samchain/econo-pairs-v1 huggingface dataset:
2  BIS Review 38/2005  Inflation rate (year/year)  –  in  %  -1.0  4.2  3.5  2.1  3.3  2.2  Budget deficit (with grants, as a percentage of GDP)  -12.1  -8.2  -7.9  -6.6  -4.9  -4.9  Public debt (as percentage of GDP)  a  69.7  71.3  66.8  65.1  60.7  55.3  External debt (as percentage of GDP)4  a  -32.3  29.4  25.8  23.4  20.7  17.8  Current account (without government transfers, as a percentage of GDP)  -8.5  -7.0  -6.1  -10.2  -8.2  -6.2  Average exchange Lek/USD  rate,  137.7  143.7  143.5  140.1  121.9  102.8  Average exchange Lek/EUR  rate,  147.0  132.6  128.5  132.4  137.5  127.7  Source: INSTAT, Ministry of Finance, Bank of Albania and the IMF estimates. The 2004 data suggest a gradual easing of unemployment rate. Although the demographic changes over the last years make difficult the statistical disclosure of labour forces displacement, according to official data the unemployment rate is estimated to have decreased from 15 percent to 14.6 percent throughout 2004. Fiscal indicators Based on the developments of fiscal indicators, it results that the fiscal policy followed during 2004 has been a prudential policy, which relied upon the Medium-term Budget Program for the period 2004-2006.

As you can imagine, the panel has been a great resource, accessible by staff at all Federal Reserve banks through a fast and easy-to-use interface. It has already been used in several 2  BIS central bankers’ speeches  Federal Reserve Board and Treasury reports, Federal Open Market Committee presentations, speeches, and congressional testimonies, and in about 100 research papers and policy analyses. It also has value for our community outreach, as we can profile specific geographical regions. Particularly impactful have been our releases of the Quarterly Report on Household Debt and Credit, containing a comprehensive summary of households’ access to and use of credit. Several of our research findings have influenced policy debates. For example, an important question regarding recent household deleveraging has been to what extent the decline in aggregate household debt was attributable to delinquent debt charge-offs as opposed to active debt paydowns by consumers. Our research found that while charge-offs played an important role, a huge change in consumer behavior had taken place. While consumers extracted home equity and took on more debt during 2007, they reverted to actively paying down debt during 2009, creating a remarkable $ billion reversal in cash flow available for consumption in just two years. In our most recent report we are seeing signs suggesting that the deleveraging period has reached its end. The availability of borrower-level data has been key to our ability to analyze consumer behavior.
Obviously, it is difficult to decide exactly how much interest rates should be increased in order to ensure that the present surge in the economy does not lead to overheating, particularly since the current monetary policy regime with declared inflation targets has never really been subjected to such a test. We simply do not have any experience to fall back on. However, most people, including the Executive Board of the Riksbank, agree that the current repo rate will have to be raised sooner or later, although opinions differ as to when and how much. Whatever the Riksbank decides to do, the main lesson of the long boom in the USA remains valid: a long period of sound real economic growth is not necessarily the result of any exceptional external events, such as the emergence of a “new economy”. It is just as likely to be the result of a carefully conceived monetary policy which applies an active and sometimes rather forceful policy to make sure BIS Review 128/1999  2  that overheating - and subsequent deep recessions - are avoided. Naturally, a more detailed comparison between the USA and Sweden would have taken into account other differences too, such as the functioning of the labour market. The role of asset prices I should like to devote the rest of my speech to another topical issue in the American debate, and that is the actual and potential role of asset prices in monetary policy.

