samchain/econo-pairs-v1 huggingface dataset:
Estimates suggest that both China and India have large and growing domestic middle-class markets - estimated to be about USD1 trillion per year in China and USD250 billion annually in India. This trend is expected to continue given an increasing young population in Asia with new spending patterns, threreby leading to the rise of a modern retail sector across the region. In China, organised retail trade as a share of total retail trade has increased from 5% a decade ago to an estimated 17%, while in India, the retail market is growing by 7% per annum. The second factor is the relatively sound financial position of households in Asia, with high saving rates that exceed 30% of GNP in most countries and relatively low debt levels, thus providing the potential for rising consumption to be sustained. This is further supported by the ability of the financial sector to provide financing to support consumption. In this regard, Malaysia is an example, with household debt at 66.8% of GDP as at end-July 2009, while the growth of credit to the household sector has continued to increase in this recent decade. Of significance is the quality of these assets, measured by the level of non-performing loans, remains low. The second strategy is the further diversification of the external markets, in particular, to accelerate the efforts to foster greater regional trade ties, for Asia.

It should be a tool of last resort, to be used only when there is a clear risk of deflation. With a long-lasting, very accommodative monetary policy, side effects and risks emerge. And while pursuing price stability is the main objective, we also have to keep in mind the costs – and not only the benefits – of our monetary policy measures. What danger does the row between Rome and Brussels over the Italian budget present for the country’s banking system? As a banking supervisor it’s not our task to comment on political discussions or decisions with regard to the budgets and fiscal stances of individual countries. Banks have to acknowledge changes and risks in the macroeconomic environment they operate in. And if these changes are relevant, we as supervisors adapt our assessment of banks’ risk profiles, too. Overall, the Italian banking system has become more resilient and banks are better equipped to deal with uncertainties than they were before. What do you see as the top priority for banking supervision in the coming months and years, in Italy and elsewhere? Among other topics, there is still further work to do on non-performing loans. They will keep us busy for the coming years. The cleaning up of banks’ balance sheets should be pushed through as quickly as possible. This is not specific to Italy. All banks should do their utmost to improve their resilience in sunny times when the economic cycle is on the upside.
Risks and monetary policy  Distinguished Guests, I would like to dedicate the last part of my speech to the upside and downside risks to inflation and monetary policy in the upcoming period. Uncertainties about food and energy prices still continue. Our baseline scenario is based on quite conservative assumptions for food and energy prices, implying that downside risks on these factors are as apparent as upside risks. In order to enhance the predictability of the monetary policy, in a period when uncertainties pertaining to oil and agricultural commodity prices continue, we deem it to be useful to share with the public the inflation and monetary policy outlook, which is based on alternative scenarios for food and energy prices. In our pessimistic scenario, we assume that food price inflation materializes at 16, 12 and 10 percent in 2008, 2009 and 2010 respectively; whereas oil prices rise to USD 180 at the end of 2008, staying constant thereafter. Additionally, adjustments in electricity tariffs are forecasted to be made in compliance with this assumption. Assuming a gradual monetary tightening during the rest of the year, our forecasts under this scenario suggest that inflation will be 9.1 percent at the end of 2009 and around 7 percent at the end of 2010 (Figure 15). In our optimistic scenario, we assume that food price inflation materializes at 12, 6, and 4 percent respectively, in the 2008-2010 period, whereas oil prices ease to USD 100 at the end of 2008, staying constant thereafter.

