samchain/econo-pairs-v1 huggingface dataset:
We know little about what the world will look like in the future, and we should be careful not to casually abandon something which has essentially worked well. It is easy to forget previous problems as time passes, and to take for granted that certain things are simply working. This is a dangerous approach, however, which can lead to setbacks. Dismantling a framework can be done quickly, but building one up takes a long time and often involves major adjustment costs. In terms of the monetary policy framework, I am convinced that the flexible inflation targeting pursued by the Riksbank and most other central banks today will continue to be the most effective approach for the foreseeable future. This does not mean, however, that I oppose all forms of change and necessarily think that everything should remain exactly as it is today. If we want something to endure, we must be prepared to change it. To continue with the metaphor I used at the beginning: it is important to constantly maintain the vessel and make any adjustments and improvements required for it to keep functioning well, even under new circumstances.3 I would today like to highlight a few areas of the Swedish monetary policy framework about which there are grounds to open up a discussion, based on the experiences we have gathered over some twenty years of inflation targeting.4 It is perhaps mainly the experiences gained after the financial crisis which have increased the need for a serious discussion.

Gent Sejko: Economic and financial developments in Albania during 2017 and objectives for 2018 Address by Mr Gent Sejko, Governor of the Bank of Albania, at the end-of-year meeting organised by the Albanian Association of Banks, Tirana, 21 December 2017. * * * Honourable AAB Chairman, Dear banking system executives, Dear friends and colleagues, As always, it a pleasure for me to be together with banking system executives in Albania, in this annual end-of-year event organized under the auspices of the Albanian Association of Banks. In my address, I would like to briefly focus on highlights that have characterised the economic and financial developments in Albania over 2017, as well as on some of our objectives for 2018. Albanian economy The Albanian economy seems to be experiencing an overall positive moment of recovery, from both the global and the regional perspective. Economic activity continued to grow reflecting the favourable financial environment, improvement of confidence, impulses generated by employment gains and the high levels of foreign direct investments, as well as the positive momentum in the economies of our trading partners. In terms of aggregate demand, growth was driven by the expansion of private consumption and investments, and the improvement of the balance of trade with abroad, especially in the third quarter. In response to the improvement by around 10.5% of the trade deficit in goods and services, the current account deficit fell to 4.6% of the GDP in the third quarter, one of the lowest levels in the last decade.
So they wanted to keep on consuming and spending beyond the levels that could be supported by the growth of their economies or income. Many people in the developed world thought, rather mistakenly, sovereign debt crisis should be the kind of mishaps that can only occur in the developing economies. At the same time, the capital market seemed to be willing to support this belief as investors were happily buying government bonds of the developed countries at very low interest rates. With what happened in the US and Europe in the last five years, we have come to realise that prosperity and good life have to be earned, through hard work and productivity growth, just like what their parents, grandparents and / great grandparents in the western world great grandparents in the western world did in the past. There is now little doubt that prosperity and good life built on the basis of rising indebtedness is unsustainable and is bound to collapse some time, just like sand castles. Trap of excessive indebtedness: Easy to get into and hard to get out 12. There is another pertinent question on why so many countries do not seem to be able or willing to get out of the trap of high indebtedness or excessive leverage. For one, it is far too tempting to spend, consume now and worry about payment later. That explains why, in addition to public debts, household debts have risen to very high levels all over the world.

This agreement has reaffirmed the commitment to monetary union, patent both in the supportive efforts of its members and in the observance of the common stability rules governing the functioning of the Monetary Union. The negotiations for the Third Bailout Programme for Greece unfolded as scheduled, and there is every indication the Programme will be launched immediately and that the day after tomorrow, on 20 August, the Greek authorities will be able to meet their ECB payments, thereby avoiding a default with dire consequences. This third bailout is, perhaps, the most complex and demanding of those so far agreed between Greece and the European authorities and the IMF. This is so, among other things, because it will include measures to reinforce the Greek banking system, which has been greatly affected by events in recent months. Evidently, it is in the interest of all euro area members that the new Programme should be properly adhered to, and follow schedule, so that assessments of its implementation before year-end may be positive and provide for its full effectiveness and continuity. Needless to say, the fulfilment of this third programme will boost the growth of the Greek economy – the central and fundamental objective of this third assistance programme – and will strengthen the euro area and its stability as a whole. Recent developments on the international economic front are positive in terms of growth.
Insurance linked securities and new insurers  One response has been to move in the direction of introducing and managing rather than providing risk capital. Insurance-linked securities and other forms of alternative insurance capital, such as sidecars and 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  the like, allow insurers to transfer risks to capital markets. These markets have been growing for some time, forming an increasing share of global reinsurance capital (Chart 2). They seem to have absorbed losses from the 2017 hurricanes without major hiccups. With the continuing search for yield and diversification by institutional investors, growth seems likely to continue. Chart 2: Share of alternative capital in global reinsurance capital  Source: Aon: ILS Alternative Capital Fortifies Its Position September 2018  Last year the government established a tax and regulatory framework for Insurance-Linked Securities in the United Kingdom. It is intended to help cement London’s position at the forefront of global reinsurance business. The PRA has since authorised a number of Insurance Special Purpose Vehicles, which can either be for one transaction or multiple transactions from one or more cedants. We are taking a proportionate approach to their supervision, consistent with the risks posed to our objectives and compliance with Solvency II requirements. We are keen to work with the industry to ensure we capture any learning as we both develop our experience of operating the new regime.

