samchain/econo-pairs-v1 huggingface dataset:
And this is despite the fact that we have encountered adverse shocks in that period, not least the slowdown in emerging market economies and renewed tensions in the euro area banking sector. So what accounts for this improved resilience of the euro area economy? Certainly the recovery cannot be explained by “endogenous” or underlying growth forces, which were unusually weak in its early phase. Nor can several of the “exogenous” factors that have supported previous euro area recoveries provide an answer. First, in the past euro area growth has been closely interdependent with world trade, with external demand playing a central role in supporting the recoveries after the dotcom crash and the Lehman bankruptcy. Since mid-2014, however, world trade has weakened considerably and last 1/6  BIS central bankers' speeches  year grew at the slowest pace since the financial crisis. Yet the correlation with euro area output has more or less broken down. Growth has accelerated even as world trade has fallen back. Second, though fiscal policy has stopped being a headwind – as it was during the 2011–13 period – it has not been much of a tailwind to the recovery either. With governments still undertaking a necessary process of balance sheet repair, fiscal policy between 2013 and 2015 was basically neutral and provided only a mildly positive contribution to growth last year. This contrasts with both the post-Lehman and post-dotcom recoveries where the fiscal stance was more expansionary.1 Third, the contribution of the supply side to the recovery has so far been limited.

The United States will be directly affected in several important ways by the start of Economic and Monetary Union in Europe, or EMU. I would like to review some of the main channels through which EMU is likely to affect American business and policymaking over the next several years. Further, I think it may be useful to highlight some of the important similarities and differences between the currency union that exists in the United States today and the currency union that you are in the process of creating in Europe. The most obvious implication of the start of EMU for the United States -- as well as for the world community -- is the coming into existence of a new currency, the euro, which is intended to function as a major international currency alongside the U.S. dollar. I should make clear at the outset that it would be a mistake to think that the United States looks at this prospect with concern, as if the introduction of the euro could somehow compromise the ability of the United States to continue to conduct trade and financial transactions with the rest of the world. As you well know, the dollar is currently used in roughly 50 percent of world trade transactions and in at least one side of 80 percent of world financial transactions. The introduction of another major international currency will neither harm the depth and liquidity of the dollar market nor hinder the ability of the United States to conduct its external transactions smoothly.
But labour, and wages in particular, is playing a significant role as a driver of inflation. It's quite extraordinary because there have been more people employed, the average hours have been up, wages are increasing – we had 5.2% growth for the first quarter in the compensation per employee –, and the output is where it is: stagnant. So, there is an issue of unit labour cost –in other words, productivity – which clearly has an impact on inflation as well. We will continue to really monitor and dissect as well as we can this entire enigma of the labour market – which is, as I said, playing a critical role. It's especially important because many services which are playing a large part in our economy are labour-intensive, and wages in that respect play a key role. That is partly, by the way, the reason why we have – I was going to say upgraded, but it's not upgraded–, but why we have increased our projection for core inflation in both 2023 and 2024. My first question: I was a bit surprised by how strong this revision of the core inflation projection was. Could you elaborate a bit on the reason? Is that all due to wages, wage expectations, or are there other reasons behind that? My second question is about the decision today. Was it unanimous? Could you maybe give us a bit of a flavour about the discussion?

