samchain/econo-pairs-v1 huggingface dataset:
In addition to the robust currency board mechanism, the linked exchange rate system is underpinned by some of the strongest fundamentals in Asia, if not the world:  •  Growth is strong, at 5.5%. •  Fiscal position has been consistently strong, with an average fiscal surplus averaging 2% of GDP for the past decade. Fiscal surplus in 1997 so far is 4.4% of GDP and is expected to exceed 5% of GDP. •  The government has no external debt. •  Exchange Fund and Land Fund together have more than $ billion in assets. •  Corporate debt ratios are amongst the lowest in Asia. •  The external account is broadly in balance. 32. The free markets and strong fundamentals mean that the nature of the shock is absorbable. Hong Kong does have a strong competitive edge, since we are a service economy with 83% in the services sector. As a major investor and integrator of production in the region, with manufacturing concerns in China and Southeast Asia, Hong Kong companies could adjust production to areas which have the greatest export competitiveness. In addition, the mainland Chinese economy is still growing at 8-9% per annum, with low inflation, a balanced external account and strong BIS Review 109/1997  commitment to reforms in the enterprise and financial sectors. All these auger well for Hong Kong as the main gateway to the Chinese market. 33. The current higher interest rates reflect somewhat a slightly higher risk premium in Asia due to the currency turmoil.

However, first and foremost I would like to point out that monetary policy aimed at stabilising the inflation rate should basically reduce the risk of over-valued asset prices leading to an exaggerated real demand. Fluctuations in the level of resource utilisation and in the output gap are traditionally assumed to be reflected in the inflation rate. If inflated asset prices stimulate demand in the economy, without a corresponding increase in the potential growth rate, inflation will rise. If the central bank anticipates this, monetary policy will normally be tightened to ensure that demand is compatible with long-term sustainable growth. And as long as demand in the economy increases at a rate compatible with long-term growth, there is less risk of exaggerated indebtedness. Inflation targeting should thus, at least in theory, reduce the risk of extensive financial imbalances accumulating. However, even with an otherwise successful inflation target policy, real and financial imbalances created by exaggerated asset prices can build up. If there are exaggerated expectations regarding growth in productivity and profits in a particular country, this can lead to a strong inflow of capital and strengthening of the currency. The increase in real demand, which is caused by exaggerated increases in asset prices, can thus be partly met by increased imports, while the currency strengthens and domestic inflationary pressure is reduced.
Recent experience does not suggest that the interbank market is special or that keeping an abundance of excess reserves prevents effective monetary policy implementation. Further, we should be mindful of the fact that banks may not be as eager to trade as much with each other in the new regulatory environment because they now face costs of expanding their balance sheet. In the U.S., the leverage ratio has been increased and the Federal Deposit Insurance Corporation has modified the base for the insurance fee it assesses on banks, effectively making it a function of the bank’s liabilities or the size of its balance sheet in excess of capital. 8 To understand why interbank trades are costly in this environment, consider the following example. Suppose Bank A has too many reserves and Bank B too few. One way to transfer reserves from Bank A to Bank B is through an interbank loan. The size of the balance sheet of Bank A would not change as a result of such a loan because the reduction in reserves would be offset by the loan to Bank B. The balance sheet of Bank B would increase in size by the amount of reserves it receives, as shown in upper part of Figure 4. What this example  6  In theory, the discount window should reduce some of this volatility. In practice, stigma has prevented it from playing that role effectively, as I will discuss further. 7  Nonbank lenders’ use of counterparty credit limits suggests such monitoring indeed occurs.

