samchain/econo-pairs-v1 huggingface dataset:
One question that has been raised is whether the Riksbank should disregard imported inflation and instead focus on domestically-generated inflation. This argument is based on the assumption that as the Riksbank is unable to affect imported inflation, it should aim monetary policy towards the areas that can be influenced. Let me give a simple example of why I do not consider this viewpoint to be valid. Of course, the price in a foreign currency that a foreign producer receives for its goods is entirely beyond the Riksbank’s control. However, when the product is imported to Sweden, Swedish importers, for instance, wholesalers, have to exchange foreign currency in order to pay for the goods. In other words, monetary policy plays some role in the price in Swedish krona that the importer has to pay for the goods through its effects on the exchange rate. When the importer then wishes to sell the goods in the Swedish market, it must have a network of retailers who will sell the product. This means that Swedish costs, such as wages and rent paid for premises, also play a part in the price the retailer charges for the goods. Naturally, the demand for the product is also an important factor. In other words, the traditional supply and demand relationship in the Swedish market is important to the endprice that Swedish consumers have to pay for the imported goods.

The fact that confidence in the inflation targeting policy strengthened fairly rapidly from the mid-1990s onwards is very clear, if one examines inflation expectations during this period (Figure 4). From relatively high levels indicated in the surveys made immediately after the changeover to an inflation target, the expected inflation rate gradually stabilised at around the target of 2 per cent. Nor does it seem to be the case that price stability was attained at the cost of stronger fluctuations in the real economy than before, which was a fear expressed by some prior to the changeover. The fluctuations in the real economy appear to have declined in comparison with the decades prior to the crisis at the beginning of the 1990s, and we have had much more positive developments with regard to real growth and real wages. Has inflation been too low? During the period from 1995 to September 2005, CPI inflation has averaged at around 1.1 per cent, which is within our tolerance interval but clearly below the target of 2 per cent. However, the average UND1X inflation rate has been higher, around 1.9 per cent between 1995 and 2004, which is mainly due to interest rates and thereby also mortgage interest expenditure gradually falling during the period. During the past two years the rate of price increase measured as UND1X has been lower, on average around 0.9 per cent.
New facilities were introduced that extended liquidity for longer durations against expanded sets of collateral (public and private) to new counterparties (bank and non-bank). This took last-resort lending to a new level. Some central banks went one step further, becoming effective market-makers of last resort in some assets to secure market liquidity. These were new and bold steps. A fourth dimension was transparency. With monetary, regulatory and operational policies all working in overdrive, central banks have had plenty of explaining to do. During the crisis, their actions have shaped the behaviour of pretty much every financial market and institution on the planet. So central banks’ words resonate as never previously. Rarely a day passes without a forensic media and market dissection of some central bank comment. These, too, are significant steps to have climbed. Where does this leave central banks today? We are not in Kansas any more. On monetary policy, we have gone from setting short safe rates to shaping rates of return on longer-term and wider classes of assets. On regulation, central banks have gone from spectator to player, with some granted micro-prudential as well as macro-prudential regulatory responsibilities. On operational matters, central banks have gone from market-watcher to market-shaper and market-maker across a broad class of assets and counterparties. On transparency, we have gone from blushing introvert to blooming extrovert. In short, central banks are essentially unrecognisable from a quarter of a century ago. Up or down? The key question, then, is where next?

