samchain/econo-pairs-v1 huggingface dataset:
5  European Commission, The 2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008–2060), European Economy 2/2009, page 47. 6  Source: Eurostat. 7  Ebejer, Ivan and Ulrike Mandl, The efficiency of public expenditure in Malta, ECFIN Country Focus Volume 6, Issue 2. February 2009. 8  The tertiary educational attainment level is defined as the share of the population aged between 30–34 years who have successfully completed university or university-like education with an International Standard Classification of Education 1997 of 5–6. 2  BIS Review 156/2010  stresses, higher education drives innovation and economic transformation. 9 The University of Malta, however, is short of funds. One way of tackling this deficiency would be to limit stipend support to students who are truly in need. This would ensure that access to a university education remains open to everyone with the potential to benefit from it, while releasing funds for improving its quality. It would also address an issue of equity: since a tertiary level education is the key to better-paid jobs and higher lifetime incomes, it is appropriate that those who benefit most from it should contribute at least part of the costs involved. … while investment has not been sufficient But enhancing the supply and quality of labour is still not enough. To produce output, labour has to work with capital. Now a country’s capital stock can only grow through investment. The recent performance in this regard has been inadequate.

First, by boosting incomes in retirement it will help support a large share of the population as it ages, reducing the burden that currently falls on the unfunded pay-as you-go system. Second, if individual contributions are linked more closely to individual payouts, this will encourage private saving, which, as we have seen, is necessary to close the saving/investment gap. Finally, if individuals perceive a closer link between their contributions and their retirement income, this should help curb the evasion of social security payments. There is little room for tax increases Fiscal consolidation, therefore, is desirable to help correct the economy’s external imbalance; to put public finances on a sound footing while coping with the costs of population ageing; and, above all, to maintain credibility and investor confidence, which are prerequisites for growing the economy. Now deficit reduction is typically achieved through a combination of increased revenue and expenditure cuts. As for the former, relying mainly on higher taxation cannot be an option at this juncture; besides, it generally distorts the efficient allocation of resources. Higher indirect taxation tends to push up the price level and, hence, harms competitiveness, while higher taxes on income depress economic growth. Neither, of course, is this a time for cutting taxes. An option which is at once fiscally beneficial and socially desirable is to close remaining tax loopholes and to engage in a more aggressive pursuit of tax evasion and benefit fraud. We need to cut spending, while rebalancing it The only real alternative, however, is to cut public spending.
This time around, there has been an additional push effect from the war in Ukraine as Iceland has received a significant number of Ukrainian war refugees. The number of asylum seekers from other parts of the world has also risen. Many refugees and asylum seekers have already found work, but finding permanent housing has been a challenge. This may have contributed somewhat to higher housing prices recently and thus higher inflation in Iceland. Iceland’s strong economy and relatively good employment prospects will likely continue to attract migrants and asylum seekers even after the war ends. The strong link between net migration and house price inflation suggests that policymakers need to pay attention to the role of the housing market in Iceland’s inflation dynamics. There are two roads to a more balanced outcome. Firstly, better demand management could make the demand for foreign labour and hence immigration more stable. Secondly, if the supply of housing could be made more elastic, housing price volatility would diminish. In the face of the large external shocks the economy has suffered in the past few years, both will be needed, but these are challenging tasks with no easy solution. Due to the strong recovery of tourism, the output gap returned to positive territory at an earlier stage than in most other OECD economies. In addition to the housing market, emerging overheating has become most visible in the labour market.

