samchain/econo-pairs-v1 huggingface dataset:
Nevertheless, the United States could be doing better. The U.S. fiscal policy program, for example, does not appear well-calibrated to the current set of economic circumstances. We have too much fiscal restraint in the short term, and too little consolidation in the long term. The degree of fiscal restraint this year (about 1¾ percent of gross domestic product [GDP] in 2013) is quite large relative to the forward momentum of the economy. Thus, we have a tugof-war between the improving economy and the current large negative fiscal impulse. How this tug-of-war gets resolved – which force dominates – won’t be known for some time. In other words, the level of uncertainty about the near-term outlook in the United States remains quite high. Meanwhile, the long-term fiscal outlook for the United States is still troubling. So far, partisan divisions in Washington have limited progress in reaching the type of “grand bargain” needed to put the United States on a sustainable long-term fiscal path, though of late we have at least seen some renewed talk about this. Nor have we yet deployed a comprehensive set of policies to support the rebalancing of the U.S. economy toward a growth path based more on business investment, trade and broad-based income gains than the type of asset price gains and credit-fuelled consumption, which dominated the last business cycle. For Europe, the near term macroeconomic outlook seems less bright. The good news is that the peripheral countries have made substantial efforts to bring down their structural budget deficits.

They have also made some progress in improving their international competitiveness, though there remains an opportunity for further structural reforms in labor and product markets – and not just in the periphery – to increase productivity and strengthen long term growth prospects. The European Central Bank’s (ECB) introduction of the outright monetary transactions (OMT) program has reduced financial market tensions considerably in the peripheral countries, so that sovereign debt funding costs in those countries are at more reasonable levels. The risk that interest rates in the periphery could spiral upward has been significantly diminished. Also, the commitment to European integration remains strong, a factor that U.S.based analysts and investors do not always sufficiently appreciate. Over the past few years, when the situation has been the most bleak, the choice in favor of the Union with the euro at its core has always won out. The bad news is that the eurozone is still in a recession and the political support for further rounds of budget-tightening has clearly lessened. The eurozone financial system is being fragmented and the partial easing of pressure on peripheral sovereign debt markets has not translated into a corresponding easing in private-sector borrowing costs in these nations. If growth does not resume relatively soon, then the political support for continued fiscal and structural adjustment could further erode. In Europe, a key challenge is to strengthen the economic foundations of monetary union at the system level.
3/3  BIS central bankers' speeches

I should also like to reiterate that the prospects for a stronger potential for growth in the euro area will depend very much on progress made in enhancing the flexibility of labour and goods markets in the euro area. Although reform efforts in several countries have been heading in the right direction, there is still much to be done when looking at the area as a whole. Finally, let me also say a few words about recent exchange rate developments. I noted earlier that, from a monetary policy point of view, these developments are a cause for concern as they add to the upward pressure on consumer prices in the euro area. These concerns are compounded by the fact that the exchange rate of the euro does not appear appropriate when looking at economic fundamentals. As you are aware, we have been expressing this concern for some time. In the meantime, we have witnessed a considerable improvement in the economic growth prospects for the euro area. At the same time, owing to measures taken by the Governing Council, the outlook for price stability in the medium term in the euro area has remained intact. At present, inflation in the euro area is among the lowest in the world. The fact that the euro has continued to depreciate over recent months is not in line with these strong economic fundamentals in the euro area. Recent global exchange rate developments are also not in line with international balance of payments positions.
To begin with, it is important to remember that there is generally no contradiction between low and stable inflation and good growth and employment. The whole point of having an inflation target is that it provides the economy with a stability that creates the right conditions for sustainable economic growth. So it is correct that price stability is the overall objective of the Riksbank’s activities. Nor do we have any specific target for production or employment in the same way that we have a specific target for inflation. Does this mean then that we are by definition, and indeed should  BIS Review 2/2008  3  be, “inflation nutters” who only care about the inflation target when deciding on the interest rate? 1 When they drew up the new wording for the 1999 Sveriges Riksbank Act the possibility of the Riksbank having a target for the real side of the economy was also discussed. For various reasons the legislators decided that it would not be appropriate. For example, both earlier experiences and economic theory show that an expansionary monetary policy that fuels inflation will not increase employment or lead to higher growth in the long term. Such a policy has on the contrary had negative consequences for households and companies. So, as monetary policy cannot be used to achieve a lasting higher level of employment or growth in the economy, it would not be appropriate to have specific targets for the real side of the economy.

