samchain/econo-pairs-v1 huggingface dataset:
And in the US, there is a divergence between weaker soft data like the ISM manufacturing survey index and still rising hard data on industrial production. Hence, restoring confidence should be the priority and it is the responsibility of political leaders: the best antidote to the current slowdown is to reduce geopolitical risks, more than changing economic policies. The French economy has been slowing down but less than in some other European countries, due to increasing purchasing power and resilient domestic demand. In 2019, French growth is expected to be higher than that of Germany and close to the euro area average. Beyond internal demand, the second pillar of European resilience should be the extension of domestic reforms. I would like here to take the example of the Portuguese recovery since 2014, after a severe crisis and courageous adjustment efforts: GDP is now growing at 2.1% in 2018. Ambitious reforms have improved cost competitiveness, boosted export performance and led to a sharp fall in the employment rate, which has more than halved since 2013. This clearly demonstrates that, in Europe, reforms do have a positive impact. 2. Our monetary policy is able to combine clarity and flexibility. Let me turn to the consequences for our monetary policy: to deal with uncertainty, we have to combine clarity and flexibility, as we did in our December’s chained guidance. I will come back to this. In the present context, we should favour state-dependent analysis over time-dependent variables.

The advances made by the European Council in December 2018 are a step in the right direction but clearly need to be strengthened and built upon. The success of the Banking Union will depend on the establishment of a solid resolution mechanism, – probably even more than a full common deposit insurance scheme. Regarding the backstop of the Single Resolution Fund, in the interests of financial stability, we should consider extending the maturities on the credit lines. And we will not achieve an effective and 4/6  BIS central bankers' speeches  profitable Banking Union without cross-border consolidation in Europe: there are still too many roadblocks and not enough cross-border restructuring. Unfortunately, there was almost no progress at all on the Capital Markets Union in the December agreement. Let us finally move on from a rhetorical consensus in principle to concrete headway, notably on harmonising bankruptcy regimes and strengthening ESMA. Both the Banking Union and the Capital Markets Union are the key components for a genuine “Financing Union for Investment and Innovation”: I have put forward this idea as a way of better channelling our abundant resources – our EUR 340 billion private savings surplus – towards the concrete needs of European economy: the energy transition, SMEs’ equity or digital innovation. But the strengthening of the euro area should also include public mechanisms of solidarity. Regarding the ESM, it should not be just about managing crises ex post, but about preventing them ex-ante above all by reinforcing our precautionary tools.
29 There is no contradiction between regulation for safety and prudence vis-à-vis regulations that are open to, or supportive of, good financial innovations. These may be new business models or use of a technology that promote competition, improve customer experiences or simply a more efficient or pleasant delivery of services. So far from adopting a Luddite instinct, many financial regulators have in fact set up dedicated teams to both support and to monitor new FinTech developments. 30 But as with any innovation in any era, FinTechs can also bring about new risks. In this regard, international organisations such as the International Monetary Fund, FSB, IOSCO and the Basel Committee have all produced several useful public reports on the potential risks. 31 As examples of new risk typologies, there may be increased vulnerabilities to anti-money laundering and efforts to counter the financing of terrorism, given the anonymity of digital currencies. Cyber-security is another area as FinTechs vary in size and risk management capabilities. There can also be an increase in macro-financial risks from contagion, procyclicality, or excess volatility given the increased speed of financial transactions, and new networks of relationships. Open banking and the ease of moving funds can also lead to potentially destabilising movements of money, posing liquidity risks. 32 I welcome more research and studies to guide such developments. It is probably too early to determine whether and how FinTechs or BigTechs may change the behaviour of incumbent financial institutions.

