samchain/econo-pairs-v1 huggingface dataset:
Given that this research was originally focused on the reasons r-star had risen, it’s ironic that I and others have ultimately dedicated much more of our careers to understanding why it’s dropped. In recent years, r-star has been averaging well below 1 percent. And it’s actually now lower than at any time before the Great Recession. One of the reasons for this dramatic decline in r-star lies in changes to the major factors determining potential growth: labor force growth and productivity growth. Baby boomers are retiring and fertility rates have come down. Both of these demographic shifts have significantly slowed labor force growth relative to past decades. Productivity growth has also fallen considerably from the boom years of the late 1990s and early 2000s. All the rapid changes in technology that we see around us every day may make this seem 1/4  BIS central bankers' speeches  counterintuitive. But for the moment, being able to order a Nintendo Switch and have it arrive the same day is, shockingly, not increasing productivity in a meaningful way. I could go on for quite some time on this topic, but will leave it to another day! I should note that these demographic and productivity trends are not unique to the United States. In fact, we’ve seen similar slowdowns in growth and sharp declines in r-star in other advanced economies.1 So why did I take you back to simple days of the millennium bug, when you were playing Snake on your phone and ordering takeout from a paper menu?

It’s 2001: Destiny’s Child is topping the charts, you were marveling over your Motorola flip phone, and I was a young economist at the Board of Governors in Washington, D.C. At the time, I was burning the midnight oil, along with a fellow economist, Thomas Laubach, trying to understand what the burst of productivity growth generated by the tech boom meant for interest rates, both in the short term and in the long run. This led us to develop a model for measuring r-star. I know what’s going through your mind: “What is this r-star that you speak of?” R-star is how economists describe the neutral or natural rate of interest. It’s the rate that we expect to prevail in the long run when interest rates are neither providing a boost to the economy nor trying to cool things down. It’s neither accommodative, nor contractionary. In other words, it’s the “normal” interest rate we expect in “normal” economic times. G-star One of the major factors determining r-star is… you guessed it, g-star! G-star is what economists mean when they describe trend growth, sustainable growth, or potential growth of the economy. The two main drivers of g-star are labor force growth and productivity growth. We started trying to understand where r-star was when productivity growth was very high. During the boom GDP growth averaged over 4 percent per year. Our estimate of r-star for that time was above 3 percent, a full percentage point higher than before the tech boom started.
Willem F Duisenberg: Another step in the direction of a united Europe Address by Dr Willem F Duisenberg, President of the European Central Bank, on the occasion of an audience by Dr Carlo Azeglio Ciampi, President of the Italian Republic, in the context of the meeting of the Governing Council of the European Central Bank in Rome, Rome, 2 April 2003. *  *  *  On behalf of the European Central Bank (ECB) and all members of the Governing Council, I should like to thank His Excellency - Dottore Carlo Azeglio Ciampi - for his kindness and hospitality to receive us today, on the eve of the Governing Council meeting in Rome, despite the geopolitical tensions we are currently facing. Moreover, I should like to thank Governor Dottore Antonio Fazio and the Banca d’Italia for organising this meeting of the Governing Council outside Frankfurt am Main. The Governing Council has decided to meet, in principle, two times a year outside the ECB premises in Frankfurt, in order to emphasise the federal character of the Eurosystem, the collective consisting of the ECB and the national central banks of the Member States that have adopted the euro.

