samchain/econo-pairs-v1 huggingface dataset:
However, my view is that, in certain situations, it can be appropriate to attempt to counteract financial imbalances with a limited tightening of monetary policy. A tightening of monetary policy would be likely to have a restraining effect on credit growth and asset prices. Even if monetary policy does not succeed in entirely preventing financial imbalances from arising, it can limit their extent. The expected macroeconomic consequences following the correction of imbalances should then be less serious, particularly if the risk of a serious financial crisis is reduced. The clear communication of the reasons for increased interest rates should raise public awareness of the risks of financial imbalances, which, in my opinion, may have a stabilising effect. In this example, monetary policy contributes to more stable inflation and resource utilisation over the slightly longer term, which should be balanced against the short-term costs of conducting a somewhat tighter monetary policy. This form of monetary policy thus does not entail a deviation from flexible inflation targeting, that is to say a monetary policy aimed at stabilising both inflation and the real development. Neither is it an issue of turning house prices or any other asset price into a target variable for monetary policy. On the contrary, it is an illustration of flexible inflation targeting in which the destabilising effect of financial imbalances on inflation and resource utilisation are incorporated into the monetary policy assessment.

However, the fact that the Riksbank clearly indicated that the development of household indebtedness and housing prices were not sustainable in the long term and that monetary policy considered this circumstance may have played an important role in curbing this development. In that case, this is exactly what is meant by leaning against the wind. The housing market today Housing prices have recently started to rise again, which has aroused some attention, not without reason. It is undeniably remarkable that housing prices are rising and that the rate of increase of the banks’ lending to households has started to grow again, at the same time as GDP is very weak and unemployment is rising. However, it seems reasonable to believe that this is because it is inexpensive to borrow money due to the low interest rates prevailing. Rising stock market rates and steadily-growing consumer confidence are certainly also significant. Household borrowing to invest in housing is also an effect we actually hoped to achieve by implementing a low interest rate. It is contributing to supporting demand and employment. Even so, household saving has risen rapidly since 2007, from approximately eight to around 13 per cent of disposable income. Over the short term, I do not consider the development of the housing market to be a problem. Housing prices in Sweden have certainly risen rather rapidly in real terms too, but there are good explanations for this.
For instance, the RMB amounts due from and due to overseas banks amounted to some RMB140 billion yuan and RMB120 billion yuan respectively at the end of June 2012. So, does the development of offshore RMB business in other financial centres threaten Hong Kong? I would say that while it is correct to be mindful about competition, we should not lose sight of the business opportunities that lie ahead of us as the pie grows bigger. To maintain and expand Hong Kong’s role as a global RMB hub, we need to enhance our RMB business links with banks and customers in other centres, and I am hopeful about the developments in this direction. Opportunity 2: asset and wealth management services Now, let us turn to the second macro opportunity I mentioned earlier, the greater demand for asset and wealth management services, both institutional and individual. One of the results of the positive growth story in Asia, especially Mainland China, is a new dynamic along the “value-chain” of the asset management industry globally. At the top of the value-chain are the end-investors, sometimes referred to as “asset owners”. They include pension and endowment funds, sovereign wealth funds and private wealth of individuals. This group of investors is primarily responsible for asset allocation. The asset owners would normally invest via asset managers – such as mutual funds, hedge funds and private equity funds – whom I refer to the middle part of the value-chain.

This growth in money was accompanied by robust lending on the part of banks. Although the rate of growth of mortgage loans to households has declined since mid-2012, it is still at a high level. Most recently, mortgage lending to companies, in particular in residential construction, has increased significantly. Overall, lending has been growing faster than nominal GDP for several years. In addition, prices for owner-occupied apartments and single-family homes have risen strongly in the past few years. Given the sustained period of exceptionally low interest rates, there is a risk that the imbalances on the mortgage and real estate markets will increase further. This development jeopardises financial stability and, in the event of an abrupt correction, can have wide-reaching consequences for the real economy. SNB monetary policy Ladies and gentlemen, the SNB continues to face major challenges. In particular, the threat that the Swiss franc could suddenly come under upward pressure again has not been averted. In the current low interest rate environment, therefore, the minimum exchange rate remains the focal instrument for ensuring appropriate monetary conditions. The financial crisis has shown that for balanced economic development more than just price stability is required; financial stability must also be guaranteed. In Switzerland, the fact that the SNB is required to contribute to ensuring financial stability was already laid down in the National Bank Act of 2004. Our annual Financial Stability Report is an important instrument in this respect.
This means that the Riksbank is as anxious that inflation should not be too low as that it should not be too high. In Sweden, the annual CPI inflation rate was negative in February, for the first time since the beginning of 1999. Is there a risk of this development continuing, and what can the Riksbank do if it does? To begin with, it is important to distinguish between whether price trends are governed by developments on the demand side or on the supply side. A period of falling prices is often due to aggregate demand being significantly lower than the total supply of goods and services in the economy. This type of situation can arise for two reasons: One is that demand could fall heavily, for instance, as a result of households for some reason reducing their consumption. The other is that supply could increase significantly, for instance as a result of technological advances leading to increased productivity. While demand-driven deflation is connected with weak production growth, the opposite applies to supply-driven deflation. These are usually termed “bad deflation” and “good deflation” respectively. In practice it is not so easy to distinguish between one sort of deflation and the other. Problems arise when demand is too low in relation to supply.

