samchain/econo-pairs-v1 huggingface dataset:
This was not the case in Sweden. As there were expectations of continued high inflation and of the Swedish krona being devalued, in other words of the target for the exchange rate being abandoned sooner or later, the wage inflation trend in Sweden was stronger than it was abroad. As the exchange rate was fixed, the competitiveness of Swedish companies weakened and a cost crisis arose. To rectify this, no other solution than to devalue the krona was thought to be available, which meant that the expectations of the krona’s devaluation were met. This in turn meant that the inflation trend could continue, competitiveness gradually weakened again, the exchange rate was once more adjusted downwards, and so on. What is normally referred to as “the nominal anchor” – the benchmark for inflation expectations and thus for price-setting and wage formation – did not function as intended. It was far from obvious that inflation targeting, introduced in 1993, would succeed in achieving what the fixed exchange-rate policy had failed to – to re-establish the anchor for price-setting and wage formation. Today, we know that it did succeed and furthermore did so relatively quickly. If I was to pick out the most important contribution made by inflation targeting, it would be precisely this – providing a nominal anchor for the economy.

Blinder, A S, Goodhart, C, Hildebrand, P, Lipton, D, and Wyplosz, C (2001), How Do Central Banks Talk? Geneva Reports on the World Economy 3, International Center for Monetary and Banking Studies and Centre for Economic Policy Research. Blinder, A S (2007), “Monetary Policy by Committee: Why and How?” European Journal of Political Economy, Vol. 23(1), pp. 106–23. Blinder, A S, Ehrmann, M, Fratzscher, M, De Haan, J D, Jansen, D J (2008), “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence”, Journal of Economic Literature, Vol. 46(4), pp. 910–945. Chehal, P and Trehan, B (2009), “Talking about Tomorrow’s Monetary Policy Today”, FRBSF Economic Letter, 35. Cruijsen, Carin A B v d, Eijffinger, S C W & Hoogduin, L H (2010), “Optimal Central Bank Transparency", Journal of International Money and Finance, Vol. 29(8), pp. 1482–1507. Demiralp, S, and Jordá, O (2002), “The Announcement Effect: Evidence from Open Market Desk Data”, Economic Policy Review, Federal Reserve Bank of New York, Vol. 8(1), pp. 29–48. Dincer, N N and Eichengreen, B (2014), “Central Bank Transparency and Independence: Updates and New Measures”, International Journal of Central Banking, Vol. 10(1), pp. 189–259. Eggertsson, G and Woodford, M (2003), “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, Vol. 2003(1), pp. 139–233. Gaballo, G (2018), “Price Dispersion, Private Uncertainty, and Endogenous Nominal Rigidities”, Review of Economic Studies, Vol. 85(2), pp. 1070–1110. Goodhart, C and Lim, W B (2011), “Interest Rate Forecasts: A Pathology”, International Journal of Central Banking, Vol. 7(2), pp. 135–171.
We must adapt to new demands from outside and implement changes where we or others find scope for improvement. Evaluation and constructive debate contribute to making us better at what we do. My introduction on monetary policy here today will in a way deal with evaluation and development. I shall talk about the contents of our Monetary Policy Report – our view of inflation prospects, the decision at the end of October to raise the repo rate by 0.25 percentage points and what interest rate policy we believe will be required over the coming years. The report is one of the best tools for examining how well we do our job. But I will also talk about some changes we have made to better meet the requirements made of us, not least in our role as independent authority. Because if I summarise what has happened in monetary policy since I was here in February, it is not merely a question of the forecasts and interest rate decisions we have published. We have also made changes in the way we communicate, to become clearer and more open. There have been fairly lively discussions of this over the past year. It is good that the Riksbank’s strategy is discussed. But I sometimes think that it has been difficult to distinguish whether the criticism concerns our forecasts not being considered good enough or whether it concerns our changes in communication.

