samchain/econo-pairs-v1 huggingface dataset:
In relative prices, the real exchange rate is now about 3.5 per cent weaker than the average since 1970, whereas it is approximately 2.5 per cent stronger than its historical average measured in terms of relative labour costs. The exchange rate in the long term There has been divergence between cyclical developments in Norway and other countries. This was most pronounced in the 1980s when we had a strong upturn while Europe was in a recession. Although the economic cycles have been somewhat more similar over the years, there is still a time divergence. While the global turnaround took place in 2000, with a subsequent reduction in interest rates abroad, the Norwegian economy continued to show a high level of activity. Towards the end of the upturn, the economy was facing labour shortages, accelerating wage growth and a sharp increase in household consumption and debt. Interest rates in Norway remained high and the interest rate differential gradually widened. There have also been other differences between cyclical developments in Norway and other countries. The expansionary period in Norway led to strong wage growth from 1998 to 2002. The upturn in the global economy at the end of the 1990s was largely driven by business investment and wage growth was moderate. Wage growth in the Norwegian business sector from 1998 to 2002 was higher than the level that over time is consistent with the inflation target and with normal productivity growth.

We also give emphasis to predictability and transparency. Normally, the interest rate is set with a view to achieving inflation of 2½ per cent at the two-year horizon. This time horizon usually provides a reasonable balance between stabilising inflation on the one hand and smoothing fluctuations in output and employment on the other. 1  See Akram, Farooq Q. (2003): “Reell likevektsvalutakurs for Norge” (Real equilibrium exchange rate for Norway), in Norsk Økonomisk Tidsskrift 118, pp. 89-112. 2  BIS Review 25/2004  If demand for goods and services is high and there is a shortage of labour, there will normally be prospects of higher inflation. When the interest rate is raised, demand is dampened and inflation is kept in check. If demand is low and unemployment rises, there will be prospects of lower inflation. The interest rate will then be lowered. The inflation target thus represents a framework, not an obstacle, for monetary policy to contribute to stability in output and employment. Section 1 of the Regulation on Monetary Policy states that in addition to sustaining the level of inflation at approximately 2½ per cent over time, monetary policy shall also contribute to stable developments in output and employment. The mandate therefore establishes a flexible inflation target for monetary policy where variations in output and employment are also given emphasis.
It is important to reiterate that we continue to project that the convergence requires the economy to have negative gaps for a few quarters, as this is necessary for the effects of the macroeconomic imbalances of previous years to dissipate. We must keep in mind that this is no simple process, nor is it risk-free. The road to inflation reaching 3% is still long and we must walk it while carefully analyzing each piece of information we receive. We all have witnessed the cost that high inflation means for families. Of the effort that every citizen of our country has had to make in order to make their income accommodate price increases beyond 6  what we were accustomed to. That is why, although this is not a cost-free process, the benefits of low and stable inflation are substantially higher, especially for the most vulnerable households. Although conditions are moving in a favorable direction, we cannot declare victory prematurely. Quite to the contrary, we must redouble our efforts and be very attentive to how the economy unfolds and its implications for inflation. True enough, this also means that we must take on many other challenges that these difficult years have left us with as a legacy. One such challenge is the need to rebuild the capacity of our economy to withstand adverse conditions. As we learned during the pandemic, the shocks that can affect us come not only from economic variables.

I also hope that your participation in this workshop results useful, in terms of exchanging the know-how on various issues and in particular, on the ethics and econometrical techniques. It is with pleasure that I declare this workshop open and I invite you to deepen our knowledge! Thank you! 2  BIS Review 132/2007
BIS Review 39/2003  1  It is important to mention here the close interplay between rigidities in capital, labour and product markets, which can strengthen one another. These interdependencies mean that structural reforms in any one of these markets will have an impact on the functioning of the others. It must be emphasised therefore that only a comprehensive reform programme can create the necessary conditions for stronger economic dynamism. The need for structural reforms tends to become most urgent and evident to policy-makers during economic downturns. But don't forget that structural reforms do not provide short-term solutions to economic problems. Although they can have positive short-term confidence effects, it normally takes time for their benefits to unfold. Hence I cannot emphasise enough the need to speed up the pace of structural reforms in capital, labour and product markets. Structural reforms in various regions of the world Let me now turn to the issue of future challenges with respect to microeconomic policies and structural reforms in particular economic areas. I shall start with structural reforms in the euro area, and then move on to say a few words about structural reform in the EU Neighbouring Regions, the United States, Latin America and, finally, East Asia. Euro area Economic activity in the euro area remained subdued in the first half of 2003. However, there is increasing reason to expect that it will recover gradually in the second half of 2003 and strengthen further in 2004.

