samchain/econo-pairs-v1 huggingface dataset:
4  BIS Review 132/2007  A strong Swedish economy with increased cost and inflationary pressures… If we begin with the situation at home, it is clear that the Swedish economy is continuing to show strong growth (slide 5). We see increased cost and inflationary pressures ahead of us and there are a couple of main factors in this development that I wish to highlight. Strong growth Both the statistics in the National Accounts and the survey of Swedish companies carried out by the Riksbank confirm the picture of strong growth in Sweden. Although the rate of increase in GDP has slowed down slightly, it remains fairly high and is expected to be around 3 per cent this year. Our assessment is that we are in a situation where we are currently making more use of economic resources than normal. If we look ahead, we are expecting GDP to grow slightly more slowly up to 2010 than it has in recent years. This is due to several interacting factors; we believe that productivity and the labour supply will increase more slowly, and that international growth will be lower. In addition, we are expecting the interest rate to rise gradually, the exchange rate to be stronger and investment to increase at a slower rate. These factors subdue growth. … and tighter labour market Despite the fact that GDP growth has been strong for several years, it was not until 2005 that employment began to increase (slide 6).

12  12  10  10  8  8  6  6  4  4  2  2  0  0 81  83  85  87  89  91  93  95  97  99  01  03  05  07  09  Sources: Statistics Sweden and the Riksbank  BIS Review 132/2007  11  8. Wages expected to rise faster Different agents’ expectations of the rate of wage increase two years ahead, Per cent 5  5  4  4  3  3  2  2  Employer organisations Employee organisations Purchasing managers  1  1  Wages in the business sector, outcome 0  0 98  99  00  01  02  03  04  05  06  07  08  09  Sources: The National Mediation Office and Prospera Research AB  9. Cost pressures increasing Annual percentage change. Broken lines and striped bars refer to the Riksbank’s forecasts. 8  8 Unit labour cost 7 6  Hourly labour cost  7  Productivity  6  5  5  4  4  3  3  2  2  1  1  0  0 -1  -1 94  96  98  00  02  04  06  08  10  Sources: Statistics Sweden and the Riksbank  12  BIS Review 132/2007  10.
But the regeneration of urban communities, and the efforts of British Waterways, have reversed this decline. The number of miles is now increasing. Last year, 13 million people visited our canals and the number of boats is actually higher now than during the Industrial Revolution. Such examples are important because our economy faces the prospect of change again. After an unprecedented financial crisis and deep recession, the UK economy needs to rebalance. Tonight I want to talk about what those changes will entail and the role which the Bank of England can play in supporting them. The Bank of England’s key role has always been to ensure that the economy is supplied with the right quantity of money – neither too much nor too little. For fifty years, my predecessors struggled to prevent there being too much, so leading to inflation. I find myself in the opposite situation having to explain that there is too little money in the economy. But, in the wake of the financial crisis, and the sharp downturn that followed, the amount of money in the economy as a whole – broad money – is now barely growing at all. That is restraining activity and pushing down the outlook for inflation. So the Bank of England has taken extraordinary monetary policy measures – through our so-called “quantitative easing” programme of asset purchases – to ensure that the amount of money starts growing again in order to support a recovery and keep inflation on track to meet our target in the medium term.

But there is a clear difference between the path of adjustment desired by the surplus countries, which are faced with the need for a longer-term structural shift away from reliance on exports, and the path of adjustment preferred by the deficit countries, which are under greater near-term pressure to reduce the burden of debt in both private and public sectors. Tensions between the two groups were evident at last week’s IMF meetings in Washington where all the talk was of currency conflicts. Such conflicts are, however, symptoms of a deeper disagreement on the appropriate time path of real adjustment. Since surpluses and deficits must add to zero for the world as a whole, differences between these desired ex ante adjustment paths are reconciled ex post by changes in the level of world output. And the risk is that unless agreement on a common path of adjustment is reached, conflicting policies will result in an undesirably low level of world output, with all countries worse off as a result. The international monetary system today has become distorted. The major surplus and deficit countries are pursuing economic strategies that are in direct conflict. And there are  2  BIS Review 136/2010  some innocent victims. Those emerging market economies which have adopted floating currencies are now suffering from the attempts of other countries to hold down their exchange rates, and are experiencing uncomfortable rates of capital inflows and currency appreciation. So there is more to this issue than a bilateral conflict between China and the United States.
Expansionary monetary policy following a financial crisis and recession can therefore open up a welcome time window for carrying out consolidation measures, cleaning up bank balance sheets and implementing structural reform measures. However, if decision-makers have reason to believe that low interest rates will probably remain in place for a long time yet, their motivation to undertake reform measures is likely to flag. This is particularly the case in countries where reforms have been under way for many years now, but are still insufficient, and where resistance at the political level is now on the increase. Here the temptation to depend on low interest rates – or even to increase political pressure on the central bank to keep interest rates low for longer than necessary – is especially pronounced. In this context, it is important not to forget that central banks cannot do everything. They cannot restructure public sector budgets and they cannot carry out structural reforms. Nor can they provide substitutes for sensible fiscal policies. This area is the responsibility of other economic agents. A prosperous economy requires favourable conditions. In this respect, the contribution of central banks is to secure one of the major conditions – price stability. And inflation? This raises the question of whether the exceptionally expansionary monetary policy will lead to inflation in the long term. In most financial systems, surplus liquidity has reached historical dimensions. Under normal circumstances, monetary developments of this kind would point to a rise in inflation.