The mandate of the euro area’s central banks is clear on this subject and there is no reason to think that some other stray thoughts would let us deviate from our key goal. It should be stressed that the Governing Council of the European Central Bank is monitoring the economic situation very carefully and will not commit to future decisions in a form that would render the Council a prisoner of their own words. Public discussions include two extraneous arguments, based on which it has been claimed that the hands of the euro area’s central banks are tied and therefore they cannot fulfil their primary goal properly. Firstly, it has been presumed that banks’ situation in Europe is so weak that we cannot abandon the extraordinary monetary policy measures that made money supply easier for banks during the crisis. Secondly, it is claimed that until the fiscal situation of some euro area countries is not firmly under control and the new financial control mechanisms have not been implemented, central banks do not dare to focus on the threat of inflation. I do not wish to underestimate either argument. The situation in global money markets, including Europe, is not entirely risk-free yet and the leaders of Europe’s public financing are struggling to ensure that the amended fiscal framework would help avoid crises in the future. However, upon fulfilling their main goal, the euro area’s central banks are not limited by these concerns to the extent that they could or should ignore the price stability goal.
Finally, I will briefly touch upon another important aspect of monetary policy, namely how to make good collective decisions, and the role of the staff in the monetary policy decision process. Communicating future monetary policy intentions Most central banks communicate future policy intentions in one way or another. The majority of central banks communicate indirectly through forecasts based on technical interest rate assumptions, and by giving verbal signals about future interest rate decisions in policy statements and speeches. With such indirect communication, the market participants gain information about the sign of future interest rate decisions, but may have less information about the size. Until November 2005, Norges Bank used technical interest rate assumptions in the inflation forecasts, but also on some occasions commented on whether the Bank intended to follow a different policy than what seemed to be reflected in market interest rates. Thus, the Bank gave signals about the sign of future policy intentions relative to market expectations, but not on the size. 2 From November 2005, Norges Bank started to use endogenous interest rate forecasts in the Monetary Policy Report. Norges Bank was the second central bank with endogenous interest rate assumptions, following the Reserve Bank of New Zealand, who introduced it in 1997. More recently, the Swedish Riksbank and the Czech National Bank have also started to publish interest rate forecasts. 1  Woodford, M. (2005), “Central-Bank Communication and Policy Effectiveness,” paper presented at FRB Kansas City Symposium on “The Greenspan Era: Lessons for the Future,” Jackson Hole, Wyoming, August 25-27, 2005.

These changes can be good or bad for those affected by them. Change therefore leads to risk, the prospect of gain or loss and the risk of loss is something that we must all be aware of. To be aware of risks does not mean eliminating them from our lives, which is certainly impossible, nor does it mean that we should do nothing about risks and accept consequences fatalistically. It means: we must manage risk. To manage risks we must decide what risks to avoid and how we can avoid them; what risks to accept and on what terms to accept them; what new risks to take on and so on. Both theory and practice of risk management have developed enormously in the last two and a half decades. The theory has developed to the point where the risk management is now regarded as a distinct sub-field of the theory of finance and risk management has become a separate subject in the master’s and MBA programs. The subject has attracted a huge amount of intellectual energy not just from finance specialists but also from specialists in physics. The most important factor contributed to this transformation of risk management was, as I mentioned at the beginning, the high level of instability in financial markets. The other factors were rapid developments in information technology, huge increase in trading activity and development of new financial instruments, namely, derivative instruments.
Although the structural balance policy was launched in this decade, fiscal efforts to smooth the copper price fluctuations began in the 1980s, with the copper stabilization fund. In fact, throughout most of the 1990s, the structural balance was near 1%. This countercyclical fiscal policy makes the effective fiscal balance highly correlated with the price of copper. Thus, our fiscal policy has been contributing for more than 20 years to stabilizing the Chilean economic cycle. As a result of the application of the rule, a large amount of resources has been saved in sovereign funds when the price of copper has been high. 4 In the period 2007-2008, 22 billion US dollars were placed in these funds, of which 20 billion – the equivalent to 12% of GDP – came from the accumulation of new funds, and the difference was the funds’ net financial gain. This has had significant implications in the current economic scenario. Since last year, particularly as from September, the world has been enduring the worst recession in the last 60 years and our country, despite being in an excellent position to address these shocks, has not been spared its consequences. But today, our fiscal policy has been able to make an important reactivation effort, thanks to the prudence with which the years of high copper prices were managed. The other critical elements in our macroeconomic policies that favor stabilization are monetary and foreign exchange policies. Although they play a somewhat more subtle role than fiscal policy, they are no less important.

