samchain/econo-pairs-v1 huggingface dataset:
As Mundell said in 2012: “The euro is more than just the icing on the cake on the single European market and the European Union (EU), it is the glue that keeps the core of Europe together.” Still, an argument frequently heard against the euro is that a currency cannot exist without a state. True, the government prerogative of coinage came to be accepted as an essential attribute of sovereignty, tying the state to the money supply; but actually the state may manipulate the unit of account to the benefit of its own finances, for instance by monetising the debt, and such manipulations were not always, to say the least, in the interest of the people. As a result, it seems to me that the key ingredient of monetary stability is not the state but the independence and credibility of the issuing institution: the central bank – and this principle is firmly established in the euro area, as well as in French law for the Banque de France. However, safeguarding our independence requires more than a series of legal provisions. As any political construct, the euro will thrive if and only if the citizens of the euro area member states are convinced that the Eurosystem delivers, year after year, on its mandate, which is to preserve price stability. This is also the reason why we are subject to accountability rules, requiring regular testimonies to the representation of EU citizens, namely the European Parliament and the National Parliaments, and the publication of our minutes and our results.

The rather good economic performance in the euro area on average still conceals individual heterogeneities. [slide] And so, first and foremost, some countries, like France and Italy, need to accelerate domestic structural reforms to improve the functioning and flexibility of their economies. And let me be clear, it is in our national interest: we currently have lower economic growth and employment than some of our neighbours, such as Germany, Spain and the Netherlands, which have succeeded in carrying out the necessary reforms. In order to achieve a “better Europe”, we need to complete these domestic reforms with what I call the “growth triangle” [slide]. It calls, at European level, for two concrete projects, in addition to domestic reforms: a “Financing Union for Investment and Innovation” (FUII) and a collective economic strategy. The first project, to be started immediately, is a “Financing Union for Investment and Innovation”, because the financial crisis has led to a persistent “investment crunch” at the European level. And yet it is not for lack of resources: the euro area has a savings surplus of more than EUR 350 billion, equivalent to more than 3% of GDP. That is huge. Several initiatives are already in place: the investment Plan of the European Commission (“Juncker plan”), the Capital Markets Union and the Banking Union which is now underway; but they do no deliver sufficient results. It is now necessary to make these initiatives converge into the FUII.
I suspect that societal discourse in Iceland has seldom been as destructive as it was then. I was born in 1970, and I remember well how inflation, the labour market, and the exchange rate dominated the radio and newspapers. I thought a lot about this inflation boogeyman that everyone was always talking about but no one could control. Actually, I was lucky enough to have price-indexed income: I owned two sheep - one multicoloured and one black. And some of the many agricultural pricing committees calculated the present value of the lambs and their wool, which I deposited to the Stykkishólmur co-op in line with inflation each year. On the other hand, money kept in banks and savings banks burned to a crisp under the white heat of negative real interest rates. At that time, interest rates, including Central Bank rates and commercial bank rates, were in principle set by political leaders. This led to real interest rates that were negative by 10 - 20% for quite some time. By 1979, negative real rates had scorched Icelanders' savings to the point where banking system deposits had shrunk 30 - 40% in real terms since the start of the decade. As a result, banks and savings banks had steadily less money to lend. Iceland's key economic sectors were in a state of continuous financial distress. Residential mortgages were in short supply. But perhaps it is incorrect to refer to "burning up" in this context.

