samchain/econo-pairs-v1 huggingface dataset:
Global rebalancing of the world economy needs countries in a strong cyclical position to direct domestic demand to imports, while countries with insufficient domestic demand to increase exports. Exchange rate adjustment should facilitate this process. Therefore, a faster appreciation of the yuan would relieve some appreciatory pressures in other EMEs, making the adjustment more balanced. But, for this to be achieved on a sustained basis, it is not enough to let the exchange rate adjust. Structural reforms will also be required to achieve a sustainable and efficient reduction of China’s savings rate. On the other hand, a rise in advanced economies’ interest rates, in particular in the U.S., would also alleviate currency tensions. However, the main responsibility for policymakers is to secure sustainable growth in their home economies that favors their citizens, and we all have to deal with the repercussions of those actions. The response in emerging market economies Emerging market economies have been facing two challenges as a consequence of this global environment. First, exchange rate appreciation and a resumption of capital inflows, and second, inflationary pressures. Sometimes, these two challenges may lead to inconsistencies in macroeconomic management. However, it is important to highlight that in small open economies any attempt to persistently manage an exchange rate away from its fundamentals, in particular at an overvalued level, may end up leading to inflation. If the adjustment does not come from a change in the value of the currency, it will happen through inflation.

Since December 2009, the yuan has appreciated almost four percent, while this figure is much closer to ten percent for most EMEs. The comparison is even more dramatic when looking at a longer period of time. This has been achieved through massive reserve accumulation and limited financial integration. However, for measures in the foreign exchange market to have real effects – that is, on the real exchange rate, which is the relevant variable from the point of view of competitiveness – these measures need to have some support from the real side of the economy. In the case of China, this is a very high savings rate. China saves about half of its GDP and the resulting current account surplus sustains a depreciated real exchange rate. Otherwise, attempts to maintain a depreciated nominal exchange rate sooner or later lead to inflation, which is the way to achieve relative price adjustment when the nominal exchange rate is not allowed to adjust. The U.S., in turn, is undertaking an extraordinary monetary expansion. Beyond having reached the zero lower bound for the federal funds rate, unconventional measures are adding additional monetary stimulus. In particular, the massive purchase of securities implemented in the so-called QE2 program. This explains why the dollar has reached its lowest level in several decades (Figure 3), but this is not only the result of expansionary monetary policy, but also of the lack of domestic demand and of the external imbalances.
[...] Moreover, the analyses were based on projections of productivity growth that proved to be too high.” As I pointed out in my introduction, there was strong growth until 1973, and it took time before it became apparent that there had been a negative shift in potential output. The red dotted line in the chart shows what GDP would have been if the growth rate had been the same after 1973 as in the previous 10 years. Because the negative shift in the level of potential output was not discovered in time, a counter-cyclical policy was employed in an attempt to sustain the output level. Whereas the output gap was believed to be negative, it subsequently proved to be positive, as illustrated by the chart. Similarly, in a study of previous US monetary policy, Ophanides11 finds that central banks overestimated the level of output that was consistent with stable inflation in the 1970s because they were not aware of falling productivity growth in time. As a result, the output gap was underestimated and policy was too expansionary. Also in the 1990s, we saw an increase in productivity growth, and even though the mistake from the 1970s was not repeated, there was a vigorous debate concerning different targets for trend growth and the output gap. In addition to the difficulty of capturing changes in potential output fast enough, there is also considerable uncertainty about the level of actual GDP. As an example, Norway’s GDP figures were extensively revised in June 2002.

