samchain/econo-pairs-v1 huggingface dataset:
Inflation expectations may be sensitive to a large but temporary shock that moved inflation outside the range within which it has remained for some years. With their belief in stability jolted, households’ inflation expectations might move by much more than was justified by the temporary nature of the shock. That would make it more difficult for the central bank to bring inflation back to target. The moral of this particular story is that it may be risky to infer from the observation that inflation expectations are stable that all is well. There will be times when large and persistent shocks occur, and it would be unwise to count on inflation expectations remaining stable when actual inflation starts to deviate substantially from its recent range. So those are the three lessons that I have learnt from Alan: (i) a recognition that economics is not a set of doctrines but a way of thinking; (ii) the importance of using qualitative and quantitative information from a range of sources; (iii) there are a small number of fundamental objectives that are crucial and which we can judge by the Greenspan yardstick of whether we have freed businesses and households from the burden of expending resources to deal with unnecessary policy volatility. Alan’s departure from the central banking scene will deprive us of a source of wisdom, inspiration and leadership. To be sure, Alan’s words, whether spoken or written, will surely still reach us from the sidelines.

In addition, a large number of residents, including myself, commute each day into the city. A smaller but still sizeable number of New Yorkers commute into this state. Now, how did the state fare during the downturn and how is the recovery proceeding? As I mentioned, the New York Fed produces indexes of economic activity to help monitor the  BIS central bankers’ speeches  3  performance of the region.1 Based on our index, the downturn in activity in New Jersey began about the same time as the Great Recession was beginning nationwide – that is, around December 2007. While activity in the state is no longer declining, and there has been a slight pickup this year in the level of activity, to date there is still no sign that a strong recovery has taken hold. Quite frankly, this modest recovery in New Jersey contrasts with the relatively sturdy recovery in activity in New York City over the past 18 months. Employment in our region also declined substantially during the Great Recession. Job losses in New Jersey totaled about 250,000 – on par with the roughly 6 percent loss nationwide. The pattern of job losses here in northern New Jersey was very similar. In New York City, job losses were also large but somewhat less severe, with employment in the city down a little over 4 percent. The jobs recovery in New Jersey to date has been sluggish.
In the end, disorderly liquidation looks to have left unsecured creditors in the holding company with a recovery of around 20 cents on the dollar. The last resort, if no white knight can be persuaded to come forward and if the contagion caused by administration was simply too dangerous, was to use public funds to attempt to recapitalise and resurrect a failing bank. Although it was the last resort, it was also probably the most common. For the UK, this proved to be the only option available for what had, before the crisis, been three of largest five UK lenders. Given these banks accounted for some 40% of lending to the UK economy – and scarred by the chaos in the aftermath of Lehman – the government  2  BIS central bankers’ speeches  was left with little option but to make a huge £ injection of funds to shore their capital position. The intervention was successful in stabilising the situation but UK taxpayers are still counting the cost. Today, the government’s stake in RBS, equivalent to economic ownership of a little over 80% of the group, is worth around £ a loss of over 25% on the funds injected. The UK was not alone. The US injected over $ of preferred stock into financial institutions, including a number of the largest firms. On the continent, the three Benelux countries injected € in a part-Nationalisation of Fortis; France, Belgium and Luxembourg injected € of capital into Dexia.

Indeed, credit rating agencies specifically identified a ‘public support uplift’ in their ratings. Nor was the reluctance of authorities to put banks into administration surprising. Administration results in a poorer and potentially disruptive outcome for continuity of functions critical to the economy. Where the bank is large and complex, it can be very difficult to split up the constituent parts. And the effects of putting all or some of the bank in to administration can spill-over to hit the financial system and the wider economy. Nowhere was failure more disruptive than for the liquidation of Lehman Brothers, where the FDIC lacked the requisite powers to resolve the firm in an orderly fashion. The process was disorderly, time consuming and expensive. And it was very contagious. It triggered the worst phase of the crisis. In the weeks following the failure, Reserve Primary Fund broke the buck, sparking a run on the US money market fund industry. More than five years on, the liquidation is still not yet fully complete. Fees paid to the administrators have, so far, totalled more than $ The sheer size and complexity of Lehman’s derivative book made it very difficult to wind-down. The FDIC estimates that, had a legal framework existed to put the firm through a resolution and receivership process, a quick resolution could have recovered far more value for unsecured creditors and, importantly, limited contagion to short term commercial paper and funding markets.
And the most recent output data and business surveys suggest that we are likely to see positive growth in the second half of 2009. These indicators have prompted numerous headlines declaring an end to the recession. In a strict, technical sense that may be right – we may be moving into a period in which positive growth is resumed. But I would caution against drawing too much comfort from those headlines. Even if output does expand in the second half of this year, for many families and businesses it may still feel like we are in the economic doldrums. Unemployment is likely to continue rising for a period and firms will still face sluggish demand. The recovery may be slow and protracted. This caution is often characterised as the Bank being gloomy. But I fear that misses the point. Let me be clear, compared with the situation we faced only six or nine months ago, the economic outlook has improved significantly. Output is no longer in free fall, the banking system has stabilised, confidence levels have improved, and the risk of a really bad economic depression has receded. To repeat, the economy appears to have turned an important corner on the road to recovery. But we are only just starting along that road. The level of national output is estimated to have fallen by around 5.5% over the past year – the largest four-quarter fall experienced in the post-war period. Employment has also fallen substantially.