This significant strengthening of the trade relations with the EU member states is mostly a result of the intensified trade with Germany, and moreover, such development is fully conditioned by the increase in the exports of RM to Germany. Thus the share of the export of goods to Germany in the total export of goods of RM in 2008 equaled 14%, while in 2013 it climbed to high 36%, or in absolute amounts, from Euro 383 million, for only five years, it reached Euro 1,154 million. It is a significant increase, a triple increase. It means that, despite the crisis in the Euro area and its negative implications, the strong economy based on sound and solid economic fundaments – such as the German, proved to be our certain partner for placement of more than a third of the exports. Besides the traditional export products, i.e. the export of the domestic textile and metal manufacturing industry, in the last two years, Germany is important destination for export of the new capacities in the technological industrial development zones (TIDZs), i.e. for the export of machinery and equipment and equipment of automotive industry. Second, Germany is our significant investor, which in 2013 advanced on the list of the ten most important foreign direct investors (9th).
I can only add that combining these ingredients - the vision, the will and the power of knowledge - form the leader, regardless whether we talk about politics, managements, or science. Having in mind education and network you have gained  1/2  during the EMBA course you have the best assumptions to succeed. I wish you all the very best in your further professional carriers. 2/2

In both of these segments, we hope to achieve the greatest impact on the market as a whole. In principle, we buy only marketable bonds and pay market prices. Apart from the mortgage bonds, we did not buy any bonds issued by financial institutes. As of mid-June, our total purchases amounted to around CHF 2.5 billion in mortgage bonds and roughly CHF 300 million in corporate bonds. For the time being, we plan to continue purchasing selectively. As regards volume, we have set no restrictions. The bond purchases also seem to have fulfilled their purpose. Risk premia have come down significantly (cf. chart 3). That said, we were able to benefit from the favourable mood in the financial markets. The fact that, in the past few weeks, several issuers found their way back to the issues market for the first time in a long time is further proof of the effectiveness of our strategy. SNB StabFund Developments in the market since the UBS package of measures was announced show that the transfer of illiquid assets from UBS to the SNB StabFund was both appropriate and absolutely necessary. Had these assets remained on UBS’s books and been valued at  2  BIS Review 77/2009  market price, the bank’s existence would have been seriously threatened these last few months. The transfer of assets was concluded at the beginning of April.
The immediate future: consolidating the measures taken and putting the reforms on a firm footing In recent weeks international financial market dynamics have continued to be influenced considerably by the high degree of risk aversion and by fragile confidence levels. There has been a resurgence of the doubts – first seen in the case of Greece – about the solvency of euro area Member States. The uncertainty over the euro area’s fiscal sustainability cannot be explained merely by the economic downturn and its impact on public finances. The measures taken by authorities to avoid the collapse of the financial system have involved, in the case of Ireland, guaranteeing the funds lent to the banking system by depositors and wholesale investors. Markets are suspicious about the ability of certain small States, with relatively large banking systems, to meet these commitments. The European Union has come to the aid of Ireland, which has experienced problems precisely because it used substantial amounts of public funds to shore up a banking system bloated with real estate assets, particularly offices and houses in the Dublin area. In Spain the situation is very different as regards both the public sector and the banking sector. Despite the substantial rise in the budget deficit in 2008 and 2009, public debt as a percentage of GDP remains relatively small in comparison with the euro area average, which is 20 percentage points higher.

