samchain/econo-pairs-v1 huggingface dataset:
With both commercial and residential rents, not to mention sales prices, high and rising in Manhattan, northern New Jersey has an opportunity to capitalize on its widening cost advantage by attracting companies and residents that value an urban location, but find New York City to be too pricey. And if preferences are indeed in the midst of a long-term shift toward urbanization, this bodes particularly well for New Jersey’s own cities. With a major international airport and seaport, a 20–30 minute train ride from most of Manhattan – but much cheaper rents – as well as a number of universities and a solid infrastructure, Newark has strong potential to develop its prominence as a major local business, economic and cultural hub. Concluding thoughts To conclude, I would like to say a few words concerning proposals to reform the Federal Reserve System. First, I concur with Chair Yellen that the Federal Reserve already is very transparent and accountable to Congress and to the public. I share her strong belief that the independence of the central bank to make appropriate policy decisions consistent with its legislated mandates is essential to a nation’s economic well-being. With regard to the structure of the Federal Reserve System and the role of the regional banks, including the New York Fed, I also agree with Chair Yellen that the system is working well, and I do not see a need for any substantive changes. I believe that the System has been designed appropriately so that a wide range of regional views are represented.

Based on the poll results, we have developed an ongoing series of clinics for small businesses to help them take the next step to access capital and identify new sources of funding. We also get important input from our Small Business and Agricultural Advisory Council, whose members help us understand key economic and financial issues affecting regional businesses and communities. This year we tapped two New Jersey business leaders to join the Advisory Council: Adenah Bayoh, co-founder of Kapwood, LLC, and Ranjini Poddar, founder of Artech Information Systems, LLC. Let me now review recent developments in the national and regional economy, and at the end of my talk, I will be happy to answer questions you may have about the economic outlook. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee (FOMC).1 National economic conditions After growing at just a 2 percent annual rate from 2010 through 2012, real GDP expanded more quickly in 2013 and 2014, rising at a 2.7 percent annual rate. This was sufficient to push the unemployment rate down by more than two percentage points over this period. This  BIS central bankers’ speeches  1  firming in growth reflected several important developments that, in my view, are likely to continue through 2015. The data we follow suggest that the household deleveraging process has largely run its course and the imbalances in the housing market have been mostly worked off.
But in practice when there is a lack of information and uncertainty about actions, the incentives facing individual actors become very important and can lead to endogenous risk creation within the financial system. 25 These incentive problems have been clearly apparent in risk transfer markets. As has been widely described elsewhere, if loan originators do not have sufficient capital at stake, they will not screen potential borrowers adequately. 5 In the US sub-prime mortgage market, rewarding loan originators by volume of issuance was a recipe for lax credit assessment standards. But even when originators seem to have an economic stake in performance, for example by holding some of the “first loss” or equity tranche of a securitisation, this is not sufficient to guarantee incentive compatibility, as it is possible to hedge the exposure to the equity tranche through a separate market transaction. 26 There is, though, also a more subtle problem. As mentioned above, holding a diversified pool provides protection against idiosyncratic risk. But the absence of a concentrated exposure can also limit the incentive to monitor individual loans, and thus the pooling of risk may lead to a reduction in the overall level of risk screening ex ante and monitoring ex post. It was the combination of these misaligned incentives that proved such a problem in the US sub-prime mortgage market. Individual end-investors had little incentive to monitor the performance of loan originators, perhaps presuming that originators had sufficient stake in the securitisation to provide market discipline.

