samchain/econo-pairs-v1 huggingface dataset:
Earlier, the krone was devalued in response to high wage growth, which contributed to veiling the effect of relatively high wage growth on manufacturing industry’s competitiveness. With an inflation target, monetary policy has become forward-looking. The high pay increases awarded in last year’s wage settlements therefore engendered expectations of higher interest rates. This led to an appreciation of the krone. Manufacturing industry is thus faced with a double burden: high wage growth and a strong krone. Over the last 30 years, manufacturing has been scaled back in waves, particularly in the years between 1977 and 1987. In the years leading up to the periods of contraction, profitability in the manufacturing sector deteriorated. It can take time for such a deterioration to translate into lower output and employment. But when the turnaround does occur, it tends to be swift and pronounced. It now appears that a new period of downscaling is under way. Several factors point to this. First, a trend analysis suggests that manufacturing employment will decline in the years ahead. This is partly related to an expected decline in petroleum investment and somewhat higher productivity growth in manufacturing than in other industries. Second, manufacturing costs have increased sharply since 1988 as a consequence of high wage growth. The appreciation of the krone since the summer of 2000 has amplified the deterioration in cost competitiveness. Third, as a result of the fiscal guideline, the internationally exposed sector is exposed to additional pressure.

The impact of monetary policy occurs with long and variable lags. Our analyses indicate that a substantial share of the effects occurs within two years. A time horizon of two years when setting interest rates allows monetary policy to contribute to stabilising production. This horizon prevents monetary policy in itself from causing unnecessary fluctuations in the economy. The sharp rise in labour costs in recent years carries with it a potential for higher unemployment. The interest rate is an effective instrument for countering lower demand and growing unemployment when measures to stimulate demand do not translate into higher wage growth or unstable financial markets. However, there is little monetary policy can do to prevent an increase in unemployment that is driven by high cost inflation. A pre-condition for an effective interplay between wage settlements and monetary policy is that the response pattern in monetary policy is known and consistent. When the response pattern in monetary policy is known and consistent over time, the social partners can take into account monetary policy responses when negotiating wages. In 2002, wage growth was higher than we had expected up to the wage settlement in the spring of 2002. In spite of the rise in unemployment, the wage settlement in 2002 indicated that the social partners still perceived the labour market as tight. Preliminary figures indicate annual wage growth between 5½ og 6% in 2002, which is substantially higher than projected.
Import prices will therefore depend on changes in the bilateral exchange rate between the local and the dominant currency, rather than that between the local and producer currency. For evidence, see Goldberg, L and Tille, C (2009), ‘Macroeconomic interdependence and the international role of the dollar’, Journal of Monetary Economics, 56 (7), pp. 9901003; and Gopinath, G(2016). “The International Price System,” Jackson Hole Symposium Proceedings. 9 Gopinath (2016), ibid, and Ito, H, and Kawai, M (2016), ‘Trade Invoicing in Major Currencies in the 1970s-1990s: Lessons for Renminbi Internationalization’, Journal of the Japanese and International Economies, Volume 42, pp. 123–145. 10 For a country with a large share of trade invoiced in dollars, a depreciation against the dollar raises the domestic price of imports, causing domestic households and firms to switch their expenditure away from foreign goods. But it leaves the (dollar) price of exports in the markets in which they are sold unchanged, albeit making them more profitable for domestic exporters in terms of home currency. Because imports would fall straight away and it would take time for the export sector to expand to take advantage of the higher profits, it is therefore likely that a rebalancing of the economy from imports to exports would be slower than if traded goods were priced in the currencies of their production. In addition, other things equal, the rise in import prices would lead to a pick-up in imported inflationary pressure.

8/9  As this is my last appearance before the Senate as Governor of the Banco de España, and to conclude, I should like to express my gratitude for the consideration that has always been extended to the Bank and to me in this chamber, and for the quality of the interventions and questions raised on which I have had to comment. I have always thought, and have said so on different occasions, that the lower and upper houses are the “natural fora” in which an institution such as the Banco de España should preferentially express itself, cooperating and contributing, as best it can, to parliamentary functions. Thank you for your attention. 9/9
With these measures, one needs to take into consideration the fiscal support through a broad range of Page | 4 Document Classification: Public  government measures aimed at helping households and businesses, which also indirectly sustain the banks by mitigating the effects of the crisis on bank balance sheets. The negative implications from the pandemic will continue to be felt in the near term and this is why the Central Bank encourages all financial institutions to preserve capital, while at the same time continue to lend prudently and avoid unnecessary forbearance measures. I will repeat: the banks are sufficiently liquid, with strong capital ratios and financial resources, and these, coupled with their technological infrastructure and human resources, is enabling them to meet the challenges that the pandemic presents. To conclude, although the pandemic has been around with us for some nine months, the uncertainties surrounding it are still high, although recent news of the rollout of a vaccine in the very near future have surely given hope that we are closer to the end of the pandemic. Nevertheless, its effects will not go away any time soon, and 2021 will be a challenging year, both from an economic perspective and for the banking sector. Therefore, both fiscal and monetary authorities will need to remain vigilant and monitor closely the situation to avoid untimely withdrawal of support measures. Finally allow me a footnote. I would have welcomed this opportunity to say something about Brexit.

