samchain/econo-pairs-v1 huggingface dataset:
Then I shall look in a more principled way at what the new economy may imply for monetary policy. In this context I shall mainly consider the consequences in terms of higher productivity growth, but I shall also be touching on the new economy’s impact on demand, which has attracted less attention in the public debate. This will be followed by a look at Sweden and the conditions for a new economy and the inflation process. What is the situation here as regards, for example, the use of IT and competition? Has the new economy led to changes in the inflation process? Finally, I shall be saying something about what the Riksbank has to consider in the context of the new economy’s existence or non-existence. My review today obviously will not result in definite answers either way. The questions are too complex for that. Economists are finding it difficult in general to arrive at sound explanations for technical development and growth. The discussion about the new economy is therefore welcome on that account. It can inspire studies of the driving forces behind the technical progress we are aware is so important for our prosperity but about which we unfortunately do not know enough. 1. Starting point: experience in the United States  The American discussion about the new economy was instigated by a generally good economic performance that combined high growth and employment with low inflation. A variety of factors contributed to this achievement.

Mr Heikensten examines different aspects of the new economy and its implications for monetary policy  Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riksbank, to The Riksdag’s Standing Committee on Finance, Stockholm, on 24 February 2000. *  *  *  The new economy, our topic today, is a concept that people are using frequently without always taking the trouble to explain what they mean by it. As interpretations differ somewhat, the discussion is liable to be a little confused. According to the definition most people seem to have in mind, the new economy is a result of a favourable shift in trend productivity that has raised the potential growth rate. This shift is attributed in turn to the development and spread of information technology (IT). Another common explanation for the higher productivity growth is the stronger competition that has resulted from deregulations and an increasingly integrated global economy. Moreover, in that much of the discussion of the new economy originated in the United States in the light of the good economic performance there in the 1990s, emphasis has been placed on the importance of a good macroeconomic environment. My starting point today is the US economy. My primary aim is not to present a comprehensive picture of developments there but rather to highlight the issues that these developments have raised and initiated the debate on the new economy. While my discussion will centre on the advances in IT, for the US economy there have been other beneficial factors.
Chart 3: Variability of default probability estimates(a)(b)(c)(d)(e)  Chart 4: Risk Weight variability in 2011(a)(b)(c)(d)  PD 2007  PD 2009  PD 2011 Mean PD = 100  7.1  Mean RW = 100 250  250 3.4  4.9  200  4.3  200  8.9  3.3  150 100  100  50  50  0 Sovereigns  Banks  Corporates  Source: FSA, and Bank calculations (a) Based on the results of the FSA’s hypothetical portfolio exercises for 2007, 2009 and 2011. (b) Results are based on portfolios comprising assets rated by all respondents in the sample (co-rated). (c) Portfolios differ between the exercises in 2007, 2009 and 2011. Results have been normalised by the mean. (d) Sample sizes differ: six to twelve in 2007 and seven to thirteen in 2009, depending on portfolio; and eight in 2011. (e) The bars show the maximum – minimum ranges. The values on top of the 2011 results indicate the maximum – minimum ratio. BIS central bankers’ speeches  150  0 Sovereigns  Banks  Corporates  Source: FSA, and Bank calculations (a) Based in the results of the FSA’s hypothetical portfolio exercise for 2011. (b) Results are based on portfolios comprising assets rated by all respondents in the sample (co-rated). (c) The sample includes six banks. (d) The bars show the maximum – minimum ranges. The values on top of the 2011 results indicate the maximum – minimum ratio.

