samchain/econo-pairs-v1 huggingface dataset:
In contrast, in the emerging economies, GDP growth is strong. These countries account for almost half of the world’s GDP and for almost 70 per cent of the world’s growth this year. China is expected to continue to grow by almost 10 per cent per year, and India by about 8 per cent over the years ahead. In the two other BRIC countries, Brazil and Russia, growth in the range of 4–5 per cent is expected (see Table 1). Differences around the world are also extensive in terms of inflation. In the United States and the euro area, inflation has risen in recent years, primarily as a result of rising energy and commodity prices, but underlying inflation excluding these prices is still low. In the BRIC countries, on the other hand, inflation is high, and the monetary policies of these countries are now being tightened to avoid overheating (see Table 2). However, there are also risks in international developments. The greatest risk for us in Sweden is probably whether the fiscal problems in certain euro area countries will lead to renewed turbulence on the financial markets. Greece, Ireland and Portugal have already received assistance from the EU and the International Monetary Fund (IMF), but it remains unclear whether Greece, in particular, will be able to repay its debts. Furthermore, the possibility that Spain may also encounter difficulties in managing its problems cannot be ruled out.

The economic conditions for wage formation in the years ahead I will now briefly present the Riksbank’s assessment of economic development in recent years. I will refer to the most recently published forecast from April. Of course, quite a lot has happened since then, but, at the same time, two months later you don’t normally know a great deal more about developments two to three years ahead. In any event, we will be publishing an updated assessment in the Monetary Policy Report in July. The international recovery is proceeding at a good rate For the world as a whole, we expect to see a GDP growth of over 4 per cent per year for the next three years. This is a high growth rate from an historical perspective (see Figure 4). But  4  BIS central bankers’ speeches  developments across the world are divided, with weaker growth taking place in the developed economies and stronger growth in emerging economies. The recovery of the United States and Europe is continuing at a fairly moderate pace. In the United States, GDP is now back to the level it was at before the crisis (see Figure 5). But the labour market has yet to recover. In the euro area, it seems likely to take a couple more years until GDP has returned to the same level as before the crisis. Growth in Europe is being restrained by the fiscal problems in several countries and the tightening of fiscal policies (see Figure 5).
Moreover, nor can we forget that an independent agency’s efficiency is not impervious to its surroundings. Accordingly, to preserve the independence and prevent overload of these institutions, it must be recognised that their performance also depends on actions taken in other economic policy areas.6 Monetary policy is an evident example of this, especially in a monetary union such as ours in which the single monetary policy coexists with each country’s own macroeconomic policies. Indeed, the governance of Economic and Monetary Union recognises the need for the single monetary policy to be accompanied by fiscal and structural policies consistent with economic stability. With this goal in mind, a wide range of coordination and supervision mechanisms have been put in place, such as the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure. Such considerations are also applicable to other areas of activity of independent institutions, such as financial stability and banking supervision in the case of the Banco de España. Indeed, these considerations justify central banks’ frequent calls for an appropriate economic policy mix. And it is in this framework of assurance of economic stability that citizens and politicians should place declarations by the independent monetary authority on economic policy conduct in general. In this respect, as I indicated earlier, the functions of the Banco de España include advising the Government and producing reports and studies. The present crisis provides us with a good example. The robust monetary policy actions of the ECB, necessary as they were, would have been insufficient had it acted alone.

