samchain/econo-pairs-v1 huggingface dataset:
Economists from the so-called Austrian School maintained that if the central bank attempted to stimulate the economy with an interest rate that was below a long-term equilibrium level, it would in itself give rise to sharp fluctuations in the real economy. They also claimed that periods of overinvestment, strong credit expansion and rising asset prices could not be avoided in a world characterised by major technological advances. Rather, it was a precondition for the dynamics that spurred growth. Should expectations of future profits prove to have been overly optimistic, the imbalances in the shape of high debt and unprofitable investment should be allowed to quickly unwind without any attempt through economic policy to soften the resultant fall in output. Discretionary stabilisation policy discredited After the Second World War, the dominant view instead was that economic policy should play an active part to stabilise the economy. Fiscal policy was therefore given a more prominent role, while monetary policy and the long-term aim of price stability were pushed into the background. During the first two decades stabilisation policy worked well in many countries. Unemployment fell, growth was robust and inflation was low. The US currency, which in turn was pegged to gold, served during the period as an anchor for inflation and exchange rates in mainly western Europe, where the majority of countries had joined the Bretton Woods system.

History has shown that inflation measured in terms of consumer prices has not always signalled when imbalances in the economy have been building up. Many of the countries that were hit by depression and banking crises during the 1930s had beforehand witnessed steep rises in asset prices and a sharp credit expansion without any increase in inflation. In Japan, the recession that followed in the wake of a strong credit expansion and rising asset prices during the second half of the 1980s proved, as we know, very severe and protracted. Neither in Japan had inflation provided signals in time that large imbalances were building up. Also during the latter part of the 1990s we have seen examples of crises with a similar course of events, for example in Thailand and other parts of Asia. Banking crises are not a necessary condition for countries to be hit hard after such a development. This is shown by what happened in the United States and England at the beginning of the 1990s. Focus on price stability and financial stability During the 1990s, confidence in an economic policy aimed at achieving price stability seems to have strengthened in earnest in large parts of the world. World inflation is now back to the levels reached before the 1970s, and monetary policy is again playing the leading role in stabilisation policy. Modern neo-Keynesian1 research based on theories of nominal rigidities has shown that not only real shocks but also monetary shocks can temporarily affect the real economy.
In addition, this expansion has also fostered the development of complex banking structures and, in some cases, unsustainable business models. The Icelandic banks are illustrative examples in this respect, attracting depositors’ money from the UK and the  2  BIS Review 50/2010  Netherlands and investing these funds in high yield structured products overseas. When their balance sheets had grown to around ten times the size of the Icelandic economy, it was quite clear for anyone to see that, if turmoil broke out, managing the situation was not going to be easy. But to be fair, it was difficult to anticipate the perfect storm in advance. Another lesson from this – and the strenuous and protracted negotiations between Icelandic and, primarily, British politicians that followed – is the need for establishing deposit guarantee schemes that are built up before a crisis occurs. The international expansion of banks and the home country principle have also had other effects on crisis management. Authorities have simply not kept up with developments in the banking system. Contingency arrangements between home and host countries are not highly developed and neither are there any concrete suggestions for how to share the costs of a crisis. While we have achieved economic integration and maintained national sovereignty, we have renounced effective supervision and crisis management. But national sovereignty does not mean that our hands are tied. The remedy is quite simple, at least on paper: we need better and more extensive cooperation between supervisory authorities, central banks and finance ministries in Europe.

