samchain/econo-pairs-v1 huggingface dataset:
In the main scenario the recovery in the United States and the euro area is expected to begin during the second half of this year and next year growth will largely be back at the trend level. Growth in Sweden is expected to be approximately the same this year as last year, but in reality this is a weakening if one takes into account the larger number of working days this year. Inflation in Sweden rose rapidly in the autumn and, measured by both the CPI and the CPIX, is expected to exceed the inflation target during a large part of the forecast period. The uncertainty over future economic developments is still considerable, however, and to highlight this a number of alternative scenarios are described in the Monetary Policy Report. One of these involves greater financial turmoil and that growth abroad will slow down more sharply. In this scenario growth in the US economy will fall more than in the main scenario, at the same time as the borrowing costs for households and companies in the whole world will  BIS Review 30/2008  1  be higher. This leads to a general dampening of demand and to lower GDP growth and inflation both abroad and in Sweden. But, as we have written in previous reports, there is also a risk that inflation will be higher than in the main scenario if wage developments are stronger and productivity weaker than expected.

Employment, measured as the number of hours worked, increased at an unexpectedly high rate and productivity growth last year was weaker than expected in the Report. The National Institute of Economic Research’s business tendency survey for February shows a clear slowdown in economic activity in the business sector as a whole. The business tendency survey suggests that employment has continued to increase, but at a slower rate. Companies have adjusted their recruitment plans downwards ahead of the coming months. In contrast, the purchasing managers index displays a more positive view in February. The total index rose somewhat and during several months fluctuated around the level of 55, which is close to the average since 2001. However, at the same time, the survey shows that growth in employment has slackened and that companies have become less optimistic about output growth in the future. In January inflation in Sweden was somewhat lower compared with the forecast in the Monetary Policy Report. However, this was largely connected with the fact that the weights in the CPI basket, as at the end of each year, had changed. The effects of this change were unusually large this time. This could be interpreted as though consumers, to a greater extent than normal, have replaced goods and services that increased rapidly in price in their consumption. The so-called substitution effect was then greater than the Riksbank and most other analysts had assumed.
Indeed, the risk of sharp, Brexit-induced, slowdown seems to be a key factor holding the sterling yield curve at its current low levels, according to market participants. On this view, the sharp slowing of UK growth in the first quarter of this year could be the harbinger of things to come. And there are already signs of a sharp slowdown in big-ticket discretionary purchases by consumers, including houses, cars and household goods. If this persisted, it too could justify monetary policymakers staying their hand. It would be imprudent to add fuel to any contractionary fire with an early interest rate rise. A final factor which, at least in principle, could be used to justify a continuing accommodative monetary policy stance is the level of the sterling yield curve. This is remarkably flat and has become flatter over the course of this year, despite medium-term growth expectations being revised upwards. Only one rise in UK interest  21  Based on the average of the different indicators’ deviation from their estimated “inflation target-consistent” rates. These estimated target-consistent rates may not be an appropriate benchmark at the current juncture if the mix between domestically- and externallygenerated inflation consistent with overall inflation at target has changed over time. For example, the trade integration of China into the global economy in the 2000s dragged on core goods inflation prior to the crisis and this may not repeat itself. 22 Bank of England (2016).