Since asset prices, as I have already mentioned, affect aggregate demand in the economy, interest rates will be raised when asset prices rise and vice versa. Although we know from experience that there are no guarantees, this is likely for various reasons to have a stabilising effect on asset markets. For one thing, macroeconomic stability in itself has a stabilising effect on financial markets. For another, there is less likelihood of over-reaction, since participants in the financial markets will expect central banks to pursue a policy dictated by their inflation targets. Thirdly, lowering interest rates helps to mitigate the imbalances that may occur as a result of rapid falls in asset prices. In addition, a credible inflation target allows monetary policy more room for manoeuvre when it comes to preventing a financial crisis. However, a monetary policy strategy that waits until the market collapses before responding to changes in asset prices may, at least hypothetically, pose a dilemma. The fact is that we still do not know very much about how the incentives of players in asset markets are affected by such “asymmetrical” action on the part of a central bank, i.e. being largely passive while asset prices are rising and then acting forcefully when they fall. Perhaps the devaluation policy that was pursued in Sweden in the 1970s and 1980s is a relevant parallel in this context. During that period expectations about the rate of inflation were determined by an economic policy which responded to excessive rises in prices and wages by devaluing the krona.
Public authorities and industry professionals need to combine forces and continue looking for ways to redirect French savings. Without necessarily making it an issue in the upcoming electoral debate, the solution could aim to be compatible on three levels: with the low interest rate environment, with the need to better channel resources towards productive investment – and therefore corporate equity – and with the expectations of savers. Prompted by the increase in life expectancies and the need to prepare for retirement, savers are adopting increasingly long-term investment horizons: they are more 2 ACPR, 2015 Annual Report, October 2016. Page 4 sur 7  concerned with the security of their investments than with liquidity. Taking inspiration from the new Euro-croissance policies, it makes sense to offer savers new, complementary forms of saving products that are less liquid and include some form of long-term capital guarantee, and that allow them to take advantage of the higher returns offered by equities over the long run. We also need, at the very least, to avoid any tax distortions that might penalise these products more than liquid and risk-free investments. Given the current low rate environment, the ACPR is taking care to ensure that insurers remain alert to the risks of adverse developments and take appropriate measures to counter them.

Inflation reached the Central Bank’s inflation target towards the end of last year, due to a stronger currency, spare capacity in the economy, and inflation expectations approaching the target. This development is not independent of the monetary policy stance, however, as spare capacity can be associated with a vicious cycle of falling exchange rate and rising inflation expectations if confidence is lacking. Indicators suggest that a weak economic recovery began in the third quarter of 2010, and forecasts assume that it will continue this year. The recovery is still weak, not least given the substantial slack in the economy. Two points of concern in this connection are that business investment is very low in historical context and export growth is rather weak in view of the low real exchange rate and robust recovery of global trade. An important factor here is that Iceland’s major export sectors face capacity constraints; therefore, exports cannot be increased to any significant degree without further investment. Growth is strong in export sectors without such limits, but their share in total exports is still small. The next crossroads stems from the vast improvement in Iceland’s foreign liquidity and the build-up of the foreign exchange reserves. As of the end of February, the reserves totalled 719 b.kr., or 46% of GDP. Iceland’s foreign reserves have never been larger as a share of GDP, not even at the end of World War II.
Mr. Heikensten considers inflation and the interest rate in Sweden Speech given by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikensten, at the Sweden Financial Forum, Örebro, on 15/10/97. What I have to say is based in the main on the Riksbank’s latest inflation report, which was published less than a month ago. In some respects, I shall be developing what we said there about the outlook for inflation, though our assessment of the situation is essentially unchanged. I shall begin, however, with some remarks about why monetary policy is constructed as it is, with the objective of safeguarding the value of money. 1. Monetary policy’s foundations Experience advocates a stable environment The reason why the Riksbank’s objective is to safeguard the value of money is basically simple: low, stable inflation contributes to a good environment for the growth of production and employment. Support for this view is readily found in the pattern of economic developments in different industrialised countries. In those countries where inflation has been allowed to accelerate, growth has normally been weaker and more erratic. We have seen this in Sweden. In the first two-to-three post-war decades Swedish economic policy was characterised by stable rules and inflation was low. Economic growth in those years was good and new jobs were created to a greater extent than in the past two decades, when inflation shot up and there was a series of devaluation cycles. There is really nothing odd about this.

As there is a time lag of 1 to 2 years before an interest rate adjustment has its full effect on the rate of price increases, the Riksbank has to work with forecast inflation. When we have reason to fear that inflation is rising above the targeted rate, it will soon be time to raise the instrumental rate and vice versa. Assessments of future inflation are presented by the Riksbank four times a year in the series of inflation reports. The assessments are published as a guide to economic agents in their own deliberations about what the future level of interest rates is likely to be. The reports also provide a basis for the discussion of monetary policy’s construction that the Riksbank is interested in encouraging. Simplifying somewhat, inflation is determined by two factors: the situation concerning demand and supply and economic agents’ expectations of future inflation. The first factor is fairly straightforward; when demand tends to exceed what the economy is capable of producing, the resultant shortages and bottlenecks will normally push prices and wages up. The part played by expectations may be less evident. If firms and employees expect increased inflation, they will tend to raise prices and demand higher wages, respectively. This may be sufficient to start and continue an inflationary process. Another factor of importance for inflation is the value of the krona, both because it directly affects pricing and demand and because it can serve as an indication of expected inflation. 2.
The IMF has been of the view, however, that CFMs of this type should not be applied pre-emptively. This position has not been adequately argued, in my opinion. In this context, it should be borne in mind that the Fund’s advice to Iceland on CFMs is based on a compromise by the IMF Executive Board in connection with the Fund’s Institutional View (IV) on this topic. This compromise was difficult and is perhaps somewhat fragile, and therefore, the text of the IV may not be deviated from to any marked degree. When the report from IMF staff was discussed by the Executive Board last year, however, Iceland received considerable support with the application of the CFM. Presumably, many saw that the CFM was not being substituted for appropriate conventional economic policy (which the IV recommends against) but the reverse: it was being used to make conventional economic policy possible. The IMF does not have jurisdiction in this matter in Iceland; it can only advise. That is not the case with the EEA and the OECD, where we still have a special exemption from unrestricted movement of capital, and the question of whether those institutions would view the CFM as a macroprudential tool or a capital account restriction has not yet been put to the test. The bottom line in all of this is that here in Iceland, we need to formulate an independent position on this matter, based on in-depth analysis and our own interests.

