samchain/econo-pairs-v1 huggingface dataset:
Looking at the main trend, the degree of dispersion in real GDP growth rates across the 12 euro area countries declined somewhat in 2004 (in annual average terms) to a historically low level (1.4% as measured by the unweighted standard deviation), while it had been fluctuating around 2% since the 1970s. By comparison, the dispersion of real growth rates across the eight US statistical regions fluctuated around an average of 1.5 % between 1990 and 2002. This is not surprising since some stabilisation channels are at work in a currency area: in particular, a credible monetary policy should bring about a convergence of expected inflation towards the definition of price stability, leading progressively to the convergence of ex ante real rates across the area; moreover, lower inflation relative to other trading partners increases price competitiveness, which in turn counteracts the initial effect of higher real interest rates. 3. Appropriateness of the monetary policy stance Has the monetary policy stance been appropriate? To try answering that delicate question, the literature of central bank watchers or observers has mainly focused on Taylor-type rules as a usual benchmark. Despite numerous caveats, such an approach can be very informative as it addresses several relevant issues such as: is the monetary policy decision process rule-based or rather discretionary? To what extent is the central bank too focused on price stability at the expense of, say, growth and employment? Is the central bank forward-looking or rather “behind the curve”?

This assessment derives from studies conducted by the Eurosystem but also from the reports published by “ECB Watchers”, with whom, incidentally, the ECB has regular contact, notably in the context of annual conferences. Figures 5 and 6 show for example that on average, the Eurosystem’s monetary policy decisions were anticipated by financial markets, whatever their orientation, at least two weeks in advance, and fully factored in at least a week before. A comparison with the Fed, moreover, does not reveal significant differences between the two institutions with regard to the ability of markets to anticipate the monetary policy decisions of the two institutions. This point to the transparency of the single monetary policy. In particular, the fact that the ECB has chosen channels other than the publication of minutes of the meetings of the Governing Council has not prevented it from reaching a high level of predictability. As regards the frequency, since the inception of the euro in 1999, the Eurosystem has changed its policy rates 16 times (8 cuts, 8 hikes), which is on average close to the usual average frequency of interest rate changes 1 However, compared to the Federal Reserve, in particular since 2001, the frequency of the changes is by far lower. Does this necessarily imply that the Eurosystem does not move enough or too low?
This was an overnight 7  devaluation of the basic exchange rate by 120 per cent! The rupee was then allowed to float under a managed exchange rate regime. Accordingly, compared to the end 1976 exchange rate of Rs. 8.83 per US dollar, the exchange rate was recorded at Rs. 15.56 at end 1977. This sharp devaluation addressed the overvaluation of the rupee observed under the fixed regime. The subsequent managed exchange rate regime allowed some flexibility to determine the value of currency largely on the basis of market demand and supply, while attempting to prevent the overvaluation of the rupee by maintaining the real value of the rupee against movements of a basket of major currencies. The Aftermath of the Managed Float The introduction of the managed floating exchange rate was a welcome move from the perspective of a liberal macroeconomist. However, this resulted in new challenges to the conduct of monetary policy, particularly as the exchange rate was no longer available to anchor inflation expectations like in the past. The Central Bank also had to face a new challenge, as the government started to run extremely large fiscal deficits funded mainly by concessional external funding to develop public infrastructure such as the accelerated Mahaweli scheme. Annual fiscal deficits averaged 13.3 per cent of GDP between 1978 and 1983, External current account deficits averaged 10.8 per cent of GDP between 1979 and 1983. Year-on-year inflation averaged 15.6 per cent during February 1978 and January 1985, with a peak of 32.5 per cent in August 1980.

