samchain/econo-pairs-v1 huggingface dataset:
An analysis of the economic situation is published by the ECB in a monthly bulletin, which aims to ‘explain to the public the monetary policy decisions taken by the Governing Council of the ECB’. The bulletin will also consider fiscal policies, economic structures and labour market tendencies in the euro area. But the ECB does not publish either forward-looking assessments and forecasts of inflation or the minutes of decision-making meetings and the positions of individual members. Press conferences with the ECB Executive will be held, however, in connection with meetings of the Governing Council. In addition, policy will be explained continuously by Executive Board members in speeches and appearances before the European Parliament. Inflation assessment The ECB and the Riksbank both have price stability as the monetary policy objective but they have given this objective different operational definitions. The ECB’s formulation mirrors a different view of monetary policy’s ability to fulfil an explicit target. Presumably it also reflects a different view of the margin a central bank shall have for tolerable deviations from the desired price stability. The Riksbank has specifically targeted inflation, measured by the CPI, at a rate of 2 per cent, with a declared tolerance interval of ±1 percentage point, thereby clearly identifying the preferred level of inflation. It is still too early to say what the differences between the formulations will signify in reality, just because we do not yet know how the ECB will act in practice.

In fact the answer was Turandot. Well at least it rhymed. Mr President it is at this point in the opera that they sing the wonderful aria "Nessun Dorma" - "None shall sleep." As I look around me, I see that that message has not yet got through to some of your guests here this evening. So let me conclude. I share the view of most macro-economic forecasters that the rate of growth in the US and world economies will remain modestly positive. I recognise the downside risks from the fragility of business and financial confidence internationally - though I expect that to improve with the gradual improvement in macro-economic data. And I assure you that like the Federal Reserve Bank, we at the Bank of England, remain vigilant, and ready to ensure that monetary policy remains supportive to the extent that we sensibly can. So my message in a nutshell is: HOPE, even modest EXPECTATION; No further BLOOD in financial markets - though I'm not sure whether that's hope or expectation; meanwhile we remain "On the spot with TURANDOT." And you'll all be pleased to know that the opera itself has a very happy ending. Mr President, on behalf of all your guests this evening may I thank you for your very generous hospitality; and I invite everyone to join me in a toast to the continuing prosperity of the ACT, coupled with the name of the Association's President, Mr Anthony Stern. Ladies and Gentlemen the Association of Corporate Treasurers. BIS Review 64/2002  3
A key weakness as far as Sri Lanka’s exports structure is concerned is a lack of diversity in products and markets, as well as low complexity in the export basket. Exports continue to be  concentrated on two traditional products, namely garments and tea, which account for more than half of total exports. No major export item has been developed since the 1990s. The Export sector shows Page 6 of 17  a lack of diversification in terms of markets as well. Europe and the USA continue to account for over half of total exports. Further,  approximately 70% of tea exports are to the Middle East and Commonwealth of Independent States, where demand is sensitive to oil prices which have been transformed by shale technology. The absence of effective trade finance also contributed to the subdued promotion of exports. At present, despite the share of  industrial exports being around 77% of total exports, it is estimated that high-tech exports account for less than 1% of Sri Lanka’s total manufactured exports. Improving this ratio entails investment in machinery, technology and skilled labour. It is necessary for our exporters to compete in complex products that are more technologically advanced. We are no longer a low wage economy, therefore we need to invest in, and become competitive in fairly complex export products, if we are to meet the aspirations of our people. Now, there was, I think, a very legitimate question asked about the availability of labour.