Foreign exchange market intervention and capital controls, followed by the special reserve requirement on capital inflows into the bond market and high-yielding deposits, insulated the exchange rate from the effects of volatile capital movements, allowing it to develop relatively unhindered and in line with underlying economic conditions. The advantages of a flexible exchange rate therefore prevailed, while the disadvantages were mitigated. This did not make for an uneventful journey, however, because even though the equilibrium exchange rate had clearly risen, it is always subject to considerable uncertainty at any given time, and the risk of overshooting was genuine. This risk may have materialised to some degree, but had the above-mentioned policy instruments not been applied, it would have materialised much more strongly,  1  with the associated risk of an abrupt correction later on, which could have had adverse consequences for economic and financial stability. This economic turning point stems from a turnaround in some of the factors that contributed to the upswing. The global economic situation is not as favourable to us. Terms of trade are deteriorating and not improving. The rise in tourist visits to Iceland has slowed markedly. Therefore, as compared with the last three years, growth in export revenues will ease considerably this year and in the years to come. GDP growth will be lower, as will the rise in our real income as a nation, no matter what we may decide about nominal pay increases in wage negotiations or about how we distribute such increases.
Stefan Ingves: The development of a modern financial sector in Sweden Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Indira Gandhi Institute of Development Research, Mumbai, 16 November 2006. *  *  *  I am honoured and grateful that you have invited me to speak here today. This is an institute of development research so it is appropriate for me to talk about development in the financial sector. It has become gradually more acknowledged by academics as well as by practitioners and policymakers that a well developed financial sector is necessary to a country’s overall economic growth and stability. It also improves the services provided to the individual citizens. A well-functioning financial services industry facilitates the transformation of savings into productive investments. It assumes, transforms and distributes risks to those willing and prepared to hold them. It facilitates payments between people and companies. The financial sector is an instrument to promote the smooth functioning and sustainable development of the whole economy. Conversely, experience has clearly shown that a badly-managed or inadequate financial system is detrimental to the stability and development of society. It may provide inefficient and expensive services and it may run hidden or explicit losses, which in the end may have to be covered by private and public money. It may also distort competition. The conclusion is obvious: Arguments for social and economic development speak in favour of conducting reforms with the aim of creating a well-functioning financial system.

I see a need for us in the authorities to explain the issues of market-based valuation to the general public. I also support the international recommendations to only gradually introduce the new market valuation principles for certain items, such as some assets and bank liabilities. I have taken you on the journey from old-fashioned regulation to a modern banking system. Let me end with a few concluding remarks. Concluding remarks The development in Sweden from a highly restricted and limited financial system to a system which is quite open and flexible took more than twenty years and is still going on. The financial services sector has now become a source of strength to the overall economy. We found, and we paid a high price for this experience in the form of the crisis, that the correct way to move is to go gradually and carefully, but not too slowly because you then lose momentum. The side effects of your actions must be considered in advance and mitigating measures may be needed, for instance in updating legislation and other regulations or the capacity and mandate of the authorities. Modernising the financial system requires considerable effort and but it is well worth the price. Simply put: The industrial and service sectors of any economy can not run and develop smoothly and efficiently unless supported by a modern financial sector. In my presentation I have focussed on the domestic aspects of having a sound and developed financial system.
25 There are lessons for the financial system from all three. To date, sampling of nodes has been the dominant means of assessing risk within the financial system, typically for a sub-set of the nodes such as banks. Where non-bank financial intermediaries are an important part of the network, sampling of nodes has shown itself deficient. For example, little was known about the activities of off balance sheet vehicles – SIVs and conduits – ahead of crisis. More fundamentally, this approach provides little information on the links between nodes. These are central to understanding network dynamics. Imagine assessing the robustness of the electricity grid with data on power stations but not on the power lines connecting them. Sampling of links has historically been little deployed when analysing the financial system. Some data exist on the degree of linkage between financial firms – for example, from regulatory returns on large exposures. This has been used to construct rough approximations of inter-bank networks. 26 But these data are typically partial and lack timeliness. They are weak foundations for understanding the financial network. That takes us to snowballing – that is, constructing a picture of the network by working outwards from the links to one of the nodes. As a way of understanding the financial web, there are attractions to this approach. It is agnostic about which are the key nodes and important links. Network boundaries are uncovered by following the money, rather than by using institutional labels or national or regulatory boundaries.