The output gap moved to positive territory earlier that in most OECD countries  Wage growth in Iceland averaged above 7% during the pandemic, a somewhat faster pace than over the preceding decade and much faster than in main trading partner countries. Recently, short-term wage settlements have been concluded that imply that the fast pace of wage growth will continue at least for the coming year. Wage and ULC growth in Iceland has been much faster than among peers  This is worrisome for medium-term inflation prospects, since the buffers that existed in the decade prior to the pandemic, and allowed faster wage growth for several years without commensurate inflationary consequences, have been depleted. The depressed level of relative unit labour costs following the GFC, fast expansion of tourism services exports in 2015 - 2017 and a current account surplus had allowed the króna to appreciate, with moderating impact on inflation. As the buffers are depleted, the relationship between wage growth and inflation is likely to be much less benign in the period ahead than during the pre-pandemic period. The fiscal and monetary dimension of the response to pandemic and war Three factors are likely to have determined the fiscal and monetary response of different countries to the pandemic: i) fiscal and monetary space at the outset, ii) the severity of the outbreak and iii) structural factors that affected the economic impact of the outbreak and restrictions imposed to contain it. On the first two accounts, Iceland was in a relatively good position.
Structural reforms are the familiar mantra of all international meetings. As a means of compensating for a large loss of competitiveness they are too slow acting to be effective. But in current circumstances they are, for the UK, a necessary complement to the other measures I have described. Since the crisis began real wages have fallen by almost 10% – a large but necessary adjustment to make the production of tradable goods and services more attractive than non-tradables, and to stabilise the public finances. Supply reforms can make that adjustment more palatable, and, by raising expected future incomes, they increase the rate of return on new investment and encourage spending, both investment and consumption, today. It cannot be for a central bank to design a programme of such supply initiatives, but in economic terms there has never been a better time for supply-side reform. BIS central bankers’ speeches  3  The need to rebalance the economy means that all of the policy responses I have discussed will be required to restore the economy to full health. The final part of the prescription is outside the UK’s control. Engineering a recovery while our main trading partner is in a downturn is a difficult undertaking. We would all benefit from a resolution of the problems in the euro area. The actions by the ECB have brought a period of calm to financial markets, and so bought more time.

We have been a pioneer in central bank digital currency (CBDC): in addition to taking an active part in the work on a potential euro retail CBDC, as early as 2020 we launched a series of twelve experiments on a wholesale CBDC, both for payments and securities settlement. The first nine experiments have been very valuable, and the three experiments underway focus on cross-border payments and tokenised asset settlement.5 We are keen to pursue our long-standing partnership with commercial banks, to reconcile innovation and security; and we now look forward to taking part in the Eurosystem-wide experiments that the ECB has just announced6. As regards sustainable finance, without going too much into the subject, Paris has stood as a pioneer for many years now. French banks, asset managers, and insurance companies are key players in sustainable finance, a segment that should further grow within the next few years. And we central banks are playing our role, in the very name of their primary mission of price stability. However, let us beware of the "magic wand" temptation7: central banks – and green finance – cannot be the only green game in town, they cannot replace sound public policies and corporate transition plans. One necessary step for public policies is to put a price on carbon: it is the only way to make more green projects profitable; and green finance without enough green projects would amount to idling our engine. I thank you for your attention, and wish you a good forum.
If, on the other hand, people expect the rise in infection rates (and the associated restrictions) to subside relatively quickly – and if there are also no close substitutes for the sorts of spending that expose people to infection risk – one would expect a more marked effect on aggregate consumption, and less expenditure switching. Charts 5(a)-(c) depict some simulations to get these points across. The model they’re based on is extremely simple and stylised. In particular, it assumes that incomes, current and expected, are held fixed, and that there’s no change in the degree of uncertainty about the economic outlook. The only thing that changes is the path, actual and expected, of the pandemic. This is very obviously unrealistic. Household incomes have clearly been affected by the crisis. And we know from long experience that when uncertainty about people’s future incomes goes up, saving rates tend to rise as well. But as we saw earlier, from Chart 4, household incomes have been significantly protected by the furlough schemes, at least as compared with the huge dip in national income. (While this isn’t a free lunch – higher government debt has to be paid for eventually – it does spread out the cost of that dip.) So the assumption 2 In a more general model than the one used here Krueger et al (2020) also point out that the impact of the pandemic on aggregate  spending is lower the closer the degree of substitutability between risky and non-risky consumption.