1 This scarcity produced a considerable volume of trading between banks; toward the end of the trading day, banks with more reserves than necessary would have an incentive to trade with banks that had too few reserves. 2 After three rounds of large scale asset purchases, aimed at stimulating the real economy, the level of reserves in the United States is about $ trillion today, orders of magnitude larger than the level before the crisis, as can be seen in Figure 1. 3 With such a large amount of reserves, very few banks ever need to borrow reserves to meet their requirements, and interbank trading has almost completely disappeared from the fed funds market. Instead, the market is now predominantly composed of trades between governmentsponsored enterprises – specifically, Federal Home Loan Banks – and banks. 4 In that respect, the fed funds market has come to resemble other segments of the U.S. unsecured money markets, such as the Eurodollar market, where nonbanks lend to banks. 5 This change in money market activity would clearly have been problematic if it had resulted in a loss of control over the policy rate, but there is no evidence that it has, as can be seen in Figure 2. So, to evaluate the consequences of this change, we are led to ask ourselves questions such as: Is the interbank market special? Ulrich suggests reasons why we might think that it is, but the answer is not clear to me, and further research would be welcome.
People with a foreign background in Sweden have found it difficult to get a foot-hold in the labour market. Employment among people with a foreign background is around 30 per cent lower on average than among native Swedes. Were the employment rate for this group to be as high as the average for Sweden's population, employment would rise by 96,000 people. Finally, the decisive factor for the labour supply is how many hours we work. The number of hours worked has fallen recently for several reasons: overtime has declined, part-time work has increased and absence to care for own children has also risen. But the single biggest reason and consequently the most serious problem in Sweden is sick leave. Both the number and length of absences due to sickness have risen sharply in recent years, thus entailing a reduction in working hours per employee. Three years ago the number of hours worked increased by 2.7 per cent. Last year the number decreased by 1.2 per cent. Larger proportion of elderly entails increased demands The age composition will place great demands on welfare services, increasing further the need for labour. In Sweden the number of people that are judged to require extensive care, i.e. those that are 85 years or older, will double up to 2035.1 This is expected to result in greater pressure on the public finances since the costs for care rise steeply in line with increasing age.

Moreover, entry into the EU and reforms in the tax and social security systems helped create better conditions for economic growth. Today, Sweden's central government finances are healthy, there is a surplus in the current account, inflation expectations are anchored around the Riksbank's target of 2 per cent and unemployment has fallen to a level that is far below the European average. Potential growth The decisive factor for economic growth and thereby the resources available for wage increases, earnings or an expansion of the public sector is the economy's long-term production capacity. Another term for this is potential growth, which determines the rate at which the economy can grow without giving rise to inflationary pressures. So it is demand in the economy in relation to production capacity that to a large extent determines the future path for inflation. Potential growth is therefore of vital importance for monetary policy. In turn, the long-term production capacity is determined by how much we work (the labour supply) and how productive we are (productivity). The labour supply depends partly on the number of people that work and the number of hours each person works. Important factors here include the age structure in the economy and the number of people on sick leave. Productivity is partly dependent on investment and technological progress - for example that machinery becomes more modern or that it is employed more efficiently. Educational levels also affect productivity. Knowledge can be put into practice in production and increase opportunities to assimilate new ideas and innovations.
Instead, they are based on misunderstandings about the importance of gold in monetary policy and would compromise the SNB’s capacity to act in pursuing its monetary policy, which would run counter to the objectives envisaged. In other words, these measures would, in certain situations, considerably hinder the SNB in fulfilling its monetary policy mandate and be detrimental to Switzerland. We therefore consider it our duty to point out the serious disadvantages of the initiative already at an early stage. Having said that, however, the SNB is interested in a dialogue on any questions connected with the initiative. With this in mind, allow me to make a few remarks. The SNB has the statutory mandate to ensure price stability, while taking due account of economic developments. The monetary policy operations that must be carried out in fulfilment of this mandate have a direct impact on the SNB’s balance sheet. In order for the SNB to fulfil its mandate at all times, its capacity to act in monetary policy matters must not be compromised by rigid rules on the composition of its balance sheet, which would be the case with the required 20% minimum share of gold and the ban on the sale of gold. It was precisely the latest crisis that demonstrated how important it is for the SNB to have the flexibility to expand its balance sheet, if needed. In future, the SNB will also need this flexibility to reduce the balance sheet again, if necessary. The demands of the initiative would considerably curtail this flexibility.

