samchain/econo-pairs-v1 huggingface dataset:
During the first half of the year, the economic outlook became increasingly pessimistic. In Sweden, it was mainly investment that was weaker than expected. The weak economic activity was also reflected in the Riksbank’s forecasts of inflation. This in turn was a contributory factor in the Riksbank’s decisions to cut the repo rate on three occasions for a total of one percentage point. During the latter part of the year, however, the outlook became somewhat less pessimistic. In Sweden, the weak investment was countered by favourable growth in consumption, both private and public, and a rise in exports. The assessment at the end of the year was that growth had increased gradually in 2003 and would reach 1.5 per cent. Growth in 2004 and 2005 was forecast to be approximately 2.5% both years, which on  2  BIS Review 6/2004  the whole is somewhat faster than what the Riksbank considers to be possible in the long term without giving rise to inflation. New Swedish data support this scenario, but the picture is still not entirely unambiguous. The National Accounts for the third quarter showed higher growth compared with previous quarters. Household consumption also rose, as did exports. At the same time, business tendency data are indicating growing optimism among firms during the latter part of the autumn, while retail sales continue to grow at a historically high level. But growth in industrial production was relatively weak in October and November while there was a reduction in the number of new orders.

This must be taken in the light of all the information that is available at the time. For my part, I will also look forward with great interest to what my colleagues have to say. Thank you. BIS Review 6/2004  5
As late as 2008, the year 2006 was still being seen as one of wasted resources. But by 2009, with revised estimates, the experts were telling us that three years earlier, the euro area was overheated and output exceeded its potential by a significant amount. Mismeasurement of the output gap can lead to errors not only in monetary policy – if and when central banks incorrectly rely on this information – but can also lead to mistakes in fiscal policy. In 2006 we had a fiscal deficit in the euro area as a whole. Alarms about fiscal soundness should have sounded before the crisis. But the alarms would have sounded much louder if the EC, the IMF and others had not suggested that the economy was running below potential. Inappropriate reliance on mismeasured output gaps can lead to complacency during good times. 2  BIS central bankers’ speeches  I recount this example about how the output gap can be misused in policy debates because once again, as we are coming out of the crisis, some voices are stressing the extent of the output gap that the euro area is facing today, perhaps drawing conclusions about policy that could again be reversed as time goes by. The focus on price stability must remain unrelenting. *** That said, another lesson is the following: the central bank focus on price stability is insufficient to maintain overall stability in the economy.

Whether a quake seems likely to occur soon has no bearing on this. For resilience in structures, the best indicator of underlying vulnerability is how close the city is to the fault line or plate boundary. On that basis, Apple’s new California HQ uses new earthquake resilient technology. 3  For resilience in the financial system, it is how much debt there is in the economy (or economies) to which it’s exposed. That’s why, when we come to decide how big the banking system’s buffers of loss-absorbing capital should be, we don’t focus on any economic tremors we may feel. We don’t insist on tougher standards just because trade tensions threaten to slow the world economy or changes in sentiment hit financial markets, or because uncertainty is weighing on the domestic economy. Instead we focus on debt – a key driver of how far up the Richter scale economic earthquakes tend to be. 4 Think of a build-up of debt as being the economic equivalent of building close to a fault line. When a quake hits, the impact is greater and more resilience is needed in the structures. This focus means we can appear contrarian. Debt has a habit of increasing in calm periods, when those in the financial system think it’s safe to take more risks. So we can find ourselves demanding tougher standards when risks are thought by many to be low. And we don’t start demanding them when the tremors start, when risks are thought by many to suddenly be high.
This is the bad news. The good news, however, is that, first, many of the principles underlying pre-crisis monetary policy frameworks are still perfectly valid, so that, in a sense, we do not have to “reinvent the wheel”. Second, the adoption of macro-prudential policies aimed at taking care of the buildup of disequilibria in asset markets, or within specific segments of such markets, offers the possibility of effectively tackling the problems which led us to the current predicament. Thank you for your attention. References Altunbas, Y., Gambacorta, L., and Marqués-Ibáñez, D. (2010), “Does Monetary Policy Affect Bank Risk-Taking?”, ECB Working Paper n. 1166, March 2010. 8  BIS central bankers’ speeches  Borio, C., and White, W. (2003), “Wither Monetary and Financial Stability? The Implications of Evolving Policy Regimes”, presented at: Monetary Policy and Uncertainty: Adapting to a Changing Economy, a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 28 – 30, 2003. Claudio Borio and Haibin Zhu (2008), “Capital Regulation, Risk-Taking, and Monetary Policy: A Missing Link in the Transmission Mechanism?”, BIS Working Paper n. 2588, December 2008. Ciccarelli, M., Maddaloni, A., and Peydró, J.-L. (2009), “Trusting the Bankers: Another Look at the Credit Channel of Monetary Policy”, ECB, mimeo. Dubecq, S., Mojon, B., and Ragot, X. (2010), “Fuzzy Capital Requirements, Risk Shifting and the Risk Taking Channel of Monetary Policy”, Banque de France, mimeo. Friedman, M. (1968), “The Role of Monetary Policy”, American Economic Review, 58(1), 1–17.

