samchain/econo-pairs-v1 huggingface dataset:
As a country, we are trying to rebalance our economy at a time when a global slowdown, and concerns about the solvency of European banks and sovereigns, threaten recovery here in the United Kingdom. Two weeks ago, the Monetary Policy Committee (MPC) decided to resume its asset purchase programme and create new money. Before I set out the reasons for that decision, I want to explain why the global nature of the crisis means that monetary and fiscal policy in the United Kingdom can only do so much. Our fate rests to a considerable extent on the policies pursued by our trading partners. That is why the Chancellor and I put such weight on this interdependence among the major economies at last weekend’s G20 Meetings in Paris. Countries have responsibilities to each other, and we need to work with our partners overseas to find a solution to present problems. Four years into the crisis it is surely time to accept that the underlying problem is one of solvency not liquidity – solvency of banks and solvency of countries. Of course, the provision of additional liquidity support to countries or institutions in trouble can buy valuable time. But that time will prove valuable only if it is used to tackle the underlying problem.

By far the most effective way of helping SMEs quickly would be to provide incentives for lending by existing banks because they can assess credit risk in a way that no other institution could do in the immediate future. Bank and Treasury officials are working together on such ideas. In the end, however, the shape and parameters of any scheme will be, and properly so, determined by the Government. Let me sum up. From the very beginning of the global crisis there has been a reluctance by governments to face up to the underlying solvency problems generated by apparently unending trade deficits with no mechanism, whether flexible exchange rates or some other means, for correcting these disequilibria. Those solvency problems have shown up on country and bank balance sheets. The initial reaction has always been to provide liquidity: through central banks or an extension of official lending by governments. Providing liquidity to buy time to devise and put in place a coherent response to the underlying problem can be not only valuable but necessary. But liquidity can never be the answer in itself. And if the time bought is not used then the size of the debt problem becomes larger and its cost is gradually transferred from private sector creditors to taxpayers. The main impediment to the strategy of rebalancing our economy is markedly slower growth in our major export markets, especially in the rest of Europe.
Our monetary policy concept, which we adopted in 2000, defines price stability, and I quote again, as "a rise in the national consumer price index of less than 2% per annum". Let me draw your attention to three subtleties here. First, our mandate is to ensure price stability, but we do tolerate some inflation! For both the ECB and the SNB, prices should slightly increase or potentially stagnate, but not decrease over time. Rising prices may not correspond to your idea of price stability, and you may think that even low inflation should be avoided since inflation causes inefficiency. The reason why central bankers think that price stability is achieved even when there is in fact some inflation, is that the better quality of new products and the improvement of existing ones can justify non-inflationary price adjustments. A second detail is that we do not name one figure as the desirable inflation rate. Rather, we say that we think of price stability as inflation somewhere between 0 and 2%. The reason for this is that uncertainties about the extent of product innovations make it difficult to define a certain inflation rate as optimal. Moreover, given the importance of trade in our GDP, our inflation rate may react rapidly to changes in foreign prices, which should not necessarily trigger a monetary policy reaction. A target band gives us more flexibility in the implementation of monetary policy.

Looking at our development over the last ten years, I do believe that price stability, due to monetary independence and flexible exchange rates, has been beneficial to the Swiss economy. It has maintained a low interest rate environment which has facilitated the private sector's adjustment to the rapid changes of the world economy. And what about Israel? I think that the arguments in favour of Switzerland's monetary independence apply even more to this country. While we at the SNB concentrate primarily on domestic developments and trends in the euro area, the Bank of Israel also has to take into account economic conditions in the US. Thus, there are three major sources of shocks that Israeli monetary policy has to respond to in order to achieve the goal of price stability. BIS Review 46/2006  7  Despite difficult circumstances, Israel was able to stabilise its monetary framework in the 1990s. The Bank of Israel now operates with an inflation target and will soon benefit from a new law that will modernise its decision-making process and strengthen its autonomy. All the necessary ingredients are now in place for the implementation of a successful independent policy in this country, as was once also the case in Switzerland. May I wish Stanley Fisher and his colleagues all the best in this endeavour. 8  BIS Review 46/2006
Accordingly, we should care much more about longer-term movements in financial conditions than about higher-frequency, transitory movements. That is because behavior in firms and households will be influenced much more by how financial conditions evolve over time, rather than by where they happen to be at a particular moment. To emphasize this point, let me give two contrasting examples—one where financial conditions moved sharply but not persistently, and another where financial conditions moved systematically over a longer time period. We will see that it is the long-lived movements that have the largest influence on the economic outlook. For the first example, consider the U.S. equity market in 1987. The S&P 500 index began the year at 242, shot up to a peak of 337 in August (an increase of almost 40 percent) and plummeted to a trough of 225 in October (a fall of 33 percent). When the stock market fell more than 20 percent on October 19th—which came to be known as “Black Monday”—many feared that the decline would lead to a recession. After all, that crash was the largest-ever one-day percentage decline of the U.S. stock market. But, no recession occurred. Importantly, households sustained their spending despite the sharp decline in household wealth. This happened, in part, because household spending had not yet responded much to the sharp run-up in stock prices earlier in the year, so consumer spending turned out to be relatively insensitive to the market’s sharp reversal.