The drift towards bilateral- and trade-focused international economic policies which bypass existing channels of trade conflict resolution severely undermines global governance of international trade. On their own, EMs have little bargaining power, and engaging in bilateral relationships with large countries could result in trade distortions and uncertainties that lead to inefficient allocation of resources. In addition to the direct impact on trade, this bilateral- and trade-focused thinking could lead to another serious implication, especially from the perspective of macroeconomists who are well-represented in this room: the distortion of macroeconomic policy framework. The global imbalance analysis illustrates this issue nicely. The existing framework that was developed by the IFIs prior to the GFC and was adopted internationally has been pivotal in the way we made policies to address global imbalances in the past. I have talked earlier about how the current framework based on current account balance alone needs to progress with the changing environment, the excess liquidity in the global financial system, and take a broader view that includes capital flows. I am afraid that the current geopolitical environment will not allow us to progress forward in our thinking. Even the existing current-account based framework of global imbalances is being challenged by the bilateral worldview that focuses on bilateral trade. A currency intervention assessment framework that focuses narrowly on current account and bilateral trade balances and disregards other types of fund flows like portfolio flows is an example of thinking that distracts us from macroeconomic reasoning.
A turning point Már Gudmundsson, Governor of the Central Bank of Iceland Chamber of Commerce Monetary Policy Meeting, Hilton Reykjavík Nordica, 8 November 2018  Mr. Chairman, honoured guests, Once again, we gather here at the Iceland Chamber of Commerce’s monetary policy meeting, which for years has been held after the Central Bank has published its autumn forecast and, in latter years, the Monetary Policy Committee’s interest rate decision. I would like to thank the Chamber of Commerce for continuing this tradition and for giving me the opportunity to talk to you about monetary policy. The economy is now at a turning point, with a strong upswing and below-target inflation giving way to weaker growth and increased inflationary pressures. Underpinning the progress of the past few years were, on the one hand, a vast improvement in external conditions, which could be seen most clearly in improved terms of trade and a surge in the number of tourists visiting the country, on the one hand, and on the other, in economic policy that proved successful in historical context, keeping inflation under control and ensuring that the exchange rate of the króna was a shock absorber rather than a shock amplifier, as has sometimes occurred in the past. Monetary policy was successful in bringing inflation — and thereafter, inflation expectations — back to the target after 2012, without sacrifice costs in terms of employment.

When the SRR was introduced in June 2016, capital flows into the bond market had more or less clogged up the interest rate channel of monetary policy transmission. As a result, the effects surfaced primarily in a higher exchange rate. Because capital controls on outflows had not yet been lifted at that time, the risk existed of an overshooting of the exchange rate, with adverse repercussions for Iceland’s tradable sector. In addition, it was considered unfortunate, and actually unnatural, that large carry trade positions should accumulate before those that had entered the economy before the crash had been released. The exchange rate of the króna was also rising, and rose even further thereafter, because of strong tourism-generated inflows through the current account. This, of course, had a crowding-out effect on other segments of the tradable sector. If this had been compounded by a steep rise in carry trade-related inflows, Iceland would have found itself in a more dangerous position, with increased risk of an abrupt correction later on and the associated impact on economic and financial stability. Because of the recent decline in the exchange rate, this risk has receded, and it could even be argued that the risk is currently in the other direction; i.e., that excessive pessimism and self-fulfilled expectations of a further depreciation in the króna could lead to undershooting.
It has also proved possible to combine low unemployment, compared with other European countries, with low inflation, contrary to what many experts expected. But open unemployment has only come down towards 4 per cent in a few occasional years, and stands today at 5.5 per cent. The number of employed now is lower than before the crisis, and some 1.2 million people of working age (16-64 years) are not participating in the labour force. The regime shift and employment Against this backdrop it's not surprising that a lively debate arises from time to time about unemployment and what can be done about it. What is perhaps more surprising is that some people still assert that the shift in stabilisation policy regime at the beginning of the 1990s is what has caused unemployment to be higher today than it was during the 1970s and 1980s. Sometimes the argument goes that Sweden has given up its previous objective of full employment in order instead, for some more or less obscure reason, to introduce a target for inflation. If we only were prepared to return to the high-inflation policies of the 1970s and 1980s, then everything would be better. There is much to say about this. Firstly, it is difficult in a more general sense to imagine that the markedly improved stability in economic policy that the shift in regime brought about in the long run could be something negative for employment.

