samchain/econo-pairs-v1 huggingface dataset:
The fact that the variables to which monetary policy responds are assumed to be known at the time of decisions contributes to this. The conceivable objections to basing monetary policy on simple rules of this type concern their very simplicity. An economy is constantly being hit by shocks of different types. Neither firms nor households behave mechanically. It is therefore not to be expected that economic policy can be boiled down to some kind of auto-pilot. Allow me to illustrate this with a couple of examples. A first objection to basing monetary policy on a simple Taylor rule is that the rule assigns too much weight to a particular indicator of the output gap. The output gap is a central concept in macro theory and economic policy but that does not lessen its complexity. Potential output tends to vary over time. Changes in such factors as demography, technology, tax and transfer systems or other important components temporarily or permanently affect productivity growth and labour supply, with an impact in turn on potential output. Although considerable progress has been made in real business cycle theory when it comes to the importance of supply shocks, we unfortunately do not have a clear intellectual framework for the forces behind potential output’s variations in the short and medium term. Changes in the output gap are therefore difficult to pin down exactly in stable measurements. The methods used to estimate potential growth and the output gap from econometric models tend to yield conflicting results that are also unstable over time.

Shanghai will become a big financial centre, first serving the Chinese market, and later, an international financial centre. Mumbai and Dubai also aspire to be international financial hubs. India will grow its manufacturing sector in a big way and make its presence felt in the export market. All countries, including Singapore, will have to adapt to these realities. Domestically, we have other long-term headaches. We are facing a demographic crunch, with a rapidly-ageing population and a declining birth rate. Our people are increasingly mobile. In a borderless world, ensuring that our best remain rooted to Singapore, physically and emotionally, will be a challenge. Despite these challenges, I am optimistic about our prospects. I base my optimism on our fundamentals. We have two basic strengths – good governance and our ability to nurture and attract talent. Good governance and talent form a virtuous cycle for sustaining economic growth. Let me elaborate. First, good governance. A World Bank Institute report released in September 2006 ranked Singapore among the top 10% of countries around the world with good governance. Good governance is possible only if you have an honest, capable and committed government. In our case, the government must, in fact, be exceptional to overcome the exceptional challenges faced by Singapore, given our land and space constraints and geopolitics. For the next decade at least, I do not see any danger of a drop in the quality of our governance. The new team under Prime Minister Lee Hsien Loong is firmly in place.
At the start of the period economic growth was sustained in particular by investments in business sectors such as power-  BIS Review 27/2001  1  intensive industry and fisheries. This gradually changed in character and for a while growth was primarily borne up by private consumption and related expenditure. Last year capital formation increased more than had been expected, however, by an estimated 9% during the year. Private consumption rose somewhat more than real disposable income, and household debt increased by 14½% in real terms, and as a proportion of disposable income from 146% to 163%. The combined impact of all these factors was to put pressure on Iceland's credit system, not least the deposit money banks which have been lending immoderately. In the first half of 1999 the twelve-month rate of lending growth was 35%, although it has since slowed down. DMB lending increased by just over 26% last year, somewhat more than in 1999. Total lending by the credit system rose by 18.4%. The largest growth was in corporate lending, or 23%, while household lending growth was slightly less at 19%. In comparison with 1999, household lending growth increased but corporate lending growth slowed down somewhat. Excluding exchange rate and price indexation adjustments, the total annualised increase in lending by DMBs during the second half of 2000 was just under 14%, compared with 22% during the same period in 1999. Lending growth has clearly slowed down, although it is still too great to be compatible with long-term stability.

