samchain/econo-pairs-v1 huggingface dataset:
In the identification of its policy orientation, the ECB bears in mind that an inflation rate too close to zero restrains the conduct of policy in deep recessions and it also filters out a host of factors that distort the measurement of the policy-relevant drift in prices. 3 Third, the strategy describes and structures a host of economic and monetary variables which can signal risks to price stability before they materialise. This set includes important monetary and financial variables which influence the way monetary policy intentions are transmitted to price-setting decisions in the medium term. As I said, the strategy turns the Treaty assignment into an action plan which, if I may borrow from performance management jargon, I would call S.M.A.R.T. — Specific, Measurable, Attainable, Relevant and Timely. Let me focus on the “M” and “A”. The action plan is measurable, and we can assess the ECB’s progress towards that goal by looking at its record. Prices since the start of the euro have indeed been stable and in line with our definition. The average inflation rate over the past 13 years has been slightly higher than 2%. 4 The goal was attainable and it was attained. Monetary policy and lack of trust in the integrity of the euro area Over the summer the price of bonds issued by some governments in the euro area fell on concerns that investors’ claims could be discharged by the issuer in a currency other than the euro, the currency of denomination.

Before I conclude, let me briefly turn to the issue of accountability, which – as I said in my introduction – is essential to secure and reaffirm trust in the central bank. For the ECB, accountability to the people of Europe is not only a matter of good accountability practices. It is important for the central bank of a currency union to reach out to the whole euro area, to people in all parts of Europe and to spread trust in our currency, our institution and our policies. As I mentioned, the ECB is accountable to the people of the European Union and – as that Union is a representative democracy – to the European Parliament, which is the only European institution elected by popular vote. Our President regularly visits Parliament to report on and explain the ECB’s policies. The Governors of the national central banks in the Eurosystem have similar hearings before their national parliaments. In addition, we have a continuous dialogue with all relevant institutions involved in the European political process, such as the European Commission, and we have regular exchanges with the finance ministries of the euro area Member States. We also regularly report on and publish our monetary policy decisions. This panel today is one such occasion. Especially in times of crisis, when policies become less conventional and more complex, it is all the more important to carefully explain our decisions.
Likewise, as supervisors we should strive to avoid financial crises, by applying supervisory tools to mitigate risk accumulations as well as reinforcing banks’ management capabilities; but, at the same time, we should work with a longer-term perspective to complete the institutional framework, in case a crisis still occurs. Thank you. 5/5

One is that house price developments in the country as a whole – as indicated by the analyses in the Financial Stability Report we published about a month ago – seem to be explained pretty well by normal underlying factors. These include of course the interest rate level, which for a relatively long period has been low. At the end of 1996, when house prices began to rise again after the crisis years, the average nominal mortgage rate for households was around 9 per cent. Today, it is approximately 4 per cent. Furthermore, households’ disposable incomes have grown firmly during this period. Another factor, of course, is the developments on the supply side, where construction of new homes has been very modest. This fell dramatically in conjunction with the crisis in the 1990s and has only begun to pick up in recent years. So it appears that the upswing in house prices has not been driven by general overoptimism among households and lenders. It might also be worth mentioning here that one reason why the elements of pure speculation probably are small is that Swedish households, unlike those in some other countries, mainly buy homes to live in and not as an investment. The risk of speculative price formation increases in countries where it is common to buy-to-let, with the investor waiting for the home to rise in value before realising a capital gain.
The situation in Sweden’s financial markets then improved as the measures for consolidating government finances began to bite, prospects for Sweden’s economy brightened and international developments became more stable. During 1995 the Swedish krona became markedly stronger and long-term interest rates declined. This trend continued during 1996, when the Riksbank rapidly lowered the repo rate. At the end of 1996 the level of the TCW exchange rate index was 114, which was inside the Riksbank’s estimated interval for long-term equilibrium. For about two years, from the summer of 1996 to the summer of 1998, the krona stayed inside a relatively narrow interval in relation to the German mark, about 3 per cent around a mean level of 4,40. In effective TCW terms, however, the krona weakened. There are good reasons for supposing that this was due to other factors than problems with credibility. The link between exchange rate movements and the long-term interest rate differential was no longer discernible, which indicates that the krona’s path now had less to do with aspects of credibility. The main explanation for the weaker exchange rate in this period lay rather in cyclical differences. Stronger economic growth in the UK and the United States caused the dollar and sterling to appreciate against the krona. Turbulent autumn In the autumn of 1998 the krona weakened again, mainly, in the Riksbank’s opinion, on account of international turbulence.

