samchain/econo-pairs-v1 huggingface dataset:
Taken together, the new information that we have received about the Swedish economy also indicates a development well in line with our forecast in the Inflation Report in October. Inflation and monetary policy Inflation in the Swedish economy has been low since the end of 2003. According to the most recent data, for September, annual inflation in terms of the CPI and UND1X stood at 0.6 per cent and 1.0 per cent, respectively.3 As we observed in the Inflation Report, the low inflation can be explained in large measure by favourable supply conditions – strong competition and fast productivity growth – and relatively low resource utilisation. At the same time, imported inflation has been restrained because the share of imports coming from low-cost countries has risen. Imported inflation has also been held back by the previous strengthening of the krona. Developments in the krona exchange rate are one of all the factors that we have to consider when we forecast inflation. It is also one of the few areas where the performance since October has deviated considerably from what we expected at the time. Allow me therefore to comment briefly on the krona exchange rate. For a succession of years the Riksbank has been predicting that the krona will  3  CPI data for October will be released today, 11 November. 5/6  strengthen. This forecast has been very accurate up to the beginning of this year even though there have been some large short-term deviations on the way (see Figure 2).

In the UK and Australia, for instance, house price inflation moderated, as I mentioned, when the central banks there began to raise key interest rates, but there has not been a general fall in house prices. In a scenario where the central bank begins to raise key interest rates to slow down a strong economy and market interest rates follow these upwards, it is plausible that the adjustment in house prices may be relatively soft, with a rate of increase that is dampened or levels off. But even a moderation of the rate of increase in house prices could help to reinforce the tightening impact on household consumption. Historically, households’ consumption ratio, i.e. the share of households’ disposable incomes that is used for consumption, has been fairly well-correlated with changes in the value of household wealth (see Figure 1).2 Since the equity market decline in 2000 this relationship has been somewhat less clear, but it nonetheless suggests that house price inflation may only need to slow for the consumption ratio to drop. The risks of a more dramatic downward adjustment in house prices would increase if economic activity were to weaken relatively sharply and household incomes were to fall as a result. Naturally, this could make itself particularly hard felt if the developments in house prices and debt beforehand had taken off far too quickly and households had taken on more debt than they can manage in the long run.
What’s going on here is straightforward enough. QE doesn’t involve “printing money”, at least in the sense that people normally understand the word (i.e. something that doesn’t bear any interest). It replaces one, longer-term interest-bearing liability of the state held by the private sector (gilts) with another, much shorter-term instrument (reserves) that also bears interest. It therefore reduces the average maturity of the public sector’s liabilities, and with it the scope for “surprise” inflation to eat into their real value. Since the 1970s the combined effects of indexed debt issuance, and latterly QE, have materially reduced the fiscal returns to higher inflation. Some history: credible monetary regime matters more for inflation than government debt The absence of any clear target for monetary policy made the inflation of the 1970s more likely but, because the event was more spread out, its underlying causes harder to identify. There were probably several. Fiscal difficulties may have been one of them and, as we’ve seen, rapid inflation clearly had material effects on the real value of government debt (even if there was a subsequent price to pay). 14  See McLaren and Smith (2013) for further information on the impact of interest rate changes on the cash transfers between the APF and HMT. 15 See also Reis (2019) and Fukunaga et al. (2019) on the fiscal effects of higher inflation.