Moreover, the opportunities for households and companies to borrow money have been restricted because access to credit has declined. The difficulties for banks and other lending institutions to find funding became acute when the financial crisis also hit Sweden with full force. They were forced to accept funding at shorter and shorter terms as these were the  BIS Review 2/2008  5  only markets that continued to function. In this situation the Riksbank intervened by, for instance, offering the banks loans at 3 to 6 months, that is, at much longer maturities than the daily and overnight loans normally offered. We took these measures to improve the functioning of the markets and to make it easier for the banks to continue to provide loans to households and companies. We will continue to offer this form of liquidity support as long as is necessary. The extraordinary measures taken by the Riksbank thus aim to ease the supply of credit and improve the functioning of the market. Although the measures primarily concern safeguarding financial stability, they will also improve the ability of monetary policy to stabilise inflation and the real economy. Substantial interest rate cut in December On 3 December we made the individually largest change in the repo rate since the inflation target officially began to apply in 1995.
Obviously, in practice, proper market functioning was distorted by perverse incentives and information asymmetry. A special role was played by implicit guarantees that regulators gave to market participants. These guarantees combined with the risk discounting usually associated with a prolonged bonanza and resulted in excessive risk-taking and leverage. In my view, the lesson is as follows: any good fix of the financial system should deal with the sources of market failure and not only try to prevent inconvenient outcomes. In doing so, I think it is better to avoid over-complex regulation, which may indeed be self-defeating in the long run. There has been a tendency to over-regulate in the aftermath of the crisis: as Haldane and Madouros (2012) observed, whereas the first Basel accord had only 30 pages, attempts to make it more flexible and fashionable turned it into a 347 pages document in its second iteration, on which the ink had barely dried when the financial crisis hit, and attempts to plug the gaping holes it revealed pushed the page count to no less than 616 pages in the case of the Basel III agreement. In the US, whereas the original Glass-Steagall act, perhaps the most influential piece of legislation of the 20th century, had a mere 37 pages, the new Dodd-Frank Act of 2010 has 848 pages, and that’s only the primary legislation – counting in the 400 pieces of detailed rule-making from various US regulatory agencies that are required for its implementation, the document risks topping 30,000 pages.

Ardian Fullani: Recent economic and financial developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Bank of Albania’s Supervisory Council decision on monetary policy, Tirana, 23 February 2011. *  *  *  Today, on 23 February 2011, the Supervisory Council of the Bank of Albania reviewed and approved the monthly Monetary Policy Report. Based on a thorough analysis of Albania’s latest economic and monetary developments and discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to leave the key interest rate unchanged at 5.00%. The Supervisory Council confirmed that the actual monetary conditions remain appropriate for meeting the medium-term inflation target and for supporting the domestic economic activity. I would like to proceed with a brief overview of economic developments and main issues discussed at today’s meeting of the Supervisory Council. *** Recent data from the global economy confirm the positive underlying momentum of the economic activity in developed and developing economies. Despite the gradual withdrawal of fiscal and monetary stimulus, economic growth has been stable, as a result of the recovery in the private sector demand in developing countries. On the other hand, the higher demand has triggered a price increase in commodities, basic products and food items, thus impacting the shift of the inflationary pressures upward. Nevertheless, globally, consumer price inflation remains still contained, as long as major economies continue to be characterised by below-potential economic growth.
It has a complex system of retirement security, with multiple pension schemes in different provinces and for different groups. But China is in the process of reforms, integrating its systems and seeking to provide adequate coverage for all workers, and I think they will be getting there. 19. Even in ASEAN, Thailand is going to begin ageing before long. And the Asian countries that grew quickly a few decades ago are also entering the ageing phase – societies like Japan, Singapore, Korea, Taiwan and Hong Kong. We don’t face quite the same problems as the rest of the world in Singapore – we have a defined contribution pension scheme which doesn’t have 2  BIS central bankers’ speeches  the same problems of sustainability. But this is a global challenge. Low interest rates and societies that are ageing and fortunately living longer will pose challenges to retirement security everywhere. 20. Globally, therefore, we need fundamental reforms. We can’t fix the problem through investment strategies, certainly can’t fix it by monetary policies. It needs fundamental reforms. 21. First, we have to enable people to work for long than they used to, in virtually every society that’s getting older, and make it attractive for older people to work. Fortunately, each new generation of people entering their senior years is also healthier.

