equipped itself with a state of the art and permanent crisis resolution scheme, a key missing piece in the initial design of EMU. Conclusions  As Asia knows very well from its own crisis in 1997/1998, a crisis can be an opportunity for reform and renewed growth. This is embodied by the character ji, which in Classical Chinese means at the same time “danger/crisis” (weiji in today’s language), as well as “chance/opportunity” (jihui to use today’s term). In this sense the Asian crisis experience is a useful lesson for the euro area, which – I am convinced – will emerge more integrated and stronger from the current challenge. Perhaps the greatest challenge at this point in time is to keep up the reform momentum even if hopefully the most severe manifestations of the crisis abate and financial market conditions, including financial integration within the euro area, come back to more normal  8  BIS central bankers’ speeches  conditions.
It is true that the setting has changed considerably but as a small open economy these relate mainly to competitiveness aspects and the capacity to deal with external shocks. It must be stressed that competiveness is not exclusively a concern for the export-oriented part of the private sector, but also for those who focus their business activity on the domestic market. Noncompetitive practices and inefficiency in that part of the economy that is not directly exposed to foreign competition tends to spill over into the tradable sectors thus threating the overall competitiveness of the whole economy. We must avoid this as much as possible. I am cautiously optimistic about the future and feel sure that despite the persistence of the sovereign debt crisis and the prospect of a weaker global economy, Malta will overcome the challenges that lie ahead, if all stakeholders remain focused on meeting the country’s economic objectives in a prudent and effective manner. Thank you for your attention. 10  BIS central bankers’ speeches

Banks have become more vulnerable to distortions in the credit markets. Historically, our 4 banks primarily obtained funds through deposits by households and enterprises. In recent  1  Folketrygdfondet will manage the new Government Bond Fund. 2  The Government has increased the capital of Kommunalbanken Norway (the local government funding agency), it has increased the scope of GIEK (the central government export credit agency) and Innovation Norway, and has offered state loans to Eksportfinans Norway (the credit institution for export financing). 3  Figures for banks’ equity capital before 1918 are based on: Jan Tore Klovland (2007): “A reconstruction of the balance sheets of savings banks in Norway 1822-1875” and “A reconstruction of the balance sheets of commercial banks in Norway1848-1900” in Øyvind Eitrheim, Jan Tore Klovland and Jan F. Qvigstad (Ed.) (2007): “Historical Monetary Statistics for Norway – Part II” Norges Bank’s Occasional Papers, No. 38, Oslo. Statistics Norway is the source for figures from 1919 to 1995. Norges Bank is the source for figures from 1996. 4  Figures are taken from the sources in footnote 3 and Hege Imset Matre, H. I. (1992): Norske forretningsbanker 1848-1990: En tilbakeføring av forretningsstatistikken (Norwegian commercial banks 1848-1990). Report No 41 from the research programme Det nye pengesamfunnet. 2  BIS Review 37/2009  years, banks have borrowed in both domestic and foreign markets. When credit markets dried up, this proved to involve high liquidity risk for banks.
As a consequence, the purchases had only modest direct effects on financial conditions.4 Starting in 2006, when the initial wave of QE ended, the BoJ began to formalize its inflation goal in numerical terms. This was initially expressed as an “understanding of medium- to long-term price stability” based on individual policymakers’ views. The inflation objective went through several iterations before being defined in 2012 as a Committee “goal” of a positive range of 2 percent or lower, with a lower interim goal of 1 percent. Following the onset of the global financial crisis in 2007–2008, Japan resumed QE, and gradually tightened the link between its policy actions and its objectives. By January 2012, the BoJ had committed to keep rates at the zero bound and to continue purchasing assets until the 1 percent goal was “in sight.” Several prominent Japanese experts have argued that there was a “start-stop” aspect to monetary policy during the 1990s and 2000s with reversals in policy beginning before deflationary expectations were eliminated.5 Fiscal policy also reversed abruptly on several occasions before economic recovery was firmly established. While Japan did enjoy a period of respectable real per capita growth in the mid-2000s, escape from deflation proved elusive. More than a decade after Japan’s bubble burst, the U.S. housing bubble burst. This exposed extensive vulnerabilities in our financial system and triggered a global financial crisis.6 Unlike Japan, we had the advantage of being able to learn from another nation’s recent experience.

