samchain/econo-pairs-v1 huggingface dataset:
This development is primarily demand-driven, fuelled by strong growth in the global economy, and in emerging market economies in particular. More recently, oil prices have increased further as political unrest in North Africa and the Middle East has led to uncertainty regarding future oil supply. Norwegian manufacturing industries are also benefiting from high commodity prices. Increased profitability for many firms and rising real disposable income may boost the demand for labour. With the prospect of continued high commodity prices and falling import prices, Norway’s terms of trade should hold up in the period ahead. BIS central bankers’ speeches  9  This, together with a tight labour market, may fuel wage growth. Looking ahead, cost inflation is most likely to edge up. On the other hand, high net immigration may have a dampening impact on wages. In 2010, the population rose by 62 000, an increase of 1.3 per cent. Low unemployment and a relatively high wage level have made the Norwegian labour market attractive to job seekers of foreign origin. 10  BIS central bankers’ speeches  Going forward, continued high labour immigration is expected to result in solid growth in the labour force. At the same time, improved terms of trade will led to higher activity in the Norwegian economy. Capacity utilisation is expected to revert to a normal level in the second half of 2011. In the coming years, output in the mainland economy is expected to increase at an annual rate of 3–4 per cent.

At the beginning of the decade, we learned that it can be demanding to strike a balance between different monetary policy considerations in a small, open economy. When the key policy rate is raised to restrain a pronounced rise in domestic cost inflation, it can have a strong impact on the krone exchange rate, as observed in 2002–2003. This influences both the real economy and the inflation outlook. Midway through the decade, inflation rapidly declined. China’s entry into world trade and increased imports to Norway from Asia led to a persistent fall in prices for many goods. The combination of low inflation and strong economic growth posed a challenge to the conduct of monetary policy. Interest rates – both at home and abroad – were set at low levels. At the same time, this amplified the cyclical upturn in Norway. Towards the end of the decade, during the financial crisis, the interest rate was reduced sharply and to record-low levels. The decision to lower interest rates was undoubtedly not a difficult decision to make at the time. A persistently low interest rate, on the other hand, can pose a challenge to financial stability in an economy where there is a strong willingness to borrow and property prices are rising. Despite challenges met over the past decade, inflation has been fairly stable and close to the target, which shows that monetary policy has been effective. Compared with the 1980s, for example, inflation has been considerably lower and growth in the mainland economy has been markedly higher.
As the US is the primary supplier of liquid and safe assets, it attracts inflows of capital, a process which accentuates global imbalances. Excess demand for those assets pushes their prices up, which triggers financial bubbles. Financial development in surplus countries would go a long way to solve that problem by reducing the asset shortage, thus the probability of future bubbles. BIS Review 85/2009  1  •  Third, there is no denying that weaknesses and failures in financial markets played a major role in the build up to the crisis. Over the last decade, financial innovation has been organized to "transform" illiquid and risky instruments into (apparently) safe and liquid assets. That unsustainable process has abruptly come to an end with the burst of the credit bubble. During that period, rating agencies, accounting rules, unregulated and off balance sheet entities as well as very poor risk management all contributed, willingly or unwillingly, to fragilize our financial systems. Those weaknesses are at the origin of the crisis. Had they been addressed in due time, most of the problems we are now dealing with could have been avoided. Creating a new regulatory regime and strengthening our supervisory arrangements are at the forefront of efforts conducted at the national and, for the EU, at the European level. Those efforts are closely coordinated worldwide through the G20 process and the newly created Financial Stability Board.

Central banks' response to the crisis History taught us that banking crises degenerate into deep and lasting depressions unless they are dealt with quickly and forcefully. Those lessons were not lost on both fiscal and monetary authorities and the policy response worldwide has, indeed, been exceptional by any historical standard. I would like to focus here on three characteristics of central banks interventions •  First, they have been fast and decisive. Indeed, the start of the crisis can be dated back to August 9 2007, when the Eurosystem provided up to 95 billion euros in exceptional liquidity support to the interbank market. As the crisis developed, those interventions multiplied and evolved, a point to which I will return shortly. The deterioration of the real economy and subsequent easing of inflationary pressures opened room for a substantial relaxation of the monetary policy stance. In the euro area, seven reductions in policy rates brought the interest rate on our main refinancing operations from 4.25% in October 2008 to 1% today. •  Second, those interventions have been flexible and highly innovative. Central banks saw as their mission to avoid the paralysis of financial intermediation and keep the monetary transmission mechanisms working efficiently. To achieve those objectives, they considerably expanded and diversified their tools and instruments. In countries where markets play an important role in the allocation of credit, they created numerous new facilities to provide financing and to lower spreads through the purchase of private and public debt securities.
Because I am certain all of you have committed to memory everything I said then, I’ll keep my remarks on LIBOR today short and to the point: We have only 459 days until the availability of LIBOR can no longer be assured, and everyone needs to put their nose to the grindstone in their efforts to prepare for the move off LIBOR. In the immortal words of Captain Jean Luc Picard—make it so! Before I continue on to today’s topic or quote other favorite Star Trek characters, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The Heart of the Economy The markets that are the center of attention today—the Treasury market, the repo market, and the mortgage-backed securities market—represent the heart of the circulatory system of our financial system and our economy, and indeed the global economy. When they are working smoothly, all the other parts of the system can perform as they should. But, the opposite is true as well. If these critical markets break down, credit stops flowing, and people can’t finance the purchase of a car or a home, businesses can’t invest, and the economy suffers, resulting in lost jobs and income.1 Financial markets aren’t static—they evolve over time in response to changes in technology, regulation, and business models. The Treasury market is not immune to this process of change.