To make the choice of path regarding digitalisation of the payment market easier, we need a clear Swedish stance that is based on political priorities and decisions. This includes a review of the Sveriges Riksbank Act that clarifies the Riksbank's mandate. It is also important to cooperate with other public authorities. The e-krona would have points of contact with many other authorities, for instance the tax account, to which all those who are to pay tax receive access, functions as a form of state money. It is possible that the best solution would be to build an e-krona system together with other authorities. It would also be good if the legislation in this field in Sweden was updated to take into account the fact that payments will in future be made digitally. If the means 8 See, for instance, Project Jasper https://www.payments.ca/sites/default/files/29-Sep-17/jasper_re-  port_eng.pdf, Project Ubin http://www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/ProjectUbin.aspx and Project Stella https://www.ecb.europa.eu/pub/pdf/other/stella_project_leaflet_march_2018.pdf. 4 [9]  of payment issued by the Riksbank is not generally accepted, it will be difficult for the Riksbank to perform its task of promoting a safe and efficient payment system. According to the Sveriges Riksbank Act, the Swedish krona, in the form of cash, is legal tender. But at the same time, it is possible to waive the obligation to accept cash by, for instance, putting up a sign that cash is not accepted. As the use of cash is declining rapidly, it is urgent that the legislator takes a stance on what status in the law legal tender shall have.
Public investment, and supranational investment coming from the NGEU funds, can only account for a small portion of this amount. 9  Moreover, a fundamental, game-changing feature for a more integrated capital market would be the existence of significant pan-European safe assets. A common safe asset would most likely become a common benchmark, allowing the prices of equities and bonds across the euro area to reflect fundamental risk more clearly. It would facilitate the development and integration of capital and financial markets in the euro area, as flight-to-quality movements would no longer imply flight-to-core-countries movements. This would be particularly relevant in times of stress, when it would help mitigate the possibility of monetary policy transmission being hampered in a context of fragmented bond markets. In this sense, the experience with the issuances to finance the SURE and NGEU programmes can serve as the prototype for this safe asset. Although relatively small in size, they have been a success in terms of market appetite and have helped most Member States reduce costs because of the pooled financing (see slide 9). Final reflections  As I mentioned at the beginning of my address, the fiscal-monetary policy mix has passed the demanding test posed by the COVID-19 crisis, so far, with good marks. The ad hoc decisions taken by policymakers were adequate, and compensated for the lack of a complete euro area institutional architecture, enabling monetary and fiscal policies to do their job, without overburdening each other.