First there were the first-generation fiscal and currency crises, which gave way to second-generation crises such as the one endured by the European monetary system in the early 1990s, and finally to third-generation ones occurring in Asia. All of them featured a variety of origins and transmission mechanisms. Now we are facing an international financial episode that many concur in labeling as the worst since the Great Depression, which originated in the developed economies, particularly the United States. Its initial symptoms are known: rapid financial innovation, credit expansion and asset price bubble. Its progression and repercussions, however, are unprecedented. On the other hand, our better understanding of the distortions that bad macroeconomic and financial policies can trigger, has made emerging economies in general, and Chile in particular, build a strong position to deal with a very weak international scenario. There is no better moment than this to get together and exchange our visions and opinions, and draw the first lessons from the events unfolding in the world economy. I want to begin with some comments on the present crisis. This episode has several unprecedented aspects stemming mainly from the complexity and sophistication of financial institutions and instruments, in a context of high financial and trade globalization. Of course, some elements have been observed before, such as the loss of confidence in key financial institutions by investors and the general public, and the uncertainty regarding its duration.
Since pegging these crypto-assets to central bank money – the only legal tender in our monetary system and hence its anchor – is complex and tricky, to say the least, allowing such settlement assets to spread unchecked could affect the transmission of monetary policy and undermine financial stability. II. Our three levers for responding to these challenges I would like to share with you what we are doing to respond to these challenges. The Banque de France is working on three complementary areas: regulation, facilitation and experimentation. A) The first of these stems from the observation that security depends on having an appropriate regulatory framework in place that guarantees financial stability, but also encourages financial innovation in order to enhance end-user services and system performances. At the European level, we have welcomed and are supporting the proposed Markets in Crypto-Assets (MiCA) regulation and the Digital Operational Resilience Act (DORA), presented in September 2020:  With the publication of the MiCA proposal, the European Union was the first G20 jurisdiction to respond to the urgent need to regulate the crypto-asset market. We also support the Digital Operational Resilience Act (DORA). The text will create a harmonised framework for strengthening the IT security of the overall financial sector. I’m thinking in particular of cloud players, whose role in critical segments of the sector raises the question of whether they should be located in the European Union.

The promotion of open economies and trade is a key element of these policies. Third, the IMF helps in the orderly correction of a country’s balance of payments problems by providing temporary financing. The ways in which we carry out our operations are also unique in several respects. Broadly-speaking, these may be divided into three categories of activities: •  Surveillance – This involves the monitoring of economic and financial conditions, both at the global level and in individual countries. For the IMF, surveillance is a central instrument for maintaining monetary and financial stability. By obliging each IMF member to engage in a regular consultation with us on its economic policies, the surveillance process also explicitly recognizes the role that all countries play in maintaining global stability. •  Lending – Our financing role is focused in assisting members with balance of payments adjustments. Through the temporary provision of funds, IMF lending gives members breathing room to implement policy measures to overcome underlying economic problems. BIS Review 43/2005  1  For the poorest countries, financing may be provided on concessional terms, and with longer maturities. The availability of IMF funds to assist in economic adjustment gives confidence to members and the international system as a whole, since it lowers the incentive for countries to take adjustment measures which are damaging to the national and international economies. •  Technical Assistance – Technical advice and assistance is provided to member countries in areas of the IMF’s expertise, primarily in macroeconomic and financial policymaking.
Two weeks after each meeting, the Bank publishes minutes, which make it clear whether there was a lack of consensus in the Committee. Publication of the minutes is required by law. An account of the implementation of monetary policy is provided in the Annual Report. All committee members are free to express their personal views on economic issues and monetary policy. In Sweden, too, interest rate decisions are made by a board of experts – the Executive Board. The members work full time, and participate in the daily operations of the central bank. An inflation report expressing the Executive Board’s collective view of the inflation outlook is published four times a year. As in the UK, special emphasis is placed on the individual responsibility of the Executive Board members. The individual members’ voting and assessments are disclosed. Any lack of consensus regarding the inflation outlook and setting of interest rates emerges from the minutes that are published from two to four weeks after each monetary policy meeting. Grounds are given for decisions on interest rates, but no press conference is held immediately after monetary policy meetings. The Executive Board does not directly announce its stance regarding interest rate movements in the period ahead, but this is implicit from the uncertainty associated with the projection, which Sweden’s Riksbank also illustrates by means of a fan surrounding the inflation projection. The Executive Board reports twice a year to the Swedish parliament, the Riksdagen.

