samchain/econo-pairs-v1 huggingface dataset:
The new comprehensive package of measures that we adopted on 10 March 2016 reflects two main objectives: first, to return to inflation rates below, but close to, 2% over the medium term. This is not the case at present since inflation stood at –0.2% in the euro area in February, taking account of the sharp decline in oil prices, but it should return to positive territory in the second half of 2016. The other objective is to bolster the financing of the real economy and to protect it from the pressures related to market volatility. The new series of targeted refinancing operations extension of the asset purchase programme, for its part, will be of particular benefit to large French corporations. We are convinced that these additional measures will deliver concrete results, as did the successive measures we have implemented since June 2014. The latter have indeed boosted lending to businesses, while lowering the cost of credit, and made a 0.3% contribution to French growth in 2015, or even 0.4% according to INSEE. This represents about 80,000 additional jobs for the economy. We are therefore consistent in our objective, and ready to act using the right instruments. But we also remain vigilant as to the possible risks that our monetary policy could generate.

The reason is that it has proved difficult in practice to lower nominal wages. If inflation is low and nominal wages cannot be lowered, it becomes difficult to adjust real wages among different professions, companies and sectors. This can ultimately bring about both higher unemployment and poorer productivity growth in the economy. These problems can be mitigated if there is some inflation. Another advantage of a target of 2 per cent, which has been particularly apparent in recent years, is that a very low average rate of inflation would make it more difficult for monetary policy to counteract recessions. If inflation on average is very low in a world of low real interest rates, like today, the average nominal interest 8 [21]  rate will also be very low. The lower the interest rate is in normal conditions, the less scope there is to lower it before it reaches its lower bound. It will thus become more difficult to counteract future economic downturns with interest rate cuts. Thus, if you do not like negative interest rates, you should not advocate a lower inflation target, as that would involve the repo rate needing to be negative more often and for longer periods. There is a widespread international discussion on whether a target of 2 per cent, which most developed countries have now, really provides sufficient scope to conduct a monetary policy that is as expansionary as it sometimes needs to be.
We have made great progress towards ending “too big to fail” and towards ensuring that the risks taken by financial sector firms are truly borne by their shareholders and creditors and not by taxpayers. The EU and international reforms in progress mean that financial firms are much less likely to fail and, if and when they do, the real economy is much less likely to suffer the collapse of the critical economic functions that the financial system provides. We need EU rules to enable and support the single market in financial services. And, though they are not as effective as a framework for open capital markets because they do not have force of law, we need global prudential standards properly and consistently applied to support a global capital market. We need the rules and standards and cooperation between regulators to prevent adverse spillovers between countries and to manage them if they occur. But we should be clear that while we have reduced the risks and consequences, were we to see a major system wide shock that led to a systemic crisis, it is only governments and national authorities that can ultimately provide the confidence to ensure there is not systemic failure. In the EU context, it is worth noting that there is only a fleeting reference in the Treaties to financial stability; it is the references and powers relating to the single market that have been the basis for the EU rules on prudential regulation. To be clear.

Christine Lagarde: IMFC Statement Speech by Ms Christine Lagarde, President of the European Central Bank, at the forty-fourth meeting of the International Monetary and Financial Committee (IMFC), IMF Annual Meetings, 14 October 2021. * * * Global economic activity has continued to recover since our previous meeting in April this year, thanks to further progress in vaccination campaigns and supportive economic policies. However, the pace of the recovery remains uneven across sectors and countries, and the spread of the more contagious Delta variant of the coronavirus (COVID-19), coupled with supply bottlenecks, is casting a shadow over the near-term growth prospects for the global economy. The main challenge for policymakers continues to be steering the economy safely out of the crisis. It remains crucial that policy support is not withdrawn prematurely. On the fiscal side, support measures should be increasingly targeted. And on the monetary side, clear communication by major central banks is essential, also in view of the recent inflation developments. The policy mix should be accompanied by well-tailored structural reforms to enhance long-term growth and minimise scarring effects from the pandemic, along with action to accelerate the green and digital transitions. Euro area developments and outlook The rebound phase of the euro area economy is increasingly advanced, despite supply bottlenecks and continuing uncertainty about the pandemic.
Eurofi High Level Seminar – Lisbon, 16 April 2021 What fiscal policies beyond monetary policy support? Speech by François Villeroy de Galhau, Governor of the Banque de France  Ladies and Gentlemen, I am very happy to join you today. I would like to extend my warmest thanks to Didier Cahen and David Wright for fostering the fruitful European spirit that we all cherish, despite the difficulties of the moment. As you know, the ECB silent period has already started, so I won’t say a word on monetary policy. However, this will give me the opportunity to tackle a core issue of our incomplete Economic Union besides our successful Monetary Union: fiscal policy. Monetary policy cannot be – and fortunately no longer is – the only countercyclical tool available in the euro area. There are two other links between monetary and fiscal policy to which I would like to draw attention: an accommodative monetary policy, as we have today, supports an active fiscal policy. The second is the risk of a bank-sovereign loop, which as supervisors we are keen to avoid. Let me nevertheless stress that I have no such fear for the country I know best: French banks since 2014 have decreased their exposures vis-à-vis public debt in absolute terms and have done so dramatically as a proportion of their balance sheet. I will first talk about the “fiscal” lessons we can draw from the Covid crisis for Europe (I).

