samchain/econo-pairs-v1 huggingface dataset:
Foreign interest rates have been reduced substantially to counter a downturn. High and widening interest rate differentials have probably contributed to the appreciation of the krone. Cyclical divergence is probably also reflected in the substantially higher wage growth in Norway compared with other countries. In our view, the strong krone exchange rate cannot solely be attributed to the change in the fiscal policy guidelines introduced in March 2001, which allowed for a moderate and steady phasing-in of petroleum revenues. The strong krone is also the result of an overheated labour market and relatively 5 high wage growth in Norway combined with a global downturn following a long period of expansion. Results from recent empirical analyses at Norges Bank indicate that the positive and widening interest rate differential is the main reason for the appreciation of the krone from May 2000 and up to late autumn 2002. At the same time, the fall in equity prices and reduced volatility in foreign exchange markets have contributed to the appreciation of the krone. These factors have contributed because the interest rate differential has been positive. Thus they amplify the effect of the interest rate differential. 6 Part of the appreciation in the past year may also be due to higher oil prices. Previous research has shown that changes in the price of oil have an impact on the krone exchange rate particularly when the price falls below USD 14 or exceeds USD 20 per barrel.

On the other hand, the outcome of last year’s wage settlement, and the debate that followed, indicate that the social partners have not yet internalised the monetary policy response pattern ensuing from 3 the mandate laid down by the Government and the Storting. Exchange rate developments The krone has appreciated considerably since summer 2000. There may be many reasons for this. Relationships in the foreign exchange market are unstable. There are nevertheless some fundamental forces that influence the krone exchange rate. The phasing in of petroleum revenues and the economic situation affect the exchange rate. In addition, the real exchange rate has a tendency to return to its normal level if there are substantial deviations over time. Moreover, the krone can be influenced by shifts and changes in wage formation, and the krone exchange rate can also be affected by external factors. Increased spending of petroleum revenues or expectations of increased use of petroleum revenues may lead to an appreciation of the krone. Increased use of petroleum revenues over the central government budget implies higher demand. The contest for economic resources will then result in a further scaling back of internationally exposed industries to make room for more sheltered activities. With low and stable inflation, this restructuring might take place as a result of a stronger krone exchange rate. Such exchange rate movements will typically come in waves. As petroleum revenues are being phased in, the real interest rate will tend to rise. The real exchange rate may appreciate, which means deterioration in competitiveness.
An increase of over 16 000 jobs is thus not very far from the middle of the preliminary range of 10 000 to 25 000 jobs saved that I mentioned at the Monetary Policy Meeting in October. To sum up, a reduction of the repo rate path by 0.25 percentage points  6  BIS Review 22/2010  over four quarters will thus give, all else being equal, an increase in inflation of just over 0.4 percentage points and, if employment varies one-to-one with hours worked, an increase in employment of approximately 0.35 per cent, which is equivalent to an estimated figure of over 16 000 jobs. We see in Figure 3 that the consequences of an unanticipated reduction of the repo rate are less than those of an anticipated reduction. In such a case, hours worked increase by 0.23 per cent, equivalent to just under 11 000 jobs, when calculated on the same basis. These estimates are unbiased estimates and forecasts of the effects of a lower repo rate path. The actual effect may be larger or smaller. It is possible that the effects of the repo rate on the economy are smaller than normal when the repo rate is close to zero. It is also possible that a reduction of the repo rate path, in a situation in which the market’s repo rate expectations remain higher than the repo rate path, can have a larger than normal downwards effect on repo rate expectations, thus increasing the effects on the economy.

