samchain/econo-pairs-v1 huggingface dataset:
This would then imply that there is an unusually low growth potential in the global economy, as in the 1930s. There is little we can do to achieve high returns on investments if global growth is weak. In this situation, not even investments in our own business sector - or for that matter in long-term bonds or infrastructure - would generate returns of any size. But even in an economy with low growth, we can basically expect to be compensated for risk. The global business sector must be profitable in the long run. This must imply that equity investments can, in the long run, generate a solid return in relation to other alternatives. If prospects for achieving a return should deteriorate, another question is whether we should save less and spend more now. However, there are good reasons to maintain the saving ratio. It will be even more demanding to finance future pensions for an ageing population if the economy stagnates. Conclusion The global economy is in the doldrums. Swings in capital markets have a substantial impact on the value of wealth accumulated by the central government. However, it is highly unlikely that investing in global business will not be profitable in the long run, and with a high portion of wealth invested in bonds the risk is spread. It is unlikely that we will achieve the substantial productivity gains seen in the 1990s. The Norwegian business sector is facing pressures on profitability, a high cost level and declining investment.

Jarle Bergo: Projections, uncertainty and choice of interest rate assumption in monetary policy Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the Foreign Exchange Seminar of the Association of Norwegian Economists, Sanderstølen, 27 January 2006. The  Charts in pdf-format can be found on the Norges Bank’s website. Please note that the text below may differ slightly from the actual presentation. The speech does not contain new assessments of the economic situation or of current interest rate setting. *  *  *  Introduction First of all, I would like to thank you for inviting me to this seminar. Participants at this and other seminars have occasionally shown some interest in Norges Bank’s views on future interest rate developments. For a long period, our analyses were based on the assumption that the interest rate would move in line with market expectations, and the discussion was usually about whether the bank agreed with this interest rate outlook or had a different interest rate path in mind. In Inflation Report 3/05, projections were based on the Bank’s own projected path for future interest rates for the first time. In other words, from using technical assumptions and others’ assessments of our future monetary stance, we have now in a sense “assumed ownership” ourselves of the interest rate path in our projections. This seminar would therefore seem to give me an appropriate opportunity to provide some background on this issue and on the assessments underlying our forecasting.
How can we ensure that financial liberalisation does not lead to excesses that can endanger financial stability? How can we make sure that finance in advanced countries is conductive to the public good? Again, the answer is most evident in the case of the banking sector. Excessive leverage is the result of a faulty system design. Hence, we must improve the system design. This is what Basel III and the TBTF work programme are about. On the one hand, it aims at removing the main incentive distortion – the implicit state guarantee. The critical element here is to make sure that it will be possible to allow a big complex institution to fail, which means resolving it in an orderly manner. On the other hand, increased capital and liquidity requirements as well as a leverage ratio serve as stronger safeguards in the event that incentives cannot be fully corrected, and also because externalities are present in the case of large and complex institutions. In my view we are on the right track, but we have not yet reached our destination. It is important that we stay on this path, and do not get caught in the “disaster myopia trap” which means, as the crisis fades in our memory, forgetting progressively the dismal consequences of the identified faults in the system and – as a consequence – losing our determination to correct them.

I would therefore, like to implore all delegates to engage fully in these discussions and make the most of the wealth of knowledge and experience represented in the house. Ladies and Gentlemen, it is my pleasure and privilege once again to welcome you to the second AFRACA Central Banks’ Forum. I now wish to invite our distinguished Guest of Honour, the Minister of Finance and National Planning, Honourable Ng’andu P. Magande MP, to officially open this Forum. Honourable Minister! BIS Review 118/2008  3
Both of these programs provide important insights into the role of the central bank as a provider of liquidity, leading to a few observations and to a few questions that I believe warrant further exploration in considering future policy actions. 1 Liquidity swaps with foreign central banks The second half of 2009 and the early part of 2010 were marked by substantial improvements in financial markets, ranging from short-term funding to longer term risk assets. There was good reason for those improvements: Efforts by the government to stabilize markets and support financial institutions were successful, and a virtuous circle appeared to be under way in which increasing optimism about the economic outlook and improving conditions in financial markets fed upon one another. The gains in asset prices were dramatic, with broad equity indexes reversing most of the declines experienced in late2008 and early 2009 and with some measures of short-term funding spreads returning to pre-crisis levels. However, more recent developments have demonstrated that conditions in financial markets can change abruptly. These developments have been widely discussed at this point, and I will not go through them in detail, except to highlight the two broad themes in play. First, investors have become concerned about the fiscal positions of some European countries, leading them to re-price sovereign risk for those countries and to question whether austerity measures and other supporting efforts will prove sufficient to restore market confidence.