Once it had completed this legal reform, Spain announced ahead of other European countries that it was going to stress-test its banking system to show that the market’s perception of bank solvency was clearly lower than it actually was. Other European partners joined this initiative and by end-July 2010, the results of the stress tests had been published. As you are aware, compared with our European partners, the Spanish stress tests were far superior in terms of scope and transparency. In Spain, the decision was taken to stress-test the whole sector and not only institutions representing 50% of the sector. Furthermore, very extensive and detailed information was published. BIS Review 161/2010  3  The stress tests showed that Spanish banks as a whole were sound, despite taking into consideration very extreme and highly unlikely scenarios. However, they also served as a channel of communication because a lot of important information was disseminated. At present international markets are once again questioning the reliability of the European stress test exercise. As I mentioned earlier, the Banco de España published bank-by-bank information, not only about the assumptions made, but also about the various portfolios and the funds available to cover hypothetical losses. The Banco de España has recently once again revised the assumptions, parameters and estimates published four months ago and considers that they appropriately describe the current situation of the banking system and its exposures.
The currency separation – a reform implemented by Alois Rašín in 1919 – entered the annals of Czech economic history long ago. It was aimed at nothing less than separating currency circulation in Czechoslovakia from that in the other parts of the former Austria-Hungary. I won’t expand on all the ways this bold step could have gone wrong. I will point out, though, that the way it was done and the way it turned out are seen as impressive to this day, as the Czechoslovak koruna went on to become one of the most stable currencies in Europe. However, this was due to many other accompanying measures, not just the separation of the currency. In other words, the currency was only as strong as the foundations of the set of economic policies in place at the time. As you all know, we tried a currency separation again in February 1993. Again we had nothing to be ashamed of, as not a single drop of blood was shed in the process. Savings started to spill over from Slovakia into banks in the Czech Republic as soon as the former federation broke up. The general level of uncertainty also increased, affecting the foreign exchange market. But despite all that, the excellent organisational preparations for this step, stared secretly in the middle of the previous year, allowed the operation to be conducted quickly and efficiently.

At the same time, we signalled that there would probably be a need to increase the rate later in the year. Growth in the world economy and in the Swedish economy is robust and our assessment is therefore that inflation will increase gradually towards the 2 per cent target, reaching it a couple of years from now (see Figures 1 and 2). However, this development assumes that the repo rate will be increased, as otherwise inflation will exceed the target. Current monetary policy Despite the fact that inflation has been clearly below target for some time, the Riksbank increased its key rate twice during the winter, by a total of 0.5 percentage points. Perhaps some people may wonder if this was really necessary; we are still in a situation with high unemployment and we cannot as yet see any inflationary pressures stemming from wages – one of the most important factors behind rising costs/prices in the economy. However, it is not today’s inflation that determines whether we shall increase or decrease the interest rate; it is the future inflation rate. The Riksbank’s forecasts and decisions refer in particular to inflation  BIS Review 43/2006  1  a couple of years ahead. We assume that it will take roughly this long before interest rate changes have a full impact on demand and thus on inflation. The Riksbank does not wish to achieve an inflation rate of 2 per cent at all costs. This is neither possible nor desirable.
These will begin to be implemented in September, under very favourable financing conditions, with the aim of maintaining the current low costs of bank funding and, therefore, of overall borrowing by households and firms. It is perhaps worth reiterating here that the ECB’s monetary policy has had very positive effects on euro area activity and inflation. In fact, by easing financial conditions and reducing financial market fragmentation, the ECB’s expansionary monetary policy has substantially contributed to the improvement in the euro area economy. At the same time, it has prevented the period of negative inflation rates experienced by the European economies further to the crisis-induced recession from turning into a deflationary spiral. Specifically, according to some ECB papers8 and to in-house Banco de España estimates, it is believed the set of monetary policy measures adopted since mid-2014 will have an  7  See M. Draghi (2019), “Twenty Years of the ECB’s monetary policy”, ECB Forum on Central Banking, Sintra, 18 June 2019. 8 Hammermann et al. (2019), “Taking stock of the Eurosystem’s asset purchase programme after the end of net asset purchases”, Economic Bulletin, 2/2019, ECB. 9/16  overall impact on the euro area’s real GDP growth and inflation. In both instances this is expected to be cumulatively of the order of around 2 pp between 2016 and 2020. It should also be underscored that these effects have arisen from the combination of the various instruments used. Beyond their individual impact, these instruments mutually complement and reinforce one another.

