samchain/econo-pairs-v1 huggingface dataset:
In addition, the indices of business activity and household confidence has clearly turned upward again, even if they remain at historically low levels. The combined effect of all these developments leads us to modify our risk assessment but does not substantially affect our scenario for the global economy. We still believe that positive growth could set in within the US in the second half of the year and in Europe at the beginning of next year. We continue to expect a modest global recovery, so that the considerable under-utilisation of production capacities will not be eliminated in the next few quarters. Consequently, unemployment is likely to increase further in the developed countries as a whole. BIS Review 77/2009  1  Swiss economic outlook As expected, the Swiss economic situation continued to deteriorate in the first months of the year. In the first quarter, GDP contracted by 3.2% in annualised terms. However, this figure obscures a much sharper drop in final demand. As in the preceding quarter, part of production was, in effect, absorbed by an increase in stocks. External demand again plummeted and the level of capacity utilisation fell substantially in the manufacturing sector. Final domestic demand by private entities stagnated, and is most likely to weaken in the months ahead, since companies will reduce their equipment investment and household expenditure will be checked by growing uncertainty in the labour market.

The number of individuals affected by short-time working was rising fast at the beginning of the year, and unemployment is increasing at a regular pace. This trend is likely to persist in the next few months since the leading indicators of labour demand are falling sharply. Nevertheless, it is to be hoped that the signs of improvement observed abroad will be gradually transmitted to the Swiss economy. From the second quarter, the decline in exports is likely to slow down. However, growth figures will probably remain negative over the next few quarters due to the weakening in domestic demand as well as the reduction of inventory levels. For 2009 as a whole, the Swiss National Bank (SNB) continues to forecast a reduction in GDP of between 2.5% and 3%. These figures are still relatively moderate by comparison with other countries since Switzerland benefits from the broad diversification and relative flexibility of its economy. Even so, I wish to stress that the risks attached to our forecast are clearly skewed to the downside. Changes in monetary and financial conditions How have monetary and financial conditions developed since our last assessment in March? Let us begin by looking at movements in interest rates on the money and capital markets as well as currency movements on the foreign exchange markets. On the money market, three-month Libor moved down, but not as far as we would have liked. Its decline was checked by the level of risk premia, and it currently stands at around 40 basis points.
It is determined by the calibration of, and interaction between, the whole array of instruments we have introduced: the level of policy rates, the pace of asset purchases, and our forward guidance on both. It is the combination of all these tools that sets a given stance. The different elements have complementary effects on preserving the very easy financing conditions that are necessary for generating sustainable inflation convergence. Our current interest rate policy and our forward guidance on the future path of rates affect the risk-free term structure of interest rates, which is the benchmark for the pricing of all other assets and interest rates. Our asset purchases complement these interest rate policies by directly compressing the term premium and other risk premia, both via portfolio rebalancing effects and by underlining the central bank’s commitment to keep interest rates at a low level – i.e. signalling effects. And since the Governing Council deems the current stance fully appropriate, it confirmed at its last meeting that net asset purchases will continue until the end of December 2017, or beyond, if necessary, and in any case until we see a sustained adjustment in the path of inflation consistent with our inflation aim. It also confirmed its expectation that key ECB interest rates will remain at present or lower levels for an extended period of time, and well past the horizon of our net asset 5/6  BIS central bankers' speeches  purchases.

