samchain/econo-pairs-v1 huggingface dataset:
Least of all should the impression be given that it is somehow possible to have all the gain without any of the pain. We all know, for instance, that virtually all public sector expenditures are in the nature of fixed charges to revenue in the form of wages, social benefits and other handouts, subsidies and debt-servicing costs, leaving relatively few discretionary items of expenditure. This probably explains why we hear many calls for cuts in Government spending, but no specific proposals on where and how much to cut. Likewise, the rigidities which pervade the labour market and work practices have become so fundamentally ingrained in the behavioural patterns of society that they have assumed the status of acquired rights. A number of institutions remain characterised by outdated cultures and practices, while a sizeable part of the population remains stubbornly dependent on subsidies and artificial protection. Under such circumstances it is clear – and recent electoral experience has underscored the fact – that the quest for competitiveness cannot, and indeed should not, be attempted by the Government alone. The change in culture and behaviour that this requires can only be successfully undertaken through the joint efforts of all the interested parties. Faced with similar circumstances, other countries have successfully injected a new dynamism into their economies on the strength of a broad consensus on reform measures among the political and social forces.

Are we doomed to end up like the ancient civilisation dwelling on Easter island, which prospered for hundreds of years, living off a tree whose reproductive cycle exceeded the life-time of an individual, and for which reason no one had ever bothered to replant as existing trees died off? The second question probably provides a clue towards understanding the issue surrounding the first. If a section of society makes a sacrifice to reform, the benefits derived in the process may accrue to the rest of society in a greater proportion than to the people making the sacrifice. The obvious solution to this dilemma would be for all sectors of society to share in the costs and benefits of reform in an equitable manner. And this is where Government and all the other social partners have a crucial role to play. It is to take the lead in agreeing on a programme of reforms and carrying their respective constituencies with them. The Malta Council for Economic and Social Development could, I believe, provide a congenial forum for this purpose. But try we must because the challenge is a formidable one and we should not labour under any illusion that it can be wished away. This is not a time for carrying on as usual. Nor is it a time for behaving as though the universal laws of economics or current world realities do not apply to us.
I’ll be taking stock on how we are doing with respect to our employment and inflation goals and whether it will be appropriate to continue purchasing longer-dated Treasuries when that program concludes. I think that this will depend on whether we have seen a substantial improvement in the labor market outlook  6  BIS central bankers’ speeches  in the interim and any further evidence about the costs and benefits of continuing such purchases. In terms of our monetary policy regime, the FOMC statement noted that the Committee expects to maintain a highly accommodative stance of monetary policy “for a considerable time after the economic recovery strengthens.” This is important because in situations such as the one we find ourselves in today, when monetary policy is somewhat constrained because we cannot lower the federal funds rate below zero, one of the most powerful things a central bank can do is to provide guidance as to how it will behave in the future. In this respect, I am pleased that we have drawn a sharper distinction between what we expect the economy to look like in a few years time and how we expect to set policy based on that outlook. In particular, when the Committee extended the period for which it anticipates keeping the federal funds rate at exceptionally low levels – which I interpret to mean the current range of zero to 25 basis points – to “at least through mid-2015,” I don’t think this was due to greater pessimism about the economic outlook.

I’ll also meet with the leaders of New Jersey Community Capital to learn about their cutting-edge programs for helping distressed homeowners and then I’ll speak to the students, faculty and alumni at Montclair State University. In addition, my colleagues and I at the New York Fed continually track conditions in our District, and we have created a number of tools for that purpose. For example, my staff produces indices of economic activity for New York City, New York State and New Jersey. We also track local household credit conditions, including the amount and type of personal debt and whether payments are being made in a timely way. We also conduct a periodic poll about the credit needs of small businesses, which are an important source of new jobs in the region. In our latest poll of several hundred firms, many report that they did not apply for credit because they were “discouraged.” Perhaps surprisingly, many of these non-applicants have credit profiles similar to other firms who successfully sought credit. This finding suggests that the demand for credit could pick up as some “discouraged” firms learn that they might be able to obtain credit now. If you, as a representative of a small business, would like to participate in our next poll, please pass your card to my colleagues, who are in the audience, or see me after the speech and we will be glad to add you as a respondent.
Although the sector has shed jobs over the past two years, it remains an important and valuable component of the local economy. There are also numerous corporate headquarters in the county and a notable manufacturing presence, particularly in the pharmaceuticals, electrical equipment and aerospace industries. In addition, the whole tri-state region has benefited from its proximity to New York City, where the rebound in the economy – and also in employment – has been much stronger. Fairfield County’s connection to New York City is not quite as strong as Long Island’s or the lower Hudson Valley: About 7 percent of working residents in the county commute to New York City compared to about 20 percent in those areas. Still, the city’s strong pace of job creation during the current recovery is supporting incomes in the county. Turning to the recent performance of the economy, this area is growing pretty much in line with the nation, at least in terms of employment. That’s a bit of an improvement from 2012 when, after solid gains in 2010 and 2011, job creation in both Fairfield County and Connecticut had stalled. Some sectors, such as education, health, and professional and business services were adding jobs; but those were offset by job losses not only in finance, but also in the goods-producing and distributing sectors. And at the end of October, Superstorm Sandy hit the region, causing major damage and disruption.

