samchain/econo-pairs-v1 huggingface dataset:
Traded goods’ inflation – a portion of which are imported and the rest are directly affected by global prices – increased substantially compared to the previous two years. Its contribution to headline inflation was about 73 percent in 2009. 1.5.2  Bank of Albania’s monetary policy  The weakening of economic activity and domestic inflationary pressures, our forecasts for a contained inflation in the future and the anchored expectations of economic agents provided room for pursuing an easing monetary policy in 2009. This policy was materialized in two interest rate cuts by 0.5 percentage points each in January and October 2009 to 5.25 percent, and in the continuous injection of liquidity required by the market and the economy. By means of this prudent monetary policy, the Bank of Albania aimed at creating appropriate monetary conditions for a balanced and long-term development of the country. The key interest rate cuts were instantly passed through to the short-term interest rates in the interbank market, which declined and were less volatile than in 2008. On the other hand, these movements were not fully and instantly transmitted to the interest rates on banking loans and deposits. As in all other countries, the increase of the liquidity premium, the higher uncertainty and the deterioration of the banking system’s financial results were amortizing factors for the easy monetary authorities’ measures. However, our monetary policy and our interbank market operations managed to successfully avoid a detrimental contraction of banks’ balance sheets, something that many emerging countries had to go through.

While omicron was milder for many—and thankfully the wave subsided relatively quickly—it still caused terrible hardship for countless families. You can see the economic effects of the pandemic right here in New Jersey. What struck me this week as I met with New Jersey business, community, and political leaders was the different ways that COVID-19 affects local economies. Just a few miles from Jersey City, Port Newark and Port Elizabeth are humming with activity. But across the Turnpike, Newark Liberty International Airport has seen a big reduction in the number of flights and passengers relative to pre-pandemic trends. Likewise, the pandemic has led to empty office buildings and fewer travelers in New York City, which affects businesses here in New Jersey as well. Today I’m going to talk about how the economy has continued to recover despite the many disruptions and imbalances that COVID-19 has caused. I’ll also discuss the labor market and the rise in inflation. Then, I’ll describe how the Federal Reserve’s monetary policy is working to help restore balance and stability to the economy during these uncertain times. Economic Outlook Since it’s the Friday before a holiday weekend, I won’t test any of you on the functions of the Federal Reserve System. But I do want to take a moment to discuss the Fed’s dual mandate of promoting maximum employment and price stability. U.S. monetary policy is set by the FOMC, which is made up of the Board of Governors and five of the 12 presidents of the Federal Reserve Banks.
At this time, most central banks, I think, have not responded systematically to this aspect of transparency. A number of central banks publish minutes and voting records of their monetary policy meetings with a lag, but the majority still don’t. The main reason is the risk that doing so could undermine the decisionmaking process where frankness and openness are required. Having detailed minutes and voting records might encourage the attending members to read out their statements rather than to get involved in detailed discussions. Because the practices differ, I said earlier there is not yet a clear convergence of the practice. Nonconvergence of practice can be seen clearly from the current practice of the eight major central banks. I want to end my remark today by sharing with you my thought on how to approach transparency in monetary policy. The first is that transparency is not just a fad. It is something that will stay. And as organizations making public policy decisions, transparency is of most importance to central banks as a way of being accountable. Also, transparency is important to central banks for building credibility and for gaining public acceptance of their policy. 2  BIS Review 10/2006  Second, in moving towards greater transparency, an approach based on sequencing or gradualism looks to me to be better and more efficient than a big-bang approach. The sequencing, in my view, should focus initially on building minimum critical components of core transparency, and then moving on to greater transparency in selected areas when ready.

