samchain/econo-pairs-v1 huggingface dataset:
In the last 10-20 years, where energy prices have risen at a faster pace than other consumer prices and the tax level has increased somewhat, the CPI-ATE has tended to underestimate underlying inflation. This is illustrated in the chart, which shows the difference between the year-on-year rise in the CPI and the CPI-ATE over a moving 10-year average. Since 1997, the difference has been about 0.35 percentage point. However, even when taking into account trend increases in energy prices, inflation is still moderate. The indicators that provide the best expression of underlying inflationary pressures in the economy may vary over time. Driving forces ahead Oil prices are of importance for the activity level in the Norwegian economy and government revenues. In recent years, oil prices have risen sharply. High demand for oil, limited idle production capacity and uncertain production levels in many oil-producing countries have contributed to this. Oil prices have risen to over USD 70 per barrel, partly as a result of the uncertain political situation in a number of producer countries. Futures prices for Brent Blend are now also above USD 70 per barrel until autumn 2008. Futures prices indicate that oil prices will remain around this level several years ahead. This is higher than the level assumed in the previous Inflation Report. Statoil and Hydro gas prices have also increased sharply in recent months. Petroleum production is expected to increase gradually in the period to 2011, and decline thereafter. Developments in the gas market will become increasingly important.

House sales totalled NOK 44 billion, twice the total for the previous year. Syndication companies and property funds account for almost half of total sales. In Sweden, the share of foreign investors has been relatively high, and rising, for several years. In comparison, foreign ownership in the Norwegian property market is modest, but probably increasing. For example, the German property fund DIFA purchased parts of the Norwegian School of Management’s college premises in Nydalen in Oslo, and the Scottish Kenmore Property Group has purchased commercial property in Norway for more than NOK 1.4 billion. In a comparison of property markets conducted in 2004, Norway was classified as “highly transparent”. 1 Increased liquidity and transparency promote foreign interest in Norwegian property. 1  2  Jones Lang LaSalle, Global Real Estate Transparency Index 2004. BIS Review 41/2006  The economic situation The mainland economy expanded by 3.7 per cent in 2005. Growth in private services, construction and electricity production was strong. So far, a substantial share of output growth has been attributable to a sharp rise in person-hours worked. The fall in sickness absence in 2004 provided an additional supply of labour to enterprises, but sickness absence increased through 2005. Wage developments reflect and influence business cycles. Strong employment growth in the 1990s resulted in a rise in labour costs, which in turn had a dampening impact on growth. Moderate wage growth in recent years is being accompanied by a strong cyclical upturn. The labour market continues to tighten.
If oil prices rise further or remain at the current high level for a long period, petroleum investment may again amplify the cyclical upturn to a greater extent than projected. Monetary policy and the outlook for the Norwegian economy The analyses in Inflation Report 2/05 are based on a baseline scenario where the key rate until 2007 follows forward interest rates, and then rises somewhat faster. Forward rates on 24 June indicated expectations that the key rate would increase to approximately 2¼ per cent towards the end of 2005 and to 2¾ per cent at the end of 2006. The krone exchange rate is assumed to shadow the forward exchange rate, which remains broadly unchanged over the next three years. Capacity utilisation in the Norwegian economy is expected to increase this year and next and exceed its normal level. There are prospects that inflation will gradually pick up and be close to 2½ per cent at the three-year horizon. Monetary policy that gradually becomes less expansionary will stabilise the economy over time, thereby curbing inflation and preventing it from overshooting the target. New information since the publication of the last Inflation Report does not provide grounds for changing the assessment of developments in the real economy. Nor has there been any substantial change in the inflation outlook. Monetary policy cannot fine-tune economic developments, but it can seek to hamper the most significant effects of disturbances to the economy.

