samchain/econo-pairs-v1 huggingface dataset:
The primary factor behind the falling inflation rate is a growing confidence in inflation targeting, which during the years following 1993 gradually affected inflation expectations. In recent years the repo rate in Sweden has been lower than the corresponding steering interest rates in the USA, the UK and the EMU area. Many doubted whether Sweden as a small country outside of the euro area would ever be able to live with short-term interest rates lower than those set in Frankfurt. However, we have succeeded in doing so for some time. If one looks at the short-term real interest rates now, they are at approximately the same level as in the euro area and Sweden, at around 2 per cent. The fact that we in Sweden succeeded in achieving a good growth rate during the second half of the 1990s without causing overheating and raised interest rates, was because we started off with a very low level of resource utilisation. Following the crisis at the beginning of the 1990s, unemployment was at a record high level and there was considerable unutilised capacity in industry. It was not until recently, since the end of last year, that we have begun to approach the capacity ceiling. Furthermore, Sweden has shown a positive development in private saving throughout the entire 1990s, and the household sector's burden of debt is currently much lower than it was after the crisis at  BIS Review 34/2001  1  the beginning of the last decade.

The alternative is, of course, a fixed exchange rate, which in Sweden's case would be synonymous to adopting the euro. In the short term we have managed perfectly well outside of EMU, with lower interest rates and inflation and a higher growth rate than the euro area. However, in a longer term perspective, periods of a wrongly valued krona and major fluctuations in the exchange rate – and we will probably have to live with these – may be a high price to pay. For a small economy with a large foreign trade like Sweden this is a development worth considering. Some conclusions Let me finish where I began, namely by concluding that the economic situation still appears uncertain in essential areas. The main clue is that the American economy will show an upturn, but take a more prolonged path than the V shape. However, there are imbalances that could cause a much less favourable development. In addition, the inflation rate has begun to rise more than expected. There is no sign of improvement in Japan; on the other hand there is a risk of a "cooling down" in the finance sector really taking hold, following an incubation period of ten years. In the longer-term perspective, this may be necessary to put right the underlying problems, but in the short term it may have undesirable effects on the global economy. In Sweden we can see continuing sings of a slowdown.
Lastly, in the 90s, regulatory and supervisory measures and changes in the structure of the financial system in the Turkish economy were not designed for strengthening the system in the long term, by incorporating elements such as prudent supervision, institutionalization of regulation, etc. Instead, the measures mostly sought daily solutions to the problems. As you know well and the research in the area suggests, “Actions to deal with crisis can clearly lead to future moral hazard. If any protection provided to banks in a crisis is greater than they expected, this could increase their risk taking and [the  4  BIS Review 38/2005  possibility of another] crisis in the future.”5 As Bagehot also put it, “any aid to a present bad bank is the surest mode of preventing the establishment of a future good bank.” In my opinion, the 100 percent blanket guarantee that was brought as a part of crisis resolution during the 1994 crisis, but kept in effect until very recently is a good example of this. The measures taken during the 1994 crisis unfortunately paved the way for the moral hazard behavior in the banking sector. All of these distortions in the banking sector and institutional structure of the financial system led to important systemic risks in the Turkish economy. As the 1990s were over, it was impossible for the Turkish economy to operate without reforming its financial sector. Therefore, the restructuring program for the financial sector was launched as a component of the exchange rate based disinflation program in 2000.

From the start, the program included five main parts: - Macroeconomic stabilisation policies: a restrictive fiscal and monetary policy to remove the monetary overhang and to reintroduce macroeconomic equilibrium. - Liberalisation of prices: after 40 years of central price fixing, the bulk of prices were freed. - Liberalisation of external trade - and introduction of partial convertibility (for resident firms’ current account transactions). That required initial devaluation toward an exchange rate seen as viable from the point of view of the balance of payments. - Massive and rapid privatisation, including the use of the voucher scheme. - Social safety net to protect people whose standard of living dropped below poverty line. These adverse impacts of economic transformation were to be contained within tolerable limits. The programme aimed at re-establishing the role of prices and markets for an efficient allocation of resources. For the start, rationalisation of price relations implied a rise of the price level, owing to a monetary overhang, and to low downward price elasticity. In a small open economy, it made no sense to free internal prices without opening the economy to external competition and to world price relations. And, there could be no meaningful liberalisation of imports and exports without current account convertibility, introduced at least for resident firms. The short Polish and Hungarian experience showed, however, that free trade and partial convertibility should not be attempted without a preceding macroeconomic stabilisation.
In fact nominal interest rates have been as low as most of us can ever remember; the overall economy has grown consistently for 40 successive quarters without interruption at an average annual rate of some 2¾%, which is comfortably above its long-term trend; and the number of people in employment has risen fairly steadily to close to an all-time high, while the rate of unemployment has fallen to a more than 25-year low. The overall picture is much the same for the West Midlands region. I don't have regional data for real economic growth, but using the deflator for the UK economy, your region grew from 1992 to 1999, at an annual average rate of 2.7% - very close to the rate for the UK as a whole. The number of people in employment in the region has also increased, with the employment rate now close to a 10 year high and in line with - in fact marginally above - the average for the UK of 74.6%. And the rate of unemployment - on the claimant count basis - at 3.5% is very close to its 25 year low. That's still a bit above the UK average rate, of 3.1% but it's very much better than the 10% rate of a decade ago.