As Chairman Bernanke noted in his most recent press conference, a strong majority of FOMC participants no longer favor selling agency MBS securities during the monetary policy normalization process. This implies a bigger balance sheet for longer, which provides additional accommodation today and continuing support for mortgage markets going forward. Fourth, even under this scenario, a rise in short-term rates is very likely to be a long way off. Not only will it likely take considerable time to reach the FOMC’s 6.5 percent unemployment rate threshold, but also the FOMC could wait considerably longer before raising short-term rates. The fact that inflation is coming in well below the FOMC’s 2 percent objective is relevant here. Most FOMC participants currently do not expect short-term rates to begin to rise until 2015. To reiterate what I said last week, some commentators have interpreted the recent shift in the market-implied path of short-term interest rates as indicating that market participants now expect the first increases in the federal funds rate target to come much earlier than previously thought. Setting aside whether this is the correct interpretation of recent price moves, let me emphasize that such an expectation would be quite out of sync with both FOMC statements and the expectations of most FOMC participants. Regional economic conditions Turning to the regional economy, my colleagues and I at the New York Fed continually track conditions in our District, and we have a number of tools we use for that purpose.
If the two fall rise and fall together – to the extent nominal interest rates can accommodate movements in nominal income growth – there’s no impact on debt accumulation: whatever proportion of income was needed to service debts beforehand is sufficient after the fact. It’s when income growth falls a lot further  1  Economists call the sensitivity of consumption to a change in its relative price over time the “inter-temporal elasticity”. That coefficient is poorly measured in the data but usually found to be relatively small and significantly less than one. At the same time, a permanent gain in real income should, even it’s expected to arrive only a year from now, prompt an immediate and almost one-for-one response of spending today. So, at least in principle, the positive “income effect” of a prospective drop in prices – holding fixed nominal pay – should be expected to outstrip the negative “inter-temporal substitution effect”. 2  If the appropriate real rate is r* then the central bank would ideally want to set a nominal rate of r*+ π , where the second term is inflation expectations. But nominal rates can’t be lower than zero – or whatever number, e close to zero, constitutes the effective lower bound – so if r*+ π < 0 the actual real rate will be higher than it should be. Note that this can happen either if πe is well below zero or if, as has been the case since the crisis, the same happens to r*.

BIS central bankers’ speeches  1  Following the financial crisis, of course, the developed world has been in exactly that position: the neutral real rate of interest has been extremely depressed, official interest rates have been pushed to the zero lower bound and central banks have employed unconventional means of easing monetary policy. Were it to occur right now, sustained deflation would therefore pose more of a risk than at times when the neutral real rate was higher. But, in my view, those risks are nonetheless relatively contained. For one thing I think the evidence suggests that unconventional policy is effective: even if they don’t circumvent it entirely, asset purchases help soften the constraint of the zero lower bound. Second, with the financial system gradually improving my guess is that the neutral real rate of interest is more likely to rise than fall over the next couple of years. Third, and most importantly, I think the chances of a sustained and widespread deflation are in any case low. That’s certainly what the international experience suggests. That experience is substantial: we have annual CPI data since 1960 for over 70 countries, a total of over 3,000 data points. In only 70 cases (barely 2% of the sample) have consumer prices actually fallen and in the majority of those inflation was positive the following year.
It seems likely that any country in a similar debt situation to Puerto Rico would have faced difficulty in continuing to raise money in the bond market and would have faced questions about the sustainability of its debt level. Debt sustainability is generally defined as a condition where government debt is at a reasonable level – one with acceptable risks to market confidence and long-term economic growth – and is not on a path to increase indefinitely relative to some measure of national income. Stabilizing Puerto Rico’s debt as a share of the Island’s income and then reducing its debt to more sustainable levels should be a key goal of the Island’s fiscal and economic policy. While the precise path toward lower debt burden is uncertain, the trend is largely determined by the interaction of three factors: the government’s fiscal policy, the growth rate of the economy and the interest rate on the public debt. Regarding the buildup of new public debt, the Commonwealth government has stated its intention that the general fund budget will be balanced in fiscal year 2015. This intention, together with the stance of not using deficit financing to support public corporations, should greatly limit the issuance of new debt. The measures put in place during this year have already had some success in cutting the projected budget gap for the current fiscal year. But what other steps can be taken to move the Island toward fiscal health?