: Quarantines begun in Santiago East  1  5  +116 3 %  Pharmacies  3  0  7  Department stores  Mar. 03  May 05  (*) Percentages show variation between 30 July and 26 August. Source: Central Bank of Chile using Internal Revenue Service data. 17  Jul. 07  1 0  Figure 11  Evolution of local assets v. baskets of comparable countries (1) Tipo de cambio (index, 17/April/2020=100)  102  10-yr sovereign bonds' interest rate (dfiference w/respect to 1/June/2020, percent)  102 0.4  0.4  0.3  0.3  0.2  0.2  0.1  0.1  0.0  0.0  -0.1  -0.1  98  98  94  94  90  90  86 17-04 17-Apr. 86 -0.2  Jun. 06 17-08 17-06 17-Jun. 17-Aug. Comparable basket (2) Sep.  Jul. 07  Aug. 08  09  -0.2  Chile  (1) Vertical lines from left to right mark the dates of: the June monetary policy meeting (June 16), approval in Congress of the idea of legislating on a bill that would allow the withdrawal of 10% of the AFP funds (July 8), and first announcements by the Central Bank of Chile (July 20). (2) The basket of comparable economies is made up of a combination of Latin American assets and commodity exporters (Australia, Brazil, Colombia, Mexico, New Zealand and Peru). Source: Bloomberg.
Such effects can be amplified if spending - consumption or investment - depends on the value of the assets that are used as collateral for loans. A fall in prices can produce a vicious circle in which the initial fall in demand lowers asset prices, reducing the value of collateral, which in turn leads borrowers to repay debt, exacerbating the original decline in aggregate demand. This “debt deflation” was first formulated clearly by Irving Fisher in the 1930s, and has recently been revived in a more sophisticated form by Nobu Kiyotaki and John Moore, here at the London School of Economics. Because deflations are, fortunately, few and far between, there is a lack of hard empirical evidence on the quantitative significance of debt deflation. In 1993, I argued that the depth of the recession in the UK and the US in the early 1990s was the result of debt deflation. Consumption fell more sharply than would have been expected given movements in incomes and interest rates, reflecting an unexpected fall in inflation and asset prices. The effects on consumption of negative equity in housing were particularly severe. The experience of Japan may add to our knowledge in this area, although, as shown in Chart 6, despite a stagnant economy over the past decade, deflation of consumer prices has not been especially large. And I am confident that all central banks will do their best to prevent the sample size of countries suffering from serious deflation from increasing. 5  See for example Pindyck and Solimano (1993).