I agree that this would be the case if all property buyers used their savings and did not need to borrow from banks. However, I do not believe that none of the purchasers of luxury properties borrow from banks. Some buyers do not approach banks for mortgages because they still have time before completing the transactions, or because they do not intend to hold the flats for a long time. I also do not believe that the markets for small and medium-sized residential flats could have become so active without abundant credit from banks. I therefore believe that the prudential measures that we have taken and good risk management by banks will help stop asset-price bubbles from forming. 10. While banks will help to control the risks, members of the public and corporations in Hong Kong also need to be more alert. They should consider what they can afford and not borrow too much at a time when interest rates are so low to avoid getting into financial difficulties when interest rates rise again. But I can see that this is not easy. As hot money continues to flow into Hong Kong, it pushes the market higher. If this continues, people may get into a mistaken mindset that the market can only go up and overlook the risk that capital and hot would might one day reverse course without warning. 11. Finally, I would like to share with you an article I read last week.
For the ECB, conditionality is key in order to ensure long-term sustainability of the fiscal, structural and macroeconomic adjustment path and to minimize concerns of moral hazard. Let me elaborate on the main elements of the Outright Monetary Transactions programme. •  The programme has been designed to ensure full compatibility with European law, and in particular with the prohibition of monetary financing. The Programme will operate exclusively on the secondary bond markets and the ECB’s primary mandate to ensure price stability over the medium-term remains entirely untouched. To ensure transparency, the aggregate OMT holdings and their market values will be published on a weekly basis and the average maturity together with the country breakdown of OMT holdings will be published on a monthly basis. On a personal note I would like to add that I am convinced that central banks more generally should further increase transparency of their actions and decisions as a means to enhance credibility and confidence. 4  BIS central bankers’ speeches  •  In order to be effective, the Programme will only operate if a country first adheres to the strict and effective conditionality of an EFSF or ESM macroeconomic adjustment or a precautionary programme and provided that they include the possibility of EFSF/ESM primary market purchases. The ECB may subsequently intervene in bond markets. I say may, because monetary policy remains fully independent and the Governing Council decides independently when to activate the OMT, entirely on the basis of monetary policy considerations.

•  To avoid possible issues related to a preferred creditor status, securities bought under the OMT will accept the same treatment (pari pasu) as purchases by private or other creditors, in accordance with the terms of such bonds. This ensures that any interventions via the OMT do not impinge on the status of private investors. The aim of the programme is to accompany countries and their sovereign to regain stable access to capital markets. •  The programme focuses mainly on the shorter end of the yield curve and in particular on sovereign bonds with a maturity between one and three years. Steering short-term market rates falls squarely into the realm of monetary policy. The interventions address disorderly market conditions and are aimed at reducing excessive market volatility. •  The Governing Council will monitor the conditions for interventions based on a large set of indicators and will assess their effectiveness to decide on the continuation of interventions. I am convinced that the new elements in sum make the OMT a much better programme than the SMP previously was. This new programme is a clear example of how far the ECB fulfils contemporaneously the role as a stability guardian and as crisis manager. By guarding the stability of the euro in the entire euro area and countering redenomination risks, the ECB plays a central role in managing expectations in the crisis. A question remains: What will be the role of central banks after the crisis?
And in highly competitive goods and services markets, consumers’ benefits show up in the form of lower prices, rather than entirely in higher pay, with important, not yet fully understood, implications for the distribution of benefits in our economy. Let us not forget the financial and corporate side of this picture as well. There is no doubt that the banking system in the United States has been far stronger in the 1990s than it was in the previous two decades. At the same time, capital markets have deepened significantly. Expanded equity markets have served as important sources of finance for new businesses, while venture capital markets have provided increased access to risk capital. By some measures, new financing from these and related markets has tripled the flow of new equity capital to business in the last five years. Also important has been the increased liquidity of financial assets. Today, asset portfolios of loans and credit cards are easily transferable through securitization or outright sale. As a result, the corporate sector, too, has witnessed significant change over this past decade, with the formation of many new businesses and the transformation of many old ones. Many of the household names today were formed sometime in the last 25 years, while a number of the corporate giants of 25 years ago still in operation today have changed dramatically. To remain competitive, many have had to shed some business lines that no longer fit their overall strategies and to invest in new lines.

