samchain/econo-pairs-v1 huggingface dataset:
Greater awareness of these public goods might help, at least a little, in closing the public perception gap. A more promising approach is “personalised framing”. This links a policy intervention to the specific circumstances of an individual or set of individuals. For example, experimental trials suggest people are more likely to pay taxes or donate to charity if they are told about the local or personal impact of doing so. 43  Personalising a message in this way increases the changes of it being heard, understood and acted on. What would be the monetary policy equivalent? Imagine a personal monetary policy scorecard, similar in spirit to a personal tax scorecard, tailored to an individual’s characteristics – assets and liabilities, housing 39  For example, Ford (2016). The Behavioural Insights Team are specialists in this area, see Halpern (2015) for a discussion of their methodologies. 41 For example, Hallsworth et al (2014). 42 Barnes et al (forthcoming) and Sheffield Political Economy Research Institute (2015). 43 Agerström et al (2016), Service et al (2014). 40  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  tenure, age, employment status etc. This would identify the channels and the amounts by which a significant change in monetary policy affected people’s finances (income, wealth) and wider well-being (employment and financial security). Now stop imagining. Figure 1 shows such a scorecard for the contribution of monetary policy since the crisis for the average UK household. In the upper part, it quantifies the annual impact on the average household’s finances.

In welfare terms, the biggest gainers from the MPC’s monetary loosening have been the young, though every age cohort benefits overall. The same is true looking along the income distribution, where every cohort gains in welfare terms, even though the same was not true of purely financial gains. Policy Implications  Where does this leave us? Let me summarise the key empirical conclusions before turning to policy lessons. I take the key empirical conclusions to be:   The material loosening of UK monetary policy after 2007 has had a significantly positive effect on employment, income and wealth, without which average living standards in the UK would be materially lower.   These gains have been shared right across the distribution of income and wealth, age and region, though the precise scale and nature of these benefits does differ across cohorts. Very few households across the UK are likely to have been net losers in financial terms from the MPC’s monetary loosening, once all of its effects are take into account.   This conclusion is reinforced if we consider the impact of monetary loosening on people’s well-being. In addition to the financial gains from higher income and wealth, many people have benefitted significantly from greater job security and reduced financial anxiety. In welfare terms, these benefits may have been as large as the financial gains. The number of households who have lost out in welfare terms from looser monetary policy is only 12%.
Øystein Olsen: Management of the Government Pension Fund Global Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 30 October 2020. * * * Please note that the text below may differ from the actual statement. The Government Pension Fund Global (GPFG) and the fiscal rule have long been important pillars of economic policy in Norway, as the past year has clearly illustrated. It has been necessary to draw on the GPFG to finance the extra costs related to managing the Covid-19 pandemic. At the same time, wide swings in international equity prices have led to substantial volatility in the return on the GPFG. Norges Bank manages the GPFG with the objective of achieving the highest possible return over time within the mandate defined by the Ministry of Finance. The GPFG is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. The GPFG has a diversified portfolio of investments all over the world. This allows us to reap the gains from an upturn wherever it may occur and shields us from negative events in individual markets. However, we cannot protect ourselves from broad-based global downturns, as shown by the developments in the GPFG through 2019 and 2020.

Under the strategy plan for 2020-2022, the Executive Board will continue to use external managers in markets and market segments where local knowledge is particularly relevant. After the Storting had discussed the white paper on the GPFG in 2019, the Ministry gave Norges Bank permission to invest in unlisted infrastructure for renewable energy. This is reflected in the strategy for the next three years adopted by the Executive Board. The Bank will assess each investment in relation to risk and return. The management of the GPFG is required to be cost-effective. Norges Bank aims to keep total 1/2  BIS central bankers' speeches  internal management costs in the period 2020-2022 below 0.05 percent of assets under management. In recent years, the number of Norges Bank Investment Management (NBIM) employees has been reduced and administrative support functions across the Bank are being streamlined. The Executive Board will continue to monitor costs closely. In the course of 2020, the Executive Board has strengthened the Bank's work as advisor to the Ministry, in accordance with our new mandate. In this year's white paper, the Ministry proposes changes in the composition of the equity benchmark index. The equity allocation to Europe will be reduced somewhat over time, and the allocation to North America will be correspondingly increased. This is in line with Norges Bank's advice. Norges Bank works systematically to set principles, exercise ownership rights and invest responsibly. Our work on responsible investment underpins the objective of the highest possible return.
The regional network provides up-to-date information on the state of the Norwegian economy. Regular communication with local contacts in Norway’s business and community life provides us with information that supplements available official statistics. It also provides us with supplementary information about areas not covered by official statistical sources, and we learn which issues are of particular concern to enterprises. The network consists of companies, organisations and municipalities throughout Norway. In six rounds of talks each year, we engage in discussions with business and community leaders on financial developments in their enterprises and industries, with about 200 visits in each round. The selection of contacts represents the production side of the economy, both industry-wise and geographically. The network will comprise about 1000 contacts in the course of 2003, who will be contacted once or twice a year. Allforsk in Trondheim is responsible for the contact meetings in Central Norway. The industry structure in Central Norway is not substantially different from the rest of Norway. The public sector and some private service segments are important for employment in Central Norway. Primary industries are relatively more important in this part of the country. A large share of the workforce in Central Norway is employed in the public sector, in part because there is substantial research and development activity in this region. Focusing on knowledge is very important for the economy’s long-term production capacity, both for the nation and for the region.

