samchain/econo-pairs-v1 huggingface dataset:
Combined with high productivity growth, this has resulted in high corporate earnings and solid growth in employment. At the same time, wage-earners share of corporate value added has been reduced, from around 75 per cent at the end of the 1980s to 70 per cent at the end of the 1990s, and now  BIS Review 121/2007  1  stands at below 65 per cent. Solid productivity growth and high prices for export goods and deliveries to the petroleum sector have contributed to the reduction in the wage share over the past few years. The ample supply of labour has probably had a dampening effect on wage growth. Increased globalisation may have provided greater opportunities for Norwegian enterprises to relocate production to other countries if labour costs become too high. This probably places some restraint on wage demands among workers in sectors where enterprises have such opportunities. Historically, a high wage share has tended to be accompanied by low unemployment. Developments in recent years have provided the basis for strong growth in employment while the wage share has fallen. Is it possible to sustain the combination of low unemployment and a low wage share? First, it partly depends on whether the positive supply-side conditions are sustained. There is probably symmetry here. Should the terms of trade deteriorate, productivity growth slacken and foreign workers return to their home country, the wage share will increase, profits fall and unemployment increase. There is now a prospect of slower global growth.

But this does not mean that there are no important tasks for the Banco de España – or other participating countries’ national supervisors – to perform in the SSM, in addition to the functions that remain intact as they are not assumed – or are assumed only partially or in exceptional circumstances – by the SSM. In recent months there has been talk of the Banco de España becoming devoid of its powers. This reflects a lack of knowledge or misunderstanding of how the SSM is organised and how it will operate and is reminiscent, in a sense, of the talk afoot when Monetary Union came into being and the ECB assumed responsibility for the main monetary policy decisions. The model then adopted entailed full decentralisation of monetary policy implementation. This meant that it relied on the national central banks for its implementation (in fact, credit and deposit institutions have no direct operational relationship with the ECB) and that in practice, although the ECB assumed decision-making powers, there was no decrease in either the workload or the staffing needs of the national central banks. BIS central bankers’ speeches  3  Albeit for different reasons, the start-up of the SSM is expected to have a similar impact on workload and staffing needs at the Banco de España and at the other national supervisory authorities. *** In any event, the creation of the SSM poses an organisational challenge for the national authorities.
Some years ago we published estimates of the exchange rate in this equilibrium; we also indicated an interval for the real TCW exchange rate index that has subsequently been cited by many journalists and market players. Estimates of that type are not, however, a direct guide to the krona exchange rate that would be appropriate for ERM2 membership. Other factors that have to be considered include the economic situation in Sweden and the rest of the world. Moreover, the estimates are expressed in terms of the TCW index, which covers all the rates for Sweden’s foreign trade, not just the euro area. The assessment must also allow for the fact that, at least in the coming years, the Swedish economy will not be in long-term equilibrium, which implies both internal and external balance. It should also be borne in mind that however sophisticated, calculations of this type do not yield precise results. In recent months the TCW index has fluctuated between 124 and 125. This is some way from the estimated long-term equilibrium range. The main conclusion from our earlier studies—that in the longer run it is reasonable to expect the krona to strengthen—still holds. But it does seem reasonable to count on this being a gradual process that emerges as the economy approaches a situation with both internal and external balance. On various occasions in recent years it has turned out that we were over-optimistic about the adjustment’s future rate.

Since its introduction in 1993, however, the inflation target has proved to be a good compass for achieving and maintaining price stability. Confidence in the monetary policy regime has gradually grown and now seems to be firm. Inflation and inflation expectations are low. Since the cyclical upturn in the summer of 1993, annual GDP growth has averaged almost 3 per cent, government finances have been rapidly consolidated and Sweden has begun to repay external debt. Important forecasting variable During lengthy periods of financial unrest and problems with confidence in Sweden’s economy the Riksbank judged that the krona was undervalued. At times, moreover, the exchange rate fluctuations have been relatively marked, even after it seemed that economic policy’s credibility had been established. In the period since the fixed exchange rate was abandoned the Riksbank has not targeted the exchange rate. For monetary policy, the primary consideration since 1992 has been the picture of inflation prospects in relation to the targeted rate of 2 per cent. But the exchange rate is still one important factor in the Riksbank’s assessment of inflation. An exchange rate movement that is judged to have consequences for inflation prospects will accordingly influence the formation of monetary policy, ultimately the level at which the Riksbank sets the repo rate. The exchange rate normally affects inflation through import prices as well as via foreign trade and resource utilisation. All else equal, a weak exchange rate will lead in theory to higher import prices and thereby to higher consumer prices.
1  Chart 1 shows the “fever curve” of the money market, i.e. the difference between the three-month Libor and the three-month (T)OIS rate (tom-next/overnight indexed swap). This difference reflects the credit and liquidity risk premium on unsecured money market trades. It is a barometer of the health of the money market and, in the broader sense, also for that of the financial markets in general. 2  The five crises in the comparison are the stock market crash of 1929, the oil crisis of 1973, Black Monday in 1987, the bursting of the IT bubble in 2000, and the current crisis. In each case, we look at price performance in and around the index’s highest recorded level prior to the crisis, which does not necessarily coincide with the onset of the turmoil. The highest levels were reached on 3 September 1929 (Black Tuesday was on 29 October 1929), on 11 January 1973 (oil crisis), on 25 August 1987 (Black Monday was on 19 October 1987), on 14 January 2000 (IT bubble), and on 9 October 2007. 3  For annual data and the Case-Shiller Composite 20 Index, cf. Robert J. Shiller, Irrational Exuberance (2006, 2nd edition). BIS Review 157/2008  1  These financial losses alone will continue to have a major impact on the real economy for some time to come, owing to the fact that their full effect is not generally felt immediately. Despite the historic disruptions in the financial markets, this is not the 1930s.