The focus of monetary policy, at least in the 25 years prior to the crisis, had been on controlling the short-term safe rate of interest. Crisisinduced monetary interventions widened that focus significantly. By pursuing QE and forward guidance, central banks began to exercise influence beyond overnight rates of interest. And for those central banks that engaged in credit easing, this influence extended further, from safe to risky rates of return across a broad spectrum of assets. These were giant steps. A second aspect of the reinvention was macro-prudential regulation. Inflation-targeting was necessary but, by itself, insufficient to curb the financial cycle. The response of governments has been to grant central banks new powers, focused on the needs of the financial system as a whole and towards the needs of the nonfinancial economy, as much as the financial sector. That is what the “macro” in macro-prudential meant. Macro-prudential policy is gaining ground every bit as quickly as central bank independence did in the 1990s. It has quite radical implications. Pre-crisis credit cycles were allowed to operate largely unconstrained. Macro-prudential policy overturns that orthodoxy, with policy instead leaning against the credit cycle to moderate its fluctuations, both during the upswing and the downswing. It, too, is a big step forward. A third aspect of the reinvention is in the operations of central banks. During the crisis, central banks flexed their balance sheets as never before.
2  BIS central bankers’ speeches  Chicago Fed economists first did work on the prospects for a declining labor force participation trend back in 2001 – near the time the rate peaked at just over 67 percent. 3 Even after revisiting this topic numerous times and with multiple generations of research assistants working on the programs, our economists’ views about the trends that are consistent with the composition of the population and a labor market near equilibrium have not changed much since then. 4 Among the many robustness analyses they performed, their models produce nearly the same trend for labor force participation as they have since 2001. 5 Depending on the details of the specification, Chicago Fed economists estimate that at the end of the second quarter of 2014, the labor force participation rate was between 1/2 and 1-1/4 percentage points below trend. Furthermore, the participation rate was as much as 3/4 of a percentage point below predictions based on its historical relationship with the unemployment rate. This disparity suggests that there likely is an extra margin of slack in labor markets beyond that indicated by the unemployment rate alone. It is interesting to dig further into these “labor force participation gaps.” Virtually all the gap during this cycle has been due to withdrawal from the labor market of workers without a college degree. By contrast, a participation gap never materialized for college graduates, even during the depths of the recession. There is no simple explanation for this striking contrast.

Mojmír Hampl: Outlook for global interest rates Speech by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the Official Monetary and Financial Institutions Forum (OMFIF) Roundtable for Public Sector Asset Managers, London, 30 January 2018. * * * My contribution to today’s discussion on global interest rates will focus on the equilibrium real rate of interest. The equilibrium rate, which determines the development of interest rates in the long run, has decreased around the world by about 4 percentage points since the 1980s, as documented, among others, by the influential studies of Holston, Laubach, and Williams (2017) and Rachel and Smith (2017). Very recently, it seems to me, the process has started to reverse, but any progress toward a higher rate is likely to be slow. Equilibrium values do not change abruptly. Seven principal reasons have been identified for the decrease in this parameter observed in the past: The first is a decrease in growth expectations caused primarily by the Great Recession and the ensuing process of de-leveraging. Gloomy prospects depress demand for capital and, in consequence, also the equilibrium interest rate. Currently, however, notions of secular stagnation are losing steam, and growth expectations have slowly been recovering to pre-crisis levels. It is perhaps useful to remind ourselves that secular stagnation has been declared many times in the past – by Malthus, after the Great Depression, and during the 1970s and 1980s – only to be refuted by continued growth.
Many observers fear that the forthcoming ruling by Germany’s Federal Constitutional Court will impose strict limits on OMTs, and that this could trigger turbulence. How big is that risk? I don’t know how the judges in Karlsruhe will rule either, and I have great respect for the court – from one independent institution to another. I think, though, that the views of market participants in New York, Frankfurt and Hong Kong are quite clear: the OMTs are fine the way they are, without any limitations being imposed. Is it really realistic to assume that the mere announcement of OMTs will be sufficient in the longer term? Jens Weidmann, President of the Deutsche Bundesbank, has said that one lesson from the crisis is the fact that announcements will be tested. BIS central bankers’ speeches  5  The principle of deterrence also applied in the cold war. But what matters is that we are completely ready to act. When the necessary conditions have been met, we will take a monetary policy decision. We’ve had extremely low interest rates worldwide for a long period of time, combined with unprecedented non-standard measures. The Bank for International Settlements (BIS) is warning that, this time, the exit will be even more difficult than in the past. Is it actually possible to exit this situation without turbulence? Otmar Issing said that an exit was a question not of technical possibilities, but of political will. This exit will certainly be more complex on account of the non-standard instruments.