This logically implies that an exclusive focus on the two-year ahead central inflation projection will cause policymakers to miss the risk of undershooting the inflation objective sometime in the future, possibly by a non-negligible amount. In turn, this implies that the central projection for inflation does not represent a sufficient statistic for monetary policy, and that a more sophisticated approach, factoring in the possibility of “tail risks” such as the bursting of a bubble, should be taken into account. A possible way of addressing the problem  9  See Dubecq et al. (2010). 10  See Reinhart and Rogoff (2009). 6  BIS central bankers’ speeches  within the traditional forecast-based framework which has been dominant among inflationtargeting central banks is to extend the forecast horizon beyond two years ahead. The risks to the central inflation projection deriving, say, from excessive credit growth and the resulting build-up of an asset price bubble would then be encoded in the probability distribution for inflation at longer horizons. This would allow the central bank to meaningfully discuss the dangers associated with such a build-up, and – assuming that within future policy frameworks monetary authorities will be endowed with macro-prudential instruments – it will allow them to explain to the public the adoption of measures designed to curb credit growth.
This supervision will demand higher levels of capital and liquidity, precisely the type of medicine that Lehman needed. Systemically significant non-banking financial companies, like Lehman, will also be obliged to submit resolution plans which will help to avoid some of the problems experienced after Lehman filed its Chapter 11 petition. Further, if  6  BIS Review 112/2010  a systemically significant organization like Lehman needs to be resolved, Dodd-Frank creates a new resolution procedure that should facilitate a more orderly winddown. Thank you again for the opportunity to appear before you today, and I look forward to answering your questions. BIS Review 112/2010  7

However, in the 2010 survey, the largest share of volume reported by dealer respondents was for transactions with “other financial institutions” – a category that includes nonreporting banks; 5 other financial institutions such as institutional investors, hedge funds, and proprietary trading firms; and official sector institutions. This shift continued through the 2013 survey, when “other financial institutions” accounted for just over half of reported volume, reinforcing evidence of a broadening in foreign exchange trading, with nondealers playing a greater role in the market. The 2013 survey broke out the “other financial institutions” category for the first time. The data showed that nonreporting banks accounted for about 45 percent of the category’s trading volume while institutional investors and hedge funds/proprietary trading firms each accounted for about 20 percent. In a market where daily trading volume exceeds $ trillion, this represents significant activity and is consistent with a general theme of increased participation by nondealers in the FX market. Execution in the FX market One factor contributing to the expansion in participation by nondealers in the foreign exchange market has been the increased ease of entry into the market, attributable to an expansion in the number of execution platforms and services. In part, this has been supported by technological advancements, which, in some cases, have reduced trading costs, increased the speed with which transactions take place, and improved transparency.
Such thoughts lay behind monetary policy in the early 1990s, when we were emerging from twenty or so years of high, fluctuating inflation and confidence in the new low inflation regime needed to be established. In both its communication and policy, the Riksbank prioritised inflation quite clearly before other considerations – it was quite simply necessary to be what Mervyn King referred to as an “inflation nutter” during a period of adaptation. If, at that time, the Riksbank had acted less resolutely – and there was definitely external pressure to have a more relaxed attitude towards inflation – it would have taken much longer and been considerably more difficult to establish the inflation target as the benchmark for price-setting and wage formation that it has been In recent decades. The independence of central banks – worth preserving As I have previously touched upon, a common view both historically and internationally has been to see central banks as relatively independent public institutions. This has partly to do with it being otherwise tempting for governments to finance budget deficits by printing more money. But it has also had to do with it being considered risky to use monetary policy far too actively in cyclical policy. Experience has suggested that this can lead to lastingly high and volatile inflation without any positive effects on the real economy. For these reasons, many countries have chosen to delegate monetary policy decisions to a highly independent central bank.