Mandate, interpretation and implementation 1  New Zealand was the first country to introduce an inflation target in 1989. Chile followed in 1990, Canada in 1991, the UK in 1992, Sweden, Finland and Australia in 1993 (Finland until 1998), Spain in 1994 (until 1998) and Iceland and Norway in 2001. A number of emerging market economies like the Czech Republic and Poland, as well as Israel, South Africa and Brazil, have introduced inflation 2 targets in the last few years. The ECB shall direct its monetary policy instruments towards price stability, which the bank has defined as inflation of less than 2 per cent. The target of the Swiss central bank has a similar formulation. In the US, price and employment stability are equally important. Experience with inflation targets has generally been good. Low and stable inflation has underpinned economic growth and employment. The fact that conditions were favourable for low inflation and renewed growth in many countries following the downturn and high unemployment in the early 1990s may also have contributed positively. Norway introduced an inflation target during a different phase of the economic cycle. We have experienced a prolonged upturn. The labour market is tight. High labour force participation and demographic conditions indicate that the possibility for further growth in the labour supply is limited. In addition, reforms that reduce the supply of labour were implemented.
A downward adjustment must therefore be made to the rate of  5  Measured as an annual percentage change in the monthly purchase price coefficient in Statistics Sweden’s figures for house prices. 4  BIS Review 105/2006  increase in household indebtedness, compared with the present rate. It is not clear how this adjustment will occur. Normally this happens at a gradual rate as an increasing number of households realise that they have borrowed as much as their finances can tolerate. However, the adjustment can also occur more suddenly, and the higher the debt ratio becomes and the more property prices increase, the greater is the probability that the adjustment will not be orderly. What we remember from the beginning of the 1990s is that this type of development can have very marked effects on the real economy. As I see it, it is quite natural that we at the Riksbank should take into account the risk of this kind of setback further ahead. To some extent one might say that we have contributed to this development through a successful inflation-targeting policy and low interest rates. What a central bank can do to manage this kind of risk is to constantly remind everyone of the existence of the risks, through speeches and documents. We can also bring forward changes in the policy rate that are already motivated with regard to inflation targeting in our monetary policy decisions. We have taken both measures.

Approximately 40 per cent of the credit institutions’ lending to the Swedish non-bank public consists of loans to Swedish households with their housing as collateral. If the household should for some reason experience difficulty in meeting interest and mortgage payments, this would affect the banks’ capacity to play their central role in the financial system. However, we believe that the probability of such a scenario is thankfully slight. I will return to this in a moment. The rise in house prices over the past ten years has been spectacular, seen from a historical perspective. Since 1996 house prices have increased by around 130 per cent (Figure 3), while the average price per square metre for a tenant-owned apartment has risen by around 250 per cent1. As house prices have soared, household indebtedness has also increased rapidly. This is not an exclusively Swedish phenomenon – throughout the developed world, with a few exceptions, the pattern is repeated – and compared with some countries developments in Sweden appear almost modest. One contributory factor to the relatively modest upturn in Sweden is that here we buy houses almost solely to live in. It is relatively common in many other countries, particularly Anglo-Saxon countries, that individuals buy housing to rent out. They buy extra housing in the same way one buys equity or other financial assets in the hope that they will increase in value.
There is a greater concern upon making long-term economic decisions in the monetary union: whether the euro area’s central banks (that is, the Eurosystem as a whole) are able to keep the pan-European average inflation rate at a suitable level. This means that in the medium term, the inflation rate has to remain below but close to 2%. While in Austria or Slovenia, or in Estonia for that matter, inflation may temporarily differ from that of the euro area, we have to look at the whole picture when making decisions. The ability of the euro area to keep inflation close to 2% over the entire past decade has inspired confidence. The average inflation rate has remained slightly below 2% throughout the history of the single currency and annual inflation has mostly ranged within 1.5–2.5%. However, we must not be distracted by our success. The euro area’s inflation indicator was over 2% at the beginning of this year, and, most recently 2.4%. This is worrying. BIS central bankers’ speeches  1  The more detailed picture is, of course, more diverse and future monetary policy measures will also have to take that diversity into account. On the one hand, the European economy is just recovering from a deep economic recession. Unemployment is higher than usual, the relatively high debt burden is inhibiting borrowing activity in many countries and the majority of the recent price hike stems from global factors, such as the price growth of energy and food on the global market.