Measured in local labour costs, cost competitiveness has been deteriorating since 1997. For a time, profits in the exposed sector were not affected by the increase in labour costs, as the krone depreciated. However, this depreciation could not last, as it would have ignited domestic inflationary pressures. Tight labour market conditions warrant a relatively tight monetary policy. Norwegian interest rates are not very high, however, when our wage growth is compared with that of other countries. On the contrary, the recent appreciation of the krone will have a cushioning effect on inflation and thus on interest rates. Since 1998, the increase in labour costs has been between 5 and 7 per cent. This year’s wage negotiations were no exception. It now seems evident that wage growth will be significantly higher than our previous estimate of 5 per cent this year. The carry-over to next year is also substantial, especially in retail trade and the public sector. It is evident from this year’s wage negotiations that our labour market is tight. Norges Bank kept interest rates unchanged at the Executive Board meeting on Wednesday, 22 May. The Bank changed its stance on future inflation risks. The main reason was the higher-than-projected wage increases. According to the Bank’s assessment of the risks associated with the inflation outlook, the appreciation of the krone cannot fully counteract stronger wage growth, faster growth in consumption, a higher oil price and a somewhat more favourable global economic outlook.
But, there are also costs of being the dominant reserve currency. For example, this can lead to shifts in the valuation of the dollar that are due primarily to developments abroad that affect risk appetites and international capital flows. In such cases, the dollar’s valuation can be pushed to levels inconsistent with U.S. economic fundamentals. For the United States, I believe that the most important goal must be to keep our own house in order. If we do this, then I expect that the U.S. dollar will earn the right to remain the most important reserve currency in the world. The United States has a number of advantages in sustaining the dominant reserve currency status of the U.S. dollar. First, there is a first-mover advantage. As the leading reserve currency in the world, there is no strong incentive for countries to move to other currencies as long as the dollar continues to have the attributes I discussed earlier. The history of reserve currency usage is characterized by considerable inertia. The U.S. dollar emerged as the leading reserve currency quite a bit after it became the world’s largest economy. Typically, the loss of dominant reserve currency status requires either substantial economic decline or political instability that motivates foreign counterparties to shift to a new reserve currency. Second, the U.S. has the deepest and most liquid capital markets in the world. This is important in making U.S. Treasuries and agency mortgage-backed securities attractive holdings as part of countries’ foreign exchange reserve portfolios.

Accordingly, we should conduct this process carefully and gradually if we wish to minimise any undesirable economic and social consequences. The goal is to achieve what has been dubbed “a fair transition”, affording due attention and support to those groups and geographical areas most severely affected by this process. Naturally, we should stress that the change of production model will also entail opportunities for economic agents. In any event, we should consider how banks may contribute to bringing about a decarbonised economy; ultimately, when we think about climate change we see particularly pollutant activities, from which banking is naturally missing. I shall try to explain today why, despite being a “low emissions” sector, banks have a major role to play as facilitators of change. If I manage to do this I hope that I will also, at the same time, dispel another doubt that many of you will have entertained: what is the Deputy Governor of the Banco de España doing opening a forum on the decarbonisation of the economy? 3/9  Combating climate change internationally As you know, combating climate change has been a recurrent goal of international institutions, at least since the United Nations Summit in Rio de Janeiro in 1992. Traditionally, the companies dependent on oil products have been those most affected by the environmental regulations resulting from these international agreements. Conversely, we should admit that the financial sector’s involvement in this battle has been rather limited. When referring to the financial sector I include both credit institutions and central banks and supervisors.
But except in the US, securitisation has in fact so far made only limited progress, and debt sales have been focused mainly on impaired developing country or corporate debt. One reason why prime corporate loans are not so far traded is the importance that both banks and borrowers still attach to their mutual relationships. My guess is that the liquidity of bank assets by these means will gradually increase; and that process may be helped by the development of techniques such as credit derivatives. But for the time being - and indeed some time to come - bank loans are, for the most part, likely to remain illiquid in most countries. BIS Review 13/1997  -5-  We can nevertheless look at the crude balance sheet data, and, for what they are worth, we have looked at the share of loans to non-banks in total assets as a measure of the liquidity of the asset portfolio for a range of different types of institution. These data show that: for some representative small, domestic, UK banks the loan ratio is still some 70-80% of the total, apparently with no particular trend; for large UK, internationally-active, banks the share of loans is currently around 50%, having fallen quite sharply from some 65-70% some five years ago, perhaps reflecting the expansion of their investment banking activity; for large continental banks the share of loans is either side of 50%, having fallen more gradually. Again JP Morgan and Bankers Trust are outliers.