The Thai economy continues to expand at a good pace with merchandise exports and tourism so far being the main drivers of growth. Although growth benefits have not spilled over to other segments of the economy as much as we would like to see, domestic demand is improving and we expect a more robust and more balanced GDP growth this year. On a longer horizon, Thailand is undergoing major transformation with the emergence of several promising economic platforms and the ongoing transition towards a new era of digital financial and payment services, all of which will unlock Thailand’s economic potential, uplift productivity, and bring about more inclusive growth. The Thai government and the Bank of Thailand, in its various capacities, are committed to making these achievements possible. Thank you very much for your attention. 10/10
Depending on when the next downturn occurs and how deep it is, there is thus a risk that monetary policy will not suffice when it comes to counteracting it. As I see it, this has implications for how to look upon the division of roles in stabilisation policy. There has long been a tendency, both in Sweden and abroad, to claim almost by default, that when you have a floating exchange rate it is the job of monetary policy and not fiscal policy to stabilise economic activity. Perhaps it is  18 For economies with sustainable public finances, government bonds are credit-risk free. The interest rate on long maturity government bonds reflects the path of expected short-rates and compensation for other risks related to the horizon of the investment and the liquidity of the bond market. 9 [24]  time, in the light of our experiences following the crisis, to qualify this picture somewhat. In a way, of course, fiscal policy always contributes to stabilising economic activity. For instance, systems for taxes and expenditure are often designed so that they automatically adapt to economic developments. Examples are progressive income taxes and unemployment benefits. On the other hand, there has long been scepticism against using so-called discretionary fiscal policy – direct decisions on adjusting taxes and public expenditure – with the aim of stabilising economic activity. One problem is that discretionary fiscal policy measures are often implemented or have an effect too late because of various delays, and they therefore aggravate economic fluctuations rather than stabilise them.

The Treasury can take note of this proposal, but can also ignore it, publishing a response. If the Treasury takes the advice, then the Office for Budget Responsibility (equivalent to the Swedish Fiscal Policy Council) will assess whether the measure is compatible with a sustainable fiscal policy. The idea is thus that discretionary fiscal policy measures shall replace the monetary policy stimulation that is not brought about because of the lower bound. Some argue that this would be a more effective and economically more reliable  19 Soon after the turn of the millennium, a committee investigated how stabilisation policy should be conducted in the event of Sweden introducing the euro (Swedish Government Official Reports, 2002). The committee considered that under normal economic fluctuations it would be enough to allow the automatic stabilisers to work and that discretionary fiscal policy would only be used in the case of unusually large disruptions. The reason the committee reached this conclusion was because of this type of problem. 20 See Yates (2017). 10 [24]  mechanism than trying to achieve the same effect through, for instance, the purchase of financial assets. 21 It is an open question whether a similar solution might function in Sweden. One condition that one should bear in mind, as the British proposal emphasises, is that the use of discretionary fiscal policy always entails a balancing act. Sweden's currently strong public finances provide protection against shocks.
However, the fact that inflation has been so low has changed the conditions for monetary policy. The unexpectedly low inflation was the reason why the repo rate was cut in December last year by a unanimous Executive Board, at the same time as the repo-rate path was revised down substantially. At the most recent monetary policy meetings there has been greater focus than before on inflation. 18  The Canadian central bank governor recently described monetary policy as an exercise in risk management, where the risk of inflation falling and moving even further from the target has to be weighed against the risk of financial imbalances. He emphasises that the credibility of the inflation target cannot be taken for granted, but must be earned by clearly focusing monetary policy on attaining the target (Poloz, 2013). BIS central bankers’ speeches  11  Perhaps the lesson here is that a monetary policy that leans against the wind is difficult to combine with an inflation target. Although there may be justification for slowing down credit growth in some situations, it may be difficult to use monetary policy for this purpose if there is an explicit inflation target. In practice, one tries to attain two targets with one single instrument and there is then a risk that one will not be particularly successful in attaining either of them. References Adolfson, Malin, Laséen, Stefan, Christiano, Lawrence, Trabandt, Mathias, and Walentin, Karl, (2013), Ramses II: Model description, Occasional Paper no. 12. Sveriges Riksbank. Swedish Bankers’ Association (2013), Stärk amorteringskulturen amortisation culture).

