samchain/econo-pairs-v1 huggingface dataset:
For example, the process of private sector balance sheet repair is nearing an end and the global stance of fiscal policy is shifting from contractionary to expansionary. Any rise in potential productivity growth would also boost the equilibrium rate. The scope for the equilibrium rate to rise will also be greater if spare capacity is larger than currently estimated. 11 See Carney, M (2018), ‘Guidance, Contingencies and Brexit’. 12 For example, as explained by Richard Clarida in his speech ‘Data Dependence and US Monetary Policy’, 27 November 2018. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  In the MPC’s projections published last week, the balance of headwinds to growth and more accommodative policies are expected to return global growth to around potential rates by the end of the year (Table 1). Table 1: MPC projects global growth likely to settle around potential rates Projections Average 1998-2007  2018  2019  2020  2021  Memo: potential  PPP-weighted  4  3½  3¼  3¼  3½  3½  UK-weighted  3  2½  2  2  2  2¼  Sources: Bank of England, Eurostat, IMF World Economic Outlook (WEO), ONS, US Bureau of Economic Analysis and Bank calculations. Notes: 2018-21 figures show annual average growth rates. Potential growth is calculated as an average from 2019-2021. This is the most likely scenario unless there are shocks from the other two cycles.

Against the backdrop of fear and uncertainty, banks have tightened their lending and consumers have become more cautious in their spending. This will act as a drag on the euroarea economy going forward. A key constraint for both the US and euro-area, as well as many other advanced economies, is the limited policy space available to authorities. In these countries, monetary policy and fiscal stimulus have been pushed to their limits. Limited capacity to respond to new shocks thus represents a real risk for these economies, and for the global economy, that we must be weary of. In this setting, and given the deep-seated nature of the problems being faced, meaningful remedies rest just as much on political factors as on economic ones. How governments respond and how their electorates receive these responses will be an important source of uncertainty. In contrast, the rising economies in Asia offer a more positive outlook. Despite the slowdown in exports of many Asian countries, reflecting the softer global economic backdrop, domestic demand remains robust. More fundamentally, the continued rise of China and the formation of the ASEAN Economic Community (AEC) will generate enormous economic opportunities for the region. As will be discussed later, the key challenge for Thailand will be how to optimally position ourselves to reap the full benefits of this trend. This brings me to the internal challenges.
The way the term ”normalise” is used in this context usually means that the policy rate is being increased after having been very low for a period, that is, it is simply a way of pointing out the natural direction for the policy rate in future. At the same time, there is an implication in the term “normalise” that there is a level for the policy rate where it normally should be. Some analysts appear to have interpreted this to mean that the Riksbank’s increases in the repo rate point reflect that there is an end in itself to achieving such a "normal" level now that the economic upturn is well established and most curves are pointing upwards, quite regardless of how inflation may develop. However, this is not the way we reason. The fact that the interest rate is below the "normal" level is not in itself a reason to increase the rate, even if real economic developments are favourable. It is not an argument that can stand for itself. The decisive factor for future interest rates is the result of our forecasts and assessments of inflation and economic developments as a whole. It may be the case, for instance, that different factors are expected to hold back inflation over a relatively long period of time and that there may thus be reason, even in an economic boom, to allow interest rates to “normalise” – if we are to use this term – at a slower rate than would otherwise be justified.