This type of inherent risk is the reason why there are special rules for banks, supervision and, for example, a deposit guarantee protecting depositors against losses. Furthermore, a central bank can mitigate the effects of such a crisis by ensuring that there is money available when no one else wants to lend. This function as lender of last resort is based on the central bank’s unique ability to create unlimited amounts of liquid funds in its own currency. 6 According to the classic doctrine, the central bank can give generous emergency liquidity assistance (ELA) at a high rate of interest and against good collateral. 7 The ability of central banks to act as lender of last resort has had major significance in many financial crises, and was particularly important during the financial crisis of 2007–2009. This crisis led to a number of financial institutions encountering difficulties which ultimately caused the global financial markets to stop functioning. The shortage of liquid funds and credit threatened the entire global economy. Central banks around the world were forced to take extensive measures to handle the situation. These measures included loans in various currencies and the purchase of large volumes of government securities, as well as other assets. Several of them were also used during the subsequent sovereign debt crisis in the  5  See SOU 2011:78. 6  See Goodhart (1988) and Capie et al. (1994). 7  See Irwin (2013). 4  BIS central bankers’ speeches  euro area.
But the general sentiment is not one which would be entirely out of place today. It is not difficult to see why. The profile of central banks may never have been higher than today. The responsibilities of central banks may never have been greater than today. And the actions taken by central banks may never have been larger or as far-reaching as today. It is no coincidence that they have recently been described, variously and colourfully, as “masters of the universe” and “the only game in town”. 3  At the same time, central banks have faced mounting criticism, and some mistrust, of their actions, responsibilities and influence, at least in some quarters. Some have suggested tweaking, perhaps even 4  reversing, central banks’ degree of operational independence over monetary policy. Others have suggested constraining, perhaps even removing, central banks’ degree of discretion over monetary policy. 5  This story has all the hallmarks of a Charles Dickens novel. Depending on who you follow on Twitter, for central banks it is the best of times and the worst of times; it is an age of wisdom and an age of foolishness; it is an epoch of belief and an epoch of incredulity. A happy ending to this story is by no means assured. These views may be polarised, perhaps even caricatured. But they matter. Trust is the lifeblood of all things monetary and financial, including central banks.

In the summer of 2013, the MPC provided guidance about the future path of monetary policy. This guidance was aimed explicitly at reducing uncertainty among households and companies, with simple and clear language about the future path of policy. It was accompanied by a communications plan focussed on the general public, including TV interviews and a published document. 43  Shiller (1997). Quoted in Thompson (2016). Sapienza and Zingales (2013). 46 See Haldane (2016). 44 45  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  The Bank conducted a survey after the guidance had been issued, with the aim of assessing its impact on the general public. This painted a mixed picture. The Bank’s message got through to around 75% of companies, but only around one-fifth of households. Moreover, even among those households who heard the guidance, as many felt less confident as more confident about the economy (Table 2). In the US and the euro area, surveys have found a similar lack of understanding of central bank actions. They have also identified where these understanding problems are most acute. In the US, survey respondents with lower incomes or without a college degree are less likely to understand monetary policy. 47  In the euro area, a Dutch survey found respondents with higher education or income were more likely to answer questions about the ECB’s monetary policy correctly. 48  This is a puzzle.
However, we have not yet been able to see any marked increase in employment since average working hours have risen. When there is an upturn in the economy existing staff are initially used more intensively, and only at a later stage do firms add to their workforces. Labour market indicators, however, are pointing to a gradual pick-up in employment. For instance, the number of redundancy notices is dropping and the number of new job vacancies is increasing. Relatively strong growth in domestic demand in the period ahead, in combination with the fact that it should become increasingly difficult for companies to boost output without also adding to their workforces, means that we foresee a rise in the demand for labour in the coming years. The Government’s recently announced labour market policy programmes for next year can be expected to entail that total employment will increase considerably more than regular employment. But there should also be a rise in the number of regular jobs, among other things in construction, the public sector and the private services sector. It is, as always, difficult to assess how total capacity pressures in the economy will develop in coming years, and thereby what inflation impulses we may expect from wage formation and companies' price-setting behaviour. Cost pressures have recently been low, which is partly due to the relatively high productivity growth. However, the reasons behind this are not entirely clear, which makes the assessment of future productivity growth more difficult.