The whole point of a model is to abstract from a wide range of factors in order to think clearly about one particular issue. Let me describe an example of what I shall call “the Greenspan approach to economics”. It concerns the ‘Lucas critique’. Robert Lucas’ 1976 paper encouraged economists to construct models which incorporated explicit optimising behaviour by households and firms. Unfortunately, some of them urged policy-makers to apply the lessons from their models as literally as the enthusiasts of the engineering approach to macroeconomic policy had done so in the 1950s and 1960s. The Greenspan approach to economics would advise great caution. The insight of the Lucas critique is that we need to think about the responses of rational households and firms when analysing the consequences of alternative policies. But the likelihood that any particular model captures how the real economy would respond to a given change in policy is vanishingly small. Lucas did not pretend that there existed a single “true” model from which could be drawn unequivocal predictions about the impact of policy changes. The second lesson from Alan’s time at the Federal Reserve is that empirical knowledge is not confined to the econometric analysis of official statistics. There are other and often crucially important pieces of information that come to us in more qualitative form. These include information from businesses about what they see happening in the economy. Perhaps the most famous example of this in recent years is the productivity acceleration in the US in the mid-1990s.
Despite being the world’s second most important currency, it is still used to a far lesser extent than the dollar. It accounts for 20% of global currency reserves compared with 63% for the dollar; by contrast, 36% of the total value of payments (including intraeuro area payments) is settled in euro, compared with 40% for the dollar. This is why the European Commission’s communiqué in December was particularly opportune. The initiatives promoting the role of the euro, notably in the energy sector, need to be examined carefully. Europe has built its monetary sovereignty thanks to the euro; it needs to preserve its sovereignty with regard to trade; and we still have a long way to go to build our economic sovereignty, so that we can meet the challenges of innovation in artificial intelligence or of the energy transition. ** I would like to conclude my speech with this almost prescient quote from Pierre Werner in 1965: “Any economic union involves periods of flagging, of disaffection, of misunderstandings [...]. But we are also aware that, in these situations, we need to hold onto the progress made, [...] to concentrate firmly on the formal commitments already entered into [...], in other words, to persevere.”9 Far from discouraging us, the scale of the challenges and uncertainties facing 5/6  BIS central bankers' speeches  Europe at the start of this year should motivate us to persevere in our ambitions. That is my wish for Europe for 2019. Thank you for your attention.

But, more importantly, there is a political pressure towards it, driven by populist impatience that would like to have a lot, right away. For a number of years this impatience has been hindering long-term efforts in the form of fiscal consolidation and structural reforms, and these have unfortunately slowed in G20 countries. When we compare the performances of our different European Member States, it is clear that debt and public spending are not the engines of growth. There is a need today for fiscal stimulus in those countries that have surpluses, and for structural reforms across the board: without this there can be no sustainable growth. On this issue, I would just like to say a word on France, which has stood out as a positive exception over the past two years: the gilets jaunes (yellow vest) crisis provided justification for an emergency “package” to bolster purchasing power; but I do not think it should or even could halt the transformation efforts already underway. Lastly, and this is our third challenge, isolationism, characterised by the escalation of trade tensions, constitutes the biggest short-term threat to global growth. Even before the tariff hikes, the uncertainty caused by protectionist stances, essentially on the part of the United States, already appears to be threatening growth via its impact on business investment. More broadly, uncooperative economic strategies – including within Europe – are on the rise.
Overall, these patterns of credit growth support the idea that the weakness of banks at the end of the Great Recession has been a contributing factor to the slow recovery of the U.S. economy since the recession. These patterns are consistent with evidence provided in the work of Carmen Reinhardt and Kenneth Rogoff, and in that of Christina and David Romer,  2  BIS central bankers’ speeches  indicating that the severity of recessions and strength of the subsequent recovery are associated with the amount of financial distress experienced in a financial crisis. 1 There is also a strong likelihood that decreased credit demand – for example, from households whose homes fell in value below what they still owed on the mortgage – also has played a part in the slow growth of credit in this expansion, as has been expressed in the work of Atif Mian and Amir Sufi. 2 Nevertheless, the patterns that I have reviewed here point to an adverse impact from a relatively weak banking sector on credit supply. However, it also suggests that the recent improvement in banks’ financial condition should provide support to credit growth going forward, which in turn would provide support to the economic growth we project over the medium term. As I noted earlier, one area where credit has flowed freely is student lending.