Florin Georgescu: Challenging the status quo in management and economics Opening remarks by Mr Florin Georgescu, First Deputy Governor of the National Bank of Romania, at the Strategica International Academic Conference "Challenging the Status Quo in Management and Economics", Bucharest, 11 October 2018. * * * Distinguished guests, Ladies and Gentlemen, I am glad to welcome you at the National Bank of Romania, as we host today the 6th edition of this prestigious international conference, together with the National University of Political Studies and Public Administration, and the Romanian Academic Society of Management. The debates today will be held under a generous and timely topic: “Challenging the Status Quo in Management and Economics”. We couldn’t have a better moment to discuss challenges to the status quo than today, as we witness a whole range of economic, social and political forces pushing for change all over the world. If this change is in the sense of progress or not, that remains to be seen. I trust that your presentations and insights will shed more light on these trends. I confess that I had a look at the titles of the presentations in both days of the conference, and the word that appears most frequently in these titles is knowledge. And I realize that not less than 50 years ago, Peter Drucker, the philosopher and management guru, launched the concept of knowledge economy. Since then, economists and management specialists of all doctrines, put knowledge at the forefront of their views of the world.
to keep inflation expectations anchored in the proximity of the ECB’s objectives, has been pivotal in determining the successive steps to be taken in terms of monetary easing. In June 2014, the ECB cut its official interest rates, setting the main refinancing operations rate at 0.15%. Also, for the first time, it set the interest rate on the deposit facility in negative territory, at –0.10%. In addition, it announced new long-term refinancing operations maturing in September 2018, with the specific aim of boosting lending. It is worth noting that these operations combine credit-enhancing elements, as they link the granting of liquidity to bank lending, with quantitative easing, through the expected increase in the Eurosystem balance sheet. In September 2014, the ECB adopted new measures. First, it made a fresh cut to interest rates, whereby the MRO rate stood at 0.05%, its technical minimum, and the deposit facility rate became even more negative, reaching –0.20%. Furthermore, the ECB initiated asset purchase programmes. In the fourth quarter of 2014, the ECB launched its third covered bond purchase programme and, subsequently, its ABS purchase programme. By end-March, covered bond purchases had reached almost € billion, with slightly over € billion of these being made by the Banco de España. As to ABS purchases, these stood at € billion at end-March, indicating that this was evidently a less significant component of the programme. In January 2015, the ECB decided to add a third programme, called the “Expanded Asset Purchase Programme”.

This involves government bond purchases and marks the launch of quantitative easing. 2  BIS central bankers’ speeches  Adding government securities and paper issued by supranational European institutions to the asset purchase programme was a very important step in the monetary easing and economic stimulus policy: the programme will run to September 2016 at least, with a monthly target of € billion for the three programmes as a whole, although government bonds will be the main component of the purchases and of the increase in the Eurosystem balance sheet. The programme is expected to give a significant monetary boost to the economy, keeping inflation in the medium term below, but close to, 2%. The monetary stimulus transmission mechanisms include both the easing of financing conditions for households and firms and, indirectly, the depreciation of the euro. Purchases of public securities will be allocated as follows: 88% to euro area sovereign and national government agency securities, and 12% to supranational institutions and international agencies resident in the euro area. Of the 88% of national government securities, 8 pp will be acquired by the ECB and the remaining 80% by national central banks, according to their capital key in the ECB, with some special rules for national central banks whose government debt markets are so small that these targets cannot be met.
William C Dudley: The outlook for the US economy in 2018 and beyond Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Securities Industry and Financial Markets Association, New York City, 11 January 2018. * * * Good afternoon. It is a pleasure to have the opportunity to speak with you at this event. Today, I will focus on the economic outlook for 2018 and beyond. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System.1 Broadly speaking, the prospects for continued economic expansion in 2018 look reasonably bright. The economy is likely to continue to grow at an above-trend pace, which should lead to a tighter labor market and faster wage growth. Under such conditions, I would expect the inflation rate to drift higher toward the FOMC’s 2 percent long-run objective. Over the longer term, however, I am considerably more cautious about the economic outlook. Keeping the economy on a sustainable path may become more challenging. While the recently passed Tax Cuts and Jobs Act of 2017 likely will provide additional support to growth over the near term, it will come at a cost. After all, there is no such thing as a free lunch. The legislation will increase the nation’s longer-term fiscal burden, which is already facing other pressures, such as higher debt service costs and entitlement spending as the baby-boom generation retires.