We expressed our confidence in the convergence towards SAPI (a sustained adjustment in the path of inflation). Let me elaborate somewhat on the foundations of this confidence, looking first at economic data and forecasts and second at some principles of our monetary policy. Data and forecast In economics, it can be hard to know exactly where you are. Monthly and quarterly data can be quite jumpy and there are often multiple plausible hypotheses to explain them: measurement error; abnormal season effects; one-off effects like strikes or natural disasters; or a genuine change in the underlying economy. What happened to output in Q1 is a case in point. Was the slowdown from 0.7% real GDP growth in Q4 2017 to 0.4% in Q1 2018 mismeasurement errors across quarters? Unusually cold weather or a German influenza outbreak? A sign of concern about a potential trade conflict? Or a warning of a slowdown in underlying economic growth? The Governing Council judged that it was largely a moderation from the exceptionally strong growth of Q4 compounded by some temporary and supply-side factors at both the domestic and the global level, as well as weaker impetus from external trade.
The next version, Basel II, came in 2004 and was more extensive and refined, but also contained a source of the instability that ensued, at least in Europe. The new framework allowed the denominator of the capital adequacy ratio to shrink if the banks themselves estimated loss probability as low. And they did. The reported capital ratio could rise without increasing the real capital base. The financial crisis of 2008 was the biggest global economic setback since the 1930s. The banking sector had contributed to fuelling the economic upturn in the years leading up to the crisis, but triggered and amplified the downturn. The financial crisis brought with it a fiscal crisis in many countries, following the exact pattern of earlier crises as described by Reinhart and Rogoff.3 Euro area GDP is still below the pre-crisis level, and in some countries far below that level. The course of history should then be that we are now facing a new paradigm shift in the field of economics. So far, the Basel II framework has been replaced by Basel III. That is something, but can hardly be called a paradigm shift. That does not, however, exclude the possibility that greater concepts are in the making. It is food for thought that paradigm shifts –  2  Getz Wold, Knut, “Norges Banks samarbeid med statsmaktene, bankene og utlandet” (Norges Bank’s cooperation with the government authorities, banks and abroad), Kristofer Lehmkuhl Lecture, 1972.

Profitable projects no longer receive funding and the real economic costs may prove substantial. Individual borrowers do not take into account how collateral values will affect other economic agents, or in other words do not take into account the increased systemic risk they inflict on others. The parallel with environmental economics fits well here. When pollution has no cost, it becomes excessive. In addition to the contagion effects through loan collateral, costs may arise from the market failure that occurs in a crisis when some economic agents deleverage substantially and the real interest rate cannot be set sufficiently low to underpin aggregate demand for goods and services among other economic agents. This theory seems to fit well with the situation in the US and Europe after the financial crisis, where it has been difficult to set policy rates below zero. The result is amplification of the real economic costs associated with a financial crisis. Individual borrowers do not take into account that more credit during good times increases the risk that the economy ends up in such a situation. 4  BIS central bankers’ speeches  The theory can be briefly summarised. The financial system left to its own devices creates excessive debt and excessive risk in upturns and insufficient credit in downturns, giving rise to credit cycles that amplify fluctuations in the economy. That is the background for macroprudential policy of banks. Regulation should be tightened during goods times and relaxed during bad times. The mechanisms I have described are not new or unfamiliar.
This annual inflation outturn was largely attributed to the decline in annual food inflation to 2.8% from 3.8% recorded in June 2010, as annual non-food inflation rose to 12.5% from 11.8% during the same period. Food inflation Quarterly food inflation rose to –0.1% in September 2010 from the –1.7% recorded in the previous quarter, but was 1.0 percentage point below the 0.9% recorded during the third quarter of 2009. This was due to higher prices of rice, various beef products, pork chops, mutton, fresh kapenta, dried kapenta, carrots, green beans, groundnuts and cassava tubers during the quarter under review. This was attributed to the impact of the upward adjustment of transport charges in July 2010 on the commodity market. Annual food inflation fell on account of price reductions on cereals, various vegetables, groundnuts, tubers, beef products (fillet steak, rump steak), mutton and dried kapenta, due to improved seasonal supply factors. Non-food inflation Quarterly non-food inflation slowed down to 3.2% from the 3.7% observed in June 2010, but was 0.7 percentage points above the 2.5% recorded in the third quarter of 2009. This was mainly attributed to lower quarterly inflation for the following sub-groups: Furniture and household goods of 4.5% [7.5%], Medical care 1.6% [2.7%], Transport and communications 0.9% [5.1%], Recreation and Education –0.1% [1.3%], and other goods and services 1.7% [2.8%]. However, on an annual basis, non-food inflation increased to 12.5% from the 11.8% registered in June 2010.

