samchain/econo-pairs-v1 huggingface dataset:
At the global level, the fall of the Soviet empire, the conversion of emerging Asia to market economics, accelerating advances in science and innovation in information technology and a deepening and widening of globalised financial markets have all been, or are, part of the powerful phenomenon of globalisation. At the European level, the adoption of the euro by 12 countries, structural reforms in goods and labour markets and the enlargement of the Union are some of the key developments in this respect. Therefore, disentangling the shocks that continually hit the euro area economy and assessing their impact on the risks to price stability in real time remains a very demanding task, in spite of the progress made in statistical data compilation, economic theory and econometrics over the past decades. In such a complex environment, a single model or a limited set of key indicators is not a sufficient guide for monetary policy. Instead, an encompassing and integrated set of data is required. The development of statistics for the euro area and the future priorities for further enhancements reflect this requirement. A rich set of timely statistical data is a necessary but insufficient precondition for sound monetary policy-making. Only if the information is structured and analysed in a consistent way will monetary policy makers be in a position to take the most appropriate decisions to obtain their policy goals.

Let me elaborate a bit more on these three themes: the need for an encompassing and integrated set of data, the achievements of, and outlook for, euro area statistics and the ECB’s framework for analysing this information. Monetary policy and the need for an encompassing and integrated set of data If we lived in the world of macroeconomic textbooks, a few simple models with a limited set of variables would be a sufficient basis for monetary policy-making and the statistical requirements could be kept to a minimum. As we all know, the real world is much more complex and, therefore, information needs are much more elaborated. In such a world, a rich and integrated set of data is needed because macroeconomic models, synthetic indicators and unconnected statistical indicators are often too rough a guide to the current and likely future development of the economy. As mentioned before, central banks have to take decisions under conditions of constant uncertainty. The economy is never at rest. A multitude of disturbances of diverse nature affect the economy all the time: financial shocks, demand shocks, supply shocks etc., and these cannot easily be distinguished in real time, let alone foreseen. In their attempts to identify disturbances and track how they spread through the economy, central banks are assisted by models. But too often, existing models are not sufficiently sophisticated instruments to identify shocks. For one thing, their focus may be too narrow, in a way that makes them  BIS Review 67/2004  1  unduly selective.
The neutral interest rate normally refers to the real rate of interest that has neither an expansionary nor a contractionary effect on the economy. 1 Central banks cannot influence the neutral interest rate but they must consider it when they adjust their policy rates. It is the relationship to the neutral interest rate that determines how expansionary or contractionary a particular monetary policy is. By causing the short-term real interest rate to temporarily deviate from the neutral interest rate, the central bank can affect resource utilisation and inflation via different channels. I would like to thank Mikael Apel for his assistance with the text for this speech, Emelie Theobald for help with the diagrams, Elizabeth Nilsson for translation to English and Kerstin af Jochnick, Björn Andersson, Meredith Beechey Österholm, Charlotta Edler, Rebecka Hallerby, Stefan Laséen, Åsa Olli Segendorf, Marianne Sterner and Ulf Söderström for helpful comments. 1 For a more detailed description, see for instance Kaplan (2018). ∗  1 [24]  One important problem with the neutral interest rate currently being so low is that monetary policy has less scope to stimulate the economy when necessary, as it is difficult to cut the policy rate as much as would be required. Moreover, estimates of the neutral interest rate and its driving forces usually indicate that it will remain low for a fairly long time to come. 2 This raises difficult questions both in the shorter and slightly longer perspective.