However, as these temporary factors dissipate, economic slack declines further and inflation expectations remain stable, inflation should slowly move up toward the Federal Open Market Committee’s longer-run objective of 2 percent. Using data from the National Income and Product Accounts, this expansion so far has exhibited unusual features compared to previous long expansions. Most notably, the pace of growth during the early years of this expansion was well below that of the early years in previous long cycles (Table 1). Among the factors for the slower growth were unusually low contributions from residential investment and from nondurables and services consumption. In contrast, the contribution from durables consumption, particularly for motor vehicles, was similar to that observed in previous expansions. Even though real GDP growth has picked up some in the past two years, these patterns are still evident (Table 2). The slow growth during the current expansion, what we might call the long shallow recovery, is likely a result of a confluence of many factors including constrained monetary and fiscal policies, demographic factors and economic and financial developments abroad. Today, I’d like to consider developments in credit markets in the context of this shallow recovery. Credit availability is a crucial ingredient in any advanced economy’s recipe for economic growth because credit can support investment in productive enterprises and can smooth household spending from fluctuations in income. Credit is the means through which financial assets accumulated by savers can earn returns by being put to productive uses.
That the Riksbank should aim to stabilise inflation follows from the Act’s price-stability objective, which the Riksbank has chosen to specify as an inflation target of 2 per cent. That the Riksbank should stabilise resource utilisation follows from the fact that the preparatory work for the Act states that the Riksbank “without prejudice to the price-stability target, should support the goals of general economic policy with a view to maintaining a sustainable level of growth and a high rate of employment”. 3 So what can the Riksbank do in order to achieve sustainable growth and high employment without prejudicing the price stability objective? Well, the best thing the Riksbank can do is to attempt to stabilise resource utilisation around a normal level. But why around a normal level? Surely, a higher level of output and employment than normal would be better? Yes, but it is beyond the power of monetary policy to increase the average level of output and employment and thus increase average resource utilisation. To increase the average level of resource utilisation one would have to use areas of policy other than monetary policy, for example a structural policy designed to improve competitiveness and the workings of the labour market. Unfortunately – as 40 years of experience have shown and 30 years of research have explained – attempts to use monetary policy to keep resource utilisation above the normal level only result in average inflation being higher than the target without raising the average level of resource utilisation.

In an economy with a developed banking system such as ours, financing for the internationalisation of the Spanish economy is largely conditional on developments at the international level. The best policy for promoting the financing of the international expansion of our companies is to ensure the financial stability and soundness of the Spanish financial and banking system. 6  BIS central bankers’ speeches
Payments and monetary and financial stability  13 To ensure that its liabilities continue to be perceived of higher quality than those of any other issuer, the institution at the apex of the payment system – typically the central bank – has an incentive to exercise close control over the terms on which they are made available to the banking system. 14 That translates into the traditional monetary stability objective: preservation of the role of the ultimate settlement asset as a store of value and unit of account. It also gives the central bank a strong interest in the stability of the financial system. And within that a reliable and resilient infrastructure for distributing the ultimate settlement asset is a key condition of stability (and of implementing monetary policy effectively). 15 In an advanced monetary economy, of course, bank deposits constitute by far the largest component of “money”; in the UK they make up some 96% of the broad monetary aggregate, M4. Agents rely on interbank payment systems to facilitate the direct transfer of deposits between banks and thereby also preserve their role as a medium of exchange. And as the sophistication of securities and other markets has grown, the core payment systems have become intertwined with the settlement and clearing systems for the key markets. Together they have become a critical part of the infrastructure not just for the financial system but for the economy more widely.