The papers to be presented by Luca Dedola from the European Central Bank and Óscar Jordá from the University of California-Davis are part of a very active literature that studies the determination of nominal exchange rates incorporating insights from recent developments in the theory of financial markets. On line with developments on financial markets theory, the paper to be presented by Craig Burnside shed lights on a central discussion on the exchange rate dynamics theory. Along with his coauthors they offer an explanation for the forward premium puzzle in foreign exchange markets, their analysis is also consistent with opportunities of profitable carry trade strategies. Given the importance of the nominal exchange rate for an open economy like Chile, these papers are also a very important and relevant contribution. As you can see this promise to be a very interesting conference and I invite you to engage in the discussion and seize the opportunity to learn from this very excellent group of researchers. BIS Review 104/2010  1  Finally I would like to thank Miguel Fuentes, Diego Saravia and Felipe Labbé for organizing what promises to be a very interesting workshop. Thank you. 2  BIS Review 104/2010
Particularly worrisome is the further increase of inactivity of women as the region faces shrinking working age population, due to the two factors: first, adverse demographics, and second, immigration. We all well know that the labor force is one of the key determinants of economic growth. There are empirical studies that show that higher inclusion of women can bring a number of benefits. And not only for women, but for the whole society. Higher inclusion of women is associated with 10% higher GDP growth in advanced economies and 30% in developing economies. Focusing more closely on the Western Balkans, a World Bank study estimates that 2/3  BIS central bankers' speeches  countries in the region each year lose on average 18% of their total GDP, due to the gender gaps in the labor market. And about two thirds of the cost of lost GDP or income in the society can be explained by the lower participation of women. Higher growth can stem not only from the higher quantity of labor force that we need in this new environment, but also, and even more importantly, from the new quality that it can bring on board from different skills and psychological virtues that women bring in, such as: higher risk aversion, thoroughness, pragmatism, empathy. Further, more diversified institutional environment tend to lead to more optimal and effective decision making. For example, Credit Suisse analysis finds that Fortune 500 companies with female representation perform better than those without.

History doesn’t seem to offer much of a guide, though we’ve seen other periods of sustained productivity booms. We did not anticipate this acceleration, which itself suggests we need to be somewhat tentative in forecasting its future. Dale Jorgenson, Mun Ho, and Kevin Stiroh have concluded in some recent research that there’s a reasonable prospect that structural productivity growth will average just over 2.5 percent a year for the next decade. And they think the probability of growth exceeding that pretty favorable forecast is higher than the odds we’ll be disappointed. In support of that view, they make essentially two points. First, they do not see evidence of deceleration in the pace of advancement in technological innovation; nor do they see signs of diminishing marginal returns to IT investment or evidence that we are coming close to fully exploiting the potential of past innovations to improve productivity. And second, they argue that the improved competitive environment - in all its dimensions - is likely to continue to be a spur to further innovation, to further investment in technology and further adoption of technology. These are reasonably compelling arguments. Their forecast is close to that of the Council of Economic Advisers, the Congressional Budget Office and the consensus of private forecasters. They may prove to be right. But the overall environment for investment and innovation could be materially affected by the disposition of our fiscal and external imbalances and our exceptionally low net national savings rate. A few key points about the dimensions of these imbalances.
The results show that the long-term benefits of early adoption of policies boosting the transition to a carbon-free economy more than offset the short-term costs of this transition. They also show that if climate change is not mitigated, the materialisation of the physical risks will generate large economic losses, which would be greater in certain geographical areas, with particularly significant effects on banks exposed to these areas. 16  Climate-related financial risks – measurement methodologies, BCBS, April 2021. 6  In terms of their impact on economic activity, the differences between these scenarios are considerable. The short-term cost, in terms of GDP, of measures to mitigate climate change will be greater the later they are implemented. Even so, by the end of the time horizon of the exercise, GDP would be approximately three percentage points lower under the disorderly transition scenario than under the orderly transition scenario, and six percentage points lower under the scenario of no significant measures. These impacts on economic activity lead to a deterioration in the financial situation of businesses and, consequently, in their ability to pay their bank debts. Also, the materialisation of climate risks impairs the quality of bank collateral and increases the losses in the event of default. Given these results, the ECB estimates that the expected losses for the banking sector arising from the impairment of the credit quality of its counterparties and collateral would amount to approximately 3.5% and 8% in 2050 under the disorderly transition and measure-free scenarios, respectively.