This past year, many countries in Latin America - other than the major oil exporters - faced the further shock of a worsening in their terms of trade, as commodity prices declined in the wake of the crises in Asia and Russia. However, a number of countries in Latin America have begun to see a resurgence of growth, following sharp falloffs in 1998. As we look ahead to the next decade, I am convinced that many of the developments we have witnessed over this past decade have greatly widened the opportunities for strong growth in the years ahead. Inflation in the global economy appears subdued, fiscal deficits have been widely reduced - and we have gained a much better understanding of how solid, non-inflationary growth can be achieved. The economic and financial crises of the 1990s, while having very adverse macroeconomic implications for the countries involved, nonetheless have reinforced the importance of sound monetary and fiscal policies for all countries and the desirability of market reforms. In addition, these crises have laid the foundation for renewed attention to structural reforms for the banking and corporate sectors as well as to the need for strengthened regulatory and supervisory measures. The challenge going forward will be to execute the necessary strategies to realize these goals. When economic times are reasonably favorable, as they are now, the risk is that complacency sets in and the  BIS Review 29/2000  6  steps needed to address the more deeply rooted structural problems are harder to take.
All else equal and given that such a depreciation were to be permanent, the stimulus to the Swedish economy would be fully equal to the effect on the United States economy of the Federal Reserve’s interest rate cuts this spring. Against that background it is accordingly difficult to claim that aggregate monetary conditions in Sweden have become tighter, even though the Riksbank raised the repo rate last December and, most recently, at the beginning of July. I should point out here that it is not the krona’s current value that features in the Riksbank’s overall inflation forecast and monetary policy. What we use instead, as described in our Inflation Report, is an assessment of the krona’s future path. The krona’s future path is invariably a major factor behind the Riksbank’s inflation forecast. And it is the inflation forecast that forms the foundation for monetary policy. Thus, the development of the exchange rate, demand, inflation expectations and so on all affect the interest rate decision indirectly via the inflation forecast. It is never a simple matter to determine the path for the exchange rate in the coming one to two years that ought to be used in the assessment of inflation. But as long as all reasonable assessments point to the Swedish economy being in good shape, in the long term that should also motivate an exchange rate that is considerably stronger than we have seen in the past year.

One alternative might be to act in relation to a shorter time horizon, which would oblige us to adjust the interest rate more markedly as well as more frequently. Both I and many others believe that would be bad for output and employment. As we all know, assessing the future is difficult and the predictions can almost always be questioned and debated. Interest rate decisions by the Riksbank’s Executive Board are preceded by extensive discussions and our opinions sometimes differ. Disagreements are obviously not intrinsically desirable but when a group of people have to decide about complex matters, they are liable to reach different conclusions at times. That happens in business and it also applies to economic policy. The difference is that the Riksbank is an open institution, which means that our task-masters - ultimately the Swedish nation - can, from the minutes of our meetings, see the basis for a decision, the preceding discussion and the positions Board members have taken. I see that as basically an advantage for people’s confidence in Sweden’s monetary policy. Having said that, I also want to underscore the broad agreement among members of the Executive Board as to the fundamental framework for our efforts. It is important to bear that in mind. After these preliminary remarks, I shall now turn to developments in the Swedish economy in recent years. Sweden’s rapid economic expansion has slowed Economic growth in Sweden has been strong for a number of years. And although demand has risen rapidly, inflation has been low.