47 More generally, strong international cooperation in the sphere of risk assessment and crisis management responses is also clearly important. With increased links between infrastructure providers in different centres and the emergence of new cross13 border infrastructures, greater cooperation is also required in the conduct of oversight: not only in terms of assessment of particular overseen cross-border infrastructures against international standards, but also in identifying potential interdependencies between national infrastructures. While existing cooperative arrangements work well, the model needs to expand and continue to evolve. 6. Concluding remarks  48 The resilience of the infrastructure of wholesale payment, clearing and settlement systems to both operational and financial shocks remains a key requirement of financial and monetary stability. But the landscape is changing fast in response to technological change and the financial innovation and globalisation it allows. Cross border and global networks are squeezing our national monopolies and commercial banks are playing an increasing role.
If the production gap is completely closed and equal to zero - i.e. actual and potential production coincide - the inflation rate should be 2 per cent as long as a credible policy is pursued and no other shocks occur. Figure 1 illustrates in principle possible future developments. An important insight in this context is that changes in the steering interest rate are significant for production and employment in the short term, but not in the long term. If prices and wages do not adapt immediately - i.e. there are nominal lags - changes in nominal quantities, including the Riksbank's repo rate, will entail changes in relative prices and real wages. These real price changes affect the economy's real aggregated demand and thereby both production and employment. If, for instance, wage agreements are signed for longer periods of time, while companies' pricing is more flexible, lowering the steering interest rate can have real economy effects in the short term, because companies' price increases will lead to lower real wages and higher profits and thereby increased production and employment. In the longer term, when new wage agreements are signed wage formation will take into account the higher price increases and be adapted to avoid changes in real wages. By changing the steering interest rate, the Riksbank can affect the actual, short-term production level but not the potential, long-term level. The latter is determined, as I said earlier, by factors such as  BIS Review 16/2003  1  technological developments, labour supply, etc.

During the crisis years production with a low level of productivity was put out of business and unemployment increased which led to an increase in the labour productivity measured. This one-off effect raised the level of productivity growth but at the same time meant that a large percentage of society's available resources was not utilised. 2  BIS Review 16/2003  In connection with and directly after the crisis there were also a number of changes in the Swedish economy that have affected developments since then. New regulations were established for fiscal policy, with an expenditure ceiling and surplus target. At the same time, monetary policy was successfully aimed at safeguarding low inflation. Also during the 1990s a number of markets were deregulated and opened to domestic and international competition. In addition, Sweden joined the EU. This development entails an increased international integration of product and labour markets, which should have had a favourable effect on productivity growth. A further explanation is the shifting between sectors in the Swedish economy. During the 1960s and 1970s there was a rapid growth in employment in the public sector, while the private sector declined. Following the crisis at the beginning of the 1990s the situation was reversed (Figure 4). As productivity growth in the public sector is probably lower than productivity growth in the private sector, this development results in a rise in productivity for the economy as a whole.
After the introduction of inflation targeting in 2001, the Central Bank has no specific objective as far as the exchange rate is concerned. This is in accordance with its policy of targeting inflation and a floating exchange rate. This has been interpreted to mean that the Bank is completely disinterested in developments in the exchange rate. This is not true. The exchange rate for the króna is very important, the events of the past year or two are more than sufficient indication of that. As the Bank has previously pointed out, the real exchange rate at present is not far from average over the past 20 years, nor much above the average of the past 10 years. The nominal exchange rate since the beginning of this year is in fact slightly lower than it was during the same months two years ago. The exchange rate for the króna is determined by the situation and strength of the national economy, external equilibrium and market expectations. The present exchange rate thus reflects to a considerable extent factors which the Central Bank can do little to influence. The large exchange rate fluctuation from 2000 to 2002 can be attributed to specific circumstances, and the exchange rate is unlikely to fluctuate as substantially in the immediate future as it did during this period. It should be borne in mind, however, that the nature of the Icelandic economy and its small size does mean that currency fluctuations as a rule will be greater than between the currencies of larger economies.

We will not hesitate to change interest rates if it is necessary to keep inflation on track. That will allow you to concentrate on the real business issues of the future. Charts  4  BIS Review 70/2006  BIS Review 70/2006  5  6  BIS Review 70/2006  BIS Review 70/2006  7