samchain/econo-pairs-v1 huggingface dataset:
Of course, this is not so easy as the public is aware of what has happened, but not of what could have happened. However, on the whole, I think most people have quite a lot of understanding that a central bank with an inflation target of 2 per cent cannot simply sit and wait for an inflation rate of around 10 per cent to fall back, without doing something about it. It was, of course, largely through this type of policy that high inflation could gain hold in the 1970s. That said, it is of course a question of judgement as to exactly how much the interest rate needs to be raised. I will come back to what the return to the inflation target might look like in different scenarios. … than when it is too low I feel that it has been more difficult to convey that it is equally problematic if inflation is persistently too low. During the period of low inflation, the Riksbank has been criticised from some quarters for trying to bring inflation up to the target of 2 per cent and therefore keeping the policy rate low, despite the fact that developments in the economy have otherwise been relatively good. Examples of arguments put forward are that the Riksbank should “apply the target more flexibly” and not “chase tenths of a per cent” of inflation. But this reflects a misunderstanding of what the Riksbank’s motives have been as well as the purpose of the inflation target.

In the euro area, they are equivalent to 1.7% of GDP and are expected, according to the IMF, to contribute to raising growth by 0.9 point in 2009 and 0.3 point in 2010. Fourthly, governments’ very strong commitment to guaranteeing the solvency of banks should prevent risks of a credit crunch. In France, the two structures set up, the Société de financement de l’économie française (SFEF) and the Société de prises de participation de  BIS Review 75/2009  1  l’Etat (SPPE), give the government considerable room for manoeuvre to recapitalise the banking sector and ensure its financing, and thereby that of the economy. Last, but not least, the 325-basis-point decline in the ECB’s refinancing rate since July 2008 is unprecedented, both in terms of size and speed. In an environment characterised by fixed rates, the effects of this decrease shall spread progressively, but rates on new loans are already falling, in line with the cuts in policy rates. In addition, the ECB has embarked on a quantitative easing policy aimed at banks, which, by contrast with the United States, provide 80% of the financing of the economy. Since October 2008, the ECB has been providing unlimited liquidity and has eased collateral rules for its refinancing operation. At its May meeting, the Governing council has decided to extend the maturity of its provision of liquidity up to one year and to purchase euro-denominated covered bonds issued in the euro area.
In fact, the Business Perceptions Survey (EPN) for May reflects a decrease in the fraction of companies that plan to make investments this year, although those that do plan to invest are more certain about their execution (figure 9). The twelve-month cumulative current-account deficit narrowed from 9% of GDP in the latter part of 2022 to 6.9% of GDP in the first quarter of this year. This fall was somewhat bigger than expected. The current-account balance improved significantly at the beginning of the year, consistent with the ongoing adjustment of the economy, which had an impact through the drop in imports of consumer goods, which is consistent with a rebound in household savings. The higher value of exports in some goods categories also contributed to this result (figure 10). On the external front, in the first quarter the Chinese economy grew more than expected and labor markets in developed countries remained dynamic. Even so, the outlook for global growth is still low. The inflationary problem remains, owing mainly to the high levels of the core components in most of the world (figure 11). In the developed economies, although several central banks are close to ending their rate hike cycles, market expectations suggest a more prolonged monetary contraction. This is particularly noticeable in the United States, where the labor and consumer markets have been surprisingly dynamic. In the Eurozone, the most recent data reflect the weakness of the bloc’s economies, but the monetary authorities continue to signal future rate hikes (figure 12).

