samchain/econo-pairs-v1 huggingface dataset:
In this connection, competition and the contained growth of relative prices are also needed for sectors that are not externally open, given that the sectors that produce tradable goods incorporate a high proportion of non-tradable goods and services. To differing degrees, the factors mentioned are contributing to a situation where Spanish exports tend to be skewed towards goods of medium and medium-high technological intensity, with a low share of high-technological-content products, below 10% of the total. As a result, the sensitivity of exports to price-based competition is high. 5/6  Further, redressing public finances should also contribute to a firm and sustained path of external surpluses. The sectoral breakdown of the net IIP shows how the reduction in our economy’s debtor position has been concentrated in the private sector. Meantime, since the start of the crisis, general government external debt has increased notably, by 26 pp of GDP since 2009, to slightly over 50% of GDP. Admittedly, from its peak of 11% of GDP in 2009, the budget deficit has fallen substantially, to around 2.5% of GDP. However, the structural deficit remains high and public debt has only fallen modestly from its peak, standing currently at 98% of GDP. Conclusion In conclusion, I would stress that in order to give continuity to the current growth phase, reduce external vulnerability and strengthen the Spanish economy’s potential, two vitally important courses of action should be followed.

Averages for the periods 1970-1989 and 1995-2003  10  10  9  9  8  8 7  7 1970-1989 1995-2003  6  6  5  5  4  4  3  3  2  2  1  1 0  0 Inflation  GDP growth  Productivity change, Nominal wage rises, whole economy whole economy  Real wage rises, whole economy  Open unemployment  Source: Statistics Sweden  6  BIS Review 65/2004  3. Open unemployment i different counties Share of the labour force i each county respectively 8  8  7  7  2002  6  6  2003  Norrbottens  Gävleborgs  Skåne  Örebro  Dalarnas  Västmanlands  Värmlands  Södermanlands  Blekinge  0  Västernorrlands  0  Gotlands  1 Östergötlands  1 Kalmar  2  Västra Götalands  2  Hallands  3  Stockholms  3  Västerbottens  4  Uppsala  4  Kronobergs  5  Jönköpings  5  Source: Statistics Sweden  4.
Once the cap has been set, expenditures across worthy public programmes must be made according to priorities – not by lifting the cap. If the ability to prioritise fails us and the cap is lifted, the long-term margin of manoeuvre will be reduced fairly quickly. Less will be left to our children. 4  The intergenerational perspective was not mentioned in the first public document to contain a broad discussion of the role of oil in Norwegian society, Report no. 25 to the Storting of 1974. The focus was on how the government would spend the revenues from the oil sector to create a “qualitatively better society” – immediately. The oil deposits were not discussed as they are today as wealth to be invested. See Report no. 25 to the Storting (1973–74): “Petroleumsvirksomhetens plass i det norske samfunn” [The role of petroleum activity in Norwegian society], Ministry of Finance. 5  In 1985, Professor Steinar Strøm wrote that it was an understandable human reaction to celebrate Norway’s new oil wealth with a spending spree. At the same time, Strøm pointed out that as oil revenues became substantial, money could be set aside in a fund abroad. Steinar Strøm (1985): “Oljemilliardene – Pengegalopp til sorg eller glede?” [Norway’s oil billions – curse or blessing? ], Sosialøkonomen, 1, p. 246. 6  Report no. 29 to the Storting (2000–2001): “Guidelines for economic policy”, Ministry of Finance.

