samchain/econo-pairs-v1 huggingface dataset:
It never crossed my mind back then that one day I would be working on the problem of how to provide monetary accommodation in an economy with massive unemployment, very low inflation (perhaps even too low) and a policy rate stuck at the zero lower bound. With the exception of scholars of the Great Depression, back in the 1980s today’s policy challenges were not on anyone’s radar screen. Of course, that changed with the developments in Japan during the 1990s. More macroeconomists began thinking about liquidity traps and the monetary policy tools to help escape from them. These analyses gained momentum following Paul Krugman’s Brookings paper in 1998.1 They focused both on the use of the central bank’s balance sheet to provide accommodation and on communication about policy goals and forward guidance about the path for policy instruments. Much of this latter work was done within the New Keynesian paradigm, since communications are central to the policy transmission mechanism in those models.2 For obvious reasons, such research has come back into vogue today. The nonstandard policies emphasized by these lines of research have been important elements in the Federal Reserve’s toolkit over the past four years. The Federal Reserve engaged in two waves of large-scale asset purchases (March 2009 and November 2010), and, more recently, extended the maturity of the assets on our books (September 2011).

On top of all this, in the middle of the recession, Spain’s public finances worsened markedly from a surplus of nearly 2% of GDP in 2007 to a deficit of more than 11% of GDP in 2009, and, in addition, the severe job destruction over the last five years has raised the unemployment rate to over 25% of the labour force. The labour market was also subject to certain illusions during those years. The enormous growth in the construction sector lay, without a doubt, behind the major immigration flows, and this strong population growth drove buoyant consumption and, by extension, the increase in activity and employment in all sectors, delaying the reforms that would have led to a more balanced adjustment between wages and employment. To overcome the crisis further reforms are needed at the national and European levels However, it should also be noted that the size of the imbalances that built up in the Spanish economy was not only a consequence of insufficient adaptation to the conditions and restrictions of euro area membership. They are also related to the deficient functioning of the disciplinary mechanisms with which the euro area is equipped and the fragilities inherent in its institutional design and its system of governance. Hence the Spanish crisis is closely related to the euro crisis, and overcoming it also depends on Europe’s ability to respond to the institutional problems of the Monetary Union.
It is important, however, that the fundamental cause of the unemployment is discussed seriously and that the calls for change are directed at those who actually have the power to carry out the required changes. All factual criticism of the Riksbank’s forecasts is good, but there’s a risk of concentrating the debate on our interest rate decisions and of the Riksbank’s deviations from the inflation target, the effects of which are transitory and even themselves out over time, overshadowing other, much more important factors that really can affect employment in the long run. We risk forgetting the much more powerful tools that other decision-makers, outside the Riksbank, have at their disposal to influence employment. What is relevant is not why unemployment is 5.8 per cent instead of 5.0 per cent but rather why it is not 4 per cent or even lower on average over an economic cycle. Equally important is why the employment rate has continued to drop in Sweden since the 1980s. In my opinion, measures must be taken to enhance the functioning of the labour market. The demands are increasing in line with the global trends that we’ve seen in recent years in the shape of outsourcing and technological progress. I have never believed that the shift in regime to a low-inflation policy would make it impossible to return to full employment according to the old norm even in the long run.

The latter issue has been discussed more and more in the public domain recently, where it has been claimed that excessively tight monetary policy has resulted in the loss of up to 75,000 jobs, as if a simple relationship existed between interest rate decisions and jobs. Allow me to begin with a retrospective approach to address the issue of monetary policy’s effects on employment in the long run. Employment and inflation in the long term - a retrospective view During the first decades of the post-war era, one of the fundamental theses of Keynes’ legacy was that there was a direct trade-off between unemployment and inflation, implying that decision-makers could secure lower unemployment by allowing inflation to rise. Inflation was moderate and full employment was achieved. Owing to this line of reasoning, the fight against inflation was completely overshadowed by demand management. In addition, the power of monetary policy was constrained by the exchange-rate cooperation at that time - Bretton Woods - which had a fixed exchange rate as its target. When I started my economics education in the early 1960s, monetary policy revolved around quantitative controls of the credit market. Interest in stabilisation policy theory was instead tied to fiscal policy. The economics curriculum focused on the impact of fiscal policy on demand developments. How big are the multiplier effects of public expenditures, tax changes and expenditures financed in different ways? The supply side, i.e. the issue of the long-term sustainable growth rate under full capacity utilisation, was almost entirely overlooked.
But at the same time as these changes were reported, the Bank announced the Board of Governors’ decision to raise the policy interest rate by 1.25 percentage points – to 15% – the largest single increase to date. That decision was the tangible manifestation of the  4  BIS Review 36/2008  serious message that the Bank considered it appropriate and necessary to communicate under the current conditions. The Board of Governors supported this decision by showing that the four-month-old inflation forecasts assuming an unchanged policy rate until the latter half of 2008 were not delivering the intended results. Inflation was higher than forecasts had projected, and inflation expectations were rising as well. In the same manner, demand was greater despite the more difficult operating environment faced by the banking system and the announcement that the credit supply was on the wane. The króna also depreciated more than was assumed in the forecasts in the November issue of Monetary Bulletin. That forecast assumed that such a development would be met with a policy rate hike, and though such forecasts are in no way binding for the Board of Governors, the Board’s message can be interpreted as implying a similar message. It pointed out that the real exchange rate of the króna was close to the lowest it has been in several decades. Such a low real exchange rate has never persisted for any length of time.