We need to solidify our confidence that our ultimate exit from the zero lower bound will occur smoothly – and in a way that sustains our escape from it. A corollary to this is we should not shy away from policy prescriptions that generate forecasts of inflation that moderately overshoot our 2 percent target for a limited time. Such a policy strategy more properly balances expected costs and benefits. And it would leave me with much more confidence that inflation will not stall out below target once we start raising rates. I agree with Atlanta Fed President Lockhart in thinking that we ought to be “whites of their eyes” inflation fighters. 15 The last thing we want to do is regress back into the ZLB. Indeed, such a relapse would be a sign there was something else going on that was preventing the economy from being as vibrant as we thought possible. To summarize, I am very uncomfortable with calls to raise our policy rate sooner than later. I favor delaying liftoff until I am more certain that we have sufficient momentum in place toward our policy goals. And I think we should plan for our path of policy rate increases to be shallow in order to be sure that the economy’s momentum is sustainable in the presence of less accommodative financial conditions. References Aaronson, Daniel, Luojia Hu, Arian Seifoddini and Daniel G. Sullivan, 2014, “Estimating and forecasting trend labor force participation,” Economic Perspectives, Federal Reserve Bank of Chicago, Vol. 38, forthcoming.
Additional sources of financing that deserve further exploration are through the European Investment Bank, and in particular through the European Investment Fund. The latter offers a venture capital facility whereby it helps venture capital and private equity fund managers to provide risk capital to SMEs. Companies can also benefit from the JEREMIE programme (Joint European Resources for Micro to Medium Enterprises), which promotes increased access to finance for the development of micro, small and medium-sized enterprises in the EU. Over 80% of the balance sheet value of the core domestic banks is funded through customer deposits, considerably higher than the 30% average in the euro area. 2 Indeed, customer loans extended by core domestic banks continue to be fully funded from customer deposits. Meanwhile, Maltese banks’ recourse to Eurosystem funding has been modest, as shown in Chart 12, which measures Eurosystem funding as a proportion of the balance sheet. This in itself is a good sign, reflecting the absence of banking distress. Banks must also exercise caution in the use of such sources. Although conditions are currently very favourable, it must be clear that such terms will not last forever. Banks are thus encouraged to continue using such facilities but not become overly dependent on them. Business models which are based on a disproportionate use of Eurosystem funds are not banking models that the Central Bank feels comfortable with.

The European Systemic Risk Board (ESRB), which is an EU-level body established with a mandate to oversee the macro-prudential oversight of the financial system, recommended the setting up of an authority or body to make recommendations on macro-prudential aspects of the financial system. The Central Bank in its capacity as the macro-prudential authority has agreed with the MFSA, to set up a Joint Financial Stability Board which will be formally constituted in a few weeks. The objective is to enhance the cooperation between the two bodies for the assurance of the stability of the financial system. The intention is to strengthen the resilience of the financial system and to mitigate the build-up of systemic risks. To these ends, the Board’s mandate includes the development of mechanisms that would identify risks to financial stability, and the establishment of the necessary macro-prudential policy tools. The Joint Financial Stability Board will also be able to make recommendations to the CBM or MFSA boards on macro or micro prudential issues, as the case may be. The board is also responsible to follow-up on recommendations made by the ESRB. Second, in the current situation, it must be ensured that fiscal consolidation is not compromised and the commitments under the Fiscal Pact are achieved. The room for fiscal manoeuvre is very limited at this present juncture of contraction in the euro area economy and the current debt-to GDP levels in the Maltese economy. Third, higher productivity allows sustainably higher wages and living standards.
Good examples of this are the work by the G-20, the creation of the Financial Stability Board (FSB), the strengthening of the Basel Committee on Banking Supervision and the changes in the governance structure of the BIS and the IMF. Highly significant progress is being made in international financial regulation, including most notably the regulatory reform of capital and liquidity (known as Basel III), which will come into force in 2013. Both the reforms already approved and those still under discussion within the FSB are geared to countering the problems identified as lying at the root of the recent crisis. Examples here are the measures aimed at smoothing the cyclical fluctuations inherent in the banking system, namely procyclicality, at restricting high-risk activities, at mitigating systemic risks (in particular those arising from the so-called systemic financial institutions) and at setting in place more rigorous and effective supervision. To this must be added the efforts made in Europe, both in terms of governance and crisis management in the EU, and of the revision of financial system regulation and surveillance arrangements. In this respect, a new supervisory structure has been set up in the EU, namely the European Systemic Risk Board, which will be entrusted with the surveillance of risks to financial stability. It will be joined by three supervisory agencies covering banking, markets and insurance, which should contribute to providing for much more fluid and efficient coordination among national supervisors.