In the first presentation, Gauti Eggertsson will analyze how the fiscal multiplier is affected by the degree of coordination between the fiscal and monetary authorities. Then, Giancarlo Corsetti will question the conventional wisdom that fiscal policy is more expansionary under a fixed exchange rate than under a floating regime. Finally, Luis Felipe Céspedes, Jorge Fornero, and Jordi Galí will present a paper that estimates the effects of Chilean fiscal policy on consumption and income using a framework that relaxes the assumption of Ricardian equivalence. The final section will focus on fiscal policy in emerging market economies. Jeffrey Frankel will discuss the structural fiscal spending rule implemented in Chile in 2001. Eduardo Engel, Christopher Neilson, and Rodrigo Valdés will conduct a welfare analysis of the effects of Chile’s fiscal rule. Michel Strawczynski and Joseph Zeira will examine the cyclicality of fiscal policy in a broad set of emerging market economies, and will analyze whether the dynamics they observe can be characterized using Aguiar and Gopinath’s distinction of permanent and temporary shocks. I would like to thank the organizers, Jordi Galí and Luis Felipe Céspedes, for putting together this first-rate programme, and Yan Carrière-Swallow and the Department of Institutional Affairs for coordinating the logistics that have made this event possible. I look forward to two days of engaging presentations and fruitful discussions. Thank you. 2  BIS Review 143/2010
Hence, relevant stakeholders in the country formulate, implement, revise and re-implement economic and other policies to achieve such goals. Whatever the policy we formulate and pursue, the ultimate aim is to raise living standards of the nation. At the same time, we are all aware that it is compulsory to have higher economic growth and fair distribution of benefits of growth for achieving higher standards of living. The issue is, how can we achieve higher rates of economic growth? Theory will say savings, investments, diversification, technology, hard work, attitudes and perceptions. Yes. All these are important and they have certain importance in a country’s overall performance. However, in a highly competitive, globalized environment with a limited resource endowment all of these factors would be second to productivity. For sustained prosperity, productivity is the key. Why is the productivity so important? Economists agree that, in the long-run, productivity growth is the principal means of improving living standards. The rate of productivity growth influences the economy in important ways, even in the short run, by affecting key variables such as output growth, employment growth, and the rate of inflation. So, as a first step, let us examine the need of productivity improvements in the current global and domestic economic context and the lessons of success by emphasizing on productivity, so that we could deal with this topic in a wider perspective. In my view, our economy should focus on productivity due to two important reasons.

Since your organization establishes the business stance on broad issues of trade and investment policy as well as on vital technical or sectoral subjects including financial services, information technology, telecommunication, marketing, environment, transportation and etc., a vital role can be played in articulating the need for improving productivity. Do it now. This will be a major contribution that you make to our country. BIS Review 116/2008  5
Certainly, it seems to me that the accompanying low levels of inflation, together with relatively high rates of resource utilization, suggest that something more than normal cyclical forces is at work. The ability to develop and deploy these technological advances rests on underlying changes in our labor and financial markets, changes that have been occurring over the last two decades. With respect to labor markets, two main changes have occurred. First, large corporations have been increasingly willing to lay off workers and restructure their businesses during the expansion phase of the business cycle rather than waiting for a recession to do so. This process has been under way in the United States for over a decade and it has not been accomplished without pain. A crucial unanswered question in the current environment is how to identify the point at which labor market tightness becomes sufficiently severe for workers to demand more permanent pay increases. Second, there appears to be a shift in the structure of compensation toward variable pay that includes, but is not confined to, stock options. This shift away from wages and traditional benefits has allowed for greater flexibility in labor costs and by this means has made it easier for new firms to add labor. Employees compensated through incentive pay take on some of the risks of capital.

