samchain/econo-pairs-v1 huggingface dataset:
I work in New York and live in New Jersey, where we know a thing or two about fiscal problems. Puerto Rico’s large public debt has the potential to reduce its growth prospects as the world economy recovers. Puerto Rico’s fiscal situation has deteriorated sharply over the last five years as the Commonwealth’s recession has deepened. Throughout this period, public debt has risen quickly as revenues that are sensitive to economic activity – such as income taxes – have declined. But the fiscal problem in Puerto Rico pre-dates the current crisis. Even when the economy was growing, public debt was growing even faster. This structural imbalance is difficult to sustain in the long run, and requires attention if Puerto Rico is to prosper. A critical factor here is ensuring that the Commonwealth’s tax system is designed to generate the revenue required to sustain government operations. Furthermore, any good tax system should satisfy three important criteria: simplicity, fairness and neutrality. The current system suffers from some problems that make it difficult to meet these tests and generate adequate revenue. In particular, high rates are levied on a narrow tax base. One of the key public services funded by these taxes is education. Workers need skills to produce the complicated technological products of the future. There is clear evidence that workers with the sort of flexible thinking skills not easily duplicated by computers have seen their productivity and earnings rise, a trend that is likely to persist in the future.

The U.S. government’s financing of Treasury’s actions required federal debt to rise sharply, and stabilizing the financial system temporarily boosted the size of the Fed’s balance sheet. 2  BIS Review 18/2010  The final numbers aren’t in yet, but it now appears that the downturn in real gross domestic product (GDP) in the United States lasted about a year and a half, much shorter than the typical banking crisis downturn. Peak to trough, output fell about 4 percent, less than half the typical decline seen in past financial crises. While there are still some significant downside risks to the economy, in general, the outlook is improving. Of particular note, the capital markets – except for certain securitization markets – are now generally open for business. In addition, the big banks in the United States have been able to raise a large amount of equity capital to put themselves in a stronger position. I believe that Federal Reserve actions over the last year and a half have contributed very substantially to this improvement. But there still is a lot of work to do. Smaller banks – especially those with large commercial real estate exposures – are under pressure, while households and smaller businesses find that their access to credit is still constrained. Moreover, regulatory reform is essential to prevent this type of financial crisis going forward.
Besides inflation forecasting, the Central Bank publishes a quarterly assessment of the economic and monetary situation and prospects, including a national economic forecast, and their probable impact  BIS Review 8/2003  1  on price developments. If inflation is heading beyond the Bank’s target on a longer-term scenario, the Bank raises its policy interest rate, but cuts it if inflation is heading below the target. In preparing its inflation forecasts and regular assessments of the economic situation and prospects, the Central Bank examines a wide range of indicators. These are both statistical data and information obtained from interviews with representatives of industry, organisations with vested interests, credit institutions and others. The Bank publishes the bulk of its statistical indicators and data on its website. Central Bank decisions are made after in-depth examinations of indicators about economic developments, its assessment of the situation and outlook, the assumptions behind the inflation forecast and the inflation forecast itself. Under the Central Bank Act, the Bank’s Board of Governors have set internal rules on the preparations of, arguments for and presentation of its monetary policy decisions. These rules were formally set in the beginning of 2002 and published in the quarterly Monetary Bulletin. Having said this, it is tempting to try to assess the success of monetary policy implementation after the framework was changed and the new Central Bank Act went into effect in spring 2001.