UND1X inflation is expected to be 1.4 per cent one year ahead and 2.0 per cent two years ahead, while the corresponding figures for CPI inflation are forecast to be 1.6 per cent and 2.5 per cent, respectively. This time, both the international and domestic inflation risks are judged to be balanced. On the international front, the main upside risk is that the oil price will develop more unfavourably and have greater contagion effects on other prices than is currently foreseen. The downside risks mainly consist of a number of financial imbalances that could contribute both to lower inflation and weaker economic activity. These include high house prices and an increase in household indebtedness in many countries, as well as the large deficits in the US federal budget and current account. On the domestic front, the risks are mainly related to productivity growth; more specifically to what extent the robust productivity reflects a more permanent structural phenomenon and to what extent it is due to cyclical  6  BIS Review 59/2004  factors. There is considerable uncertainty in this regard and there is a risk both of overestimating and underestimating future productivity growth. The balanced risk outlook means that the probability of inflation being higher than the forecast in the main scenario is judged to be equal to the probability of it being lower. In other words, the risk-adjusted inflation forecast is the same as the forecast in the main scenario.
Therefore, in strengthening the effectiveness of institutions, it is about putting such institutions in an environment in which they are able to rise to the demands for performance and discipline. This therefore places emphasis on following a certain order, rules and regulations that would bring value to society. While mature and developed economies have benefitted from effective institutions, the changing global and national landscape that is becoming increasingly more interconnected now demands for new institutional arrangements for the way in which engagements or interface takes place. Equally important are the arrangements for the management of the new emerging challenges. Experience has shown us that this can be highly challenging when it involves changes in relationships when the structures of institutions have not changed. Such institution building is particularly important for public policy decision making. This is particularly  BIS central bankers’ speeches  1  relevant when coordination arrangements for inputs from the different parts of the public sector become necessary. For the economies in the emerging world that are at a different phase of development, the creation of strong and effective institutions is even more pressing. Not only do existing institutions need to be strengthened but new institutions need to be built to facilitate the effective functioning of the economy. We have heard this morning in the tribute to Dr. Puey, his tremendous role in institution building in Thailand and his role in the Asian region.

Among the future challenges that are likely to confront Asia is the sustainability of our prevailing growth model given the consequences arising from the erosion of our demographic advantage, the rising indebtedness, the rising cost of living despite an apparent period of low inflation, the need to meet the massive infrastructure requirements and the need to address the rising income disparities and the environmental challenges. What then are the ways economic management can prepare us for the future? This will involve policies and reforms that will reduce leverage, that will address the widening BIS central bankers’ speeches  3  income disparities, that will effectively manage infrastructure development and urbanisation, that will accord environmental sustainability and finally that will accord importance to governance, accountability and integrity in the implementation and execution of the many endeavours to achieve a sustainable advancement. This implies an important role of institutional building that will support the ability to address these challenges. For most Central Banks in the emerging world, our mandate is broader. Most certainly we are expected to have a role in contributing to addressing many of these challenges both directly and indirectly. Some of these issues include financial inclusion, financing of infrastructure, putting in place financial and social safety nets, and environmental sustainability.
Improved competitiveness and the development of the oil industry facilitated the rapid integration of new technology by firms. Productivity growth remained relatively high up to around 2005. But since then it has declined. The decline has been more pronounced than among our trading partners. The phasing-in of a highly profitable oil industry and higher petroleum revenue spending via the central government budget has amplified the structural shifts in the Norwegian economy. Services production has increased. When the financial crisis hit, industries that do not benefit from oil sector demand or public spending stagnated. The differences in growth across industries has thus widened since 2008. 12  BIS central bankers’ speeches  Chart 14  Labour-intensive sectors with relatively low productivity have accounted for a large share of employment growth in recent years. Employment has shown only moderate growth in industries with a high productivity level, such as manufacturing and engineering. Productivity growth has stagnated in most OECD countries. Goods production has declined, while services production has increased, as in Norway. In many countries this shift was based on borrowing rather than increased earnings. After the financial crisis, funding sources dried up and these countries were faced with a debt crisis. Fundamental structural problems with eroded competitiveness came into evidence. These countries must not only reduce their debt levels, but also engage in a painful process of structural adjustment. Only then can these economies find the path to renewed growth. The Norwegian economy has experienced virtually 20 consecutive years of growth.