In short, being transparent also means being able to explain one’s own decisions and actions. And the final related point about disclosure is that, despite the recent trend on transparency, with more and more central banks moving towards greater transparency, our research shows that there is still no clear convergence of the practice. Central banks continue to practice things differently, although in some areas the established practices are more or less uniform. To illustrate this point, let me now turn specifically to transparency in monetary policy which is the heart of central banks’ responsibilities and operations. In monetary policy, there are six areas where transparency is now well established and is being practiced by most central banks. These are (1) stating clearly what the objectives of monetary policy are; (2) explaining clearly the framework of monetary policy and its operating procedures; (3) having regular economic data release; (4) making known clearly the decision-making process of monetary policy which includes who make the decisions, how often, the timetable of meetings, and the dissemination process to announce the policy decisions; (5) publishing timely economic reports to explain views on the economy and risks as well as the rationale for their monetary policy decisions; and (6) the readiness of central banks to communicate with markets either through the media and public addresses or appearing before public or congressional committees.
This means that Sweden has a very open economy, exposed to competition on the world market. th  In a way, the globalisation process at the end of the 19 century went further than the process we are seeing now. This was because the labour force was more mobile across national boundaries then. Prior to the World War I, there was extensive emigration, primarily to the American continent. Sweden lost one quarter of its population through emigration. Between 1890 and 1910, 10 per cent of the world's population moved permanently from one country to another. During the past quarter of a century the corresponding figure for emigration was only 1-2 per cent. I think that what one usually means by globalisation is that which has happened on the capital markets over the past 20 years and which is connected to the deregulation of capital markets. For Sweden, this goes back to the mid-1980s, when deregulation of the capital markets began. The deregulation process reached a peak when the final elements of the currency regulations were abolished in 1989, enabling the free movement of capital across our borders. However, this is nothing new, either. Prior to 1914 capital could move freely over national borders. There was extensive direct cross-border investment. This was when the Swedish railway network was built up and the Swedish hydroelectric power system was built with the aid of foreign capital.

Overall, however, looking to the extent possible through this volatility, the rate of broad money growth continues to moderate in line with the trend established over the past 18 months, with the intensification of financial tensions since September leading to significant substitution among the components of M3, rather than, at least so far, sharp changes in the trend of M3 itself. Turning to the evolution of bank loans, the tightening of financing conditions resulting from the intensification of the financial tensions has contributed to a slowdown in the flow of monetary financial institution (MFI) loans to the non-financial private sector in recent months. 2  BIS Review 5/2009  More data and further analysis are necessary to form a robust judgement about the severity and scope of credit constraints and their possible implications for economic activity. To sum up, we decided to reduce the interest rate on the main refinancing operations of the Eurosystem by a further 50 basis points, bringing the total reduction since 8 October 2008 to 225 basis points. Today’s decision takes into account that inflationary pressures have continued to diminish, owing in particular to the further weakening in the economic outlook. The Governing Council recalls its operational decision, taken on 18 December 2008, to widen again the corridor formed by the rates on the Eurosystem’s standing facilities as of 21 January 2009.
In addition to a high level of activity in the construction industry and strong growth in retail trade, the upturn is now also being driven by higher exports and increased activity in the petroleum industry. Optimism seems to be holding up, and the market outlook for the next six months is bright for all sectors, although brightest for retail trade and construction. So far, optimism has only resulted in a moderate willingness to invest. In general, investment remains at a normal, average level. The exception is housing investment and investment within retail trade. In contrast to earlier periods, several sectors, such as petroleum-related manufacturing, retail trade and services for the business sector, are now reporting rising employment. Growth in the Norwegian economy is probably somewhat stronger than projected in Inflation Report 1/04. On the other hand, capacity utilisation at the end of 2003 may have been somewhat lower than projected earlier. Consumer prices have moved approximately in line with projections in Inflation Report 1/2004. The aim of monetary policy is higher inflation. With the current low level of inflation, it is appropriate to be particularly vigilant with regard to developments in consumer prices. However, consumer prices may show random variations from one month to the next. We now have several monthly observations showing a rise in prices that is consistent with the most recent forecasts. Later this year, we will receive further confirmation of whether consumer prices are rising in line with our projections. We also place emphasis on avoiding imbalances in the real economy.