6  BIS Review 100/2008  Table 1: Monetary Policy Committee (MPC) Decisions in 2007 and 2008 Dates for MPC Meetings  Decision Rates  January 16th, 2007 February 15th, 2007 March 15th, 2007 April 18th, 2007 May 14th, 2007 June 14th, 2007 July 12th, 2007 August 14th, 2007 September 13th, 2007 October 16th, 2007 November 14th, 2007 December 13th, 2007 January 17th, 2008 February 14th, 2008 March 19th, 2008 April 17th, 2008 May 16th, 2008 June 17th, 2008 July 18th, 2008  No Change No Change No Change No Change No Change No Change No Change No Change -0.25 -0.50 -0.50 -0.50 -0.25 -0.25 No Change No Change +0.50 +0.50 +0.50  on  Interest Interest Rate 17.50 17.50 17.50 17.50 17.50 17.50 17.50 17.50 17.25 16.75 16.25 15.75 15.50 15.25 15.25 15.25 15.75 16.25 16.75  Source: CBT. 3. Inflation outlook and monetary policy  Distinguished Guests, After summarizing the developments in the previous period, in this part of my speech, I would like to share with you our projections about the inflation and the monetary policy in the upcoming period and the seasonally adjusted inflation forecasts of the Central Bank. Recent readings on supply and demand conditions are in line with the outlook presented in our April Inflation Report and the open letter of April 2008. Although first quarter private consumption growth at 7.3 percent appears quite strong in annual terms, the seasonally adjusted figures point to an ongoing moderation in economic activity (Figure 8).
The euro area’s trade openness has increased by about 9 percentage points over the first years of the euro, from roughly one-quarter to one-third of output, notably as a result of rapidly growing trade with vibrant economies, such as the new EU Member States or China. The euro area is the world’s largest trading partner, after the European Union itself, accounting for about 14% of global exports and imports in 2010. Economic and Monetary Union has fostered trade. Not only inside the euro area (+50% increase in trade volumes over the first years of the euro), but even more so with the European Union as a whole and the rest of the world (+80% over the same period). The euro area is also very open financially, and increasingly so. Its international assets and liabilities averaged each around 170% of GDP in 2009, compared with roughly 140% of GDP for the US and 90% of GDP for Japan. As financial globalisation unfolded in the last decade, the euro area’s external assets and liabilities have grown in tandem, by roughly 80 percentage points of GDP between 1999 and 2009. The euro area is a vast continent of more than 331 million citizens. By population size, it is comparable with the other large economy of the developed world, namely the United States, with a population of 310 million. In terms of economic output, the euro area is second only to the United States.

It is against this background that financial sector supervision should also be directed at financial institutions that pose the greatest risks, such as, non-bank financial institutions. In this regard, the adoption of the risk-based approach allows the supervisor to devote more supervisory effort to those areas that have a high-risk profile. This therefore, entails that supervisory authorities should shift their focus from the traditional Capital, Assets, Management, Earnings, Liquidity, and interest rate Sensitivity (CAMELS) approach to a more risk-based approach. A risk-based supervisory approach would involve the identification of key risks, the level of these risks and the key risk areas. After identifying these risk factors, a comprehensive supervisory framework with appropriate resources is then assembled to mitigate the risks. The amount of resources required is dependent on the level and intensity of the perceived risk. However, suffice to mention that this does not mean that the risk-based supervisory approach ignores the strengths of the CAMELS approach, but rather addresses the weaknesses by putting more emphasis and resources on areas with potentially higher risk. Ladies and Gentlemen As many of us are aware, financial sector operations have become complex nowadays, as they entail, among others, managing financial, market and operational risks, which depend, to a large extent, on public confidence in the financial system. In this regard, proper supervision is critical to minimising risks as well as ensuring the stability of the financial sector and engendering public confidence.
Sebastián Edwards analyzes the relationship between inflation targeting and exchange rates in three areas: the exchange rate’s effectiveness as a shock absorber, the exchange rate’s volatility and the role of parities in the conduct of monetary policy. Stephen Cecchetti and Stefan Krause examine the optimality and the practice of weighting inflation rate targets and price level targets, providing evidence from countries with and without inflation targets. Frederic Mishkin and Klaus Schmidt-Hebbel present evidence on the macroeconomic and monetary policy effects in all inflation targeting countries, and compare them with earlier times and with non-inflation-targeting developed economies. Refet Gürkaynak, Andrew Levin and Eric Swanson present evidence for Canada and Chile, on the contribution of inflation targets to the anchoring of long-term inflation expectations, in comparison with a country that has no explicit target, the United States. The Conference’s fifth and last session will analyze the relationship between the optimal monetary policy and inflation targeting. Athanasios Orphanides and John Williams, using a model estimated for the US, show how under conditions of imperfect information the optimal policy rules are modified and how a monetary scheme based on the key elements of an inflation targeting regime seems to contribute to a higher macroeconomic equilibrium. Carl Walsh analyzes the relationship between inflation targeting and transparency, showing how the quality of central bank projections and their public communication can affect the outcome of monetary policy.