Following the Lehman Brothers bankruptcy last September, banks became ever more reluctant to lend to each other as a result of a sharp increase in the perceived risks of counterparty default and a continued lack of transparency about the health of banks’ balance sheets. 5 Since last October, the ECB has provided unlimited funding in euro at fixed interest rates over periods up to six months against an expanded list of eligible assets for use as collateral in Eurosystem refinancing operations. This extraordinary expansion of liquidity provided to euro area banks is reflected in the growth of the Eurosystem’s balance sheet. Between the end of June 2007 and the end of April 2009, the balance sheet of the Eurosystem increased by about EUR 600 billion, and had reached EUR 1.51 trillion which is equivalent to 16% of the nominal GDP of the euro area. By comparison, the size of the Federal Reserve System balance sheet had reached 14% of the US nominal GDP at the end of April 2009. III. The effectiveness of central bank policies  How effective have the ECB policies been in mitigating the impact of the crisis on the financial system and the economy? We can assess this by first examining the effects of the measures taken on the money and credit markets. The provision of unlimited amounts of liquidity (against adequate collateral) in the interbank money market and the sharp reduction in the ECB’s key policy rates to exceptionally low levels have resulted in a significant improvement in money market conditions.
In the fiscal area, the post-crisis recovery has not been accompanied in a significant number of countries, advanced and emerging alike, by a sufficient reduction of structural deficits in public accounts and the halting of the process of rising public debt. More generally, in many cases it may be necessary to move forward with fiscal reforms that seek to reduce the distortions to growth while allowing the most vulnerable sectors of society to be supported more decisively. The limited fiscal space available is exacerbated in the longer run in many economies, principally but not exclusively the advanced countries, owing to the adverse demographic prospects. Ageing populations pose significant challenges for public finances, as they bear on both the revenue and the expenditure sides. On the expenditure side, ageing will considerably affect pension and healthcare spending which, in many cases, will require rethinking pension systems to guarantee their sustainability. On the revenue side ageing leads to changes in the composition of tax bases as it does to lower labour income shares, to capital deepening and to changes in the composition of consumption. In the area of monetary policy, many advanced economies are still in a situation of zero lower bound. More generally, in most countries the room currently available to face a hypothetical recession is less than that existing at previous similar cyclical junctures. Monetary policy also needs re-thinking, on the basis of more long-term challenges for the economy. The natural interest rate has been falling since at least the 1980s.

About overall economy, a more sustainable development should be ensured, relating mainly to better control on trade deficit, supporting the sectors that actually contribute or may contribute to increasing exports in the country. Public authorities should strengthen their commitment to developing the non-bank financial market, which gradually leads to reduction of economic dependence on the banking sector condition and improves access to financing of a higher number of private entities. In this way, a greater opportunity would be provided to the financial system to finance projects in the agricultural sector, which has a high potential for ensuring competitive advantages in the Albanian economy. Allow me to conclude by emphasizing the Bank of Albania’s willingness to contribute, through its policies on monetary and financial stability, to maintaining a better climate of sound development of the financial and banking activity, as a condition for a greater financial support to business development in the country. I think that this forum will make a valuable contribution to setting some concrete development policies and projects, about which, I believe that the Black Sea Trade and Development Bank will offer its own support and expertise. Wishing success to the proceedings of this forum, I thank you for your attention! 2  BIS central bankers’ speeches