In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium-term target and to preserve the smooth functioning of monetary policy transmission. We are now ready to take your questions. *** Six weeks ago you provided a fairly similar guidance in your statement. In the press conference you said there's more ground to cover and the ECB is not pausing. My first question is that, if you have a similar guidance, are you willing to make the same comment in the press conference today? The second is, what lessons do you draw from the Fed's pause? I don't mean that you need to emulate the Fed; clearly, the ECB has its own policy. But I mean the reasons behind the pause, as quite a lot has been done. There needs to be an evaluation of the effects of policy tightening. So, do you see a reason for the ECB to contemplate a similar pause? Is there a risk that focussing on past projection errors could increase the risk of a policy error by the ECB? On your first question, this meeting was the meeting of a Eurosystem projection exercise. So, we have looked very much at data. We have revised our projection. We essentially did what we said we would do: data dependent and using the three elements of our reaction function to determine what was the right decision today. That is the reason why we increased all three rates by 25 basis points.
After a period, the rise in prices for domestically produced goods and services also slowed. Inflation measured by the CPI-ATE reached its lowest level in the first months of 2004. Inflation remained at less than ½% until after the summer before picking up in the autumn. Inflation moved up primarily as a result of a slower decline in prices for imported consumer goods. The depreciation of the krone since the beginning of 2003 has contributed to these developments. In addition, the rise in prices for domestically produced goods and services stabilised, and towards the end of 2004 there was a tendency towards a higher rise in prices for these goods and services. Prices for imported consumer goods fell more than expected at the beginning of 2005, while the tendency towards a more rapid rise in prices for domestically produced goods and services has persisted. So far in 2005, inflation measured by the CPI-ATE has been around ¾ per cent. The other Nordic countries have also experienced falling inflation. Inflation has declined, and is now relatively low in Sweden, Denmark, Finland and Norway. The year-on-year rate of underlying inflation in these countries was around 1 per cent in March. A common feature of the low level of inflation in the Nordic countries seems to be the sluggish trend in prices for imported consumer goods, even though developments have not been entirely the same in all the Nordic countries. BIS Review 34/2005  1  Reliable information about the economic situation is important when setting the interest rate.

An interest rate that is kept at the current level for a long period might lead to a situation where capacity utilisation becomes too high further ahead. Bottlenecks may arise in some sectors of the economy, and the sharp rise in property prices and borrowing may persist for a longer period. This could be a source of instability in demand, output and inflation in the somewhat longer run. This implies, in isolation, a higher interest rate. At the same time, the current rate of inflation is low, and there are prospects of low inflation for a period ahead. The objective of bringing inflation back to the target of 2½ per cent and anchoring inflation expectations imply a continued expansionary monetary policy. The monetary policy assessments presented by Norges Bank in March indicated that the interest rate will rise after a period and at a gradual pace. Economic developments since then have been broadly in line with expectations. International key rates are rising, albeit slowly and from a low level. Although a gradual rise in the interest rate seems to provide a good balance between the different objectives, the Executive Board concluded that it is too early to increase the interest rate at this monetary policy meeting.” Low interest rates over a long period have contributed to strong growth in household borrowing. Both housing investment and house prices have risen sharply. House price inflation has slowed somewhat, but remains high. In 2004, housing starts were the highest in several years. Home refurbishment is probably also rising sharply.
Thus, the linkage between the policy setting and the economy can be affected by changes in the relationships between policy and financial conditions or between financial conditions and the economy. Let’s consider the linkage between the policy setting and financial conditions first. In my view, the major components of financial conditions include: 1) the value of the equity market; 2) the level of real interest rates across the yield curve; 3) the level of credit spreads; 4) the availability of credit; and 5) the exchange value of the dollar. There are certainly others, but these are probably the most important ones. If we look at these financial indicators as a set, financial conditions do not appear to be unusually tight or easy in aggregate:   For the equity market, the evidence is mixed (Figure 10).   On one hand, the equity risk premium actually appears to be quite elevated relative to historical levels and price/earnings ratios based on current year expected earnings are not unusually high. On the other hand, based on valuation measures using trailing 10-year earnings, the U.S. stock market valuation may be more stretched.   For interest rates, conditions are accommodative. Real rates are unusually low (Figure 11).   For credit spreads, the level is well within normal ranges – neither as narrow as in 2005 or 2006 nor as wide as during 2008 and 2009 (Figure 12).