Not only are bond term premia depressed due to quantitative easing both here and abroad, but the low inflation environment is also likely a contributing factor. If investors perceive that the risk of significantly higher inflation has fallen over time as inflation has persistently undershot 2 percent, they should demand lower bond term premia as compensation for inflation risk. Finally, while inverted yield curves have typically preceded recessions, I am unaware of any causal element in that relationship. For example, I don’t believe that banks become unwilling to lend when the yield curve inverts and that this tightening of credit availability “causes” a recession. I think it is noteworthy that in the current environment, higher short-term interest rates tend to raise—not lower—the banking industry’s profitability. This is demonstrated, in part, by the strong performance of bank stocks in 2017 as the Federal Reserve raised short-term interest rates. As I see it, the Treasury yield curve becomes inverted when investors believe that short-term real interest rates are high and monetary policy is tight. Investors anticipate that such a regime will slow the economy and be followed by a reduction in short-term rates. Because these expectations turn out to be validated eventually, we observe that inverted yield curves precede and signal recessions. But, we are not in this situation currently. Investors expect short-term interest rates to rise, not drop, and to remain higher in the future than they are now. Despite the flatter yield curve, the consensus view continues to be that monetary policy is not yet tight.
The favourable economic outlook associated with the accession to an economic union was another major cause for synchronous capital inflows in several countries. It is the case of countries joining the European Union or NAFTA. Foreign investors acted on the assumption that the accession to a union is an anchor limiting exchange rate fluctuations, cutting capital costs by lowering risk spreads and maintaining share prices at satisfactory levels. MilesiFerretti and Lane (2006) provided a breakdown of sources of massive capital inflows in Central and Eastern European (CEE) countries. The euro area countries provided 73-95 percent of total foreign direct investment in CEE countries. In 2004, in most CEE countries, more than 50 percent of total portfolio investment on the stock exchange came from the euro area, which was also the main source of foreign assets in the banking systems of CEE countries as well as of debt-creating long-term investment. The rise in prices of goods such as crude oil, copper, diamonds, a. o. (“hard” commodities) fostered capital inflows in countries exporting the aforementioned goods. Where capital inflows in countries exporting such commodities are due to low or negative real interest rates in the countries of origin of capital, then the prices for such goods come under the impact of the interest rate channel (Frankel, 2006). Nevertheless, the empirical assessments of Reinhart and Reinhart (2008) covering the 1967–2006 period do not clearly confirm the reverse correlation between real interest rates and the prices for the above-mentioned commodities. Large capital inflows had similar effects in emerging economies.

Mugur Isărescu: External deficit financing and macroeconomic adjustment during the financial crisis – the case of Romania Dissertation by Mr Mugur Isărescu, Governor of the National Bank of Romania, on the occasion of being admitted to the Reial Acadèmia de Doctors, Barcelona, 24 November 2009. *  *  *  Introduction The issue of the financing-adjustment relation can be best described starting from the corporate level. Here, an adjustment programme may attract financing only if the envisaged changes are trustworthy. Corporations may raise the funds necessary to fulfil the new goals via capital increases made by owners, via taking out new bank loans or selling newly-issued corporate bonds to the public. At macroeconomic level things are much the same, but instead of a company’s balance sheet, we speak about a country’s balance of payments with its two accounts, i.e. the capital account and the current account. These accounts register the continuous changes reflecting the country’s foreign transactions. The direction of such changes may differ from one year to another. For this reason, not any change in the equilibrium of the two accounts may be defined as an adjustment. In order to describe an adjustment in the balance of payments, the key concepts are the improvement or the worsening in the balance of either account. The improvement concept may apply, separately, both to the current account and the capital account.
The origins of the present approach go back to 1992, when the Conservative government adopted an inflation target as the centrepiece of a package of reforms designed to rebuild credibility with financial markets in the wake of sterling’s abrupt departure from the ERM. This approach - which came to include the popular “Ken and Eddie show” - proved successful in establishing a track record of low and stable inflation. In 1997, the incoming Labour Government “entrenched” this success by handing the operation of monetary policy over to the Bank of England and setting out a detailed institutional and legal framework for the conduct of monetary policy. The result was to depoliticise interest rate decisions, within a framework of accountability that left the Government clearly in charge of setting objectives for inflation. Taking operational monetary policy decisions out of the hands of politicians was a decisive step. The touchstone of a successful monetary policy framework is its credibility. If people believe policy makers will always act to keep inflation low, this expectation will itself put a brake on inflationary wage and price increases. Economists long argued that it was difficult for politicians to make a fully credible commitment to low inflation. And perceptions are what matter: even if a government has no intention of manipulating  BIS Review 71/2004  1  monetary policy for political ends, as long as firms, workers and financial markets entertain that as a possibility, the job of keeping inflation low will be that much harder.