The goal, of course, is to be able to resolve distressed giant institutions, complex institutions, without taxpayer solvency support, but also without disastrous disruptions to the flow of essential financial services to our economies. I would say two substantive things about the tools needed to make this feasible. First of all, as the crisis around the world has demonstrated, we need to extend the basic resolution toolkit I was talking about beyond commercial banks to bank holding companies and to affiliated companies; in other words, to groups. And we must extend the scope of the basic resolution regime to non-bank financial institutions and groups in circumstances where their distress could prove systemic. This is essentially what the Dodd-Frank Act does in the United States. It makes it possible for the FDIC to manage and run down a SIFI from a bridge company. This could work well in some circumstances; for example, where there are buyers for parts of the business in the wings, as with Lehman. This is, therefore, a resolution instrument which we should seriously contemplate adopting in Europe. I am not certain that it would definitely work in all circumstances; eg if there were no buyers in prospect, the state ends up running the group, which could be quite a thing, with a risk that staff and counterparties may drift away. But even in those circumstances it would surely be preferable to a normal liquidation.
BIS Review 67/2009  1  Figure 1: Contribution to Annual CPI Inflation  14 12  Food and Energy*  Tobacco and Gold**  Services  Basic Goods  10 8 6 4 2 0  03 07  05 07  07 07  09 07  11 07  01 08  03 08  05 08  07 08  09 08  11 08  01 09  03 09  * Food and Energy: Food, non-alcoholic beverages and energy ** Tobacco and Gold: Alcoholic beverages, tobacco products and gold. Source: TURKSTAT, CBT. In the first quarter, the increase in food prices lost pace over previous years in response to the significant slowdown in the processed food group and energy prices dropped owing to the lagged effects of the recent decline in oil prices. Goods prices excluding food and energy slumped by a lower margin over the first quarter of the previous year. The slowdown in services prices became more pronounced (Figure 2). Figure 2: CPI Sub-Groups (First Quarter Percentage Change) 10  2007  2008  2009  8 6 4 2 0 -2 -4 Food  Energy  Goods excluding Food and Energy  Services  Source: TURKSTAT, CBT. 2  BIS Review 67/2009  The unprocessed food group posted monthly price hikes of significant levels in the last quarter of 2007 and the first half of 2008 on account of production losses and cyclical developments all over the world. Annual inflation in this group surged to 25 percent.

The lagged effects of dips in international oil prices had a favorable impact on transport services in the first quarter. Rental price movements remained quite below the averages of previous years due to the contraction of domestic demand. The prices of the restaurants and hotels group also followed a similar course owing to shrinking demand and decelerating food prices (Figure 5). I would particularly like to draw attention to the decrease of annual rent inflation. Seasonally adjusted data point to a continual and accelerating downward trend in rents in the first quarter of the year. The slowdown in services prices is expected to continue in the upcoming period as well. BIS Review 67/2009  3  Figure 4: Services Prices  Figure 5: Services Prices  (Annual Percentage Change)  (First Quarter Percentage Change)  Other Services Transportation Services Rent Restaurants and Hotels  21 18  6 2006-2007 Average  2008  2009  5 4  15  3  12  2  9  1  6  0  3 0  -1 -2  03 05 07 09 11 01 03 05 07 09 11 01 03 07 07 07 07 07 08 08 08 08 08 08 09 09  Source: TURKSTAT, CBT. Other Services  Transportation Rent Services  Restaurants and Hotels  Source: TURKSTAT, CBT. The first quarter saw a significant decline in the prices of durables excluding gold (Table 1).
It looked, on the face of it, like there could be tension between the two[22]. I would argue our institutional arrangements handled this well. First the Bank, following a recommendation from the FPC, made the decision to intervene in markets explicitly on financial stability grounds. That made accountability and purpose clear. Second, we designed the intervention to be targeted – buying long-dated and later index-linked  Page 8  gilts that LDI funds needed to sell to reduce their leverage. Third, it was explicitly temporary, running for only 13 days. In November, just a few weeks after our financial stability operations ended, Quantitative Tightening (QT) sales had begun[23]. And by 12 January – just three months after the end of our operation – the gilts we purchased had been sold back into the market[24]. With this temporary and targeted intervention we were able to do what was needed for financial stability without treading on the toes of monetary policy[25]. And while there may have been a difference in direction of policy – buying versus selling gilts – the goals were complementary. The aim of our intervention was to prevent financial stability from being threatened by severe dislocations in gilt markets. With the gilt market dysfunctional, monetary policy would have had unpredictable effects and would likely not have fed through to the economy as expected. So stabilising the market also supported the conditions for monetary policy to be carried out as normal. Looking ahead Surviving this crisis doesn’t mean the FPC can relax.