We have been able to observe that it is a broad-based decline in inflation, to the extent that all major components are affected.6 Low inflation has come to be a widespread phenomenon and many countries and regions have recently reported inflation rates clearly below their targets. Inflation has fallen particularly sharply in the euro area. The fact that this happens in a situation where there is plenty of spare capacity – which is the case in large parts of the euro area – is not particularly surprising. However, the downturn in Swedish inflation is larger and has been going on for longer than in other countries. And the question is why... One possible reason, which was also discussed in an article in the latest Monetary Policy Report in February, is that Swedish companies have not been passing on their cost increases to consumers as much as is normal.7 They have thus not increased their prices to the extent that one might expect, given the historical relationships with unit labour costs and import prices faced by producers. There may be several reasons for this, but one is that margins may decline when economic activity is weak, which is also noted in the article. Current research using US data implies that price mark-ups vary positively with the business cycle.8 Another reason may be that the weak development in the euro area has hit Swedish exports hard and that this has contributed to resource utilisation being lower than normal over a long period of time.
Without any doubt, the distinguished economists and practitioners who have actively taken part in this conference have been its most valuable asset. * Turning to the rapid credit growth that has been observed in CEE economies over the past years, the first question that comes to an economist’s mind is the following: do these developments pose a threat to the macroeconomic stability of the countries of interest? In order to answer that question, one has to ask another: what forces have been the decisive factors behind the rapid credit expansion? Several papers presented at this conference have sought to provide answers to these questions. One approach, followed by the papers 1 presented in the first session, has been to estimate the equilibrium rate of credit growth and check whether the actual growth has been below or above that equilibrium path. The decomposition of credit growth into a convergence and a boom component has shown that for most of the CEE economies, the former component has been dominant, i.e. the rapid credit expansion can to a large extent be attributed to a continuous improvement in the macroeconomic fundamentals and the initial low credit volume in these countries.

This is a remarkably favorable picture; and yet there is growing concern about the long-term challenges for the U.S. economy and their implications for future prosperity. In parts of the business community, there is growing anxiety about a perceived shift in the locus of dynamism and growth away from the United States toward Asia and other parts of the world. Public opinion surveys report increased concern among Americans about economic security; about the prospects for future income growth and economic mobility; and about the implications of the long-term increase in income inequality. And there we can see growing concern among the general public and in the business community about the struggle to find a political consensus to support reforms to help us meet these challenges. The United States has long been one of the most open of the major economies. This basic policy choice, along with a range of other actions that have made our economy relatively flexible, has allowed us to be a substantial beneficiary of the rapid increase in global economic integration and in the growing economic success of the rest of the world. Globalization has brought challenges as well as benefits, however. The combined forces of technological change, immigration, and the rapid integration of China, India, and other economies into the world economy are altering the dynamics of competitive pressures on U.S. companies. The pace of change seems to be increasing, and more things we produce, and more of our services, are becoming tradable.
But in the meantime, given that the problem is driven by perceptions of the eurozone, rather than any particular strength of sterling, it is very difficult to see what we in the UK can do directly to resolve it. The weak euro affects us at the macroeconomic level in two ways: it has a dampening effect on our price level; and it reduces net external demand on our economy. To offset these influences - to prevent overall demand growth falling short of underlying capacity growth, causing inflation to fall significantly below our 2½% target - and I remind you it is a symmetrical target - we have had to keep interest rates lower than would otherwise have been necessary, in effect encouraging stronger domestic demand growth, to keep the economy as a whole on track. The risk in this approach, of course, is that we could find it difficult to moderate the pace of domestic demand growth to a sustainable rate as and when the euro recovers. But that’s a bridge we will need to cross when we get there. Now some of you involved in those sectors that are suffering most from the weakness of the euro would - from your own perspective - like us to go further and try more actively to drive the exchange rate down. If I were in your shoes, I’d be tempted to argue that myself. Euphemistically it is suggested that we should “pay more attention to the exchange rate” - than, as I’ve explained, we do already.