Chart 1  BIS central bankers’ speeches  1  One of the main reasons is the strong demand for Norwegian goods in countries where economic growth remains robust. The centre of gravity in the world economy is shifting. In the course of the next few decades, China will most likely be the largest economy in the world. Emerging economies – with China at the forefront – are the main driving force behind the increase in demand for crude oil and other commodities. As a result, prices for Norwegian export goods have remained high, even in the context of declining growth among our traditional trading partners. Chart 2  The emergence of newly industrialised economies has also led to lower import prices in Norway. The improvement in Norway’s terms of trade is without parallel in our recent history. We have to go back to the boom period at the time of World War I to find anything similar. Developments in other countries have been less favourable. What started as a banking crisis in the US and the UK has developed into a sovereign debt crisis, with Europe at the epicentre. Austerity measures and economic contraction are now going hand in hand. Social unrest is spreading. Unemployment in many countries has risen to alarming levels. Economic growth is weak, particularly in Europe, constrained by uncertainty and fear of new setbacks. Both the public and private sectors are focusing on reducing debt. Banks are consolidating their balance sheets and holding back on lending to businesses and households.
Jean-Pierre Roth: Real estate crisis in the United States – similar risks in Switzerland? Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Banque Cantonale Vaudoise, Lausanne, 9 June 2008. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  In the past few months, developments in the mortgage and real estate markets have attracted increasing attention. Europe, and Switzerland in particular, have been indirectly affected as a result of commercial bank activities in US mortgage markets. Over the past few quarters, the European real estate market has also been affected, with a number of countries experiencing a downturn in prices similar to that in the United States. By contrast, other countries, such as Switzerland, have seen real estate prices rising at a steady pace. In some respects, what the United States went through is a classical property crisis of the type that Switzerland experienced in the early 1990s. However, the US real estate crisis spilled over to encompass the international financial markets, endangering their stability and prompting the intervention of several central banks. These events confirm the importance of sound real estate market developments for the economy. It is important to recognise that the Swiss mortgage and real estate markets are very different from their US counterparts.

There are arguments, however, that call for specialization of some functions. So far, we have seen in Chile a banking supervisory agency that takes into consideration the macro-systemic aspects and a central bank concerned about both price and financial stability, arrangement that has permitted the necessary coordination in dealing with situations of financial distress. The role of capital flows In what follows, I will deal with the issue of capital flows as a source of financial instability within the framework of inflation targeting and flexible exchange rate. In particular, I am concerned with the interaction between price and financial stability when a small open economy, like Chile, is exposed to volatile capital flows. I have to start by emphasizing that in the current surge of capital inflows, Chile was not subject to massive inflows as was the case in the past. However, we cannot rule out this possibility, as prospects for advanced economies are very gloomy, while emerging markets offer very healthy returns to investment. First, the long history of emerging markets booms and busts has shown us that frequently in this type of economies the building up of risks is associated with periods of capital bonanzas that fuel credit booms, asset bubbles, and exchange rate misalignments, and that frequently end in sudden stops and reversals of capital inflows that wreak havoc in the financial system and the real economy.
There is reason to believe that capital intermediation via the securities market will increase at the expense of financial institutions. The elimination of foreign exchange risk, greater price transparency and harmonisation of market practices will increase liquidity in the market, leading to conditions similar to those in the US. Losing the advantage of operating in the national currency will result in keener competition in securities markets for brokers, issuers, investors and stock exchanges. National ties will be of less BIS Review 16/1999  –6–  importance as participants are drawn towards markets with the lowest costs. The integration of stock exchanges will increase. The Oslo Stock Exchange, for example, is one of several stock exchanges currently evaluating prospective partners. The possibility that the euro may lay the foundation for a European market for private bonds should be of interest to enterprises both within and outside the euro area. This market is large and well developed in the US, whereas European enterprises have primarily relied on bank financing. The introduction of the euro will also result in a broader and more differentiated selection of securities in a single currency, while increased competition in issue and investment services will probably make it less expensive to raise capital directly in the securities market. The elimination of currency risk in the euro area will also enable investors to focus more on credit risk, thereby improving their ability to evaluate this risk.

Mr Bergo looks at the impact of the euro on the economies of non-member states Speech by the Deputy Governor of the Central Bank of Norway, Mr Jarle Bergo, to the Scottish Norwegian Business Forum, in Edinburgh, Scotland on 3/2/99. At the beginning of this year we witnessed the implementation of the greatest monetary reform of the century: the launch of the euro and the final stage of EMU. Norway watches this great experiment from the outside, but we are not uninfluenced by it. On the contrary, it constitutes an important change in the environment of our policy-making, especially with respect to monetary policy. In addition, there are important questions concerning the use of the euro by Norwegian economic agents and possible implications for the Norwegian business sector, particularly the banking and financial industry. I shall try to address these issues. My basic proposition will be that in most respects the euro does not give rise to fundamentally new challenges, but almost certainly accentuates some that are already present. The euro and Norwegian monetary policy Monetary policy in Norway has been oriented towards maintaining exchange-rate stability for almost the entire post-war period. When the Bretton Woods system collapsed in the early 1970s, Norway joined the European “Snake”. However, when the European Monetary System was set up in 1979 Norway chose a link to a trade-weighted basket of currencies.