The market value of households’ financial and housing assets has fallen by over 10% over the past two years. Does this mean that there is some form of hole in households’ balance sheets that will weigh on the recovery as they seek to repair it? 2  This increase reflects purchases of assets. It does not include the returns from these investments. BIS Review 114/2009  3  Any real or perceived need for households to rebuild their balance sheets may play an active role in determining their levels of spending. 3 For example, the cost of financing debt and the uncertainty about future employment prospects may make households reluctant to exceed a certain level of net borrowing. In this case, the deterioration in the financial position of some households may cause them to spend less in order to repay debt or increase savings. The “payback period” I mentioned earlier. This possibility has focussed much recent attention on the state of households’ balance sheets. But standard measures of households’ financial position – such as the ratio of debt to assets – may exaggerate the severity of the problem. That is because these conventional measures suffer from a “missing” asset and a “missing” liability. Let me explain. The “missing” liability is the cost of purchasing a house in the future. This argument is directly related to the redistribution argument I discussed earlier.
Moreover, a few months after the start of the pandemic, a significant number of activities, such as trade and education, had adapted their operation to do business under the newly imposed restrictions, resorting to digital or telematic means. To a large extent, this has been possible thanks to the experience, capacity and buffers accumulated over many years within the framework of economic policy adopted in Chile. Fiscal prudence, expressed in the structural balance rule, generated assets and borrowing capacity to meet spending needs and adopt a countercyclical fiscal policy in the current situation. Monetary policy kept inflation low and expectations firmly anchored, generating space to strongly expand its expansionary stance by using both conventional and unconventional instruments. The rigor of our banking regulation, which is expected to be strengthened with the adoption of Basel III standards, allowed banks to expand their loans and respond to the cash flow difficulties of the companies. The depth of our capital market allowed large companies and the government to continue finding financing in the local bond market. The floating exchange rate continued to act as a buffer against external shocks, and the diversification of foreign trade allowed Chile to benefit from the anticipated recovery of China and other Asian economies. All this has made this crisis different from previous cycles, not only because of the origin and magnitude of the initial shock, but also because of its propagation mechanisms and mitigating factors.

The banks’ provision expenses are at their highest in several years, which could suggest expectations of a deterioration in repayment rates. This contrasts with the drop in the system’s delinquency rate, explained by increased write-offs and restructurings, and a portion of the withdrawn pension savings used for debt payment. As for the cost of bank financing, it remains low in historical perspective for the different users of credit, supported by the expansionary nature of the measures implemented by the CBC. To put it briefly, the economy has improved after the sharp contraction of the second quarter, and measures to support households and credit have succeeded in mitigating the threat posed by the pandemic to the welfare of the population and the solvency of businesses. However, the prolonged sanitary restrictions, the lingering recovery of the most affected areas and the scars left by the crisis have held back the dynamism of the recovery, affecting not only aggregate demand but also the response capacity of supply. Consequently, the fall in activity this year will be sharper than we expected in September. Even so, the economy will continue on a gradual path to recovery in the coming quarters and is still projected to return to September 2019 levels only by 2022. This considers that the pandemic situation will permit maintaining higher levels of mobility than those of mid-2020, and that during 2021 progress will be made in the immunization process, as stated by the government.
In addition, the Act states that the Riksbank, without prejudice to the objective of price stability, shall support general economic policy with a view to achieving sustainable growth and high employment. Furthermore, when the new Act was passed, responsibility for general issues relating to foreign exchange policy was transferred from the Riksbank to the Government It is thus the Government that is to decide on the krona’s relationship to other currencies. This means, for instance, that it is the Government that shall decide whether and when Sweden shall apply for participation in the European exchange rate mechanism, ERM2. However, the Riksbank is responsible for setting the exchange rate at which the linkage shall be made in this case and the width of the band in which the krona shall be allowed to vary. In practice, it is reasonable to assume that this takes place in consultation with the Government, not least because Sweden cannot decide on this unilaterally. Control is exercised in various ways to ensure that monetary policy is conducted in accordance with the law and the intentions of the democratically appointed government authorities. What is involved therefore is not at all complete independence. The Government authorities naturally exercise control of how the Riksbank performs its work. We on the Executive Board of the Bank have also responded to the consequences of this independence by the way in which we have organised the monetary policy decision-making process.