It is true that, to the extent that the present imbalance within the economy reflects sterling’s appreciation against the euro, we would have been protected against that. But, with accelerating inflation in the economy as a whole, the price of such protection of the suffering sectors would have been tantamount to real exchange rate appreciation, which would in any event have damaged their competitive position. And, it would not in that case be possible to reverse that effect through exchange rate adjustment. Joining EMU from the start would in fact, as things have turned out, have been a strong form of relaxing our objective for consistently low inflation in the economy as a whole to ease the pressures on the internationally-exposed sectors which I argued against a few moments ago. There are no easy answers so long as our economies continue to diverge. Coping with such tensions as may emerge within the Eurozone - with or without the UK - is likely to be easier in a context of structural, supply-side flexibility and adaptability - which also, as I say, essentially determines the underlying rate at which the economy can expand in the medium and longer-term. The Eurozone started with chronically high unemployment. Some countries still have very high ratios of public debt to GDP. And most face the prospect of an increasing burden on their public finances with ageing populations.
There are also rigidities in the economy that mean that it will take time before a sharp fall in exports can be replaced by an increase of exports or by an increase of domestic demand that fully compensates for this decline. I actually think it is more reasonable to concentrate the negative effect on potential GDP to the period immediately after the start of the financial crisis, rather than to spread it out over a larger number of years before and after the financial crisis in the way that both the HP trend and the PF approach do. This would mean that the GDP gap would not appear so high in 2008 and perhaps not so low in 2009 either. But this is unimportant for the assessment of resource utilisation this year. Resource utilisation is largely normal My assessment is thus that resource utilisation is largely normal. The measures of resource utilisation that I showed earlier in Figures 8 and 9 indicated this. But it is also supported by other measures of resource utilisation, based on questions to individuals and companies. An additional advantage of measures of this type is that they can be seen directly in the statistics, thus avoiding the problems associated with HP trends and PF approaches. Figure 11 shows such a measure, capacity utilisation in the manufacturing sector from Statistics Sweden (SCB). It is now more or less on the average level for the period 1996–2008.

And when the repo rate is comparatively far from a more neutral monetary stance, monetary policy can be adjusted in larger steps than when the rate is closer. Thus, there are various ways of making up for the fact that economic forecasts beyond the short term not infrequently miss the mark and still allow for the circumstance that it takes a comparatively long time for the full effect of monetary measures to materialise. Conclusion I should like to conclude by saying that while we all know that the Riksbank’s main concern is the future path of inflation in the Swedish economy, our deliberations about how to hold inflation at a BIS Review 13/2000  4  stable level around the 2% target can just as well be seen as the Riksbank’s endeavour, by means of the repo rate, to contribute to a continuation of the Swedish economy’s favourable trend. In many situations our statutory duty - the maintenance of price stability - is fully commensurate with the requirement that the Riksbank helps to make the development of production and employment in the Swedish economy as stable as possible. 5  BIS Review 13/2000
Continued growth at a rate around 3 to 4 per cent was not reasonable. Observers usually consider that the Swedish economy is capable of long-term growth at an annual rate of about 2 to 2.5 per cent. A similar situation had been faced for a time by other central banks around the world. In the United States, for example, the Federal Reserve had raised its instrumental rate successively during 1999 and 2000 to 6.5 per cent. In Europe, the ECB tightened its rate last year to 4.75 per cent, while the Bank of England’s rate was raised to 6.0 per cent. The same type of reaction was also evident in other countries. I recall that in the course of last year many observers counted on relatively large interest rate hikes in Sweden, too. They thought they saw clear signs that the Swedish economy was on the way to becoming overheated and argued fairly strongly that the Riksbank should therefore act quickly to increase its instrumental rate in keeping with other central banks around the world. But the Riksbank arrived at a different assessment and chose instead to proceed more cautiously with interest rate increases. In our opinion, the relatively favourable inflation prospects last year simply did not warrant a tighter monetary stance. We kept to the level of 3.75 per cent for practically the whole of 2000. In December, however, we did raise the repo rate 0.25 per cent points, from 3.75 to 4.0 per cent.

This is partly explained by cyclical factors. By this I mean the plentiful supply of unutilised resources - not least all those who had lost their jobs during the economic crisis that ravaged Sweden in the early 1990s. That lessened the risk of the upswing in production soon leading to the economy reaching its potential output. But as far as we can judge at present, the more favourable trend also has to do with an economy that is functioning more efficiently. Sooner or later, however, demand growth that is unduly strong and persistent will generate economic imbalances, whereupon price and wage increases usually tend to accelerate. In time, such a development is liable to turn into a recession, with falling output and rising unemployment. Rapidly rising inflation is often - though not always - an indication that the economy has been expanding too rapidly and that economic policy has not been sufficiently tight. Economic overheating and rising inflation were in fact a recurrent problem in the 1970s and ’80s. Restricting economic activity when times are good has often proved difficult. But sooner or later it has had to be done in ways that were then more dramatic. Production and employment have then fallen and unemployment has risen. BIS Review 72/2001  1  Towards the end of last year we judged that it was time for economic activity in Sweden to start slowing down to the growth rate that is commensurate with a stable long-term trend.