samchain/econo-pairs-v1 huggingface dataset:
In 1913, US Federal tax rules summed to 400 pages. By 1945, this had risen to 8,200 pages, by 1974 to 19,500 pages and by 2000 to 46,900 pages. In 2013, US Federal tax rules amounted to 74,000 pages. That is almost a two hundred-fold increase over a century. Viewed through the lens of history, it is not difficult to explain this evolution. As cracks have emerged in the plaster – for example, regulatory and tax loopholes – they have been papered over. Like a bad painter and decorator, new layers have been applied to support the  BIS central bankers’ speeches  1  layers below. These were rational responses to real problems. And for a time they will have filled cracks, reduced uncertainties, corrected incentives. Yet this evolutionary path leads inexorably towards a framework – whether regulatory or tax – which is a patchwork of make-do-and-mend. History locks in the idiosyncrasies and complexities of the past, generating a steadily rising tide of red tape. As the regulatory and tax codes attest, the resulting frameworks can be Byzantine in their complexity and HeathRobinson in their design. For three distinct reasons, this patchwork may not serve society well. First, maintaining such a framework is a high-cost activity. In financial regulation, it makes for a steadily-rising standing army of regulators and compliance officers. In the US in the 1930s, there was roughly one regulator for every three banks. Today, there are roughly three regulators for every US bank.

Bilateral investment is also gaining importance, notably with the two recent Government-to-Government agreements, involving the establishment of an industrial park in both countries. The cornerstone to the strength of our bilateral economic relations is the ability to continually harness the synergies and economic complementarities that exists between our economies. The use of renminbi for trade settlement provides a natural hedge for businesses with renminbi obligations. It also generates cost savings and minimises exchange rate risks, in particular, it reduces the exposure to exchange rate fluctuations of a third currency. While the dollar will continue to remain an important currency for settlement of trade obligations, the availability of renminbi would provide companies an additional currency for such trade settlement. BIS central bankers’ speeches  1  The benefits to be gained can be significant given the large and increasing trade base with China which stood at RM167 billion in 2011. By undertaking the transactions in local currency, exporters and importers in China would be able to eliminate the hedging and conversion costs. The reduction in transaction costs for the exporters and importers will contribute towards more competitive pricing for both exporters and importers. The full potential benefits are however expected to be realised in stages. The benefits will rise as the trade volume settled in renminbi increases and reaches a critical volume in terms of size which will in turn allow for the realisation of economies of scale.
While the underlying core inflation rate, that strips out volatile food and energy prices, has been somewhat higher than expected a few months back, it appears that the annual rate of core inflation2 has peaked and we expect it to begin to decline later this year.3 Finally, inflation expectations, which play an important role in the inflation process, remain well anchored. By this I mean that people expect that the rate of inflation will continue to be relatively low for some time to come. Regional economic conditions So how is the recovery proceeding in the state and the region? As I mentioned, the New York Fed produces indexes that help us track economic activity in the region. Based on these measures, the economic recovery got underway in both New York State and New York City in late 2009, and economic activity has continued to expand through early 2012. The New York Fed also conducts the monthly Empire State Manufacturing Survey to monitor conditions for regional manufacturers. The most recent survey, for which a number of Long Island firms participated, points to continued expansion in manufacturing activity throughout the first quarter of 2012 and heightened optimism about the general business outlook. Recently released employment revisions indicate that the economic recovery has taken hold on Long Island. But there still is a long way to go. Employment on the island declined by a little over 4 percent in the downturn – a steep drop, to be sure, but only about two-thirds of the decline that occurred nationally.

