samchain/econo-pairs-v1 huggingface dataset:
Uncertainty over long-term trends – more cautious monetary policy A large part of today’s speech has concerned long-term levels and trends on the labour market and the financial markets. When such trends change, it often takes some time before one notes the change and this can also be difficult to assess. One example of this is our forecasts of labour force participation. Figure 13a shows the forecasts for labour force participation at different points in time, together with actual outcomes. The forecasts do not appear to have succeeded in capturing what appears to be an increasing trend in labour force participation. This is partly because we have underestimated the population increase, which is based on Statistics Sweden's forecasts, and partly because labour force participation has risen as a share of the population. The latter could be due to reforms that have stimulated the labour supply and an increase in labour supply that is not registered in the population database. However, the forecast errors can be smaller 19 [24]  when it is not a question of changes in trends, which can be illustrated by the forecasts of GDP growth, see Figure 13b. One uncertainty factor in the monetary policy decisions is thus the difficulty in detecting changes in trends, but there are also other uncertainty factors to take into account. Alan Greenspan put it like this: “Uncertainty is not just an important feature of the monetary policy landscape; it is the defining characteristic of that landscape”.

We are both children of the successful German central bank, the Bundesbank. We have sprung from the same intellectual model, where the target is price stability, the management are appointed by the political system and the actual work is done at an arm's length from party politics. ·  In my opinion, the value of conducting a national interest rate and exchange rate policy is exaggerated in the EMU debate. On the other hand, it is conceivable that situations might arise where strongly stabilising fiscal policy measures are necessary. It would then be necessary to find institutional solutions to help the government and parliament to make the necessary long-term decisions and to do so even in situations where they may be politically difficult and even risky. Here I think it is possible to draw on some experiences of the Riksbank's actions in recent years. Clear targets, transparent analyses and discussions, combined with regular assessments, can put pressure on the political system to take action in time. ·  4  As representative of the Riksbank, I have been able to experience at first hand the closed doors to the meeting rooms of Europe and the fact that we have lost influence. During the early years, when the ECB was being built up, we sat at the decision-making table.
Repo rate  0,5  1-quarter inflation  0,5  0,5  0,0  0,0  0,0  0,0  -0,5  -0,5  -0,5  -0,5  0  4  8  12  16  0  20  Real repo rate  4  8  12  0,5  16  20  Real exchange rate  0,5  0,5  1,5  0,0  0,0  1,0  1,0  -0,5  -0,5  0,5  0,5  -1,0  -1,0  0,0  0,0  0  4  8  12  16  20  0  4  8  4-quarter inflation  12  1,5  16  20  GDP  0.5  0.5  0.4  0.0  0.0  0.2  0.2  -0.5  -0.5  0.0  0.0  0  4  8  12  16  20  Hours worked  0.4  0  4  8  12  0.4  16  20  0.4  Anticipated 0.2  Unanticipated  0.2  Note. All x-axes refer to quarters. 0.0  0.0 0  4  8  12  16  20  0.35 per cent of an estimated potential employment rate of, conservatively, 93 per cent of a labour force of approximately five million is equivalent to over 16 000 jobs. Calculating on the basis of 93 per cent thus entails assuming a rather high figure for long-term unemployment of 7 percent.

In the absence of more detailed information on the effect that may be dominant, it does not seem unreasonable to assume that the effects of a reduction of the repo rate path will be of a normal scale. These figures and the estimated effects of a repo rate reduction are not the final word. Of course the future will bring further developments of Ramses and other models, more empirical estimates and new experience, which will lead to the revision of these figures. However, I would claim that these figures are the latest and best word on the basis of the information and knowledge currently available, and therefore provide the best basis for a decision right now. Similarly, the mean squared gaps are perhaps not the last word when it comes to measuring the Riksbank’s target achievement. However, it is fair to claim that is the best way we have found so far of me assuring target achievement, that is, the extent to which the Riksbank has succeeded stabilising both inflation around the inflation target and resource utilisation around a normal level. I consider Figure 1 very clarifying.
As late as 2008, the year 2006 was still being seen as one of wasted resources. But by 2009, with revised estimates, the experts were telling us that three years earlier, the euro area was overheated and output exceeded its potential by a significant amount. Mismeasurement of the output gap can lead to errors not only in monetary policy – if and when central banks incorrectly rely on this information – but can also lead to mistakes in fiscal policy. In 2006 we had a fiscal deficit in the euro area as a whole. Alarms about fiscal soundness should have sounded before the crisis. But the alarms would have sounded much louder if the EC, the IMF and others had not suggested that the economy was running below potential. Inappropriate reliance on mismeasured output gaps can lead to complacency during good times. 2  BIS central bankers’ speeches  I recount this example about how the output gap can be misused in policy debates because once again, as we are coming out of the crisis, some voices are stressing the extent of the output gap that the euro area is facing today, perhaps drawing conclusions about policy that could again be reversed as time goes by. The focus on price stability must remain unrelenting. *** That said, another lesson is the following: the central bank focus on price stability is insufficient to maintain overall stability in the economy.