We expect this positive momentum in consumption to persist in the final quarter of the year, amid relatively resilient labour market conditions, though the containment measures introduced in October are likely to limit expenditure on certain services and may keep household saving still abnormally higher. Overall, consumption is expected to decline in 2020, but is expected to be the main driver of the recovery in the coming year. Page | 2 Document Classification: Public  The decline in demand and the elevated level of uncertainty have also led to deferrals in private investment plans. Therefore, overall investment is projected to fall significantly in 2020. However, as the level of uncertainty recedes, private investment is expected to bounce back. Furthermore, the EU Budget as well as NGEU funds will provide a substantial boost to government investment during the next year. One of the surprising aspects of this recession has been the extraordinary resilience of the labour market in Malta. Despite the unprecedented decline in economic activity in 2020, overall employment levels have held up very well. Following an increase in unemployment levels in April and May, thereafter unemployment embarked on a gradual downward path. The unemployment rate, though above pre-pandemic levels, remains very low historically and the lowest in the euro area. Nonetheless, the outlook remains surrounded by an elevated degree of uncertainty and risks remain firmly tilted to the downside. These relate mainly to the response of consumers and firms when a number of support measures came to an end.
One such question could be: Why must the Riksbank spoil the party? The Swedish economy has finally begun a period of good growth, rising employment and decreased unemployment, while inflation is low. So why do central bank representatives have to talk about the need to raise the interest rate in such a situation? May it not lead to a renewed increase in unemployment? Another question is how strongly the Swedish economy can expand without risks for inflation. Can it be the case that even the Swedish economy is displaying new tendencies, as certain observers argue has happened in the United States, that is, that growth can be higher without inflation taking off? If so, why is the Riksbank talking of a need to raise interest rates? Let me begin with the first question. Why spoil the party? History teaches that when the growth of demand outpaces the economy’s long-term output trend, this leads in time to risks of capacity shortages and bottlenecks that result in turn in rising prices and wages. At the same time, as it takes one to two years for an adjustment of the instrumental rate to affect the economy, the central bank’s monetary policy decisions have to be based on assessments of the future. Faced with the risk of a situation of this type occurring, it is therefore better to try to slow BIS Review 92/1999  2  things down with a small interest rate increase at an early stage.

A point worth noting is that, if they continue, today’s higher market interest rates will have a direct impact on inflation from household interest expenditure, just as the recent years’ steeply falling interest rates had a sharp downward effect on inflation. In that case, the higher interest expenditure would pull CPI inflation upwards fairly rapidly towards the targeted rate and above inflation’s underlying rate (UNDIX). Monetary policy would then face the same situation, albeit in reverse, as on so many occasions in the recent past. An attempt to counter the tendency by tightening the monetary stance would accentuate the direct impact and add to the increase in CPI inflation. That is why it is inflation excluding transitory factors that is the focal point for monetary policy. Central issues for monetary policy in an upward phase About a fortnight ago the Executive Board of the Riksbank confirmed that the stronger growth can lead to increased price pressure. Monetary policy may accordingly need to be conducted in a less expansionary direction in the future. But the Board also emphasised that the Swedish economy is not yet in such a situation. The trade-off between inflation and growth is uncertain and earlier relationships therefore have to be tested in the light of new information. I consider that this conclusion still holds. When the Riksbank begins to talk of a less expansionary monetary stance, I can imagine it raises a number of questions. I should like to take this opportunity of discussing some of them.
At the very first gathering of economists to create the American Economic Association, in Saratoga in September 1885, Richard Ely showed that he had the makings of a good central banker when he said, “We acknowledge our ignorance, and if we claim superiority to others it is largely on the very humble ground that we know better what we do not know”. Or, in Hayek’s words, “It is high time we took our ignorance more seriously”. The inability to bind future generations means that institutions do not resemble an optimal timeinvariant design chosen from behind the “veil of ignorance”. They reflect, in Hayek’s words, “how nations in the darkness stumble upon institutions which are in fact the result of human actions, not the implementation of a human plan”.20 Suitably designed, though, monetary institutions can help to reduce the inefficiencies resulting from the time-consistency problem and can incorporate new ideas into a discretionary monetary strategy constrained by a mandate that has widespread support in the population as a whole. A central bank needs to explain to the population both what it knows and what it does not know. Such a framework of “constrained discretion” for central banks is far-removed from the world of 1930 when the Deputy Governor of the Bank of England explained to the Macmillan Committee that “it is a dangerous thing to start to give reasons”. In 1908 Congress set up the National Monetary Commission to report on “what changes are necessary or desirable in the monetary system of United States”.