The Central Bank itself takes the view that criticism of its work is desirable. Within the Bank, all are aware that, for every decision made, several options were possible, and the decision to embrace one option over all others is accompanied by a variety of consequences. In making decisions under such circumstances, there must be ample room for comment, contrasting viewpoints, and criticism. And – thank goodness – the Central Bank has not been free of such comments and criticism. Indeed, most comments have been presented in a responsible and appropriate manner and have been both helpful and useful in the broadest sense. That is not to say that there aren’t exceptions – predictable canting litanies that are of little use to anyone – but valuable comments have nonetheless been salient and they are heard and considered. Last Tuesday, after the Easter holidays, the Bank announced several amendments to its internal rules and terms. Those amendments were designed to grease the wheels of the financial markets, which must now tolerate deteriorating operating conditions. The Icelandic government has also announced a bond issue that is launched with the same objective. Though the Central Bank does not wish to make too much of these changes, the purpose is to pave the way for easier operation of the financial system during at time of difficulty on the global front.
perform an assessment based on the information available to the decision makers, or what can be called an assessment ex ante. The question that should then be answered is whether the analysis and the interest rate decision were reasonable given the information and the forecasts available at the time. Did the Riksbank, for example, arrive at a reasonable balance between stabilising inflation and stabilising resource utilisation? An assessment based on the information available to the decision maker also has the great advantage that it can be conducted in real time immediately after the publication of the monetary policy decision and the information and analysis on which the decision is based. One does not thus need to wait for a couple years to see what the outcomes for inflation and the real economy will be. The decisions of the Riksbank can therefore be assessed and debated on an ongoing basis. An important part of the assessment of a flexible inflation targeting policy is to assess how credible the inflation target is, measured in terms of the extent to which various economic agents’ inflation expectations correspond to the inflation target. If inflation expectations are stable close to the inflation target then the target is credible and it will therefore be easier for the Riksbank to stabilise both inflation and resource utilisation. As I have already said, it takes time for monetary policy to have an impact on inflation and the real economy. Monetary policy is therefore governed by forecasts.

These challenges exist for all participants in these markets: for the institutions that underwrite, structure and distribute these risks; for those who trade or hold them; and for third parties, like the rating agencies. These challenges of complexity are significant as well because they can exacerbate the problem of dealing with classic principal-agent problems. You can see this in the subprime mortgage market where, for example, a person may be rewarded for generating new mortgages on the basis of volume, without being directly exposed to the consequences of default; but these problems exist wherever incentives diverge and contracting is imperfect. Financial institutions typically maintain a range of different checks and balances to deal with the risk of misaligned incentives: for example, between a trader and the principal whose resources are at risk, or between the mortgage broker or underwriter and the firm that ultimately ends up holding the risk. But these checks and balances depend in part on the capacity of risk managers to observe and understand the underlying economic risk in these instruments. Where that is harder because of this combination of complexity, imbedded leverage, and short loss history, then market discipline will be weaker. A third issue relates to the dynamics of failure and the infrastructure that supports these markets. The dramatic growth in the volume of over-the-counter derivatives and the growth in the number and size of leveraged funds inevitably complicate the resolution of the failure of a large financial institution that is active in these markets.
Ladies and gentlemen, A mere glimpse into the conference program can show us how proud Africa can be of its diaspora, which has succeeded in positioning itself in the best universities in the world. This great potential can be harnessed by integrating some Africa-specific issues in its research agendas, and strengthening the ties with the African academic institutions. National authorities, for their part, have an important responsibility in this respect. They are called upon to put in place enabling frameworks that are flexible enough to attract this diaspora and benefit from its skills. 5  In our view, it also falls upon the international cooperation to strongly support Africa through this path, by systematically expanding its programs and including a component dedicated to enhancing research capacities. This becomes all the more important today as Africa has launched a major project of economic integration, namely the African Continental Free Trade Area, whose success is determined by taking into consideration other related fields, particularly research and teaching. Ladies and gentlemen, In conclusion, I would like to highlight the great interest aroused in our country by holding such a scientific conference which brings together many eminent researchers and professors here present today. I take this as a gesture of support and encouragement, but also as a sign of confidence in the future of research both in Morocco and Africa. I wish full success to this conference and I thank you all for your attention. 6