13.10.2020  Panel: Macro Economic Policy in Transition – Perspectives from Advanced and Emerging Countries IMF Annual Meetings: Macro Conversations Pablo Hernández de Cos Governor  As in the rest of the world, the COVID-19 outbreak has given rise to a health and economic crisis in the euro area that is unprecedented in recent history. And, again, similarly to other jurisdictions, economic authorities have in the face of this situation responded forcefully both at the domestic and European level. In the particular case of monetary policy, in the last seven months, we, at the European Central Bank (ECB), have deployed an extensive package of measures to mitigate the impact of the pandemic on the euro area economy. From the outset, the ECB faced three significant pandemic-related challenges: first, the need to stabilise financial markets throughout the euro area, to head off cross-country financial fragmentation; second, to protect the supply of bank credit, which is especially important for funding for households and SMEs in Europe; and third, to counter the downward pressure on the medium-term inflation outlook stemming from the COVID 19 crisis, in accordance with our price stability mandate. Against this backdrop, we adopted a series of measures that may be grouped into two main blocks. As regards the first block, the ECB approved a broad raft of measures to provide liquidity to banks so that they, in turn, were able to ensure access to credit for households and firms. The measures included a significant improvement to the conditions of the TLTRO III operations.
Mr Heikensten discusses whether Sweden should join the euro area  Speech given by Mr Lars Heikensten, Deputy Governor of the Sveriges Riksbank to Stockholm City’s financial staff on 3 September 1999. *  *  *  Besides being one of the most momentous changes in the continent’s economic policy for many decades, the introduction of the single European currency at the beginning of this year was a major step in the political process that has been bringing the countries of Europe closer together since the 1950s. When EMU is debated in Sweden, the latter aspect tends to be neglected in favour of more or less short-run economic advantages and drawbacks. In 1997 the Government and the Riksdag (Sweden’s parliament) decided that Sweden would not be adopting the single currency from January 1999. A lack of popular support was given as the reason. Euro area participation at a later date was not ruled out, however, and it was underscored that Sweden must therefore have its options as open as possible. For true freedom of action there are certain definite requirements. Policy must remain focused on stability so that we can fulfil the jointly agreed criteria for entry. Sweden must follow developments in Europe and make practical preparations so that participation is feasible when we want to join. Freedom of action also requires that we are knowledgeable about the monetary union and actively debate its issues. Today I intend to make a contribution to that discussion.

Már Guðmundsson: Capital flows and fragmentation of the international financial system Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, in Session I in the conference “Fragmentation in the international financial system – can the global economy become one again?”, organised by the Central Bank of the Republic of Turkey and the Reinventing Bretton Woods Committee, Cappadocia, Turkey, 14 July 2012. *  *  *  For the most part, I will discuss some flaws in the international monetary and financial system(s) (IMFS) and in the European Union (EU) framework for cross-border banking and financial stability as they relate to both net capital flows and vulnerabilities in gross capital positions. My perspective on these issues is that of a policy-maker from a very small, open, and what used to be financially integrated economy, but it is also informed by the work I was involved in during my tenure at the Bank for International Settlements. The current international and monetary and financial system is in some sense a non-system, a hybrid of miscellaneous exchange rate regimes and diverse rules on cross-border capital flows and activities of financial institutions. This opens the door to country choices that, in the aggregate, cause and perpetuate global current account imbalances. This problem and its solution have been discussed extensively, and I will not dwell on that topic here.
  A second way we can use the balance sheet in support of monetary stability is by using reserves to buy or sell other financial assets in the open market; that lets us directly influence market interest rates. If we buy government bonds, for instance, the price of those bonds goes up which makes their yield – the effective interest rate earned by holders of bonds – come down. Like reserves, government bonds play an important role as safe assets in the financial system, and so changes in their yields also affect broader financial conditions, aggregate demand and inflation. It is this process of using reserves to buy other assets that goes by the complex-sounding and in my view slightly misleading name “quantitative easing” or QE. With Bank Rate having been close to its effective lower bound since the Global Financial Crisis, the “new normal” has been for QE to be the primary monetary policy tool. 8 As Peter put it in a paper with Colin Ellis titled “quantitative easing is not as unconventional as it seems” – it is just another way of using our balance sheet as a tool for monetary stability.9    A third way our balance sheet can be used in support of monetary stability is by lending reserves directly to banks. The precise facilities used to do this vary, with different incentive structures supporting different policy goals.

By potential output and potential growth we mean instead the output and growth that is possible without serious imbalances arising in the economy; the level of output at which supply and demand correspond and actual and expected inflation are in line with the central bank’s inflation target (assuming that there is one). The potential output level is not constant over time; it usually shows a growth trend, which is illustrated in Figure 1. This is mainly because technological developments mean that higher output can be achieved with the same amount of factors of production. Another reason could be long-term changes in the factors of production. The change in potential output from year to year is equal to the potential growth of the economy, which thus is the growth rate that is sustainable in the long term. Figure 1 shows the potential output level according to a simple statistical method where the trend, and thereby also the potential growth rate, is allowed to vary over time. The difference between actual and potential output is known as the output gap, and this reflects the cyclical variations in the economy. A negative output gap, that is to say, when actual output is lower than potential output, is usually connected with a recession. The demand pressure for goods, services and the factors of production is then small and there are ample unutilised resources in the economy. Price and wage increases are small and inflation is usually below the central bank’s target level.
If all a CBDC did was to substitute for cash – if it bore no interest and came without any of the extra services we get with bank accounts1 – people would probably still want to keep most of their money in commercial banks. But even then it’s likely you’d see some money moving out of existing deposits. That drain would be greater the more closely a CBDC resembles a genuine bank account. One imagines it would also be counter-cyclical – resources would flow out of commercial banks during times of financial stress, back towards them when risk aversion is low. Shifting deposits to the central bank, and away from the leveraged commercial banking sector, has two important implications. On the one hand, it would probably make them safer. Currently, retail deposits are backed mainly by illiquid loans, assets that can’t be sold on open markets; if we all tried simultaneously to close our accounts, banks wouldn’t have the liquid resources to meet the demand. The central bank, by contrast, holds only liquid assets on its balance sheet. The central bank can’t run out of cash and therefore can’t suffer a “run”. On the other hand, taking deposits away from banks could impair their ability to make the loans in the first place. Banks would be more reliant on wholesale markets, a source of funding that didn’t prove particularly stable during the crisis, and could reduce their lending to the real economy as a result. This is the really main point I want to get across.