There was a reduction in Stage 2 loans in the same period, to stand at 7.2% in March, although this level remains above its pre-pandemic figure of 5.9%.11 Forborne exposures also dropped, to 4.1% of all lending to the resident private sector in March 2023, below their pre-pandemic level (5%), while foreclosed assets saw a 14.5% fall in 2022.12 As for credit backed by Spain’s Official Credit Institute (ICO), the proportion classified as Stage 2 shrank in the 12-months before March 2023 by 3.2 pp to 19.6%. However, nonperforming assets in this portfolio increased by 70% in 2022, lifting the NPL ratio to 8.2% (up by 4.1 pp on March 2022). The reduction in the size of this portfolio (14.9% yearon-year to March 2023) accounted for 1.2 pp of the increase in the NPL ratio. Profitability Return on assets (ROA) has continued to improve, up to 0.71% in March 2023,13 one of the highest levels in the last decade. Meanwhile, return on equity (ROE) stood at 11.3%, more than 400 bp over the level observed in 2019 and above the cost of equity. The improvement in profitability stems, mainly, from the growth in net interest income, which rose by 28.5% year-on-year,14 driven by the fact, as I mentioned earlier, that the increase in market interest rates has been passed through to loans more than to deposits. Conversely, impairment losses climbed by 38.8%, as a result of business abroad, as they rose by barely 1.7% in business in Spain.
Only time will tell whether these defining moments have truly secured the monetary system and central bank independence. Conclusion Public institutions are the product of their tasks and history. The monetary system was shaken when Norges Bank solely focused on bringing the krone’s value back to par. We might say that the institution lost sight of broader social responsibilities. But the monetary system also suffered in the following period when the authorities took control and lost sight of the central bank. The conclusion with regard to the monetary system is that it must be both steered and guarded. The political authorities must define the objectives and the central bank must be the devoted guardian of the monetary system. The central bank must deliver price predictability, a robust payment system and a stable financial system. It is in its performance of this responsibility that the central bank contributes to realising the mandate issued by the Storting – to supervise the monetary system. Inspired by the former Governor of the Bank of England, Mervyn King, I will summarise my experiences in a few simple principles, which if followed, would enable institutions to fulfil their role in society and serve its citizens:43 1. It must know its social responsibility and restrict itself to the pursuit of the defined objectives and not be distracted by extraneous concerns – it must keep its promises. 2. It must use its instruments and expertise44 to achieve the objectives – it must make good decisions.

Mohamed S Fofana: Managing Sierra Leone’s post-conflict economy Keynote address by Mr Mohamed S Fofana, Deputy Governor of the Bank of Sierra Leone, at the opening ceremony of the Regional Forum on Economic and Financial Management for Legislators, Freetown, Sierra Leone, 12 July 2004. *  *  *  Mr Chairman, Hon. Minister of Justice, Your Excellency, the High Commissioner of The Gambia, Hon. Members of National Parliaments of WAIFEM Countries, Director General of WAIFEM, Directors of the Bank of Sierra Leone, Distinguished Guests, Facilitators and Participants, Ladies and Gentlemen, Introduction It is my honour and privilege to extend a hearty welcome to all of you on behalf of the Government and people of Sierra Leone, Governor JD Rogers who is unavoidably absent today, the Board, Management and staff of the Bank of Sierra Leone and on my own behalf, on the occasion of the opening of the Regional Forum on Economic and Financial Management for Legislators organized by WAIFEM. As host, I would like to urge you to take time out of your crowded programme to visit Freetown and behold the many attractions of this rejuvenated city. Ladies and Gentlemen, permit me to briefly dwell on the state of the West African Economy.
Range (*)  Spot  U.K.  U.S.A.  South Korea  Mexico  Japan  Norway  Malaysia  Poland  China  India  60 Israel  60 N. Zealand  80 Chile  80 Turkey  100  Thailand  100  South Africa  120  Hungary  120  Canada  140  Philippines  140  Czech Rep.  160  Rusia  160  Australia  180  Brazil  Figure 6 Real exchange rates in the world (index, average January 2000 - April 2011=100) 180  Average  (*) The range indicates maximum and minimum values shown by the currency during specified period. Sources: Central Bank of Chile and Bank for International Settlements (BIS). 10  BIS central bankers’ speeches  Figure 7 Incidences in monthly CPI inflation (*) (percentage points) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8  1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8 10  Mar. May  Jul. Sep.  Nov.  11  Mar. May  Foodstuffs minus fresh fruits and vegetables (21.3%) Other (64.7%) Fuels (5.7%) Fresh fruits and vegetables (2.9%) Public utilities (5.4%) CPI (*) In parentheses, shares in CPI basket. Sources: Central Bank of Chile and National Statistics Institute.