4  BIS Review 9/2001  Credits The monetary projection for 2001 envisages continuation of the intensified credit activity of banks registered in 2000. It is consistent with the expected growth in the banks deposit potential and the growth in the government deposits with the Central Bank. In 2001, total banks’ credits in favor of the non-government sector should increase by Denar 5,420 million or by 13.1%. Observed by structure, the Denar credits are projected to increase by 10.9%, or by Denar 3,610 million, while the foreign currency credits are projected to increase by 21.5% or by Denar 1,810 million. The monetary policy will be aimed at achieving the projected dynamics of the economic growth in the Republic of Macedonia, creating room for growth of banks’ credits to the non-government sector. Simultaneously, the downward trend in lowering the share of the non-performing credits in total banks’ credit exposure is expected to continue. This should derive from the initiated improvements in the commercial banks’ credit policy, stimulated by the strengthened banks' corporate governance, on one hand, as well as by the continuous strict supervision examination on the banks operations by the Central Bank, on the other hand.
But behind those questions, the clarity of Pi-star as expressed in the form of the inflation target is the touchstone for the MPC’s approach to monetary policy. R-star and Y-star are trickier to deal with. These are both real variables that, at least over medium-term horizons, are largely independent of monetary policy.19 They cannot be determined or even much influenced by the central bank. Moreover, R-star and Y-star are not directly observable. They are latent variables, surrounded by considerable conceptual as well as empirical uncertainty. Researchers don’t always agree on what they mean, let alone how to measure them, and still less what their specific value is at any point in time. The Wicksellian neutral real rate of interest is a concept that may be recovered from the data and interpreted in a specific model context after the fact and with the benefit of hindsight. Even then, that exercise is difficult and unlikely to prove definitive. But R-star is not a very meaningful guide or reference for real time monetary policy making.

Indeed, some characterised the liquidity trap as an absorbing state: the Hotel California of monetary policy, where you can try to check out but can never leave. The experience of Japan since the early 1990s was held up as a salutary example. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  Robust control MINIMAX thinking implies an aggressive response to the threat of falling into such a deflationary liquidity trap. Since the costs of doing so are large and persistent – possibly permanent – the magnitude of the policy response should rise as the risk of entering such a trap increases. Monetary policy should do everything it can to avoid a deflation trap. Go big and go early. If what you have done is not enough, do more. No Brainard-like attenuation in the face of risk here. By nature, when seen in isolation, such an approach is highly asymmetric – and has been criticised as such. But should the implied aggressive easing in the face of deflation prove successful, then the balance of risks and uncertainties faced by monetary policymakers may shift abruptly. If the biggest threat to price stability then became the emergence of a self-sustaining cost / price spiral, then a literal – but symmetric – interpretation of the MINIMAX approach might then entail an aggressive tightening to choke off the threat of such a spiral.
The biggest issue here is not the principles involved, but rather the likely future evolution of yields and asset prices. Here I think it is worth stepping back from recent developments to consider the behaviour of yields over a longer horizon. Chart 8 shows the nominal and real yields on UK and US government debt over the past twenty years. Though yields have dipped recently, the most striking feature of this chart is the general downward trend that was evident for some years even before the financial crisis. The causes of this downward trend are still not well understood. Some have pointed to a global “savings glut” associated with unusually high levels of savings in some emerging economies,9 especially China, which have been more than enough to finance the high levels of investment there. That was reflected in downward pressure on global safe interest rates, as well as the pattern of current account imbalances. While the Chinese surplus has fallen in recent years, reflecting in part efforts to stimulate domestic demand, that has been offset by a widening in the surplus of the major oil producers as increased revenues resulting from high oil prices are largely saved rather than spent. While one might expect the Chinese economy to continue to rebalance towards greater reliance on domestic demand and lower savings, that process is likely to take many years to play out, so an early reversal of that factor holding down yields seems unlikely.