That, in my view, does not reduce the special public BIS Review 13/1997  -9-  interest in banking activity; although it may well affect the appropriate substance of banking supervision; and it certainly extends to banks’ other, different, functional public interests, including different regulatory interests. On the other hand I am not persuaded that the special public interest in banking activity extends to non-banking financial institutions, though different functional public interests in many cases clearly do. What is absolutely clear, in a world of increasing financial integration, is that neither the financial regulators nor the central bankers among you can expect an easy life! BIS Review 13/1997
The US economist Robert Gordon says that the pace of innovation has slowed down substantially since the 1970s and that today’s innovations do not provide the same productivity gains as the earlier ones, which should dampen the global willingness to invest. Demographic developments affect the composition of the population and can also have consequences for saving and investment. We are now heading towards an  20 For a description of the method, see De Rezende (2017) and De Rezende and Ristiniemi (2018). 17 [24]  increasingly ageing population with more old-age pensioners and fewer children. Demographical factors are generally difficult to analyse and there are arguments that global saving can both increase and decrease as a result of demographic developments. Seen in a life cycle perspective, we save the most when we are of working age. This is when most of us earn the most and are motivated to save for our retirement. The majority of household savings and labour supply therefore comes from people of working age. Minors and children have little income and consume from their parents’ incomes and therefore contribute negatively to total savings. Old-age pensioners also contribute negatively as their labour supply is small and they largely live off their savings. Figure 12.

12 They say that there has been a change in the composition of the labour force over the past  11  See Jonsson and Theobald (2019). 12 See Mojon and Ragot (2019). 8 [24]  ten years. Labour force participation in the age group 55-64 years has tangibly increased, which has slowed down prices and wages. If the compensation levels are lower, employees will have greater incentive to accept lower wages. This will also lead to companies’ costs declining and to price pressures slowing down. If employees’ negotiating strength weakens, their scope to have their wage demands accepted declines. This means lower wages and a downward adjustment in prices. One should not draw any definite conclusions regarding the implications for monetary policy on the basis of these results. While lower price pressures in themselves might justify a more expansionary monetary policy, decisions on the policy rate consist of an overall assessment of various different factors, where developments on the labour market are one such factor. On the other hand, one can say on the basis of these results that supply effects and long-term trends may be important pieces of the puzzle for monetary policy analysis. This is something that has been emphasised in other studies, too. 13  A flatter Phillips curve need not signify less of an impact from monetary policy.
Another objection to central banks publishing their own interest rate forecasts is connected to the functioning of the market. This means that in principle the financial market agents could stop looking for other information if they have access to the central bank’s forecasts for interest rates in the slightly longer term. How the market views economic prospects is normally reflected in the long-term market rates. This source of information could thus be lost and this would impair the functioning of the market. But as I perceive it, there have not been any such signs so far. In addition, I find it very difficult to imagine that the market agents would stop making independent assessments because we are publishing our own view of interest rate developments. They if anyone know that the interest rate path is a forecast and they therefore have strong reasons for continuing to search for information via other channels than the Riksbank. So far it has been clear that we and other market agents have actually had slightly different views regarding how the interest rate will develop in the future. And this is actually a sign that things are as they should be. It is quite natural that forecasters make different judgements, particularly in the slightly longer term. In the long term, there are also more factors than expected monetary policy that have significance for interest rates.