It may take longer for households to work out the  10  BIS Review 68/2002  impact of low inflation on real interest rates than to realise that the rate of increase of prices of everyday purchases has fallen. Learning takes time. Chart 7 One-year ahead inflation expectations and inflation outturns in the UK, 1988-2002  Note: Inflation is the four quarter change in the RPI. Expected inflation is based on the quarterly Barclays Basix survey of inflation one year ahead. It is the weighted average across all surveyed sub-groups, excluding the general public. Expected inflation is lagged on year in the chart, so that expectations and outturns for the same period can be compared. Source: ONS and Basix. One possible consequence of a slow adjustment to low inflation is that households may mistake too much of the reduction in nominal interest rates for a permanent fall in the real rate. As a result, asset prices are bid up to levels that prove unsustainable when learning finally occurs - and at the LSE you know that in time we do learn. How far this theoretical argument applies to the British housing market at present is difficult to say, but it demonstrates the risks from current house price to earnings ratios that are close to the peaks reached in the late 1980s. *** So much for the costs of unanticipated inflation. What are the costs of anticipated inflation? Time permits me to comment only briefly on the four costs of anticipated inflation noted by Lord Kingsdown.
Josef Bonnici: Enhancing competitiveness Address by Professor Josef Bonnici, Governor of the Central Bank of Malta, at the ifs Malta Annual Dinner of the Institute of Financial Services, Saint Julian’s, 15 December 2014. *  *  *  Accompanying charts can be found at the end of the speech. Hon. Minister, Members of the Institute, Distinguished Guests, I would like to thank the President and Committee of IFS-Malta for once again organising this Annual Dinner and giving me the opportunity to share my thoughts with such a distinguished audience. I would like to take this opportunity to welcome Ms Pelin Berkmen, Head of an IMF delegation, and members of her team, who are with us tonight and who have just concluded the annual Article IV Mission. A warm welcome also to Mr Antonio Bassanetti, from the IMF’s Executive Director’s office. I trust you will find this evening of relevance. Mr President, I was pleased to hear about the achievements of the Institute over the past year. Education and training are fundamental components of a successful and sustainable financial services sector. The endeavours of the Institute deserve due recognition. Well done to all of you and I wish every success for the future. Introduction The aftermath of the crisis provides an important starting point for the discussion of competitiveness, which will be the main theme of my remarks tonight. I will commence by focussing on Chart 1, which compares the performance of various economies since the onset of the crisis.

In addition, improved information flows make it easier to move production outside of the company’s premises, to “outsource” activities that are not part of the core activities and to decentralise. The most important effects of IT probably occur in terms of company structure, working life and the everyday life of the individual. The price is crucial One way of evaluating the strength of IT is to compare it with earlier technological changes. The telegraph is an interesting example, both with regard to parallels and differences. The introduction of the telegraph led, just like IT, to a strong increase in the flow of information in the economies of the time. A message that had previously taken perhaps a month to arrive, could now be transmitted in a matter of minutes. Today, with the aid of the Internet, this type of message can be transmitted in a few seconds. This further time gain is relatively marginal, but the significance of the Internet is not. 1  BIS Review 93/2000  The difference lies in the cost. Telegraphy was expensive, which is why its spread was limited. The people of the nineteenth century had to visit a telegraph office or employ a telegraph boy and pay a considerable amount of money if they wanted to send a telegram. In today’s money value it cost them approximately SEK 2,000 to send a long distance message of 20 words, while the corresponding cost today is around 10 öre for 20 pages.
To a considerable degree, the banks’ high CDS spreads could be a consequence of their enormous borrowings on the global markets, together with the unusual circumstances currently reigning in the financial markets. The Icelandic banks’ CDS spreads now range from 4% to over 6%. Well-known international banks must also tolerate high premia, even though they are lower than those in Iceland. For example, the American investment bank Bear Stearns has paid a premium of 3½% and over on five-year CDS agreements, and Lehman Brothers and Merrill Lynch have been charged 2% and over – not far from the premia charged to Landsbanki until very recently. The CDS spreads of many large, well-known international banks have risen by 0.4 – 0.8% so far this year. It may be mentioned that the proptional increase of the CDS spreads of the Icelandic banks over the last two years has not been greater than of many other and better known banks. This fact does not, however, improve their position in the captial markets. The CDS spreads charged to Icelandic banks mean that they do not currently have access to international funding on acceptable terms. The pricing of international loans is based on CDS spreads, especially if liquidity is limited in underlying bonds. This is the case even though the CDS market is imperfect and non-transparent and quotes differ significantly in the market. It is nonetheless used as a reference.