Joseph Yam: Changes in Asia – a brief look at the dynamics within the region Statement by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, and Alternate Governor for Hong Kong, China in the Asian Development Bank, at the 40th Asian Development Bank Annual Meeting, Kyoto, 6 May 2007. *  *  *  I would like to thank the Government of Japan and the people of Kyoto for their hospitality in hosting this year’s Annual Meeting of the Asian Development Bank (ADB). I would also like to congratulate Mr Kuroda on his re-election as the President of the ADB. This year marks the 40th anniversary of the ADB. Over the past four decades, Asia has achieved remarkable development, particularly in terms of economic growth and the reduction of poverty, and clearly the ADB has contributed significantly to this achievement and has established itself as a regional financial institution of strategic importance. Asia has undergone remarkable changes too over the past four decades and in many ways, in particular in terms of the economic dynamics within the region, and between the region and the rest of the world. Changes have been particularly marked in the past decade or so, under the influence of globalisation and the revolution of information technology. There has, for example, been rapidly increasing trade integration, encouraged obviously by the high degree of freedom in international trade, and consequently increasing economic interdependence within the region. Changes always present new challenges and opportunities.
However, these were not the only reasons why it proved difficult to gain acceptance for a low-inflation policy in Sweden and why the thought of entrusting monetary policy to an independent institution raised doubts. The Keynesian tradition has been extremely strong among Swedish economists and across party lines ever since the 1930s. Therefore, the idea that the state can continuously control or influence the economic situation has probably been more persistent here than elsewhere. Our strong parliamentary tradition, which is based on the idea that all power derives from Parliament, has also played a part. Countries where power is shared more evenly among the political institutions have found it easier to accept the delegation of monetary policy to an independent authority. Having said this, it is worthwhile recalling that there is in fact a completely different Swedish tradition. The policy shift of the early 1990s is in fact a return to a long tradition of price stability that was temporarily interrupted for a few decades. Between 1870 and 1970, the average rate of annual inflation was about 2%. 1  BIS Review 39/2000  Diagram 1.

Before I comment on the significance of board charters in augmenting good corporate governance in the financial sector, I think it is appropriate that I acknowledge the commendable work that has gone into implementing the FSDP through collaborative effort involving government and other institutions. The Government, working with the three financial sector regulatory bodies, namely, the Bank of Zambia, the Pensions & Insurance Authority and the Securities & Exchange Commission has continued to take the lead in implementing various reforms. This effort has been supported by private sector experts and representatives responsible for the technical aspects of implementing the FSDP recommendations.
In addition, it has discontinued its purchases of Swiss franc bonds issued by private sector borrowers. Indeed, movements in the Swiss franc against the euro over the past few months have caused monetary conditions to tighten somewhat. Yet, overall, monetary policy is still expansionary. The three-month Libor remains at a low-water mark of 0.25%, and we continue to supply the banks with generous amounts of liquidity. Let me now turn to the outlook for 2010 and the monetary policy challenges ahead. IV. Outlook for 2010  The global economy has been in a phase of recovery since mid-2009. The SNB expects that this will continue, although the recovery is still exposed to risks and will vary greatly from region to region. BIS Review 59/2010  3  The greatest expansion will be seen in emerging Asia. The entire region will, in particular, benefit from the strong growth in Chinese domestic demand. In the industrialised economies, the recovery is still being driven by the expansionary monetary and fiscal policy measures adopted at the start of the crisis. At the same time, there are a number of factors weighing on growth prospects. High unemployment, growing sovereign debt and the deterioration in household wealth are likely to dampen private consumer spending in many economies. In addition, given the underutilisation of capacity and the tighter lending conditions, corporate investment seems unlikely to stage a strong recovery. Moreover, in a number of countries the situation in the real estate market, and hence the outlook for the construction industry, will remain difficult.

For this reason, it is acting decisively to prevent an excessive appreciation of the Swiss franc. As part of its measures to combat the crisis, the SNB supplied large amounts of liquidity to the banks. Liquidity created via repos and currency swaps is temporary: it flows back automatically when the transactions are not renewed. Since the volume of these transactions has declined sharply over the past few months, the amount of liquidity resulting from repos and swaps has already decreased substantially. The liquidity that we created by purchasing foreign exchange or Swiss franc bonds is, however, of a more permanent nature and must be reabsorbed in good time, to ensure price stability in the medium and long term. The SNB has at its disposal the requisite instruments for rapidly absorbing large amounts of liquidity as and when necessary. Foremost among these are the SNB’s own debt certificates, SNB Bills. We can also use reverse repos. Thus, absorbing excess liquidity is technically not a problem. The challenge lies in selecting the right moment for a normalisation of monetary policy. A major factor in this decision will be the further development of the inflation outlook. The inflation forecast is the main indicator used in monetary policy decision-making by the SNB. The SNB monetary policy strategy does not, however, foresee a mechanical reaction to the forecast on the part of the Governing Board. Aspects such as uncertainty about economic development and the situation on the financial markets are also factored into the monetary policy decision.
But another important aspect to ensure the independence of these institutions is to prevent governments or interest groups affecting such independence. In the specific case of the Banco de España, the respect of the authorities for its independence and reputation is crucial for maintaining confidence in our banking system at home and abroad, and for overcoming the major challenges we currently face. Naturally, this respect for the independence of regulatory and supervisory agencies should unavoidably be accompanied by an obligation on their part to account for the performance of their functions before Parliament. Such accountability to the representatives of the nation should not only be an obligation for these agencies but also their right, since the transparency provided by Parliament is a mainstay for safeguarding the independence of the institution from possible interference by authorities and interest groups. Allow me to thank those here, the Deputy Governor, the Governing Council members and the Directors General, and all the Bank’s staff for their collaboration these past six years. I deeply recognise the competence and dedication with which they discharge their important responsibilities. But I should like to conclude expressing my particular appreciation of those who have participated in the supervisory function of the Banco de España these past years.