By contrast, the central bank essentially holds nothing but liquid assets – largely government securities (Chart 49). Shifting deposits away from commercial banks, and towards the central bank, would therefore make for a “narrower” banking system – a “narrow” bank being one whose assets are as liquid as its liabilities. In principle, it would also make for a safer one. Backed by liquid assets, rather than risky lending, deposits would become inherently more secure. They wouldn’t be vulnerable to “runs” and we would no longer need to insure them. 8  Nor is it a live issue for the Bank. As the Governor recently said to the House of Commons’ Treasury Committee, “May I…be absolutely clear: there are no plans to abolish cash at the Bank of England”. 9  The Bank of England’s balance sheet has obviously grown following QE. Those operations have been conducted via the Asset Purchase Facility (APF), which is not directly on the Bank’s balance sheet – strictly speaking, the blue bar in Chart 4 is not direct holdings of gilts but a loan from the Bank to the APF. But the APF itself holds only gilts and, even before QE, the vast majority of assets on the Bank’s balance sheet were government securities. BIS central bankers’ speeches  5  The case for narrow banks has a long and distinguished pedigree. The classical economists Adam Smith and David Ricardo favoured such a system.
The events of 11 September have strengthened all the parties' awareness of the extent of international integration in a crisis situation. While the benefits of international cooperation have so far been undisputed, at least theoretically, empirical evidence has now been provided. Cooperation among the authorities in the various countries on the level of the Bank for International Settlements, the relevant committees of central bank governors of the Group of Ten and the International Monetary Fund is to be intensified. 8. A current example of such efforts can be found in the payment systems sector. Any strains on the financial system can spread rapidly as a result of the international integration of participants as well as of payment and settlement systems. Increased attention must be paid to devising and linking systems such as Switzerland's SIC (Swiss Interbank Clearing) and the planned CLS (Continuous Linked Settlement) among others. 9. Further problems which must be dealt with in particular by the private financial industry concern the inadequate geographic diversification of production locations and backup facilities, which have proved less than satisfactory in some cases. 2  BIS Review 101/2001

How climate risk is relevant to the fund What does this approach to managing the fund mean for the fund’s climate risk? With a wide spread of investments, we are protected against events that affect specific companies or sectors. But we cannot protect ourselves against events or trends that affect everyone. The fund is exposed to two kinds of climate risk: physical risk and transition risk. Transition risk is about how the companies we invest in handle the transition to a low-carbon economy. The size of this challenge differs widely between sectors and companies. Chart: Transition risk and the fund The fund’s equity investments can be categorised by transition risk as measured by analysis firm MSCI. The blue columns in the chart show each category’s share of the value of the portfolio. The white columns show their emissions. Companies in the “transition” category have high emissions and therefore need to make the biggest changes. These make up 14 percent of the equity portfolio. The remainder are companies considered either to have neutral exposure or to contribute positively to the transition. These last companies are therefore part of the solution.1 Physical risk is linked more directly to climate change. The most obvious example is acute events such as extreme weather, but more gradual changes such as higher temperatures, droughts and rising sea levels may also impact individual investments, both negatively and positively.
During most of the 1970s, there was a darkening cloud over the perceived will and ability of the Fed to take action to reverse the rise in inflation, in the face of substantial political aversion to the perceived costs of disinflation. Memoirs of executive branch officials for the decades following the Treasury Accord are replete with references to attempts to influence the decisions of the FOMC. In 1978, Congress passed The Humphrey Hawkins Act which gave the Fed its present mandate of “maximum employment, stable prices, and moderate long-term interest rates,” and this legislation established a more systematic schedule of reporting and testifying to the Congress. This is the mandate that governs the Fed today. Over this period of broad continuity in the legal framework of the Fed, U.S. monetary policy had its good moments and its less distinguished moments. The degree of legal independence we enjoyed at the beginning of the 1970s was not materially different from what existed at the end of the decade. The institutional framework for formal decision making was the same. The formal mandate was modified in 1978 with the addition of the explicit reference to price stability, but this change cannot explain the substantial difference in monetary policy outcomes over the last two and a half decades. An institutional framework that was not sufficient by itself to produce a consistent record of good  monetary policy decisions over the decade of the 1970s can’t be credited fully for the substantial improvements in monetary policy and economic outcomes that followed.