Furthermore, efficient and well-balanced financial system will allow the system to better manage and absorb shocks as the market would be less prone to one-way market conditions and possesses greater liquidity. The experience of the Asian crisis, for example, points to the critical importance of the development of long-term local currency debt market, to increase the depth and the breadth of financial market. In addition, the lack of diversified structure and market may lead to increased risk from concentration of credit and maturity risks in the banking system. Lack of markets may lead to the mispricing of risk and excessive delay in correcting large exposures, as well as increased vulnerabilities from capital inflows. Ladies and Gentlemen, The interaction between financial markets, economic growth and monetary policy is by no means a new issue for central bankers. Indeed, the continued deepening of capital markets is a significant issue for policymakers, and particularly for central bankers, since smooth functioning and efficient financial markets are crucial in ensuring an effective transmission of monetary mechanism. The best contribution that monetary policy can make to Thailand’s capital market development and its economic growth is to maintain steady medium-term price stability. Such a policy is beneficial, as it will minimize the adverse effects of inflation and high inflation uncertainty. As we all know, price stability brings numerous benefits.
But much of my talk will focus on the unique complications associated with negative nominal interest rates and the extent to which these complications constrain how low the rates can be set. After outlining these challenges, I’ll suggest that the zero lower bound on policy interest rates is much like the low tide mark on a beach: Standing at that border between the land and the ocean, you can continue to lower your elevation by walking into the water, but with each additional step, you will need to push against the increasing resistance of the water. There is a distinct qualitative difference between positive and negative nominal interest rates, just as there is a distinct qualitative difference between the beach and the ocean. The zero lower bound is marked by this same qualitative difference: zero is a rate below which a central bank encounters the distinctive and increasing costs of a negative nominal rate, relative to a nonnegative rate of interest. Purpose In September 2014, the ECB lowered its deposit rate to its current level of negative 0.2 percent. More recently, in late 2014 and early 2015, the SNB, DNB, and Riksbank reduced their policy rates to levels below zero, with the SNB and DNB setting their rates at negative 0.75 percent. 1 These central banks established their negative rates for various reasons. Both the SNB and DNB established negative policy rates primarily to deter capital inflows and reduce the appreciation pressure on their currencies.

At the same time, our policies are creating the most favourable conditions for the full impact of structural and fiscal policies to be felt. The Parliament’s calls for an ambitious European response were heard by European leaders. It 3/4  BIS central bankers' speeches  will now be important to ensure that the Next Generation EU funds are used not only in a timely fashion, but also in a way that enhances long-term growth and supports common EU objectives. If we get it right, Next Generation EU could be just the game changer that Europe needs – in terms of modernisation, resilience and prosperity. 1 Dossche, M. and Zlatanos, S. (2020), “COVID-19 and the increase in household savings: precautionary or  forced?”, Economic Bulletin, Issue 6, ECB. 2 ECB staff macroeconomic projections for the euro area, September 2020. 3 Fraccaroli, N. et al. (2018), “The evolution of the ECB’s accountability practices during the crisis” , Economic  Bulletin, Issue 5, ECB. 4 Introductory statement by Christine Lagarde, President of the ECB, at the ECON committee of the European  Parliament, Brussels, 6 February 2020. 5 Available on the ECB’s website. 6 See “ECB proposes to reduce reporting burden for banks and increase data quality”, press release, 21  September 2020. 4/4  BIS central bankers' speeches
Yet it seems that the very excess capacity of the banking sector is acting as an entry barrier to banks from other jurisdictions, given that the potential gain in costs and synergies arising from the elimination of duplicated networks and services occurs chiefly in national mergers. Lastly, another means of improvement would stem from cost-cutting and the subsequent enhanced efficiency. Admittedly, I did say our banks made notable efforts to shed the excess capacity in place pre-crisis; but there still remains room for improvement. In any event, further gains in efficiency appear to be closely linked to technological transformation. Technological change We are all aware that technological change is one of the main transformations banking must pursue. If we look at what has happened in recent years in other sectors, there is clearly a need for the banking business model to adapt. Technological change is a complex matter, but one that is fundamental for tackling the future. It should be part and parcel of deeper reflections relating to the banking business model and its sustainability in the long term. Naturally, technological adaptation calls in many cases for significant investment in systems to be made. However, such investment today will be key to future income. 11/15  Clearly, the gains in efficiency will be very closely linked to technological change. Most banking transactions in Spain continue to be made through ATMs and bank windows. However, the proportion of online users is growing every year. In step with this trend, the potential for cost savings is significant.