In other words, financial companies have pulled equity indices downward – much more so in Iceland, where banks constitute a greater proportion of the index than in other markets. Iceland’s commercial banks went through a difficult period in early 2006 and learned a number of things from the experience. Among the lessons they learned was that they must increase transparency in their operations to a significant degree, reduce cross-ownership, significantly enhance their liquidity position, and increase the proportion of deposits in their funding. Having undergone these changes, they were much better prepared to weather last year’s turmoil than they would otherwise have been. Iceland’s banks have been considered bold in their investments, and they have a reputation for being more risk-tolerant than banks in many of our neighbouring countries. This may be correct, but it is also reflected by the fact that Icelandic banks have elected to maintain a relatively strong equity position. The banks are all subject to surveillance by the Icelandic Financial Supervisory Authority, which bases its operations on the regulatory framework that applies to financial markets in the European Union. Subsidiaries of Icelandic banks are all subject to surveillance by the financial supervisory authorities in their home countries. The Icelandic Financial Supervisory  1  E.g. Credit Sights, February 3, 2008: Icelandic Banks FY07: Heads You Lose, Tails You Lose. BIS Review 25/2008  3  Authority carries out regular stress tests on the banks’ accounts and publishes the results on its website. These stress tests assume extreme changes in fundamental premises.
Villy Bergström: Is the present low inflation rate a problem? Speech by Mr Villy Bergström, Deputy Governor of Sveriges Riksbank, at the annual meeting of the Swedish Association of Independent Savings Bank, Vadstena, 30 May 2005. *  *  *  As one of my colleagues said recently, it appears as though we are now undergoing the gloomiest economic boom of our time. It is in many ways an unusual economic situation; growth is healthy, productivity is very strong, export demand is stable, wage trends look good, households are borrowing away and house prices are developing well. However, employment is weak and inflation is low. The annual CPI inflation rate was 0.3 per cent in April and the UND1X rate was 0.4 per cent. This is below the interval of 2 per cent +/- one percentage point we have as our inflation target. Of course, this is a failure, albeit one that is largely beyond our control. Our efforts, analyses and assessments are all aimed at keeping inflation as close to the target level as possible and within the interval we have specified ourselves. The question is what conclusions we should rightfully draw from this miscalculation, particularly with regard to employment. Monetary policy’s effect one to two years ahead – a challenge for communication To begin with the low inflation rate makes greater demands on the Riksbank’s ability to explain its policy.

Even if the Riksbank had conducted an even more expansionary monetary policy one to two years ago, it is not certain that this extra stimulation and the possibly even stronger lending that would have ensued would have affected the labour market in the way some critics believe. The situation today is quite simply a different one from the classical shortage of domestic demand, where lending and liquidity are weak and an interest rate stimulus would have a considerable effect on demand and thereby employment. Inflation outlook and future monetary policy This brings us to the other question – namely what monetary policy can do today to ensure inflation reaches the target level one to two years from now. What we have seen in the United States, which is considered to be slightly ahead of Sweden in the economic cycle, is that productivity growth is gradually subsiding. When the stimulus from monetary policy and fiscal policy has been maintained sufficiently long, companies are unable to respond with more efficient organisation and outsourcing alone, they have to begin recruiting. Productivity growth is dampened, employment rises and in the United States we have recently seen that inflation also rises. This is also the kind of development we can expect to see in Sweden. The most likely scenario is that over the coming years we will see a more subdued growth in productivity, rising employment and an increase in resource utilisation, despite the pressure for change in the economy.
Because although the capital buffers are much larger in the new system, they can be wiped out in an instant if the losses are big enough. Despite the liquidity requirement, banks may suffer a confidence crisis resulting in overwhelming bank runs and other funding difficulties. And risk management can never be entirely watertight. In short, we cannot rest on our laurels. Because even if we strengthen the banks, there is always a risk of banks failing. And the fact is that we currently lack the tools to deal with this properly. We therefore support continuing reform work by the Basel Committee in this field. For instance, they are trying to ensure that financial supervisory authorities have the right tools to be able to manage what are known as systemically important banks. These are banks that are so important that the functioning of the entire financial system would be threatened if they failed. This could be due to their size, for instance. Or because they are involved in a large number of transactions with other banks or financial market participants. It is almost impossible to predict the effects on the financial system, and thus the costs to society, if such a bank were to fail. For this simple reason, we dare not take the chance. And both the systemically important banks and their customers realise this. They rely on the state to inject capital or provide some other form of assistance if they should get into trouble.

Twice in the past 40 years we have succumbed to the temptation of living above our means. The first time was in the late 1970s, when the Norwegian state borrowed substantial amounts abroad. Our current account deficit in 1977, at 15 per cent of GDP, set an OECD record and we were probably on the brink of having to ask for an IMF program. We were investing heavily in the welfare state and in North Sea projects at the same time, and these investments could not be fully financed on the basis of economic growth. The second time was during the years of economic crisis before and around 1990, when levels of domestic spending, private and public, far exceeded our economic limits. It was not until 30 years after oil had been discovered off our shores that Norway was in a position to put some money aside. We are nonetheless frequently reminded that petroleum production has reached a plateau and will begin to decline in a few years’ time. Our welfare system, including old-age pensions, is basically financed by current income. It is not fundbased, as pensions are in a number of other countries. Even though it is likely that the Pension Fund will grow considerably in the years ahead, estimates show that the capital in the Fund will only cover some 60 per cent of public pension expenditure in the future. It cannot therefore be argued that the government’s savings are large relative to its obligations.