Over the past ten years, revisions to services output have accounted for more than half of the average revision to GDP growth; and around four-fifths of the variance of GDP revisions can be attributed to revisions to service sector growth. Indeed, research by Bank staff has indicated that the private-sector business surveys may give a better guide to the ONS’s estimate of service sector output growth two years or more after the event than do the ONS’s own early estimates. (In contrast, the ONS’s early estimates of manufacturing output growth clearly outperform the business surveys as a guide to later estimates.) The ONS is well aware of this imbalance. In fact, it has been at the forefront of developing and improving measures of service sector output: within the OECD only the UK and Korea produce a monthly Index of Services production, the counterpart to the well-established monthly Index of Production for the industrial sector. The Allsopp Report should give further welcome impetus to this work. The third focus of the Allsopp Report is the capacity of the ONS to identify and respond to structural change in the economy. The make-up of UK economic activity is constantly changing. Fifty years ago, the manufacturing industry accounted for about one-third of UK output. The service sector made up less than one-half. Today, the corresponding shares are less than 16% for manufacturing, and over 70% for services. Responding to this sort of change is challenging.
For the post-crisis period alone, when the monetary policy trade-off was particularly stark, lambda is estimated to be around one-quarter, also on the basis of both outturns and forecasts. 18  In other words, the MPC tolerated a period of above-target inflation in order to  support the real economy. When combined with an average Phillips Curve slope, this implies deviations of the output gap from zero that are around half the size of those of inflation from the target. Chart 6: Data outturns are consistent with a value of lambda of between 0.1 and 0.2 for the inflation-targeting era as a whole, and around ¼ for the post-crisis period… Great moderation  Chart 7: … with similar values implied by MPC forecasts since independence  Inflation deviation from target (pp) 1.0  Inflation (%)  6  Financial crisis and after  Great moderation Financial crisis and after  0.5 4 0.0 -1 2 -6 -4 Output gap (%)  -2  0  2  -0.5  0  0.5  1  -0.5  1.5 2 Cumulative growth, relative to trend (%)  -1.0 0 -1.5  -2 Source: Bank calculations. -2.0 Notes: Chart shows inflation deviation from target at the 2-year forecast horizon against cumulative growth, relative to trend, as a proxy for the output gap. 16  Typically, these demand disturbances were well signalled by survey measures of activity, resulting in a high correlation of these and Bank Rate Ref Broadbent.

If Sweden had had a system of recurrent reviews of the policy objective, the at times almost surprisingly heated debate over recent years would probably have been more balanced. The issues raised in the debate had then been publicly examined in these reviews in an objective and scientific way, and it would have been clear that the Riksbank is not “running its own race”, decoupled from its remit. To motivate the policy conducted by a central bank, it is of course significantly easier to rely on a review of the remit from at most just a few years ago than, as in Sweden’s case, on a system that was determined more than 25 years ago and whose status and meaning today seem unclear to many. I think that a procedure of regular reviews of the remit could also be a way of counteracting the forces in many parts of the world looking to make central banks  16 Giavazzi and Mishkin (2006), Goodhart and Rochet (2011) and Goodfriend and King (2016). 17 James Bullard, Head of the Federal Reserve Bank of St. Louis, has expressed similar thoughts, see Federal Reserve Bank of St. Louis (2019). 18 Bank of Canada (2016). 10 [21]  less independent. It would make it clearer that central banks act based on the remit they have and do not just do as they please, which seems not to be such an unusual opinion these days.
Finally, I will offer some reflections on the regulation of hedge funds. Definitions surrounding hedge funds and the hedge fund industry can give rise to confusion. In many ways, the word “hedge” has little definitional value.2 Hedge funds are best understood as potentially leveraged private investment vehicles deploying a wide range of largely unconstrained investment strategies with the aim of achieving high absolute rates of return. Hedge fund managers typically invest a share of their personal wealth in their own funds in order to align their incentives with the interests of the external investors. Hedge funds usually have a dual fee structure. The investor pays an annual management fee of 1% to 5%. In addition, most hedge fund managers charge incentive fees on capital gains. These incentive fees vary between 20% and 50%. Many hedge funds impose investment lock-in periods of anywhere from one to three years. During these lock-in periods, principal and in many cases profits cannot be withdrawn. During the last decade, the hedge fund industry has steadily grown in size. In 1990, there were an estimated 2000 hedge funds managing around USD 40bn. In less than 15 years, these numbers have increased dramatically.

Very high growth in demand for oil is one of the factors behind record high oil prices. In the first half of this year, the price of Brent Blend fluctuated for the most part between USD 45 and USD 55 per barrel. Oil prices rose further this summer, exceeding USD 60 per barrel in August and September. Oil futures have also increased. 4/7  Little excess production capacity in OPEC countries, combined with the prospect of lower production in non-OPEC countries, has probably influenced oil prices. At the same time, there are prospects of continued strong demand growth in important oil-importing countries, such as China and some other emerging economies. Rising or persistently high oil prices may gradually dampen growth among our most important trading partners. The slowdown may occur gradually and may not be particularly marked, but there are now growing concerns that high oil prices may have a stronger impact on inflation and inflation expectations. Monetary policy easing in response to this may then trigger a more pronounced downturn. High oil prices have a different impact in Norway than in oil-importing countries. A rise in oil prices improves our terms of trade. Other countries perceive this as an externally imposed tax. As a result of persistently high oil prices and expectations that oil prices will remain high, investment in the petroleum sector may reach record levels this year. The investment intentions survey for the petroleum sector points to very high growth.