In addition, we monitor various cyclical indicators and acquire information from our regional network.6 There is uncertainty associated with the estimation of both trend growth and the output gap, but the correspondence that seems to exist between the different methods of indicating pressures in the economy makes us confidant that the output gap, as we calculate it, provides useful information. The output gap provides an overview of the overall pressures in the real economy. If there are no substantial economic disturbances - or shocks - there will be no conflict between stabilising inflation and stabilising output and employment. A positive output gap will over time result in inflation that is above target, while a negative output gap will result in inflation that is too low. Nor will demand shocks in a closed economy result in a conflict in the short term between price stability and stability in the real economy. A positive demand shock will result in higher inflation, and an appropriate monetary policy response would be to increase the interest rate as much as is necessary for output to return rapidly to its potential level. In an open economy, however, a conflict of objectives could arise in the short term following a demand shock. Although a higher interest rate would contribute to stabilising both output and inflation, there might be a conflict with regard to the “dosage”.
Lastly, there are various measures available in current trade agreements, such as antidumping measures and countervailing duties for dealing with “unfair” trade, as well as escape clauses that provide safeguards for industries that face a sudden surge of imports. Again, the challenge is to ensure that such measures are effective, that they help facilitate rather than retard adjustment, and that they are not abused so as to avoid foreign competition. But, both sanctions and temporary relief have been provided for in global trade rules. We should be willing to use them when their use would lead to more equitable outcomes and would help sustain political support for a more open trade regime. Conclusion Free trade is a concept that remains compelling but periodically will be tested by economic change. That is an inescapable fact of life and is a good thing because it requires the economics profession to articulate anew the value of a liberalized world trade regime. While the value from trade is very high, the associated adjustment costs can be significant and will require greater attention if globalization is to work for all of us. Thank you for your time. I would be happy to take some questions. 1 Mary Amiti, John Clark, Gerard Dages, Matthew Higgins, Tom Klitgaard and Joseph Tracy assisted in preparing  these remarks. 2 Figures from UN World Investment Report, IMF World Economic Outlook Database, World Bank World  Development Indicators. 3 IMF World Economic Outlook, April 2017, in market exchange rate terms.

Instead, we need to provide greater support to displaced workers so they can obtain the skills needed to find new well-paying jobs. We need to do better in preparing workers to deal with the challenges of globalization and technological change. These issues are important to me as a central banker, as they affect the long-term health and productivity of the economy, and the economic opportunities available to our people. The debate around globalization, particularly in advanced economies, reflects a range of factors. Undoubtedly, the global financial crisis and subsequent slow recovery have been significant. But, just as important have been longer-term trends, such as growing income inequality, the loss of middle-income jobs, and the rise of large emerging market economies such as China and India. Although the debate about globalization is not new, I believe we are at a particularly important juncture. If support for liberalized trade and an integrated global economy were to suffer a significant setback, the consequence could be slower economic growth and lower living standards around the world. While considerable effort has gone into liberalizing trade and developing the existing set of trade agreements, that does not mean they cannot be improved upon. I have no doubt some trade agreements could be enhanced or updated. Some may not adequately address recent changes in the global economy—such as the rise of digital trade—and may need to be refreshed. And, important trade barriers still remain and should be addressed.
BIS Review 32/2004  3  Facing this reality, we decided to act independently and lowered interest rates initially in March 2001, a few months before the European Central Bank. Then, facing a clear economic slowdown and a strengthening of the Swiss franc, we lowered interest rates repeatedly and aggressively. So far, the magnitude of our policy loosening has exceeded that of the European Central Bank. We thus kept our monetary autonomy intact, and the interest rate differential between the euro and the Swiss franc has even slightly increased. 4. Swiss monetary policy in the new monetary order  What have we learned about the effects of the new monetary order on the international monetary system and on the effectiveness of monetary policy? (a)  The stabilizing role of the euro  Developments in currency markets over the past 5 years have taught us that the introduction of the euro has fundamentally modified and stabilized the international monetary system. In the past, this system was dominated by the dollar. Dollar crises were violently affecting economies dependent on international trade and capital mobility. The Swiss franc was particularly vulnerable as Switzerland is a small open economy with a currency playing the role of safe haven. Today, the euro has become the counter-weight of the American currency. When the dollar tumbles, the euro absorbs funds in quest for stability. Third party currencies are thus better shielded from speculative flows. Indeed, the Swiss franc is not the only currency to benefit from this new monetary order.