2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Part of the case for an international capital standard is that insurance markets have become more global over the past few decades, even if that trend appears to have steadied after the financial crisis (Chart 1). This is most obvious in wholesale general insurance and reinsurance, where the underlying rationale for insurance provision arises from the law of large numbers and the benefits from pooling and diversifying across risks. Recent cross border mergers and acquisitions, and with talk of more to come, suggests the increase in the amount of business written by overseas companies might resume. Chart 1: business written by overseas insurers  Source: OECD and Bank calculations  Mergers and acquisitions are in part a response to the prolonged period of soft conditions in wholesale general insurance and reinsurance markets. For many insurers underwriting returns are now below the levels required to achieve sustained profitability, even in years of ‘normal’ natural catastrophe activity. Our sense is that until this year, many had thought that market conditions would improve cyclically: for example, following a large loss event. They had therefore sought to maintain their market position and wait for better times. The limited increase in market prices following the losses from the 2017 hurricanes in the US and Caribbean has, however, caused a number of boards to look more fundamentally at the sustainability of their current businesses.
Fourthly, wage formation is functioning better than was previously the case, much as a result of the Industrial Agreement and the inflation target. This should also act as a built-in brake in the system and contribute to inflation not lastingly ‘running out of control’. From 500 per cent to −0.5 per cent – and then what? The critical question is how much the interest rate needs to be raised. Will we go from 500 per cent to −0.5 per cent to – well, what comes next? The historical average of the Riksbank’s policy rate since 1907 is 4.7 per cent. In 1992, a policy rate slightly below 5 per cent would have been perceived as improbably low. Today, many people would regard it as improbably high. Within the forecast period, a 5 per cent policy rate is unlikely, but I hope that this brief historical review shows that we cannot exclude the possibility of a policy rate in line with historical averages over the next 30 years. Today the Riksbank’s policy rate is 0.75 per cent. It will need to be increased further. The policy rate path indicates that the policy rate will be raised to slightly over 2 per cent in early 2023. Inflation outcomes have been higher than expected and the risk of inflation is still on the upside. We aim to tighten policy without the Swedish economy having to enter a recession, a so-called soft landing.

These movements reflected the euro’s recovery following the French elections and the attendant easing of political uncertainty. The Swiss franc’s depreciation against the euro and the US dollar since September reflects the fact that it is currently less sought after as a safe haven, because of increased confidence in the euro area’s recovery and the vitality of the global economy. However, we still consider the situation on the foreign exchange market to be fragile. The SNB’s willingness to intervene as necessary therefore continues to be important. In her remarks, Andréa Maechler will go into more detail on the market environment for the Swiss franc. Monetary policy outlook  Ladies and gentlemen, let me summarise my key points. Inflation in Switzerland remains modest, and the recovery of our economy is continuing at a gradual pace. Inflation expectations are well anchored. The rise in oil prices and the weaker Swiss franc have pushed up our short-term inflation forecast slightly. In the longer term, however, inflationary pressure in Switzerland has not increased. Our expansionary monetary policy remains appropriate in order to underpin the recovery, and thereby ensure price stability, while taking due account of economic developments. The SNB is therefore maintaining the negative interest rate, as well as its willingness to intervene in the foreign exchange market as necessary. Ladies and gentlemen, thank you for your attention. It is now my pleasure to give the floor to Fritz Zurbrügg. Page 4/4
In other words, we needed to act and communicate in order to tighten financial conditions further, including by shifting up the interest rate path expected by markets. Thus, we raised our rates by 50 bp and, more importantly, we signalled our intention to continue raising them significantly at a steady pace to reach sufficiently restrictive levels, and to keep them there for some time. 1  Indeed, after our December communication, there was an upward shift in the risk-free (OIS) forward curve. 1 In particular, the day before our February meeting, the 10-year OIS rate was 0.27 basis points (pp) higher than before the December meeting, while the 3-month OIS rate was 0.51 pp higher. Equally important, in real terms the 10-year OIS rate was 0.51 pp higher than in December, once adjusted for market inflation expectations. And the euro had simultaneously appreciated by 2.88% against the dollar in the same period. Our February decision represents a continuation (i.e. “staying the course”) of the policy tightening path that we signalled in December. Continuing this path was based both on our updated assessment of the inflation outlook and on the financial conditions prevailing in capital markets at that time. Let me address each element in turn. As regards the inflation outlook, at our February meeting we did not have the benefit of a new round of staff macroeconomic projections. But as I said before, our assessment of the inflation outlook is based on a wealth of information, which also includes s urvey-based and market-based indicators.