As a result, banks in Asia were not as prone to the problem of massive over-leveraging, undercapitalization, or under pricing of risk of complex derivatives. So from this perspective, the significant improvement of Basel III over Basel II is in addressing the problem of procyclicality and adoption of macroprudential approach in our policy framework. This is a major contribution of Basel III going forward. The key emphasis of Basel III is to strengthen capital base. While this is important, I regard this as only a second line of defense. The first line of defense is a good risk management system, and strong governance. Asia’s simpler banking model, and reforms to strengthen bank risk management and risk-based supervision, help to foster a strong first line of defense. But as I mentioned earlier, we would risk false sense of security if we believe we can depend just on our simpler banking model. With economic and financial liberalization, especially propelled by the regional economic integration such as ASEAN Economic Community or AEC, that simpler banking model is changing. I will return to this issue later. For now, let me return to Basel III and the potential side-effects for Asia? There are some concerns about unintended consequences from Basel III that bankers and regulators in Asia have voiced to the standard setters. I will, at this time, not comment on those issues which are not concluded such as liquidity rule.
- Next, I would like to share the Albanian and regional perspective on the possible implications from Brexit. - Concluding, I would like to present an overview of challenges facing the two main central bank policies: the monetary policy and the macroprudential policy. 1. Albania and Western Balkans in the post-crisis period The last global crisis affected the economic, financial and social dimensions of the human activity. By size of shock, complexity of challenges and interdependence of transmission channels, the crisis was unprecedented, for decades. It started as turbulence in certain segments of the financial system to later transform into a fully-fledged crisis of the system; before long, it was transferred to the real sector. This shock caused immense loss in production 1/4  BIS central bankers' speeches  and employment levels, reduced the welfare and put to test the stability of growth and development models in many countries. Western Balkan countries were not at the eye of the cyclone of the global crisis. Yet, while at the periphery, the effects of the crisis became increasingly stronger on the region, as well. The decline in foreign demand, increased uncertainties, tightening of financing conditions and deleveraging in the region decelerated the economic activity and evidenced a series of structural problems. I would rather not list all the channels and consequences of the global crisis, but I would like to say that withstanding the crisis required revising many conventional policies and practices. First, central banks were obliged to explore untrodden paths.

This movement has produced various results: in some places it has been reflected in increased protectionist barriers, in other places in isolationist policies, in others in repatriation of capital and refocusing of activity in home countries. The result of the 23 June referendum on the relationship between the UK and the European Union is one of them. The anti-globalist movement and barriers to the free movement of goods, people and capital appear as harmful to the overall global economy. However, their negative effects fall disproportionally on emerging countries, such as Albania, and the Western Balkans in a broader sense. Let me know outline our assessment on the potential negative implications resulting from Brexit and the relevant effects on the central banks in the region. 2. Potential implications resulting from Brexit for Albania and the region Brexit is certainly a determinant factor for the European Union and the euro area. As such, it has left its mark in Albania and the region. It may be accompanied by direct or indirect, short-term or long-term negative effects in the labour, goods and services markets. Overall, the direct implications for Albania and the region are assessed as minor ones, given that 3/4  BIS central bankers' speeches  trade exchange with the United Kingdom is low. To illustrate my point, the export of Albanian goods to the UK accounts for only 0.2% to the total over the past ten years, whereas the share of imports amounted to around 1.1%.
The financial crisis in the advanced economies and the years since have clearly delineated the fault lines in the global system and accentuated the dire lack of effective global financial governance. One would think that there would be a greater sense of urgency in collaborating to ensure that weak links in the system do not have wide-spread contagion. Unfortunately, there is no such sense of urgency. At its core, the global system remains uneven, unanchored and unorganised. Let me elaborate. First, the foundations of the international financial architecture are uneven. As everyone is aware, there is an over reliance on the US dollar as the reserve currency and by extension, an over-concentration of risk with the US economy and financial system. The burden of adjustment is asymmetrical across countries – between deficit and surplus countries, between debtors and creditors and between governments and the private sector. Despite the higher contribution of emerging economies to world growth, global policy priorities, decision making and standard setting remain largely the domain of the advanced economies. Second, the system is unanchored and crisis prone. With no guideposts, automatic corrective mechanisms or coordination to facilitate adjustment, the system is prone to excesses and is perpetually facing disequilibrium conditions, resulting in persistent global imbalances in terms of both the current and capital accounts, and the unsustainable build-up of debt. With no means to correct itself, adjustments often occur through costly upheavals in the form of balance of payments or financial crises. Third, the system is unorganised with inadequate global response mechanisms.