Headwinds in the aftermath of the financial crisis are still in evidence, particularly the diminished availability and tougher terms for residential mortgage credit. How fast the normalization process will proceed depends mainly on two factors: how the economy evolves and how financial market conditions respond to movements in the federal funds rate. If financial market conditions do not tighten much in response to higher short-term interest rates, we might have to move more quickly. After all, the point of raising short-term interest rates is to exert some restraint on financial market conditions. In contrast, if financial conditions tighten unduly, then this will likely cause us to go much more slowly or even to pause for a while. At the end of the day, we will move short-term interest rates to generate the set of financial market conditions that we deem is most consistent with our employment and inflation objectives. How high will short-term rates ultimately need to go? I think this issue is very difficult to judge for a number of reasons. First, it depends on how financial market conditions evolve in response to our monetary policy adjustments. Second, it depends on other factors, such as real potential GDP growth, which, in turn, depends on the growth rates of the labor force and of productivity. My current thinking is that the long-run nominal federal funds rate consistent with 2 percent inflation is somewhat lower than in the past. My point estimate is 3½ percent, but I wouldn’t bet the farm on this.
To achieve the 2% inflation target over the medium term but at the cost of an avoidable depletion of the economy’s supply capacity would not be congruent with the MPC’s Remit, which includes supporting growth and employment in so far as that is consistent with the overriding goal of price stability. I was glad that the “effective supply” way of thinking about this was reflected in our latest Inflation Report. But I would readily concede that we must not lose sight of the potential “speed limit” effects that featured in our November Report. Given the need for some rebalancing in the pattern of demand and activity, and the likely lags in firms bringing even suspended capacity back on-line, bottlenecks are a distinct possibility. We will need to be especially alert to messages from the Bank’s Agents, to survey evidence, and to data on productivity, wages and prices for any sign of inflationary pressures. Volatility of inflation, and inflation expectations The Committee’s strategy has warranted maintaining the very substantial monetary stimulus notwithstanding the marked pick-up in inflation over recent months. As the Governor explained at our press conference a fortnight ago, we think that the recent rise in inflation is accounted for mainly by the increase in petrol prices, the restoration of VAT to 17.5%, and lagged effects of sterling’s substantial depreciation. But we can’t be, and aren’t, comfortable about it. Not least because the country has to trust us that these will be temporary disturbances.

This country suffered too much from the inflationary booms and busts of the past for us to take risks on that score – in either direction. QE: the stimulus to nominal demand, and the financing of the banking system To avoid the downside risks, we need to help to revive the economy. And the monetary stimulus is, of course, directed at a big deficiency of nominal demand in the economy. At our latest monthly meeting in early February, the MPC maintained Bank Rate at 0.5% and the stock of money injected via asset purchases at £ The money market yield curve has edged down slightly since then. Over the past year my colleagues on the MPC have variously set out the key mechanisms through which Quantitative Easing (QE) should work. I shall not go over all that ground today, but there is unavoidable uncertainty about the speed and potency of QE’s effects. I am minded to think that some of the effects will come through fairly gradually. And therefore I would stress that the monetary stimulus from QE has not stopped. The flow effect of our bond purchases on gilt yields is not the beginning and end of how QE provides monetary  4  BIS Review 21/2010  stimulus. Plainly the mechanisms through which our money injections affect the economy differ in some respects from the transmission of changes in Bank Rate, which in an economy with a lot of (net) floating-rate debt can affect household and business borrowers’ cash flows quickly.
If the interest rate is increased to the extent that output is reduced to a level that is consistent with stable inflation over time, inflation may be too low as a result of an appreciation of the exchange rate in the short term. A trade-off must be made in the short term between the inflation target and stability in the real economy. A cost shock, which fuels inflation and at the same time reduces output and employment, leads to a more marked conflict in the short term between the inflation target and stability in the real economy. Different types of disturbances will often occur at the same time, and the central bank must continuously make trade-offs between variations in output and employment on the one hand and variations in inflation around the target on the other. Given that inflation over time shall be close to the target, these trade-offs are at the core of flexible inflation targeting. In the theoretical literature, making trade-offs between price stability and stability in the real economy is often described as minimising a loss function, where variations in output and variations in inflation are included.7 The central bank shall then choose the path for interest rates ahead that minimises the discounted “losses” in all future periods. The loss in one individual period will be:  In the equation, denotes inflation, * the inflation target and (y-y*) the output gap. The loss function thus includes the deviation between output and the output potential and between inflation and the inflation target.

Projections for imported price inflation may therefore be said to be characterised more by Knight uncertainty for a period ahead. Monetary policy under uncertainty was one of the many topics discussed in the report Norges Bank Watch 2003, where our policy response pattern and communication were evaluated in the light of the theory of monetary policy under uncertainty. This was useful input and constructive criticism which we will keep in mind in our future work. Norges Bank Watch 2003 points out, for example, that we should make a clearer distinction between additive uncertainty and multiplicative uncertainty. This distinction is most clearly reflected in our economic models. The uncertainty associated with the exogenous variables is called additive uncertainty. Examples of additive uncertainty are add factors in our economic models and other exogenous factors such as fiscal policy and the oil price. Uncertainty about the actual functioning of the economy may, however, lead to multiplicative uncertainty. Multiplicative uncertainty often involves uncertainty about the structural parameters in the model, such as the effect of the interest rate on demand and the exchange rate and the slope of the short-term Phillips curve.