samchain/econo-pairs-v1 huggingface dataset:
This symmetry means that both negative and positive deviations from the target are equally undesirable. The ECB too points out that the marked decline in the equilibrium real interest rate has meant that the effective lower bound for nominal interest rates is likely to limit monetary policy more often. It also emphasises that one consequence of this is that strong or sustained monetary policy measures are needed when the interest rate is close to the lower bound to avoid negative deviations from the inflation target becoming permanent. It also notes that the new strategy may mean that inflation periodically will be above the target, but, unlike the Federal Reserve, it has chosen not to introduce an average target.7  Mutual dependence We have thus seen that a prerequisite for fiscal policy and monetary policy to be effective is that they have a stable long-term foundation. For fiscal policy, there must be confidence that public debt is stable over the long term and, for monetary policy, there must be confidence that the central bank can keep inflation low and stable. In order for monetary policy to be able to use the policy rate to counteract economic downturns and increased unemployment, it is also necessary for average inflation not to be too low.

13 [17]  References Auclert, Adrien, Hannes Malmberg, Frederic Mertenet and Matthew Rognlie (2021), “Demographics, wealth, and global imbalances in the twenty-first century”, NBER Working Paper 29161. Blanchard, Olivier (2019), “Public Debt and Low Interest Rates”, American Economic Review 109(4), pp. 1197–1229. Calmfors, Lars (2021), “Det är kanske dags att ompröva det finanspolitiska ramverket” [It may be time to review the fiscal policy framework], article in Dagens Nyheter, 21 October (in Swedish). ECB (2021), “The ECB’s monetary policy strategy statement”, https://www.ecb.europa.eu/home/search/review/html/ecb.strategyreview_monpol_strategy_statement.en.html Economic Commission (1993), Nya villkor för ekonomi och politik [New conditions for the economy and politics], Economic Commission’s proposal, SOU 1993:16 (in Swedish). Government (1997), Government Bill 1996/97:150, 1997 Spring Bill (in Swedish). Government (2021), Statement of Government Policy, 30 November. Jansson, Per (2019), “Considerations of an interest rate dove and an inflation hawk”, speech at Danske Bank, 3 December. Jansson, Per (2020), “Thoughts on the need for changes to inflation targeting”, speech at Handelsbanken, 16 December. Lane, Philip R. (2021), “The future of the EU fiscal governance framework: a macroeconomic perspective”, address at the European Commission’s webinar on “The future of the EU fiscal governance framework”, 12 November. Lagerwall, Björn (2019), “Fiscal policy in a monetary policy perspective”, Economic Commentaries No. 5, 2019, Sveriges Riksbank. Leeper, Eric M. (2018), “Sweden’s fiscal framework and monetary policy”, Economic Review 2018:2, Sveriges Riksbank.
We would have been attentive to the opacity around the ABS market; and to the cliff effects stemming from mechanistic reliance on rating agency ratings by banks, investors and regulatory regimes. And, finally, I trust that we would have been more exacting in following up the early-2000s’ G10/Financial Stability Forum report on the difficulties of resolving Large Complex Financial Institutions. Some of those interventions would have addressed long-standing structural faultlines in the global financial system. Others, perhaps more speculatively, would have been contingent on cyclical conditions. For example, a respectable macroprudential authority would ideally have tightened banks’ capital requirements against exposures to property and to shadow banking. Perhaps more compellingly, I think a macroprudential authority equipped with powers to do things would at least have asked whether the system was sufficiently resilient given a pervasive sense, from the market itself, that risk was underpriced. BIS central bankers’ speeches  7  Lo and behold, the sphere of influence of the FPC will come via both “structural” and “cyclical” instruments.7 Once the legislation is in place, the FPC will be able to make Recommendations, on a “comply or explain” basis, to the Prudential Regulation Authority and to the Financial Conduct Authority (the planned securities markets-cum-consumer regulator) on their rules and policies. And the FPC will also be able to Direct the microregulators to take certain kinds of action, to be set out in secondary legislation; that is so that our Parliament decides the spheres in which the microregulators will be obliged to follow the FPC’s lead.

Or the incentives, here in the USA, for Government Sponsored Enterprises such as Fannie and Freddie – massive players in global capital markets and so with a significance stretching beyond your borders – to take on more risk in lending to poorer households. Or for banks to badge illiquid ABS tranches as trading positions in order to benefit from much lower Trading Book capital requirements. Or for banks to move credit portfolios to off-balance sheet vehicles supported by liquidity lines against which no regulatory capital had to be held. I could go on and on. The microeconomics of finance matters hugely to stability. The faultlines of the system are sometimes obscure. And a macroprudential authority needs, therefore, to be attentive to the complex ways in which the different parts of the financial system interact, generating leverage and liquidity risk. Threats may often be buried in the complex details of the system – subprime CDO2, conduits and SIVs etc in the latest crisis; investment trust cross holdings in the 1920s – but the task is to make the connections without getting lost in the trees. Which brings me from scene setting to the real world of the new UK framework. The UK’s new Financial Policy Committee Who we are The FPC exists. We will hold our first formal policy meeting in June. We are a Committee of eleven.
Balance sheet measures can be roughly 3/9  BIS central bankers' speeches  divided into two categories: purchases of long-term bonds and long-term extraordinary loans for banks. The objective of this balance sheet policy has been to further reduce the cost of long-term loans. The measure that has attracted most attention is central banks’ government bond purchases, frequently referred to as quantitative easing, or QE. The purchases pull up prices and reduce yields on these bonds. To the extent that the sellers of the bonds shift their demand towards other riskier securities, the yields on these securities could also fall. Central banks’ government bond purchases can also function as a signal that policy rates will remain low. Studies suggest that this policy has had an appreciable effect on interest rates and financial prices.5 The alternative monetary policy instruments have most probably also stimulated economic activity, pushed up inflation expectations and underpinned bank lending.6 However, it is difficult to estimate the strength and persistence of these effects more precisely. The choice of method and assumptions affect the results, and estimates diverge widely. A range of studies point out that unconventional monetary policy instruments are most effective in the context of market imbalances and when risk premiums are high. The effect appears to have diminished as interest rates and risk premiums have fallen or as policy rates have approached their lower effective bound.7 In the current environment of very low interest rates in many countries and prospects for slower growth, this gives cause for concern.