Figure 14  CPI inflation forecast (1) (2)  Core inflation forecast (1) (2) (3)  (annual change, percent)  (annual change, percent)  5  5 5  5  4  4 4  4  MP Report Sep.20  3 2  3 3 2 2  MP Report Jun.20  1 0  MP Report Sep.20  18  19  20  21  22  MP Report Jun.20  1 1 0 0  18  19  20  21  22  (1) Plotted for 2018 is the annual changes in the CPI and CPI minus volatiles obtained by splicing the series with base 2013=100 with the monthly variations of the 2018=100 basket as from February 2018. See Box IV.1 of the March 2019 MP Report. (2) Gray area, as from the third quarter of 2020, shows forecast. (3) CPI minus volátiles. Sources: Central Bank of Chile and National Statistics Institute (INE). 19  3 2 1 0  Figure 15  MPR corridor (*) (percent)  3.5  3.5  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0  20 Corridor  21 Confidence interval: 33%  FBS  22  EES  Confidence interval: 66% Forward  MPR (*) The corridor is constructed following the methodology in Box V.1 of the March 2020 MP Report.
For the societies of free-trading, networked countries to prosper, they must first re-distribute some of the gains from trade and technology, and then re-skill and reconnect all of their citizens. By doing so, they can put individuals back in control. For free trade to benefit all requires some redistribution. There are limits, of course, because of fiscal constraints at the macro level and the need to maintain incentives at the micro level. Fostering dependency on the state is no way to increase human agency, even though a safety net is needed to cushion shocks and smooth adjustment. Redistribution and fairness also means turning back the tide of stateless corporations. As the Prime Minister recently stressed, companies must be rooted and pay tax somewhere: businesses operating across borders “have responsibilities … in terms, for example, of payment of tax.” They must recognise “the role that they play in local communities and the responsibilities that they have in any country they are operating in to abide by the rules.”  15  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  15  That is why the G20’s BEPS initiative, which will allow all countries to work together to implement measures against tax Base Erosion and Profit Shifting, is so important. And that is why the G20 might at least consider, as Larry Summers has suggested, a minimum tax on reported earnings to be paid somewhere.

3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  Chart 3: Real GDP per capita more than doubled since 1960  Chart 4: Life expectancy at birth up around two decades since 1960  Index 1960 = 1  Years 75  3.0 GDP per capita (constant 2010 $  World life expectancy at birth, total (years) 70 2.5 65 2.0 60 1.5 55  50  1.0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: World Bank  1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: World Bank  Real income growth has been meagre, compounding unequal distribution. The cry for more inclusive growth starts with a crisis of growth itself. To put it mildly, the performance of the advanced economies over the past ten years has consistently disappointed (Chart 5). Chart 5: Global growth serially disappointing Actual GDP growth  2011  2012  2013  2014  2015  2016 Per cent 8.0  Dotted lines = Emerging economies Solid lines = Advanced economies 6.0  4.0  2.0  0.0 2010  2011  2012  2013  2014  2015  2016  Source: IMF World Economic Outlook. Each line shows how forecasts for a particular calendar year have evolved over time. The diamond shows the eventual outturn.
The absence of extended periods of high unemployment in the face of significant adverse developments suggests that labour markets have been able to adjust. Indeed, unemployment in Malta has been less volatile than in the euro area. The exchange rate peg has also been a valuable nominal anchor, restraining price increases. In fact, inflation has averaged just 2.4% in the past five years (1.3% in 2003), indicating a considerable measure of nominal convergence with our major trading partners, and with the euro area in particular. Taken together, these features of the Maltese economy suggest that the likelihood of experiencing an asymmetric shock is small; and they lead us to believe that the exchange rate peg provides a suitable framework for joining ERM II and that the country should be able to adopt the euro sooner rather than later. We are also aware, however, that the peg will have to be maintained during the lira’s passage through what is essentially uncharted territory. Professor Eichengreen’s words of admonition to last November’s East-West Conference here in Vienna readily come to mind, “… prescribing bands for the new EU members for an extended period is the worst form of macroeconomic malpractice. Bands are fragile and difficult to manage. Their fragility is clear from Europe’s own experience in 1992.” In order to ensure a smooth transition towards, and through ERM II, therefore, it will be necessary to convince the markets that ERM II is indeed a natural culmination of the lira’s currency basket regime.