Sterling loans to banks and building societies (including related specialist mortgage lenders) to UK resident households and private non-financial corporations. Although only a small rise in absolute terms, according to our business contacts this increase in interest rates was accompanied by generally tighter lending standards, reflected in broader changes in terms and conditions, and came after two years of flat GDP growth and 3 years of declining credit growth to households and businesses in the UK (Chart 6). And despite this being a period in which the MPC re-launched quantitative easing, helping to bring down longer term yields on gilts to record lows. Central banks should not normally have to intervene to provide banks with medium-term funding at reasonable spreads. But enough was enough! The FLS will not address any of the underlying problems in the euro area or in the financial sector, but given that many of those problems are outside the UK’s direct control, it became necessary for us to do something innovative. 8  BIS central bankers’ speeches  I want to use this opportunity today to expound on some of the principles underlying the FLS. It is a deceptively simple scheme and inevitably there will be some misunderstanding about what it is intended to achieve and how it works.3 To begin, I wish to make clear that the FLS has been designed to support the UK economy, not the banks.
As Professor Lin said we had the great recession of 2008 and its immediate aftermath what you found was that three strands of relatively new economic activism manifested themselves. In the first instance you saw a huge pump-priming effort by the People’s Republic of China, which in its wake created perhaps the strongest commodity price boom that we have seen in recent history. That I think was a key take away from that period and China to some extent prevented the world from falling into a depression by stimulating its economy, and as Professor Lin has now elaborated to us, it falls in line with his perception that in times of recession developing countries are well-advised to go ahead and really stimulate domestic infrastructure construction etc. to take on the slack caused by international events. Secondly we saw the major central banks of the world, that includes the United States, the Europe, the United Kingdom, Japan and Switzerland, creating money on an unparallel basis which for my calculations to date add up to about 8 trillion dollars worth of new money created in the last 5 to 6 years. That is significant. That’s the second strand that emanated from this crisis period. And thirdly what we have seen is that the so called developing economies in a curious twist of their economy fate, actually became the biggest creditors in the world and the so called rich countries, the developed countries, were actually the biggest debtors.

the expected loss) that, in relative terms, should equal the average annual net insolvency burden borne by the Spanish banking system in the last fourteen years. This time span covers more than a full economic cycle. You might note that the internal approach to calculate the expected losses or the latent risk squares perfectly with Basel II developments. The new provision has started with a vector of coefficients that will result in a burden lower than this average. This takes account of the improvements in risk management since the last cyclical peak (93/94), and facilitates acceptability of the scheme among institutions. Probably the scheme will be adjusted in the coming years, on the basis of the experience gained with its application. BIS Review 35/2002  5  A limit of three times the annual gross burden has been put on the accumulated statistical provision, to avoid an unnecessary or excessive accumulation of funds in the event of a prolonged cyclical bonanza. At present, the impairment of assets and other credit risk is at an historical low in Spain; and it will remain so in the foreseeable future, due to good economic conditions. The new provision should thus accumulate a significant amount of funds, with a reasonable, acceptable impact on the bottom line of the profit and loss account. Those funds should allow extra solvency losses to be covered when the tide turns. Technically, the new provision is considered a value adjustment.
We also hope we will be quick to escape the fetters of the capital controls and the predicament faced by monetary policy as a result of the debt crisis and the large proportion of foreigndenominated debt. It will then be time to determine a new monetary policy framework. Joining the European Monetary Union could be an option in due time, but it is not a certainty, and in any event, it will take some time to materialise. The most obvious choice is therefore to adopt some sort of inflation target and floating exchange rate. That is a topic for another speech, but for the moment, suffice it to say that the experience of the past several years, both in Iceland and elsewhere, indicates that such an inflation-targeting regime would have to be somewhat different than the pre-crisis regime. It must be much better supported by fiscal policy, macroprudential financial market regulation, and effective financial supervision. It would have to be an “inflation target-plus” framework, which would specifically include accumulating foreign exchange reserves during upswings in the exchange rate cycle and using them in times of need. Thank you. BIS Review 146/2009  5