Despite the calming in the money markets, the situation in the stock and credit markets continued to worsen as a result of the rapid deterioration in economic conditions. I would like to illustrate the unique nature of the current situation with a comparison of the Dow Jones Industrial Average from five stock market crises (cf. chart 2). 2 Price declines this time round are significantly steeper than those in 2000 and 1973 and not at all comparable with 1987, when the stock markets recovered very quickly. Measured by the extent of the Dow Jones losses, the current crisis can only be compared to that of 1929. Although the financial losses suffered this time have probably already far exceeded those of 1929. The reason for this is the considerably higher market capitalisation of the stock markets, as measured by gross domestic product (GDP). What is more, the losses suffered today are not merely limited to the stock markets, they also affect practically every other type of asset, of which there are significantly more nowadays than back then. Prices have plummeted across the board, from corporate bonds to structured products, from raw materials and emerging market currencies to real estate investments. While US property prices dropped by 2% in 1929 and 4% in 1930, they are currently falling at a rate of 17%. 3 Never before have so many assets been wiped out worldwide in the space of a few months as they were this year.
It is encouraging that credit flows are no longer contracting because households’ renewed demand for credit has no doubt supported some of the recent rise in consumer spending. Trends in household debt in the region One key question we’ll address today is how this process is playing out for households in our region. In general, our region has fared well in comparison to the nation as a whole. Following the three phases of the cycle that I noted for the nation, I will consider three questions:   How much debt did our households take on during the run-up?   How much deleveraging has occurred throughout the region during the crisis?   Are we beginning our convalescence – have households started to increase borrowing again, and what signs of stress remain? One reason that households in our region have weathered this credit cycle relatively well is that debt levels are lower relative to income and this debt rose more modestly in the run-up to recession than in the nation as a whole. Using the debt-to-income ratio to help us make meaningful comparisons across different geographies, debt levels are particularly low in upstate New York and New York City. Three key exceptions to this generalization are Long Island, Edison, New Jersey and Puerto Rico, where household debt-to-income ratios have risen to levels above the U.S. average.

Public authorities may find it virtually impossible to predict or avoid shocks completely; however, both public authorities and the private sector may minimise the effects of these shocks through structural reforms aimed at creating productive and flexible structures, and preserving balance sheet stability. Public authorities and the private sector should be aware of the fact that long-term benefits from reforms exceed their short-term costs. Third, financial integration provides an additional channel of exposures to foreign shocks, whether in the form of global financial crisis or volatility in the regulatory framework. Overall, financial integration has been and remains a positive factor for development. In the case of Albania, it brings in financial capital and managerial know-how, with a series of positive effects on the Albanian economy, spearheading the economic and political integration of the country. Yet, integration requires fostering cooperation and exchanging information with our international partners and counterpart institutions. Lastly, the monetary and financial stability of the country should not be seen as an exclusive responsibility of the central bank, notwithstanding its primary role in it. It requires the contribution and cooperation of all state authorities. Dear ladies and gentlemen, The Albanian economy has solid premises for continuing and even accelerating the pace of growth. Strengthened financial stability, coupled with prudent monetary policies, offers additional guarantees for its sustainability. However, let me point out that many challenges lie ahead of us.
The public must therefore understand the central bank’s intentions in interest-rate setting. Transparency regarding Norges Bank’s monetary policy assessments improves the predictability and effectiveness of monetary policy. In recent years, we have endeavoured to facilitate the public understanding of our actions. The background material for the Executive Board’s monetary policy meetings is published and the assessments underlying interest rate decisions are explained. When I addressed this assembly in Sanderstølen last year, Norges Bank had just started publishing its own interest rate forecast. From using technical assumptions or others’ assessments, we have now taken ownership of the interest rate path in our projections. In the Inflation Report, Norges Bank publishes the interest rate path that in the Bank’s view provides a reasonable trade-off between stabilising inflation at target and stabilising developments in output and employment. So far, the experience of publishing our own interest rate forecasts has been positive. It seems that most economic agents have understood the content of the forecasts. At the same time, I want to stress the uncertainty surrounding the interest rate path, which is why we present fan charts with uncertainty intervals around the forecasts. In addition, the Inflation Report contains several different sensitivity analyses to illustrate alternative interest rate paths that may come about should economic developments deviate from the baseline scenario. At the same time, we present "interest rate accounts" where we explain any changes in the interest rate path since the previous Report.

