samchain/econo-pairs-v1 huggingface dataset:
With low unemployment, solid wage growth, and ample job openings, all indicators show that the strength of the labor market is at a level consistent with my view of maximum employment. Inflationary Pressures The other side of our mandate is price stability, and this is where our greatest challenge now lies. Inflation is far too high. In February, inflation-as measured by the personal consumption expenditures (PCE) price index-was nearly 6½ percent. And high inflation is a key concern in many countries around the world. Even before Russia's invasion of Ukraine, the rapid global economic rebound had driven up prices for oil and many other commodities. Higher inflation is especially detrimental for those who are least able to meet the growing cost of essentials like food, housing, and transportation. The war in Ukraine and the global response present even greater challenges and uncertainty. For example, Russia and Ukraine are large exporters of key materials, including neon, palladium, and platinum. Those materials are used in the production of a wide array of products, from auto parts to computer chips. Even before the war,  2/5  BIS - Central bankers' speeches  manufacturers were confronting shortages of important inputs. Further disruptions to these key products could create spillovers to economies across the globe. But there are differences in the ways in which countries are experiencing inflation. In the United States, we are now seeing elevated inflation across many categories of goods and services.

With inflation too high, we are focused on restoring price stability, while maintaining a strong labor market. Before I go any further, I should give the standard Fed disclaimer that the views I express here are my own and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or anyone else in the Federal Reserve System. Shared Impacts It's striking to think that just two years ago, the U.S. economy was reaching the trough of the COVID-19 recession. Back then, we were living through unprecedented lockdowns. And we had no way of knowing that this would be the shortest recession on record, or that the rebound would be so dramatic. If we think about the global pandemic as a common factor, shutdowns, contractions, and rapid rebounds were the shared impacts across countries around the world. But so were supply-chain bottlenecks, shortages in semiconductors, and backlogs at portsissues we grapple with today. And just like the United States, other countries have experienced imbalances in demand. Since the initial lockdowns, people have spent more of their money on electronics, cars, and furniture-and less on entertainment, travel, and restaurants. 1/5  BIS - Central bankers' speeches  Many nations also showed considerable resilience of economic activity through the Omicron wave. But global risks remain. The BA.2 variant is now fueling a rise in cases in some countries, including China, Hong Kong, and the United Kingdom. Their experiences bear close monitoring.
Progress here has helped Spain in ceasing to evidence excessive macroeconomic imbalances, in the opinion of the European Commission, expressed in the conclusions of the report it issued on 5 March as part of the European Semester. This is a positive result which should nevertheless not distract us from the need to continue adopting measures that further the correction of the imbalances still in place, even though appreciable progress is being made. Of most visibility and weight has been the redressing of the external deficit. Following a deficit of 10% of GDP in 2007, the external balance posted a surplus of 1.5% of GDP in 2013. From the standpoint of its contribution to GDP growth, net external demand has substantially cushioned the fall-off in domestic demand. The opening-up of our productive system to the external sector through trade flows and foreign direct investment is, as you know, one of the factors that has most boosted the modernisation of the Spanish economy in recent decades. The aggregate share of goods and services imports and exports from 1995 to 2013 has risen from 45% to 66% of GDP, outpacing countries such as France and Italy, although it is still some distance off those economies with greater export potential, such as Germany. The buoyancy of Spanish exports has exceeded the increase in global trade. Our export share in the world total, in real terms, has increased over the past five years to around 2.2%, slightly above the relative weight of our economy in world output.