However, China’s reopening may temper inflation through its impact on supply bottlenecks. Indeed, the end of the zero-COVID policy will avert production distortions caused by restrictions. In the recent past, the COVID-induced production stoppages in China were key factors behind the bottlenecks and inflationary pressures and, therefore, the reopening could be seen as net deflationary. All in all, it is difficult to disentangle the net effects of all these factors on inflation and close monitoring will be needed. The resilience of euro area growth and its composition In the second half of 2022 the euro area economy proved more resilient than expected and the slowdown in the fourth quarter of last year was less severe than anticipated . This has occurred in a context on which a significant reversal of previous supply shocks (bottlenecks and energy prices) was observed, households and firms had plenty of buffers (in particular the household savings built up during the pandemic), the post-COVID rebound in demand continued to generate positive effects and monetary policy had not yet been fully transmitted. However, there is much uncertainty about the continuity of these factors. In particular, the sharp decline in European gas prices reflects unusually mild weather, energy-saving measures and strong inventory levels, which mitigate supply risks for next winter. However, 12  Ko lerus, Diaye and Sabo ro wski (2016) “China’s Footprint in Global Co mmodity Markets”. International Mo netary Fund.
Given the nature of these processes, we estimate that annual inflation will pass its peak in February—March, after which it will be going down incrementally. This will become possible as the impact of the above proinflationary factors is gradually exhausted. Beginning from March, the statistical base effect will also play a significant role in the decrease in annual inflation. Taking into account the monetary policy pursued, we forecast that prices will grow by 3.7%—4.2% over the year. The third factor we were taking into account when making our today’s decision is that monetary conditions remain accommodative. While nominal interest rates on loans and deposits changed only slightly, real price conditions were eased. Banks also continued to ease non-price lending conditions in a range of segments. Yields on federal government bonds increased somewhat amid the growth of long-term interest rates in global financial markets. Owing to the monetary policy pursued and the Government’s anti-crisis support measures, the increase in the banking system’s claims on companies accelerated to 10.2% last year, which is more than in 2019. The growth rate of claims on households equalled 12.9%. The economy and borrowers obtained the funds they needed to more smoothly overcome the acute phase of the crisis and resume development. In 2021, monetary conditions will remain accommodative, further promoting lending expansion, despite the expected gradual termination of preferential programmes.

Focusing on the last 15 years, somewhat larger fluctuations have been observed since 1997. In 1998 the price of oil dropped temporarily below $ per barrel. This year the price has increased substantially above the $ to $ a barrel price range that we consider a more “normal” level. 4. Fluctuating oil prices and economic stability: Dutch disease and the Government Petroleum Fund  Oil revenues increase consumption possibilities. However, it is a challenge to manage these resources in a way that increases welfare for current and future generations. A rapid expansion of the sheltered sector based on uncertain and perhaps temporary increases in petroleum revenues may lead to the situation called Dutch disease. The impact of oil price fluctuations on the exchange rate and on economic stability in general will depend on the speed at which petroleum revenues are used. In general, income can either be used now, or saved by accumulating assets abroad, so as to redistribute the increased income and thus consumption between generations. The income can be used to increase net imports while resources BIS Review 121/1999  4  from the internationally exposed sector are transferred to the sheltered sector. This will allow for increased consumption of both exposed and sheltered sector goods. If petroleum revenues are to be used for increased sheltered goods consumption, a real exchange rate appreciation will be needed to initiate the reallocation of resources to the sheltered sector.
2/3  BIS central bankers' speeches  ** Since we are in Berlin, allow me to conclude with a European perspective: Europe has not developed global social networks like some important countries. This raises the stakes for the European authorities, if they want a stronger, more autonomous and more innovative European financial sector, to succeed in developing a coherent strategy. We do not have much time to decide this consistent European payment strategy, including EPI and a possible CBDC: one to two years. This makes our today’s discussion still more welcome. 3/3  BIS central bankers' speeches