Bravo-Ortega and De Gregorio (2005) state that, whenever natural resources draw the scarce human capital away from growth favoring activities, the development of natural resources might reduce growth. Thus, countries with high endowment of human capital can more than offset the negative effect of natural resource abundance on growth. Still, while growth can be slower, abundant natural resources do result in higher income, which is what ultimately matters from the standpoint of the welfare of the population. Finally, it is worth to make the distinction between the abundance of and the dependence on natural resources. This issue has been analyzed in Cerný and Filer (2006), who find that natural resource dependent countries are the ones associated with low economic growth, not natural resource abundant ones. 2 When studying the case of Chile, it can be argued that there is no evidence of the problems that associate natural resource abundance with bad economic performance. On the one hand, we can observe that our country is more and more open to international trade (figure 2). This integration not only brings benefits because of the traditional gains from trade based  1  Another closely related work is Boschini et al. (2003). These authors claim that the natural resource curse depends not only on the quality of institutions but also on the characteristics of the resources. Specifically, whether it is easy to obtain large earnings in a short period of time from having control over the resource.
Indeed, as I have said in some of my recent appearances in Parliament, in certain cases it may be appropriate to use some of the European funds to defray the initial or transition costs that certain structural reforms typically entail. One such example in this respect could be the introduction of the so-called “Austrian backpack” scheme, which various institutions (including the IMF) have recommended to combat the duality of the Spanish labour market. However, the introduction of such a scheme entails transition costs, insofar as the costs and payments implicit in the new scheme are not distributed between firms and employees in the same way as in the current scheme. These transition costs, the determination of which requires very detailed prior analysis, could be met, at least in part, by the European funds. 4 Conclusions The macroeconomic setting in which the Draft Budget has been prepared is, as we all know, complicated and uncertain. The outlook for activity and employment outlined in it is subject to significant downside risks. In such a complex situation, budgetary policy must continue 35  countering unfavourable macroeconomic developments. And this, if the downside risks materialise, includes the need to allow the free play of the automatic stabilisers, even though a bigger budget deficit ensues. In parallel, against the current backdrop, discretionary measures must be more focused on the population groups and firms most affected by the adverse effects of the pandemic.

Against this background I shall be discussing the current monetary policy appraisal of the Swedish economy, together with some factors of importance for the final assessment. First, however, I shall briefly outline monetary policy’s line of thought. Forecasts and probabilities Monetary policy’s overriding objective is to safeguard the value of money. The annual rate of inflation, measured as the change in the consumer price index, is to be kept at 2 per cent. As it takes time for the Riksbank’s monetary measures to work in full, our actions have to be based primarily on an assessment of inflation’s future path. The policy horizon - the period in which most of the impact of monetary policy materialises - is around twelve to twenty-four months. The Riksbank’s assessment of future inflation is presented continuously in our Inflation Reports. Since the first Report was presented in October 1993, the content has been developed and the Riksbank has, for example, become increasingly explicit in its assessments. In the first two years the Report contained a more general account of how the inflation indicators and inflationary pressure in the economy were developing. From November 1995 onwards the Riksbank has been attaching numbers to its inflation assessments. In the June 1996 Report the inflation assessment was underpinned for the first time with an overall picture of the cyclical position. A further step was taken in September 1997, when the inflation assessment was supplemented with a path for inflation in the forecast period.
The specific interest rate path cannot and must not be looked upon as a guarantee and a path to which we unconditionally have committed ourselves. Should economic developments deviate from the projected path, the interest rate path will also shift. Instead, it can be said that through our communication we commit ourselves to a pattern of behaviour, a response pattern. If interest rate expectations can be influenced, it will in many cases be useful for a central bank to commit itself to a predictable response pattern. This kind of commitment can, if it is perceived as credible, have a positive effect on the  2  BIS Review 10/2007  economy’s functioning and enhance the effectiveness of monetary policy. I will revert to this theme shortly. A relevant question is the extent to which our communication actually influences interest rate expectations. Forward interest rates derived from yields at various maturities will in the absence of term premia and other risk premia normally reflect the market’s short-term interest rate expectations.1 When Inflation Report 3/06 was published in the beginning of November last year, the forward interest rate was on a par with our forecast for the next six months, but considerably lower thereafter. It is now almost three months since the previous Inflation Report was published. Since that time forward rates have increased and approached Norges Bank’s interest rate path. Forward rates somewhat further out are still lower than our forecast.