Such coverage is the norm for exports towards countries with appreciable risk and in transactions which, frequently, have the sovereign guarantee of the importing country. CESCE also provides underwriting on the State’s behalf for the political risks associated with exports (the main such risk being default by the sovereign or by the institutions backed by the sovereign), except in operations at less than two years in EU and OECD countries, where it is considered that there is a sufficiently developed private underwriting market; it also extends guarantees and bonds for participating in international tender procedures and projects. From 1998 to 2007 there was a strong expansion in international banking activity in financing for Spanish companies’ international activity. Banks took on a relevant role in the financing of trade flows to emerging countries and in the opening-up of new markets. Against the backdrop of this boom, the use of instruments offered by export credit agencies for exports became less necessary and less frequent. The international financial crisis The financial instability as from mid-2007 and the outbreak of the crisis in autumn 2008 radically altered this financial landscape, giving way to an across-the-board decline in financing by international banks. The contraction in credit had a particularly severe effect on international trade, which fell by between 20% and 30% in the main economies. The central banks responded to this situation through coordinated action that stabilised bank financing conditions.
As Arthur Cecil Pigou (18771959) put it: “The social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives … is the beginning of economic science.” One may have chosen economics to find out how to become wealthy. Woody Allen said: “Economics is the study of money and why it is good.” Or one may have chosen economics to find out how society functions. Economics certainly offers a good starting point for this endeavour. Let me quote Alfred Marshall (1842-1924): “Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” Or one may have chosen economics because it is so hopelessly difficult and therefore enormously attractive to, and here I quote Robert Solow, “the overeducated in pursuit of the unknowable”. In the process of studying economics, every student sooner or later will have to decide whether do drop out or to continue. Most of the students opt for the practical application of what they have learned and quit university after their final exams. Some, however, will opt to stay on. In practice, this means to teach, to do research and increasingly to administrate since the universities have become large and slow-moving institutions. Let’s forget the latter and talk about the former. In teaching and in research lies most of the professional fulfilment of a university economist.

I just came back from a trip to Puerto Rico and the U.S. Virgin Islands, which are part of the New York Fed’s district. The overwhelming feedback I received from community leaders there was how useful they found our research reports for thinking about how to strengthen their local economy. An example closer to home is the work we do looking at the credit behavior of households at the zip code level. Analysis from the New York Fed is used by Financial Empowerment Centers across New York City to support people on low and middle incomes get out of financial trouble and build a credit profile. It also acts as a barometer for the success of programs, which helps practitioners learn which interventions are most effective. 2/4  BIS central bankers' speeches  Convene As well as connecting people with research and data, we play an important role creating spaces where different stakeholders convene, discuss the challenges and opportunities facing their communities, and share best practices. This is where our workforce development program comes in, and it’s an area where Federal Reserve Banks from across the country have been collaborating to share knowledge among key stakeholders. The work we’re doing bringing together schools and local employers is also in this vein. We owe it to young people to ensure that their investments in education pay off and that there’s a job at the end of all their hard work and study.
An assessment of which tools that might be useful will partly depend on the specific features of the Norwegian credit and financial markets and partly on the shocks that hit our economy. The tools we resort to in a crisis may be less suitable in a normal situation. Gains must be weighed against costs. This brings us to some key interrelated questions: what should the level of ambition for monetary policy be, and how far should the limits of monetary policy be stretched before other components of economic policy must take over? Conventional monetary policy – how much room for manoeuvre is there? Chart: The policy rate in Norway First, a few words on our most important monetary policy instrument – the policy rate. Since the trough at 0.5 percent, the policy rate has been gradually raised to 1.5 percent, reflecting favourable developments in the Norwegian economy. In our September interest rate forecast, the policy rate remains close to today’s level of 1.5 percent for the next couple of years. On the one hand, growth in the Norwegian economy is still solid, inflation is close to the target and capacity utilisation is somewhat above a normal level. On the other hand, there is considerable uncertainty about the global growth outlook. The policy rate path reflects a trade-off between these conditions. Chart: Low policy rates abroad A rate of 1.5 percent is considerably lower than the average level for the policy rate since inflation targeting was introduced in 2001.