Early identification of difficulties is fundamental in this context. Banks must proactively identify those customers who, despite temporary difficulties, have a viable business, for whom debt restructuring may be an appropriate option. 7  For those cases of non-viability, it is clearly necessary to promote ways of ensuring an orderly exit from the market. It is vital that banks envisage sufficiently prudent scenarios in their capital projections and be conservative when setting aside impairment provisions. In this respect, I have already pointed out that the easing in the third quarter in provisioning by Spanish banks does not seem prudent in the current circumstances. Allow me to conclude. The exceptional situation caused by the pandemic continues to evolve and, thus, so do the public support measures and the focus of our activities as supervisors. Without a doubt, the development of an effective vaccine would contribute decisively to clearing the medium-term horizon, eliminating the most extreme economic scenarios, although the short-term remains beset by uncertainty. As long as this uncertainty persists, our responsibility is to remain prudent. Thank you very much. 8
Indeed, the FOMC discussed this issue at great length (see the minutes of our January 2011 meeting).4 However, I have yet to see empirical evidence based on a modeling framework that successfully captures U.S. business cycle dynamics that shows such supply-side structural factors can come close to explaining the huge shortfalls in actual GDP from trend and the high level of unemployment. For example, extended unemployment insurance and increased difficulties in matching workers to vacant jobs may have resulted in a transitory increase in the natural rate of unemployment, but the analysis I’ve seen doesn’t get you close to the 9 percent rate we currently are experiencing. The policy loss function The macroeconomics literature often describes the policymaker’s problem as one of minimizing societal costs of bad outcomes – which it mathematically approximates by the sum of the squared deviations in inflation from its target and the unemployment rate from its so-called natural rate. It turns out that a conservative and tough-minded central banker should value these deviations about equally.5 Accordingly, an inflation rate of 5 percent against an inflation goal of 2 percent is the same sized loss as an unemployment rate of 9 percent against a conservative estimate of 6 percent for the natural rate of unemployment. Today, we are facing an unemployment rate of 9 percent with little prospect of meaningful declines soon and the medium-term outlook for inflation is under 2 percent. This policy framework is often described as flexible inflation targeting.

In my mind, the Federal Reserve Act is very clear in specifying that the Federal Reserve has a dual mandate: The FOMC should provide for monetary and financial conditions that support maximum employment and price stability.2 With regard to inflation, we should seek to keep inflation near 2 percent over the medium term. We should also remember that a 2 percent objective should represent an average level of inflation, not an impenetrable ceiling. With regard to our real economy mandate, we should minimize the deviations of the actual path of the real economy from its potential path (or more technically, its efficiently-achievable path). From my earlier discussion of the immensity of the current problem, we are far from minimizing these real deviations today. Second, the FOMC needs to closely look at the plethora of data that comes out every month in order to evaluate the outlook for the economy and inflation, keeping in mind a variety of potential risk scenarios and financial stability considerations. Four times each year, the FOMC formally publishes forecasts in its Summary of Economic Projections. Of course, it is crucial for each FOMC member to update his/her outlook for each meeting. Third, in evaluating the state of the economy and inflation pressures, the FOMC must periodically step back and ask itself whether something very different than normal is afoot. We all recognize that our views about how the economy works are imperfect.
Lending standards have certainly tightened, but the Chilean economy is far from suffering the problems that other countries are facing. Accordingly, the inflation outlook changed significantly, while monetary policy reacted with a change that was large in magnitude and swift in implementation. October 2008 was the month where y-o-y inflation peaked. November brought some relief, largely determined by the drop in fuel prices in world markets. By then, no break in the inflationary trend was foreseen. Nonetheless, given the weakening outlook for activity and inflation, the Central Bank not only did not raise the MPR – which was the most likely path of monetary policy as discussed in September’s Monetary Policy Report presented to Congress – but also communicated that the most likely course of action would be an easing of policy by early 2009. In January 2009, with a clearer assessment of the reduced inflationary pressures, the MPR was lowered by 100 basis points. Later, with the evidence of alleviated inflationary pressures and drastic increases in downward risks to growth and inflation, the Central Bank decided to cut the MPR by 250 basis points at both its meetings of February and March. The monetary easing process continued and completed 775 basis points in seven monthly meetings, bringing the MPR to 0.50%, the minimum level deemed adequate for a normal functioning of money markets.