-  On the labour market, reforms should aim at protecting the persons, rather than the jobs. Professional mobility can be accompanied without blocking changes, while further progress can be made at improving risk sharing among employers and employees and fostering education. The gains from taking such steps are only reaped in the long run, while the costs are paid in the short run. In addition the gains can be seen as small from an individual point of view because widespread across a large number of agents, while the costs are more visible, concentrated on fewer beneficiaries who lose their position. This means that the reforms have to be well explained and well designed. Besides, a healthy public finance situation is seen as one of the prerequisites for the success of structural reforms: the degrees of freedom are also limited in that respect. In this regard, modernising public administrations can be a key element to ensure control over expenditure and budgetary consolidation. Appropriate monetary policy has a limited, although essential, role, insofar as it can help create favourable conditions for reform by insuring a stable price environment and therefore reducing overall uncertainty. Taking into account the achievements and the prospects for further reform in the present Euro area, what are the challenges facing the New Member States in the process of convergence and what are the prospects for a successful Euro area integration? In contrast with some gloomy predictions made ten years ago, the Euro is a success story.
In this context, we should bear in mind that while Iceland’s performance in 2011 was good in spite of heavy weather globally in the latter half of the year, it is a small country and cannot remain insulated from international economic developments for long. Monetary policy has been under discussion recently, as it has often been before, and opinion is divided on its optimum stance. There was a turning point in August, when the Central Bank published its forecast that inflation would rise strongly in ensuing months and peak in Q1/2012. It was also projected that Iceland’s economic recovery would continue and that the difficult situation globally would not necessarily intensify enough to derail it. This outlook lay behind the Monetary Policy Committee’s decision to raise Central Bank interest rates by 0.25 percentage points and indicate further increases ahead, which materialised in November and again this March. Another underlying factor was that the real policy rate had fallen considerably in the weeks beforehand. These decisions and the analysis on which they were based have proven correct. The economic recovery gained momentum, and it tolerated turbulence from abroad and modest rate hikes at home, which did little more than prevent the real policy rate from becoming even more negative. The Bank’s rate increases were very controversial at first, but the discussion has become less heated as the underlying analysis has been shown to be correct.

BIS Review 161/2010  7
The most recent of these measures is the activation, in February this year, of the countercyclical capital buffer (CCB). These measures were necessary and useful. For example, this year a  2  BIS central bankers’ speeches  few large domestically focused banks – citing, among other reasons, the activation of the CCB – have taken steps to strengthen their capital and thereby their resilience. So far, however, the package of measures has not been enough to prevent a further build-up of imbalances on the mortgage and real estate markets. In an environment of persistently low interest rates, coupled with banks’ undiminished appetite for risk, the danger of a further build-up of imbalances remains considerable. For this reason, the SNB continues to monitor the situation very closely, and regularly assesses whether the CCB should be adjusted. Supply of secure banknotes ensured at all times Now I would like to say a few words on the subject of banknotes. At the beginning of October, we informed the public that, since autumn 2012, a small number of Swiss 1000-franc banknotes have been in circulation which were not issued by the SNB. As you know, these notes were abstracted during the production process at Orell Füssli, before they had been through all stages of production. Out of consideration for the investigation by the Office of the Attorney General, this information was only made public after some of these notes appeared in Switzerland.

10  Importantly, in addition to the ECB measures, others that have also been conducive to the flow of bank funding to the economy during this crisis are the public guarantee programmes implemented by national governments and the decisions of both macroprudential and microprudential authorities to allow financial institutions to make use of their capital buffers. In particular, the public guarantee programmes would help explain the disparate performance of credit between households and firms in Spain: while the rate of decline in credit to households has increased slightly, credit to productive activity has grown at rates over 7%. More than 40% of all new credit granted to firms comes under the guarantee programme, which reflects its importance in explaining these developments. The ECB also approved a second block of measures, relating to the asset purchase programmes, designed to stabilise financial markets in all euro area countries and neutralise the downward pressures on inflation stemming from the contractionary effects of the pandemic. Since end-February, financial conditions had tightened in the euro area, with both corporate and sovereign risk spreads widening considerably. This widening of spreads implied an increase in financing costs both for governments and firms, which acted as a channel for transmission of the pandemic crisis to the real economy. The spread widening in the euro area was uneven: countries that started from weaker fiscal positions, with higher debt levels, and those that were most affected by the first wave of the pandemic witnessed a much more pronounced increase in their financing costs.
A more automatic system of activation could solve many of these problems, while at the same time introducing an additional automatic stabiliser for the lending and/or the business cycle. However, given that we do not have much experience to date with the working of this tool, the calibration of an explicit policy rule would be premature and the principle of “guided discretion” seems a second-best option. Assesing how to use the different macroprudential tools Let me now turn to the second issue I wanted to tackle. Systemic risk, unlike inflation or the public deficit, is multidimensional and this is why having different macroprudential tools at the disposal of the macroprudential authority is crucial. However, it is not always obvious how to discriminate among the different macroprudential tools, in particular given the potential interactions between them. A first example is the decision to activate the CCyB as opposed to activating a sectoral CCyB. It is perfectly feasible that some credit segments show exhuberant behaviour in the economy without any evidence of the credit cycle being in an expansionary phase. The activation of the countercyclical capital buffer to address a situation of this type does not seem advisable. If this particular activity is sufficiently profitable (at least in the short term) and that is why it is gaining weight in the overall credit portfolio, the increase in the aggregate cost of financing derived from the activation of the CCyB could be counterproductive.