This may seem to be a modest goal, but is not a trivial one. People of my generation may remember the German Gunter Sachs, one of the heirs to the Opel fortune. He was known for saying that he had not worked a day in his life. 11 Sachs could live off his fortune and his spending was not confined to only useful things. For example, he lavished thousands of red roses on Brigitte Bardot, strewn over her home from a helicopter. There is no shortage of examples of individuals who have spent large portions of their wealth on an opulent lifestyle. But nations do not have the possibility of living off wealth alone. A nation thrives on each other’s labour, as Finance Minister Erik Brofoss stated in his address on the state of economy to the Storting (Norwegian parliament). The economists Jeffrey Sachs and Andrew Warner 12 have shown that countries with abundant natural resources have generally experienced weaker growth than otherwise comparable countries. Perhaps this is not so strange. Sudden wealth in one sector of the economy also results in higher wages and cost levels in other sectors. Such visible wealth can also weaken and crowd out internationally exposed business. Economists refer to this phenomenon as the “Dutch disease” after the Netherlands pursued an expansionary economic policy based on huge revenues from gas sales in the 1960s. When gas production declined, a period of harsh economic restructuring followed. The sheltered sector had to be reduced and the internationally exposed sector increased.
Most of the time, the best projection of asset prices at that horizon is for them to be broadly flat. Consequently, I suspect that our policy choices would not have been radically different had we been tasked with targeting an inflation measure that included a measure of owneroccupied housing costs. Finally, there is something of a logical error in moving from the indubitably correct observation that successful inflation targeting is insufficient to guarantee either macroeconomic stability or financial stability to the conclusion that monetary policy should in addition, or instead, be focussed on some other objective. There is a real danger in overburdening monetary policy if it is expected to achieve both price stability and financial stability simultaneously. With two objectives, one needs two independent means of achieving them. The assignment of instruments to targets then revolves around which instrument is most effective at achieving which objective. Though loose monetary policy, particularly in the United States during 2001–5, arguably contributed to the build-up of the financial imbalances, it was but one of many causes, including a plethora of failings within financial institutions. These include: inadequate care in the extension of loans to risky individuals, when those loans are then sold on; the inappropriate use of off-balance-sheet vehicles to circumvent capital requirements; reward packages that encouraged an undue focus on short-term returns; excessive complexity and opacity in some asset-backed securities; and distorted incentives facing ratings agencies.

Even though we have called a pause in our asset purchase programme, the effects of past purchases will continue to work through the economy for some time to come. The aim of quantitative easing is to boost the supply of money, push up a wide range of asset prices and facilitate finance through the capital markets, thus raising nominal demand in the economy. How well is quantitative easing working? Chart 3 shows, for the two days following each successive announcement about the scale of the asset purchase programme, the movements in: average gilt yields; the expected average level of Bank Rate over the same maturity (from Overnight Indexed Swap rates); and the spread between them 1 . That suggests gilt yields are lower as a result of the programme by a total of around one percentage point. Moreover, since the programme began, investment-grade corporate bond yields have fallen by almost four percentage points, equity prices have recouped half their  1  The impact is measured by the change over two days in the average 5 to 25 year (zero coupon) gilt spot rate.
It’s not simply that there’s more money to play for (remember how much more is held in bank accounts). It’s that the assets backing the two are qualitatively quite distinct. Shifting resources from one to the other might therefore have an important effect on the relative supplies and prices of those assets. Charts 3 and 4 make the point. Modern commercial banks, whose sterling balance sheets are aggregated in Chart 3, have what is called a “fractional reserve” structure. Their holdings of liquid assets, including reserves at the central bank, are much smaller than their deposit liabilities (the purple bar). Most of their assets are loans. But loans are “illiquid”: there’s no secondary market in which to sell them and, at least in the short run, their value to the creditor cannot be easily realised. Indeed, when banks attempt to do so – by demanding early repayment or abruptly curtailing lines of credit – they can cause great economic damage, as we (re-)discovered after the 2008–09 crisis. This “maturity transformation” – the combination of on-demand liabilities and illiquid assets – imparts an inherent fragility to commercial banks’ balance sheets. If everyone tried simultaneously to withdraw a bank’s deposits, it wouldn’t have enough liquid resources with which to meet the demand. That’s why banks are vulnerable to “runs”. Taken with the economic costs of deleveraging, it’s also why society regulates and under-writes the banking system, via deposit insurance and central banks’ lender-of-last resort facilities.

Over a mediumterm horizon, balance of payments trends remain unchanged. This year’s revision of the estimate for foreign currency reserves from $ billion to $ billion comes a result of higher foreign currency purchase volumes based on the fiscal rule in the context of higher oil prices. In conclusion, I would like to make the following comment. Should the situation unfold according to our baseline forecast, we hold open the prospect of a key rate reduction somewhat sooner than we assumed back in December last year. We do not rule out that this may occur in 2019. The Bank of Russia will make its key rate decisions, as it always does, taking into account inflation and economic dynamics against the forecast as well as risks posed by external conditions and the reaction of financial markets. 3/3  BIS central bankers' speeches
My main message is that recent events support rather than oppose my opinion – namely that further regulation is not necessary as long as the major banks manage their exposures to the hedge funds correctly. I shall shortly discuss the role the hedge funds have played – and not played, during last autumn’s unrest in the financial markets. However, let me first say a few words as to why hedge funds as a group are important to financial stability. Hedge funds spread risk and improve pricing Hedge funds are, as we know, a broad concept and one that covers managers with a number of different working methods and strategies. However, a common denominator for most hedge funds is that they have as a goal an absolute return rather than a relative return and have far more liberal investment rules than other funds. Also they often have highly leveraged portfolios with the aim of increasing the return. For those who reflect on the way in which financial stability develops, and all central banks do so, it is, of course, of particular interest to see what advantages and risks hedge funds as a group can convey – once again being aware that this is an extremely heterogeneous group. In my opinion, hedge funds fulfil several useful functions in the financial markets. They contribute to spreading market risk and credit risk to more agents. Further, since they can act swiftly and in a flexible manner, they can often help improve the pricing for different products.