The aim of preventing inflation expectations from becoming entrenched markedly below target was one of the main reasons for reducing the key policy rate to a very low level when inflation fell and approached zero in 2003 and 2004, at a time when there was also spare capacity in the Norwegian economy. We indicated that the interest rate would remain low until we saw clear signs of rising inflation. Since summer 2003, the Norwegian economy has been in a clear upswing. Low interest rates, high oil prices and a favourable global environment have been important driving forces. Growth is strong in most industries, and profitability in the business sector is solid. Underlying inflation is still considerably lower than the inflation target. However, several factors point to higher inflation further ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy. Employment is  BIS Review 10/2007  1  rising rapidly and unemployment has fallen markedly. There are signs of higher wage growth and expectations of rising inflation. We are now normalising the interest rate gradually. Since summer 2005, the key rate has been increased by 2.0 percentage points and there are prospects of further interest rate hikes. The shortest money market rates are determined by the central bank via the key policy rate. But private-sector consumption and investment decisions depend more on expectations regarding future developments in the key rate. To be successful, monetary policy must be able to influence these expectations.
The correlation between the two series was a remarkable 0.85 during the period 2005 to 2011. 2 / 11  BIS central bankers' speeches  Admittedly, academics typically take this correlation much less seriously than practitioners. It is a good habit of academics to dismiss contemporaneous correlations between two variables as spurious. If anything, standard theory – also known as uncovered interest parity (UIP) – predicts a correlation between today’s interest rate differentials and tomorrow’s exchange rate changes, thereby discrediting any perceived contemporaneous causality. Other approaches are less dismissive, however. The “asset market approach” to exchange rates, for example – which, in essence, is an alternative representation of the UIP – posits that, as an asset price, exchange rates should fully reflect today’s expectations about the future, just as equity prices reflect the expected discounted stream of future earnings and other relevant information.5 The implication is that the current level of the exchange rate should be a function of the average of current and future expected short-term interest rates. And because monetary policy, away from the zero lower bound, predominantly sends signals about the current level of central bank interest rates, and because the term premium – the additional return that investors demand for the risks incurred by not simply rolling over a series of short-term bonds – was typically contained at shorter horizons, it is not surprising to see a strong correlation between short-term interest rates and the exchange rate.

So, what could have happened is that market participants, trusting central banks’ forward guidance that policy rates would stay at very low levels for an extended period, were increasingly pricing exchange rates on the basis of information about how policy would evolve in the more distant future. That is, with short-term rates broadly stable, the weight investors attached to the 8 4 / 11  BIS central bankers' speeches  expected future path mechanically increased – just as theory would predict.8 Term structure models can therefore provide compelling evidence that exchange rates remain deeply connected to monetary policy also when interest rates are at, or close to, the effective lower bound, even if interest rate differentials per se suggest a structural break in the relationship. Asset purchases and exchange rates But the right-hand chart also suggests that this is not the full story. A clear break emerged in late 2013. And that break is likely related to the second policy instrument I mentioned before, namely asset purchases. Although asset purchases, by removing duration risk from the market, act primarily on the term premium, they also entail a strong signalling channel, in particular at, or close to, turning points. For example, the Federal Reserve’s decision to start tapering in December 2013 triggered an appreciable increase in future expected short-term rates. You can see on the right-hand side that the ten-year expectations component differential vis-à-vis the euro area widened by more than 50 basis points in just a few months.
Svante Öberg: My views on the Riksbank and financial stability Speech by Mr Svante Öberg, First Deputy Governor of the Sveriges Riksbank, at a meeting with the Swedish Bankers’ Association, Stockholm, 7 June 2011. *  *  *  My term of office as Deputy Governor of the Riksbank is drawing to a close and I have announced that I will not be available for a new period of office. After almost six years on the Executive Board of the Riksbank, it feels natural for me to now reflect on the experiences we have had and what these may mean for the future. Earlier in the spring, I presented my view of the Riksbank and monetary policy. And now it is the turn of our other important main task, namely financial stability. In particular, there are three issues I would like to argue for:   The Riksbank and Finansinspektionen (the Swedish Financial Supervisory Authority) should be merged    The Governor’s role should be strengthened    The Riksbank should have a sufficient foreign currency reserve. I will begin my speech by looking back on the years prior to the most recent financial crisis, the risks we saw – and the ones we didn’t see. I will continue by describing the financial crisis and the measures we adopted during the crisis. I will then address the future and the work that is underway as regards reforming the framework of the financial sector.