But, of course, this is not a precise forecast of the level of Global R*. Among the risks to this assessment are the other potential drivers that have not been considered in this model. For example, one potentially important driver, which is absent from the structural model simulation, is the rise in inequality. Existing results tend to suggest that the rise in inequality, as seen in recent decades, puts downward pressure on Global R*. [15] Another widespread trend that could push in the opposite direction is the growth in the provision of publicly-financed social security and healthcare. Rachel and Summers (2019) argue that that this trend would both reduce the incentives for households to accumulate wealth and crowd out private capital, resulting in upward pressure on Global R*. Of course, both inequality and social security provision are themselves endogenous to other underlying structural forces, including the demographic trends that I have already talked about. So incorporating these into our narrative requires a fuller consideration of these interactions. The Missing-Investment Puzzle  Page 9  I will now consider one of the potential implications of the past decline in Global R*, focusing on investment. Standard neoclassical theory, such as that underlying the structural model considered earlier, implies a strong co-movement between the safe real rate and rate of return on capital. This suggests that we would expect a fall in Global R* to be associated with a fall in the return on capital.
“Building an economic governance framework fit for the challenges ahead”, press release, 9 November 2022. 5  Caselli, F. and P. Wingender (2021). “Heterogeneous effects of fiscal rules: The Maastricht fiscal criterion and the counterfactual distribution of government deficits”. European Economic Review, 136, 103748. 5  management features. In the highly uncertain world that we live in, the proposal tries to improve the effectiveness of the MIP with a more forward-looking assessment of the existence of risks of imbalances, monitoring adverse trends in flow-related variables that could lead to the build-up of imbalances. The Commission’s proposal envisages to reduce the current inertia of the MIP by placing more weight on risk analysis and on actual policy implementation to address imbalances. The key elements of any reform of the SGP These orientations are a promising starting point for a debate that should, by the end of this year, lead to the adoption of an improved fiscal and governance framework for the EU. In particular, the Commission’s proposal reflects the consensus reached by both the theoretical and the empirical literature on how to design fiscal rules. It does this in four ways. First, it anchors debt sustainability at the centre of the debate. Second, it highlights the need to use an expenditure rule as an intermediate target, given that this is the one variable under the control of the fiscal authorities, allowing the extraordinary revenues that sometimes materialise, beyond their control, to be saved.

6  See the Eurosystem reply to the Communication from the European Commission “The EU economy after COVID-19: implications for economic governance” of 19 October 2021  7  See, for example, Lorenzoni, G., F. Giavazzi, V. Guerreri and L. D’Amico (2023). “New EU fiscal rules and governance challenges”, VoxEU Column, 2 January 2023; Blanchard, O., A. Sapir and J. Zettelmeyer (2022). “The European Commission’s fiscal rules proposal: a bold plan with flaws that can be fixed”, Realtime Economics Blog, Peterson Institute for International Economics, 30 November 2022; and Wyplosz, C. (2022). “Reform of the Stability and Growth Pact: The Commission’s proposal could be a missed opportunity”, VoxEU Column, 17 November 2022. 6  Second, the fiscal rules must be able to avoid the traditional pro-cyclical behaviour of public finances. Ideally, fiscal rules should foster savings during expansions and support growth during recessions. Clearly, the existing framework has not been able to do so, contributing to the undesirable increase in public debt levels that we have seen. It would therefore be desirable for the new framework to incorporate a clear incentive scheme to boost efforts to consolidate public finances when the economy is doing well, so as to provide room for manoeuvre in times of crisis. It should combine positive incentives such as allowing countries to design the fiscal consolidation path - and negative ones – like an improved regime of sanctions, including restrictions on the access to EU funds. Third, greater compliance can be achieved with rules that are more automatic.