Ladies and Gentlemen, This initiative is positive and both BancABC and NORFUND should be highly commended for it. As a financing institution, I am aware that NORFUND financing rates are favourable. I want to encourage BancABC to pass the benefit of getting money at  BIS central bankers’ speeches  1  favourable NORFUND rates to the final borrowers so that the SME sector will experience the full benefit of this relationship. I wish to end by wishing BancABC the best and success in growing a successful SME lending portfolio. I THANK YOU…  2  BIS central bankers’ speeches
Mugur Isărescu: Hard landing unlikely for Romania Interview with Dr Mugur Isărescu, Governor of the National Bank of Romania, by Mediafax news agency, Bucharest, 8 September 2008. *  *  *  Mr. Governor, foreign analysts have placed Romania along with four other states – Lithuania, Latvia, Estonia and Bulgaria – in a group of countries heading to a hard landing. In fact the economies of Estonia and Latvia have contracted sharply, with growth plunging from levels of around 10 percent into negative territory; inflation has reached two-digit levels and the external deficit exceeded 15 percent of gross domestic product. Is it possible for Romania to witness similar negative growth dynamics? Is it fair to include Romania in that group? Reading what those foreign analysts said, I have hardly found a solid rationale that would justify Romania's being placed within the hard-landing risk zone. On the contrary. Turning now to comments, I will underline that there are some similarities among the countries in this group: GDP per capita is below the EU average, they all have registered high growth rates in the catching-up process. However, there are also fundamental differences, among which the most important in my view is the monetary policy mechanism. Three of the four countries mentioned in the group have currency boards in place, and the fourth, i.e. Latvia, has a mechanism close to a currency board. Of course, currency board has its clear benefits.

That would not prevent some analysts from saying that, if GDP growth slows to 6 from 9 percent, the growth rate plunged by 33 percent. An 8-9 percent growth means overheating? What is your opinion? I have never ventured to say that one figure alone would mean the economy is overheated. I usually present things in a more nuanced manner, just like they are in reality. What does  2  BIS Review 113/2008  overheating actually mean? A development that substantially exceeds the growth potential, leading to an overheating of output factors, especially to a chronic lack of labour force and a fast increase of wages and prices. For this year, I believe we need a sectoral approach. On the one hand, we have a significant rise in farming output due mainly to natural factors. And there is no overheating there. On the contrary, prices of most agricultural products are falling and production factors – especially land, but also labour force – are obviously underexploited. Romania's great farming potential has yet to be turned to account. On the other hand, in construction, another major contributor to this year's growth, there are visible signs of overheating: scarce labour force, substantial increases of prices for building materials, higher wages, etc. Of course, a wise policy should stimulate only the sectors where the potential is not fully exploited (such as agriculture) or where we have bottlenecks, as it is the case of road infrastructure in Romania.
I am confident CIFF would embed a culture that places unequivocal commitment to professionalism and ethics that would raise the prestige of the Islamic finance industry and its practitioners. 2  BIS central bankers’ speeches

In this particular case, I think the open nature of the EU economy sets very serious limits on the proposal’s potential impact on the collection of tax, since the same scope for avoiding tax would continue to exist outside the EU as it does at present; and it seems unlikely that countries outside the EU area would voluntarily follow the same policy. So I think there is a very real danger that legitimate business would relocate, not just outside London, but outside the EU, thus further undermining any economic rationale for the proposal. This does not mean that work should not continue to see whether there are amendments to the scheme that could satisfy the interests of all the parties involved. But the Bank continues to believe that it is important to avoid any scheme that would damage EU financial markets. Turning to equities, I expect to see growing emphasis on analysis and investment according to European sectors, not countries. Thus you would expect to see investment banks’ research departments focusing more on pan-European sectors, rather than dividing their teams on national lines. In many firms this is happening already. More generally, I think we can expect to see greater “equification” in continental Europe. In the UK, the equity market’s capitalisation is around 165% of GDP. Among the “ins” it is generally much lower: in Germany and Spain it is perhaps 35%, in France 40% and in Italy 25%. Only the Netherlands really stands out, at around 130%.