In other words, such shocks tend to put upward pressure on the NAIRU (at least initially, they move you rightwards along the Phillips curve in Chart 2, not downwards4). Yet, for much of the past two years, pay growth was weak even as unemployment declined sharply. I commented on the striking flexibility of real wages in a speech last summer, from which Chart 2 is taken. Suppose, however, that the drop in productivity has had nothing to do with existing jobs but instead reflects the skew in the creation of new jobs towards relatively less productive, less well-paid roles. To that extent, there’s no real-wage resistance, among existing employees, to overcome, and the arithmetic impacts on average pay and average productivity are necessarily immediate and coincident. This would also help to explain why pay surveys, which track wages of the median employee (rather than the average), appeared to over-predict wage growth in 2013 and 2014 (Chart 6): they failed to take account of changes in the mix of employment. You can see from Chart 6 that when the compositional effects were positive, during the recession, the surveys undermeasured AWE growth. Finally, these shifts can also shed light on the most recent trends in the aggregate data. The latest estimates show that the compositional effects have risen during the first half of this year – the skew towards lower-paid jobs has diminished.
Instead, with an additional objective of managing credit growth and asset  5  Sveriges Riksbank (2011). 6  Results using Swedish data in Claussen, Jonsson and Lagerwall (2011) entail a reduction (or avoiding an increase) in housing prices of 10 per cent during a seven-year period normally requiring a policy rate increase that leads to GDP being 6 per cent lower than it would otherwise have been. Under the assumption of an Okun coefficient of 2, this means an increase in unemployment of 3 percentage points. Assenmacher-Wesche and Gerlach (2010) find, using data from 18 countries, that a reduction in property prices of 10 per cent normally requires a policy rate increase that leads to GDP being 4 per cent lower than it would otherwise have been and thus with the same Okun coefficient, to unemployment being 2 percentage points higher. 7  Bean, Paustian, Penalver and Taylor (2011).

In an open economy, domestic demand changes can easily be satisfied through increased imports. As a consequence, domestic inflation may become less sensitive to the domestic output gap and more sensitive to global tensions on production capacities. 2  2  Notably put forward by Laurence Ball. BIS Review 103/2007  Finally, it is possible that (due to immigration and structural reforms) labour supply has become more elastic in many countries, and, as a consequence the cyclicality of wages (and prices) has been reduced. 3 Flatter Phillips curves may be a mixed blessing for Central Banks. In such circumstances, looking at actual and projected inflation may not be sufficient to detect incipient imbalances between supply and demand. In other words, inflation becomes less informative about the output gap. There is a risk, then, that imbalances are allowed to build up to a point where a stronger reaction may become necessary. To prevent that risk, Central Banks may want to look at information coming from a broader set of indicators, chosen because of their ability to detect, at an earlier stage, potential inflationary pressures. Obviously, monetary and credit aggregates for instance are good candidates for such a job. What role for money in monetary policy? As you may know, this is precisely what is done in the context of the Eurosystem’s two-pillar monetary policy strategy which assigns an important role to money. This structure is based on a particular premise and has one important implication.
The essential instrument of monetary policy - control over short-term interest rates operates, through a number of different channels, certainly - on the demand side of our economies - primarily on domestic private sector demand. There is very little that monetary policy can do directly to influence the supply-side capacity of our economies to meet that demand over time, which is what determines the rate of growth that we can hope to sustain. Improving supply-side performance is therefore fundamentally important and hugely more complex than overall macro-economic management of which monetary policy is a very important part. Our supply-side performance is affected by the whole range of public policy decisions. It is affected, for example, by the extent of free trade and market competition both nationally and internationally; by all forms of regulation, which have an important bearing among other things on the flexibility of goods and labour markets. It is affected by the level and structure of taxation on the one hand and of public expenditure on the other. And perhaps most fundamentally it is affected by the attitudes, and the technical and entrepreneurial skills of the workforce and management which, in turn, depends importantly on education and training. Decisions in these areas often involve difficult political judgements on how to strike the right balance between social and economic considerations. I shall have no more to say about supply-side issues in my remarks, except to thank my lucky stars that I was born a central banker and not a politician.