For a start, the adoption of the euro should not involve any major regime shift. In fact, since the collapse of the Bretton Woods system the Maltese lira has been pegged to a basket of major currencies. Since then the lira was only devalued once, in the wake of the ERM crisis in 1992. Apart from that episode, the currency has enjoyed relative stability. In each of the past five years, for example, fluctuations in the euro/lira rate have moved within a band of between 1.4% and 3.3% around the average rate for the year. The fact that the currency peg has been successfully maintained for so long - as testified by the underlying upward trend in the external reserves, which today represent nine months of imports suggests that this is a viable exchange rate regime for Malta. The choice of a fixed exchange rate as the intermediate target of monetary policy is dictated by the key characteristics of the economy. First, Malta’s size implies that it is a price taker and cannot hope to influence its terms of trade through nominal exchange rate movements. In addition, because of the economy’s openness, the conduct of monetary policy must take the exchange rate into account.
Though it’s also been rising, price  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  inflation for (largely non-tradable) consumer services is currently close to its average during the inflation targeting period. Another indication is that we’ve seen similar surges in inflation in many other developed economies as well (Chart 3). This is a global phenomenon. And what’s striking is that this has happened even though global (UK-weighted) economic activity has only just returned – and in several individual countries has yet to return – to pre-pandemic levels (Chart 4). In the UK, in the third quarter of the year, output in the private sector – the part of the economy that actually sets prices – was still 2% lower than it had been at the end of 2019. More often than not higher inflation is associated with stronger, not weaker, economic activity. At least if you consider the last eighteen months or so as a whole, taking account not just of the resurgence this year but the huge contractions in 2020, that’s not what’s happened on this occasion. Chart 3. Inflation has risen significantly in many countries... UK  Euro area  US  Chart 4.

Even varying just this one thing, the two-year inflation forecast was half a percentage point higher in the second case than in the first. And, in the meantime, we also know that these global pressures are not the only determinant of future inflation. Arithmetically, domestic pressures have been less important so far. But the domestic labour market has also come under increasing strain through the course of this year. I now want to have a look at the latest evidence in this area. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Unemployment higher than before the pandemic but the labour market nonetheless looks very tight As we saw earlier, while the economic recovery this year has been predictably rapid, cumulative growth over the period of the pandemic as a whole – taking account of the deep trough from which the economy was having to recover – has not been as impressive. In the third quarter of this year private-sector output grew by a little less than we’d anticipated in August and was still 2% lower than at the end of 2019Q4. In contrast, employment growth was stronger than we’d expected and unemployment fell further (Chart 13). And, although in the three months to September it was still a little (0.3 percentage points) higher than just before the pandemic, and still slightly above the MPC’s existing estimate of the long-run “natural rate” of unemployment, other indicators point to a much tighter labour market.
That means that falling food prices can have a significant impact on the CPI. In the past two years, developments in consumer food prices have been well below the inflation rate in terms of both the CPI and the measure we use to look at underlying inflation, UND1X, as well as in terms of domestic inflation, UND1X (Chart 3). Food prices are greatly affected by weather conditions, e.g. the fluctuations in inflation around the turn of the year 2001/2002 were largely attributable to the effects on fruit and vegetable prices of the floods in Europe. But temporary factors also play a part, such as mad cow disease, which first caused meat prices to rise and then to fall back in 2003. However, it is reasonable to assume that the recently low, and periodically negative, rate of price increases for food is due in some measure to stiffer competition in the non-durables sector. Increased competition and new trends in the retail food sector For a long time three large food chains have dominated the Swedish non-durables sector, and still do so. All three have integrated their businesses, meaning that their retail network and wholesale activities are part of the same company, thus making them active in both the wholesale and retail markets. As a result, the Swedish non-durables sector is strongly concentrated to a few players; together, they accounted for roughly 90 per cent of the non-durables market in 2004.3 It is not obvious what effects such a concentrated market will have on food prices.