A fiscal capacity for the euro area There are many ways a euro area fiscal capacity could be implemented, ranging from simple macro insurance or an unemployment benefit scheme to a fully-fledged euro area budget that could include the provision of public goods. Each of these options entails its own technical and political challenges and opportunities. In the end, the choice as to which option or combination 2  BIS central bankers’ speeches  of options should be adopted will need to be a political one. This is in fact an opportunity to have a debate about Europe’s collective goals; such a debate is more necessary than ever and goes beyond the economic sphere alone. 3 From the perspective of the economist and of the central banker who has a keen interest in making EMU as a whole work better, the crucial question behind the discussion about a fiscal capacity for the euro area is how to maximise its positive effects on the functioning of EMU, while at the same time preserving incentives for sound fiscal policy-making and addressing structural weaknesses at the national level. To start with, we should all be able to agree that the objective of the fiscal capacity should be to make EMU more resilient by increasing the capacity for automatic stabilisation in the euro area. The aim should not be to actively fine-tune national economic cycles or to equalise revenues.
But, unconstrained, such a simulation would imply a potentially unbounded relationship between market capitalisation and a country’s GDP. Because market capitalisation is the discounted value of future profit streams from companies, that seems implausible. Charts 10 plots equity financial depth for the US and UK since 1929 and 1965 respectively. Between 1929 and 1990, the financial depth ratio in the US was roughly flat, at around 50%. As the US liberalised this ratio shifted upwards, averaging around 100%; it has remained roughly at these levels since. The UK has followed a similar pattern. To reflect these findings, in the simulations an (arbitrary) cap of 100% is placed on countries’ market capitalisation to GDP ratio, once they have reached current levels of US GDP per capita. 6  BIS central bankers’ speeches  Using the relationship in Chart 9 and the GDP projections, equity financial depth in the G20 countries can be projected forward. Many of the advanced countries have only a short distance to travel to reach 100%, given their starting point. Among the emerging G20, the average financial depth ratio rises from around 50% in 2010 to around 100% by 2050 (Chart 11). In other words, the pace of financial deepening in the emerging G20 countries is rather gradual. If anything, this may understate the likely pace of change. Nonetheless, these trends imply a rather striking shift in the composition of the global market portfolio.

3  The Future of Community Banks: Lessons Learned from Banks That Thrived During the Recent Financial Crisis by R. Alton Gilbert, Andrew P. Meyer, and James W. Fuchs all of the Federal Reserve Bank of St. Louis. 2  BIS central bankers’ speeches  characteristics across the successful banks? These characteristics are undoubtedly important and will be an essential element of success in the future. Some factors that one might think are important turn out not to be critical in determining performance. For example, asset size was generally not a factor in performing well during, and following, the financial crisis. Community banks that thrived varied in asset size – from below $ million, to as large as $ billion in assets. Geography, though, did matter to a degree. By definition, community banks are not geographically diversified, so those located in states that were most severely affected by the financial crisis and the recession faced the largest challenges. However, there are examples of banks that performed well in Michigan despite the severe economic problems that Michigan experienced; and there are examples of banks that floundered in Texas despite the solid economic performance that Texas experienced. Here in the Second District, while we had relatively modest declines in real estate values on average, some local areas saw house price declines as serious as in the worst hit states such as Arizona, California, Florida and Nevada. Recent research has identified several characteristics common to community banks that prospered during and following the financial crisis.
If a household, firm, bank or government has become too heavily indebted, all experience to date indicates that, sooner or later, the debt will have to be restructured. Hayek would probably have reiterated the view he expressed in 1932: “ ..... the existence of public debt [on a large scale] imposes frictions and obstacles to readjustment very much greater than [the frictions and obstacles imposed by] the existence of private debt.” Perhaps Hayek, originally from Austria, had in mind Germany’s enormous reparations debt from the First World War, which probably contributed to the fall of the Weimar Republic. We should not exaggerate: after all, Europe is still a region of peace, prosperity and cooperation. This is perhaps the greatest difference between the current situation and the 1930s. Nonetheless, the 1930s taught us that deep economic crises can also have substantial social and political consequences. The European Central Bank – the ECB – is the only institution in Europe that can have a material influence on developments across the continent in the short term. The ECB is keeping government debt yields low by means of record-low policy rates and large government bond purchases. This is keeping the wheels in motion. It is also supporting 4  BIS central bankers’ speeches  government finances in a number of European countries.