Why does this historical detour matter? The five or six years since the outbreak of the financial crisis have seen signs of a reversal of some aspects of the greater openness we had seen in the 1980s and 1990s. And probably none more so than the decline in crossborder bank lending. Moreover, the UK experience in terms of lending has been amongst the more pronounced. But again, does this matter? My answer is yes. First, because many of us do believe in the economic benefits of free trade and capital flows, as well as the contribution of migration to balancing supply and demand in the economy. Second, and closer to home, the City of London and its financial markets benefit hugely from, and are at the hub of, the open world economy. For example, whatever you think about the more troublesome recent innovations of banking, basic trade finance remains a core, simple and essential service provided by banks, and the City has for a very long time been a leading centre for providing this finance to support world trade. International wholesale banking is therefore an important part of maintaining and developing the world economy, just as it was in the nineteenth century. Yet, we have to recognise that in the last five or six years of the crisis we have gone backwards. Cross-border bank lending has declined more sharply than overall lending – home preference has set in.
The key to solving this policy dilemma is to make sure that firms hold enough liquidity (and capital) in the good times so that, when a downturn hits, supervisors can take a relaxed view about firms using those holdings as buffers to absorb the macro shock. That was not the position post 2008/09 when banks had not been holding enough liquidity or capital in the good times. It is an aim of the new regulatory frameworks put in place post-crisis, that banks should hold bigger liquidity buffers in normal times. The Bank of England’s balance sheet can also be used actively to backstop liquidity for the system as a whole, via the banking system, and the new operating frameworks put in place over the past 5 years will allow that to happen more quickly and easily. How will this all co-ordinate in practice? When the Bank, HMT and FSA took joint action in 2012 to reignite the recovery via the Funding for Lending Scheme – reviewed in my two previous talks to you – the FSA, as predecessor to the PRA and having two members on the interim FPC, contributed by relaxing liquidity requirements and making it clear that liquidity buffers were there to be used. This was a crucial element of the package.

Moreover, many firms have been able to raise their profit margins in sectors faced with constrained supply and resurgent demand. The energy price shock implies a hit to the domestic economy, which should be absorbed by both firms and workers in order to ensure that it does not lead to a spiral of upward price and wage adjustments. In the baseline of our latest staff projections, headline inflation has been revised down, mainly reflecting a smaller contribution from energy prices than previously expected. We now see inflation averaging 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025. At the same time, underlying price pressures remain strong. Inflation excluding energy and food is expected to average 4.6% in 2023, which is higher than foreseen in the December projections. Subsequently, it is projected to come down to 2.5% in 2024 and 2.2% in 2025, as the upward pressures from past supply shocks and the reopening of the economy fade out and as tighter monetary policy increasingly dampens demand. As inflation is projected to remain too high for too long, the Governing Council last week decided to increase the three key ECB interest rates by 50 basis points, in line with our determination to ensure the timely return of inflation to our 2% medium-term target.
Household debt has increased at a faster pace than income over the past ten years. Norges Bank’s calculations indicate that debt growth may largely be due to the sharp rise in house prices in recent years. Higher house prices have a fairly prolonged effect on household debt growth. As a result, credit growth will remain high for a fairly long period even though the rise in house prices is expected to slow. Given the assumptions underlying our projections, it is likely that debt will continue to grow at a faster pace than disposable income through the entire projection period. High credit growth has led to a rise in the household debt burden, measured as loan debt as a percentage of liquid disposable income. The debt burden, measured in this way, is now record high. Due to unusually low interest rates, the interest burden is, nevertheless, relatively low. A normalisation of interest rates will increase households’ net interest expenses, but according to the projections the interest burden will not be higher than it was at the end of the 1990s. If there are expectations of persistently low interest rates, there is a risk that debt may increase more than assumed. Net interest expenses and the debt burden will then also be higher than assumed. In addition, households will be vulnerable if unexpected disturbances result in higher-than-expected interest rates. 5/7  Capacity utilisation in the Norwegian economy is expected to increase this year and next and exceed its normal level.