The sustainability of the fund has been supported by a fiscal rule that specifies that over the course of the business cycle, the government can only spend the expected real return on the fund but it cannot use any of the fund’s capital. For another example, this time of a country that does not have any significant resource endowments, Singapore is considered to have prudent public financial governance. Again the fiscal rectitude is guided by legal constraints. For example, the country has adopted a legal constraint to balance the budget over the government’s term in office. It also maintains an internal discipline of keeping government spending at below 20% of GDP 5. By comparison, most developed countries have government spending at around 40–50% of GDP. So, good public financial governance is possible, assuming there is the political will to put in place the appropriate mechanisms. What about financial governance in the private sector? The financial crisis in the advanced economies and the years since have shown how unsustainable household finances can drag down economic growth for many years. Excessive leverage and high household indebtedness often have negative economic implications.
The baseline scenario of this Report reduces the growth outlook for gross fixed capital formation. This new estimate assumes that mining investment will remain near its levels of 2015. Also, that the boost that the coming into force of the VAT on construction gave to housing investment will be diluted as time passes. Add to this the lower impulse coming from public investment associated with the recently announced fiscal adjustment. Other investments should recover gradually over the projection horizon, to the extent that expectations and external demand improve. Meanwhile, in line with the expected slowdown of our trading partners, exports are also revised downward from December. Manufacturing shipments will be most affected, considering that their destinations are more concentrated in Latin America, and some sectors, such as salmon, have been beset by specific factors. On the imports side, changes are bigger, because we estimate that the adjustment in spending will be greater for tradables given the evolution of the exchange rate. Thus, the current account deficit should reach 2.5 percent of GDP in 2016. This correction reflects both price and volume adjustments. In 2017, the deficit will be reduced to 2 percent of GDP, considering increased exports of copper resulting from the entry into production of some deposits and improved terms of trade. Measured at trend prices the current account deficit will have a similar evolution.

Given these developments, the baseline scenario in this Report assumes that GDP will grow between 1.25 and 2.25 percent in 2016, less than was expected in December, and in 2017 it will grow between 2 and 3 percent (table 2). This implies that the economy will keep growing below its potential for the better part of the forecast horizon, so that a further increase in the output gap is projected. Just for refreshment, let me remind you that in the Monetary Policy Report of September last year we included several boxes that reflected our new estimate for trend growth (i.e. the medium-term growth rate) and potential growth – the non-acceleratinginflation rate of growth. Estimates remain as we communicated then: about 3.5 percent for trend growth and around 3 percent for potential growth. The labor market has been strikingly resilient, with persistently low unemployment rates and strong growth in salaried employment in most of 2015. Most recently, however, the latter has tended to decelerate, which along with other indicators in the same direction suggests that this market could be weakening (figure 4). About inflation, no big changes are foreseen from December. Incoming data confirm that it will gradually converge to 3 percent, after remaining above 4 percent during the first half of 2016. The better behavior of some components not included in the CPIEFE will help speed up this convergence. Thus, by December this year we expect inflation to be at 3.6 percent, two tenths of a point less than what we thought in December.
With the introduction of the TSLF and the PDCF, the New York Fed sent small teams of two monitors into each of the four remaining investment banks, Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers – something it had never done before. Let me again emphasize that we were not intending to conduct supervisory activities with our personnel, nor were we attempting to displace the SEC, the primary regulator of the investment banks. To the contrary, we were acting as a potential lender to these potential borrowers, and we wanted to know our new borrowers better. Because of concern that our monitoring role could be misunderstood or misconstrued, Vice Chairman Donald Kohn described our objectives in public testimony. He said that the on-site monitors had two narrowly tailored goals: (1) to ensure that any credit that the Fed extended to the investment banks would be repaid, and (2) to ensure that the investment banks did not become too dependent upon Federal Reserve credit and would continue to work on improving their liquidity positions and financial strength. 2 The Federal Reserve monitors did not take on the broader responsibility of  1  Mary L. Schapiro, Chairman, U.S. Securities and Exchange Commission, Testimony Concerning the Lehman Brothers Examiner’s Report, before the United States House of Representatives Committee on Financial Services, April 20, 2010.

Under the law, the New York Fed does not have the authority to provide what I would characterize as a “naked” guarantee – one that would be unsecured and not limited in amount, and would put the U.S. taxpayers at risk for the entirety of Lehman’s trading obligations. As Chairman Bernanke has observed, “the Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability and economic prosperity….” 6 In this case, Lehman had no ability to pledge the amount of collateral required to satisfactorily secure a Fed guarantee, one large enough to credibly withstand a run by Lehman’s creditors and counterparties. As events subsequently played out, several weeks after Lehman weekend, on October 2, 2008, Congress passed the Emergency Economic Stabilization Act (EESA), which provides the U.S. Treasury Department with legal authority to issue a guarantee. 7 Again, the Federal Reserve did not then, and does not now, have such authority. Even if it had been legally possible, a Government guarantee would have also placed the taxpayer at enormous risk because it would have undermined deal certainty. It is important for the acquirer – and not a third party – to issue the guarantee because it gives the acquirer a strong incentive to close the deal and assume control of the target. For example, J.P. Morgan Chase, which proffered the guarantee needed to merge with Bear Stearns, negotiated a host of provisions from Bear Stearns that assured deal certainty.
How much lower would unemployment have been with a more expansionary monetary policy? Let us assume that inflation would have been 1 percentage point higher and thus been closer to the target now. According to an empirical estimation using Swedish data, a 1 percentage point higher inflation rate leads to around 1.3 percentage points lower unemployment, corresponding to around 65,000 fewer unemployed.27 This could perhaps give rise to 4 per cent higher housing prices, according to the results from Claussen, Jonsson and Lagerwall (2011).28 Would this have increased the risks in household debt so much that it would nevertheless be better to have 65,000 more unemployed?29 Not as far as I can see. Positive with an open debate As I have discussed, much of the debate conducted has been based on the differences in opinion regarding whether household debt entails risks to financial stability and the macro economy, whether monetary policy is a suitable means for influencing household debt and whether it is worth holding back inflation and keeping unemployment up to reduce the risks of indebtedness. As according to extensive research in the field, monetary policy has little effect on household debt but large, negative consequences in the form of low inflation and high unemployment and there are more effective means that are already used, I draw the conclusion that monetary policy should not be used to try to influence debt.