Page 3/5  Our country has one of the most solid currencies in the world, namely the Swiss franc. No other currency has retained its value so well since the outbreak of the First World War. Nor has any other country kept average inflation lower than Switzerland. But there is another side to this coin. In times of high uncertainty, the Swiss franc tends to appreciate strongly, putting the economy under pressure and jeopardising price stability. We have witnessed this again recently. As a result, the SNB has been faced with the challenge of using its monetary policy to guarantee price stability in Switzerland. With the negative interest rate and our willingness to intervene in the foreign exchange market as necessary, we are able to counteract the attractiveness of Swiss franc investments. Our goal here is always to ensure appropriate monetary conditions in Switzerland. In general, an overvalued Swiss franc can pose a problem for the financial industry too. This is especially true for the important business of wealth management, where returns mainly accrue in foreign currencies, while costs are generally incurred in Swiss francs. We are, of course, also aware of the challenge that the negative interest rate poses to the financial sector. We have therefore reduced the burden it places on the Swiss banking system to the level necessary for the implementation of monetary policy. Once again, I must also stress that the low interest rate environment is a global phenomenon with structural causes. This is unfortunately not something that Switzerland can escape.
As expected, the very diverse European national media are playing a key role in the transmission of the information to the various audiences of the ECB. Experience so far shows that the approach works well and that the media have contributed to a homogeneous understanding of the role and tasks of the ECB. 4 As the “porte-parole” of the ECB and its Governing Council, I think we have shown our capacity to communicate in unison with a high level of team spirit in interaction with a highly sophisticated and complex media network dealing with 320 million European citizens speaking 13 languages. It must be underlined that the European Central Bank decided from the very beginning to embark on a bold concept of transparency. On 1st January 1999, at the moment of the start of the euro, the state of the art of central banking was, not to say anything immediately after each decision on monetary policy, let observers and markets guess what had been the reasoning of the central bank and publish five or six weeks afterwards, the reasons why the decision was made in the form of “minutes of the decision-making college”. We decided from the first day of the euro that we would have a significantly higher level of transparency. First, we thought it was necessary to give to the public the economic and monetary diagnosis of the Governing Council, and the reasons why the monetary policy decision was taken, immediately after the meeting.

This quasi real time display of the detailed reasoning of the Governing Council took the form of five to six pages of “introductory remarks”. Second, we considered it to be useful to give additional explanations to the media, to market participants and to the general public in the form of a press conference that would take place immediately after the Governing Council and would be introduced by the “Introductory Statement”. The ECB, in so doing, contributed to a significant change in the state of the art on transparency of central banking. Today central banks are more often giving real time information on their decisions, generally in the form of explanatory communiqués that are published immediately with the decision. We remain nevertheless quasi unique amongst  4  See Berger, H., M. Ehrmann and M. Fratzscher (2006), “Monetary Policy in the Media”, ECB Working Paper No. 679. BIS Review 6/2008  3  major central banks in publishing a detailed analysis in quasi real time and in having a press conference. Why were we so keen to introduce a new and bold concept of transparency? I think we had three main reasons: Firstly we had to consider that we were launching a new currency to which we had to transfer the full legacy of stability, of confidence, of credibility which was the characteristics of the most credible previous national currencies. The Maastricht Treaty had been entirely based upon this benchmarking concept.
These include the FXCs in Mexico, South Africa, Scandinavia and Switzerland. Through the membership expansion, the Code will become more global as these FXCs promote the adoption of the Code within their jurisdictions. 7 Second, on embedding the Code and integrating it into the FX market. If done well, we should see market behaviours reflect the good practices set out in the Code. We have seen that the process of issuing the Statements has prompted internal reviews within many firms, where market participants considered how the Code could apply to their business. In issuing our Statement, we have done the same in MAS. It has been a helpful and meaningful exercise to benchmark our internal processes against these good practices. We have also seen a number of training tools being developed by market participants to support learning, and these have enhanced the ecosystem of good practices within the FX market. Another key area where we think the Code has enhanced market behaviour is that a number of market participants have updated client disclosures to provide greater transparency, and to incorporate the principles within the Code. 8 Third, on evolution of the Code. When the Code was launched, the GFXC has stated that the Code will need to evolve over time to promote a robust, liquid and transparent FX market. The Code has become the platform or reference point for discussing issues relating to the FX market. This is a good outcome where emerging issues are identified, debated and addressed within the Code.

In addition, the GFXC hopes to develop a framework that can assist market participants to review or develop their client disclosures, and to identify any challenges to appropriate transparency. 13 Third, to continue to embed and integrate the Code into the FX market. A survey was conducted by the GFXC last year, to assess the industry’s baseline in Code awareness and adoption. We plan to conduct another survey later this year, to see how market participants are embedding the Code and how practices and behaviours have evolved. This survey will be rolled out across the key FX jurisdictions likely through the FXC network. We look forward to your active participation when the survey is rolled out. From the survey findings, we hope to identify ways to deepen adoption and broaden awareness over time and across jurisdictions. 14 These efforts need the support of you as market participants, and we hope that you can do 3/5  BIS central bankers' speeches  your part in promoting the good practices set out in the Code, from your respective vantage points and positions within the FX market. Singapore’s approach 15 Last year, I shared that the Singapore Foreign Exchange Market Committee (or SFEMC) has taken on the responsibility to promote and encourage adherence to the Code in Singapore. 16 Given Singapore’s position as the preeminent FX centre within the Asian time zone, it is important for us to continue to take a leading role in adopting the Code.