A stronger krone reduces the cost of imported goods and services for enterprises and households. Imported inflation is lower. So far this year, the import-weighted krone exchange rate has appreciated by about 3 per cent. Substantial uncertainty surrounding international economic developments There is considerable uncertainty attached to international economic developments. 4  BIS Review 47/2001  In the US, industrial output and retail sales have weakened markedly over the last three months. Between March and April employment declined by more than 200 000. GDP growth slowed from an annualised rate of a good 5 per cent in the first half of 2000 to about 1 per cent in the fourth quarter of last year and the first quarter of 2001. US equities, as measured for example by the Dow Jones index, declined markedly through 2000 and in the first quarter of this year. Stock markets in other countries also fell during this period. Equity prices have picked up again since the beginning of April, however. In addition, industrial commodity prices and oil prices have risen over the last month. Moreover, long-term interest rates have increased. These developments may indicate that many operators in financial markets and commodity markets have again become somewhat more optimistic about the prospects ahead. Household and business confidence also deteriorated through the latter half of last year and early this year, but has remained steady over the last two to three months, as illustrated by the confidence indicators in this chart.
For instance, in 2008, the SNB was involved in a coordinated reduction of interest rates, it concluded swap lines with the aim of alleviating tensions in money markets, and it remained in close consultation with other central banks. However, the principle that the SNB conducts an independent monetary policy for its own currency area remains completely unaffected by these activities. Cooperation and independence are not irreconcilable. On the contrary. Good cooperation promotes and reinforces the effectiveness of monetary policy decisions which have been taken independently. Perhaps this can be illustrated, once again, by using the example of the minimum exchange rate, which enjoys a high level of international acceptance – not least as a result of our excellent dialogue with other central banks. Neither are independence and the minimum exchange rate irreconcilable. The minimum exchange rate does not restrict our monetary policy independence, as some observers wrongly claim. Rather, it is a genuine expression of our monetary policy independence. The minimum exchange rate is not a move towards the euro and most certainly not any tie to the European currency. What it in fact does is to ensure appropriate monetary conditions for our country in an economic environment which remains extremely difficult. Meanwhile, the value of the Swiss franc is still high. In the long run, a central bank can only pursue an autonomous monetary policy in line with the needs of its country if it is independent.

Accordingly, the contribution of net exports to growth increased notably, and the current account balance posted a noteworthy improvement in the second half of the year (Chart 4). Chart 4. Current Account Balance (Seasonally Adjusted, Billion USD)  * Estimate for December. Source: TurkStat, CBRT. BIS central bankers’ speeches  3  Despite the attainment of favorable outcomes regarding macro financial risks, soaring inflation in the last quarter required a revision of the monetary policy stance. The ongoing deterioration in the global risk appetite as of August led to an excessive depreciation in the Turkish lira posing risks on the inflation outlook. In addition, sizeable price adjustments in administered products in October led the short-term inflation to increase above forecasts. In order to not to allow inflation expectations to deteriorate, the CBRT delivered an important tightening in monetary policy since October. Accordingly, the interest rate corridor was widened upwards and the amount of the Turkish lira funding through one-week repo auctions was adjusted and the average funding cost was raised significantly (Chart 5). Chart 5. CBRT Policies CBRT Policy Rates and Overnight Repo Rates  Source: CBRT. CBRT Funding and Average Interest Rate  Source: CBRT. The Monetary Policy Committee believes that the tight monetary policy stance should be maintained for a while to ensure that the inflation outlook is consistent with the medium term targets. Moreover, due to the ongoing uncertainties regarding the global economy, we are of the opinion that maintaining a flexible monetary policy will be appropriate.
To finish, Stephanie Schmitt-Grohé and Martín Uribe derive optimal but operational rules for monetary policy in a general equilibrium  4/5  model calibrated for the US, under different initial conditions and different degrees of indexation to past inflation. I would like to end these words by thanking Frederic Mishkin and Klaus Schmidt-Hebbel for their hard work in putting together this magnificent conference, and Mauricio Larraín and Mónica Correa for valuable assistance in organizing it. I also thank the large number of discussants of the papers for their dedication in preparing their remarkable interventions, which will undoubtedly contribute even more to our understanding of these important issues. To you all, dear participants, I wish two days of fruitful discussions and much learning. 5/5