The volume and value of cheques returned unpaid on account of insufficiently funded accounts continued to decrease following the issuance of the directives on dishonoured cheques and direct debit instructions by the Bank of Zambia in the second quarter of 2010. The volume of unpaid cheques decreased by 15% to 4,202 (Quarter 2: 4,929). The public is advised to ensure that they have sufficient funds on their accounts whenever they issue cheques in order to avoid charges. Economic reform programme An IMF Mission was in Zambia from 2nd to 15th September, and 28th October to 3rd November 2010, to conduct the 5th Review under the Extended Credit Facility (ECF) arrangement. Overall, the mission was satisfied with the programme performance and reached agreement with the Zambian authorities on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011. The policies and structural measures would pave the way for the completion of the Fifth Review of the ECF arrangement, subject to approval by the IMF’s Executive Board. 4  BIS Review 148/2010  Total disbursed poverty reduction budget support (PRBS) in the third quarter of 2010 amounted to US $ million from the World Bank. A total of US $ million mining tax revenue was received while the Bank of Zambia foreign exchange purchases from the market amounted to US $ million. Preliminary data indicate that the quantitative performance criteria under the Extended Credit Facility (ECF) arrangement were observed as at end-September 2010 and that all structural benchmarks were generally on track.
Price stability vs. financial stability  NATIONAL BANK ACT Article 5: Tasks 1 The National Bank shall pursue a monetary policy serving the interests of the country as a whole. It shall ensure price stability. In so doing, it shall take due account of economic developments. Interest rate reduction  Credit growth  More investment & consumption  2 Within this framework, it shall have the following tasks:  … e. It shall contribute to the stability of the financial system.

I therefore wish to implore Bank of China to continue playing an effective role and stimulate economic activity by providing well structured financial products and services, especially those aimed at boosting growth in key sectors such as mining, energy, tourism, manufacturing and agriculture. However, in order to achieve this, there is need for Bank of China and other commercial banks to do more in terms of reducing lending interest rates and influence the safe expansion of private sector credit and at the same time contribute to the reduction of the cost of doing business in Zambia. The current environment of relatively low inflation and stable exchange rate offer a good opportunity for lowering commercial banks’ lending interest rates. Ladies and Gentlemen, let me conclude by further challenging Bank of China (Zambia) Limited to expand beyond one branch and broaden its customer base and operations swiftly in order to consolidate the gains that have been achieved over the last 10 years. I thank you. 2  BIS Review 36/2007
In its conduct of monetary policy, Norges Bank places emphasis on satisfying the fundamental preconditions for exchange rate stability against the euro: instruments must be oriented with a view to reducing price and cost inflation to the level aimed at by the European Central Bank (ECB). At the BIS Review 105/2000  8  same time, monetary policy must not in itself contribute to deflationary recessions, as this could undermine confidence in the krone. According to the Maastricht Treaty, the main objective of the ECB is the maintenance of price stability. The ECB has defined price stability as inflation of less than 2%. Inflation in Norway cannot remain higher than inflation in the euro area year after year without this having consequences for the exchange rate of the Norwegian krone against the euro. If price and cost inflation remains higher than the rate of increase aimed at by the ECB over a long period, our experience indicates that the krone will depreciate against the euro sooner or later. Norges Bank must therefore counter such a development. There are institutional differences between the Norwegian monetary policy regime and monetary policy in countries with an inflation target. Norges Bank will inform the government authorities (via the Ministry of Finance) if measures other than those available to the central bank are required in the event that the krone exchange rate cannot be returned to its initial range without creating inflation or a deflationary recession.

Monetary policy decisions usually include a statement of bias, ie the probability that the next change in interest rates will be an increase or a reduction. At the same time as the press release, a press conference is held at which a more detailed account of the background for the decision is given. BIS Review 105/2000  14  15  BIS Review 105/2000  On 20 September this year, Norges Bank decided to increase its key interest rate, the deposit rate, by 0.25 percentage point to 7%. This has brought the overall increase in interest rates this year to 1.5 percentage points. This has happened in a climate of interest rate rises in other countries and a relatively weak effective krone exchange rate. Moreover, the past year has seen increased risk that price and cost inflation may remain considerably higher in Norway than in other European countries. Norges Bank had no choice but to counter this, in order to satisfy the fundamental preconditions for exchange rate stability. This is why the Bank has raised its key rates. I would like to conclude by once again thanking you for inviting me to give this account of the basis for Norwegian monetary policy. References: Akram, Q F (2000): “PPP despite real shocks: An empirical analysis of the Norwegian real exchange rate”. Working paper 2000/7, Norges Bank, Oslo.