The trend in prices for consumer goods over the past two or three years is a result of a favourable supply shock to the Norwegian and global economies. Low inflation is being accompanied by real income growth and a rise in production. Since last summer, monetary policy in Norway has been oriented towards a gradual increase in the interest rate – in small, not too frequent steps – towards a more normal level. On the basis of current information, this interest rate path provides a reasonable balance between the objectives to be given weight by Norges Bank in its conduct of monetary policy: •  On the one hand, the objective of bringing inflation up to the target and anchoring inflation expectations suggests in isolation that interest rates should be kept at a low level until there are clear signs of higher inflation. •  On the other hand, the Norwegian economy is growing at a solid pace. Capacity utilisation is slightly above the normal level and increasing, and house prices and household debt are rising sharply. In isolation this would call for a tightening of monetary policy. Norges Bank has decided to use some time to bring inflation back to target and has chosen to gradually shift to a less expansionary stance. The assessments of economic developments ahead will determine how gradual the interest rate increase will be. Our current assessment implies an interest rate path where the interest rate is raised by about 1 percentage point this year.
Erdem Başçi: Latest economic outlook and macroeconomic developments in Turkey Speech by Mr Erdem Başçi, Governor of the Central Bank of the Republic of Turkey, at the January 2012 Inflation Report press conference, Istanbul, 31 January 2012. *  *  *  Distinguished Guests, Welcome to the press conference held to convey the main messages of the January 2012 Inflation Report. As required by our new communications policy, we will hold two of the four inflation report press conferences in Istanbul, all of which used to be held in Ankara before. I will now present an overview of the first inflation report of 2012, which will be published on our web-site shortly. The Report summarizes the economic outlook underlying monetary policy decisions, shares our evaluations on macroeconomic developments and presents our medium-term inflation forecasts which have been revised in view of the developments in the last quarter, along with our monetary policy stance. Moreover, the Report includes eleven boxes which entail interesting and up-to-date analyses on various topics. For instance, there is an analysis on the functioning of our recent liquidity management policy and its effects on financial markets. There is also a box exploring the sources of changes in inflation forecasts in the previous year, which is a topic included in the first inflation report every year. Another box examines the base effects that will play a major role in the course of inflation in 2012.

There may still be loan losses that may damage trust and confidence in the market when they come to light. This applies to both the United States and Europe. Figure 1. House prices Annual percentage change  35  35  25  25  15  15  5  5  -5  -5  -15  -15 95  96  97  98  99  00  Danmark  4  01  02  Irland  03  04  Spanien  05  06  07  08  USA  BIS Review 60/2008  Figure 2. Property price index (FPI) and CPI in Sweden Index 1995=100  280 260 240 220 200 180 160 140 120 100  280 260 240 220 200 180 160 140 120 100 dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec- dec94 95 96 97 98 99 00 01 02 03 04 05 06 07 FPI  KPI  Figure 3. Household debt and interest ratios Per cent  200  20 Skuldkvot (höger skala) Räntekvot (vänster skala)  16  160  12  120  8  80  4  40  0  0 1982  BIS Review 60/2008  1986  1990  1994  1998  2002  2006  2010  5  Figure 4.
BIS Review 18/2005  5  Last year we encountered a similar situation to that today, when the Bank's forecasts suggested that inflation would undershoot the target for almost the entire two-year period ahead, even though it was estimated to be on target in two years’ time. One reason we decided not to cut rates then – a reason that is still valid today – was that we saw that demand was growing strongly already. So, monetary policy appeared to have had the desired effect. This development has been reinforced now that business investment seems to have begun to pick up in earnest and that private consumption is also stronger. In other words, economic activity is already firm and GDP growth is above what is judged to be sustainable in the long term. Given that, a rate cut now would probably mean in practice that we would have to tighten policy more quickly in the future. So it is a question of trying to avoid excessive fluctuations in the real economy and interest rates. Another, partly related aspect that we also have reason to consider when making decisions about the repo rate is that the low inflation is due in large measure to markedly weak price developments for certain products as a result of increased competition, e.g. in the retail food trade and textile industry. It is probably not always prudent to fully counter this through highly loose policy that would drive up domestic demand.