The domestically-oriented sectors have, for the most part, been doing relatively well, whereas those sectors that are exposed to international competition, particularly within or from the Euro area, have been under considerable pressure. And that pressure on the internationally exposed sectors has of course intensified with the slowdown both in the US and in the euro area. Understandably in these circumstances we too have been criticised, by many in the suffering sectors, for being slow to respond. They point to the fact that inflation has been consistently below what is intended to be a symmetrical target for the past two years, and they assume that had interest rates been lower over that period so, too, would the exchange rate. They sometimes, also, find it difficult to understand why, when our inflation rate is lower than in the Eurozone, and the US, our interest rates are higher. In fact, the undershoot of the inflation target has been marginal over the past two years - averaging less than ½% and we tend to argue that - given all the uncertainties - it is unrealistic to suppose that we could get much closer to the target than that; we point out, too, that sterling has actually strengthened against the euro since the beginning of the year even though we have reduced our interest rate relative to that of the ECB.
It counters the risk of an undesirable appreciation and, in turn, the associated risks to price and economic developments. Conclusion Ladies and gentlemen, following the discontinuation of the minimum exchange rate of CHF 1.20 to the euro almost a year ago, Swiss competitiveness came under pressure in the short term. Yet Switzerland’s position among the leaders in major international rankings clearly shows that, over the long term, exchange rate developments are only one factor shaping competitiveness. A more decisive role is played by the existence of a strong network of location-specific factors which have been established, nurtured and honed over several decades. By fulfilling its price stability mandate, the SNB contributes substantially to perpetuating one of these factors – macroeconomic stability. In this regard, a monetary policy geared towards flexible exchange rates has, in principle, stood Switzerland in good stead over the last 40 years. Under certain conditions, however, the SNB is prepared to intervene directly in the foreign exchange market. This applies especially in the prevailing environment. Whether, and to what extent, foreign exchange market intervention is called for requires careful deliberation, and consideration of the international environment. Prior to the discontinuation of the minimum exchange rate, international developments had caused the euro to lose considerable ground against all major currencies; the minimum rate had thus become unsustainable. We appreciate that the exchange rate situation since then has presented you all with a huge challenge. Our decision was inevitable, however, to guarantee the SNB’s continuing ability to conduct an effective monetary policy.

The last but by no means the least point I would like to make is that we now have an occasion for showing, once more, the ability of the Turkish economy to overcome adversity by meeting the challenge to our resilience following a major earthquake. During the last two years, we have survived the South Asian, Russian and Latin American crises, and also an economic slowdown in the EU region that is an extremely vital trading, financial and economic partner for Turkey. We also had the uncertainties preceding the early election held in April 1999, which tested the resistance of the Turkish economy. I truly believe that we have already passed these exams, and also that we have gained enormous experience. I have always said that we are extremely good in bad times, although we don’t like them. This time the situation and prospects are different, and we will show the abilities of the Turkish economy in good times as well as bad. If the program we have begun implementing is successful, that success will affect at least the next 50 years of Turkey’s economic and social life. I believe these messages are clear and will be well understood by our international partners. BIS Review 109/1999  4
We must find a new equilibrium in which the financial system truly supports the real economy, encouraging a flow of balanced credit. The adjustment may not be immediate and it needs to follow a gradual path in order to arrive, in due course, at a new point of balance that allows a restoration of confidence not only among investors but also taxpayers. Everyone must play his or her part. The regulatory authorities have to agree quickly on the new system parameters, in consultation with the private sector. Macroeconomic policy must promote conditions for a gradual adjustment, in line with the objective of sustaining economic growth and the restoration of a financial market that efficiently performs its primary role as an intermediary. Market players must understand that the future cannot be a simple return to the past, to the pre-crisis situation. If we fail to reach the new equilibrium in due course we will have wasted not only the crisis but also the resources of taxpayers that have been used to save the system. This can only backfire on the system. 38  BIS Review 10/2010  Figure 1  Changes in credit standards applied to the approval of loans or credit lines to enterprises (net percentages of banks contributing to tightening standards)  Notes: The net percentage refers to the difference between the sum of the percentages for “tightened considerably” and “tightened somewhat” and the sum of the percentages for “eased somewhat” and “eased considerably”.

My central view is that the peak impact of the past depreciation on inflation has probably passed – monthly goods price inflation has slowed in recent quarters and the total adjustment in relative prices is similar to previous exchange rate changes. But there is considerable uncertainty surrounding this judgment and it is quite possible that there may be further significant upward pressure on prices to come. The increase in prices associated with the combination of the rise in oil prices, the changes to VAT, and the past depreciation of sterling is more than sufficient to explain the strength of inflation relative to target. Moreover, the fact that some of these factors were not predictable in advance and that their implications for inflation – particularly so in the case of the exchange rate – appear to have been greater than initially anticipated, can also help to account for the upside surprises in inflation. But the exact contribution from these price-level shocks is uncertain and it is possible that the other factors identified by the pricing framework also contributed to the surprising strength of inflation. The impact of spare capacity on costs and prices Consider first the impact of spare capacity on costs and prices. There are good reasons to believe that a substantial margin of spare capacity opened up during the recession and remains today.
The Central Bank will monitor such borrowings to ensure that highly geared leasing companies do not borrow excessively from the market and terms and conditions will be imposed to mitigate risks to the investors in debt instruments issued by leasing companies. In addition to business growth and fund raising, the viability of the finance and leasing companies should also be monitored and watched, although their asset base accounts for a mere 4.8% of total financial sector assets. Also, these institutions are engaged in granting credit to the more risky sectors in the economy absorbing higher credit risks which the conventional banking sector is not willing to take on. Their contribution to the capital formation in the economy particularly through the provision of leasing and hire purchase facilities is significant. A failure of one or two big companies would have a far reaching impact from a stability point of view, given the ripple effects it could have on the whole financial sector. There are several stakeholders involved in examining the viability of businesses of finance and leasing companies. The chief among them are shareholders, regulators, auditors, investors, depositors and creditors. All these stakeholders have functions and responsibilities assigned to, or assumed by them by law or practice. It is becoming increasingly clear that some of the functions and responsibilities will not be effective if done in isolation without consulting the other stakeholders. In particular, the regulators and external auditors should closely coordinate their roles and responsibilities.