*** The crisis has reaffirmed the benefits of an independent central bank focused on maintaining price stability and safeguarding well-anchored inflation expectations in line with price stability. The focus on price stability yields gains in credibility and allows central bank flexibility as well as the ability to act decisively when needed on other issues. As an example, let me remind you of the decisive provision of liquidity in August 2007 and later in September 2008. Another example is the decisive policy easing in response to the crisis. The risks of deflation were greatly reduced because inflation expectations over the medium term remained wellanchored, in line with our definition of price stability2. The new spike in energy prices, that reminds us of the spectre of stagflation risks, once again reaffirms how important it is to act decisively to ensure that inflation expectations remain well-anchored to preserve stability. *** Another lesson reaffirmed is that monetary policy is not just about setting policy rates. Even though the academic consensus was converging to this view before the crisis, monetary policy is not just about determining current and future overnight interest rates. As both practical experience and also earlier generations of academics have taught us, there is much more to monetary policy. Prior to the crisis, some were concerned about the zero bound on short-term nominal rates.
We have proved how our country, business and society have a strong institution they can rely on as a pillar of stability and for protecting the long-term public interest, an institution that does not give in to pressure and opportunistic interests. On a day like this, when we normally weigh up past events, our thoughts could go further back in time, long before the worries of this passing year. Some events can often be more wisely judged when looked at from a longer historical perspective. If we take such a look back into the 135-year history of the BNB, we would see many examples demonstrating the strength of our central bank and its insusceptibility to coteries’ intrigues and shallow trivial debates (which only absorb energy from the public creative resource, before vanishing in time). But our history has witnessed obscurantist episodes too, when the BNB was suppressed to obey political or other temporary interests. The implications of such interventions have always been tragic for the country. Here is one brief example. On the famed date of 9 September 1944 the BNB Governing Council set a “buying” rate for the Soviet rouble (15 levs for 1 rouble) after being instructed on the telephone by the then Minister of Finance. Two days later, on 11 September 1944, the government ordered the BNB to stop buying the  2  Basel Core Principles for Effective Banking Supervision of 14 September 2012.

Indeed that is why we took it upon ourselves to reform SONIA. We started collecting daily data on money market transactions in February 2016 from over 50 banks, building societies and investment firms. These data give us a much clearer picture than we have previously had of what is going on in sterling money markets. A subset of the data will be used for reformed SONIA. The reformed rate will be much more robust, with daily transaction volumes three to four times greater than current SONIA. Any change in SONIA’s properties will be minimal – so far the reformed rate has been around one basis point lower than on the current methodology. Another key reform is that the Bank has consulted on and will implement a changed definition for SONIA. The new definition will allow the methodology and input data of SONIA to evolve if material changes to market structure or functioning threaten to undermine the integrity of the rate. This unique feature will ensure the robustness of SONIA over the long term, giving users confidence that their contracts will not be disrupted. Let me emphasise that, from the perspective of a user of SONIA, implementing these reforms should be seamless. However, one operational consequence that users should be aware of and prepare for is that the publication time for SONIA will move from the evening of the day in question to the morning of the following day. The Bank is working with ISDA, LCH and others to ensure this change is implemented smoothly.
This means that Sweden has a very open economy, exposed to competition on the world market. th  In a way, the globalisation process at the end of the 19 century went further than the process we are seeing now. This was because the labour force was more mobile across national boundaries then. Prior to the World War I, there was extensive emigration, primarily to the American continent. Sweden lost one quarter of its population through emigration. Between 1890 and 1910, 10 per cent of the world's population moved permanently from one country to another. During the past quarter of a century the corresponding figure for emigration was only 1-2 per cent. I think that what one usually means by globalisation is that which has happened on the capital markets over the past 20 years and which is connected to the deregulation of capital markets. For Sweden, this goes back to the mid-1980s, when deregulation of the capital markets began. The deregulation process reached a peak when the final elements of the currency regulations were abolished in 1989, enabling the free movement of capital across our borders. However, this is nothing new, either. Prior to 1914 capital could move freely over national borders. There was extensive direct cross-border investment. This was when the Swedish railway network was built up and the Swedish hydroelectric power system was built with the aid of foreign capital.