This should include “an IMF standing liquidity facility.’’ The global financial safety net is the best insurance we can get against the risks created by economic divergence and it comes at a limited cost. ** So, in conclusion, we as central bankers should be predictable without being pre-committed. In other words, we should give clarity without pretending to certainty. Voltaire summed this up nicely in 1770: “Doubt is an uncomfortable condition, but certainty is a ridiculous one.”4 In these times of doubt, the Governing Council of the ECB is committed to give as much clarity as possible; clarity, not certainty, which is neither possible nor desirable. Thank you for your attention. 1 Brainard, W. (1967), « Uncertainty and the effectiveness of policy » the American Economic Review, Vol. 57, No. 2, Papers and Proceedings of the Seventy-ninth Annual Meeting of the American Economic Association, May, pp. 411–425. 2 Blinder, A. (1999), Central Banking in Theory and Practice, the Lionel Robbins lectures, MIT Press, Cambridge  Massachusetts. 3 Rey, H. (2013) “Dilemma not Trilemma: The global financial cycle and monetary policy independence”, Jackson  Hole conference proceedings, Kansas City Fed. 4 Letter to Frederick William, Prince of Prussia (28 November 1770). 3/3  BIS central bankers' speeches
Between 1975 and 1995, Swedish inflation averaged 8 per cent a year. Real wages rose by only 0.5 per cent a year. Swedish companies’ competitiveness deteriorated and industrial production dropped. Sweden slipped from 4th place in the OECD’s standard-of-living league to 18th place – below the average for OECD countries. We became a relatively poor country in Europe and the industrialised world. Meanwhile, deregulation in the credit market during the 1980s resulted in a sharp expansion in credit, with an accumulation of debt among the general public as a consequence. Demand increased but supply was weak and productivity growth low. The economy overheated, inflation picked up and competitiveness was eroded. In 1990, the international economy began to weaken and prices of assets and property fell. The economic climate deteriorated dramatically and eventually the banking crisis hit the country, with large loan losses as a result. The Riksbank defended the fixed krona exchange rate to the very last, but after large currency flows and extreme rises in interest rates the fixed exchange rate was abandoned on 19 November 1992. The outcome of the performance during the 1970s and 1980s was that we slipped down the standardof-living league, suffered mass unemployment and saw a drop in GDP of 4-5 per cent. It was at this juncture that an explicit inflation target was introduced. The depreciation of the krona in 1992-93 of almost thirty per cent gave the manufacturing industry a powerful boost.

Now, if you read page C3 of today’s Wall Street Journal, specifically the article titled “Watchdog Warns of Risks in Markets” about the risks of a repeat of the bond market turmoil of October and concerns about market stability as seen through the eyes of the Office of  1  The FOMC’s “Policy Normalization Principles and Plans” released on Sept. 17 is available at www.federalreserve.gov/newsevents/press/monetary/20140917c.htm. 2  Over the past 15 years, the U.S. long rate has averaged about 40 basis points higher than the German long rate. Since January 2013, the yield spread has widened by 110 basis points to about 1.50 percent. Over the same period, German 10-year inflation expectations have dropped from 1.9 percent to 1.0 percent, or 90 basis points. U.S. 10-year CPI inflation expectations have dropped from 2.3 percent to 2.2 percent – just 10 basis points. So it is worth noting that the drop in German inflation expectations relative to U.S. expectations can account for most of the widening of the yield spread between these two sovereigns. For investors who measure performance in terms of nominal returns or returns against nominal indexes, however, the currently widened spread is relatively attractive. BIS central bankers’ speeches  1  Financial Research (a bureaucracy of some 225 people and growing, created by the DoddFrank law), you would have noted the following sentences: “A reduction in securities that are available to lend against in financial markets – such as Treasury bonds and asset-backed securities – also is fueling...volatility.