Four times a year the Riksbank produces a so-called inflation report. This is a detailed account of the state of the Swedish economy, which leads to an assessment of inflation in the coming two years. These assessments are based on the development of GDP, investments, consumption, public expenditure, the central government budget balance, foreign trade and various prices. The forecast horizon is adapted to the time period that “the Riksbank’s weapon”, the so-called repo rate, has an effect on the economy. 3. The morning after the Executive Board has made an interest rate decision, which normally takes place 6-8 times a year, the decision is published with a motivation in a press release. The Governor of the Riksbank, the Executive Board member responsible for preparing the monetary policy decisions and some of the Bank’s economists also take part in a press conference and answer questions when decisions have been made to change interest rates or when the so-called inflation report is published. 4. A few weeks after the Executive Board has had a monetary policy meeting, minutes are published from the Executive Board meeting where the submissions made by the different Board members are presented anonymously but where any reservations against the inflation report and/or majority decisions on the interest rate are reported stating names. The Riksbank, together with the Bank of England, has a distinctive position among central banks with regard to openness. In this respect the Bank of England has shown the way for the Riksbank.
The share of income received by the top 1 per cent of the population has also risen since the 1980s across many industrialised countries, including Australia, Canada, the United Kingdom and the United States (Atkinson and Morelli, 2014). 5  See Autor, Katz and Krueger (1998) and Autor, Katz and Kearney (2008). For example the last 60 years have seen US returns to education rise despite a large increase in the supply of more educated workers. And there is evidence that increases in the employment of more skilled workers between the 1970s and the 1990s were greater in more computer intensive industries. BIS central bankers’ speeches  1  Now is the time to be famous or fortunate. There is also disturbing evidence that equality of opportunity has fallen, with the potential to reinforce cultural and economic divides. For example, social mobility has declined in the US undercutting the sense of fairness at the heart of American society. 7 Intergenerational equity is similarly strained across the advanced world. Social welfare systems designed and enjoyed by previous generations may prove, absent reform, unaffordable for future ones. 8 And environmental degradation remains unaddressed, a tragic embarrassment now seldom mentioned in either polite society or at the G20. To maintain the balance of an inclusive social contract, it is necessary to recognise the importance of values and beliefs in economic life.

The combination of unbridled faith in financial markets prior to the crisis and the recent demonstrations of corruption in some of these markets has eroded social capital. When combined with the longer-term pressures of globalisation and technology on the basic social contract, an unstable dynamic of declining trust in the financial system and growing exclusivity of capitalism threatens. To counter this, rebuilding social capital is paramount. Financial reform is now helping. Globally systemic banks are simplifying and downsizing. Some are de-emphasising high-profile but risky businesses that benefited employees more than shareholders and society. Authorities are working feverishly to end too-big-to-fail. The structure of compensation is being reformed so that horizons are longer and rewards match risk. Regulation is hard-wiring the responsibilities of senior management. And new codes are seeking to re-establish finance as a true profession, with broader societal obligations. A welcome addition to these initiatives would be changes to the hard and soft infrastructure of financial markets to make them dynamic and fair. Through all of these measures, finance can help to deliver a more trustworthy, inclusive capitalism – one which embeds a sense of the systemic and in which individual virtue and collective prosperity can flourish. 21  8  Sir Richard Lambert’s Review was commissioned by the Chairmen of Barclays, HSBC, Lloyds, Nationwide, RBS, Santander and Standard Chartered in response to the recommendations of the Parliamentary Commission on Banking Standards. See http://www.bankingstandardsreview.org.uk/.
that it strengthens against other countries when Sweden's economy shows better growth and weakens when the Swedish economy shows weaker growth than other countries. The exchange rate would thus counteract imbalances that arise. If Sweden alone were to suffer a negative disturbance that required prices and wages in Sweden to develop differently than those in the euro countries, a floating exchange rate would facilitate the adaptation. Here the development of the krona in recent years gives some cause for reflection. Does the krona really function as a shock absorber in practice? Or do fluctuations in the exchange rate risk being affected by so many other factors that the role as shock absorber is counteracted? It is difficult to see the most recent severe weakening of the krona as an adaptation to the fact that Sweden has come out of synch with the surrounding world. So what actually steers the krona rate? Since the 1970s the krona has weakened by almost 90 per cent against Sweden's most important competitor countries. Approximately half of this weakening can be explained by the fact that inflation in Sweden has been higher than in other countries. However, now inflation in Sweden is developing roughly in line with international inflationary trends. The weakening of the krona in recent years therefore cannot be explained by differences in the inflation rate.