(2018) and Kuttner (2018) provide an overview of alternative instruments introduced by the central banks in the US, the UK, Japan and the euro area. They also refer to different estimates of the effect of alternative instruments on financial prices and interest rates, the real economy and inflation expectations. See also Filardo and Nakajima (2018), Hesse et al. (2017) and Haldane et al. (2016). 6 Borio and Zabai (2016). 7 Cf. Borio and Zabai (2016), Filardo and Nakajima (2018) and Hesse et al. (2017). 8 Borio and Zabai (2016). 9 The arrangement allowed banks in Norway to enter into agreements whereby covered bonds could be  temporarily swapped for short-term government securities. 9/9  BIS central bankers' speeches
With this in mind, a further strengthening of the capital situation and – in conjunction with this – a further realignment of the business model in order to achieve sustainable profitability, are still central challenges facing the big banks. The profitability and the capital situation of the banks with a domestic business focus – the cantonal, regional and Raiffeisen banks – were significantly higher in 2009 than the longterm average. The dip in GDP from mid-2008 to mid-2009 has so far barely had any effect on these banks, with the result that the provisioning requirement for credit risk continued at a low level in 2009. Nevertheless, in our estimation, the position of these bank categories is less comfortable than may appear at first glance. First of all, the capital situation of the Raiffeisen banks and the state-guaranteed cantonal banks needs to be put into perspective: the Raiffeisen banks can count the additional funding obligation required of members in the  BIS Review 85/2010  1  cooperative as capital until the end of 2011, and the cantonal banks are entitled to a reduction in required capital due to the state guarantee. In the absence of these concessions, the capital ratios – particularly for the Raiffeisen banks – would be markedly lower. Second, according to our assessment, the risk exposure of the domestically focused banks is higher now than it was in 2009. For one thing, the interest rate risk of cantonal and Raiffeisen banks is at historically high levels.

Inflation expectations  Inflation expectations cannot be observed directly, but approximate measures can be derived indirectly in three different ways: asking a sample of consumers, surveying professional forecasters and extracting information from financial markets. Let me elaborate. The European Commission conducts a poll every month in which it seeks consumers’ opinions on inflation developments in the euro area, in particular their perceptions of current inflation developments and their expectations for the next 12 months. These two measures are plotted in Chart 10, together with actual inflation. Consumers’ expectations have declined strongly in recent months, reaching a record low in May (the survey started in 1985). Most respondents thought that prices would either remain unchanged or fall in the next 12 months. But this is not really the same as expecting deflation. The second way of measuring inflation expectations is via the ECB’s Survey of Professional Forecasters. It suggests that most respondents regard deflation as unlikely. In the second quarter of 2009, none of the 50 participants reported a negative point estimate for 2009, and two participants reported a point estimate below zero for 2010. Together with point estimates, participants are also asked to assess the likelihood of future inflation falling within given ranges. Averaging the individual responses provides a summary of their assessment. As Chart 11 shows, in the most recent survey, respondents assigned an overall 18% probability that annual inflation will be negative in 2009 (left side of the chart), which is significantly higher than in previous rounds.
The fact that we both have essentially the same objective – and are subject to the same limitations – does not, of course, mean that we can adopt the same policy stance – the same level of short-term interest rates, as some commentators have recently, and oversimplistically, suggested. We start from different positions, and our respective economies are subject to many different, as well as many of the same, influences. That was an important economic reason why the Government decided, rightly in my view, not to participate in the first wave of monetary union – despite the attraction, in the right circumstances, of nominal exchange rate certainty across the European continent. It was, I know, a matter of regret to many of our European partners; but there was also a sense of relief, because many of them recognised that our different economic situation would have complicated European monetary management had we joined from the outset, as it would have complicated monetary management in this country. In our case, the UK economy has grown at an average annual rate of around 3% now for the past six and a half years (to the third quarter of last year). That is well above any plausible estimate of the underlying rate of growth of capacity in the economy as a whole – which is typically estimated at some 2–2½%. So what we were in fact doing over this period was steadily reabsorbing the economic slack created by the recession of the early 1990s.