In Macedonia, the relatively low share of external funding in total funding (10.8%; Q3 2013) shielded our banks from broader deleveraging trends among European banks. However, group strategies by foreign parents, which are asking strengthening the capital ratios at the consolidated level, impose limits for asset growth in the largest banks in the system. This largely has restricted the credits growth in our economy. The subsidiaries of European banks account for 56% of the banking system assets and are systemically important for Macedonia, but still account for a minor share of the overall group assets (parent banks are from Greece, Slovenia, Austria, and France). Local subsidiaries are well capitalized, liquid and have limited exposure to parents. Their funding structure is mostly based on local deposits. Thus, on system level, the funding liquidity risks remain low (loan-to-deposit ratio 0.89, high share of  BIS central bankers’ speeches  1  time deposits 67% in total deposits, liquid assets to total assets ratio 32% which is higher than the pre-crisis level). Since the start of the crisis, the balance sheets are expanding (total banks’ liabilities as of Q3 2013/Q3 2008 raised by 43% and in Q3 2012/ Q3 2012 for 7%) and this trend has continued with the share of external funding remaining relatively stable. The capital adequacy ratio has climbed to 17.3 percent (with tier 1 capital at 14.7 percent).
As I have previously stated, the foreseeable impairment of assets will, based on our analyses, significantly impact banks’ solvency. Moreover, this impact will differ from bank to bank, depending on their starting point and on their different exposure to the sectors most affected by this crisis. In this connection, the ECB has recently undertaken a vulnerability analysis of the banks under its supervision. The aim was to conduct a forward-looking test of banks’ resilience to the shock caused by the pandemic. The results of this exercise, which I will now refer to, do not differ very much in qualitative terms from the provisional results we obtained at the Banco de España in the FLESB stress test exercise, whose final findings will be published in our autumn Financial Stability Report. As usual, I shall be submitting those results to this House. The baseline scenario posited in the vulnerability exercise included the most likely effects of the crisis on macroeconomic variables, namely cumulative declines in euro area GDP this year and in the next two years of around 1%. The exercise estimated a 2 pp reduction in the solvency of European banks as a whole to 12.6% on average, above the prudential requirements in place. While there is cross-bank heterogeneity, these results highlight the fact that, on one hand, banks have faced this crisis with greater margins of safety, partly as a result of the regulatory changes made in the wake of the international financial crisis.

Before completing this overview of the recent changes in financial stability risks, I would like to refer briefly to the most recent performance of the financial markets and the real estate market. Starting with the financial markets, it is evident that this crisis is also having a major impact on the valuation of many financial assets, and on their volatility. Initially, the stock markets underwent a severe correction and the volatility of equities and debt securities rose sharply. Subsequently, following the global monetary and fiscal policy response, the stock markets began to recover and volatility to decline. Indeed, both in the United States and the euro 8  area, some market valuation indicators, such as earnings per share, have returned to alltime highs. This could suggest a certain disconnect between the rapid and significant recent recovery in financial markets and the more moderate changes observed in the macroeconomic data and the concerns regarding corporate sector weakness. In this respect, despite the slowdown in recent months in the pace of credit rating downgrades, after widening sharply between March and May the spreads on high-yield or speculative grade corporate debt (i.e. with an external rating below BBB), ceased to improve in June in Europe and in the United States. They have thus remained short of their pre-crisis levels, in contrast to the case of investment-grade corporate debt (external rating of BBB or higher). This deterioration in corporate credit quality is a further factor of vulnerability for financial stability.
The rise in core inflation was relatively subdued, despite the sharp exchange rate depreciation. Although recently observed pass-through seems lower than historical estimates due to subdued demand conditions, exchange rate movements still pose upside pressures on inflation. Figure 9. Headline CPI and Core Price Indicator (Annual Percentage Change) 11 10 9 8 7 6  CPI  H  5  01.17  11.16  09.16  07.16  05.16  03.16  01.16  11.15  09.15  07.15  05.15  03.15  01.15  11.14  09.14  07.14  05.14  03.14  01.14  11.13  09.13  07.13  05.13  4  Source: TURKSTAT, CBRT. Going ahead, the lagged pass-through impact and the base effects resulting from previous year’s food price volatility will continue to weigh on inflation. On the other hand, the impact of tax adjustments on CPI inflation is likely to fade away throughout 2017, given the government’s clear statement of no additional tax hikes in 2017 (Figure 10). 6  Figure 10. Contribution of Tax Adjustments to Inflation (Percent) 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 2011  2012  2013  2014  2015  2016  Source: TURKSTAT, CBRT. Our recent Inflation Report provides the updated inflation and output gap forecasts. We have revised the output gap on the downside, whereas short-term inflation projections have been revised upwards. Disinflationary impact of weaker economic activity was more than offset by the exchange rate pass-through effect for the near term forecasts.