A couple of the rate-cutting phases we have had during this period have also been a little unusual. What happened in 1996 in particular, when the repo rate was cut from almost 9 to just over 4 per cent, was largely a question of confidence in the inflation target become established and enabling a substantial cut in the policy rate. The substantial rate cut in connection with the global financial crisis, from 4.75 to 0.25 per cent within the course of a year, was also special, as crises of this kind are fortunately rare (see Figure 3). In the United States, which has a longer history of a floating exchange rate, it is usually estimated that the policy rate is cut by around 5 percentage points in economic downturns. 5 It is reasonable to assume that in Sweden, which is a small open economy, a larger share of the adjustment in an economic downturn will come through the exchange rate than is the case in the United States. Let us say, without claiming any scientific exactness, that it would be desirable to cut the repo rate by 2.5–3 percentage points in a normal economic downturn. If the downturn were to occur at the beginning of 2021 and the policy rate were cut  4 Rudebusch (2016) shows that the probability of an economic upturn being broken does not now increase in  proportion to the time it has lasted. However, this was the case with the economic upturns prior to the Second World War.
In addition, collateral security must, as stipulated by the attendant regulations, be assessed as a market value calculated in a manner that is prudent and sustainable over time, i.e. it is possible that the experience of potential losses in adverse situations over the last twenty years may not be consistent with the characteristics of the current situation. This has to be taken into account by institutions in calculating the capital consumed by real-estate loans under the advanced Basel II approaches. But this need for prudent assessment is not limited to credit institutions: appraisal companies play a key role in Spain’s financial system and hence it is essential for them to operate under the clear prudential guidelines laid down in their specific regulations. The sustainability of results, their recurrence, the diversity of income sources and the ongoing search for efficiency are needed to strengthen the line of defence represented by the high profitability of Spain’s institutions. In this respect, we must not overlook the behaviour of the liabilities side of bank balance sheets. The financing of this high volume of assets has been made possible by their access to efficient financial markets after Spain joined the euro area. This enabled them to supplement their traditional deposit-based financing, which despite its strong momentum is insufficient to finance lending activities.

The dollar’s fall in the period 2002-04 has not prompted a turnaround in the progressive widening of the US external deficit, either because, as is well known, depreciations tend only to correct currentaccount deficits with a lag, or because of the aforementioned asymmetry in the behaviour of the dollar against the main currencies and the fact that it has scarcely depreciated against the currencies of the countries that are running the counterpart surpluses. In turn, in a situation of large current-account surpluses and strong capital inflows, the Asian countries with de jure or de facto fixed exchange rates against the dollar continued to build up sizable international reserves. The need of the Asian central banks to place these reserves also partly explains another salient feature of economic developments in 2004: the maintenance of long-term interest rates at abnormally low levels. This is also largely attributable to the persistence of low inflation expectations, set against highly credible counter-inflationary monetary policies, and to the conditions of ample liquidity in which international financial markets operated. For much of the year, European bond yields were markedly synchronous with their US counterparts, despite the different position of the fundamentals of the two economies. From November, however, European rates declined, moving progressively away from US rates so that the yield spread between these areas widened considerably. This more recent development is consistent with the uncertainty over economic recovery in the euro area and the brighter outlook for the US economy.
Ivan Iskrov: Financial progress and prospects Speech by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, at the Sixth Business Roundtable with the Government of Bulgaria, Sofia, 21 March 2006. *  *  *  Dear Minister Oresharski, Ladies and gentlemen, It is a pleasure for me to participate together with the Minister of Finance in this panel event dedicated to the financial development and prospects of this country’s economy. Based on the statutory division of labour between the Central Bank Governor and the Finance Minister on the one hand, and between the Central Bank and the Government on the other, in my speech I will deal mainly with the issues relating to the country’s external position, the development of bank lending and inflation, and the impact these variables have on the BNB’s policy. I would like to immediately underscore that these issues cannot be discussed, outside the context of economic growth prospects, the accession of our country to the EU, and the trends of development in world economy. For better understanding of Bulgarian economy in the recent years, several global trends influencing significantly the development of our economy should be highlighted. Firstly, the dominance of the principle of free trade and the liberalization of capital movement, combined with the investors’ increasing propensity to hold assets issued by third country residents, brought about the on-going growth of international trade and exchange of capital.