The recently created instrument for convergence and competitiveness, while a step in the right direction, lacks stabilisation capacity. It does not incorporate some of the potentially most effective elements, such as European unemployment insurance and the use of European funds to mitigate the impact of specific shocks on certain economies. The lack of effective macroeconomic policy coordination mechanisms in the euro area is exacerbated when monetary policy comes up against its effective interest rate limits. As I said earlier, this circumstance might become more frequent in the future if we move into a more persistent setting of low rates. Moreover, it is in this setting that the effectiveness of fiscal policy may prove greater.13 There is thus a pressing need to create some type of common cyclical insurance mechanism in the euro area. This instrument would help automatically absorb adverse shocks at the aggregate level (symmetric) or idiosyncratic shocks in certain countries (asymmetric). Its dual aim would be to smooth effects in individual countries and safeguard the stability of the euro area as a whole. Some recent analyses suggest that it would be possible to design a mechanism which, without committing major funds (fewer than the current European budget) and without it entailing permanent cross-State transfers, would provide for a similar stabilisation capacity to that achieved with the US transfer system.14 The role of macroprudential policy We should not forget the role that so-called “macroprudential policy” can and should play.
The reversal in overall borrowing during 2013 was driven by increased credit card and mortgage debt among the young and those with high credit scores. While this suggests that lenders are concerned about the safe underwriting of such loans, it also points to the overall importance of borrowing by younger individuals. Not only did borrowers under age forty-nine take on more credit card and mortgage debt in 2013, they also did most of the borrowing to finance auto purchases and college educations. This is not new – historically, younger individuals account for most new loan originations, while older individuals on average pay down their outstanding debt. Nonetheless, while borrowing for such things as cars and houses is up among younger individuals, it remains somewhat subdued. Now, this overall picture – young borrowers getting loans while older borrowers are reducing their debts – makes sense, and it is consistent with a growing population and improving income prospects for the young. The fact that (unlike 2006) we now see reductions in mortgage debt for the least creditworthy borrowers tells us about how unusual lending was during the credit boom of the mid-2000s, and it is instructive and reassuring to see that today’s patterns look different. In spite of the improved outlook for income growth and consumption implied by these changes in the way households view and use debt, some imponderables remain on the horizon.

I’ll argue that this is an encouraging development, although we should be cautious both in predicting future borrowing and in recognizing that the aggregate increase in borrowing may mask the fact that many individual households remain constrained by prior borrowing and/or a reduction of income. These households are still engaged in attempting to reduce their debt burden by pay-downs in debt. Furthermore, I’ll explain how the type of borrowing by households has changed over time. Here too there is a reason for some caution, because borrowing for education has become more common for U.S. households. It appears that heavy student debt can restrain the consumption activity of those individuals who are burdened with it. If this is the “new normal” for the economy, it might result in delayed purchases of homes and autos for those graduates who finance their education by taking on large amounts of debt. This is a potential development that bears close monitoring. Why do I suggest that an increase in household borrowing is an encouraging development? While in recent years we have certainly seen that household debt can carry serious negative consequences, overall an increasing level of borrowing indicates that the economy is returning to normal patterns. After all, with rising GDP and an expanding population, we should not be surprised to see debt increasing, if only modestly.
Both approaches have their place in making sense of the dappled economic and financial world. But, to date, both have not been given equal billing. The global financial crisis is an opportunity to rebalance those scales, to take uncertainty and disequilibrium seriously, to make the heterodox orthodox. A profession that has, perhaps for too long, been shackled needs now to be Shackled.

In general, a system comprising three bodies undergoing motion via a force cannot be solved analytically – the “three-body problem”. And there are many problems in physics which involve the interaction of “particles” in ways which are complex and non-deterministic. 13  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  13  These features have resulted in ABMs being extremely widely used in the physical sciences, at various different levels of resolution. At the micro scale, some of the earliest applications of ABMs were to study plasmas – charged particles which constantly interact. Plasmas are the fourth state of matter after solids, liquids and gases. They are prime ABM candidates because they exhibit rich, non-linear, complex behaviour. In 1966, Edward Teller wrote a paper which described how to build a plasma ABM with 32 interacting particles (Brush, Sahlin and Teller (1966)). Even with “only” 32 interacting agents, this was a formidable computational challenge. But the advent of parallel and high performance computing since the 1990s has changed the scale of plasma particle simulations. Simulations today regularly use as many as 10  9  computational agents (Turrell et al (2015)). These plasma ABMs have found widespread application, micro and macro. At the micro level, they have been used to help identify and kill cancer cells with pinpoint accuracy, while leaving healthy surrounding cells unharmed (Bulanov et al (2002)).