Second, the country in which the gold is stored must be politically and economically very stable and guarantee the immunity protection of central bank investments. Unlike the other two demands of the gold initiative, the manner of storing the gold reserves has no immediate implications for monetary policy. In our opinion, however, the principles of risk diversification and the requirements of due diligence in the conduct of business still speak for decentralised storage in Switzerland and abroad. Concluding remarks Ladies and gentlemen, in order for the SNB to continue fulfilling its statutory mandate, it is important that it can maintain its capacity to act in the conduct of monetary policy. Given the challenging environment in which we will also be operating this year, we once again need broad support. In this spirit, I would like to thank our shareholders for their loyalty and great interest in the activities of the SNB. On behalf of the Governing Board, my thanks also go to our staff for its tireless efforts for our institution. Thank you all for your attention. BIS central bankers’ speeches  5
•  First, introduce a great degree of selectivity in terms of public spending. Since France is the country in the euro area with by far, as a percentage of GDP, the highest level of public spending, it should give priority to forward-looking spending that supports reforms. From this point of view, a review is necessary in particular of the “defensive” cuts in social contributions that offset the constraints, obstacles and costs facing our companies. These cuts now exceed the equivalent of France’s spending on higher education. More generally, the effectiveness of subsidised contracts in the long term is questionable: they are useful, or even essential, when they allow those deprived of equal opportunities to integrate into the labour force; they are more dubious when, conversely, they financially compensate the effects of rigidities in hiring decisions and the functioning of the labour market. It would be extremely useful to conduct a thorough review of these measures on the basis of this simple distinction. •  Second, reduce structural expenditure. France has a high quality civil service, which is a crucial asset. Current demographic trends and the needs of a modern economy require adjustments to be made. France must have a great civil service in terms of quality but a less bloated one in terms of quantity. The reforms implemented over the past decades are not necessarily consistent with this imperative: of all developed countries, France has recorded the greatest growth in public sector jobs.

That being said all central banks, in periods like this where you have inflationary threats that are coming from commodities, have to go through the hump and be very careful that there are no second-round effects. This is what we are doing. WSJ: When you hiked rates in 2008 there were signs of those second-round effects. Do you see evidence they are starting to take hold in Germany or elsewhere? TRICHET: At this stage, we do not see this. And everybody knows we would not let secondround effects materialize. We will continue to deliver price stability. WSJ: Could the ECB raise interest rates while still maintaining nonstandard measures including unlimited loans to banks? TRICHET: It is our doctrine since the beginning of the turbulence that interest rates on the one hand and non-standard measures on the other hand are decoupled. We design the monetary policy stance; we decide interest rates to deliver price stability in the medium term. Non-standard measures are there to help restoring a better functioning of monetary policy transmission. We are disconnecting both measures. We can move interest rates on the one hand, and we can move non-standard measures on the other hand independently. WSJ: Euro member states are working on comprehensive measures to address the debt crisis. What elements should be in that package? TRICHET: These decisions are the responsibility of governments. We have in particular a very strong message, which is that we need a “quantum leap” in the strengthening of governance of economic and fiscal policies.
While there is wide sympathy for our decisive action against market manipulation, we have been cautioned by some on the need not to be confused by herding behaviour. Others have challenged us to come up with hard evidence that manipulation existed, reminding us of the established academic theory of market manipulation, and urging us to examine carefully the history of the events leading to last August, collect data and conduct econometric research into them. While I agree that all these need to be done where possible, I must tell you that such advice reminded me of what Andrew Crockett, the General Manager of the BIS and Chairman of the Financial Stability Forum, once told me. He said that the economic theorists are those that attempt to look in a dark room to find a black cat. The economic historians are those that attempt to look in a dark room to find a black cat that is not there. And the econometricians, who conduct all those regression analyses from the data collected, are those that attempt to look in a dark room to find a black cat that is not there and say that they have found it. I certainly do not wish to be involved in that sort of thing. But there is surely one thing that ought to be done, if we are serious about the matter. Using the same analogy of the dark room and the black cat, why don’t we just light up the room and look?

To reach this objective, three conditions need, in my view, to be fulfilled: •  firstly, the monetary strategy should be set in a medium-term framework. More generally, the European policy mix should consist both of a medium-term stability-oriented monetary policy and of a medium-term fiscal policy aiming at a balanced budget (or “close to balance” as stated in the Stability Pact).1 This medium-term stability-oriented policy mix is the best we can do to create the conditions for durable growth in the euro area. And it is now widely agreed in the European Union that the policy mix should not give the illusion that it can fine tune the economy;  1 By urging governments to aim for a fiscal position close to balance or in surplus in the medium term, the Stability Pact enables them to let automatic fiscal stabilizers come into play during recessions without exceeding the 3% reference value. In short, it allows them to create a fiscal buffer during normal economic periods that can be drawn on if an asymmetric shock occurs. BIS Review 112/1997  -2-  •  secondly, the strategy pursued should provide a clear anchor to inflation expectations. This implies the public announcement of a quantified definition of the final objective of price stability; for instance, the Banque de France aims at an inflation rate not exceeding 2%;  •  thirdly, the strategy should be based on a forward-looking approach.
Do the utmost to increase the lobbying authority and capacity with the Albanian executive, parliament and judiciary. Intensify your contacts with business associations and analyse every claim or request, case by case, even if it comes from a single business. Take a public stance in any case so that speculations and abuse are reduced to maximum. Engage all your financial, human and media arsenal for a more solid anchoring of your expectations with the public. Turn the public into your most powerful anchor. Third, I would like to call for the Albanian executive to increase the confidence in and support to the banking system, especially as regards finalising legal amendments on collateral execution. BIS central bankers’ speeches  5  Cooperation between public institutions and the banking system may be fruitful also in terms of introducing specific development programmes and providing financial and concession support to sectors, branches, important operators, including foreign investors. Fourth, I would consider as vital a broad-based consensus of the entire political spectrum for supporting the Bank of Albania’s efforts and moves to maintain the country’s macro-financial stability. We remain open to explain continuously, transparently and responsibly our past, present and future decision-making. We remain firm in our position that a central bank is successful and enjoys the trust of the public when it makes independent, far-sighted and fully transparent decisions. In these moments, the unquestionable guarantee that the Bank of Albania gives to the public for the country’s macro-financial stability is paramount.