We have increased the required equity capital held by banks – the first loss absorbing element of their liabilities. We have required that hybrid debt – equity instruments have automatic and transparent triggers which are not exercised only by an event that cannot happen. In the UK, banks have set the trigger for conversion to equity high enough at a 7% common equity tier one capital ratio to seek to ensure that conversion happens well before the bank has run out of capital. This is the right thing to do. We have introduced liquidity regulation designed to enable banks to withstand the loss of more footloose, short-term wholesale funding, which has gone alongside a sharp shrinkage by banks in their use of that funding. In the UK, we are introducing structural reform or ring-fencing which will provide for an internal separation inside the major banks so that the so-called qualifying EU customer deposits must be inside the ring-fence. Being inside the ring fence does not I should emphasise protect against all risk; indeed, the crisis saw the failure of a number of banks that were predominantly of the same nature as a ringfenced bank will be. But it does keep the balance sheet on which most customer deposits will appear in the large UK banks in a more simple state, and that should be conducive to effective governance and supervision without being burdened with great complexity, and also facilitate recovery and resolution actions should they be necessary.
In addition to these objections to the simple Taylor rule it can be noted that there is a lot of evidence to the effect that instead of being stable, the equilibrium interest rate in the equation varies with the potential growth rate. This is a view that can be traced back to the Swedish political economist Kurt Wicksell’s notion of a “natural interest rate”. A monetary policy based on forecasts I should now like to present some reflections on the forecast-based monetary policy we undertake at the Riksbank. First of all, an inflation targeting policy based on forecasts has several basic characteristics in common with the other alternatives I have been discussing. (This, however, does not apply to the alternative of basing policy solely on CPI outcomes.) One common denominator is the fundamental philosophy and aim of safeguarding the value of money. Monetary policy strives for price stability as a way of providing a nominal anchor for the economy. Another similarity is the medium-term perspective rather than short-term activism. This in turn calls for a forward-looking perspective when the instrumental rate is set. A further resemblance is that in the Riksbank’s strategy, monetary policy reacts systematically, though neither automatically nor mechanically; this helps households and firms to base their expectations of inflation on a monetary policy that is predictable. We have followed our rule of action relatively closely, as is evident from Diagram 1. 4  BIS Review 24/2002  1.

Urban Bäckström: Perspective on the inflation target Speech by Mr Urban Bäckström, Governor of Sveriges Riksbank, to the Swedish Economics Association, Stockholm, 17 April 2002. In the work on this paper I have been greatly assisted by Claes Berg, Anders Borg, Jörgen Eklund, Staffan Viotti and Anders Vredin. I am also grateful for valuable comments from members of the Executive Board and other colleagues at the Riksbank. At the same time, I am solely responsible for any remaining errors and shortcomings, as well as for the opinions expressed here. The references for the speech can be found on the Sveriges Riksbank’s website. *  *  *  First I want to express my thanks for the invitation to attend your Association and discuss various aspects of the Riksbank’s assignment. I truly look forward, in keeping with recent years, to a dialogue on economic policy issues both with my two opponents and with other scholars and students in this Association. The theme for today’s discussion, “Perspective on the Inflation Target”, has led me to take the past year’s increase in the rate of inflation as my starting point. To many forecasters, including those of us at the Riksbank, the increase has come as a surprise. This may raise questions about the intellectual framework, which rests on forecasts, for monetary policy’s formation.
Many have pointed out that development in the Swedish economy in recent years has resembled that in the United States although with a time lag. A difference in the assessment of the impact a cyclical downturn can have is that Swedish households and companies overall are not indebted to the same extent as their American counterparts have been in recent years. This is reflected among other things in our having had a balance of trade surplus ever since the mid-1990s. The current account in the United States has on the contrary been negative throughout the 1990s and it has been the private sector’s savings deficit that has increased and now totals over 6 per cent of GDP. Swedish households and businesses have instead had a savings surplus for large parts of the 1990s and it is first recently that a deficit has been noted. There are also many other factors that are positive for the Swedish economy in the short term: tax reductions keep household disposable income up and the real hourly wage increases are high. Another factor that counteracts a cyclical downturn is that housing investment is on the increase and will not be affected in the short term by a dampening of the cycle. It also seems as if the expansion of broadband is taking place in an appropriate cyclical situation if the plans are fulfilled. These investments are also spread throughout the country.