The position is complicated in the euro-zone by a reviving political debate about just how much of the unemployment reflects supply-side weaknesses requiring structural reforms, and how much it reflects inadequate overall demand. The outcome of that debate will be crucial to the future evolution of the euro-zone. But in the immediate situation there was no reason to suppose that continued growth of demand and output was inconsistent with effective price stability in the zone as a whole. So much for our different starting points. But over the past year, the world – and I mean the world – has changed quite dramatically for both of us in that we have both been affected by the international economic slowdown. This started, in fact, with the financial disturbances in Asia in the latter half of 1997, but even as late as the beginning of last summer it seemed as if it might have only limited impact on the overall world economy. The IMF, for example, was still then projecting 3–3¾% world growth in 1998 and 1999 respectively – which was certainly a setback compared with their forecast of over 4% just six months before – but it was hardly catastrophic. Since last summer it has become increasingly clear that things are likely to be significantly worse than that.
History has taught us that Malthus and its intellectual descendants have always been proven wrong. The whole process of economic growth was borne out of the ability of mankind to overcome scarcity through human inventiveness and technical progress. It won’t be different this time. I am also very optimistic in the long run on the fundamental rebalancing of the world economy. Income per capita levels in the emerging world will progressively converge to those of the advanced economies and this will present gigantic market opportunities for producers in those countries. At the same time, tensions and insecurity created by differences in income and productivity levels will abate and disappear. The transition process, however, may be bumpy. Unavoidably, advanced economies, especially in Europe, will have to adjust to the permanent shift in world comparative advantages. They will have to increase flexibility and, above all, develop and preserve their most precious resource – human capital – through education and excellence in research. Emerging economies will have to face the dual challenge of aging and reducing inequalities. During that transition period, which may last several decades, it is important that the whole process is not derailed by shocks and crisis borne out of imbalances in the world economy. This is where the twin questions – (1) of the level and distribution of global demand and (2) the level and allocation of world savings – may matter most. Inside the G20, there is broad agreement on the need to rebalance aggregate demand.

The future of the Spanish economy hinges greatly on these policies, not only in the long run but also in the more immediate term. The priority of these reforms should be to generate a rapid and deep-seated change in the prevailing labour market trends. That requires altering a good number of the institutions that currently regulate this market. In particular, innovative hiring arrangements are needed to facilitate job creation and to overcome the marked segmentation currently in place which has adverse consequences for employee training, job stability and for efficiency and equality in the economy. In turn, collective bargaining should be reformed so that internal organisation and labour costs are better tailored to the specific situation of each company and to cyclical developments, but also so as to equip firms with the flexibility they need to increase productivity. But there are other measures we should not rule out, even though their effects may take longer to materialise. This is the case, firstly, with education. Undoubtedly, improving education is the most important issue pending for economic growth in Spain. True, we have made progress in some areas; but it is no less true that there are incipient signs that the increase in the level of educational attainment of the workforce observed in the second half of the 20th century is slowing. The reform of the education system, moreover, would complement that of the labour market.
8 The Federal Reserve permits purchases of debt issued or guaranteed by the U.S. government or government  agencies (such as agency debt and agency MBS). 9 This channel usually relates to signaling about short-term rates. A variant is to target longer-term interest rates  by a commitment to use balance sheet expansion if necessary. The ECB’s OMT program, created to purchase government bonds of euro-area countries that were granted financial assistance under certain conditions, was perceived as meaningfully reducing yields through commitment alone; no actual purchases were needed. In late September 2016, the Bank of Japan unveiled a new monetary framework called “quantitative and qualitative monetary easing with yield curve control” (QQEY). The new regime consists of two major components: (1) “yield curve control,” in which the BoJ will target both short-end interest rates (with the deposit rate at –0.1 percent) and long-dated yields (around 0 percent for 10-year Japanese government bond yield), and (2) an “inflationovershooting commitment,” which amounts to maintaining monetary expansion until the 2 percent inflation target is exceeded in a stable manner. 10 See the May 10, 2010 press release for the ECB’s Securities Markets Programme. 11 For example, the Federal Reserve chose to transact in the agency MBS market via external investment  managers at the start of LSAP I “as a means of implementing the MBS program quickly and efficiently while at the same time minimizing operational and financial risks.

This approach should be a consensual approach of the shareholders, a transparent one, where everybody, sponsors and countries of operations agree on the principles and objectives. Ladies and gentlemen, 1/2  BIS central bankers' speeches  Allow me to conclude by saying that the National Bank of Romania strongly supports the partnership with the European Bank for Reconstruction and Development. We appreciate the assistance provided and its benefits and positive impact. We will remain your reliable partner, as always. I invite Mr. Eugen Teodorovici, Minister of Finance and Governor to the EBRD to give his keynote speech on “Romanian Government Program and Future Presidency of the European Union Council”. I wish you fruitful and successful discussions. Thank you. 2/2  BIS central bankers' speeches