Looking at the prospects and having in mind the country’s strategy for expeditious accession to the euro area, however, this is a macroeconomic variable which faces the country with the greatest challenges. The inflation criterion, as defined in the Maastricht Treaty (this is not the place to deal with the issue how good this definition is), is very strict and requires a purposeful policy going beyond the monetary and fiscal policies. In Bulgaria’s case, under the currency regime of fixed exchange rate and extremely conservative fiscal policy, untapped prospects should be sought in encouraging competition and improving the business climate, thus ensuring to the economy the flexibility to respond to exogenous changes (including with regard to the prices of raw materials) and enabling supply to react more promptly to increases in demand (both domestic and external). In the past year, inflation reached 6.5 % under the strong proinflationary impact of the increase in the prices of energy resources (direct contribution of 1.0 % in the overall price increase).In addition, the largescale floods resulted in an unexpected increase in foodstuff prices (contribution of 2.6 % in the overall price increase). This year, inflation is expected to decline to 6.0%. The slow process of decreasing inflation is mainly determined by the harmonization of indirect taxes with the minimum levels in the EU, pursued early in the year.
At the heart of those distortions lay turmoil in the government bond market – the largest capital market in the euro area. The government bond market is extremely important for price formation in other capital market sectors – for bank and corporate bonds, for example. Spreads between the yields on the government bonds of euro area countries increased to levels that, in a number of cases, significantly exceeded those justified by fundamentals. Yields on Spanish and Italian ten-year government bonds incorporated premia of more than 6 and 5 percentage points respectively relative to German government bonds. Even at the short end of the yield curve, distortions could be observed: in July 2012 the yields on Spanish and Italian two-year government bonds peaked at 6.6% and 5.1% respectively, while the ECB’s main refinancing rate was 0.75% at that time. Those spreads could, in part, be attributed to concerns by market participants regarding the sustainability of public finances. Fiscal reasons alone did not provide a full explanation, however, because the rapid rise in spreads in the first half of 2012 was not accompanied by an equivalent deterioration in those countries’ fundamentals. At the same time, there was an acute risk that contagion would affect other euro area countries, pointing to systemic risks that were not limited to specific countries. A key factor driving those developments was fears in the markets regarding an involuntary break-up of the euro area – i.e.

fears concerning the “reversibility of the euro” and the  BIS central bankers’ speeches  1  associated implicit exchange rate risk. This view was supported by model calculations which showed that, in July 2012, the spread that could not be attributed to fundamentals stood at up to 2 percentage points for Italian and Spanish two-year government bonds. There were also signs that international firms were hedging against the risk of individual Member States leaving the euro area. Britain’s financial supervision authorities were advising financial institutions to be prepared in the event of the euro area collapsing. Moreover, Spanish and Italian banks lost their access to market-based financing instruments. Between April and July 2012 Spanish bank bonds to the value of € billion matured, but no more than € billion of Spanish bank bonds could be newly issued during that period. Against that background, we had to conclude that, in individual parts of the euro area, the steering of monetary policy was not functioning fully, or was in part not functioning at all. The key interest rate had lost its key function, with considerable disruption of the transmission of monetary policy on account of the implicit exchange rate risk. This economic environment clearly pointed to a significant credit crunch and a severe decline in economic activity. There was a risk of an incipient deflationary spiral – a process involving continual declines in prices. Price stability would then no longer have been ensured across the euro area.
By end-2007, consumer inflation had reached 8.4 percent, exceeding the 4-percent target. However, the fall of core inflation (which excludes items beyond the control of monetary policy such as food and energy) to 4.8 percent confirmed that the monetary tightening implemented in 2006 was the right policy choice. During this period, domestic demand and capacity conditions also continued to support the disinflation process. In early 2008 the supply side shocks in food and energy prices started to exert significant inflationary pressures, as they reached unprecedented levels above and beyond expectations. For instance, October 2007 Inflation Report, based on forecasts of international agencies, had foreseen oil prices around USD 70 per barrel in 2008 and a gradual correction in food prices. In other words, it was assumed that supply side shocks would be temporary and that they would lose impact after a while. These forecasts were in line with pricing in forward and futures markets. However, these expectations did not materialize. Both crude oil prices and agricultural commodity prices continued to rise. The adverse impacts of supply shocks reached unprecedented levels during the first half of 2008. 4  BIS Review 82/2008  Under normal circumstances, supply shocks are expected to have a temporary impact on relative prices, not changing the course of medium-term inflation. Nevertheless, the emergence of multiple shocks at the same time and their persistence for a considerable period aggravated the risks on pricing behavior.