Under a fixed exchange rate regime the real appreciation takes place through higher inflation and real depreciation through lower inflation, while with a floating exchange rate it occurs through nominal appreciation or depreciation. A tight fiscal policy can counteract the extraordinary real appreciation due to capital flows. A strong central government budget also makes it possible to respond with an expansive fiscal policy if the capital flows are turned into outflows. However, this requires that fiscal policy has ample reserves. The convergence criteria for public finances in the EMU, particularly the target for a budget deficit no greater than 3 per cent of GDP, therefore function as sound targets for the candidate countries. Despite the recent criticism vis-à-vis the budget criterion I believe that 3 per cent is a sufficient margin for fiscal policy, as long as it is in balance over the cycle. Yet there are still risks in rushing to meet all of the convergence criteria – especially if EMU membership cannot realistically occur for several years. There is a discussion in academic circles on whether very low inflation figures, that is to say, much lower than most candidate countries have now, are really compatible with rapid growth and a fixed exchange rate. The export sector's rapid growth creates pressure on the domestic economy through the 'Balassa-Samuelson' effect and raises domestic prices, creating a 'natural' inflation. To then artificially press down inflation to very low levels could be overly ambitious.
The policy was summarised in a single sentence in our explanatory document:6 “In essence, the MPC judges that, until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the current exceptionally stimulative stance of monetary policy, provided that such an approach remains consistent with its primary objective of price stability and does not endanger financial stability.”  4  For example, Gagnon, Raskin, Remache and Sack (2010) estimated that the Fed’s first round of Large Scale Asset Purchases reduced 10-year term premium by somewhere between 30 and 100 basis points, with most estimates in the lower and middle thirds of this range. 5  For instance, Neely (2010) finds evidence of significant spillovers from the Federal Reserve’s LSAPs to other advanced economy sovereign bond markets, with yields falling on average by around half the associated fall in US 10-year yields, while Moore, Nam, Suh and Tepper (2013) find that emerging economy government bond yields fell by around a sixth. 6  Monetary Policy Trade-Offs and Forward Guidance, Bank of England, August 2013 (http://www.bankofengland.co.uk/ publications/Documents/inflationreport/2013/ir13augforwardguidance.pdf)  BIS central bankers’ speeches  5  In case that’s not sufficiently simple, let me put it the other way round: we remain committed to returning CPI inflation to its 2% target in line with our remit but, in doing so, we will not act in a way which would risk choking off the recovery prematurely, given the potential for a substantial amount of spare capacity in the economy.

Chart 3  Chart 4  Selected ten-year government bond yields(a)  Emerging market equity indices  Spain  Italy  US  Germany  UK  Indices: 22 May 2013 = 100  Per cent May 3rd  May 22nd  120  9  May 22nd  8  110  7 100  6 5  90  4  South Africa Korea China - Shanghai India Mexico Brazil Turkey Indonesia  3 2 1  80  70  60  0 Jan  Mar  May  Jul Sep 2012  Nov  Jan  Mar  May 13  Jul  Sep  Yields to maturity government bonds  Feb.  Mar. Apr. May. Jun. Jul. Aug.  Sep.  2013  Sources: Bloomberg and Bank calculations  Source: Bloomberg. (a)  Jan.  on  ten-year  benchmark  Although the sell-off has been wide ranging and left several EMEs with difficult policy challenges, I don’t sense any long-lived market dysfunction. Market infrastructures worked and prices adjusted to the revised policy outlook. Yes, volatility rose, but not to levels which  BIS central bankers’ speeches  3  are particularly unusual for such episodes (Chart 1). The most highly leveraged positions – such as in mortgage REITs1 – were reported to have liquidated quickly, and some ETFs2, primarily fixed-income, came under liquidity pressure. Those institutions with short trading horizons and leveraged positions may have found conditions very difficult at times to adjust portfolios.
The theoretical model is confirmed: the cumulative wage gap explains a significant part of the deviation of inflation from its target: more than one third of the inflation gap in the first wage adjustment episode and more than one fifth of it in the second adjustment episode (which has not been closed yet). We also present graphical representations for selected countries which have statistically significant coefficients. For the first wage adjustment episode the cumulative wage gap explains more than 60% of the inflation gap in Iceland, about two thirds of the inflation gap in the US and Ireland, more than half the inflation gap in Finland and Switzerland, close to half of the inflation gap in Netherlands. It even explains almost one quarter of the inflation gap in Korea, despite the fact that this country has not closed the first wage adjustment episode yet. For the second wage adjustment episode, the cumulative wage gap, which in most cases has not been closed yet, explains more than 60% of the inflation gap in Slovenia and Slovak Republic, between 40% and 60% of the inflation gap in Greece, Italy, Portugal, and Spain, and between 20% and 40% of the inflation gap in Australia, Canada, Denmark, France, Hungary, Ireland, Netherlands, New Zeeland, Switzerland and United States. We checked the robustness of our results separately, in the standard method, as well as the log-normalized method. The results confirm the strong relation between cumulative real wage gap and inflation gap in the OECD countries.