This was especially so between 2000 and 2016, wherein GDP increased by a compounded annual growth rate of 10.4%, while exports grew only 4%. Page 5 of 17  Sri Lanka’s economic growth during the past decade or so has mainly been generated by the expansion of domestic demand, rather than increased exports. The tradable sector, that is Imports and Exports as a percentage of GDP, declined from nearly 80% to 45% from 2005 to 2015. As a Small Open Economy you simply  cannot do that. The problems were compounded by a heavy recourse to foreign commercial borrowing for projects with low returns. That is what has led to the debt problems and many of the other difficulties we are having. When compared with regional peers and competitors, Sri Lanka’s export performance has lagged behind significantly. The Export Value Index presented by the World Bank shows the extent to which Sri Lanka’s export sector has been lagging in comparison to its regional counterparts, during the period from 2000 to 2015. Sri Lanka has only increased its exports by 1.9 times in that period 2000 to 2015, while Vietnam and Bangladesh have increased by 11.2 times and 5.1 times respectively. Even South Korea and  Thailand which have a much higher base, increased their exports by 3.1 times, whereas we, as I said only recorded a 1.9.
This is sometimes described as choosing a point on the Taylor frontier showing, as in Chart 4, the combinations of lowest volatility of inflation for a given volatility of output. 9 That optimal choice leads to a policy reaction function describing how the central bank responds to shocks hitting the economy. 10 The success of the New Keynesian framework was that it showed how the long run objective of price stability could be implemented by an appropriate central bank policy reaction function. It stressed the importance of expectations and credibility, to which too little attention had been paid during the inflationary episodes of the 1970s and 1980s. But inevitably, as with all models, the basic New Keynesian model omits a number of key factors. The treatment of expectations is simplified, and neglects the possibility that expectations themselves may be a source of fluctuations, rather than simply reflecting changes elsewhere in the economy. Sentiment can vary, misperceptions occur, and people can change the heuristics they use to cope with a complex world. 11 And it lacks an account of financial intermediation, so money, credit and banking play no meaningful role. Those omissions obviously limit the ability of the model to help us understand the trade-offs between monetary policy and financial stability.

A counter-factual monetary policy 1997–2007 I want to ask whether, with the benefit of hindsight, monetary policy should have been set differently during the period of the so-called Great Stability. Should interest rates have been higher during that period in order to mitigate some of the growth of credit, rise in asset prices, and increase in the leverage of the banking system? Many commentators today seem to think that the answer is clearly yes – though I seem to remember that fewer said so at the time – and most of the  21  Another mechanism, working through banks’ leverage, is posited by Adrian and Shin (2011). They show that if banks target a Value-at-Risk constraint, then monetary policy loosening can increase risk taking. The reduction in policy rates boosts asset prices (by lowering discount rates), and also steepens the yield curve which tends to increase banks’ net interest margins. Other things equal, this reduces bank leverage by boosting the net worth of the bank and increasing its ongoing profitability. To hit its target Value-at-Risk the bank expands its balance sheet, purchasing assets and pushing up the price of assets thereby amplifying the effect of the initial monetary policy loosening. 22  There is a further consideration that is even more intriguing. The existence of misperceptions, the “cycle of confidence” and the use of heuristics, and the search for yield, all create direct welfare costs over and above their impact on inflation and output because they distort household behaviour.
Another indication that the workings of the economy may have taken a turn for the better is the Riksbank’s upward revision of potential output in the light of, for example, good productivity growth and very moderate inflationary tendencies even when GDP growth has been comparatively high. At the same time, methods have now been developed that probably enable us to get a little closer to the mark than before. The current output gap estimates, which represent the difference between actual and potential GDP, suggest that total production will rise above the potential level in the coming years. There is nothing dramatic about this, however. In the longer run one would expect the economy to be above its potential level about as much as it is below. As regards potential growth, the Riksbank, like most other observers, now counts on a rate somewhere between 2 and 2.5%. One approach to estimating this rate is based on the trends for labour supply and productivity. The latest assessments from the Medium Term Survey, based on such factors as demographic changes and labour force participation, put the annual increase in the labour force up to 2008 at 0.5%. Labour productivity, according to the available statistics, has risen faster in the 1990s than it did in the 1970s and 1980s; whereas the annual increase in the period 1974-93, for example, averaged approximately 1.4%, since 1994 the rate has averaged about 1.9%.