In short, diversification strategies by individual firms generated a lack of diversity across the system as a whole. So what emerged during this century was a financial system exhibiting both greater complexity and less diversity. Up until 2007, many participants in financial markets would have viewed that network evolution as the inevitable by-product of technical progress in finance. Until then, complexity plus homogeneity equalled stability. But in just about every non-financial discipline – from ecologists to engineers, from geneticists to geologists – this evolution would have set alarm bells ringing. Based on their experience, complexity plus homogeneity did not spell stability; it spelt fragility. In understanding why, it is useful to explore some of the wider lessons from those disciplines, taking in turn the effects of complexity and diversity on stability. Complexity and stability Tropical rainforests are a complex adaptive system. In the immediate post-war period, these eco-systems were often used as a case-study when demonstrating why complex systems tended to exhibit greater stability. 3 In Elton’s (1958) words, this was because there are “always enough enemies and parasites available to turn on any species that starts being unusually numerous”. Complexity strengthened self-regulatory forces in systems, so improving robustness. This was the prevailing ecological wisdom up until the early 1970s. That conventional wisdom has since been turned on its head. From the 1970s onwards, orthodoxy was altered by a combination of enriched mathematical models and practical experience.
The market can thereby assess itself when interest rates will start to rise. The Riksbank could certainly achieve an equivalent effect by being clear and, through the use of alternative scenarios and systematic monetary policy, making  12 See Del Negro et al. (2015). 13 The Fed introduced this type of state-contingent forward guidance in December 2012 when it was communicated that interest rates would not be raised before unemployment had declined to 6.5 per cent (with inflation expectations anchored); see Bernanke (2020). 15 [25]  the market understand how we will react to future surprises. However, it cannot be ruled out that some form of more explicit forward guidance can sometimes be a simpler and more effective way of communicating. Coordinating with fiscal policy at the lower bound In the last 30 years, the division into fiscal policy and monetary policy in Sweden has been quite clear. An independent central bank with inflation targeting has used its interest rate to push the economy, in the short term, in the direction necessary to reach the inflation target: a high interest rate in upswings and a low interest rate in downturns. The fiscal policy contribution to stabilising the economy has primarily been in the form of automatic stabilisers. Fiscal policy has instead mainly focused on distribution policy and structural issues such as creating stable conditions for sustainable growth. The background to this division was the slow decision-making process in fiscal policy and the difficulty in rapidly adjusting to the changed conditions.

That group is being chaired by Stuart Siddall, Chief Executive of the ACT, and is due to issue a report in the next few months. Syndicated loans and asset backed securities A substantial part of lending to larger UK corporates is normally undertaken via syndicated loans. The Bank investigated whether there was a market failure or illiquidity premium in this market which could be addressed by making APF purchases. After a thorough investigation, the Bank concluded that what was needed was more large-scale bank funding, particularly to replace the foreign bank lenders who had been withdrawing from the UK market. But the appropriate way to address that was through the various schemes in place to support the banks. Similarly, the Bank investigated the state of securitisation markets. Here, there were two problems. First, many investors were extremely wary of buying mortgage-backed securities and similar products, because the crisis had raised uncertainty over their underlying risk characteristics. At the same time there was a huge outstanding stock of such assets already issued, which would swamp any operation aimed at improving liquidity. In the United States the authorities have undertaken substantial purchases of mortgage-backed securities, and funded the purchase of other securitised assets. It is not clear yet whether those markets will be self-sustainable once official intervention comes to an end. In the United Kingdom, we have made a range of ABS, including mortgage backed securities, eligible collateral in the Bank’s permanent liquidity insurance facilities as well as in the SLS.