At the monetary policy meeting of 11 August, the Executive Board stated that new information since the previous monetary policy meeting does not suggest that we should deviate from the interest rate path envisaged in the June Inflation Report. Monetary policy easing through 2003 and into 2004 has resulted in low real interest rates. Short-term real interest rates may now be considerably lower than the level that implies long-term balance in the economy – the neutral real interest rate. A low real interest rate, and expectations of a continued low real interest rate, will contribute to stimulating activity even after the effects of the interest rate fall unwind. Calculations may, on an uncertain basis, indicate that the neutral real interest rate for Norway lies between 2½ and 3½%. It has probably fallen somewhat in recent years. Although the projections are based on rising real interest rates, the real interest rate will be lower than the neutral rate during the entire period. The monetary policy stance is therefore expansionary. So far,  the effects do not appear to be stronger than expected, but we have little experience of such low interest rates. It is uncertain how quickly prices and wages will react when growth in output and employment picks up. There is also a risk that an interest rate that is kept low for a longer period may lead to expectations of a persistently low interest rate. This may involve a risk of persistently high capacity utilisation and inflation eventually overshooting the target.
As a result, by issuing securities in a segmented TIPS market, the Treasury may keep realized yields on bill and nominal coupon securities lower than they otherwise would have been. The last noteworthy fiscal benefit from TIPS issuance is the fact that it reduces risk to the U.S. government in terms of the variability of its net financial position. The rate of inflation influences both the cost of TIPS and the government’s tax receipts. Thus, some level of TIPS issuance may reduce the variability of the government’s net financial position. This, in turn, should lead to a more regular and predictable pattern of issuance, which should help minimize interest costs. In summary, our analysis of the ex-ante costs of the TIPS program and the more difficult-tomeasure benefits suggests that TIPS issuance provides at least a modest net benefit to the Treasury. So, now I want to turn to a related question: Are there ways to increase the benefits? 6  See Fleming (2002), Krishnamurthy (2002), Laubach (2003). BIS Review 14/2009  5  I would be willing to make two modest suggestions here. First, it may make sense to emphasize longer-dated TIPS issuance rather than shorter-dated issuance. Analytically, the logic goes as follows. Inflation uncertainty is likely to increase at longer time horizons. Thus, investors are likely to pay a greater premium for inflation protection at longer-time horizons. This implies that the cost savings associated with TIPS are likely to be greater for longer maturities rather than shorter maturities.

This is partly because these can cause instability in both the real economy and prices when the bubble bursts and partly because the stability of the banking system could be threatened. Measures to avoid financial imbalances being built up are thus motivated on the basis of both of the Riksbank's objectives; to maintain price stability and to promote a safe and efficient payment system. However, the question is how effective the interest rate is as a weapon – perhaps other means can be utilised. Examples of such measures are monitoring the financial institutions and making capital adequacy requirements of them. The analyses made by the Riksbank in its Financial Stability Report are also aimed at drawing the attention of the banks and other authorities to any problems and they thus play a role in this context. BIS Review 39/2001  3  How great are the problems created by the imbalances in the USA? Is there a risk that the imbalances in the American economy are so great that the process of adaptation back towards a balance will dramatically intensify and prolong the economic slowdown? It can be noted that none of the ten major economic analysts of the American economy assesses that the USA will suffer a recession during the next few years. Firstly, it is probable that the growth potential that can be created by developments in technology is far from exhausted. There should thus be good reason for at least some of the optimism that has comprised a basis for earlier developments.
That includes ensuring that the common monetary policy is properly transmitted to all sectors of the economy and to all countries, and to prevent the financial fragmentation of the area. We also stand ready to adapt all our instruments should it be necessary. Naturally, we must also remain vigilant regarding the risks to financial stability. Evidently, the banking sector is facing this crisis from a healthier position than in the previous recession, which highlights the importance of the far-reaching changes made in this sector over the past decade. The ECB has also taken resolute action here. Among other measures, it has allowed banks to use the capital buffers available, which were created precisely for situations such as the present one. But, undoubtedly, the crisis will significantly impact the quality of banks’ credit portfolios, on a scale that will depend on its ultimate severity and which will be uneven across banks. The outcome will depend on banks’ starting position, on their business model and on the distribution of their exposures to the sectors and regions most affected by the pandemic. Accordingly, we supervisors must continue to closely monitor the risks to financial stability and we must be ready to provide a forceful, panEuropean response should such risks materialise. In short, European and national economic authorities must share the objective of preventing the current crisis from being accompanied by an across-the-board tightening of financing conditions or from seriously harming the stability of the financial system.