This is illustrated in Chart 1, which shows that the real rate was 0.8% just before the last interest rate decision. This is lower than in 2013, when there was still a considerable slack in the economy. Of course, the progress made in anchoring long-term inflation expectations at the target — another term for enhancing the credibility of monetary policy — has made it possible, all else being equal, to keep inflation at target over the medium term at lower interest rates than would otherwise be required. But it is questionable whether a real rate of less than 1% will suffice for an economy at or above full employment, with inflation already above the target, with a positive output gap, and with GDP growth that is approaching equilibrium from above. 3  Chart 1  It cannot be said that the interest rate hike took the market by surprise. According to the Bank’s survey of market agents’ expectations, published on Monday, most respondents expected a 0.25 rate increase before the end of the year. The share of respondents who considered the monetary stance too loose had risen steeply since August, reaching 40%. And bond market activity in the wake of the rate hike did not indicate that the increase was unexpected. Even so, the rate hike has been criticised by some of the social partners and some politicians.
We have no pre-set course, however; the timing will depend on the data. Moreover, the precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited. Why does the Bank expect this to be the case? In part, because the headwinds facing the economy are likely to take some time to die down. Demand in our major export markets remains muted. Public balance sheet repair is ongoing. And a highly indebted private sector is likely to be particularly sensitive to changes in interest rates. Over the medium term, several dynamics are likely to keep rates lower than in the past. UK rates could be restrained by continued imbalances between global saving and investment, together with potentially lower rates of global productivity growth. Central banks can also be expected to accommodate with lower risk-free rates the higher spreads that are likely to result from new regulatory requirements. All of these factors likely mean that, even when spare capacity is used up, Bank Rate will need to be materially lower than in the past in order to keep the economy operating at its potential and inflation at its target. The Bank is well aware that a prolonged period of historically low interest rates could encourage other risks to develop. In the UK, the biggest risks are associated with the housing market, which is why last spring the Bank took graduated and proportionate actions.

And the Lloyd’s market underlines London’s status as a world centre for insurance excellence and innovation. But the economic contribution of insurance goes much deeper. By spreading and managing risks, it increases the resilience of corporations, investors and financial institutions. It makes entrepreneurship and trade more viable. And it safeguards companies and individuals from perils they could not otherwise shoulder. From a financial system perspective, insurance companies play a vital role in the efficient allocation of capital. By matching long-term savings and investment, it finances the infrastructure essential to build our economy. The long-term perspective of insurance companies diversifies the financial system and reinforces its resilience. The contribution of the UK insurance industry can’t be taken for granted – especially in a macro-financial environment that challenges traditional business models. Challenges from the macro-financial environment Of course, relative to the recent past, the economic outlook is much improved. The UK has experienced the strongest growth in the G7 over the past year. Job creation has been the quickest on record. Inflation has fallen below target having been above for most of the past five years. With many of the conditions for the economy to normalise now met, the point at which interest rates also begin to normalise is getting closer. In recent months the judgement about precisely when to raise Bank Rate has become more balanced. BIS central bankers’ speeches  1  While there is always uncertainty about the future, you can expect interest rates to begin to increase.
Emerging countries continue to record high growth rates, but this momentum is weakening and in 2014 this weakness may become more pronounced. In the euro area in a scenario of weak economic growth and despite the improvement since summer 2012, monetary and financial markets remain fragmented and the uncertainty about monetary union and governance of the European Union has not been completely dispelled. In Spain, we have made significant progress in correcting the imbalances affecting our capacity to grow and I think we are on the right path to achieving a recovery of activity and the creation of employment on a sound basis. However, it will be essential not to abandon the policy of reforms aimed at increasing the flexibility of our economy and at boosting competitiveness. The fundamental task outstanding for the Banco de España is, with the help and close cooperation of the Government and the resolute support of the banking sector, to complete the balance sheet clean-up of our banking system, affording it the utmost solvency, efficiency and transparency. This target, to bring about a system that fulfils its key function to intermediate between savers and investors and which enjoys the full trust of customers and depositors, will, with hard work and rigour, be within our reach. But we will need something more: to restore economic growth, revive investment, create jobs and overcome the banking and financial crisis, we require legal security. I take this opportunity to request that you work resolutely to safeguard and strengthen it. Thank you for your attention.