Here, too, Nicholas Bloom, together with Scott Baker of Stanford University and Steven Davis of the University of Chicago, made an important contribution in developing an economic policy uncertainty index for the US, Europe and other major economies. The measure has been used not only in academic papers but also by investors and financial professionals.5 It has also been subject to intense discussions in the blogosphere in view of some of its political uses. The difficulties in finding good indicators controlled to avoid reverse causation and the use of political events provided fodder for the debates. Professor Bloom’s work on measuring uncertainty stimulated more systematic analysis of uncertainty indices also at the ECB. We developed our own composite uncertainty indicator which combines four components: systemic stress, uncertainty of private households and firms, political uncertainty and financial risk aversion. Measurement difficulties were also an issue Professor Bloom had to tackle in the second strand of his research, namely in his research on the role of management practices in driving productivity and growth differentials across companies and across countries. Due to an absence of good quality data on management practices, little prior research was conducted on this important topic. To address this gap in the literature, Nicholas Bloom, together with John Van Reenen of the London School of Economics, developed a methodology for quantifying management practices.
6 I shall not go further into this, but merely wish to point out once again how important it is to analyse the driving forces behind inflation to be able to explain the monetary policy conducted. This means that we from time to time highlight different measures of inflation. In the current stage it is thus important to distinguish the effects of our own measures which we have implemented to alleviate the effects of the financial crisis on international growth and thus on growth in Sweden. 5  For a detailed discussion of this, see “Should monetary policy stabilise resource utilisation?” Economic Commentary No. 1 2008, Sveriges Riksbank. 6  Inflation measured in terms of the CPIF, which disregards changes in mortgage rates, is around 1.6 per cent on average in 2009. If one also excludes energy costs, the average for 2009 is 2.2 per cent. BIS Review 38/2009  5  Monetary policy is dependent on a functioning transmission mechanism Inflation is affected by the Riksbank’s changes in the repo rate through what is usually known as the transmission mechanism. This influence goes through several different channels, such as short and long real interest rates, the exchange rate and the supply of credit. The impact occurs with different degrees of delay. The repo rate is the interest rate the banks pay when they borrow from or deposit money in the Riksbank for one week against collateral.

As I will discuss today, however, the possibility of achieving this type of stabilisation is also dependent on inflation expectations being reasonably stabile. If inflation expectations are stable, a change in the policy rate will have a direct effect on the real interest rate, which corresponds to the nominal interest rate minus expected inflation. As it is the real interest rate that determines aggregate demand, monetary policy may in the short term have an impact on the real economy. Today I shall take up the question of what monetary policy can affect in the short and long run. I shall use some examples to illustrate the balance that must be attained between the inflation target and developments in the real economy. Functioning financial markets are of vital significance for the functioning of the whole economy. The Riksbank’s other main task, beside monetary policy, is to safeguard financial stability. During the current financial crisis the Riksbank has taken a number of measures to safeguard financial stability. This has been parallel to taking monetary policy measures. BIS Review 38/2009  1  Monetary policy and financial stability are closely linked. The possibility to conduct efficient monetary policy depends on the transmission mechanism functioning. I shall return to this question later in my speech. Finally, I shall make some concluding comments.
rates based on a sufficiently large number of transactions. The Libor administrator, ICE Benchmark Administration (IBA), reacted to the FSB report by announcing further improvements to ensure that the Libor rates would become better established through the use of actual transactions. Such actual transactions will be used either directly, for calculating the Libor rates, or indirectly, for underpinning the contributions. In this context, the inclusion of short-term loans to large customers or money market instruments, in addition to interbank market transactions, is being examined as a future possibility. In order to assess the FSB proposals, surveys are being conducted to collect data in the currency areas concerned. The SNB conducted such a survey at the beginning of summer for Switzerland, collecting data on bank transactions on the interbank market and with large customers, as well as on trade in money market instruments. More than 50 domestic and foreign banks took part in the survey. The results confirmed that the small number of actual transactions on the money market currently constitutes a problem for the creation of robust benchmark interest rates. Consequently, it seems improbable that a pure transactions-based approach could be implemented for the Swiss franc. This is also the case if other transaction types and additional instruments are taken into account. For this reason, the Swiss franc Libor will continue to be based mainly on contributions by participating banks. 1  2  IOSCO is the International Organization of Securities Commissions.