They also have had to pay more attention to evaluating business opportunities by using more sophisticated risk/return analysis than they previously did, a strategy financial firms have been particularly aggressive in pursuing. What lessons might other countries thus draw from the US experience and what are the implications of the strong economic performance in the United States for other countries? One lesson seems clear. With the advances in technology, all countries that move toward more open and transparent markets stand to benefit from the universally available strides that have been made in information technology. I want to emphasize that the processes I am speaking about do not call for just onetime efforts. Quite the contrary. They demand ongoing attention and adaptation to new circumstances. Second, it is not just that productivity growth is being driven by technological advances. It is also a question of how these technological advances are applied. At the end of the day, I believe, the United States has had such strong economic performance because of the high degree of flexibility and adaptability that has been built into the US labor, product and financial markets over the past decade. BIS Review 29/2000  4  These lessons seem to be gaining a following, as many countries across the globe have begun to record substantial progress in liberalizing and deepening their capital markets, deregulating their state-owned enterprises, and easing existing labor market rigidities. In so doing, these countries position their economies to capture the manifold benefits technological advances allow them to enjoy.
Government influence also directed bank lending into uneconomic projects and non-viable companies. This government involvement lent credence to the view that regional banks were effectively government guaranteed, which made it easier for these banks to borrow in the global interbank market. This provided the fuel for the irresponsible lending which took place. Hong Kong did not suffer from these structural and systemic weaknesses. But it is the case that imbalances had emerged in the economy, and this became particularly evident during 1997 as confidence grew that the Handover would proceed smoothly - as indeed it did. This was reflected in soaring residential property prices - up by an average of 48% during the year to October 1997 and a record level for the Hang Seng Index of 16,820 in August 1997. The boom in asset values was to a large extent financed by the banks. The sharp escalation in asset prices and in bank lending was clearly unsustainable. A downward adjustment would have been necessary and would have happened sooner or later. All that was required was an external shock to bring it about. This of course is precisely what happened in BIS Review 48/1998  -2-  the third week of October when the Hong Kong dollar came under speculative attack. The operation of our currency board system meant that the sales of the Hong Kong dollar depleted the clearing balances which the banks maintain with the HKMA for settlement purposes and the resultant shortage of liquidity caused interest rates to rise sharply.

With the lifting of pandemic-related restrictions in China and lower energy prices, activity among trading partners will likely be higher than we had anticipated earlier. High inflation has prompted central banks in many countries to raise policy rates to the highest levels since the 2008 financial crisis. Over the past year, foreign interest rates have risen more than Norwegian rates. Combined with the turbulence in financial markets, this has probably contributed to the depreciation of the krone. The krone is now considerably weaker than we envisaged in December. A weaker krone means an increase in prices for imported goods and services in krone terms. This will contribute to sustaining inflation in Norway. Figure 5. High employment Activity in the Norwegian economy has been higher than expected. Employment is high and unemployment is low. At the same time, we have seen an increase in labour force participation, which is a welcome development. Growth in the economy will likely be weaker ahead, but the slowdown appears to be less pronounced than projected in December. The enterprises in our regional network report slightly better prospects than before Christmas, but there are wide variations across industries. In the secondary housing market, prices have risen somewhat in recent months, but the number of homes for sale is quite high. New home sales are very low. We expect a modest decline in house prices ahead as a result of higher interest rates.
However, I would like to mention two points which are closely related to financial stability. One is the noteworthy overseas expansion by Icelandic banks, which has major ramifications for the financial system. Among the changes that this entails is that the banks are now less exposed to volatility in the Icelandic economy, because of the large share of their activities that has been transferred abroad. At the same time, they are left more prone to shocks originating in foreign markets. This development calls for a review of the Central Bank’s working procedures. I shall not go into details here of possible changes, which were discussed in Monetary Bulletin last autumn. The other point is the growth in lending by the credit system, in particular by the banks. The surge in lending over the past two years is a cause of concern both for financial stability and the Central Bank’s inflation target. Accounts of the credit system are published quarterly and the most recent statistics show that lending by the credit system as a whole increased by 16% in real terms last year. The credit system embraces all undertakings involved in lending activities, including the HFF and the pension funds. The latest figures for the largest credit institutions show that domestic lending by the deposit money banks (DMBs) grew by 40% over the twelve months to the end of February. By far the greatest increase has been in mortgage lending.