This quickly encroaches on what is properly the domain of politics, rather than helping the political system to be consistent in implementing its own plans. A more detailed discussion of fiscal policy boards, with a focus on the board in Sweden, is found in Matsen, Natvik and Torvik (Samfunnsøkonomen no. 2, 2010). 21  The financial crisis has also reminded us of weaknesses in models and methods used in analyses behind the economic policies pursued. We must with humility acknowledge that we understand less about the functioning of the economy than we would have liked. Mervyn King, the Governor of the Bank of England, recently voiced this view in a speech, “Twenty years of inflation targeting”, which he gave on 9 October 2012 at the London School of Economics (see http://www.bankofengland.co.uk/publications/Pages/speeches/2012/606.aspx). Similar reflections have also recently been expressed in an interview with Andrew Haldane, the Executive Director for Financial Stability at the Bank of England, under the title “Our models are no longer working properly” (see http://economicsintelligence.com/2012/10/24/bank-of-englands-haldane-on-the-crisisof-economics-our-models-are-no-longer-working-properly/). 22  In his article, “Time on the Cross: How and Why Not to Choose Between Economics and History” in Pat Hudson (2001), Living Economic and Social History, Glasgow: Economic History Society, pp. 81–85, Marc Flandreau gives a personal and colourful account of how he inadvertently and unwittingly and in the spirit of “having it both ways” became an economic historian, because he refused to choose between economics and history.
It is, I think, a wise strategy to proceed cautiously and to continuously observe what is happening around you in order to decide whether to continue following the chosen path, call a halt or change direction. Strongly driving policy in a particular direction may be a success factor in other policy areas, but for monetary policy it is a case of carefully monitoring the state of the real economy and being constantly prepared to adapt policy so that our predetermined target, the inflation target, is not put at risk. There are no absolutes in monetary policy. If we fail to realise this there is a risk that monetary policy will be subject to sudden and radical changes of direction. 10  The realisation that uncertainty about economic relationships often justifies a more cautious policy goes back to Brainard, W. (1967) “Uncertainty and the Effectiveness of Policy”, American Economic review 57(2), 411-425. 10  BIS central bankers’ speeches

Philipp M Hildebrand: Where is productivity growth in Europe? Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to the Vereinigung Basler Ökonomen, Basel, 28 October 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Since 1996 the E.U. is lagging behind the U.S. in terms of productivity growth. This phenomenon has become more pronounced since 2001. The growth of GDP per work hour in the E.U. between the periods 1990-1995 and 1995-2002 is lower by two percentage points per year. This difference amounts to 2,8 percentage points per year if one compares the periods 1990-1995 and 2000-2005. Differences in GDP measurement account for roughly 0,5 up to a maximum of 1 percentage point of the productivity growth differential. The remaining difference is caused by two factors. On the one hand, total factor productivity growth has accelerated in the U.S. This was made possible by a wideranging restructuring of the U.S. economy which provided an optimal backdrop for the new information and communication technologies. On the other hand, capital deepening in Europe was lessened by employment growth. The productivity of this additional labour input has to be increased through strong educational efforts, open markets and additional investment. Labour market reforms remain indispensable in order to enhance the productivity of all workers. Product market reforms will be crucial in order to unleash the full productivity potential of the new technologies.
The country would then probably also face difficulties in meeting the other Maastricht convergence criteria, further complicating the task of economic management. If the risk of this happening is considered unacceptably large, a slower pace of fiscal consolidation, entailing a smaller risk of slippage, could be chosen. The late adoption of the euro would, however, imply that the enjoyment of the relative benefits would be postponed, and that the country could lose competitiveness if other new member States successfully adopt the euro at an earlier date. In summary, the best case scenario is the one where a relatively fast pace of fiscal consolidation is both planned and achieved. The worst case scenario is the one where fiscal policy fails to deliver on a planned fast process of consolidation. The scenario featuring a slower pace of consolidation can be described as intermediate in terms of its degree of preference. However, this could turn into a worst case scenario if fiscal policy fails to deliver even on a planned slower consolidation process. It is for these reasons that medium-term fiscal planning should be adopted, detailing concrete objectives and measures to be implemented over a number of years. It is equally important that such a programme enjoy the support of the social partners. The consensus-building approach being followed in the MCESD is a welcome, positive development in this regard, one that could facilitate an early adoption of the euro.