If use of the franc were to be crowded out by the euro, the Swiss National Bank would have had little  2  BIS Review 32/2004  leverage left to influence monetary conditions in our own country. It would become a paper tiger! (c)  Third, even short of a “euroization” of the Swiss economy, we feared the loss of our monetary autonomy. Given the importance of the common currency for the Swiss economy, what else could the Swiss National Bank do other than follow the European Central Bank’s monetary policy and de facto integrate the franc into the euro zone? A gradually shrinking interest-rate differential between euro and Swiss franc investments as well as a loss in monetary autonomy would have resulted. How does our recent experience relate to these concerns? 3. Our experience as an independent monetary entity  (a)  The euro/Swiss franc relationship  Our fears of a euro destabilizing the Swiss franc did not materialize. Relative to the euro, and since its introduction, the franc has been fluctuating in a relatively narrow band of plus or minus 5 percent, about four times less than against the dollar during the same period. The Swiss franc appears now to be less affected by exchange rate shocks and more shielded from speculative movements.
(a)  Do we need an IMF? The apparent success of central banks has led some economists to argue that the widespread adoption of inflation targets and floating exchange rates is sufficient to ensure the smooth running of the international monetary system – a regime which Professor Andrew Rose calls the ‘reverse Bretton Woods system’. There is no need for an international institution such as the IMF to watch over the system. It is certainly true that the most important thing any nation state can do to minimise the spillover effects it has on others is to maintain domestic economic stability. And that is exactly what Australia, Britain, and other countries have done during the recent period of economic success, known as the “Great Stability”. But domestic stability is not sufficient to eliminate spillover effects. The impact of national macroeconomic policy decisions is transmitted to other countries through important prices in the world economy: real exchange rates; real interest rates, and prices of important commodities like oil. Changes in spending by US households affect export demand in the rest of the world, both directly and indirectly through movements in the dollar. Changes in saving by governments in Asia affect spending in the rest of the world through movements in real interest rates. Changes in the supply of oil from the Middle East affect incomes and spending elsewhere through movements in oil prices.

Voting rights are an area where hard work and many hours of persuasion will be needed if countries are to be convinced to see the bigger picture and relinquish some degree of direct control over the IMF in return for the creation of a more effective institution. Hard work, perseverance and dogged determination have been characteristics of this year’s Australian presidency of the G20 under Peter Costello, Ian MacFarlane and Glenn Stevens. Their efforts have been crucial to the progress that has been made towards quota reform over the past year. It is important that the Australian legacy be carried forward if the process of quota reform is to be completed. (e)  Are there overlaps with other institutions? Unnecessary duplication is a waste of both time and money. I have already spoken about the respective comparative advantages of the IMF and OECD. There has also been some discussion about the roles of the IMF and the G7 in respect of exchange rate issues. Over the past three years – especially since the Boca Raton G7 summit of February 2004 – the inability of the G7 to deal with the major spillover effects in the world economy has become more and more evident. Adding new members, even if they were willing to join, is not the answer. More productive would be to use the IMF as flexible forum to bring the relevant group of countries together to handle issues as and when they arise. 5.
This adjustment also involved the creation of the strategic- and technological-risk Department. Technology. A technological observatory was created intended to act as catalyst for enhancing knowledge and adopting important innovations for the CBC’s fulfillment of its functions. The main objectives of the observatory are: (i) to agree on common principles and contribute, inside the CBC, to the coordination of the treatment of disruptive technologies, (ii) create networks with the external community to enhance know-how and identify opportunities and threats, and (iii) agree on the pillars of innovation to promote and contribute to knowledge in those areas. The pillars of interest that have been defined include: digital currencies of central banks, cryptoassets and financial stability, development of digital payments and technology of distributed records and their applications, technology and data management, cybersecurity and risks for the financial system, among other issues. Employer of excellence. We have been working on strengthening the organizational culture and improving the value proposition for our staff in order to achieve effectiveness in attracting and retaining employees and developing their careers. To strengthen the internal career, we are developing an exercise to improve job description and assessment. Hand in hand with the strategic initiatives just defined, the CBC has continued with its projects linked to the fulfillment of its permanent functions.

Some of you may know that FAA had its beginnings as a division within the Asian Institute of Finance, to review the quality of programmes being offered by AIF’s affiliated institutes. As the components of a quality assurance framework and process started to come together under the AIF, it became clear that in order to realize the vision of a highly competent and high performing workforce in the financial sector, assuring the quality of the learning programs that serve the industry was vital. This led the Board of AIF to take the decision to establish an independent entity which would spearhead and develop this important role to its full potential. That decision was motivated by two objectives. The first was to ensure that the quality assurance function would be fully independent of any interests in program development or delivery. This is necessary to provide a high level of confidence to the industry which should be able to rely on quality assurance assessments as a basis for decisions on training and development priorities. As a separate agency with a transparent governance structure in  BIS central bankers’ speeches  1  place, FAA has been able to build a high level of credibility in providing an independent, objective assessment of the quality of training and development programs in meeting defined learning objectives. The second objective was the desire to contribute towards raising standards on education and development in the area of financial services.
We should stress here that, of the larger euro area countries, France has the highest proportion of market-based financing, at 40%. Non-bank financing in France totals EUR 1.748 trillion, and the leading asset manager in Europe is a French firm, Amundi. France also has an internationally recognised regulator, in the form of the AMF, while Paris is home to the European Securities and Markets Authority, ESMA. After Brexit, I also have every reason to believe that a significant share of the market activities of the largest global banks will be based in Paris. First of all, I want to put an end to the non-debate over whether market-based financeis better than bank-based finance and vice versa, and the misconception that the US system should be 1/3  BIS central bankers' speeches  replicated in Europe: working towards a balanced development of non-bank finance simply means giving companies the option of diversifying their debt financing. Fun damentally, the real debate lies elsewhere: it is about switching from debt to equity.This is crucial in advanced economies, where growth is dependent on innovation. Equity financing is better suited to the uncertainty and often long-term returns associated with innovative projects. The euro area is seriously lagging behind in this respect: equity only accounts for 74% of GDP, compared with 125% in the United States. Moreover, it only makes up half of the total external financing of euro area corporations (equity + debt), compared with three quarters in the United States.