At times during the 1970s and 1980s, when the so-called anglo-saxon model of relatively unbridled financial markets was not delivering particularly good results in terms of economic growth, there was some envy of what one might depict as the institutional model of corporate ownership, as evident in Germany and Japan for example. In this model much of the equity of major businesses is closely held by friendly groups of long-term investors including one’s bankers and associate companies. It has been argued that this arrangement provides the best environment for long-term growth and stability, in contrast to the situation where businesses are exposed fully to the cut and thrust of the stock markets, which are characterised as being populated by people seeking only short-term profit and ever alert to opportunities for takeovers, asset stripping and the like. But experience of the 1990s does not support that view. Germany and Japan have been the laggards of the decade. The true cost to Japan of the longstanding cosy relationships between banks, industrial corporations and government ministries has become apparent. And we watch in some amazement the reaction among some sections 1  BIS Review 135/1999  of the political and business communities in Germany to the Vodafone/Mannesmann takeover battle an almost unprecedented (for Germany) hostile bid, no more palatable for being from abroad - along with the government’s efforts to save the Holzmann construction group, not to mention the authorities’ stout defence of the largely state-owned domestic regional banking network there.
Except for a few interludes, they have partied along for decades using the people’s money as though life were an endless summer, storing nothing to draw upon for the blustery fall and the bleak winter that inevitably follow. Now a fiscal reckoning is upon us. The gig is up. Congress can no longer carry on as before, oblivious to the deleterious effect of spending our, and the successor generations’, money with unfunded abandon. Tongue firmly in cheek, Carol Reed might have reminded us that there are alternative versions of this fable. In 1924, Somerset Maugham wrote a version about two brothers: one an ant-like hard worker and the other a grasshopper wastrel. In the end, the grasshopper marries a rich widow who dies and leaves him a fortune.2 Case closed! In Things Change, a film released by Columbia Pictures in 1988, the character played by Don Ameche recites a version in which the grasshopper, fed up with all this moralizing about the virtues of hard work and saving for a rainy day, just up and eats the ant. I think we can safely assume that neither of these scenarios will occur. No one is going to bail out the government at the last minute. The ants that are the hard-working taxpayers are, if anything, poised to chew up and spit out improvident politicians should they fail to put an end to fiscal profligacy.

In their solution to the debt crisis, our political leaders must develop an entirely new structure of incentives for private businesses and investors to put their money to work creating jobs here at home. Only fiscal authorities have the power to affect this outcome. Monetary authorities, like me and my colleagues on the Federal Open Market Committee of the Federal Reserve (FOMC), have limited influence. We can fill the gas tank with attractively priced fuel – abundant and cheap money – needed to propel the economy forward. But we cannot trigger the impulse to step on the pedal and engage the transmission mechanism of job-creating investment by the  2  2  See Collected Short Stories, by William Somerset Maugham, New York: Penguin Books, 1972. BIS central bankers’ speeches  private sector. This is the province of those who write our laws and regulations – the Congress of the United States. I firmly believe that the Federal Reserve has already pressed the limits of monetary policy. So-called QE2, to my way of thinking, was of doubtful efficacy, which is why I did not support it to begin with. But even if you believe the costs of QE2 were worth its purported benefits, you would be hard pressed to now say that still more liquidity, or more fuel, is called for given the more than $ trillion in excess bank reserves and the substantial liquid holdings above the normal working capital needs of corporate businesses.
Or will protectionism rear its head? Although these may be slow burn, gradual issues, they could over time have a significant effect on labour supply. I would expect that those involved with monetary policy will have this area on their radar screens for many years to come. Such a new way of thinking about the labour market alters how we need to think about capacity in the economy in general and indeed the output gap in so many areas of the economy. Pensions and longevity The last of my four areas today is longevity and pensions. I hesitate to mention it, because for many this is an area more for social policy than for monetary policy. But for me there is a clear monetary policy dimension. I will not attempt a long commentary on the underlying issues. We are all familiar with the facts, both as they relate to the need to anticipate working longer; and to the policy of governments in many countries of transferring risk in pension provision from the state towards the individual. In addition we are increasingly aware that returns on many asset categories that are suitable for inclusion in pension funds have been more modest in recent years. For monetary policy the key issue is how and over what timeframe will these changes impact on savings, which at a domestic level are likely to have to increase to provide adequate income in retirement.

In particular how best to assess the sometimes bewildering quantity and variety of data; yet to keep a sense of perspective in relation to the big issues. There is for example the need to understand the implications of the frequent data revisions and updates: how to think about them and what conclusions we need to draw ahead of the next policy decision. But it is the big picture issues, all of which have puzzling unknowns, which have fascinated me most. We spend considerable time reflecting on these in our quarterly forecast round, when we estimate the course of the economy and inflation three years ahead. The November Inflation Report was published a couple of weeks ago and provided an analysis of the UK economy, the factors influencing policy decisions and the MPC's latest forecasts for inflation and output growth. The models of the economy that we use to produce these projections provide a framework to organise thinking on how the economy works and how different economic developments might affect future inflation. The forecasts need to reflect the uncertainty in the economy. The technique we rely on is “fan charts”. [Chart 1] They show the Committee’s best collective judgement about the balance of risks and uncertainty around the central case. It means that members can agree on the overall outlook and balance of risks, even though they may come to that view for slightly different reasons.