Some years ago we published estimates of the exchange rate in this equilibrium; we also indicated an interval for the real TCW exchange rate index that has subsequently been cited by many journalists and market players. Estimates of that type are not, however, a direct guide to the krona exchange rate that would be appropriate for ERM2 membership. Other factors that have to be considered include the economic situation in Sweden and the rest of the world. Moreover, the estimates are expressed in terms of the TCW index, which covers all the rates for Sweden’s foreign trade, not just the euro area. The assessment must also allow for the fact that, at least in the coming years, the Swedish economy will not be in long-term equilibrium, which implies both internal and external balance. It should also be borne in mind that however sophisticated, calculations of this type do not yield precise results. In recent months the TCW index has fluctuated between 124 and 125. This is some way from the estimated long-term equilibrium range. The main conclusion from our earlier studies—that in the longer run it is reasonable to expect the krona to strengthen—still holds. But it does seem reasonable to count on this being a gradual process that emerges as the economy approaches a situation with both internal and external balance. On various occasions in recent years it has turned out that we were over-optimistic about the adjustment’s future rate.
Rigidities, whether in institutions, markets or work practices, that impede progress towards cost  6  The Sustainability of Malta’s Social Security System: A Glimpse at Malta’s Welfare State and Suggestions for a Radical Change of Policy, Today Public Policy Institute, July 2009 and Sustainability Report 2009, European Commission. BIS Review 154/2009  5  competitiveness and higher productivity are incompatible with enduring membership of the currency union. They also render the common objective of raising living standards less likely to be achieved. Needed structural reforms are being implemented, but given the uncertain growth prospects in export markets, the change process needs to be accelerated and given greater focus. The directions for change I have suggested are by no means original because they emerge spontaneously from an analysis of the current state of the economy. They do, however, imply difficult policy choices, not least because they often entail a departure from established practices and the loss of acquired rights. This is undoubtedly a major challenge, but it is also one that cannot be avoided if we want Malta’s boat to be lifted by the rising tide, when it comes, along with those of other countries. 6  BIS Review 154/2009

1 The Market Advisory Group (MAG) in the framework of the ESY € project 2 4/5  BIS central bankers' speeches  2 European Payments Initiative  5/5  BIS central bankers' speeches
Consequently, the capacity utilisation rate of the industrial sector remained at 56 % on average for the year. Capacity utilisation rate did not expand significantly was due to the fact that many manufacturing industries for domestic market were affected by the deceleration in domestic expenditure which led a number of industries to operate at less than half of total capacity namely beverages, automobiles, and iron & steel products. Another reasons being that those export-manufacturing industries which have performed well have been expanding their capacities. For example, the electronics industry, where the capacity in the integrated-circuit sector has increased by 65 % since 1997. With excess capacity prevailing, demand for new investment has been low, thus reducing the role of investment in propelling economic recovery. Moreover, some firms halted operations temporarily as the result of debt problems, adding to excess capacity in the system. This year, the recovery has been propelled mainly by export. Industries geared to export markets expanded by 22 % on average, while industries selling to domestic markets contracted by 7.5 %. Exports which saw high growth rates were in the hi-tech manufacturing products group, the export value of which rose by 30 %. This group comprises such products as integrated circuits, electrical appliances, automobiles and computers. In addition, firms that have upgraded product quality and competitiveness in labour intensive industries such as garments have also recorded buoyant exports. Such development pointed to an adjustment in the right direction.