We will become less dependent on Sweden as a nation being economically successful as some of our pension money is invested in other countries' shares and bonds. However, it also makes us owners of very mobile capital, which immediately flees a country facing economic difficulty. None of us would want the AP funds or PPM to invest their capital in Argentina, would we? Are poor countries negatively affected by globalisation? Globalisation with regard to movement of free capital must be regarded as different when it comes to less developed economies. The population in these countries, e.g. in South East Asia, is more vulnerable than others in well-developed welfare societies. Let us finally look at the events in South East Asia around 1997. Domestic banks lent money to longterm projects, often with government guarantees, such as shopping centres, hotel complexes, airports, motorways, etc. Banks and companies financed themselves by taking up short-term loans in the international capital markets, which had lower interest rates than the domestic markets. When the foreign investors became nervous at the possibility that those making the investments might not manage to pay the interest rates, they cancelled the short-term loans, the capital flowed out of the country and the banks suffered a crisis. No interest rate was high enough to attract the foreign investors to provide new loans. The foreign currency reserves dried up and exchange rates came under pressure. Devaluation was the only way out. Bankruptcies, bank crises and mass unemployment were the result.
But, notwithstanding the current difficulties, I am convinced that the best prospect for a relatively happy ending is for all of us to persist in our attempts to achieve the macroeconomic stability and supply-side flexibility which I identified as our common goal at the outset of my remarks. I am very happy now to take your questions. 4  BIS Review 47/2001

16.09.2019  The EMU at 20: from divergence to resilience Welcome address. Third Annual Research Conference of the Banco de España Pablo Hernández de Cos Governor  Ladies and gentlemen, Let me start by welcoming you to the Banco de España for the Third Annual Research Conference. We began organising this conference three years ago, with the aim of bringing together leading scholars and policymakers to discuss frontier research on relevant topics. This year, the chosen topic is “The EMU at 20: current status and the way forward”, which I think ranks highly in the current policy debate. It would be hard to imagine a more eminent group of researchers to discuss this topic. I would like to thank all of you for your attendance here today. 2019 marks the 20th anniversary of the creation of the euro. We reach this milestone in the context of a global macroeconomic deterioration, while still facing the legacy of the crisis, in terms of high unemployment rates and persistent levels of indebtedness. Part of this worsening of economic conditions is linked to trade tensions, against a background in which the multilateral financial and trade system in place since the end of the Second World War is being put into question. At the same time we are confronted with global trends, such as digitalisation and climate change, which pose significant challenges, of a different nature, for the European economy. But I am optimistic about our common future.
What sorts of models does the Committee find useful? In his peer review of the Bank’s use of economic models3, Adrian Pagan suggested that economic modelling may involve a trade off between theoretical consistency (good economics) and data coherence (a good fit); our goal should be to ensure that we are positioned on the efficient frontier between the two. Any model we use should in principle be on this frontier – but we want to be able to move along the frontier and use different sorts of models for different purposes. 2  Charles gives five arguments for having an IR that is the responsibility of the MPC itself: transparency, discipline, a better informed MPC, better forecasts and accountability (in that order). I think they fit within my taxonomy. 3  Pagan, A (2003) ‘Modelling and forecasting at the Bank of England’, Bank of England Quarterly Bulletin Spring 2003. Adrian Pagan has been commissioned to produce a postscript, following the introduction of the new Bank of England Quarterly Model. This will be published later this year. 2  BIS Review 17/2005  For example, if, as I have suggested, we want to use models to facilitate discussions about fundamental economic issues, we clearly need models with rich economic structures – structures that reflect the Committee’s views on the way the economy works. The Bank’s new Quarterly Model (BEQM)4 has been developed with this function very much in mind.