This is why it’s crucial to eliminate the obstacles to offering jobs to young and old, to everybody in fact. With the right institutions in place, not only would entrepreneurs be able to offer a higher number of jobs that were profitable for their companies but, more importantly, workers would have the option to decide whether they wanted to accept these jobs or not. Because the problem now is that, with no jobs being offered, they do not even have the possibility of deciding. It is sometimes claimed that, whatever our legal and institutional framework, unemployment can only fall if we manage to substantially raise the GDP growth rate. Admittedly, past experience shows that, on average, the Spanish economy has created jobs when it has been able to grow at over 2%. But these relationships are not unmovable since they are precisely an outcome of the institutional framework in place. If structural changes are made to eliminate the obstacles to offering jobs, lower unemployment rates with lower GDP growth rates may be attained. The reforms aimed at increasing the supply of jobs are, moreover, absolutely unavoidable now we are in the Monetary Union. And this should be stressed because, although I believe there is broad consensus on the need to adjust our economy, there is still not sufficient recognition that this adjustment must be different from those made when we had the possibility of devaluing our currency.
To create greater clarity, monetary policy is guided by a principle that the Riksbank’s ambition is normally to bring inflation back on target within two years. One might say that this two-year horizon is a restriction that the Riksbank has placed upon itself to maintain confidence in the inflation target. 1  A description of the Riksbank’s objective and strategy for monetary policy can be found in the document “Monetary policy in Sweden”, which can be downloaded from the Riksbank’s website, www.riksbank.se, or ordered in printed form. 2  See Lars Heikensten’s speech at the Swedish Economics Association on 22 February 2005, “Thoughts on how to develop the Riksbank’s monetary policy work”. BIS Review8/2007  3  We have chosen a two-year horizon for monetary policy because this is considered to give sufficient scope in most cases to ensure acceptable developments in the real economy. However, the exact pace at which inflation should be brought back on target within this horizon will of course depend on what kind of shocks have affected the economy. 3 Sometimes the deviations from target can be so large that there is reason to allow inflation to return to target beyond the normal two-year horizon. In these cases, we shall explain this clearly in connection with our decisions. These thoughts on how to take into account developments in the real economy are not, of course, unique to the Riksbank.

Fiscal policy had previously often been too expansionary and contributed to high inflation. Now it was subjected to requirements for long-term stability and durability in public finances. With a floating krona the main task of monetary policy was to directly act to ensure that inflation remained at a low and stable rate. In January 1993 the Riksbank specified this task as ensuring that inflation remained at two per cent a year. The target would formally apply with effect from 1995. This created a new norm for monetary policy and Sweden then became one of the first countries in the world to conduct monetary policy with a floating exchange rate and an explicit inflation target. It may be worth mentioning that the Riksbank’s tasks are also stipulated by law. The objective of maintaining price stability and the task of promoting a safe and efficient payment system were introduced into the Sveriges Riksbank Act in 1999. In connection with this the Riksbank was given greater independence. Monetary policy is now formally the Riksbank’s task and the six members of the Executive Board are expressly forbidden to seek or receive instructions when carrying out monetary policy tasks. This is the same model as applied within the ESCB. The period with an inflation target How have the past ten years or so of inflation targeting functioned? Looking back, it is difficult to come to any other conclusion than that the new stabilisation policy regime has lived up to expectations.
xxvii  That is perhaps why studies of expansionary monetary actions generally find they reduce, not increase, inequality while raising demand and supporting jobs. xxviii  And there appears to be little evidence that  stimulative monetary policy makes groups worse off. Do these lessons apply to the most recent UK recession and recovery? Macroeconomic Outcomes The 2008 financial crisis threatened depression and mass unemployment, with the least well-off most exposed. Fiscal policy quickly came under severe strain as tax revenues plunged, the costs of social benefits rose sharply, and the huge bills for too-big-to-fail banks came due. Since then sustained austerity has reduced the fiscal deficit from around 10% of GDP in 2010 to around 3 ½ % today. While necessary, this has, on average, subtracted around 1 percentage from demand each year. Over that time, structural policies have boosted participation in the labour market but have been unable to return productivity growth to anything resembling its historic average. For seven years, in the face of severe headwinds to growth, monetary policy has been the only game in town. Its task has been complicated by those historically low equilibrium interest rates. These likely turned negative in the aftermath of the crisis, meaning that monetary policy has had to run very fast just to stand still. Given constraints on how low nominal interest rates could go, the Bank of England’s MPC had to buy gilts – so-called Quantitative Easing (QE). What if the MPC had not acted?