It translates into Thai "Do not be afraid to walk slowly. Be afraid to stand still." Let me end by stating that the Thai economy is ready. But readiness can not stand still forever. Let me end my speech by paraphrasing this saying. If Thailand were not to have a second wave, a second crisis: "Do not be afraid to walk fast". Thank you for listening. BIS Review 6/2001  7
What really counts is the direction for monetary policy on the basis of the information available at the time the decision is taken, not what should have been done if it had been possible to predict the future with perfect accuracy. When we experience major disturbances or changes in the economy, we cannot merely concentrate on the effects on prices. Let me illustrate this with reference to oil prices. If we assume that oil prices rise. Inflation rises, which means that real wages fall, partly as a result of petrol and heating oil becoming more expensive, which means that consumers have less money over to spend on other goods. This leads to a decline in demand and thereby in prices on other goods. Higher oil prices can thus lead to both rising prices and lower demand, which in the long term will once again subdue inflation. It is difficult to predict oil prices as they do not always reflect the demand and supply situation, but are also connected to politics. The current situation can illustrate this difficulty. Are oil prices rising because the increase in global demand and growth is higher than was assumed, or is the political uncertainty in the Middle East the most important factor? What is the resource situation within the economy? A price rise that occurs when resource utilisation is on its way down can lead to a rapid and profound decline.

Changes in production methods, including an altered pattern for adapting stocks and new technology, may have enabled the demand and supply for both goods and capital to be matched more quickly than before, which contributes to the milder downturns and longer upswings. A further factor that could have contributed is that the percentage of services in GDP has increased and the production of services has shorter lead times. Expansive economic policy - good years for the Swedish economy A low inflation rate and tidy public finances have provided room for manoeuvre when facing a downturn in economic activity. A changeover towards a more expansionary economic policy in a large number of industrial nations has laid the foundation for the recovery this year. In the USA there was a substantial change in monetary policy at the beginning of 2001. On top of this came considerable fiscal policy stimulation. Monetary policy in Europe and Sweden has also been expansionary. However, many large countries in Europe are still struggling with large budget deficits, which have limited their fiscal policy scope for action. Last year Sweden had one of the largest surpluses on public savings in the EU. This has enabled an expansionary fiscal policy. This year households’ disposable incomes are expected to increase by almost 5 per cent, almost 80 per cent of which comes from increased transfers and lower taxes and charges. Such a large increase in income has only happened on a few occasions over the past decades.
Finally, in the past few years, macroprudential tools have been developed to tackle risk stemming from the traditional banking sector. Macroprudential policy has thus mainly been implemented as a form of banking regulation. As a consequence, resilience in that sector has increased. But, on the other hand, the non-banking sector is increasing rapidly and so, most likely, is risks related to it. This being my third and final issue, I think it is most important that we increase our understanding of these changing trends and the risks they entail, and that we start developing macroprudential instruments that can counteract these risks. In order not to fall behind the curve, work on developing new tools should start promptly, as it will take years before such instruments can be in place at national levels. 1  See also Skingsley, C., (2015), Inflation-targeting policy after the financial crisis, speech at Almega, Stockholm 2015. BIS central bankers’ speeches  1

Much of the credit for this belongs to the European Central Bank (ECB), whose steadfast commitment to price stability has created an environment conducive to investment, reflected in the fact that interest rates are low across the yield curve. The ECB’s credibility in fighting inflation is now so well established, moreover, that long-term inflation expectations are well anchored at around 2%. Price stability clearly yields important welfare benefits. So there are both advantages and opportunities for policy makers and economic agents in the euro area. But in setting out on this new phase of Malta’s economic development, we must be aware that, while the ECB can, and indeed has, delivered low and stable inflation, it cannot use the interest rate to permanently increase growth. From Malta’s perspective, therefore, the adoption of the euro must be viewed as but one in a continuum of challenges to be faced. The purpose of this conference is precisely to focus attention on the policy choices that need to be made in the years ahead. Put simply, the task that Malta faces is to bridge the remaining income gap with the more advanced members of the euro area. The success of this endeavour will depend importantly on how effectively the public and private sectors work together, both in assimilating the lessons learned during these first years of EU membership and in implementing appropriate policies.
The bicentenary is a natural occasion for me to cover the scope of Norges Bank’s tasks, against the backdrop of the challenges facing us today. Low growth and structural changes In 1814, the great powers of Europe dominated world trade. The world’s economic centre of gravity has since shifted westward. Today, in the 21st century, the centre of gravity is moving across the Pacific to Asia. Chart 2: International trade for the US and China When China became a member of the World Trade Organization in 2001, its foreign trade was 30 percent of that of the US. The Chinese economy has since grown at an unprecedented pace. In 2013, China overtook the US as the world’s largest trading nation. An ample supply of labour and low cost levels have given China and the other growth economies of Asia strong competitive advantages in international markets. The global flow of credit over the past 15 years has taken an untraditional direction – from relatively poor countries with strong economic growth to more prosperous, mature economies experiencing lower growth. For a long period, this shift contributed to substantial imbalances in the global economy. An ample supply of credit in western economies pushed down borrowing rates. Facing competition from Asia, it became relatively less profitable for firms in the west to invest in new productive capacity in their home countries. Instead, cheap credit was used to debt-finance consumption and housing, particularly in the US and Europe. Banks and financial institutions had, in practice, free rein to fuel credit growth.