In my opinion, American analysts who in general have a very optimistic view of a very short downturn underrate these risks. What effect will the American economy have on the Swedish economy? The question is also what effect developments in the American economy will have. If you look just at the effects on trade flows, the effect on Europe and Sweden is not so strong. Exports to the United States only account for a bit more than 2 per cent of our GDP and the American market has about the same importance for the euro area. In addition, we are affected by demand for Swedish goods from other countries reducing when their export to the United States drops. Moreover, some international companies with activities in the United States can affect household wealth in Europe as well through share prices –this applies not least to Sweden. Our “Swedish” companies are very international (Ericsson, Electrolux, Stora-Enso, Volvo, Atlas Copco, Skanska) at the same time as a large part of Swedish households’ shareholding is invested there. What conclusions should we draw then for the Swedish economy? I would like to begin by reminding that the Swedish economy is better equipped than for a very long time as regards the underlying climate for growth. We have sound and stable public finances. We have paid off our foreign debt after a number of years with a current account surplus. Inflation expectations are stable and unemployment has been considerably reduced (see Diagram 2).
But we are not there yet. How shall we keep our balance in the future? In a financial crisis most of what is not built on stable foundations and does not have a robust structure is washed away. But when the situation has calmed, we have the chance to build up something new that will work better than that which failed the trials. We have this chance now. We must take part in the change work Keeping our balance once we have landed on our feet will require reforms with regard to legislation and supervision. Difficult and important challenges lie ahead of those of us who work with these issues – the central banks, the financial supervisory authorities and the legislators. Here Sweden must take on the challenge and play an active role in the international discussion. And it is necessary to act quickly. The reform work has already begun. Within the EU a new supervisory structure is being built up with regard to banks, insurance, securities and systemic risk. The new body, the European Systemic Risk Board, ESRB, will play an important role in this. Change is required in a number of different areas. The most recent crisis has demonstrated how a liquid market can very quickly dry up and become illiquid under certain conditions. Tougher rules are required regarding liquidity and the buffer that banks and credit institutions need to be able to withstand shocks. Further consideration is required here before we find a good solution.

Repo rate forecasts, per cent, quarterly averages 7  7 90% 75% 50% Outcome Forecast  6 5  Greater effects of support measures Confidence strengthened more quickly  6 5  4  4  3  3  2  2  1  1  0  0  -1  -1  Phasing out of support measures Higher productivity  -2  -2 04  05  06  07  08  09  10  11  12  Source: The Riksbank  We are currently expecting to hold the repo rate unchanged at a low level for a further period to come, until autumn 2010. This is necessary to contribute to a stable recovery and to attain the inflation target of 2 per cent. Moreover, we Executive Board members decided at the most recent monetary policy meeting that further measures were necessary to contribute to interest rates on loans to companies and households remaining low. We therefore decided to offer the banks the opportunity to borrow from the Riksbank at a fixed interest rate and a maturity of around 11 months. The loan auction was held on Monday this week and the final amount lent was SEK 95.3 billion. We expect the loans to the banks to complement the repo rate tool in a way that enables monetary policy to have the desired effect. Once economic activity has recovered, we are intending to raise the repo rate to more normal levels.
In closing those gaps, a useful intermediate objective would be to create in the UK a leading-edge diffusion infrastructure, to rival and complement its leading-edge innovation infrastructure. This boost our world (and, with luck, our World Cup) rankings. Inclusive innovation could serve as a conduit to inclusive growth. The UK’s innovation hub would get the spokes it needs to reach every sector, every region, every worker. It would be an industrial strategy for everyone. 58  Haldane (2017). 23  All speeches are available online at www.bankofengland.co.uk/speeches  23  References Acemoglu, D (2002), ‘Directed Technical Change’, The Review of Economic Studies, Vol. 69, No. 4, pp. 781-809. Acemoglu, D, Gancia, G and Zilibotti, F (2015), ‘Offshoring and Directed Technical Change’, American Economic Journal: Macroeconomics, Vol. 7, No. 3, pp. 84-122. Acemoglu, D and Robinson, J (2012), Why Nations Fail: The Origins of Power, Prosperity and Poverty, Penguin Random House. Aghion, P, T, Besley, J, Browne, D, Caselli, R, Lambert, R, Lomax, C, Pissarides, N, Stern, J, van Reenen (2017), ‘Investing for Prosperity: skills, infrastructure and innovation’, LSE Growth Commission Report. Andrews, D, Criscuolo, C and Gal, P (2015), ‘Frontier firms, technology diffusion and public policy: micro evidence from OECD’, OECD Productivity Working Paper Series, No 2. Andrews, D, Criscuolo, C and Gal, P (2016), ‘The Global Productivity Slowdown, Technology Divergence and Public Policy: A Firm Level Perspective, Hutchins Center Working Papers. Baddeley, M (2006), ‘Convergence or Divergence? The Impacts of Globalisation on Growth and Inequality in Less Developed Countries’, International Review of Applied Economics, Vol.