The second issue is how independence should a Central Bank be? I believe that a Central Bank should be independent within the government because it is the Minister of Finance who has to be accountable to the parliament on issues relating to macro economic, fiscal, monetary and financial system matters. I agree absolutely with Governor Paul Acquah that monetary and fiscal policies must be harmonized in order to achieve macro stability, meaning that a Minister of Finance and a Governor of a Central Bank must work hand in hand to achieve a proper policy mix of fiscal and monetary policies so that sustainable growth can be achieved. BIS Review 53/2002  3  Ladies and gentlemen, I feel that I have taken enough of your time already. Therefore, I would like to conclude that a Central Bank can be considered as having its independence when it can perform its duty of achieving and maintaining price stability without any political or governmental interference, and with honesty and integrity while working hand in hand with the Ministry of Finance to achieve a balanced fiscal and monetary policies mix that lead to macro stability and sustainable growth. Inflation targeting approach is an effective mean to achieve Central Bank independence because it encompasses 4 very important ingredients: operational independence, responsibility, transparency and accountability. Other means can be just as effective if they have these 4 required ingredients.
Distortions in a currency’s valuation, in particular, can justify interventions on foreign exchange markets – even in an environment of floating exchange rates. With regard to the interest rate instrument, it has become apparent that the room for manoeuvre in monetary policy is larger than previously assumed, and that interest rates can be lowered into negative territory. The fear that the introduction of negative interest will precipitate a flight to cash has thus far proved unfounded. 4  Chart 12 shows the deposit rates of Switzerland, Denmark and the euro area. For the Czech Republic, the discount rate is used, and for Sweden, the repo rate minus 10 basis points. In Sweden, this interest rate is available to the banking system within the context of fine-tuning operations by the Riksbank. 5  In Switzerland, the Federal Council introduced negative interest for foreign account holders in the 1970s. For details, cf. Bernholz, Peter (2007), From 1945 to 1982: the transition from inward exchange controls to money supply management under floating exchange rates, The Swiss National Bank 1907–2007. BIS central bankers’ speeches  5  Further monetary policy expansion in the euro area (from mid-2014) Now we come to the third phase, shaped by quantitative easing in the euro area. Economic recovery in the euro area was slow, although the ECB’s promise in July 2012 to do everything necessary to preserve the euro greatly reduced market uncertainty.

Thomas Jordan: Monetary policy in the euro area’s neighbouring countries Text of the SAFE Policy Lecture by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the SAFE Policy Center, Frankfurt am Main, 23 February 2016. *  *  *  The author would like to thank Oliver Sigrist for his valuable support in preparing this speech. He also thanks Simone Auer, Petra Gerlach and Carlos Lenz for their helpful comments, the SNB’s Communications and Language Services units, and Francesca Boucard for compiling the data. Ladies and gentlemen I am delighted at the invitation by the SAFE Policy Center to give this presentation in the “capital” of the euro area. While most of my European colleagues attend ECB council meetings here every few weeks, I have somewhat less occasion to visit Frankfurt. Since Switzerland is not a member of the euro area, the Swiss National Bank (SNB) naturally has no right to take part in or influence the decision-making process here. Yet at the same time, decisions on European monetary policy are of utmost interest to us, since they strongly affect the SNB and Switzerland. This being the case, I would like to speak today about monetary policy in the euro area’s neighbouring countries. I will focus not just on Switzerland, but also on other small open economies, and in doing so, illustrate our experiences – both shared and divergent – since the onset of the financial crisis in 2008.
15  In addition, the Federal Reserve Board has been testing a facility through which it offers term deposits to credentialed depository institutions. Term Deposit Facility (TDF) transactions could be used to temporarily immobilize reserve balances. An eight-week series of tests this summer explored how demand for term deposits responds to variations in the maximum individual award limits and rates. Higher offered rates relative to IOER attracted greater use, both in the number of participants and the total dollar volumes. The next round of TDF testing, which gets underway in October, will incorporate an early-withdrawal feature, as well as gradual increases in the maximum individual award amount and rate. For details see http://www.federalreserve.gov/newsevents/press/monetary/20140904a.htm. BIS central bankers’ speeches  7  Conclusion In conclusion, during normalization the FOMC will continue to communicate the stance of policy through a target for the fed funds rate, and will move the fed funds rate into the target range primarily by adjusting the IOER rate. ON RRPs and other supplementary tools will be used as needed to control the fed funds rate. The Committee will continue to test features of the ON RRPs to determine how a facility might best be structured to supplement IOER in the control of the funds rate while limiting the potential for unintended effects in financial markets. Given the range of available tools, I am confident in our ability to raise short-term interest rates from the zero lower bound when the time to do so arrives.