The interest rate has been reduced by 5 percentage points and is now approximately the same as among our trading partners. The krone has depreciated by about 12 per cent over the past year, and has returned to the level prevailing in the summer of 2001 and is in line with the average for the 1990s. Chart 20. After-tax real interest rates Quarterly figures. Per cent 10  10  8  8  3-month rate  6  6 10-year rate  4  4  2  2  0 1990  0 1992  1994  1996  1998  2000  2002  2004  Sources: Statistics Norway and Norges Bank  Monetary policy is expansionary now. This is reflected in low after-tax real interest rates. A long-term real yield on 10-year bonds can be estimated at about 1 per cent. We have adjusted the nominal interest rate for expected inflation. The short-term real interest rate is estimated at 1½ per cent. We have then adjusted the figure for actual inflation. The fall in nominal interest rates in 2003 has also reduced household net interest expenses. This has increased household purchasing power considerably. Chart 21. Labour costs in Norway compared with trading partners Index.
Haruhiko Kuroda: How to sustain economic growth in Asia Speech by Mr Haruhiko Kuroda, Governor of the Bank of Japan, at the Amartya Sen Lecture, organised by the Cambridge Society of Thailand, Bangkok, 21 July 2015. *  *  *  Accompanying charts can be found at the end of the speech or on the Bank of Japan’s website. Introduction It is a great honor to give a presentation in front of such a distinguished audience, especially Mr. Anand Panyarachun and Professor Amartya Sen. I have admired Professor Sen ever since I became acquainted with his work when I studied economics at Oxford, about 45 years ago. At that time, I was fascinated to read not only his elegant theoretical papers on social choice but also his research on poverty and inequality, which has had a huge impact on development economics. Today, I have chosen a topic which is inseparable from the subject of development, and that is economic growth. More specifically, I would like to discuss how we can sustain economic growth in Asia. As Robert Lucas has correctly pointed out, “Once one starts to think about economic growth, it is hard to think about anything else.” 1 Therefore, I will take off my central bank governor’s cap for a while, and there will be no mention tonight of either “unconventional monetary policy” or “quantitative and qualitative monetary easing.” In recent years, the question of how to sustain economic growth has become an increasing preoccupation both within academia and among policy makers.

The debate on the “secular stagnation” of mature economies is one manifestation of this. 2 Given the tendency of regression to the mean, even rapidly growing emerging economies may eventually face similar challenges. 3 In the light of these discussions, whether Asia can sustain its robust economic growth over the coming decades may not be a particularly comfortable question, but it is nonetheless a question worth asking. In the following presentation, I will first consider a number of stylized facts regarding economic growth in Asia. Then, I will move on to a discussion of how economic growth in Asia might be sustained. I. Three stylized facts  The first stylized fact that I want to consider is that Asia has grown almost constantly at a very rapid pace over a number of decades. Chart 1 shows per capita GDP by region. It is quite impressive that Asia, which was at the lowest level in 1950, has outperformed the other regions in terms of growth. In this long-term context, the Asian crisis of 1997–1998 seems to have been just a slight hiccup. The average growth rate over the last 60 years or so is about 4 percent per year. Thanks to the power of compound interest, this makes Asian per capita GDP now 12 times as large as that in 1950. No wonder Asian economies are often characterized as “dynamic Asia.”  1  Robert E. Lucas Jr., “On the Mechanics of Economic Development,” Journal of Monetary Economics, Vol. 22, No. 1, pp. 3–42, 1988.