On the monetary policy side, we at the Fed have maintained unusually low levels of short-term interest rates and engaged in large-scale asset purchases. These measures have fostered a sharp improvement in financial market conditions. On the fiscal side (that is, government spending and taxes), the economy has been supported by the shift in policy to help support growth. In particular, the temporary reduction in payroll taxes could have a particularly strong impact on growth during the first part of the year. Third, growth abroad – especially among emerging market economies – has been strong and this has led to an increase in the demand for U.S.-made goods and services. Over the four quarters of 2010. real exports rose 9.2 percent. After a disappointing performance earlier in the year, U.S. net exports surged in the fourth quarter. The firming in economic activity, in short, is due both to natural healing and past and present policy support. In this regard, it is important to emphasize that we at the Federal Reserve have been expecting the economy to strengthen. We provided additional monetary policy stimulus via the asset purchase program to help ensure that the recovery regained momentum. A  BIS central bankers’ speeches  3  stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course. Yet, we must not be overly optimistic about the growth outlook.
The credit of the sovereign was preserved, and all debt obligations have been paid in full and on time. On the whole, these measures were successful, which mitigated the effect of the banks’ failure on the economy. The domestic payment system functioned more or less seamlessly throughout, and there was continuous access to deposits and basic banking services in Iceland. The economic programme with the IMF was initiated in November 2008. It had three key goals: stabilisation of the exchange rate, fiscal sustainability, and reconstruction of the financial sector. Financing amounted to USD 4.4 bn. with 1.4 bn. coming from the IMF and the rest from bilateral loans from the Nordic countries and Poland. Despite some initial delays due to the bilateral dispute on deposit guarantees, which I will not discuss here, the programme was very successful, and all three goals were reached. The programme ended in August 2011. The Nordic bilateral loans were prepaid in 2012–2015, and the IMF facility and the Polish loan were prepaid in autumn 2015. Comprehensive capital controls were an important element in the programme, but their rationale was to help to stabilise the exchange rate after the currency had fallen more than 50% in 2008, where foreign króna positions – a legacy of carry trade and capital inflows – amounted to around 40% of GDP, and where a large fiscal deficit that had to be financed in the domestic market had developed.

It was an accident waiting to happen, and happen it did, with a vengeance, at the peak of the international financial crisis in autumn 2008, when there was a wholesale run on the FX financing of internationally active banks. After having done a post mortem on the failed banks, we now know, however, that they also had other ailments that would probably have done them in at a later stage, although the process might have been somewhat less disorderly. The combination of the macroeconomic imbalances, an unsustainable banking system, and the full eruption of the Great Financial Crisis meant that Iceland faced unprecedented challenges in 2008. The financing of the current account deficit became impossible when Iceland experienced a full-scale sudden-stop currency crisis early in the year, when the currency plummeted by 26%. Then, in the first week of October, almost 90% of the banking sector failed. This resulted in a further 26% depreciation of the currency. Although the depreciation would later contribute to the recovery, at that point it exacerbated the crisis through negative balance sheet effects on a private sector that was heavily indebted in foreign currency, both directly and indirectly, through price indexation. The outlook was bleak indeed, and many expected that the sovereign would be forced to default on its obligations. That outcome was avoided, and the economy has performed better than seemed likely that dismal autumn. Part of the reason is the nature of the shocks.
Much of this credit was used to buy houses and property prices began to soar. …because of overly expansionary monetary policy? There is a debate as to the role of monetary policy in creating this situation. The debate has mainly concerned claims that the US central bank had held interest rates too low for a number of years prior to the crisis. But other central banks, such as the European Central Bank, also held interest rates low during this period. It is not entirely clear what role monetary policy played – and plays in general – for the development of property prices and for risk propensity among economic agents. This is a subject that will probably continue to be discussed. However, on the basis of the information available at the time, there was no obvious reason for conducting another monetary policy than the one that was actually conducted. In the United States, for example, there was justified concern that the country might suffer the same deflation problems as Japan, and many other countries also perceived the threat of deflation as something to be taken very seriously. …as a result of a global savings glut? But there was also another and probably more important factor contributing to the low interest rates. Since the end of the 1990s the emerging economies in Asia, particularly China, and in the Middle East had experienced large current account surpluses, particularly in relation to the United States, but also to other western countries.

Secondly, as I recently noted, many countries have experienced problems with large deficits in their public finances. This is a problem that has now become acute, and needs to be dealt with. We in Sweden are all too well aware of the confidence problems that can arise from mismanaged public finances. It is of course easier to make the necessary consolidation if private sector demand is kept up. One could say that many countries therefore need to undergo what could be described as an internal adjustment of demand – from public to private. 2 Thirdly, an external adjustment of demand is also needed. Many countries in the western world, and not least the United States, which was overly dependent on high domestic demand before the crisis, must rely more on exports in the future. Correspondingly, countries which have accumulated large current account surpluses, and in particular China, will have to rely more on domestic demand. Thus, what is needed is a changeover from domestic to foreign demand in some countries and the reverse changeover in other countries. Create new regulatory systems There is currently fairly substantial international unity on the first issue – the need for a better regulatory framework and more effective supervision of the financial sector – even though much of the details remain to be discussed. There has also been some progress in this field. One example is what is known as the Basel III regulations, agreed by central banks and financial supervisory authorities around the world some weeks ago.