The first situation is when the highly leveraged institutions taking very large positions are overwhelmed by market forces. As the case of LTCM has illustrated, highly leveraged positions can pose serious risks to systemic stability even in the large and established markets of the developed economies. As the highly leveraged institutions are, for circumstances they have not factored into their mathematical models, forced to unwind their very large positions, particularly against the background of highly volatile and illiquid market conditions, the credit losses of institutions providing the highly leveraged institutions with funding can be huge. The rapid de-leveraging of large positions by highly leveraged institutions is also highly contagious in that it in turn exacerbates volatility and reduces liquidity not only in the markets concerned, but also in other markets. The rapid de-leveraging of the short yen positions by the hedge funds in October last year is a good example of the volatility that can result. The yen strengthened by 11% to 111 over a couple of days. Such volatility affects the positions of yet other highly leveraged institutions and their counter-parties providing them with credit. The potential for market dislocation and the systemic risks this posed were so serious that, as you all know, last September the Federal Reserve Bank found it necessary to broker an unusual package by a consortium of banks to rescue LTCM. The second situation is when the smaller markets are overwhelmed by the forces of the highly leveraged institutions.
But the maturity mismatches inherent in bank balance sheets makes them susceptible to runs and so to collapse. And their role in the economy’s payments and credit system makes their failure especially costly. In consequence, sound banks have long had access to liquidity from central banks; and they are also compelled by the state to join industry-wide deposit-insurance schemes that mutually guarantee the value of transactions deposits. Those state-sponsored measures reduce the probability of unwarranted failure, but they also increase the private returns to bankers and their shareholders by transferring some risk to the state. The final part of the Contract is, therefore, that banks’ business should be subject to regulation and supervision, so that the state can influence the risks that banking poses to the wider economy. In pretty well every dimension, that Social Contract was found wanting. The regulatory regime was revealed to be riddled with design faults. Supervisors in many countries did not compensate for those regulatory flaws. And they even drifted away from focusing on the soundness of the system as a whole, to a narrower interest in consumer protection: a perverse development as consumers’ most basic financial need is the safety of the banking system. Central banks’ liquidity-insurance facilities were also found in need of running repairs. And in some centres, notably the US, it turned out to be necessary for the monetary authorities to extend liquidity temporarily to non-banks.

Paul Fisher: The outlook for the UK economy Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, to the Cardiff Breakfast Club, Cardiff, 24 May 2013. *  *  *  Introduction It’s nice to be back in Cardiff again. As always, I will be taking the time while here to visit a number of local businesses in an effort to find out what is happening “on the ground” in the Welsh economy. Our network of agents across the UK provide the MPC with valuable intelligence on a continuous basis, but there’s nothing quite like hearing it at first hand for oneself. Recent changes at the Bank of England I’d like to start this morning by outlining some of the recent institutional changes at the Bank of England, which will help shape the policy environment for a generation. First of all, supervision is back! The new Prudential Regulation Authority, a subsidiary and therefore part of the Bank of England, has moved into its new offices at 20 Moorgate, just a two minute walk from the back of Threadneedle Street (or faster on a cold morning!) The move back to the Bank will help us to exploit the synergies between microprudential supervision on the one hand and the markets, economics and financial stability expertise of the wider Bank on the other. But most importantly this is an opportunity to change the way in which banks (and building societies, credit unions, insurers and major investment companies) are supervised.