Instances of “follow-the-leader” behaviour occur not just in bullish stockmarkets but also in the currency market when many countries with different conditions are lumped together in a general assessment. Market players must assess each country separately. Central bank interventions under certain circumstances are uncommon with a flexible exchange rate regime but they do occur. I cannot exclude the possibility of the Riksbank intervening again if this were to be called for. Growth in the industrialised countries may thus be affected by the real economic crisis which has hit the emerging markets and resulted in a sharp fall in output there. The magnitude of such an effect will be highly dependent on confidence - confidence among households and firms so that they are prone to consume and invest, confidence among banks so that they are prone to provide credit. The Riksbank’s appraisal In the Riksbank’s most recent Inflation Report we counted on an OECD area growth rate of around 2 per cent in the years ahead. It should be borne in mind that this figure represented the latest in a series of downward revisions over the past twelve months. Since the publication of the September Report, our assessment of tendencies in the rest of the world has not changed. Considering the mechanisms to which I have just referred, however, it is not surprising that our Report highlighted the risks associated with the external situation. This situation is unusually difficult to evaluate and has to be followed closely.
Assuming that the three-month Libor rate will remain stable at 1.25%, average annual inflation is expected to hover between 0.9% and 1.6% in the next three years. For 2002, the National Bank still anticipates a growth rate of around 1%. The difficult situation of the world economy has had a marked influence on the development of business activity in Switzerland in the past few months. Following a decline in the third quarter 2001, the economy stabilised in the fourth quarter, and in the first quarter 2002 gross domestic product again rose somewhat. Notably exports and capital spending were on the decline during this period, while private and government consumption as well as the construction industry exerted a stabilising influence. On the whole, the development in the past six months fulfilled our expectations. We assume that the Swiss economy will grow extremely moderately and below its potential until mid-2002. Growth is likely to pick up perceptibly again only during the second half of 2002. Consumption will remain robust and strengthen economic activity. The actual upswing, however, should be triggered by higher exports and these, in turn, will depend on improved economic conditions worldwide. With a slight time lag, capital spending is also expected to grow markedly again. As already stated, we still believe that real economic activity should increase by around 1% in 2002. In 2003, growth should continue to approach its potential, thereby clearly exceeding this year's level.

At 1.6%, the price pressure on domestic goods still clearly exceeds that on foreign goods. The dashed red curve in the graph shows our latest inflation forecast, while the table contains the corresponding average annual inflation. Our new forecast rests on the assumption that after the surprisingly strong first quarter, growth in the US will be considerably weaker in the second quarter of this year. Subsequently, however, the US economy should gradually return to its potential growth path. BIS Review 39/2002  1  In Europe, the economy will stagnate until the middle of this year and should then again accelerate markedly. We expect that the dollar/euro rate will remain at about the current level and that the oil price will be around $ per barrel. On the assumption that the three-month Libor rate will remain stable at 1.25% during the next three years, inflation should average 0.9% in 2002, move up to 1.3% in 2003 and reach 1.6% in 2004. The forecast inflation will accelerate over time. Throughout the forecasting period, however, it will remain within the range of price stability. Until mid-2003, the forecast inflation will be considerably influenced by basis effects, which explains the various fluctuations. After that it will be largely determined by monetary policy effects. Until the beginning of 2004, the new forecast is very similar to the forecast of December 2001. In the new forecast, however, inflation then rises rapidly and at the end of the forecasting period it is only barely within the range of price stability.