The difficulties monetary policy is faced with when markets cease functioning normally has also been underestimated, despite previous experiences from, for instance, Japan. Monetary policy and financial stability overlap in several areas. Following the past year’s dramatic economic developments, it should be evident that insufficient financial stability leading to a major financial crisis seriously impairs the preconditions for monetary policy. Strategically important markets must be made to function in order to avoid a total collapse. Central banks have thus been compelled to undertake a series of unconventional measures, partly aimed at maintaining a functioning payments system and partly aimed at improving the functioning of the financial markets, thereby contributing towards the desired effect of the expansionary monetary policy. At the same time, there exists greater awareness of the fact that a monetary policy that does not adequately consider financial factors can lead to the accumulation of serious financial imbalances. Financial stability has been demonstrated to form an important restriction to the manner in which monetary policy can be applied in crisis situations. 3 Monetary policy models must become better at capturing the functioning of financial markets. In my opinion, the present monetary policy framework, in which monetary policy is aimed at stabilising both inflation and real development, still works well. However, monetary policy analysis needs to be developed, in certain respects, to enable us to make better forecasts within this framework.
Chart 13: Global capital issuance by tier $ billions  Lower T 2  50  Upper T 2  40  T 1 (incl hybrid capit al)  30 20 10 0 Jan May Sep Jan May Sep Jan May Sep 2005  2006  2007  Source: Dealogic  Chart 14: UK mortgage approvals Top 5 banks by market capitalisation O ther banks and lenders Building societies  2001  2003  Source: Bank of England  BIS Review 149/2007  2005  Thousands 100 90 80 70 60 50 40 30 20 10 0 2007  Chart 15: UK net secured lending to households Top 5 banks by market capitalisation O ther banks and lenders Building societies  £ millions 8000  6000  4000  2000  0 2001  2003  2005  2007  Source: Bank of England  13  Diagram C: Shifts in supply of credit (CS(1)→ CS(2)) and money supply iloan CD CS(1) A  il(1)  B  CS(2)  il(2)  C1  Credit  C2  iwholesale M  MS(1)  D  MS(1)  A’  iw(1)  B’  iw(2)  M1  Money  M2  Chart 16: Lenders’ margins on UK mortgages Basis point s 140  Basis point s 600 P ersonal loans (RHS)  120  500  100  400  80 60  300  Mort gages (LHS)  200  40  100  20 0 1999  0 2001  2003  2005  2007  Source: Bank of England Note: spreads of effective rates on stocks of lending over appropriate funding costs.

If reintermediation is significant, banks will be taking back on to their balance sheets conduit and investment vehicle paper or just holding onto loans for longer than usual before they can be sold onto the capital markets. 19  Perhaps nothing illustrates this as cleanly as the advent of credit derivatives. Derivatives of any kind unbundle funding (and so liquidity risk) from the underlying risk to which an agent is seeking exposure via a particular contract. So a credit derivative unbundles credit risk from funding. This further complicates interpretation of the bank lending data (M4L). Imagine that, due to their customer networks and screening capability, banks originate all credit, but that they use credit-default swaps to shed a great portion of the credit risk via CDS to non-bank financial institutions. In the limit, this would be a world in which M4L correctly measured (bank) lending and M4 was one useful measure of “liquidity”. But it would also be a world in which shocks to credit conditions from capital and risk appetite worked largely through non-bank lenders, and in which shocks to liquidity worked largely through depositor confidence in the banking system. In the real world, this story underlines the need to look at total credit, and to analyse the monetary data with finesse. 20  See Bank of England Inflation Report, November 2007, Section 1 on “Money and Asset Prices”, pages 16-17.
The difference between the two lies in the fact that a household, firm, national treasury, or nation is facing a debt sustainability problem if cannot service its debt with the available revenue surplus no matter how long the debt is stretched out. Then debt relative to income rises without limits. In that case, there are only three solutions: increased revenue surpluses, reduction of debt, or reduction of interest rates. On the other hand, a payment and refinancing problem exists when a longer loan duration would eliminate temporary debt service shortfalls. But two provisos must be made here. First of all, the boundaries between the two are not always clear. Unlimited loan durations are not available. A sustained refinancing problem can lead to a default and a debt sustainability problem. It can also change into a debt sustainability problem if interest rates rise steeply upon refinancing. Second of all, a nation’s debt is different in nature than the debt of an individual. A nation consists of numerous legal entities, and if some of them cannot handle their debt, it need not have severe consequences for other parts of the whole, provided that the sovereign is not involved. Under a flexible exchange rate regime, national debt service in excess of surpluses will also cause the currency to depreciate and the surplus to grow. But this process is not without limits.