As I have said on previous occasions, the greatest cause for concern at present should not be predicting exactly when positive quarter-on-quarter growth will resume, but rather determining to what extent the Spanish economy is ready – or not – to move into a long phase of robust growth. During the last upturn, the Spanish economy built up some significant imbalances, such as the excessive weight of real estate activities, a swollen external deficit, a relative loss of competitiveness, and high corporate and household debt. Over the course of the crisis, some of these imbalances have begun to be corrected, but others are still significantly holding back a pickup in growth. With the crisis, these pre-existing structural problems have been compounded by an increase in unemployment to levels far higher than those of any other developed countries and by the sharp deterioration in public finances. These are now undoubtedly the two main problems affecting our economy. To embark on a sustainable economic recovery, the imbalances built up by the Spanish economy before and during the crisis must be reversed. Job destruction must be halted and unemployment absorbed. And, further, an ambitious plan must be devised and set in place to cut the budget deficit, to redress the financial position of the private sector and, in sum, to mitigate all those structural shortcomings that are currently weighing on the recovery and contributing to reducing the growth potential with which our economy will face the new expansionary cycle.
BIS central bankers’ speeches  7  Figure 2 Stock market indicators (1) (2) (index, 01/03/2011=100)  Sovereign risk premiums (1) (3) (basis points)  120  120  500  500  110  110  400  400  100  100  90  90  300  300  80  80  200  200  70  70  100  100  60  60  0  0  ene.11 jul.11 ene.12 jul.12 ene.13 11 Jun. 12 Jun. 13  11 11  Latin America  Emerging Asia  Emerging Europe  Developed  11 Jun. 12 12 12 Jun. 13 13 Latin America (4) Emerging Asia (5)  Chile  Emerging Europe (6)  (1) Dotted vertical line marks statistical closing of March 2013 Report. (2) Stock market indexes by region from dollar-denominated Morgan Stanley Capital International. (3) Measured by 5-year Credit Default Swap (CDS). Simple average of countries in each region. (4) Includes Chile, Brazil, Peru, Mexico, Panama and Colombia. (5) Includes China, the Philippines, Indonesia, Thailand and Malaysia. (6) Includes Czech Rep., Hungary, Croatia, Bulgaria and Turkey. Source: Bloomberg. Figure 3 Inflation indicators (annual change, percent) 10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 06  07  08 CPI  09  10  11  12  13  CPIEFE  Source: National Statistics Institute (INE).

At the very beginning of this conference, Jürgen Stark mentioned three issues: First, to what extent is analysis of monetary developments relevant for the conduct of a monetary policy aimed at the maintenance of price stability? Second, how should the analysis of money be organised in the policy process leading to interest rate decisions about the policy rates? And third, how should the monetary analysis and its implications for monetary policy be presented to the financial markets and public? With the benefit of hindsight, let me take stock of what I have learned over the past couple of days. With regard to the first question, Prof. Flandreau has demonstrated that, in assessing the success of central bank policy, the historical context always needs to be taken into account. Political, institutional, and economic circumstances need to be adequately considered. During the run-up to Monetary Union, money and monetary analysis played a crucial role in the experiences of most central banks in Europe. Viewed in this context, the ECB’s choice of strategy was a natural continuation of previous best practice, while at the same time incorporating insights from economic theory and the experience of other central bank. I think it is fair to say that the strategy has served us well. The clearest evidence of this is the high credibility which the ECB has enjoyed since its inception.