Our last speech for this event will be held by Mr. Cristian Popa, Deputy Governor of the National Bank of Romania, showing you just where we, as central bank and as economy, stand in the preparation of the introduction of inflation targeting. What I do want to mention is the current debate on the appropriateness of adopting inflation targeting in Romania. I am very happy that monetary policy steals the spotlight from football, at least temporarily. Some acknowledged Romanian economists claim that inflation targeting is not needed since future euro adoption requires fulfilling the grueling conditions of the ERM-II framework. In line with this argument, the exchange rate might prove to be a better choice for a nominal anchor. Given the soon to be completed capital account liberalization, I believe that exchange rate management would be very difficult outside a currency board. Although I am confident about our option, I respect all disagreeing opinions. For those retaining their doubts about the benefits of inflation targeting, there is one more argument, courtesy not of a renowned economist, but of the Danish physicist Niels Bohr. When asked why he, an enlightened scientist, kept a horse-shoe on display in his house, his prompt answer was that “it helps non-believers too”. Likewise, provided that the National Bank of Romania has convinced enough people of its commitments, non-believers should also enjoy the benefits of this policy change. Ladies and gentlemen, let me now introduce Rachel Lomax, Deputy Governor of Bank of England and member of the Monetary Policy Committee.
Joseph Yam: East Asian financial markets - the next frontier Welcoming remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the conference on "East Asian Financial Markets - The Next Frontier", Hong Kong, 22 June 2006. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to welcome you to this conference on "East Asian Financial Markets - The Next Frontier". It is also an honour for the Hong Kong Monetary Authority to be co-hosting this event with the World Bank to discuss the findings of its latest Regional Financial Sector Flagship Study and the future development of the financial markets in Asia. The World Bank has been very supportive of economic development in the region and I particularly welcome the focus in its recent work on financial markets. Here in Asia, considerable efforts have been made at the individual economy and regional levels to further develop our financial markets. Much remains to be done, however, so it is with great anticipation that I look forward to the discussions, conclusions, and recommendations that will emerge during the coming two days. The title of the conference, "East Asian Financial Markets - The Next Frontier" is, I believe, very fitting. Each part of it carries an important message. The focus on financial markets reminds us that a wellfunctioning financial system is increasingly important for economic development.

Svein Gjedrem: The conduct of monetary policy Introductory statement by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 22 May 2008. Please note that the text below may differ slightly from the actual presentation. The statement is based on Norges Bank’s Annual Report for 2007, Monetary Policy Report 1/08 and the Executive Board’s assessments published after the monetary policy meeting on 23 April. *  *  *  I would like to thank the Chairman of the Committee and also thank the Committee for this opportunity to report on monetary policy in connection with the Storting’s deliberations on the Government’s Credit Report. My statement is based on the Bank’s Annual Report, but is also updated based on the Executive Board’s assessments for the period to the previous monetary policy meeting and new information received to date. I also refer to this year’s report from Norges Bank Watch, an independent group of experts that evaluates Norges Bank’s conduct of monetary policy. Monetary policy in Norway is oriented towards maintaining low and stable inflation. The target is annual consumer price inflation of close to 2.5 per cent over time. The inflation target provides employers and employees with an anchor for inflation expectations among businesses and households. Inflation stabilised early in the 1990s after falling from a high level in the previous decade.
But they did not portend a permanent ratcheting up of inflation. Core PCE inflation – which excludes the volatile food and energy components and is a better predictor of future overall inflation – has been just 1.7 percent over the past year. Furthermore, prices for energy and many other commodities have softened of late. And with the unemployment rate still high and capacity utilization low, resource slack continues to exert downward pressure on prices. In addition, measures of longer-run inflation expectations are at the low end of the range they have been running since last November. Putting these factors together, I would argue that inflation is likely to remain moderate over the foreseeable future. The FOMC forecasts for core inflation were concentrated near 1.8 percent this year, and its forecasts for total inflation were in the range of 1.5 percent to 2.0 percent for 2012, 2013 and 2014. My own assessment is that inflation will be at the lower end of these ranges. Fed performance These disappointing forecasts pose a challenge for monetary policy. The Fed is charged by Congress in the Federal Reserve Act to encourage conditions that foster both maximum employment and price stability. This is what you hear us refer to as the Fed’s “dual mandate”. Given the high unemployment rate and low job growth, I think it is clear that the Fed has fallen short in achieving its goal of maximum employment. I will return to this point shortly.

All of these factors may permanently lower the path of potential output. As I said in the fall of 2010 and I repeat the message again today: I think state-contingent policies such as those I just described are a productive way to provide such necessary monetary accommodation. There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape. It is imperative to undertake action now. References Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans, 2005, “Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy”, Journal of Political Economy, February, Vol. 113, No. 1, February, pp. 1–45. Chung, Hess, Jean-Philippe Laforte, David Reifschneider and John C. Williams, 2010, “Have We Underestimated the Probability of Hitting the Zero Lower Bound?”, at the conference, Revisiting Monetary Policy in a Low Inflation Environment, Federal Reserve Bank of Boston, October 13. Eggertsson, Gauti, and Michael Woodford, 2003, “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, Vol. 34, No. 1, pp. 139–211. Federal Open Market Committee, 2011, Minutes of the Federal Open Market Committee, January 25–26, Board of Governors of the Federal Reserve System, February 16. Krugman, Paul R., 1998, “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap”, Brookings Papers on Economic Activity, Vol. 29, No. 2, pp. 137–206. Reinhart, Carmen M., and Kenneth S. Rogoff, 2009, This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press.