The financial crisis committee, which was appointed by the Government, is currently looking into the design of such a framework – for instance, which tools should be used and by whom. However, some measures belonging to the macroprudential toolbox have nevertheless been implemented and apparently to good effect – here I am thinking of Finansinspektionen's loan-to-value cap. According to the report on the housing market that Finansinspektionen published in March 2012, the loan-to-value cap has had the intended effect and the loan-to-value ratio for new mortgages is now falling for the first time for many years. A short-cut in the reasoning Monetary policy thus has relatively little effect on housing prices and household debt, but relatively large effect on inflation and unemployment. Moreover, there are other, better instruments than the repo rate available. One can therefore claim that the first statement above, that household debt in Sweden today entails sufficiently large risks to need to be addressed, does not have any significance for monetary policy. It is not monetary policy that should be used if household debt needs to be addressed. But let me nevertheless also discuss the first statement. How should we regard household debt in Sweden at present? This is where I perceive that those who advocate a higher repo rate because of household debt tend to take a short cut in their reasoning.
Third, the low interest rates helped to reduce the service costs of the existing loans and to lower their re-financing costs. This has facilitated the activity of borrowing enterprises and households. Fourth, the low interest rates supported the increase of private consumption and investments in the economy, through encouraging a behaviour oriented more towards consumption and less towards savings. According to our economic models, in the absence of monetary policy effects, economic growth and inflation for 2016 would have scored respectively 0.5 and 0.4 percentage point lower than their actual values. Honourable committee members, The Bank of Albania is independent in formulating and implementing its monetary policy. It is, however, aware of the mutual impact between the monetary policy and the fiscal policy in achieving the respective objectives. Therefore, for a right combination of macroeconomic policies, we are constantly mindful to coordinate the monetary policy stance with the fiscal policy stance; similarly, the latter is detailed in the budget per calendar year, and in medium-term draft 3/8  BIS central bankers' speeches  budgets. As I have said previously, the inclusion in 2016 of specific provisions for guaranteeing fiscal stability in the Organic Budget Law, established more solid basis for a better coordination of the two macroeconomic policies, as it contributes to increasing the discipline and foreseeability of the fiscal policy. About the latter, the Bank of Albania finds that the fiscal policy has been on a consolidation path during in 2016, reflected in the reduction of the public deficit and public debt.

The challenge facing the UK economy in the years ahead is to ensure that the private sector can once again become an engine of job creation and growth as the public sector rebalances, repeating the positive experience of the 1990s recovery. 6  Public sector net borrowing was 7.7% of GDP in 1993/4, moving towards a surplus of 0.5% in 1998/9, a swing of 8.2% in the public sector financial balance as a share of GDP. The Budget plans show a 9 percentage point swing – from borrowing of 10.1% in the current financial year to 1.1% in 2015/6. 7  From Q3 1991 to Q4 1998, public sector employment fell by 827,000 – a fall of around 14% of the total. The Office for Budget Responsibility projects a fall in 600,000 over the present consolidation, a fall of around 10%. BIS Review 134/2010  7  There is, however, one important difference between the situation now and the mid-1990s in that the flow of finance to support the growth of private sector businesses has been affected by the impact of the financial crisis on the banking sector. For many businesses and individuals, the terms on which they can access lending are much less favourable than before the crisis. In one sense, this is very appropriate in that credit was too freely available in some parts of the financial system in the mid-2000s and this created the conditions for the global credit boom which preceded the financial crisis.