Plans by the Housing Financing Fund (HFF) to raise its loan-to-value ratio and maximum mortgage amounts prompted a response from the banks, which began offering mortgage loans on far easier terms than had been customary. So far the main impact of increased credit supply on the price level has been through the housing component of the Consumer Price Index (CPI). In the beginning of March the twelve-month rate of increase in housing prices was 24%. Excluding the housing component, the CPI had increased by 2% over the same period. Housing inflation has therefore clearly made a major contribution to total inflation in recent months. Another cause of concern is inflation in services. Over the past twelve months, prices of public services have risen by 6.9%, driving up the CPI by 0.5 percentage points, and private sector services by 3.5%, adding a further 0.8 percentage points. Rising prices of private sector services have often been an indication of mounting demand pressures. According to estimates by Statistics Iceland, GDP growth amounted to 5.2% in 2004, on the back of 4.2% growth in 2003. Faster GDP growth was largely the result of a continued surge in national expenditure, while exports also increased significantly after a low in 2003. Private consumption also continued to firm up during the year with an estimated growth rate of 7.5%, the fastest for five years. Real disposable income increased more slowly than in 2003, but private consumption was spurred by lower mortgage debt service and easier access to credit.
The increase in housing prices now appears to have slowed down and they are roughly at the same levels as at the end of 2010 (Figure 1). Figure 1 Prices of single-family dwellings and tenant-owned apartments Index January 2008 = 100 130  130  Valueguard (single-family house) Mäklarstatistik (single-family house)  120  120  Valueguard (tenant-owned apartment) Mäklarstatistik (tenant-owned apartment)  110  110  100  100  90  90  80  80  70  70  60  60 05  07  09  11  Sources: Mäklarstatistik and Valueguard  13  One example of a fundamental relationship that changed suddenly was the drastic reduction in the right to make deductions for mortgage interest that were included in the tax reform at the beginning of the 1990s. The mortgage rate after tax increased drastically for many borrowers. Even the real interest rate increased drastically, despite the severe recession. This is something that one can hardly expect to happen within the current inflation targeting regime. 6  BIS central bankers’ speeches  Is household indebtedness sustainable? Opinions on this are divided, but allow me to begin by pointing out here that households have very strong balance sheets. Household debt in relation to disposable income, the debt ratio, has increased over several years and the debt ratio is now around 170 per cent of disposable income (see Figure 2).

12  4  Kung, 2015, discusses the equilibrium implications of such “shared appreciation mortgages”: http://www.newyorkfed.org/research/conference/2015/mortgage_design/Kung_Edward_housingstructural_052 015.pdf. BIS central bankers’ speeches  BIS central bankers’ speeches  5
The requirement to make analysis in the following period of the need of modification to the other elements of the own funds, the capital quality, which can be qualified for risk coverage, as well as the introduction of countercyclical capital protection mechanisms remains. Also, the proposals for introducing the leverage ratio are in the process of analysis. The Basle Committee and the International Board for Accounting Standards in the MSFI 9 proposal support the creation of impairment based on the anticipated loss principle, and not on the incurred loss principle, as the current International Accounting Standards envisage. In the regulations pertaining to the credit risk management we apply the anticipated loss principle. 8  BIS Review 90/2010  Despite the intentions for accepting the International Accounting Standards, our valid methodology for classifying the credit risk exposure contains prudent filter, which requires from the banks primarily to know the debtor’s characteristics, its credit history and expectations regarding the payment of its liabilities. Such a solution in the regulations in line with the Basle recommendations, enabled our banks to have relatively sufficient amount of impairment for covering the incurred credit losses during the entire turbulent period, which prevented serious pressures on their capital base. The crisis showed that even well capitalized banks can be seriously affected, if they fail to have adequate level of liquidity. The Basle Committee developed two minimal liquidity ratios, short-term liquidity up to 30 days and second ratio with longer term character and represents structural liquidity ratio.

The damage caused by a period of non-growth, with two recessions, is considerable. There is, of course, structural unemployment, but business investment also declined considerably during this period and has still not regained its 2008 level. Countries have also cut back sharply on infrastructure investment. And has the financial sector stabilised now? The financial sector is on a firmer footing. It has largely been recapitalised. Banking supervision is now carried out at European Central Bank level, and that is a very positive development. But pockets of fragility still exist, for example the level of non-performing loans in some countries. Provisions have been made for these debts, but they are an element of fragility nonetheless. The low profitability of some banks and the level of public sector debt, which is still significant, should also be underscored. Before the crisis, public debt in the euro area represented 60% of GDP, but today it stands at nearly 100%. To conclude, the economic situation in the euro area is improving but remains difficult. The main challenge for the euro area will be to demonstrate its ability to bring prosperity and security. An enormous amount of work remains to be done. To this must be added the political risks of what I call “seeping pessimism”. There is still considerable support for the euro but at the political level greater European integration is still rejected to some extent. That is one of the risks for the coming years.