This is definitely something the general public can require of us in our role as an independent authority. So, to refer back to the questions I asked at the beginning. No, I do not think we have made things unnecessarily complicated or tried to fix things that are not broken. We have made changes we consider to be necessary both to improve the base for making monetary policy  BIS Review 106/2007  5  decisions and to provide as true and honest a picture of how monetary policy is conducted as possible. What has happened on the financial markets? In principle, communication is always important to a central bank and is a corner-stone in most parts of our activities. When the world around us is marked by uncertainty and unrest, the question of communication becomes even more important. There has recently been considerable unrest in the financial markets. But the Riksbank has nevertheless seen no need to specifically go out in public and comment on these developments. Sweden has not been affected to the same extent as many other countries and the Swedish interbank market and the financial system have functioned comparatively well. But let me nevertheless say a few words about what has happened and about the role the Riksbank plays in this context. General uncertainty has increased the need for liquidity abroad… Over the summer we saw signs of problems in the US housing market.
A common use case for crypto tokens is payment. But does that make them Money? Money – as we learnt in Economics 101 – serves three functions: as a medium of exchange, a store of value, and a unit of account. No crypto token currently meets these three functions in sufficient measure to qualify as Money. My colleagues on the Financial Stability Board – Agustin Carstens and Mark Carney – have spoken at length on this subject recently, with erudition and eloquence. Let me briefly echo some of the key points. With the possible exception of the dark web, crypto tokens are not widely accepted as a medium of exchange in any market, let alone across any variety of transactions Payment transactions in crypto tokens are often slower and more expensive than conventional electronic transfers of funds. Crypto tokens cannot be a store of value if their prices fluctuate so much. Since the beginning of last year, the daily value of Bitcoin against the US Dollar has fluctuated about 20 times more than the Singapore Dollar did against the US Dollar. People may buy some crypto tokens to speculate on their values. But with such volatility, I doubt they will put their retirement savings into them. Crypto tokens also fail as a unit of account. How many entities do we know of, which maintain 1/6  BIS central bankers' speeches  their financial statements in crypto tokens? So, does it mean that crypto tokens can never become Money? With technology, we can never say never.

As well as having pursued a brilliant academic career, Vitor Constancio has been at the commanding heights of Portuguese politics and economic government. Constancio has been a Member of Parliament, Minister of Economy and Finance, Governor of the Banco de Portugal on two occasions, the second from 2000 to 2009, a member of the 2  BIS central bankers’ speeches  Council of State and a professor at various Portuguese university institutions. In 2010 he was appointed Vice President of the ECB. Given his position, and also in light of his personality and experience, Constancio plays a very important role in steering and designing the ECB’s policies. He is a representative of what I would define as “flexible orthodoxy”, i.e. a rigorous point of view on ECB’s tasks and priorities, but one which flees from rigidity and never forgets common sense when it comes to the complex and often difficult decisions, in both the technical and political sense, that the ECB has to adopt. I give the floor to Vitor Constancio. BIS central bankers’ speeches  3
Alongside these fiscal challenges, the size and concentration of external imbalances in the system are at an unprecedented scale, between five to six percent of GDP in the case of the U.S. current account deficit. This imbalance is the result of a combination of a sharp decline in U.S. net national savings, driven by increased public sector borrowing and a large rise in household debt, and a sustained increase in the relative strength of U.S. demand growth compared with Europe and Japan. The counterpart of this deficit is a large inflow of capital from the world’s private savers and foreign central banks. The expected trajectory for this imbalance produces a dramatic deterioration in our net international position and cannot be sustained indefinitely. These two broad forces coincide with the increasingly rapid integration of China and India into the global economy and financial system. Their impact on the world economy already seems substantially greater than their shares of global GDP. This process of integration has a long way to go. It offers tremendous potential gains in income growth, not just for their 2.5 billion citizens, but also for those who trade with them, through lower prices and further impetus to productivity gains. But it also brings greater adjustment pressures for producers of tradable goods and services, generating greater demands on political leaders to provide protection against those competitive pressures.

I’ll also meet with the leaders of New Jersey Community Capital to learn about their cutting-edge programs for helping distressed homeowners and then I’ll speak to the students, faculty and alumni at Montclair State University. In addition, my colleagues and I at the New York Fed continually track conditions in our District, and we have created a number of tools for that purpose. For example, my staff produces indices of economic activity for New York City, New York State and New Jersey. We also track local household credit conditions, including the amount and type of personal debt and whether payments are being made in a timely way. We also conduct a periodic poll about the credit needs of small businesses, which are an important source of new jobs in the region. In our latest poll of several hundred firms, many report that they did not apply for credit because they were “discouraged.” Perhaps surprisingly, many of these non-applicants have credit profiles similar to other firms who successfully sought credit. This finding suggests that the demand for credit could pick up as some “discouraged” firms learn that they might be able to obtain credit now. If you, as a representative of a small business, would like to participate in our next poll, please pass your card to my colleagues, who are in the audience, or see me after the speech and we will be glad to add you as a respondent.