In particular, along with the adverse impact that the social distancing measures we may have to maintain in the future may exert on activity, there is a further effect. This is more difficult to measure a priori and relates to the possible and potentially persistent changes in agents’ behaviour in response to the “new normal”. These changes might include modified patterns of consumption and saving, or changes in supply chains or in certain aspects of firms’ operations. All these considerations would warrant qualifying the current recovery as uncertain, to take the second of the adjectives I used earlier to characterise this recovery. Additionally, from the standpoint of the sectors of activity, not all of them suffered on a comparable scale the consequences of the pandemic lockdown measures, as they are not equally susceptible to the imposition of social distancing measures. And the gradual startup in activity is not taking place at the same pace in the different sectors. The earlier normalisation of manufacturing and of certain services coexists alongside a slower than usual recovery in levels of activity in those other services, such as leisure and hospitality, where personal interaction is greater. Here, full normalisation is not likely to be attained until we have an effective medical solution. These differences in the pace at which normal levels of activity in productive sectors are being restored allows us to characterise this recovery as uneven, taking the last of my three adjectives.
Although policies have now been in crisis management mode for five years, the interbank market has yet to return to its normal state, reflecting the extent of the lingering damage within the financial sector. To a considerable extent, the common currency masked vulnerabilities related to the build-up of various imbalances, since such imbalances could no longer be addressed by exchange rate corrections. BIS central bankers’ speeches  1  These factors have raised questions on the viability of the European single currency model as this has perhaps failed to achieve the targets it was primarily set-up for. The extent of these fragilities is reflected in Chart 1, which shows a convergence in sovereign yields in the run-up to the formation of the monetary union, followed by a decade-long stability. In retrospect the low yields were clearly not consistent with the underlying fiscal positions or economic fundamentals at the national level. Indeed, low interest rates enabled governments to pile on additional debt at relatively cheap interest costs. This period coincided with deterioration in competitiveness and wider current account deficits as peripheral countries continued to finance such deficits via capital inflows. Eventually, when markets switched their focus to economic sustainability, the flow of capital reversed direction, sovereign debt was downgraded and yield spreads widened dramatically, as seen in Chart 1. Chart 2 provides a contrast between two groups of countries.

While each financial institution is best positioned to monitor its own risk exposure, it does not have the incentives to internalize the costs it may impose on other financial institutions should it experience difficulties. Second, supervisors are able to obtain and monitor proprietary information about an institution’s risk exposures, its management information systems and its internal controls when such information is not publicly disclosed. Third, supervisors are in a unique position to observe trends across groups of financial institutions and, based on these insights, to provide the industry with a perspective on what constitutes best practice. Fourth, official supervision is needed to enforce compliance with applicable laws and regulations. We have observed that poor compliance, beyond simply being wrong, can result in serious operational problems, including capital allocation deficiencies, managerial oversights and increased reputational risk. As we have seen, such problems can threaten the wellbeing of a financial institution and carry the potential for systemic risk. Finally, supervisors are able to assure that prompt corrective actions are taken when serious financial or other problems are identified, particularly if the problems are not known to the market. The importance of the role supervisors can play in problem cases, both through public enforcement and through other less visible means, cannot be overstated. Changes in the financial services industry present new challenges for how official supervision is to be carried out most effectively.
It gives market participants the opportunity to make secure profits at even lower interest rates and hence sets a lower bound for how low the interest rate on short-term government securities can fall. 18 It seems reasonable that this price development has been caused by our bond purchases and that the interest rate on government securities with short maturities has been pushed down by at least 0.3 percentage points, and that a similar price effect has also been exerted on government bonds with longer maturities. As the public sector budget is more or less balanced, the government’s total borrowing requirement does not increase over time, but the government must nevertheless take out new loans when older ones mature. In other words, new government bonds and treasury bills need to be issued on a continuous basis. According to the Debt Office’s latest forecast, bond borrowing will amount to about SEK 90 billion a year in 2015-2017 while borrowing via treasury bills is expected to amount to just over SEK 110 billion a year. Government bonds have an effective maturity of just over 7 years while all treasury bills by definition mature within a year. If the Riksbank’s bond purchases push the nominal interest rate down by 0.3 percentage points on average, this produces a total profit in terms of lower interest expenditure of approximately 0.003*(7*90+110)*3 = SEK 7 billion for these three years.

We will, in any event, reassess the value of each portfolio component before making the transfer to the special purpose vehicle. The lowest valuation will be applied. To secure initial financing for the operation, we will obtain US dollars through a Dollar-SwissFranc swap with the Federal Reserve. Thereafter, we will turn to the market for refinancing. The SNB will therefore not incur any currency risk. Since the entire operation will be effected in US dollars, it will not affect the National Bank's monetary policy in any way. Reasons for operation This operation is nevertheless unprecedented with regard to the reasons for it. In carrying it out, we are making a contribution to an essential element of the Swiss financial system, at a time when financial markets have been in turmoil for some months now. A better functioning of the financial markets – in particular the banking sector – is essential so that our country will be able to weather the economic difficulties resulting from the anticipated global economic slowdown in the months ahead. It is therefore preferable that we go ahead with this operation now, in an orderly fashion, despite the fact that the markets have regained a certain degree of optimism in the past few days – rather than at a later point under potentially more adverse conditions. The Federal Council and the Swiss Federal Banking Commission have been kept abreast of the preparations underway and our negotiations with UBS. BIS Review 125/2008  1
Surely, they say, enormous increases in the monetary base are likely to be accompanied by substantial price level increases. The problem with this story is that the banks have not been lending these reserves nearly enough to generate big increases in broad monetary aggregates. And even if they did, as an indicator of inflation, the monetary aggregates lost their predictive content many decades ago. The evidence, again, is that inflation remains low. But what if? What if lending picks up? Well, that would be really terrific. Dramatically higher bank lending would surely be associated with higher loan demand and a generally stronger economy. Strong growth and diminishing resource slack would be part of this story, and a rising rate environment would be a natural force diminishing the rising inflation pressures. In the meantime, monitoring the entire state of the economy along with  6  Evans and Fisher (2011). BIS central bankers’ speeches  5  inflation seems like a sensible and appropriate safeguard against this currently low probability scenario. Third, another potential source of inflationary pressures would be rising inflation expectations. Here, I mean a breakout of inflation expectations separate from any fundamentals that might accompany the previously discussed cases of rising commodity prices and stronger bank lending. One could think of this as the spontaneous combustion theory of inflation. The story goes like this: Households and businesses simply wake up one day and expect higher inflation is coming without any further improvement in economic fundamentals.