Page 1  Two sides of the same coin – delivering monetary and financial stability timelessly – speech by Sarah Breeden Given at the University of Leeds  Page 2  Published on 09 March 2023  Sarah Breeden talks about links between monetary and financial stability. She argues that though complementary - two sides of the same coin - their interaction can be complex. Having two separate committees, the Monetary Policy Committee and Financial Policy Committee, has worked well through multiple tests to date, helped by: shared analysis; building resilience in advance of potential stress; and targeted differentiated operations where needed. Speech Introduction As I stand in front of you – ambitious students with your careers ahead of you – I can’t help but reflect on the three decades since I was sat in your position as an economics undergraduate, wondering whether and how I could put my studies to use. I’ve spent those decades at the Bank of England, a period of huge change for the institution. An early highlight was working in the Governor’s office in 1997, which you may know saw the creation of an operationally independent Monetary Policy Committee (MPC), tasked with maintaining price stability, via an inflation target set by the Government. Prices had been far from stable in the 70s and 80s, so this new institutional arrangement – adopted in the UK and elsewhere – was welcome and indeed resulted in a long period of low, stable inflation.
At this point, instead of going into detail about the inflation outlook, I suggest that you refer to the press release “March Inflation and Outlook”, which is available on our website. Figure 2: Inflation Developments * 100.0 90.0  CPI  WPI  80.0 70.0  (%)  60.0 50.0 40.0 30.0 20.0 10.0  Mar-05  Jan-05  Nov-04  Jul-04  Sep-04  May-04  Mar-04  Jan-04  Nov-03  Jul-03  Sep-03  Mar-03  May-03  Jan-03  Nov-02  Jul-02  Sep-02  May-02  Mar-02  Jan-02  Nov-01  Jul-01  Sep-01  Mar-01  May-01  Jan-01  0.0  *For the January-March 2005 figures, 2003 base year index was used. Source: SIS. I would like to briefly consider the underlying reasons for the success of the fight against inflation. Along with the issues mentioned above, the implementation of firm and sound policies and important institutional reforms are crucial to the decline of years of inflation and finally getting rid of the label; “a country with chronic high inflation”. The first, and perhaps the most significant institutional development, is that the institutional structure of our Bank has become conducive to maintaining price stability. As you know, in 2001, in amendments to its law, the main purpose of the Central Bank of the Republic of Turkey was designated as maintaining price stability and the Bank was given the mandate to directly determine necessary monetary policy and monetary policy instruments.