9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9  Rather, and in line with the way in which global governance has developed, it requires a relationship built on the assessment of similar outcomes, in a non-discriminatory way, paying due respect to home country regimes in line with FSB norms. Both the EU and UK have I think recognised principle. Second, future regulatory and supervisory arrangements between the EU and the UK need to be stable and built on good faith. This is not primarily because cross border activity beneficial to both sides will not be maintained in an unstable environment – true though that is. It is because abrupt disruption of cross border activity in the financial sector is in itself a source of risk. Of course, even in a relationship grounded on similar outcomes and deference, it must be possible for supervisory and regulatory arrangements to change over time – for one side or the other to conclude that due to changes in the regulatory framework or new challenges handled in different ways, financial stability risk cannot no longer be managed in the current framework. In such a case, additional controls and restrictions on cross border activity may be needed. But these need to be clear and transparent regulatory and supervisory decisions, grounded in evidence and applied within agreed procedures to ensure that their implementation itself does not become a source of risk.
Policy actions may turn out to be ill-timed or miscalibrated in the face of these uncertainties. There is thus an inevitable short-term volatility in UK inflation, which monetary policy makers have  Page 6  to live with. And when the shocks driving that short-term volatility are large, then the amplitude of this short-term volatility in inflation can be large. This story remains an important part of what the UK has experienced of late. Recognising the impossibility of fine tuning inflation developments on a month-to-month basis, the MPC has long emphasised its focus on achieving the inflation target over the medium term. This medium-term orientation of monetary policy is crucial if the inflation target is to be met in a sustainable manner and monetary policy is not to become a source of inflation volatility itself. At present, the desirability of adopting this medium-term orientation is bolstered by the nature of the underlying drivers of UK inflation. The large rises in the prices of international goods and energy not only directly raise UK inflation, but will also weigh on domestic incomes and demand through the terms of trade channel. [10] As a result, in taking monetary policy decisions today, the MPC needs to take account not just of the immediate inflationary impact of higher energy prices in the coming months, but also the potential disinflationary impact of higher energy prices through weaker incomes and demand at longer horizons. This distinguishes the situation we face from that in other jurisdictions – notably from the US.

Third, the statement gives an indication of how the MPC intends to respond to future data developments. In line with the argumentation that I have already offered, it emphasises that the MPC will be focused on ‘indications of more persistent inflationary pressures’ – in my view, this places emphasis on identifying potential second-round effects in price and wage setting behaviour. This helps to clarify how the MPC defines it policy ‘reaction function’ at present, prioritising the more persistent component of inflation developments over the headline spot measure. Fourth, by signalling preparedness to ‘if necessary act forcefully in response’ to indications of  Page 11  greater persistence in inflation, the statement reflects both my willingness to adopt a faster pace of tightening than implemented thus far in this tightening cycle, while simultaneously emphasising the conditionality of any such change in pace on the flow of new data and analysis. Much remains to be resolved before we vote on our August policy decision. How I vote on that occasion will be determined by the data that we see and my interpretation of it. And finally, harking back to the opening section of my remarks, the statement places a direct and clear statement of the MPC’s commitment to return inflation to target at its heart. This is something all MPC members agree on – and the main message addressees of the statement should extract. As I said earlier, it is also the message I would like you to take from my comments today.
With the timely implementation of accommodative fiscal and monetary policies, the world economy has seen a quicker turnaround than originally expected. The most recent economic data indicate that the world economy has stabilized. This was shown by the fact that the recession has ended in several countries with positive quarter-on-quarter growths from the second quarter onward. More importantly, financial institutions that were the origins of the crisis have appeared to become much more stable, though not yet returned to normal. This was reflected by indexes measuring concerns on liquidity and credit risks in the financial  BIS Review 164/2009  1  market such as the 3-month Libor spread and the external debt market spread which have continued to adjust downward. For Thailand, the green shoots started to emerge in the second quarter, owing primarily to a pick-up in the world’s demand, large government’s stimulus packages, accommodative monetary policy and strong economic fundamentals. The recovery of the world economy has augured well for Thai exports as the sector has turned into an expansion of 5.3 percent in the third quarter. As a result, the manufacturing sector in the same quarter grew by 2.6 percent, while the capacity utilization rate rose from a low of 54.8 in the first quarter to reach 62.4 percent at the end of the third quarter. In addition, domestic demand has also been boosted by accommodative monetary policy and a rise in public spending, causing private consumption and investment to grow at 1.0 percent and 3.7 percent respectively in the third quarter.