With a flexible exchange rate regime, there is nothing new about some depreciation in connection with a cyclical downturn. Numerous examples can be cited from all over the world. Basically, in a small, open economy the exchange rate often functions as a sort of shock-absorber. The problem today is that the krona’s depreciation has occurred from a level that was already weak. This amounts to a further appreciable lowering of Swedish manufacturing’s relative costs and thus an increased profit share. Our experience from the 1970s and 1980s has shown that a weak exchange rate can generate inflationary tendencies. Let us not forget what happened in recent years. When the krona weakened in connection with the crises in Mexico, Asia and Russia, Swedish exports recovered quickly and strongly. During the autumn of 1998 exports dropped, order inflows were weak and forecasts where quickly revised downwards; but just a few quarters later production for export was booming again. So it is reasonable to expect that sooner or later, although just when is not clear, Swedish exports will pick up this time as well. But the terrorist attacks have probably postponed the recovery and perhaps even accentuated the slowdown in the short run. It is important to keep an eye on the exchange rate as well as economic activity. On the domestic scene there are some bright spots. Household disposable income, for instance, looks like rising strongly next year.
The Master Plan will provide a road map to achieve a  4/5  convergence towards the common vision among countries in the development of an Islamic financial system. Conclusion In developing and strengthening our Islamic banking and financial system to become more integrated with the international financial system, Malaysia is positioning itself as an Islamic financial gateway to the East Asian region. In emerging on the radar screen of international investors, Malaysia thus not only offering financial communities that want to deal in Islamic financial transactions, but also the international investment community at large, the potential for further opportunities for financing and investment in productive activities. In closing, I wish to say that our mission is for the development of an increasingly international integrated Islamic financial system. I am confident that in taking this approach, it would contribute towards facilitating increased trade and investment transactions, strengthening the global economic and financial inter-linkages, and thereby raising the prospects for more balanced global growth and shared prosperity among the Ummah, InsyaAllah. Thank you. 5/5

That means there is no room for the type of misguided economic policy that characterised the 1970s and ’80s, for example, when Sweden used repeated devaluations in an attempt to rectify the situation. Such failures must be avoided at any cost. Against this background it is not remarkable that the discussion about economic policy with EMU has focused on stabilisation policy. Even so, it is important to start from a broader perspective. The issues to do with stabilisation policy have featured prominently in the Swedish debate. This has to do with a strong Keynesian tradition and the ability of Lars Calmfors and his former colleagues to place the so-called insurance argument in the centre of the whole discussion about a monetary union. The latter naturally has to do with the fact that the very dramatic crisis which hit Sweden in the early 1990s was so closely connected with stabilisation policy. It is hardly surprising that in many other countries the discussion took a very different course before they adhered to the EMU. It is extremely important that our discussion about economic policy – with or without the euro – does not overlook or play down the supply side of the economy. Countries that create conditions for a smooth adjustment of labour markets and a favourable development of productivity will almost certainly do well as members of the monetary union. Measures to this end are naturally warranted in any event – they promote prosperity.
If they materialize, they may reshape the macroeconomic outlook and, therefore, may alter the course of monetary policy. We have identified two types of risks in the external front facing the Chilean economy. Some of them may potentially have a material impact, yet are hard to quantify (such as political-economic uncertainty). Others risks have been mentioned for quite some time, but their likelihood have varied. Regarding the latter, the expected trajectories of fiscal and monetary policy in the U.S. may potentially generate upside or downside risks. China remains a source of concern although its authorities appear to have successfully managed a gradual deceleration without a major disruption thus far. These are probably risks for most economies of the world, but particularly for a small open economy, such as Chile. 16. On the domestic front, after several years of subdued growth, we cannot rule out that a more persistent phenomenon may be affecting the economy’s ability to grow, in which case it would be necessary to revise the public and private expenditure plans. Moreover, while the labor market has gradually adjusted without generating a significant increase in unemployment, it is possible that after several years of low growth, firms require larger personnel adjustments, especially if the expected growth recovery towards the end of the year stalls.

As a result, we used the working assumption that the MPR would follow a trajectory similar to the one implied by financial asset prices during the ten days prior to its statistical closing. In practice, this meant at least one additional 25bp cut. It is always worth remembering that this is a working assumption and as such, contingent to the new developments and their impact on projected inflation. If incoming information points at the necessity of an additional boost or, on the contrary, if this is no longer needed, we will react promptly, communicating the justification of doing so. Consistent with the assumption used in our March Report, in April we decided to lower the MPR by 25bp, to 2.75%. The press release issued then stated that we will assess the need for some additional increase in the monetary impulse, which will hinge on the medium-term inflation outlook (figure 8). This way, our monetary policy continues to be one of the most expansionary in a group of comparable economies. Figure 8 MPR and expectations (percent)  5  5  MPR  4  Financial asset prices, December 2016 Report (*)  3  Financial asset 4 prices, March Report (*) 3  EES Financial asset prices (17 April)  FBS 2 14  15  16  17  18  2  19  (*) Constructed using interest rates on swap contracts up to 10 years. Source: Central Bank of Chile. 15. As usual when making forecasts, our macroeconomic scenario faces several risks.