Although there are signs of improvements in the recovery, many economies are still in a weak financial position, and domestic demand is expected to grow at low rates for some time. After years of financial excesses, households in many countries, particularly in the U.S., have accumulated excessive debt. Many advanced economies also have weak fiscal positions, due to fiscal expansions implemented to contain the recession, measures to support the banking sector, or simply the fiscal profligacy that took place prior to the crisis. In particular, the level of government debt in some European countries will require a significant and protracted fiscal consolidation to avoid insolvency. Therefore, the deleveraging process of households and governments implies that domestic demand is unlikely to be an engine of growth. As a consequence of this scenario, the inflationary pressures will be relatively contained. The rise in commodity prices is having effects on headline inflation, but the propagation to other prices will be limited because of a negative output gap. This is in sharp contrast with the situation in emerging market economies (EMEs). Accordingly, monetary policy in advanced economies will remain expansionary, and despite some tightening in the near future, they will still have lower interest rates than those in EMEs, and which will be well below what used to be considered a neutral stance. In contrast, EMEs have been growing strongly, and after suffering moderately from the global crisis, many have already reached levels of full capacity, and some of them may even be overheating (Figure 1).
06.06.2017  Appearance by the Governor before the Senate in relation to the Draft State Budget for 2017 Luis M. Linde Governor  Ladies and gentlemen, In my appearance, which forms part of this Chamber’s discussion and approval of the State budget for 2017, I shall begin by reviewing the current macroeconomic setting and outlook for the Spanish economy. I shall then analyse the main aspects of the State budget for this year, according to the draft Law approved by the Government on 31 March, and the Updated Stability Programme for the period 2017-2020, submitted by the Council of Ministers to the European Commission on 29 April. The external environment of the Spanish economy The current international economic setting is characterised by an increase in uncertainty, chiefly the outcome of the political changes in the past year in the United States and the United Kingdom. However, that does not appear to have exerted a significant influence, so far, on the real economy, or on the financial markets. Both have continued to perform favourably and, despite rising in the final months of 2016, interest rates are holding at stillmoderate levels at all terms. The main exception to this climate of relative stability has been oil prices, which have been highly volatile in recent months. Recent economic developments in the euro area show a firming in the recovery, which is progressively extending to more sectors and countries.

The prolongation of the Spanish economy’s current growth phase over the coming months will essentially be based on the strong pace of expansion of national demand, although the external sector will continue – as seen since 2016 – to maintain its positive contribution. In particular, buoyant employment and the favourable conditions of access to credit are boosting household consumption and the pick-up in spending on residential investment and on equipment. 3/8  In the medium term, there will foreseeably be a gradual convergence towards more moderate growth rates, as a result of the disappearance of certain factors that have contributed to boosting activity. Such factors have been the declines in oil prices, the moderation of financing costs, supported by the ECB’s monetary policy, and the expansionary fiscal policy stance over the two-year period 2015-2016. As in the euro area as a whole, since late last year the year-on-year rate of change of the CPI has been highly volatile; it stood in May at 1.9%, the outcome – as earlier stated – of energy price fluctuations and, also, of the effect of the Easter holiday week in April, given that in 2016 Easter fell in March. These temporary factors will progressively peter out in the coming months, although the average rate for the year is expected to stand at around 2%. In 2018 and 2019, in the absence of further shocks, the rate of increase of the CPI might settle below this reference.
As regards economic developments abroad there are three obvious uncertainty factors that we have considered in conjunction with the most recent monetary policy decisions. The first concerns the effects of the United Kingdom’s withdrawal from the EU – Brexit. As you know, people in the UK voted to leave the EU in a referendum back in June 2016, so this risk has indeed been with us for some time now. And the recent course of events has increased the uncertainty still further. The second risk these past twelve months concerns the trade conflict between the United States and China. Developments seem to have subdued export orders abroad. And recently, growth looks to have slowed in China, which has otherwise provided traction for global growth over a long period. The third risk concerns Italian fiscal policy. The discussion between the EU and the Italian Government about the Italian budget has periodically created unease on the financial markets, even though the most recent course of events is providing some breathing space. As regards the domestic economy, the Riksbank has long since warned about developments on the Swedish housing market, which is the most important domestic factor that could trigger poorer economic development than in our forecast. After having risen sharply over a long period of time, housing prices started to fall quite rapidly last autumn. During the course of 2018, prices have recovered slightly, and our forecast is for them to continue to rise at a modest rate in the coming years.