The pass-through effect has been gradually becoming weaker, as a consequence of the transition to the floating exchange rate regime, increasing competitiveness, inflation targets increasingly assuming the role of being an anchor owing to reliable economic policies, as well as changes in the pricing behavior of producers and consumers. Especially in the recent period, the effects of the changes in the exchange rate on inflation were lower than expected, and at the same time were weaker and more lagged compared to previous periods. As a matter of fact, worldwide examples also show that in economies that have achieved price stability, the pass-through effect on prices of exchange rate movements becomes weaker owing to the  BIS Review 36/2005  7  prevalence of pricing in terms of the domestic currency, thus perceiving any depreciation of the national currency as temporary, and companies resort to price adjustments much less frequently. In fact, it is inevitable that exchange rate developments will influence prices in Turkey due to the fact that the goods basket of the CPI mainly consists of imported goods and imported intermediate goods make up a significant portion of input costs. Another contributory factor is that Turkey is a small sizeopen economy obtaining goods at global prices. Yet, studies conducted under the umbrella of the CBRT point to an evident breach regarding the reflection of exchange rate developments on prices following the 2001 Crisis. The pass-through effect of the historically high exchange rates on prices seems to have weakened especially in case of non-tradable goods.
Lucas Papademos: How to deal with the global financial crisis and promote the economy’s recovery and sustained growth Speech by Mr Lucas Papademos, Vice President of the European Central Bank, at the 7th European Business Summit organised by the European Business Forum, Brussels, 26 March 2009. * I. *  *  Introduction  The European and global economies are experiencing the most severe and prolonged financial crisis since the 1930s. A few facts and figures highlight the magnitude and nature of the challenge we face. Since the beginning of the financial turbulence in 2007, the total reported write-downs and losses of banks globally have exceeded 888 billion dollars. Some estimates of the overall expected losses by banks and other financial institutions are in the range of 2.2 trillion dollars. 1 Asset prices have plummeted worldwide, though the extent differs across countries and market segments. In the EU, the value of equity has fallen by 6 trillion euro, 2 a decline of more than 50% from the peak reached in summer 2007. Economic activity decelerated sharply during 2008, especially in the last quarter; it is projected to contract significantly in the EU this year and to recover very moderately and gradually in the course of 2010. Importantly, the economic outlook is surrounded by exceptionally high uncertainty reflecting, among other factors, the low level of consumer and business confidence as well as the ongoing deleveraging of banks and other financial institutions.

The economic and financial situation and prospects are characterised by two features: first, a synchronised decline or deceleration in economic activity in all economies which is associated with a collapse in world trade; and, second, growing signs of an adverse feedback loop between the real economy and the financial sector. Although the sharp drop in the value of toxic assets has weakened many banks’ balance sheets, the weakening of economic activity has been impairing the quality of bank loans, adversely affecting their capital positions and their willingness to extend credit to the private sector. This, in turn, constrains the pace of economic activity and the ability of the private sector to service its debts, entailing a risk of a vicious circle. II. Policies for economic recovery and sustained growth  These observations have two general implications for economic policy. First, the economy’s recovery requires the simultaneous implementation of macroeconomic policies to stimulate aggregate demand and of measures that will help repair banks’ balance sheets and encourage the provision of credit to the economy. In this way, a potential vicious circle can be prevented. Second, concerted policy efforts in all economies, especially the large ones, are necessary so that world trade can be revitalised and financial capital flows stabilised. This will help support the emerging market economies and global growth.
BIS Review 46/2003  3  First, the government has emphasized the importance of balancing between external reliance and domestic strength in order to mitigate the problem of over-dependence on the possibly volatile external demand. The government’s dual track policy aims to maintain global links between Thailand and her external markets while also creating a strong and broad-based domestic demand especially at the grass-roots level. The merit of programs that reach out to the grass roots like the Village Fund and the People’s Bank is to help relax some of the financial constraints on low-income families which have had limited access to formal financial services. On the upside, more opportunities are being granted to the underprivileged, with long-term benefits hopefully realized in the form of greater ability to earn and consume. However, overdoing some of these programs may induce households to assume too much risk and accumulate debt beyond their ability to service. That will eventually give rise to loan defaults and a burden on the government’s budget. At present, Thailand’s household debt is still considered low compared to other emerging countries. At the end of 2002, the ratio of Thailand’s household debt to GDP is only 27 percent, significantly lower than the ratios observed in other Asian economies. Moreover, this debt accumulation has taken place along with a steady increase in household income and asset, thus mitigating the risk of excessive debt burden.

For bonds and equities, a little bit more of the probability mass implied by options11 is currently in the lower tail (beyond one standard deviation) than is the case over fairly long-runs of historical outturns12 (Table 2). But for equities, bonds, and dollar exchange rates, the lower probability mass is pretty well in line with the average ‘tail’ implied by options markets in the past (Charts 4 - 5). That does not suggest much sensitivity to the various risks preoccupying the official sector. 9  This is a different point from that, advocated for example by Chairman Bernanke, explaining a fall in long-maturity risk-free rates in terms of an ex ante imbalance of global savings and investment. The two explanations are not mutually exclusive, as the observed fall in yields on indexed government bonds could reflect a combination of a fall in the risk-free rate and falls in term premia. 10  For example see Bank of England Financial Stability Report, Overview, July 2006, pp 5-13 and Bank of England Inflation Report, November 2006, Chapter 5. 11  Using three-month expiry options. 12  Since the 1930s for equities; 1960s for bonds; and 1970s for exchange rates. 4  BIS Review 2/2007  Market contacts offer various explanations for this – some of them, I should make clear, sceptically. One – and here bear in mind my earlier remarks – is that not much really nasty will happen given the collective wisdom of the world’s monetary authorities.