The new thing would be to combine those ingredients together, at scale. The question of whether to do so is complex, and beyond the scope of my remarks today. The UK will publish a consultation on this issue later this year. But the implications for central bank balance sheets will also depend heavily on how any CBDC is designed: on who can hold it, where it can be used, how much can be held, and whether it is interest-bearing (Table 1). The Bank of England’s work in this area is available at: UK central bank digital currency | Bank of England. 1  Bank of England  Page 3  Source: Bank of England  Design choices that placed the economic features of CBDC close to today’s banknotes might have relatively limited implications for central bank balance sheets, at least in normal economic conditions. Choices that positioned the economic features of CBDC closer to today’s retail commercial bank deposits could have a more material impact. To give some sense of potential scale, Chart 1 compares two stylised benchmarks – the stock of banknotes; and 20% of retail commercial bank deposits2 – to the size of central bank balance sheets between the period before the Global Financial Crisis and today. In the UK, the upper end of that benchmark range is nearly half the size of the Bank of England’s balance sheet today, and six times that in 2007.
Thank you for your kind attention. 2015 U.S. Monetary Policy Forum The Equilibrium Real Funds Rate: Past, Present and Future  4  BIS central bankers’ speeches

They will discuss how countries can best formulate labour market policies in the pandemic’s wake to restore and rebuild workers’ ability to engage in the labour market of the future. 13 At lunchtime, we are privileged to have Professor Emi Nakamura join us virtually. She will speak on “Inflation, Monetary Policy and the Phillips Curve”, a topic that that has become dominant to policy considerations this year. 14 Anchoring today’s discussions is Professor Ricardo Reis, the author of this year’s Commissioned Paper, who will discuss whether monetary policy has placed an undue emphasis on the natural real rate of interest, which we term r* and measure by government bond yields, a parameter that is inherently tricky to define and problematic to measure. Despite these difficulties, r* has seemingly come to occupy a central place in assessments of the appropriateness of the policy stance, a conundrum that Professor Reis will help clarify. We are delighted that Professor Andres Velasco and Professor Vissing-Jorgensen are with us to discuss the paper. 15 But first, we are honoured to have Dr Li Bo, Deputy Managing Director at the IMF, to deliver the opening address for AMPF2022. He brings with him a wealth of experience in economic policymaking, serving in a range of monetary- and macroprudential-policy related roles at the People’s Bank of China, before assuming his current position at the IMF. Dr Li’s breadth of experience and depth of technical expertise will offer pertinent insights, at this complex global conjuncture. ***  © 2022, Government of Singapore.
Those policy simulations could be complemented by controlled trials of policies, the like of which have been successfully pioneered by the What Works Centre for Local Economic Growth.55  The economy is a complex, adaptive system. Behaviour in those systems is difficult to predict ex-ante, especially at times of policy change; it is emergent, just as a hurricane or tornado is emergent. Often, our policy intuition about complex systems is simply wrong. No model, however micro-founded or data-rich, is proof against those uncertainties. But one that embodies complex, micro-level dynamics is more likely to do so than one without them. A complex systems framework can make for robust policy choice. That was Jay Wright Forrester’s insight in the 1950s. We know it to be true from more recent experience. The real-time, supply-chain data system developed by Walmart twenty years ago transformed inventory management, at Walmart and elsewhere. The real-time micro-level models developed by meteorologists transformed weather-forecasting at around the same time. Today, digital twinning is transforming processes across companies. These are microcosms of what might be achievable at the macroscopic scale. 55  For example, What Works Centre for Local Economic Growth (2018). 43  All speeches are available online at www.bankofengland.co.uk/speeches  43  Can a Central Bank be Local? Finally, what are the implications of these local economic perspectives for central bank policy? On the face of it, these might seem few. Central banks are national agencies. Their policies, such as interest rates, can only be set at the national level.

Information about future demand and supply levels ought to be reflected in the current price and in the prices of commodity futures. But the increases from Autumn 2010 onwards were largely unexpected, and have been a genuine surprise for our forecasts. For example, spot oil and gas prices have risen very substantially since their low points in 2009.2 Spot oil prices are well above the levels implied by futures prices at the time of the February Inflation Report (Chart 2). Gas futures prices have also moved markedly higher since then (Chart 3). Chart 2  Chart 3  Sterling oil prices(a)  Sterling gas prices(a)  Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. Each futures curve assumes that the sterling-dollar exchange rate remains constant at its average during those periods. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. (b) One-day forward price of UK natural gas. (b) Brent forward prices for delivery in 10–21 days’ time converted into sterling. Third, we have been experiencing the ongoing effects of sterling’s fall during 2007 and 2008, when the nominal effective exchange rate fell by around 25% (Chart 4).