This would enable us to also seize opportunities to tackle these “twin challenges” in an integrated manner. It is my sincere hope that today’s event, along with the release of the report, will encourage broader dialogue and increase awareness around nature-related risks and opportunities, in turn paving the way for concrete action on this important front. I would like to thank the World Bank for this fruitful collaboration, and the esteemed speakers joining us today. I look forward to the engaging sessions ahead. Read Report: An Exploration of Nature-related Financial Risks in Malaysia See also: BNM’s Climate Change website 1  IPBES. 2019. “The global assessment report on biodiversity and ecosystem services: summary for policymakers.” [Link to IPBES]  2 World Economic Forum New Nature Economy Series [Link to PDF] 3 2/3  BIS central bankers' speeches  3 UN Biodiversity page [Link] 4 SDG 8. 5 SDG 3. 6 "Life on land” is SDG 15, “Life below water” is SDG 14. 7 Network for Greening the Financial System. 3/3  BIS central bankers' speeches
The market capitalization of digital assets reached $ trillion in November 2021.1 The rapid growth of digital assets presents opportunities to both reinforce the role of central banks and regulatory bodies in stewardship of the global financial system and be positioned at the technological frontier. However, this growth is not without risks: in May, the crash of Terra, an unbacked algorithmic stablecoin, and the subsequent wave of insolvencies, wiped out over $ billion of investor and consumer funds.2,3 Currently, the total cryptoasset market capitalization rests around $ trillion, a 66 percent decline from its November 2021 peak. When I consider the ways in which digital assets impact the mission of the Federal Reserve, I see several channels – including monetary policy and the provision of an elastic currency, the preservation of financial stability, and the smooth operation of the payments system. Regarding monetary policy and currency, in January, the Federal Reserve released a discussion paper that considers a future where digital assets may play a large role in our financial system, and in particular, establishes some broad principles and outlines some of the pros and cons of a central bank digital currency, or CBDC.4 While at present the Federal Reserve has neither issued a CBDC nor plans to do so imminently, ongoing research improves our understanding of the risks and opportunities inherent to a CBDC. Central bank money – a liability of the Federal Reserve – is the bedrock of the U.S. financial system.

Thus, this step will help to insulate U.S. markets from the pressures in Europe and support the availability of credit to U.S. households and businesses. European banks are particularly active in areas such as trade finance, project finance, energy lending and municipal finance – a sharp contraction of the financing they provide would be harmful for the U.S. economy as a whole including for U.S. exporters, firms working on infrastructure projects, the energy industry and hardpressed state and local governments across the country. U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses. In sum, I am hopeful that Europe can effectively address its current fiscal challenges. The Federal Reserve is actively and carefully assessing this situation and the potential impact on the U.S. economy. At this time, although I do not anticipate further efforts by the Federal Reserve to address the potential spillover effects of Europe on the United States, we will continue to monitor the situation closely. Thank you for your invitation to testify today, and I look forward to your questions. BIS central bankers’ speeches  3
It is clearly the case of the last few years with the rapid development of credit derivatives, securitization, hedge funds and private banking that has led to a situation where most credit risk are no longer in the form of loans, held to maturity on the balance sheets of banks, but where much of the credit risk is now held by nonbank financial institutions that can take on substantial leverage. It has occured in Europe in the context of a major financial innovation, the introduction of the Euro, and poses new challenges for central bankers: it makes monetary analysis more complex, modifies the monetary policy transmission mechanisms and, in some cases, may endanger financial stability. 1  Weber, 2006; Rajan and Zingales, 1998  2  Dynan, Elmendorf and Sichel, 2006  3  Cecchetti, Flores-Lagunes and Krause, 2006  4  Campbell and Horovitz, 2005  5  IMF, 2006  BIS Review 42/2007  1  1. Financial innovation is a challenge for the interpretation of developments in the monetary aggregates and for the best use of our second pillar  It is clearly not a surprise, at a time of burgeoning financial innovation to observe signs of instability in money demand. New products and new intermediaries tend to blur the distinction between monetary and non-monetary assets and to modify the financial behaviour of economic agents.