that the krona has been affected by a net outflow of capital from Sweden. The development of the krona and the stock market has shown a strong correlation since the beginning of 2000. This is probably connected with foreign investors selling Swedish shares in line with falls on the stock market, which has affected Sweden more than other countries, as a large part of the stock market value is owned by foreign investors. Moreover, Swedish investors have bought a large amount of foreign shares, which is probably connected with the new pension system and the freer investment regulations for the AP pension funds. It has been possible for the AP pension funds to increase their foreign exchange exposure, i.e. the percentage of foreign assets, from 10 to 15 per cent with effect from this year. The funds can increase their exposure by five percentage points a year to a maximum of 40 per cent in 2006. On top of this comes a factor that is difficult to explain on the basis of classical exchange rate theories. The krona is affected to a large extent by general unease on the global financial markets. During times of financial unrest the krona weakens when investors leave the Swedish market for ones considered a safer investment. This was particularly noticeable during the Mexico crisis of 1995 and the Asia crisis of 1997-98. The recent unrest on the financial markets in connection with uncertainty over the global business climate has once again had a negative effect on the krona.
It has often been argued that economic growth should be given priority at the current stage, and only later on should the nominal convergence goals be pursued more vigorously. As a result, we have heard many warnings against fast EMU entry. In reality, however, most of the accession countries have already achieved impressive results in the nominal convergence process. They are now among the countries with moderate or even very low  BIS Review 17/2003  1  inflation rates, and their nominal interest rates have converged to the EU levels. In the majority of cases, no practical problems with achieving the Maastricht criteria on inflation and long-term interest rates are thus envisaged. Moreover, this progress has often been achieved simultaneously with satisfactory growth performance, even though some countries have gone through periods of growth slowdown correcting previous imbalances in their economies. Therefore, I think that the potential conflict between real and nominal convergence has often been exaggerated. The two processes have different time horizons, nominal convergence being achievable in the medium-run, whilst real convergence remains a long-run matter. There is, however, one particular link between the two processes that needs to be taken into account when we design our policies towards EMU accession. Faster GDP growth is likely to lead to a real exchange rate appreciation, making it impossible to have both very low inflation and a completely stable nominal exchange rate. This issue is well known and has received much attention.

Therefore, let me stop at this point and pass the floor to the chairman of our first panel debate, Mr Jakob A. Frenkel (from Merrill Lynch International). Before I do that, though, I would like to welcome you once again and thank all of you for accepting our invitation to this event. BIS Review 17/2003  3
And that is the reason why it is so important, so decisive that we draw all the lessons from the present episode, across the board, without any prejudices, without giving any privilege of untouchability to any part and parcel of global finance. From that standpoint I think the work of the Financial Stability Forum – scrutinizing liquidity risk management as well as credit rating agencies, analysing without complacency the weakness in the structure of incentives of the “originate to distribute” model as well as the monitoring of the off-balance sheet vehicles, examining the implementation of the Basel II agreement as well as the arrangement for dealing with in particular weak cross-border financial institutions – is of the essence. Third, even with a right and pertinent diagnosis, and appropriate significant improvements in benchmark voluntary principles and codes of conduct for the private sector as well as substantial progress in rules and regulations, in cooperation and coordination between authorities where needed, my understanding is that we could not be ensured that the “unavoidable and necessary market corrections” of the future will be reasonably “smooth and orderly”. For a higher likelihood of that to happen we need probably simultaneously what I would call a further significant change of culture at national as well as at global level. I would sum up this change in our overall approach with these words: Transparency, Holism and Anti cyclicality.

However, one fundamental problem is that it is difficult to see how a relaxation of rules in certain areas could be compensated by a purposeful tightening in others. Relaxing the 3 per cent rule would thereby imply a weakening of the construction as a whole at a time when - as I mentioned earlier - the conduct in some countries suggests that if anything the opposite appears to be required. There is already flexibility in the regulatory framework for different interpretations of the phrase “exceptional circumstances”. To increase this flexibility by allowing for country-specific factors on a general level would lead to risks. In particular, there is a risk that the rules would be interpreted too much ex post and that small countries would be discriminated against even more than is already the case. However, there is room for substantial improvements in the preventive arm of the Pact. The Achilles’ heel of the Pact is not actually the 3 per cent limit but its asymmetry; the pact involves gentle warnings in booms but hard sanctions in slowdowns. This means that the pact lacks credibility when, after impotently highlighting indiscipline during booms, it is expected to force governments into highly painful, 180-degree turns towards austerity during slowdowns. It also risks contributing to procyclical policy. Against this background the Commission has worked hard on improving the preventive arm in recent years. I have sympathy for many of their proposals. Some examples: •  Strengthen incentives in good times. Here, considering the debt level could play a role.