Pridiyathorn Devakula: Monetary policy in Thailand: current challenges and prospects Speech by M.R. Pridiyathorn Devakula, Governor of the Bank of Thailand, to the APFA 2001 Conference held in Bangkok, 24 July 2001. *  *  *  President of APFA, Distinguished Guests, Ladies and Gentlemen, It is an honour to address the 8th Asia Pacific Financial Association Annual Conference, and to welcome the distinguished members of the Asia Pacific financial community. Judging by the attendance I trust that this three-day event will prove most fruitful and rewarding for all participants. I would like to discuss today the current challenges facing monetary policy in Thailand and what we, at the Bank of Thailand, have set out to do to meet those challenges. In so doing, I will briefly review the progress of the past few years, and look forward to some key emphases of our current policies. The current situation On July 2nd this year newspapers in Thailand ran headline stories to remind us of the four-year ordeal since the floating of the baht and the ensuing economic and financial crisis. These have been difficult years as the economy fought hard to regain macroeconomic and financial stability, and the confidence of financial markets. Economic growth shrank by more than 10 percent in 1998. Underlying this was a sharp correction in the current account in response to the depreciation of the exchange rate. The correction was substantial.
This development was the main reason underlying the downward revision in the outlook for inflation and monetary policy in the last three months. 12  BIS Review 67/2009  Figure 20: Quarterly GDP Growth Rate  Figure 21: GDP  (Percent)  (Seasonally Adjusted Fixed Prices of 1998, Billion TL) 27  12 9.4  10 8 6.8  6.2  6  8.4  7.3  6.9 5.3  25  4.7 2.8  4  1.2  1.1  2  23  0 -2 21  -4 -5.7  Source: TURKSTAT. 2008-2  2008  2006  2004  -6.2 2002  2000  -8  2008-4  -6  19 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 2004  2005  2006  2007  2008  Source: TURKSTAT, CBT. An analysis of Gross Domestic Product developments in terms of output in the last quarter of 2008 reveals that all the subcomponents except those of the agriculture sector contributed negatively to growth. A comparison of this financial crisis with that in 2001 points to a similarity between not only the Gross Domestic Product growth rate, but also the composition of production sectors (Figure 22). On the other hand, making the said comparison also in terms of expenditures is crucial considering the projections pertaining to the timing of the possible rebound in economic activity.

As temporary support measures have expired, the fiscal stimulus has gradually petered out and, with the economy expanding faster than previously forecast, public finances have also recovered faster than expected. The accelerated pace of the economy provides an opportunity to reach a structurally adjusted fiscal balance at an earlier stage than expected. However, although the current fiscal policy framework may be relatively transparent and predictable, it does not seem to provide a sufficiently strong incentive to take advantage of unexpected fiscal windfalls in a counter-cyclical fashion. Consequently, monetary policy has been forced to carry a larger share of the burden of adjustment than would be desirable from the standpoint of an optimal policy mix. As inflation hits social groups differently, fiscal policy can be effectively used to support the most vulnerable groups in the economy. However, as the immediate impact of inflation on the fiscal balance is positive - as revenues are in practical terms price-indexed during times of high inflation - it is important that fiscal policy resist the temptation to allow increased revenues to feed into expenditures more than is necessary. From the standpoint of the monetary authorities, while providing support to vulnerable groups, the fiscal authorities could prioritise tightening the fiscal stance and take advantage of the strong economic growth to close the budget deficit. The war in Ukraine still poses significant risks to the global economy. However, as the global energy and food crisis is resolved and monetary and fiscal stimulus is withdrawn, the prospects for global disinflation improve.