In August, the balance of these demand, supply, and exchange rate effects was consistent with the need for additional monetary policy stimulus. These measures are working. For those looking to borrow, credit is widely available. For those with debts, the cost is cheaper. Neither solely due nor totally unrelated to the actions the MPC took in August, growth appears to have been materially better than we had expected in the summer. Households appear to be looking through Brexit-related uncertainties at present. For them, signs of an economic slowdown are notable by their absence. Perceptions of job security remain strong. Wages are growing at around the same modest pace as at the start of the year. Credit is available and competitive. Confidence is solid. 16  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  16  In contrast to developments in the real economy, financial markets have taken a less sanguine view of Brexit prospects. Sterling is currently around 16% lower than its peak a year ago. Partly reflecting this depreciation, measures of inflation expectations have picked up notably. Chart 17: Growth has been increasingly driven by consumption Other Real GDP (oya)  Chart 18: Saving rate back to pre-crisis level since around 2013, and consumption rising as a share of employee income  Consumption  Saving rate  4  Per cent 14  3.5  12  Per cent  3 10 2.5 2  8  1.5  6  1  4  0.5 2  0  Source: ONS and Bank calculations.
In contrast, the UK banking system has, I have noted, so far been able to absorb the initial surge in demand for credit from firms6 and extend payment holidays to households. The FPC stress test indicates that banks have the resilience to continue to maintain credit to the real economy. Admittedly, given the risk around economic prospects and the impact on firms, much of the additional lending that is necessary needs to be supported by government guarantee. But we would be dealing with a very different credit environment now absent the resilience – both capital and liquidity – that has resulted from the post crisis reforms. The FPC stress test also illustrates one of the key lessons of the great financial crisis, that if banks have resilience and can use it to help to maintain credit in the real economy in a stress rather than deleveraging, the outcome is in the end better for banks themselves. The capital they might preserve by deleveraging is 4  Since the 2008/09 financial crisis, the Bank has increased the range of collateral it accepts, which now extends to loans and a wide range of securities. 5 To take a very simplified example: the aggregate CET 1 ratio of major UK banks was around 4.5% in 2007 (compared to over 14% now). A 3.8 percentage point capital drawdown (the drawdown we expect banks to face in the MPC’s illustrative scenario) would have depleted a very significant fraction of the capital banks had available.

BILD: But it is precisely this policy of cheap money that is not working… Draghi: Wrong – our policy is working, but we must be patient; investor confidence has not yet been fully restored. For two years, the economy in the euro area has been growing month by month, banks are lending and unemployment is steadily falling. Meanwhile, euro area countries are now able to buy more German exports again, which, for German companies, is partly making up for the decline in trade with China. But it is a slow process because the crisis was more severe than anything we’d had since the Second World War. BILD: And when will interest rates rise again? Draghi: It’s quite simple: when the economy is growing more strongly again and inflation rises closer to our objective. Low interest rates today will lead to higher rates tomorrow. BILD: Does the ECB’s policy of cheap money not make it far too easy for euro area countries like Italy and France, for example, to shirk necessary but unpopular reforms? Draghi: No. The majority of governments are acting, albeit too slowly for my personal taste. All of them would be well advised to do more. But that is not primarily dependent on the ECB and its policies. Most countries started to implement reforms when the level of interest rates was already very low. Furthermore, reforms of judicial systems, electoral laws or labour laws, for example, don’t have much to do with interest rates.