The men of Eidsvoll needed a bank that could provide credit in Norway. Norges Bank quickly became an important lender. It was not until the latter half of the 1800s that a private banking system truly came into being. Norges Bank acquired its present-day role of the bankers’ bank and lender of last resort. With private banking came banking crises. The 1899 crash in Christiania triggered the first serious banking crisis in Norway. A real estate bubble in the capital burst and house prices  4  BIS central bankers’ speeches  plummeted. It took more than 100 years for real house prices in Oslo to return to their precrash level.4 Banks play a key role in the payments system and channel credit from savers to investors. If the flow of credit seizes up, problems will rapidly spread through the entire economy, as witnessed during the latest financial crisis. A robust banking system is of benefit to us all. Banks are now adapting to new capital requirements. On top of the new capital requirements is a countercyclical capital buffer. The countercyclical capital buffer will vary over time. It will be increased when financial imbalances build up. In the event of economic stress and large bank losses, banks will be able to draw down the buffer. Chart 7: Key policy rate and bank lending rates Even if the key policy rate is low, interest rates on loans to households and enterprises are not particularly low.
The difficulty today is one that monetary policy must address – this is to balance the risks of removing the stimulus from the expansionary monetary policy too soon, starving a recovery while it is still immature, against the risk of allowing inflation and inflation expectations to become stuck at above the target level. Balancing those risks in the UK is not easy. That is the issue the Monetary Policy Committee at the Bank of England faces today and the one I now want to explore. The immediate monetary policy problem The financial crisis dealt a huge blow to the financial infrastructure in most of the developed world. In the UK, and here in Ireland, the financial system came close to total breakdown. It was not so much that virtually no-one thought this sort of thing would happen. It was worse than that; virtually no-one thought this sort of thing could happen. But it did happen. As a result the supply of credit to businesses and to households was – and continues to be – seriously affected. The confidence of businesses and households has been severely dented. Fiscal deficits have exploded; private sector investment has imploded. Whatever the aftermath of this event is – and we will not know that for many years – I very much doubt it will be a normal cyclical recovery after a downturn.

Leverage and financial stability The fundamental problem in the financial crisis was that the ability of many highly-geared financial institutions to withstand substantial – but by no means unprecedented – falls in the  4  BIS Review 133/2010  value of their assets was rightly perceived to be low. Much of the debt of the highly leveraged institutions was wholesale funding – some of which proved footloose when there was increased concern about asset values. It was reasonable to have concerns over the strength of banks because leverage was so high. Between 2005 and 2007 major UK banks – which were by no means the most highly geared – had leverage ratios that averaged slightly above 30. The highest ratios – and this was for major banks – were close to 60 (Chart 5–6). By leverage I mean total bank assets (netted for derivatives and minus cash at the central banks and goodwill) relative to shareholder equity (also net of goodwill and excluding minority interest). So true equity capital was often barely 2% of total assets. The vulnerability that high gearing brought to financial institutions meant that even relatively modest falls in asset values triggered concerns about solvency that in turn led to funding problems that threatened to be – and in some cases became – self-fulfilling as sources of funding dried up and some assets needed to be sold because they could no longer be financed.