In this context it is not the present exchange rate that is decisive, but how we see it developing in a slightly longer-term perspective. There is no reason to depart from the basic assessment we made earlier; there are still strong reasons in favour of a stronger krona. It is not merely that Swedish macro data in general has developed well over a number of years compared with, for instance, the euro area; most forecasts indicate that this development will continue. Sweden is also one of the countries that has had the highest trade surplus as a percentage of GDP over a number of years, which is one indication among many that the value of the krona has been relatively low. However, even if we should not – as I see it – change our basic assessment that the krona will strengthen, its value at present is rather different. There is therefore reason to take into consideration a risk scenario for inflation linked to a weaker exchange rate. Just as the Riksbank emphasised during 2003 and 2004 that the strong krona was one reason behind the low inflation rate, there is reason to point out that the weakening of the krona this year, particularly if it persists, could result in higher inflation,” said Mr Heikensten. ”All in all, I do not at present see any reason to change my view of inflation now to any great extent, compared with the October assessment.
There is a correlation, it turns out, between the level of household gearing prior to the crisis and the drop in its consumption spending afterwards. But this goes away once you also take into account the prior growth rate of debt. Once you know the change in a household’s indebtedness ahead of the crisis, knowing the level tells you nothing more about its subsequent spending. Anyway, I think we can take a couple of things from all this. First, there may be country-specific factors that make the same quantity of debt more affordable and less risky in some places than in others, or even at different points in time. If so, then one should at least try to take these into account. Second, however, this probably isn’t the only thing going on, since the superior predictive power of growth rates is apparent even over single episodes in the same country. Structural changes in unsecured household debt One example of structural effects – things that affect measured debt but probably have less significance for households’ financial risk – is the series for unsecured household debt in the UK. In aggregate, this has risen quite a bit in recent years, much faster than household income (Chart 5). But if you look under the surface, there’s less to this than meets the eye. It’s true in general that unsecured debt carries more risk for  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  the lender than the borrower, at least when compared with mortgage debt.

The spread is currently relatively high – on this measure housing is unusually “cheap” compared with government bonds – and, taken at face value, would point to somewhat faster growth of house prices over the future. But perhaps this is justifiable. If you thought relatively weak economic growth was likely to persist over the next few years – and that’s  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  certainly the consensus view – you might reasonably expect the same for rental prices. Amidst higher uncertainty, prospective homebuyers might need an additional discount, relative to rents, to buy a house (the warranted “risk premium” on housing might be above average). Recent house price growth is already quite a bit lower than the rate crudely suggested by Chart 12. Near-term survey indicators – Chart 13 plots the RICS balance – offer little prospect of an acceleration any time soon, let alone the kind of pick-up you’d need to make much of a dent in the longer-term, 15-year average used in Chart 10. All this is why it seems to me improbable that aggregate mortgage debt will grow that rapidly over the next few years. People coming into the housing market, and trading up it, are unlikely to have to pay (or therefore borrow) much more than their predecessors did, several years earlier.
This particularly affects SMEs, because they make up an outsized share of firms in the sectors worstaffected by the crisis and they employ around 75% of the people working in those sectors. [6] So it is no surprise that many SMEs in Europe were put at risk of liquidity problems. [7]  2/8  But the recession we have gone through is not a typical one. Firms have been hit by a public health crisis that affects them indiscriminately, irrespective of whether they are the best or worst performers. That is why policymakers had to step in. They had to prevent an unjustified loss of capital, jobs and incomes that would have deeply damaged our economic potential. Essentially, what many firms needed was a bridge to the other side of the pandemic – support to pay wages and cover bills until they can do so again themselves. So the policy response has been about putting that bridge in place. Fiscal policy has rightly taken the lead, because it can be targeted at the firms and sectors most exposed to the crisis. And it has, on the whole, been effective. In Germany, more than six million people were enrolled in the “Kurzarbeit” scheme during the first lockdown last April, which was more than four times the peak during the global financial crisis. [8]  But it was also crucial that SMEs did not face a credit crunch at the very moment when their revenues were drying up. And for that they needed finance.