The significant CHF appreciation in early January 2015 has entailed measures tailored to the particular features of each country. Specifically, Polish authorities recommended banks to come up with individual solutions to cut down on debtors’ debt service. Croatia introduced a fixed exchange rate of the kuna against the Swiss franc for a one-year period. The Hungarian authorities took over much of the effort of managing the consequences of the developments in the CHF/HUF rate; it should be mentioned, though, that CHF-denominated loans accounted for approximately 50% of local government borrowings and would have had a significant impact on the budget assuming inaction on the part of the authorities. VI. Pseudo-remedies vs. realistic and balanced solutions  There may be various ways of action to solve the issue of CHF-denominated loans, but any negotiated solution should be based on the following principles: •  target those individuals in real need of support;  •  reasonable burden-sharing;  •  not generate moral hazard, i.e. not lead to unreasonable expectations in the future (related to not paying the debt service) and not discriminate debtors in other currencies (RON, EUR, USD);  •  not impair financial and banking system stability. Financial system stability is essential for: (i) ensuring financial intermediation and hence the funding of economic growth, (ii) job creation, (iii) higher household income, (iv) paving the way for credit repayment, (v) preserving depositors’ confidence in the banking sector;  •  comply with the EU Treaty and Romania’s accession conditions, i.e. not restrict free capital movement.
Brainard, L. (2017), Rethinking monetary policy in a new normal, Presented at the Rethinking Macroeconomic Policy Peterson Institute conference, Washington, DC. Bridges, J., C. Jackson and D. McGregor (2017), Down in the slumps: the role of credit in five decades of recessions, Staff Working Paper No. 659, Bank of England. Broadbent, B. (2018), Monetary and macro-prudential policies: The case for a separation of powers, Speech at Reserve Bank of Australia, Sydney. Caballero, R., E. Farhi and P. Gourinchas (2017), The safe assets shortage Conundrum, Journal of Economic Perspectives, Vol. 31 (3), pp. 29-46. Carney, M. (2019a), Pull, push, pipes: sustainable capital flows for a new world order, Speech at the 2019 Institute of International Finance Spring Membership Meeting, Tokyo. Carney, M. (2019b), The global outlook, Speech. Clarida, R. (2019), The Federal Reserve's Review of its monetary policy strategy, tools, and communication practices, Speech at the "Fed Listens: Distributional Consequences of the Cycle and Monetary Policy" Conference. Dynan, K. and W. Edelberg (2013), The relationship between leverage and household spending behavior: Evidence from the 2007-2009 Survey of Consumer Finances, Federal Reserve Bank of St. Louis Review, 95(5), pp. 425-48. Eggertsson, G. B., N. R. Mehrotra, and J. A. Robbins (2017), A model of secular stagnation: Theory and quantitative evaluation, NBER Working Paper. Fagereng, A. and E. Halvorsen (2016), Debt and household consumption responses, Norges Bank, Staff Memo. Gagnon, E., B. K. Johannsen, and D. Lopez-Salido (2016), Understanding the new normal: The role of demographics, Finance and Economics Discussion Paper, Federal Reserve Board of Governors.