In the emerging economies, performance remained uneven, while growth continued to cool in China. The global economy is expected to gather pace again, reinforced by expansionary monetary policy around the world and ongoing low oil prices. For instance, after a disappointing first  BIS central bankers’ speeches  1  quarter, the two large economies, the US and China, are starting to show signs of improvement. Nonetheless, uncertainty about the future development of the global economy remains high. Various risks – first and foremost the difficult financial situation in Greece and geopolitical tensions – could jeopardise the recovery. Swiss economic outlook According to initial estimates, Switzerland’s real GDP declined slightly in the first quarter. As expected, goods exports suffered from the strong Swiss franc appreciation, but also from a downturn in global trade. Domestic demand, by contrast, developed robustly. Having said this, the situation varies considerably from one industry to another. Profit margins are under significant pressure in several sectors, and this is forcing companies to take steps to reduce production costs and raise efficiency. Against this backdrop, unemployment has increased slightly on a seasonally adjusted basis. Over the coming months, the global economic recovery is likely to lead to a gradual upturn in demand for Swiss products; this will cushion the impact of the exchange rate shock somewhat. As the global economy gathers momentum, we expect Switzerland to return to positive growth in the second half of the year. The SNB continues to anticipate growth of just under 1% for 2015 as a whole.
Of course, this process is never at an end, but I can nevertheless note that we have come a long way. As I now hold my final speech as member of the Executive Board, I would like to take this opportunity to give my own perspective on parts of this journey, on the challenges we have faced and on what may lie ahead of us. An organisation that is constantly developing A lot has changed since my first day at work in 1976, not only outside of, but also inside of the Riksbank’s walls. My workplace of the 1970s in practice has little more in common with today’s Riksbank than the building itself. It is quite simply a different world. Credibility and better conditions Today economic policy has a different credibility, and also the tools needed to deal with shocks to the economy in a flexible way. A long development process lies behind this much better starting point with "greater room for manoeuvre”. Something that has been a decisive factor is the changes in the economic policy framework made following the crisis at the  BIS Review 155/2008  1  beginning of the 1990s. Sweden was then forced to get to grips with many problems that had been around for a long time. There was also broad support, not least from politicians, behind the demands for change. Both monetary and fiscal policy were transformed and with good results.

Even the best of products would not have a good chance of success without a well-conceived communication strategy. This goes beyond marketing and advertisement. It would include educating customers to adapt to the new ways of doing banking transactions or changes being introduced and to use the innovative products being offered. It is also interesting to note that the survey findings clearly indicated the importance of quality interface between customers and banks. As such, numerous interface points need to be reengineered to ensure the right mix of the virtual and physical environment. New branch models have emerged, incorporating features from both virtual and physical environment, to fulfil the varying needs of different localities and market segments. BIS Review 28/2004  5  Conclusion Ladies and Gentlemen: While the new emerging trends in both the domestic and global economy will have significant implications on the domestic financial landscape, each banking institution will need to be able to formulate differentiated strategies to effectively respond to these forces in a strategic manner. Thus, the ability to precisely assess the institutions individual capabilities and strengths as well as opportunities in this changing environment is key to facilitate effective strategic management at the organisational level. Through this process, I envisage that the domestic financial landscape will evolve into a banking environment characterised by three types of banking institutions that will emerge to meet the future demands of the economy. a.
Growth in output per worker has been around 1% recently and is likely to have fallen a little further towards the end of 2015.18 The result is that the levelling off in pay growth has had smaller implications for unit cost growth. In the third quarter of 2015, these grew at around 1½ to 2% on a range of measures, and seem likely to grow at rates a touch below what we expected in August.19 Stepping back, there is little indication of accelerating unit costs we had expected. And certainly, given the scale of foreign disinflationary pressures, current domestic cost growth is not yet consistent with a firming in underlying inflation. This brings me to the final set of factors, core inflation measures. Core inflation measures Around one third of the inflation basket is accounted for by non-energy imported goods whose prices depend on their world prices and the sterling exchange rate. Measures of core inflation, which strip out the direct impact of volatile CPI items like energy and food prices, help to give a read on how developments in these variables combine with domestic cost pressures to drive underlying inflation trends. They also tend to give a sense of headline inflation once the effects from volatile items drop out of the annual comparison.20 Put differently, total CPI is more likely to move towards core than the reverse, suggesting, as a rule of thumb, that inflation is likely to pick up but not to overshoot core CPI a year ahead. 17  See Annex.

As always, I stand ready to change my views should the economic outlook change sufficiently to warrant it. BIS central bankers’ speeches  9