The two recent crises have brought to fore the issue of food insecurity that had been brewing under the surface. Chronic hunger, child and mother malnutrition, and pervasive poverty, always features of poorest members, have been exacerbated by the surge in global food prices that has pushed many more millions into poverty, even in some middle-income countries. The international community has to rise to the challenge. In this connection, we welcome the IMF’s new food shock window as a part of its emergency support facilities that should be accessible to all eligible members in an evenhanded manner and with the same sense of urgency. The sad plight of the Afghan people should not be forgotten. Afghanistan is facing the highest incident of insufficient food consumption in the world, with 90 percent of households, and an even higher percent of households headed by women, are facing insufficient food consumption. Close to 4 million Afghan children are acutely malnourished. It is difficult to imagine how long and how far this situation could continue. Going forward, we all bear responsibility of putting the world economy back on a sustainable and steady track. The expectation is for the AEs to maintain the delicate balance in the inflation-growth trade off, recognizing the significant negative spillovers of policy mistakes, in either direction, as they try to lower inflation and keep inflation expectations anchored. While we will all benefit from lower inflation, we cannot afford an overtightening of monetary conditions when the world is at the cusp of a serious recession.
The Rehnberg Agreements of 1991–1992 resulted in significantly lower agreed wages than previously and – more importantly – they removed the price and wage clauses from the agreements, thus contributing to breaking the price and wage spiral. The Industrial Agreement of 1997 was another important change. The wage bargaining rounds of 1995 had resulted in relatively high wage increases of over 5 per cent per year for the following two years. This resulted in pressure from the government of the time on social partners to change wage formation through negotiation. The Industrial Agreement was exactly this kind of change. It assumes that the manufacturing sector, exposed as it is to international competition, should determine the level of wage increases. The Agreement also means that there are rules for the conducting of negotiations, for example that demands should be specified well ahead of the expiry of agreements and that the conclusion of negotiations should be supported by mediators, the so-called impartial chairman. There are also similar, but not as far-reaching, agreements in other sectors. The National Mediation Office, which was set up in 2000, was another important change. As is widely known, the Office’s tasks are to mediate in labour disputes and to actively promote efficient wage formation. The active promotion of efficient wage formation entails, among other tasks, ensuring that wage formation permits the strong growth of employment.

This is probably partially because, over time, there are smaller variations in wage growth than there are in inflation, and partially because wage agreements provide important information on future  2  See J. Johansson, S. Palmqvist and C. Selander, “The CPI will increase more rapidly than the CPIF over the next few years”, Economic Commentary no. 5, 2011, Sveriges Riksbank. 3  Hourly wage costs are estimated to increase above hourly wages by 0.2 per cent per year. For the sake of simplicity, I have chosen to disregard this difference. 6  BIS central bankers’ speeches  wage growth. Over the last 14 years, the Riksbank has had an average forecast error of 0.4 percentage points in its spring forecasts of the next year’s wages. However, the error has been significantly larger in certain years. Wage increases in the years ahead will ultimately be determined both by the final agreements and by economic developments. There is a risk that the rapid improvement of the labour market will push up wage increases faster than we have calculated. This applies to both agreed wages and wages over and above agreement. There are signs that matching on the labour market may have deteriorated. Labour market shortages are increasing rapidly, even though unemployment is still relatively high (see Figure 12). The Beveridge curve, which shows the connection between unemployment and vacancies, also indicates impaired matching. On previous occasions when the vacancy rate has been at the current high level, unemployment has been just below 6 per cent.