At the end of my speech I expressed concerns that the correction of financial imbalances, and the associated re-pricing of risk, might not have run its full course. As we now know, this was indeed the case. Only ten days later, the re-pricing in markets took a quantum leap. In mid-September the turbulence turned into a full-blown crisis. The chart of money market spreads tells this tale clearly. BIS Review 103/2009  1  As you can see, credit spreads soared. Financial market activity fell dramatically, volatility spiked and the global financial system came close to seizing up. Central banks stepped into the breach, addressing this unprecedented market failure. The ECB was in the vanguard of actions to contain these intensified tensions, taking a number of standard and non-standard measures. The measures by the leading central banks eventually paid off. As you see in the chart, money market spreads – a symptom of the market failures that I mentioned – retreated from their peaks. They are now back at levels comparable to those before the intensification of the crisis last year. But they still remain elevated in a longer time perspective. The crisis triggered a freefall in economic activity. The chart shows that within a few months only, from January to July 2009, the projections for 2009 shifted massively to the left, in highly negative territory. After they centred around -1.5% in January 2009 and -3.2% in April 2009, they dropped to -4.5% in July, entirely outside the distribution range still a few months earlier.
As mentioned, the Petroleum Fund acts as a buffer against the wide fluctuations in the krone exchange rate that petroleum revenues could have generated. An increase in petroleum revenues will result in higher capital outflows from the Petroleum Fund. Operators in the foreign exchange market may at times have a tendency to underestimate this stabilisation mechanism. The increase in oil prices has increased the need for allocations to the Government Petroleum Fund, and in July Norges Bank resumed its daily purchases of foreign exchange for the Petroleum Fund. This comes in addition to the regular transfers of profit from the State’s Direct Financial Interest in petroleum activities (SDFI) to the Petroleum Fund, which are to be invested abroad. 2  BIS Review 47/2004  Higher oil prices mean higher revenues for the oil companies. International and Norwegian oil companies with activities in Norway increase their capital outflows when profits increase. Thus, in the short and medium term, cumulative profits in the petroleum sector do not generate substantial krone holdings in the domestic economy. It is possible to define a “basic balance”3 in the external account that is found by subtracting the capital outflows from the Petroleum Fund from the current account balance. The basic balance is not affected by fluctuations in oil prices and the currently high price level when the central government’s use of petroleum revenues follows a long-term guideline, but it is weakened by the increase in imports.

If we hold the bond until it has matured, we know exactly how many Swedish kronor the Riksbank will receive in interest on it. And we also know how much it cost to buy. But we don’t know what the funding cost for the bonds will be. Because the cost depends on how the repo rate develops up until the bond matures. This maturity transformation is actually quite similar to operations pursued by commercial banks to make a profit, i.e. holding long-term assets funded by short-term borrowing. And even if such operations are associated with an interest-rate risk which makes for an uncertain return, one can normally count on making a profit more often than making a loss. This is because short-term rates (such as the repo rate that has a one-week maturity) are usually on average slightly lower than long-term rates (e.g. the rate for five-year government bonds). In economics jargon, this is referred to as term premiums on the financial markets normally being positive. In practice, however, it is very difficult to determine how large these term premiums are at any one particular time. The premiums cannot be directly observed on the financial markets but must either be estimated based on a forecast for future shortterm rates or estimated using statistical methods based on historical connections between interest rates at various maturities and different asset-types. 7 The ECB’s (2012) interpretation of this is that central banks should avoid prolonged periods with negative  equity.
And second, as banks have developed they have increasingly become the main providers of money in modern economies – 96% of money in the UK is in the form of claims issued by banks. Failure can mean that large numbers of people lose most of their access to money – if not their money itself – and to the financial system while the bank goes through insolvency. As banks developed and grew larger in the twentieth century, the question of ‘who pays when the bank fails?’ continued to challenge policy makers. Once the liability of a bank’s shareholders was increasingly limited the emphasis shifted to the bank’s creditors, including its depositors. However the dangers of exposing short-term creditors, like ordinary depositors, to losses were demonstrated in the early twentieth century in the US. Bank failures leading to depositor losses led to numerous bank runs making the whole system unstable and liable to runs at the first sign of bad news. The episode demonstrated the costs of bringing into doubt the ‘moneyness’ of banks’ deposit liabilities. As a result, policymakers realised that depositors were not best placed to absorb losses and federal deposit insurance was established in the US with the creation of the FDIC in 1933. The answer then to the question of ‘who pays?’ was first the shareholders, then unprotected depositors and finally the surviving banks that as a whole funded the insurance – with bridging loans from the taxpayer if necessary.