The fundamental challenge is that, alongside its great benefits, every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge. 24  Carney, M (2016) 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Moreover, recently, we have seen the power of networks to divide as well as to connect. Social media can reinforce our tendency towards confirmation bias as we search out the information consistent with our priors and disregard that which is not. 25  How to lead in such a world? First, define your purpose and stick to it obsessively. And remember that purpose, including of business, must be grounded in the objectives of clients, society and humanity. As John Kay has observed, “Profit is no more the purpose of business than breathing is the purpose of living.”  26  Second, in a world of division, fusion will bring breakthroughs. Select your teams wisely and recognise that while diversity is a reality, inclusion is a choice. Take it. Third, while you should always marshal your facts, you must engage people’s intuitions and win their trust in order to convince them. Do this through empathy – the antidote to righteousness. 27  Be open to dialogue and  remember Henry Ford’s advice that, “the secret of success is to see things from another person’s point of view.”  28  Finally, do not confuse your leadership role with yourself or become addicted to the status and privileges of power.
At this point, I have to confess that I too was sceptical for similar reasons, also because I have always argued that unsound government fiscal policies would ultimately discredit the efforts of monetary policymakers to fight inflation. However, at the same time, I also believed that, if all countries did their homework and the Maastricht Treaty criteria were met, I could envisage a successful monetary union – although, to be honest, in the first half of the 1990s I did not think it would be possible for 11 European countries to achieve price stability at the start of Monetary Union. In 1998, at my hearing in front of the European Parliament, I said: “The introduction of the euro will reshape the face of Europe. It is the most significant event in the international monetary and financial world since the end of the Second World War. But the euro will  14  Budget balances for 2005, broadly ranging between a 2% of GDP surplus and a 5% deficit, and debt ratios varying from 7% to 108% of GDP, are accompanied by differences in the interest rates on government bonds of around 30 basis points at most. Ten years before, when spreads still included substantial exchange rate risk premia, they exceeded 600 basis points, with budget balances ranging from a 3% of GDP surplus to a 10% deficit, and debt ratios varying from 7% to 133% of GDP (ECB, 2006).

The effects of globalisation are also channelled via foreign direct investment (FDI). The role of multinational enterprises in the world economy has similarly grown over the years, as reflected in the expansion of the world’s FDI stock, which is almost equal to the annual GDP of the euro area. In many countries, the operations of foreign affiliates are now extremely important for domestic growth, with rising sales, value added, employment and exports. For the euro area, these international linkages are  4  2  For a comprehensive analysis on the implications of alternative exchange rate regimes, see Issing (2006). BIS Review 43/2006  highly significant, particularly because economies of scale and cross-country technological spillovers support euro area economic growth. Euro area corporate businesses are among the most dynamic in the world, providing more than one-third of the world’s FDI stock. At the same time, almost one-third of world FDI is invested in euro area Member States. Intra-euro area FDI stocks have also grown robustly, increasing from almost 14% of euro area GDP in 1999 to around 24% by 2004. Consumers clearly benefit from greater trade and FDI linkages via greater variety of goods and lower prices. However, adjustment costs, which are often front-loaded and concentrated on specific regions and sectors, also need to be taken into consideration. The change in the structure of the global economy requires individual countries to make structural adjustments through the determined implementation of structural reforms; such reforms are even more vital for countries in a monetary union.