These surveys provide significant transparency into the finances of those entities, which is invaluable for policymakers and citizens wishing to understand, monitor and exert control and discipline over the fiscal policies of their governments. They may also serve the purpose of increasing investor understanding of how the Commonwealth’s finances compare to other governments. New York City’s experience in the 1970s shows the value of better financial reporting. Prior to the City’s fiscal crisis in 1975 through 1977, New York had relatively poor financial reporting practices. As part of its recovery from that crisis, and a condition of accessing credit, the City’s reporting improved dramatically and has since won several awards. Along with those improvements, the City’s access to credit markets steadily improved. Economic research indicates that more transparent budgets are associated with lower public sector funding costs. A fourth step would be to look for ways to strengthen the performance of public corporations. A major difference between Puerto Rico’s balance sheet and those of the states is the presence of large, heavily indebted, corporate-like entities that continue to lose money and increase borrowing. For any financial reform agenda to be successful, it must confront this issue head on. Key elements of a successful reform strategy might include strengthening the public corporations’ financial standing and controlling the future flow of liabilities. BIS central bankers’ speeches  5  Puerto Rico could also seek out the opportunity to benefit from outside management expertise, including the wide experiences of U.S. mainland states.
6  If the crisis was caused only by a rise in uncertainty, a rapid recovery could be expected (Bloom, 2009), but the argument here is that imbalances exist that may hold back this recovery slowing it down. BIS Review 76/2009  7  De Gregorio, J. (2009), “Chile frente a la recesión mundial,” Estudios Públicos, Vol. 113, summer 2009, pp. 5-26. Dixit, A. and R. Pindyck (1994), Investment Under Uncertainty, Princeton University Press. Figure 1  Countries posting drops in real GDP in the fourth quarter of 2008 (*) (percentage of whole sample) 100  100  90  90  80  80  70  70  60  60  50  50  40  40  30  30  20  20  10  10  0  0  71  74  77  80  83  86  89  92  95  98  01  04  07  (*) Using the annualized quarterly GDP for a sample of 29 developed an emerging economies. Source: Central Bank of Chile. Figure 2 Equilibrium  D  A  Y, EY  8  BIS Review 76/2009  Figure 3 Multiple Equilibria  D  A B  C  Y, EY  Figure 4 Volatility of S&P 500 (*) (percent) Subprime crisis erupts  90  Bear Stearns goes bankrupt  Lehmann, AIG, etc.

This is obviously not the case in Chile today. In our country, the extraordinary fiscal and monetary stimulus should be very effective, because these efforts are sustainable and credible. This is visible also, to different degrees, in other economies in the region that are committed to foreign exchange flexibility, price stability, fiscal responsibility and financial soundness. Developed economies will need to correctly address the medium-term effects of monetary expansions and increased public debt. If the origin of the global loss of confidence is the financial crisis, then stabilizing the banking industry and restoring the payment system is not only a priority but a necessary condition for economic recovery. Hence the importance that developed countries have placed on stabilizing the financial system, which is timidly beginning to bear fruit. No simple or rapid prescription exists to rebuild the confidence that has been lost. Some think that conveying optimism is a good idea. However, if such optimism has no ground, only a lack of sense of reality will be communicated. On the other hand, sending a pessimistic message can erode confidence even further. If there is one thing we know, not only about economics but about every walk of life, it is that people cannot be fooled forever, so the only way to act is realistically. 6  BIS Review 76/2009  We are enduring a world recession, and nobody disagrees about the current hardships the world economy faces, so the discussion has shifted to when we will see the first signs of recovery.
In current, unstable circumstances, what role should the central bank play? Monetary policy should certainly stick to its mandate and ensure price stability in the medium run. In Europe, with financial conditions tighter as a result of the explosion in sovereign spreads, increased uncertainty and loss of confidence, – as shown by the fall in most indicators – there are now more downside risks to price stability. It was therefore appropriate to lower our policy rates by 25bp, a decision reached unanimously by the Governing Council. Second, we need to ensure that the banking system has access to liquidity –what is sometimes called the role of lender of last resort of the central bank. In this respect, the  BIS central bankers’ speeches  3  Eurosystem has confirmed its policy of providing unlimited liquidity – at fixed rates – to the banking system until at least until the end of Q2 2012. Collateral policy has been adjusted to avoid the shocks and liquidity squeezes borne out of rating changes. Dollar funding, based on the existing swap with the Federal Reserve, has also been made easier. Finally, in a period of intense market disruption, it is essential to ensure that the monetary policy transmission mechanism actually works. This may involve temporary and exceptional interventions on those market segments where dysfunctions are most apparent. This is the purpose of the Securities Markets Program (SMP), initiated in May 2010 by the Eurosystem.