Promises about future actions may be seen as not fully credible given the potential for changes in a central bank’s leadership and policy committee and the degree of uncertainty about economic conditions that will prevail far out in the future. 8  In addition to acting to manage inflation expectations, the central bank can also support expectations about the outlook for growth and job creation. This can be implemented by making it clear that, subject to mediumterm price stability, it will seek to stabilize the economy and has the means to do so even at the zero bound. 6  BIS central bankers’ speeches  In recent years, we have developed considerable positive experience providing accommodation through changes in the size and composition of the central bank balance sheet. Taking interest rate risk and mortgage prepayment risk out of private hands has proven to be effective in easing financial conditions, increasing wealth and lowering private sector borrowing costs.9 The impact of purchases may be attenuated to some degree by deleveraging and ongoing adjustments in markets such as real estate. But it is material even in these circumstances, and builds over time as these needed adjustments proceed. The sum is greater than its parts Another important insight is that each of the components of policy – the current stance in terms of the policy rate and the balance sheet, expectations about the future stance, the degree of commitment to future policy, and the clarity of communications – all interact.
Lars Nyberg: Sweden and the world economy Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Danske Securities, Stockholm, 24 September 2001. *  *  *  Exactly two weeks ago I landed courtesy of SAS at Newark airport, after circling around Manhattan. As always, I was fascinated by the skyline dominated by the twin towers of the World Trade Center. Less than 24 hours later, those towers were gone and thousands of people had lost their lives in an act of terrorism that shook the entire world. It is tragic, terrifying and in many respects still incomprehensible. You all work in the financial sector and I am sure many of you have business contacts or friends who have been affected, directly or indirectly. I myself will never forget the pictures of human despair reflected in the US media during the week I had to wait for a flight back to Sweden. Naturally, the events in New York and Washington will have both political and economic consequences. At the moment, everything appears to be very uncertain, for understandable reasons. However, it is necessary to take developments in the US economy as a starting point for any assessment of how the Swedish economy will develop over the next few years. This applied before the attack against the USA and it applies even more now.

This means that the Riksbank must make assessments of how the krona will develop in relation to other currencies during the forecast period, and assess what effect the development of the krona will have on demand for Swedish goods, as well as the impact the krona will have on consumer prices. None of these assessments is simple. Allow me first to point out the mechanisms that are important with regard to a direct impact on inflation via import prices. If the krona weakens and prices on the goods we import are determined in the exporter’s home country currency, the weaker krona will have a direct impact on import prices. For the weaker krona to have a full impact on prices of imported goods in the consumer channel, all domestic intermediaries must pass the price increases on to the end consumer. During the years with a floating exchange rate we have been able to note that the weakening of the krona has not had the impact on consumer prices that we had expected. One explanation could be that internationalisation and increased competition have first and foremost meant that the exporting companies endeavour to adapt their prices to developments on the markets where they sell, in order to retain their market share. It is reasonable to imagine that large corporations with sales and production spread around the world can act in this way without facing large fluctuations in profits.
The ECB and the entire European System of Central Banks stand ready to assume the macro-prudential supervision tasks envisaged in the report by the de Larosière Group and to provide the necessary analytical and logistical support to the Systemic Risk Council. For the new Council to function effectively, three key requirements will need to be fulfilled: First, in order to identify and assess the risks and vulnerabilities in the EU financial system as a whole, to issue risk warnings and to adopt related macro-prudential policy recommendations, the Systemic Risk Council will need to have an information base that draws on both macroand micro-prudential supervisory information. This will allow the use of all relevant information for assessing, among other things, the “interconnectedness” of financial institutions and markets and its implications for financial system stability. Close cooperation and well-functioning information-sharing mechanisms between the new Council, microprudential supervisors and the proposed European System of Financial Supervision will therefore be indispensible. Second, adequate institutional mechanisms need to be in place to ensure that the risk warnings and the related recommendations issued by the Systemic Risk Council are translated into effective action. The days when risk warnings were issued and very few listened – or wanted to listen – should be over! Third, for the Systemic Risk Council to be effective, legitimate and independent in its decision-making, a solid legal basis is  4  BIS Review 49/2009  essential.