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
But also intergenerational concerns, uncertainty and considerations about political processes may favour a more cautious spending rule. I will address these issues in turn in more detail in the following. Graph: Arguments for higher saving 3/6  BIS central bankers' speeches  Resource movement As described in the seminal paper by Corden and Neary, a resource economy is affected by strong structural changes also due to increased demand for labour and capital from the extraction industries. Eventually, demand from the oil-related sector will decline, and it will be necessary to reverse a downsizing of manufacturing. To avoid “Dutch disease” effects, spending should be well below the permanent income level during the extraction period. Let me shed some light on the direct demand from the companies that operate on the Norwegian continental shelf. Graph: The Norwegian Troll A platform and some other structures Crude oil and natural gas are extracted from large depths below the sea level. In particular, capital expenditure is high. The platform “Troll A” provides a striking example. If most of it was not covered by water, it would dwarf some other, well-known structures. In the years prior to the recent oil price fall, oil companies invested about as much as all businesses in the mainland economy combined. Total oil-sector demand 4 amounted to more than 13 percent of mainland GDP in 2014. This is well above current government spending of oil and gas revenues, and also more than the estimate of the permanent income.

All the revenue is channelled to the Government Pension Fund Global. The fund’s capital is invested abroad. The annual transfers from the fund to the fiscal budget are guided by the fiscal rule, which stipulates that on average over the cycle spending must be limited to the expected real return on the fund – currently estimated at 3 percent. The general view in Norway is that the management of our natural resource wealth has been a success. The OECD and the IMF have commended the framework. Still, there is an ongoing debate on whether current spending is too high. Some argue that the planned consumption profile takes too little account of future obligations, in particular pension liabilities. Others claim that the estimates of the expected real return on the fund’s capital are too optimistic. Bergsten and Gagnon (2017)1 and Gagnon (2018)2 present a different view. They point to high current account surpluses over a number of years and argue that Norway instead spends too little. Hence my presentation’s title – does Norway save too much? I will proceed by giving a few general perspectives on global current account imbalances. I will then turn to the question of how much oil producers should save – and the reasons for high saving in Norway. Graph: Outline 1/6  BIS central bankers' speeches  WHY A SURPLUS OR DEFICIT? The international capital market allows countries to decouple the size of savings from investments.
32  An expression equivalent to the IS curve above can then be used to define  the natural interest rate, 𝑟𝑡∗ , which is the interest rate that would prevail in the absence of any nominal rigidities: ∗ 𝑦𝑡∗ = 𝐸𝑡 𝑦𝑡+1 −  1 ∗ 𝑟 𝜎 𝑡  Using this, the IS curve can be re-written in output gap form, using the output gap definition 𝑥𝑡 ≡ 𝑦𝑡 − 𝑦𝑡∗ and the definition of the natural interest rate to give:  (2)  1 𝜎  𝑥𝑡 = 𝐸𝑡 𝑥𝑡+1 − [(𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) − 𝑟𝑡∗ ]  31  In other words, the simple model here abstracts from all channels of monetary transmission other than the inter-temporal substitution channel. Of course, building in addition frictions and model features, like borrowing constraints and open economy features, can restore the roles of the other channels. 32 In particular, in the simple model, one can show that 𝑦𝑡∗ = 𝜓𝑎𝑡 , where 𝑎𝑡 is the log-level of TFP, assumed to follow an exogenous process. 18  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  18  This says that the output gap is negatively related to the sequence of “real rate gaps” (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) − 𝑟𝑡∗ delivered by monetary policy. For example, when monetary policy delivers real interest rates equal to the natural rate, so 𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 = 𝑟𝑡∗ , the output gap is zero at all times.