CDS quotes on sovereign debt instruments issued by CEE countries  percentage points  450  basis points  180  3.0  400  160  2.5  350  140  300  120  250  100  200  80  150  60  100  40  50  20  0  0  2.0 1.5 1.0 0.5  Source: Reuters  Poland  Romania  Hungary  Poland  Nov.17  Sep.17  Jul.17  Mar.17  Sep.17  Jul.17  May.17  Mar.17  Jan.17  Nov.16  Hungary Germany  May.17  Czech Republic Romania  Sep.16  Jul.16  May.16  Mar.16  Jan.16  -1.0  Jan.17  -0.5  Jan.13 May.13 Sep.13 Jan.14 May.14 Sep.14 Jan.15 May.15 Sep.15 Jan.16 May.16 Sep.16 Jan.17 May.17 Sep.17  0.0  Czech Republic  Source: Reuters, NBR calculations 15  Figure 22. Composition of the deficit on the balance on goods  Figure 21.
But they need to be organised systematically into an analysis framework. A natural starting point is what is usually called growth accounting. 2  1  Barrell et al (2007)  2  This focus is based on what is usually called neoclassical growth theory. The starting point is considered to be two papers by Robert Solow (Solow, 1956 and 1957). A good and brief description can be found in, for instance, Romer (2005). 2  BIS Review 61/2007  The starting point for growth accounting is an assumption that a company uses two types of resources in its production; labour and capital. In addition to these, they also benefit from the available general technology, that is, how skilful we are at using capital and labour together. One classical example of this technique is the conveyor belt. In the simplest example of growth accounting labour productivity is divided into two parts. One part is concerned with the capital-worker ratio, what is known as capital intensity. The other part of productivity, often known as total factor productivity (TFP) is concerned with the available general technology. If we apply this division into developments during the period 1981-2004, the picture looks like this. The rate of increase in productivity for the whole economy during this period was around 2 per cent a year. The contribution from increased capital intensity and the contribution from total factor productivity were both approximately one percentage point. However, the difference between the 1980s and the later years is substantial.

All of them had in common that they were important to be able to analyse and understand productivity. They included better price indices in the private services sector to be able to better calculate volume growth and thereby productivity growth. Also better capital stock calculations, better input-output statistics and better IT statistics. Statistics Sweden has now received money to make these improvements. This can provide us with better conditions for understanding productivity and the driving forces behind it. Productivity growth over the coming years I will now move on to the second of my questions, the question of productivity growth over the coming years. My conclusion is that productivity will slow down in the near future. This is indicated by changes in both the economic cycle and structure. Economic cycle indicates a slowdown I shall begin with the cyclical factors. In February we estimated that the rate of increase for productivity in the business sector would decline from approximately 4 per cent a year over the past five years to an average of 2.4 per cent a year during 2007-2009. Productivity growth has been unusually strong in recent years. This can be partly explained by the normal course of events in an economic cycle. As I said earlier, productivity usually increases quickly in the initial phase of an economic upturn. When the cycle then enters a more mature phase, employment begins to rise. We have been in this phase for the past two years. Employment is now increasing rapidly.