The 1992 tax reform streamlined the tax system and tax rates were substantially reduced. It became easier for investors to find projects that yielded high returns. State-ownership policy in Norway was changed to introduce a clearer division of roles and healthier commercial principles. And not least, the EEA Agreement provided access to the European Single Market for most of the Norwegian business sector. When oil prices fell again in 2014, Norway was better prepared. But as a nation, our income has nonetheless been reduced by the fall in oil prices and we should be cautious about introducing measures that will increase consumption. Reasonable measures in a period of restructuring are those that promote economic growth over time, without crowding out private enterprise. Monetary policy can facilitate restructuring. And it is able to do so because there is confidence that inflation will remain low and stable. With low and stable inflation, a weaker krone and higher import prices will not pass through to wage growth and inflation, as was the case after the fall in oil prices in 1986. On the contrary, the depreciation of the krone over the past couple of years has compensated for more than a decade of high cost inflation. This has improved the competitiveness of Norwegian firms – in foreign and domestic markets. In addition, lower interest expenses are easing the burden for many households and firms. There is still room for manoeuvre in monetary policy.
Moreover, with domestic inflationary pressures, particularly wages and unit labour costs, still subdued, it was appropriate to leave the policy stance unchanged at that time. Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional. The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations. These are some of the issues that the MPC will debate in the coming months. III. Conclusion After an expansion that has relied overly on consumption, the rotation to other components of demand, particularly investment, will be important to sustain momentum. Stronger investment will support productivity growth, stronger wages and higher welfare for all. It will also give monetary policy more traction. Globally, there are signs that such a rotation may be beginning. Although some UK–specific uncertainties might limit the UK’s participation in that pickup, the Bank of England will make its contribution by pursuing determined policies within well-established frameworks in order to maintain monetary and financial stability.

The issue, therefore, underscores the inadequate risk management, covering the entire process: from the lack of proper risk measurement, especially with regard to complex product, as well as liquidity risk, to inadequate risk management and control, and to micro-prudential risk-based supervision. In addition, there is now greater attention being paid to the importance of macroprudential approach, in recognition of the risk from procyclicality and interconnectedness of institutions, especially the large and highly complex financial institutions. Also, greater recognition is given to the problem of the unregulated shadow banking sector, like the hedge funds, which are also key in systemic risk process. All these issues pose a major policy challenge, as indeed the various working groups and committees of the BIS are now working on the guidelines, and on the key issues such as accounting, valuations, procyclicality, and adequacy of capital and provisions. In view of the depth of the current problem, and the fact that it may be quite sometime before the global standards on these issues can be settled, regulators, in my view, must be ready to take the needed action to ensure that we address these risks in our financial systems systematically. This is why Pillar II is all the more important, because the essence of Pillar II is to ensure that financial institutions have adequate risk management process and capital, commensurate with their risk profiles.
He belonged to the old guard of economists who believed that economic prosperity cannot be attained by printing money. This was indeed going against the popular tides of the late 1930s and 1940s. At that time, Keynesianism had been accepted by the mainstream economists on both sides of the Atlantic as a new religion. It explicitly advocated the desirability of deficit financing as a strategy for attaining full employment. Exter doubted the validity of this claim both in his public speeches and writings. At one stage, even Paul Samuelson had teased him that ‘though Exter may be right, he was lonely in his opinion’. The fact that there were no supporters for his view did not prevent Exter from making public what he believed to be true. On the very first day of the establishment of the Central Bank of Ceylon, in a press interview he gave as the first Governor of the Bank, he warned against the use of the Bank for things which it cannot fulfill. “Today, we can only be filled with high hopes for the future. It would be a mistake to expect startling results immediately from the establishment of the Central Bank. There is no financial wizardry by which the Bank can suddenly pull out of a hat a higher standard of living for everybody. The Bank’s contribution must necessarily be a long-run contribution. The Bank does not itself produce goods and services, but it should, by creating the right monetary conditions enable the country…” to do so.

It is from there that he came to Ceylon as the consultant on the establishment of a central bank, still on release from the Federal Reserve System. After serving his term as Governor of the Central Bank, Exter did not return to the Federal Reserve System. Instead, in 1953, he joined the World Bank and was offered the position of the division chief for the Middle East. After a year with the World Bank, he came back to the Federal Reserve System as its Vice President on international operations at the Federal Reserve Bank of New York. His career at the Federal Reserve System ended in 1959 when he decided to join the First National City Bank which later became the Citibank. From 1960 to 1972, he was the Senior Vice President of the Citibank in charge of its relations with foreign central banks and governments. With a huge fortune made on the  BIS Review 20/2007  1  gold market by using his own expertise on the foresight of irresponsible central banking and its inevitable consequences, Exter took an early retirement in 1972 and went into private consultancy work. According to his own admission, the prospect for his fortune on gold dawned on him after a friendly debate he had in 1962 with his one time Harvard buddy and Nobel Laureate Paul Samuelson. In that debate on why the dollar was becoming weak and USA was losing gold, Exter gave his diagnosis which was based on his experience with the Federal Reserve System.