Note: Coefficients are recalculated into percentages as per Palmquist (1980) due to log-linear specification. A negative pay gap in this chart indicates that women earn less than men. Chart 22: Conditional gender wage gap under specification (5) Difference in lnpay  0.05 0 ‐0.05  Gender pay gap  ‐0.1 ‐0.15 ‐0.2 ‐0.25 ‐0.3  1994‐1998  1999‐2003  2004‐2008  2009‐2013  2014‐2019  Source: ONS Labour Force Survey and Bank of England calculations. Note: A negative gender pay gap in this chart indicates that women earn less than men. 11 The regressions assume the effect of the controls on pay is homogenous between different groups. If we run a Chow test on this restriction, it fails in our sample. This would be a useful area for future research. 12 Coefficients are recalculated into percentages as per Palmquist (1980) due to log-linear specification. 27  All speeches are available online at www.bankofengland.co.uk/speeches  27  We can replicate this regression for ethnicity with the same set of controls, except that the occupation, age groups, and children under 2 variables now interact with the ethnic minority variable. Where  (6) ln  ∝  h  =  ∗ 1 0  h  ∗  person does not belong to white ethnic group person belongs to white ethnic group  With this specification, the conditional gap for ethnic minorities averages around -11% and is again significant at the 1% level.
Not only did he point to the importance of maintaining price stability, but he also gave the interest rate responsibility for doing so. When we today refer to a normal or neutral rate of interest, Wicksell is an obvious reference. In 1907, he wrote the following about the relationship between the interest rate and inflation: “… the problem of keeping the value of money steady, the average level of money prices at a constant height, which evidently is to be regarded as the fundamental problem of monetary science, would be solvable (…) by a proper manipulation of general bank rates, lowering them when prices are getting low, and raising them when prices are getting high”.6 Wicksell’s proposal to establish a Scandinavian central bank was never realised. Wicksell himself entered into a union with a Norwegian woman, Anna Bugge. As the story goes, she strongly urged him to complete his academic works, rather than devoting his time to writing for newspapers and popular oratory. She was active in the peace and women’s movement and was Sweden’s first female diplomat. The union between the two did not consist of a formal marriage as Wicksell refused to enter into a contract which at that time would have made him her guardian. It was a contractual form of cohabitation based on mutual trust and respect, perhaps not unlike the cohabitation that Norway and Sweden have enjoyed on the Scandinavian peninsula over the past 100 years. But that is another story.

The fiscal rule stabilises enterprises’ expectations concerning competitiveness and the krone exchange rate. This can prevent abrupt and pronounced swings in the structure of the economy. If the government authorities disregard the rule, enterprises will lose an important reference. A policy rule can make matters worse if economic agents have drawn up long-term plans on a faulty basis.3 Both short-term and long-term considerations imply that the use of petroleum revenues as a share of the Petroleum Fund should be curbed ahead. The Norwegian economy is growing at a brisk pace. The public sector has invested heavily in the care of the elderly, which should cover the needs of a generation that was born just after World War I. The need for growth in public expenditure will be more moderate in the coming years and marked by the small cohorts of the 1930s and war years, who are now joining the ranks of the elderly. Moreover, the National Insurance Scheme, introduced in 1967, is nearing maturity. In addition, a few years remain before the large post-war cohorts retire and add to the demand for health services. Hence, the conditions are now conducive to returning to the use of 4 per cent of the Petroleum Fund. The current cost level in the Norwegian business sector is adapted to an expansion of the petroleum sector and a steady phasing-in of petroleum revenues into the mainland economy. Costs rose sharply from the mid-1960s to the mid-1970s and reached a very high level.
And, finally, the number of people in employment - and let’s never forget we are talking about people here - is currently around the highest number on record. Now we don’t have fully comparable data for Scotland within this overall picture. Interest rates are of course identical, and as far as we can tell, the inflation story over the past seven years is pretty much the same as in the rest of the UK. So, too, is the story of sustained economic growth. On the basis of annual data Scotland’s economy, too, has grown year by year over the period - at an average rate of 2.6%. And on the basis of the new quarterly GDP data series for Scotland, produced by the Scottish Executive, Strathclyde University’s Fraser of Allander Institute concluded that, while the Scottish economy is somewhat more volatile than that of the UK as a whole on a quarterly basis, it moves broadly in line with the UK over longer periods. 1  BIS Review 5/2000  We do have consistent data for the labour market. And this shows that Scotland too, like the UK as a whole, has enjoyed a steady fall in the rate of unemployment, from a peak of some 10% at the end of 1992 to just over 5% now. In the case of Scotland, this is the lowest rate since the middle of 1976. (It compares with the truly grotesque Scottish rate of unemployment of close to 14% in the mid-1980s.)

BIS Review 5/2000  4