Overall, substantial risks remain, with the focus on issues relating to the economic outlook for Greece and the Ukraine conflict. Assessment of the exchange rate situation I would now like to look at the exchange rate situation. In recent quarters, this was mainly driven by diverging developments in the US and the euro area. The direction of monetary policy in the major currency areas is drifting ever further apart. While in the US a start to monetary policy normalisation is in sight, the European Central Bank (ECB) has now launched a further substantial easing of its monetary policy – its quantitative easing programme. Since the first indications of quantitative easing by the ECB in spring last year, the euro has depreciated sharply against the US dollar. In May 2014, a euro still cost almost USD 1.40. At our monetary policy assessment in December, the EUR/USD exchange rate was at 1.25. When we discontinued the minimum exchange rate on 15 January, the euro had already fallen to USD 1.18; now, in March, it is trading at USD 1.05. In other words, in the short period since our monetary policy assessment in December, the euro has lost around 15% against the US dollar; and since May 2014, as much as 25%. Given this situation, it is clear that a minimum exchange rate of CHF 1.20 against the euro was no longer sustainable.
The results of this appropriate policy mix, which placed the burden of the response to the crisis on the shoulders of the SNB, can be seen in the remarkable accounts of the Swiss general government: public surpluses in both 2009 and 2010 (+0.8% and +0.2% relative to GDP, respectively) and a reduction of the debt level to less than 40% of GDP.11 One reason for the misperception is probably the view, propagated by the academic literature on the subject, that central bank interventions in foreign exchange markets are geared to achieving an exchange rate target and that they are generally unsuccessful at doing so. As has been repeatedly emphasised, this was not the objective for the SNB in 2009–2010.12 The SNB’s objective was to provide appropriate monetary conditions to the Swiss economy. A given exchange rate level in that context may be maintained for a limited time period, but it is subject to review as macroeconomic conditions evolve. And as the SNB’s experience in 2009 demonstrates (illustrated in Chart 7), influencing the exchange rate level temporarily is feasible and makes sense at the zero lower bound when the traditional monetary policy instrument is exhausted. III. Conclusion: how to judge whether interventions were successful? All actions by the SNB have to be considered in the light of its mandate. The primary goal is to ensure price stability, while taking due account of the overall economic situation. In this way monetary policy contributes to creating an environment that fosters prosperity and economic growth.

In contrast to a “traditional” bank run, such as those that occurred during the 1930s,2 the run in the current crisis took the form of a large and sudden increase in collateral haircuts in the US repo market.3 If one plausibly estimates the size of the US repo market at $ trillion at the eve of the crisis, a 20% increase in haircuts led to a withdrawal of funds from the banking sector equivalent to $ trillion.4 Chart 4 provides an estimate of the increase in haircuts in the US market while Chart 5 displays the drop in overnight repo volume between March and December 2008.5 This run on the repo market had obvious implications for the ability of the banking sector to lend. The consequent dearth of liquidity in US dollars was felt throughout the world, in particular in Europe. It was the main reason for the swap agreements initiated by the Federal Reserve and a number of international central banks, including the SNB. The aim was to substitute central bank liquidity provision for the failing money market in US dollars, and was directed, particularly, at international market participants. In contrast to this account of the early phase of the financial crisis in the US, Chart 6 reports the evolution of the exchanged volumes in the Swiss secured and unsecured money markets.
The distribution of euro banknotes and coins had been well prepared in all countries of the euro area well before 1 January 2002. Euro banknotes – particularly the smaller denominations – had to a large extent been distributed in advance to banks and retail traders, beginning in September 2001, and the coins were distributed mainly to retailers and the general public in December. Without this preliminary work, the logistics of the transition would have been much more complicated, so frontloading can be considered a decisive factor in the successful outcome. The countries chose slightly different methods the frontloading of coins; e.g. in the Netherlands a major investment was made in providing a free set of coins to every citizen over the age of six years, while other countries sold sets of varying sizes at their face value. In this way, the euro coins soon became familiar to the general public and created an interest in the new currency. In Finland the central bank exchanged "company packages" equivalent to FIM 2,000 and containing both banknotes and coins, with the aim of preparing small companies for the transition. Common to all of the countries involved was that they supplied the retailers with large amounts of coins so there would be no shortage of change during the transition. Another important factor in the cash changeover was the ATMs, as a large part of the euro banknotes was distributed via these.

There are a large number of legal acts from the EU and the ECB that regulate how the introduction of the euro should be implemented. Although the legal acts currently only apply to the countries that have already adopted the euro as legal tender, the corresponding regulations will probably also be applied to future applicant countries. To keep the door open for a rapid future membership, the Riksdag (the Swedish parliament) decided back in 1997 that Sweden should maintain the highest possible state of readiness by continuing the technical and practical preparations for membership. The Riksbank has therefore been working on internal EMU preparations for almost five years now, as well as preparations together with the financial sector. This work is conducted within the SIFS group, whose seventh progress report was presented in the autumn and is available to read on our website. The most recent progress report describes two possible transition scenarios, a gradual scenario and what is referred to as "Big Bang". A gradual transition would mean that the exchange rate would be irrevocably fixed on membership of EMU and the euro would become Sweden's currency, while banknotes and coins in krona would continue to be legal tender during a transition period. This means that if someone wants to pay with banknotes and coins in krona, they must be accepted as payment. During this period there is no compulsion to use the euro and no prohibition either. It would be fine to pay with euro if both parties are in agreement on this.