8 [13]  … but their cashflows are affected more by interest rate adjustments than before Increasingly higher household indebtedness – in combination with a large share of mortgages taken at variable interest rates – has resulted in their cashflows being more affected by rate changes than previously. Traditionally, we tend to talk about the so-called interest rate channel when discussing the effects of monetary policy on household consumption. Simplified somewhat, the interest rate channel implies that it will be more attractive to save than to borrow when the interest rate is raised – and vice versa when the rate is lowered – which affects consumption. Another effect is that when the interest rate is raised, disposable income for savers increases and decreased for borrowers – and vice versa when the rate is lowered – which also affects consumption. This is usually referred to as the cashflow effect of monetary policy. 9 We can understand this effect by looking at how disposable income is defined: Disposable income ≈ wages + transfer payments + interest income + other capital income – interest expenditure – taxes According to the Financial Accounts from Statistics Sweden, households’ debts are approximately twice the size of their interest-bearing assets. Which is why a rate increase has a negative net effect on total disposable household income. This effect has increased as household indebtedness has grown. What then does an increased effect mean in actual monetary terms? We have studied this as well.
The most immediate one is the uncertainty over the outcome of the Brexit vote. Even if we don’t want it, prudence requires that we prepare ourselves for the possibility of a no-deal Brexit, the impact of which would be more significant for the United Kingdom than for the euro area. However, any consequences for financial stability must and can be managed. But there are also considerable uncertainties outside Europe. The US cycle appears to be reaching maturity after an expansionary phase that began in mid-2009, but it is still far too early to worry about a recession. Growth should remain robust at around 2.3% compared with 3% in 2018, although at the expense of an ill-timed fiscal stimulus. There are greater uncertainties overshadowing the Chinese economy. The latest activity indicators have been weak. An escalation in trade tensions could lower Chinese GDP growth by up to 1.5 percentage points6 over a two year horizon. The slowdown could also encourage authorities to stimulate the economy, leading to increases in already high levels of corporate debt (155% of GDP compared with 106% in the euro area)7 and in the risks to financial stability. Our second challenge is impatience. Thirty years ago, independence was conceived as a response to the temptation to make trade-offs between growth and price stability. But the real temptation, which is even stronger today, is to trade off long-term interests in favour of the short term. Financial markets are frequently characterised by short-termism and bouts of extreme volatility.

This possible weakening in the link between wage rises and price rises could be attributable to more structural factors, which are also being discussed in the United States: we shall pay close attention to how data on this issue evolve. 3 - Relentless efforts towards a stronger Europe Monetary policy cannot be the only game in town. I understand and share German concerns on this... and that is why we need to push relentlessly for a strengthening of our Economic Union. Allow me to mention a great Luxembourger, Pierre Werner. At the end of the 1960s, he dared to suggest in his report that the monetary area needed a common budget, that its decisions should be endowed with democratic legitimacy or that unions should be given an active role. In this respect, the advances made by the Eurogroup in December 2018 constitute limited progress that needs to be extended. With regard to the Banking Union, its success will be predicated on the establishment of a solid and effective resolution mechanism, more than on the deposit insurance scheme. We need to pave the way for the backstop to be implemented as soon as possible. Moreover, in the interests of financial stability, we should consider extending the maturities on the credit lines and reach a definitive agreement on how to make emergency decisions. Unfortunately, there was almost no progress at all on the Capital Markets Union in the 4 December agreement.