Urban Bäckström: Swedish economy in transition  Speech by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, at the Independent Academy of Building & Construction, on 2 October 2000. *  *  *  Thank you for inviting me to talk with you this evening about the Swedish economy and monetary policy. The issues I have chosen to consider are why the Swedish economy is performing so well and what can be done to ensure that this continues. As you know, output and employment are rising rapidly at present. Annual output growth has averaged 3% over the past six years and the current rate seems to be somewhere between 3 and 4%. Unemployment has come down and is still falling to levels that few had believed possible some years ago, particularly in view of the high European rate. At the same time we have seen that even comparatively low nominal wage increases can result in higher real wages. As a matter of fact, the real wage increases have exceeded most people’s expectations and been higher than for many years. Moreover, inflation has remained low in spite of all this. But monetary policy may still have challenges to face as resource utilisation in the Swedish economy becomes increasingly strained. The current situation also contains a number of risks that have to be assessed.
3 There is also work underway on the problem of how to ensure that financial institutions have compensation structures that curb rather than encourage excessive risk taking. This issue of compensation is obviously a hugely potent one, as there is a fundamental unfairness in what has happened over the past few years. The actions taken by the Federal Reserve and others to stabilize the financial system had the effect of rescuing many of the same financial institutions that contributed to this crisis. Many of those financial institutions are now prospering, and many of their employees will be highly compensated. This situation is unfair on its face. But it is even more galling in an environment in which the unemployment rate is 10 percent and many people are struggling to make ends meet. Despite the fundamental unfairness of the situation, I don’t think it is feasible or practical for the Federal Reserve, or any other supervisory entity, to attempt to determine the level of compensation at individual firms on an ongoing basis. A better approach is for supervisors to ensure that a firm’s compensation regime is consistent with an institution’s safety and soundness and with broader financial stability. That can and should have important implications for the level of individual compensation. For example, a trader should not be paid solely on the basis of this year’s accounting profits if those profits are based on the valuation of illiquid assets held on the bank’s books that could easily go down considerably in value before they are liquidated.

Distinguished Ladies and Gentlemen, the role of financial services in economic development cannot be over-emphasized. It is generally accepted that financial services play an important role in improving income-generating opportunities and overall living conditions among households. Furthermore, better access to finance not only increases economic growth, but also helps to fight poverty and reduces income inequality between the rich and the poor in society. It is for this reason that the role that financial services play in an economy is sometimes compared to the significant role that blood plays in the human body. It should be stressed that no economy can function efficiently, if at all, without financial products and services. The opening of this branch by NATSAVE is therefore expected to spur economic growth and contribute to the ease of access to financial services which has for long time been a hinderence to economic development in this district. We therefore, expect that the opening of this branch will unlock the vast economic potential of this district. Honourable Ministers, the Bank of Zambia attaches great importance to initiatives that seek to enhance the provision of financial services to the underserved sectors of the economy. To  BIS central bankers’ speeches  1  this effect, the Bank has continued to implement the Financial Sector Development Plan. The Financial Sector Development Plan seeks to address various weaknesses in the Zambian financial system, among them being the low financial intermediation and limited access to finance.
With inflation well above target and the level of output still depressed, the Committee has to balance the speed  BIS central bankers’ speeches  3  with which it returns inflation to target and the support it provides to output and employment. If we attempt to return inflation to target too quickly, by withdrawing monetary stimulus, we risk undermining the fledgling recovery. But returning inflation to the target too slowly might cause people to question the MPC’s commitment to keep inflation close to 2% in the medium term. Again, the issue here is to do with the transparency and accountability of policy, rather than its actual setting. The need to juggle these two challenges – returning inflation to target and supporting growth – has been the single most important determinant of our monetary policy decisions over recent years. But an inflation target, on its own, is not well suited to explaining the judgements and rationale underlying the Committee’s approach. Put bluntly, it speaks to only one half of the trade-off. The stakes are high. Our management of the trade-off between returning inflation rapidly to target and supporting the recovery directly affects businesses and families up and down the country. It is only right that the Committee be clear about its view of the appropriate trade-off so that we can be challenged and held to account.

I shall here take up three aspects of flexible inflation targeting: measures of inflation, taking consideration of developments in the real economy and taking into account financial developments,” said Mr Öberg. “Monetary policy is guided by various measures of underlying inflation. There is no single measure of inflation that at each point in time indicates the proper stance of monetary policy. The Riksbank can choose to disregard effects that contribute to inflation deviating temporarily from the target. This occurs on a regular basis with regard to, for instance, indirect taxes and household mortgage interest expenditure, as well as supply shocks that are assessed as temporary. In practice, monetary policy today is mainly based on one measure of underlying inflation, UND1X,” observed Mr Öberg. “The Riksbank also takes into account developments in the real economy when making monetary policy decisions. In the preparatory works for the Sveriges Riksbank Act, it was stated 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 high rate of employment. If a disruption were to contribute to inflation deviating substantially from target, it is a question of judgement as to how quickly it should be returned to 2 per cent. Normally, monetary policy aims to attain the inflation target within two years.