And had Jane been living in the euro area today, in Germany for example, she would only have been able to invest for the long term at a negative interest rate – the 30 year bund yielded minus 0.27% in August. Nominal interest rates do vary through time of course. Since the Napoleonic wars and outside wartime, UK long term nominal rates moved mainly in a 2-5% range until the decades of inflation following the Second World War, during which they rose above 15%, before falling back as inflation was brought under control. They have been falling ever since. The fall in long rates is a phenomenon that has been building since the late 1980s, gathering pace after the financial crisis (Chart 1). During the past couple of months, UK long nominal rates have dropped to around, and sometimes even below, 1%. They have not been this low in the past 200 years. The same is true, more generally, for other advanced economies. 1 See Avery Jones (2019). 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Some of this likely reflects low current and expected inflation. But it is a great deal more than just an inflation story. Long term real rates – in the United Kingdom and in other advanced economies – are extremely low and indeed are negative. I want to look briefly today at why we are in a period of low interest rates and why we might expect it to persist – ‘low for long’ in other words.
I’ll just have to say that I’m fact-based. New York Fed is fact-based. And I hope we stay that way. Maureen O’Hara: Do you have alternative facts? Just checking, just checking. President Dudley: Look, I think a healthy debate is a good thing about what facts matter and how the world works. You know, people can have different models about how the world works and what’s important, and what’s not. But I think that they have to be based on real evidence. So, I’m going to continue to live in my world, which is very much fact-based. Maureen O’Hara: I think we have time for one more question, and we have someone back there who’s got a mike. Audience Member: Yeah, Mr. Dudley, I have a question. You mentioned that there was some nefarious behavior by banks. I heard you mention that there was some nefarious behavior going on by banks during the financial crisis. President Dudley: Well, the employees of banks. Audience Member: Ok, employees of banks. My question is, there was – some of the big banks, including J.P. Morgan and Bank of America, basically bailing out the government and the FDIC, buying institutions like Countrywide, Merrill Lynch, Washington Mutual. In some of these cases, they were given winks and nods by the government that they were not going to be held accountable for let’s say the sins of these institutions that they took over.

Indeed, the very knowledge that the Bank stands ready to purchase assets may be as beneficial as the actual purchases. And over a period of time, as market functioning improves, the quantity of private sector assets held by the Asset Purchase Facility may well decline as assets mature and are rolled over into the private market. This should be seen as a sign of success not of dwindling support. The Bank continues to review actively the case for extending its operations into other corporate credit markets, and recently announced its intention to extend its purchases to include commercial paper secured on loans for working capital. But given the relatively modest size of corporate credit markets in the UK, to increase significantly the scale of our corporate debt purchases would involve changing the nature of our operations. Rather than improve their functioning, large scale asset purchases would risk crowding out private debt markets: substituting for markets rather than supporting them. That is not consistent with the aims of the Asset Purchase Facility and could detract from the long-term efficiency of the economy. A second criticism that is sometimes made against the asset purchase programme is that some of the gilts we have purchased have been from foreign investors and this may limit the effectiveness of the purchases. This argument is based on the supposition that overseas investors may be more likely to reallocate their portfolios into foreign currency assets, rather than into alternative sterling assets, such as corporate bonds or UK equities.
This part of the monetary policy decision-making process is important, as it provides a base for the Executive Board to be able to choose the decision alternative that appears to provide the best target fulfilment. The staff’s proposal for monetary policy is the most important base for the discussion at a longer meeting that includes a large number of analysts from the Monetary Policy Department and the Executive Board, and which is normally held around two weeks prior to the monetary policy meeting. The Financial Stability Department of the Riksbank also plays an important role in the analysis work and therefore takes part in this meeting. The Riksbank has always considered it important to monitor developments in the financial markets and in the Swedish banks, and this has been particularly important in the forecasting work during the financial crisis. The Executive Board members’ input is important at this meeting and may in particular affect the forecast for the repo rate. However, this has repercussions for the forecasting work as a whole, as the future repo rate affects most of the other variables in the forecasts. The Executive Board may also have views on other parts of the forecasts than the repo rate path, but the discussion usually mainly centres on what is a well-balanced monetary policy. At a shorter meeting that usually takes place the day after the large meeting, the members of the Executive Board have the opportunity to discuss the main scenario and give their views on it in a more limited circle.

We are as always prepared to take whatever measures are necessary to safeguard financial stability. If we need to take action we will, as usual, make it clear what we intend to do, how we will do it and when we will do it. The recent developments illustrate something that has direct relevance to the theme of my speech today – namely the difficulty in capturing all of the relevant factors when making forecasts. Sweden has little trade with Greece and our banks have little exposure towards the country. Nevertheless, Greece’s problems are important factors when we try to predict future developments in the Swedish economy. And this leads me back to what I had actually intended to talk about today – the role of forecasts in monetary policy. Probably like many other economists outside the bank world, I was very sceptical of forecasts when I came to the Riksbank last year. To me, making forecasts appeared to be an activity that required very elaborate machinery, with complicated models and vast amounts of data, the results of which were nevertheless usually incorrect. Since then I have gained a new perspective, both with regard to the process of making forecasts and their role in monetary policy decision-making. Today I intend to share with you some of my new insights into this field.