The diversity of experiences is also evident with respect to access to mortgage credit, both for households attempting to transition to homeownership and for homeowners who want to trade up. We have also been monitoring mortgage originations at the zip code level using the New York Fed’s Consumer Credit Panel. When we rank zip codes by their 2012 average adjusted gross income, we see mortgage origination volume in the lowest quintile locations was 38 percent of the volume for the highest quintile locations in 2007. By early 2015, this ratio had fallen to only 14 percent. As highlighted by these examples, and as you’ll hear during today’s presentation, data at the aggregate level and at a more micro-level illustrate different sides of the same picture. As such, both must be considered as we work toward fully understanding the economy. I will now ask Aysegul Sahin to provide a detailed account of how various economic outcomes vary across individuals, households and regions. 2  BIS central bankers’ speeches
Under these circumstances it will be exceedingly important to make a thorough scrutiny of the social security system’s design; this is a question that has been on something of a back burner, what with the crisis for stabilisation policy in the 1990s and the achievement of a more lasting solution to the issue of pensions. In such a discussion about social security systems that are effective and sustainable in the long term there is a place for the issue of cyclical stabilisation. Systems that are fully or partly funded, publicly or privately, can function well as stabilisers. Thus, it is mainly in this context that I would like to place the discussion that has taken place about various types of buffer fund. But the need to reform the social security system is primarily connected, not with stabilisation policy but with being able to guarantee a high quality of publicly financed services without raising the tax take. Measures for influencing the business cycle Finally there are the questions of whether a more active, discretionary fiscal policy would be advisable and whether, to function better in the future, it may need to be supported by new institutional arrangements. First, let me stress that, for reasons I mentioned earlier, I do not have much faith in fine tuning. Of course that does not rule out trying not to accentuate fluctuations as far as possible when measures are taken primarily for other reasons.

In this regard, ASEAN members have agreed to prioritise efforts to liberalise the cross-border supply of Marine, Aviation and Goods in International Transit (MAT) insurance and to support the establishment of an ASEAN Disaster Risk Financing and Insurance (DRFI) mechanism. Progress in these areas will enable ASEAN members to increase capacity for such risks which are growing in scale and complexity, and achieve broader diversification of risks across the region, leading to lower costs of insurance. It will also enhance the protection of ASEAN communities and economies against increasing exposures to catastrophes. Significant progress has also been made in promoting freer flow of capital and greater connectivity between the ASEAN capital markets through the various initiatives and measures by the ASEAN Capital Markets Forum. Market participants can look forward to more seamless cross-border investments with reduced costs and greater access to ASEAN investments. Financial integration initiatives are also focusing on harmonising further the operating environments for payment systems within ASEAN countries. A key outcome is to create an efficient, reliable and secure payment and settlement system which is able to operate smoothly across ASEAN. Consumer transactions such as cash withdrawals and payments for goods and services will be further simplified, contributing towards the growth of retail businesses in ASEAN economies. The development of more convenient and cost effective retail payment systems can also help realise the full potential for e-commerce in ASEAN. Efforts are also underway to promote the use of ASEAN currencies for trade settlement.
In the wholesale  2  BIS Review 39/2005  and retail trade, unit labour costs have increased at a slower and slower rate in recent years, not rising at all in 2004, and profit margins, moreover, have continued to shrink.2 The retail trade is a significant part of the distribution sector and is half composed of non-durable goods, which largely comprise the food sector, while the other half consists of durables such as electronic goods and clothing. Competition in the retail sector has increased considerably in recent years, to a great extent due to globalisation. For several years we have been able to buy home electronics at increasingly cheaper prices. Likewise, particularly in the recent period, we have seen greater downward price pressure in the Swedish non-durables sector, which has long been dominated by a few major players. We are seeing the establishment of more and more low-price chains, both foreign and Swedish chains, as well as massive advertising campaigns in which one large operator after the other announces price cuts. This development can to a large degree be seen as an effect of tougher competition and of the price consciousness that globalisation has entailed. I now intend to mainly concentrate on what is happening in the food sector and to put this into a slightly broader perspective. Developments in food prices as a component of the CPI Food is an important component of the CPI, comprising just over 13 per cent.

Although the economic recovery has provided for an appreciable reduction in this rate, it still stands at around 19%. Foreseeably, several years must go by before unemployment in Spain falls to levels comparable with those of other developed economies. Of note in Spain’s case is the heterogeneity of the unemployment rates in different regions, from levels slightly over 12% 4/7  in Navarre to close to 29% in Andalusia, with Catalonia in the lower part of the table at around 15%. Monetary and financial policy in the face of the crisis The recovery in the developed economies, and in particular in the euro area and of course in Spain, has necessitated far-reaching actions in all economic policy areas. Early efforts by the central banks focused on alleviating the liquidity problems affecting the financial system. But the serious worsening of the situation opened the way for more powerful plans, both in the financial and monetary realms and in terms of fiscal initiatives to boost aggregate demand. Regarding monetary policy, the depth and persistence of the crisis has required an ongoing effort by central banks. Over these years, the monetary authorities have broadened their range of instruments, resorting to non-conventional tools that have enabled monetary stimuli to be deepened and that have been conducive to their pass-through to lower borrowing costs, thereby encouraging household and business consumption and investment decisions.