During Jarle Bergo’s 40-year long professional career, views on monetary policy have changed. The general economic environment has also changed dramatically. The global economy has become increasingly integrated. When I speak of the term globalisation, I refer to the growing interdependence of national economies as reflected in greater and freer flows of goods, services, capital and labour across national borders. The number of countries taking part in the global exchange of goods and capital has soared. China, India, Russia and many other emerging markets have opened their borders and embraced capitalist reforms. The globalisation process has accelerated over the last two decades through increased trade liberalisation, political changes, technological advances, and a sharp reduction in transaction costs. This new, globalised world economy presents us with new possibilities, but also with challenges. We are very proud to be hosting this conference and we are especially glad that we have been fortunate enough to attract such a distinguished group of speakers. We are honoured to have President Axel A. Weber of the Deutsche Bundesbank here as our first speaker of the day. He will be taking a closer look at globalisation, monetary policy and the euro. In terms of age, the euro is still in its youth, in terms of global economic importance a mature adult. Since the euro was introduced almost ten years ago, it has gained importance as a global reserve currency. Globalisation changes the environment in which we live. Increased trade and economic integration are bringing opportunities for raising living standards to ever larger groups.
At the same time, we introduced as a new element the principle of "representativeness", linked to the desire that at any moment in time the NCB governors exercising the voting right represent a reasonable share of the euro area as a whole. This desire to ensure "representativeness", by way of the differentiation among governors on the basis of the country ranking, should not be misunderstood as an attempt to re-introduce national elements into decision-making. On the contrary, the allocation of governors to groups is a purely auxiliary device, which is used exclusively to determine who votes when. For substantive decision-making – and that is what was crucial to us – the tried-and-tested principles of the Eurosystem constitution have been kept fully intact: the principle of ad personam participation of governors remains valid and the "one member, one vote" principle applies to all members exercising a voting right. All of this will ensure that, also in a future enlarged Governing Council, it is the force of arguments that counts in our deliberations and not which country an NCB governor comes from and whether this is a large or a small country. Finally, given that the sequencing of future euro area expansions is highly uncertain, the new voting system had to be sufficiently robust and able to accommodate up to 27 euro area Member States, so as to avoid having to change the rules every time a new Member State joins the euro area.

There is, of course, a circularity involved, since liquidity depends on valuation, fair value must be based on a market price, and the ability to price an asset itself depends on sufficient liquidity in the market. The difficulty to get out of this circularity in periods of stress is currently creating significant uncertainty. o  Hence a dependence of the whole market on the rating process. In a securitized world, investors heavily rely upon rating agencies to provide information about the risks attached to various instruments. These agencies have been strongly criticized recently. It is not my purpose to enter into any blame game. Suffice it to say that there has been a deep misunderstanding between investors and rating agencies as to the scope and true meaning of ratings. Most investors were not fully aware that rating did not encompass liquidity risk; nor did they realize that ratings for structured products were intrinsically more volatile than for more simple "plain vanilla" securities. The use of identical metrics for rating what are fundamentally different categories of assets certainly did not help and may have contributed to the confusion. o  Finally the turmoil has revealed the fragility of off-balance sheet structures and vehicles which underpinned securitization. Conduits, especially SIVs, were not built to absorb shocks. Their relationships with sponsor banks are sometimes very ambiguous.
Mr. Duisenberg reports at a press conference on the outcome of the meeting of the Governing Council of the ECB. Introductory statement by the President of the European Central Bank, Mr. Wim Duisenberg, in Frankfurt on 8 April 1999. __________________________________________________________________________________ Ladies and gentlemen, the Vice-President and I are here today to report on the outcome of today’s meeting of the Governing Council. Let me start with the Governing Council’s discussion of recent economic developments and the decisions that the Governing Council has taken today in the field of monetary policy. After an indepth review of recent monetary, financial and economic developments, the Governing Council decided that the interest rate for the ECB’s main refinancing operations will, from next week on, be set at 2.50%. In addition, the interest rate on the marginal lending facility will be lowered to 3.50% and the interest rate on the deposit facility to 1.50% with effect from tomorrow. Let me report in some more detail on the reasons for which the Governing Council, in the context of the ECB’s monetary policy strategy, deemed it appropriate to lower interest rates. As regards monetary developments in the euro area, the acceleration of monetary aggregates seen in January 1999 was partly reversed in February. The 12-month growth rate of M3 declined from 5.6% in January to 5.2% in February.