The results show that an increase in the capital to assets ratio by 20% reduces the GDP per capita by 1.6% for the whole sample, and by 2.5% for the emerging markets, while the increase of the liquid reserves to assets ratio by 20% adversely impacts the GDP per capita by 0.4% and 0.5%, respectively. Another research, conducted by the International Institute of Finance (IIF), a private sector institution, in 2011, finds pronounced net cumulative impact on economic activity of the proposed financial sector reforms (both, CAR and LCR) estimating that the level of GDP will be 3.2% lower than it would otherwise be after five years with an output loss of 0.7% per annum. On the other hand, the analysis conveyed by the Macroeconomic Assessment Group (MAG), which was set up by the BCBS and FSB in 2010 with a purpose of assessing the macroeconomic effects of the new Basel III proposals suggests a modest impact on aggregate output of the transition towards higher capital and liquidity standards. According to MAG’s assessment results, a 1 percentage point increase in the target ratio of tangible common equity (TCE) to risk-weighted assets is estimated to lead to a decline in the level of GDP by a maximum of about 0.19% from the baseline path after four and a half years (equivalent to a reduction in the annual growth rate of 0.04 percentage points over this period).
17 For Gallatin, a reduction of the United States’ federal debt burden “was the end toward which all other fiscal policy was designed.” 18 He argued forcefully that the federal government should spend tax revenues on new public services, goods or investment only when tax revenues were freed from having to service a large public debt stock. 19 Gallatin’s cautious management and reduction of the public debt during his first years in office was crucial. It gave the United States Treasury the necessary credibility to access financial markets and therefore finance extraordinary expenses. The most prominent example, of course, is Gallatin’s arrangement to finance the Louisiana Purchase in 1803. He quickly managed to raise the necessary amount – nearly USD 15 million – through a bond issue arranged by the British merchant bank Barings. 20 With hindsight, some scholars have questioned whether public debt reduction should be the main fiscal policy objective of an emerging country with high growth potential. 21 But, given Gallatin’s debt reduction objective, his efforts were extraordinarily successful. By 1808, Gallatin had managed to reduce the federal debt-to-GDP ratio by an estimated 50 percent or so, including the additional debt from the Louisiana Purchase. 22 This was a remarkable effort  16  Balinky, op.cit., provides a detailed description of the tax structure of the early United States and its changes under Gallatin. 17  See Balinky op.cit., pp. 101-103, for an account of the United States Mint under Gallatin. 18  Quoted from Balinky, op.cit., p. 39.

After the introduction and the keynote, the conference explores four directions of thought on the topic of monetary unions in history. A panel is devoted to each of them. The first panel will explore the link between monetary unions and economic integration by offering a glimpse in their history. The second session will focus on twentieth century monetary unions following the great and continuous economic stress of the First World War. The third panel will examine monetary unions as facilitating tools for greater customs and economic integration within the Comecon and the Austro-Hungarian Empire. Finally, the last session will address the question to what extent the political relations transcend in the monetary unions as well illustrated by the Great Britain and the member-states of the European Union. This program will break for a discussion between leading academics and policy-makers on the issue of the parallel currencies in history. I would not crowd out the precious conference time by dwelling on each piece of research to be presented and discussed today. Let me pause here, to give way to interesting and open exchange of opinion and deliberations which I believe this conference will stimulate. And once again – welcome to Sofia and enjoy your stay in Bulgaria! Thank you. 2/2  BIS central bankers' speeches
6  Firms have taken advantage of the improvement in financing conditions in both bank lending markets and fixed-income markets and have resorted to debt to cover part of their higher liquidity needs. The year-on-year growth rate of debt increased from 1.3% in February to 6.2% in May. Since then, there has been some deceleration and the latest figure, for August, shows a year-on-year rate of 4.2%. The breakdown by instrument shows that the bulk of new debt has been in the form of bank lending extended by domestic banks. The public loan guarantee programme seems to have played an important role in improving firms’ access to bank loans. Up to end-September, the programme was used to extend loans to 541,000 firms and self-employed workers to the tune of more than EUR 102 billion. 62% of this amount has been granted to SMEs, 31% to large firms and the remaining 7% to the self-employed. More granular data, available until June, show that 46% of new lending to firms between March and June was extended under the public loan guarantee programme. As expected, 7  the use of public guarantees was particularly high among firms facing potentially more difficult access to external funding at the current juncture, such as SMEs, riskier firms and firms belonging to sectors more exposed to the shock, with a share of guaranteed loans relative to total loans of 64%, 65% and 60 %, respectively.

In particular, it introduced new bridge refinancing operations for banks, improved the conditions of the existing TLTRO III refinancing operations (which give banks incentives to lend to the real economy) and relaxed the collateral framework in order to increase the amount of funds that banks can obtain in these operations. Additionally, with the aim of easing financing conditions in fixed income markets and averting their fragmentation, the ECB increased the size of the existing asset purchase programme by EUR 120 billion and introduced a new programme (the Pandemic Emergency Purchase Programme) for an amount up to EUR 1.35 trillion. The design of this programme allows for a higher degree of flexibility in the distribution of purchases both over time and across regions to make it more efficient. Finally, financial policies have also played a role in supporting bank lending. In particular, both macroprudential and microprudential requirements on capital and liquidity for European banks were relaxed. Additionally, the European regulation on capital requirements was reformed, with rule changes affecting sovereign exposures, impairments on nondefaulted exposures, SME support factors and software deductions, among other elements of bank capital calculation. These latest regulatory changes generally involve an increase in banks’ capital ratios. In order for banks to preserve loss-absorption resources in the near future, the ECB and national authorities asked banks to halt dividend distributions until 1 January 2021, and also to refrain from share buybacks and to apply moderate variable remuneration policies.