François Villeroy de Galhau: Challenges for France’s economy and financial sector in 2016 New Year Address by Mr François Villeroy de Galhau, Governor of the Bank of France, Paris, 18 January 2016. *  *  *  Ladies and gentlemen, Thank you for coming here today to this magnificently restored Golden Gallery. This is the first time that I am giving this address as Governor of the Banque de France, but it is an auspicious tradition that brings us together. I would like to start by extending my warmest wishes to you, your colleagues and your institutions. 2016 has already been marked by volatility: weak financial markets and commodity prices, from China and the Middle East; political uncertainty in Europe, in Southern Europe, in Eastern Europe, North-Western Europe with the British referendum, and even in Central Europe with the refugee crisis. It is our duty to be vigilant, but we must also, on the one hand, distinguish real information from background noise and real challenges – and there are no shortages of them – from the sensational and sometimes excessive statements at this start of this year; on the other hand, in the face of current volatility, we must stick to our mediumterm objectives. This evening I will not discuss the Eurosystem’s monetary policy as we are in the “silent period” leading up to the Governing Council meeting this Thursday. Such longterm strategies also apply to the reforms in Europe and in France.
It would fester and be harder to uproot as a result. Such a suggestion is preposterous, and we can simply forget it. The exchange rate of the króna is high in an historical context, to be sure, and a depreciation is factored into the Central Bank’s forecasts. The Bank has emphasised strongly how important it is that the economy begin to cool off before the exchange rate drops too much, so that the depreciation will have less of an effect on inflation. Some think that, instead of using the chief weapon in its arsenal, the Bank should use other means, primarily the reserve requirements. But changing reserve requirements is an obsolete measure that would have a limited and unpredictable effect apart from raising interest rates. After Iceland’s banks were privatised and their international operations began to grow, it was inevitable that reserve requirements here should be similar to those in other countries; otherwise, the competitive position of Iceland’s financial institutions would be quite different – and poorer – than that of their competitors. In developed countries, central banks no longer use the reserve requirement as a tool to combat inflation. It has been said that the Central Bank’s problem is that it is looking in the rear-view mirror when it makes its decisions, whatever that might mean. It is true, of course, that the Central Bank looks both at the present and the past when it examines indicators of likely future developments.

Davíð Oddsson: The ongoing battle against inflation Opening address by Mr Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, at a breakfast meeting of the Iceland Chamber of Commerce, Reykjavík, 6 November 2007. *  *  *  Last Thursday’s decision by the Board of Governors of the Central Bank of Iceland to raise the policy interest rate appears to have taken many people by surprise, though few seem to view that surprise as a welcome one. However, the Board of Governors considers that, over the past several months, it has issued a number of signals indicating the possibility of a policy rate hike. On the last two interest rate decision dates, in July and September of this year, the Bank emphasised strongly that the short-term inflation outlook had deteriorated and that, in the absence of a change for the better, it would respond in line with its duties. On the latter decision date, in September, it could be discerned that the Bank wished to wait yet awhile to see if the outlook would improve against all odds. It wanted to see the outcome of the turmoil in the global and domestic financial markets in August, and to see how the budgetary bill for next year would be received.
The chart shows labour costs in Norway compared with trading partners, calculated using a common currency. The real exchange rate measured by relative labour costs in a common currency is an expression of the cost competitiveness of Norwegian companies. The real exchange rate has varied considerably over time. Nevertheless, there has been a tendency for the real exchange rate to revert to earlier levels. The point for 2006 shows the real exchange rate with the wages projections for 2006 presented in the latest Inflation Report and the exchange rate level so far this year. The real exchange rate has been stronger in recent years than in the latter half of the 1990s, largely because of a stronger nominal exchange rate. The corollary to this is a marked improvement in Norway’s terms of trade. The sharp rise in prices for oil and other Norwegian export products have contributed to the appreciation of the krone in recent years. The real krone exchange rate has appreciated because the Norwegian economy is faring well. Developments in the real krone exchange rate do not provide a full description of competitiveness. Relative hourly labour costs are taken into account, but not productivity growth. If higher relative hourly wage growth in a country partly reflects higher productivity growth, an appreciation of the real exchange rate by this measure will not necessarily imply a deterioration in competitiveness. The analyses in Inflation Report 2/2006 point towards a relatively stable exchange rate and somewhat higher wage growth in the next few years.

The resilience of equity flows shows that they have better risk-sharing properties than debt.8 So, even though important measures are taken to reduce trade balances (sometimes at a high cost), the way these current account deficits have been financed continues to impact current and future current account imbalances, thus limiting the efficiency of demand rebalancing. Valuation effects and income flows are increasingly driving net external positions, more than the trade balance itself [slide 10]. This implies keeping a close eye on the types of financial flows which finance current account imbalances, and watching out for the relative contribution of FDI, equity, debt and banking flows to the build-up of external imbalances as well as the exchange rate exposure both on assets and liabilities. 3. So what are the possible policy responses to limit excessive global imbalances? Let me start by stressing what the non-adequate responses are. First, protectionism is a temptation but it is not an option. From a macroeconomic point of view, an increase in protectionism is recessionary and inflationary, acting as a negative supply shock. Furthermore, as the current account is determined by the balance between savings and investment, there is no clear evidence that trade policies are likely to affect both variables. For example, due to the increasing integration of global value chains, any increase in tariffs on imported inputs immediately translates into higher production costs, thus undermining export competitiveness.