Similarly, we hope that this MAS office can also cater to the needs of the larger Chinese financial community by enhancing understanding and contacts with Singapore and the regional markets, as thereby contribute in our own small way to the continued development of China’s financial sector. 2  BIS central bankers’ speeches  Concluding Remarks 18 On behalf of all my colleagues in MAS, I would like to express our strongest appreciation to the People’s Bank of China for their approval and support for MAS’ representative office in Beijing. 19 We look forward to taking full advantage of this milestone collaboration to deepen our financial and economic cooperation and take our bilateral relations to new heights. 20  Thank you. BIS central bankers’ speeches  3
Before the decline, the housing market had seen an important boom fuelled by expected future higher earnings, an important inflow of migrants and low financing costs. The buoyancy of aggregate demand, in turn, supported a wage-setting environment that did not correspond to the underlying gains in productivity. In the future, changes in labour market institutions to make wages adjust to productivity are essential to repairing past cumulative misalignments. There is a need for moderation in wage claims to regain competitiveness. This window of opportunity cannot be missed in those countries where substantial increases of production costs have been one of the causes for widening imbalances in current accounts, and Spain is one of them. In this country, the burden of the crisis has fallen disproportionately on temporary workers. Compensation for those employed on a permanent basis has seen only minor adjustments. Looking into the future, wage flexibility will need to be made more widespread. At the same time the main asset for growth and development in our societies is human capital. Incentives need to be shaped to maintain and develop knowledge by each individual and – collectively – by companies and institutions. This includes training and investment into the workforce, supported by well-designed employment contracts. Reforms in services, can further support the recovery and contain price increases once private expenditure recovers. In the end, these reforms, by increasing productivity and competitiveness help rebalance the external accounts on a permanent basis and reduce the reliance on external financing.

Some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing credibility. Spain – where fiscal consolidation had progressed more than elsewhere – will have to make sure that it keeps its fiscal credibility in the years to come in strictly meeting the requirements of the Stability and Growth Pact. A clear plan for a medium-term fiscal correction becomes even more pressing for rapidly ageing societies like ours, as an increasing numbers of pensioners will mean mounting claims on public transfers. IV. Conclusion  More than one year after the dramatic deepening of the financial crisis in September 2008, we can spot a number of signs of economic stabilisation in the euro area. We have halted the freefall in economic activity that we witnessed over a period lasting more than six months after the intensification of the crisis in mid-September 2008. But the crisis has debilitated the real economy. As I said, the crisis has proved so deep because it has deprived our citizens of confidence. Every business activity is by its very nature an act of trust, an expression of confidence. As regards bankers, by granting loans more actively to entrepreneurs they can contribute to transmitting and inspiring confidence to the economy at large. Being part of the euro area and the European Union will help in this process.
On the monetary policy side, we at the Fed have maintained unusually low levels of short-term interest rates and engaged in large-scale asset purchases. These measures have fostered a sharp improvement in financial market conditions. On the fiscal side (that is, government spending and taxes), the economy has been supported by the shift in policy to help support growth. In particular, the temporary reduction in payroll taxes could have a particularly strong impact on growth during the first part of the year. Third, growth abroad – especially among emerging market economies – has been strong and this has led to an increase in the demand for U.S.-made goods and services. Over the four quarters of 2010. real exports rose 9.2 percent. After a disappointing performance earlier in the year, U.S. net exports surged in the fourth quarter. The firming in economic activity, in short, is due both to natural healing and past and present policy support. In this regard, it is important to emphasize that we at the Federal Reserve have been expecting the economy to strengthen. We provided additional monetary policy stimulus via the asset purchase program to help ensure that the recovery regained momentum. A  BIS central bankers’ speeches  3  stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course. Yet, we must not be overly optimistic about the growth outlook.

17 [19]  Diagram 8. The Riksbank’s repo rate Per cent  Note. Unbroken line refers to outcome, broken line represents the Riksbank’s forecast. Outcomes are daily rates and forecasts are quarterly averages. Source: The Riksbank. Tabell 2. Overview of the effects of policy rate raises and QT, respectively Raises in the policy rate  Interest rates  Demand  Exchange rate  Higher short-term rates  Higher financing costs for households and companies with variable loan rates  Stronger  Lower demand for consumption via  higher savings  cash flow effects Lower investment demand Broader impact QT  Somewhat higher long-term rates  Higher financing costs for some companies  Moderate rise in spreads for corporate and mortgage bonds  Higher financing costs for banks’ mortgage loans  Stronger  Moderate reduction in consumption and investment Narrower impact Source: The Riksbank. 18 [19]  Diagram 9. Riksbank's asset holdings declining through maturities from 2023 – no purchases beyond 2022 Nominal amounts, SEK billion 1 000 800 600 400  200 0 2015  2018  2021  2024  2027  2030  2033  Total assets, bonds in SEK  Technical projection  Note. Quarterly data. The figure shows a technical projection of the Riksbank's total asset holdings if no reinvestments are made after 2022. Source: The Riksbank. Diagram 10.