On the contrary, they should assert their ascendancy over it through strict financial management. 2. Finance should not dominate the economy, it should serve it. i)  Reasserting the importance of regulation and supervision:  BIS central bankers’ speeches  1  •  The period from the 1990s to the start of the 2000s is sometimes called “The Great Moderation” because inflation remained stable at moderate levels and growth appeared solid and sustainable. In reality, however, the period saw frequent buildups of financial excesses. These excesses led to the crisis, and they were firmly rooted in the dogma of self-regulation – a dogma which was itself fostered by the belief that financial markets were somehow sacred and inherently “efficient”, capable of setting “real” prices. •  The crisis completely discredited this theory. From the first sparks of turmoil, the lack of transparency in certain segments of the market – notably CDOs – significantly exacerbated the loss of confidence. Financial institutions had insufficient capital cushions to absorb the shocks, leading to bankruptcies and forcing the government to bail them out, a process that was extremely costly for public finances, but also very damaging to financial sector accountability, as at times it meant bank losses were “socialised” whereas previously their profits had been “privatised”. This is the problem of moral hazard, a subject which will no doubt come up over the course of this session.
BIS Review 39/2005  3  price differences between low-price chains and traditional food shops in the Stockholm region; differences of up to 30 per cent. The prices at low-price chains outside the city centre were a further 10-20 per cent cheaper than those of the traditional chains in the city centre. Other surveys also indicate large price differences. The stiffer competition is being facilitated by a greater ambition on the part of politicians to increase the number of shop sites for low-price chains. For example, in Stockholm there are plans to raise the number of new sites considerably. •  Another trend we are seeing is that shops are becoming bigger and the share of sales accounted for by hypermarkets is rising. The total shop space is increasing at the same time as small food shops are being driven out of business. That entails a drop in costs and enables lower prices, partly in order to respond to the new chains’ lower prices. •  Food chains are also concentrating more and more on private labels, which is clearly evident on their shelves in terms of the greater share of products that bear the shops’ own brands as a complement to the different suppliers' brands. The purpose of private labels is to strengthen the chain’s brand name and to reduce costs through lower marketing expenses and fewer middlemen.

Ongoing price squeeze in the non-durables sector So far we can say that the retail food sector is seeing a price squeeze following the arrival of new foreign players, and the current operators have begun to compete through low-price subsidiaries or jointly owned companies. This price squeeze appears to have been made possible by shrinking profit margins and low unit labour costs. The potential for price reductions is difficult to estimate, but comparisons with other countries as well as between different regions in Sweden indicate that there is scope for lower food prices in Sweden. For some time now the price squeeze has become increasingly noticeable to people in general in so far as we have more low-price shops to choose between and there is a wider range of cheap products in the traditional shops, but also through greater downward pressure on the prices of “ordinary” goods. It is difficult, however, to ascertain how long the price squeeze will continue and when it will have reached its full impact on the recorded CPI. Concluding remarks Globalisation and tougher competition have entailed effects both on price developments and on the labour market in Sweden and requires much in terms of the ability to adapt in the economy and in society on the whole. If the structural changes do not generate new employment quickly enough, the competition risks driving companies out of business and reducing the number of employees without  5  Source: International Tax Comparisons 2004, the Swedish Taxpayers Association.