Bank of France reports industrial output continued to grow in most sectors in France in January 1997 BANK OF FRANCE, MONTHLY BUSINESS SURVEY, 17/2/97. In January, according to the business leaders surveyed by the Banque de France, industrial output continued to grow in most sectors. Activity was especially buoyant in the intermediate goods and consumer goods sectors. The food processing sector was alone in recording a contraction in activity. The capacity utilization rate improved. Overall demand strengthened further. French products were very competitive on foreign markets and this led to an increase in export orders. Export sales increased in the United Kingdom, Italy and Germany, while demand remained firm in the United States and Asia. On the domestic market, inter-industry demand was strong, even though the orders received came with very short delivery times in most cases. Order books are now near to normal levels. They are still considered to be low in the food-processing and automobile industries, but are deemed to be satisfactory in the capital goods and consumer goods sectors. Inventories of finished products are gradually returning to normal overall, but they still exceed the desired levels in the consumer goods, food-processing and intermediate goods sectors. The outlook for the coming months is distinctly brighter. Activity should increase in all sectors, with marked improvements in the intermediate goods and food-processing sectors. Commodity prices were stable overall, while finished product prices declined slightly. This fall stemmed mainly from substantial price cuts in the automobile industry, while prices generally held up in the other sectors.
There is little reason that I can see to suppose that global growth will not recover to at least its earlier trend rate over the next 2-3 years once the immediate shock has been absorbed. But in the meantime, the UK cannot be wholly immune from a more pronounced or prolonged global slowdown in the short term than we had previously expected - if that is indeed what occurs - even though we are better placed than some others to withstand it. Inflationary pressures remain well contained. Domestic demand appears to have been sustained into the third quarter, underpinned by increasing government spending in line with the Chancellor's intentions and by the easing of monetary policy. And consumer confidence in this country - on most of the evidence - seems to be holding up well despite the terrorist attacks. While business confidence generally weakened further in the third quarter, it remains stronger in the services sectors than in manufacturing. And on the basis of last week's BCC survey - it is notable that confidence in the services sectors here in Wales actually increased quite strongly. No-one can know quite how things will turn out in the present climate of uncertainty. We cannot rule out a further slowdown here in the UK. But all-in-all I am still persuaded on the evidence that we will avoid the overall recession that is widely spoken of in the media - though it may be a bumpy ride for a time.

The imbalance within the economy which these figures reflect - notably the continuing imbalance between the internationally-exposed companies and sectors, which are having a really rough time, and the domestically-orientated sectors which are doing much better - is certainly not ideal. The continuing imbalance is not without risks. On the one side, we may find it increasingly difficult to offset the negative impact of the global slowdown in the face of increasing domestic private sector debt; and if the slowdown in the UK spreads beyond manufacturing to the services sectors it may cause unemployment to rise which in turn could slow the growth of consumer spending. But, on the other side, we may find it difficult to moderate the growth of domestic demand when the international environment improves. There is no doubt that if we could simply redraw the map, we would opt for stronger external demand and weaker consumption growth. That would represent a more sustainable balance within our economy. Sadly that is a choice that we are not immediately free to make. Doing what we can to encourage domestic demand growth to compensate for the global economic weakness is certainly preferable to an unnecessary slowdown in the economy as a whole. And that is the path we must for the time being continue to pursue. 2  BIS Review 85/2001  So what then are the prospects?