Cyclically-adjusted net lending Percentage of potential GDP 0  0  -1  -1  -2  -2  -3  -3  -4  -4  -5  -5 2010 2011  -6  -6 Euro area  Germany  Advanced economies  Source: The IMF  The links that exist between the levels of debt, interest rates and growth also suggest that a high level of public debt entails risks. For example, a high level of debt tends to lead to higher long-term interest rates, as shown in Figure 3.3 A high level of debt may also lead to lower growth due to increased vulnerability to future crises, or because taxes may have to be increased to finance the debt.4 The higher the level of debt, the more the country must set aside to make the interest payments on its debts. These are a couple of the reasons why  2  The term cyclically-adjusted deficits here refers to public net lending adjusted for cyclical effects. The group advanced economies includes the United States, the euro area, Japan, the United Kingdom, Canada, South Korea, Australia, Taiwan, Sweden, Switzerland, Hong Kong, Singapore, the Czech Republic, Norway, Israel, Denmark, New Zealand and Iceland. 3  See also Baldacci, Emanuele and Kumar, Manmohan S. (2010), Fiscal Deficits, Public Debt and Sovereign Bond Yields. Working Paper no. 10/184. IMF. 4  For more details see Fiscal Monitor Update, November 2010. IMF or Kumar, Manmohan S. and Woo, Jaejoon (2010), Public Debt and Growth. Working Paper no. 10/174. IMF.
José De Gregorio: Exchange rate and export development Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the Special Session on Exchange Rate at the Chamber of Deputies and the 23rd National Meeting of Fruit and Vegetable Producers, Santiago de Chile, 6 October 2010. *  *  *  Chile has prospered during recent decades thanks to globalization. Having tried various strategies, we can say we have reached consensus on this matter. For an economy of our size and characteristics, opening up to the rest of the world is essential for creating the competition and efficiency that will stimulate development. Four decades ago, this idea was a voice in the desert in developing economies, but today it is the accepted norm. There is also consensus that monetary and exchange policy should be conducted by an autonomous central bank, and that fiscal policy should be governed by transparent, predictable and sustainable rules. After much trial and error, our country adopted an institutionality that has allowed us to walk through complex international situations with relative stability. Today I would like to discuss how we at the Central Bank of Chile view the challenges facing export development, in particular with regard to monetary and exchange-rate policy. Let me open by explaining the four principles guiding our decisions, so I can clarify some misconceptions with respect to the Central Bank and the exchange rate.

There is a school of thought that suggests the sole objective of central banks should be price stability. Accordingly many countries have adopted the inflation targeting approach in their conduct of monetary policy. Price Stability indeed is essential for sustained economic growth and there is no argument that it should be pursued. Moreover, the inflation targeting approach has the benefit of building up the credibility and commitment of a Central Bank. However, there is a risk that central banks may concentrate on achieving price stability as measured by a consumer price index, which may not necessarily guarantee economic and financial stability. With globalization and improvement in productivity, there has been a general tendency for inflation to remain relatively low. Though, price stability in terms of a consumer price index is achieved, there could be other imbalances arising from excessive demand pressure which may be reflected in assets price inflation and external payment imbalances. There could also be a danger of developing deflationary conditions which depresses growth. Therefore, it is important that central banks take into account other signs of economic imbalances in designing their policies, even though the sole objective may be defined as price stability. The Central bank of Sri Lanka has defined its key objective, not simply as price stability, but as economic and price stability. This is expected to prevent the Bank from trying to stabilize a price index rather than ensuring overall price stability in the economy.