3  BIS Review 39 /1999  Question: Mr. Duisenberg, I just want to ask if you could elaborate a little bit on the convincing structural reforms that you said you would like to see from euro zone governments and also if you feel that by cutting the rates in such a large step that you actually reduce the pressure on these governments to make these reforms? Duisenberg: We hope that the contrary will emerge over time. Convincing structural reforms relate to the following: We, and most other observers, are very convinced that the phenomenon of an unacceptably high rate of unemployment across the euro area, but particularly in the larger countries in the euro area, is due to structural factors and to inflexibility in markets for labour and in markets for goods and services and that monetary policy is neither the cause of that structural unemployment nor is it the solution to it. The solution to that problem has to be found in measures of a convincingly reformist nature in the labour and in the goods markets and we do hope that taking the monetary policy stance we have taken today will in the ensuing months increasingly focus the attention of policy-makers and the public on the real causes of the unemployment problem, because it will demonstrably become clear that monetary policy is not the answer to solve those problems.
A quite short time horizon means that substantial changes in the interest rate are required in order to achieve the objective. Such substantial changes may in turn result both in monetary policy appearing abrupt and in undesirable and significant fluctuations in growth and employment. In contrast a very long time horizon will bring greater short-term stability to growth and employment, but at the same time lead to considerable fluctuations in inflation. These fluctuations may weaken confidence in the price stability policy and lead to higher instrumental rates over time. Here monetary policy is obviously faced with a balancing problem. The more credible the policy is, the more room there is to manoeuvre in practice. There may be reasons for completely abstaining from reacting to certain inflationary impulses of a one-time nature. An example of such “one-time inflation” is indirect tax hikes. If price disruptions are judged to have merely temporary effects on inflation and do not affect expectations of future inflation, it would imply unnecessary real economic instability to prevent the price increases from having an impact on the consumer price index. Question 6: Doesn’t the Riksbank itself “talk up” inflation? Now and then the criticism is made that the Riksbank stresses the risks of inflation in the economy and is thereby guilty of “talking up” inflation.

In any event, it is important to stress that facing the challenge of population ageing (which is not exclusive to Spain, but is proving particularly acute in our country) will call for the adoption of a multidisciplinary strategy to encourage the participation of elderly workers, to adapt migratory policy to the needs of the labour market and to boost the birth rate. Despite strong job creation during the recovery, the unemployment rate remains very high, and its persistence (in particular among specific groups, such as the lesser skilled) raises the risk of it becoming structural. In this respect, the high skills mismatch between the employed and unemployed calls for active employment policies to boost the employability of each socio-demographic group, using those instruments which, further to appropriate assessment, have proven most effective. Furthermore, the number of temporary employees as a proportion of total employees stands in excess of 27% and there is some evidence of new temporary contracts being of shorter duration in the recent period; in addition to the social difficulties that generates, human capital accumulation is also impaired. Reducing the incidence of temporary employment would call for boosting the attractiveness of permanent hires. Thirdly, I wish to refer to productivity. The Spanish economy has continuously posted very weak figures for this variable in recent decades, and this has prevented a greater degree of real convergence with our European partners. Improving the dynamics of this variable is crucial for raising the economy’s potential growth in the long term, and the well-being of our citizens.
All in all, this development will lead to investors, borrowers and banks being able to create the combination of risks that they prefer. As I mentioned, this has changed the conditions for the banks, mostly on an international basis. The banks now need to find new sources of income to compensate for the decline in income on more traditional, mature markets. Their activities are increasingly being centred on more customised solutions, financial innovations and risk management. Thus, the banks are now less dominant in all areas of the financial system’s functions than they once were. Many analysts claim that the financial system – that is to say the agents, market-places and infrastructure – can function more efficiently after these changes, as risks are spread among more agents and can therefore be managed in a better way. At the same time, there are those who advise caution and believe that certain tendencies in the new development will probably lead to fewer, but more serious financial crises. Let me begin by discussing the potential advantages of the new developments. Have the financial markets become more robust… The question of whether the financial markets have become more robust is one asked by many people after the Asia crisis, the Russia crisis, LTCM and other crises came and went without leaving making any major disruptions in the markets, other than temporary and relatively small price fluctuations.

With low unemployment, solid wage growth, and ample job openings, all indicators show that the strength of the labor market is at a level consistent with my view of maximum employment. Inflationary Pressures The other side of our mandate is price stability, and this is where our greatest challenge now lies. Inflation is far too high. In February, inflation-as measured by the personal consumption expenditures (PCE) price index-was nearly 6½ percent. And high inflation is a key concern in many countries around the world. Even before Russia's invasion of Ukraine, the rapid global economic rebound had driven up prices for oil and many other commodities. Higher inflation is especially detrimental for those who are least able to meet the growing cost of essentials like food, housing, and transportation. The war in Ukraine and the global response present even greater challenges and uncertainty. For example, Russia and Ukraine are large exporters of key materials, including neon, palladium, and platinum. Those materials are used in the production of a wide array of products, from auto parts to computer chips. Even before the war,  2/5  BIS - Central bankers' speeches  manufacturers were confronting shortages of important inputs. Further disruptions to these key products could create spillovers to economies across the globe. But there are differences in the ways in which countries are experiencing inflation. In the United States, we are now seeing elevated inflation across many categories of goods and services.