When the new framework for macroprudential policy is eventually in place and in use, the Riksbank will need to consider how it believes macroprudential policy measures will affect the development of the economy and financial stability in its forecasting work. The Riksbank should be able to take into account the effects of the macroprudential policy instruments in roughly the same way as it now takes into account how the government’s future budget plans will affect the economy. Gradual improvement in economic activity, but uncertainty remains I began this speech by looking back at the economic situation over the last few years. I would now like to spend the rest of my time looking forward. My second argument for leaving the repo rate unchanged at 1 per cent in July and September was namely that the economy seems to be taking a turn for the better. A gradual improvement in economic activity was indeed in line with the Riksbank’s earlier forecast, but ahead of the September meeting we had received additional statistics and other information that supported this assessment. For example, confidence indicators for Sweden and abroad had improved. Share indexes on the financial markets had risen thanks to positive signals about the recovery of the global economy. The outlook for a continued recovery in the United States was good and there were signs that an improvement had begun in the euro area.
If the function adds value even under such a scenario, then it will be retained, but if not, then the house concerned sees no long-term future for it. I think the challenge facing financial markets and market participants is to identify where they can add value and which services the consumer will continue to pay for: not all will pass the test and survive. My third theme combines both my earlier ones, and concerns the role of market intermediaries. Disintermediation is an ugly word, but it is a trend that exists today and will I am sure continue to grow in importance. Electronic secondary trading of securities is becoming more common, and we have also begun to see electronic primary distribution - the issuance of securities on the Internet, and, in some cases, without the involvement of an issuing house. Now some people see in this a threat to markets themselves: everything, they fear, will migrate to the web and fragment, with a loss of the BIS Review 15/2000  2  transparency and regulatory framework that organised and official markets provide. I do not share this view, nor do I think that there is no future role for markets and market intermediaries. But I do think that the marketplace of 10 years hence will be very different from the one we have now - just as the screen-based markets of today are very different from the physical market floors of the past. Earlier I offered you a possible motto for central bankers.

In any case, such reforms are a necessary foundation for dynamic and sustainable growth in the future and they must be vigorously pursued. There is no doubt that the euro area as a whole will benefit from these national reforms that represent a significant asset for us in the global economy. 2.2. The challenge for the banking system: continuing to ensure that the economy is properly financed while strengthening the financial sector  The dilemma here is easy to understand: on the one hand, it is absolutely necessary to strengthen banks’ balance sheets to enable them to better absorb shocks, protect public finances and re-establish normal market functioning. On the other, a disorderly deleveraging would create enormous problems and add credit constraints to the many headwinds currently facing our economies. The euro area is currently making sure that these two objectives – although sometimes difficult to reconcile – are achieved. Banks are meeting their new capital requirements. The capital plans submitted to the European Banking Authority (EBA) indicate an intention to exceed the benchmarks set by  2  BIS central bankers’ speeches  more than 20%. French banks already comply with the Basel 2.5 regulations. At the same time, bank lending seems to be stabilizing, although at a relatively low level. Banks are starting to assess their financial situation more positively and in many cases their willingness to grant loans is increasing. This would not have been possible without the strong support of the Eurosystem.
More  11  The impact on the physical capital stock would be compounded to the extent that the recession also weighed on the growth in human capital. In particular, employees ability to “learn by doing” on the job or through job related training is likely to have been reduced as a result of the decline in average hours during the recession. Weale (2010) suggests that the learning by doing channel could eventually reduce aggregate labour productivity by around ½%. 12  “Investigating the characteristics of patents and the businesses which hold them”, Thomas, A., Economic and Labour Market Review, April 2011  BIS central bankers’ speeches  5  generally, the amount of management time devoted to raising finance and managing banking relationships has increased very substantially, diverting attention from the search for new products and new markets. It is impossible to quantify with any precision the effect that strains within the banking system have had on the growth of productivity over the past few years. But evidence from previous periods of financial turmoil suggests that the effect might be material. In particular, research by the IMF suggests that persistent falls in TFP growth following banking crises can account on average for around one third of the loss of output seen following such episodes (IMF 2009). So where does all this leave us? As I warned you upfront, I don’t think there is a single, simple explanation for the recent surprising weakness of productivity. Some of it may well get revised away.

The so-called Great Stability of the past decade has bestowed on the MPC the great gift of credibility – a golden halo which eluded monetary policy-makers in the UK for most of the twentieth century. What part has the MPC played in its own success? It’s difficult to say. But it is hard to believe that luck played no role. My own view is that the MPC has benefited from a virtuous circle. As we have kept inflation close to target, people have increasingly come to expect us to do so in the future, and to act on the assumption that inflation will stay low. These expectations have underpinned the wages they have bargained for, and the prices they have set. And that behaviour has helped us to keep inflation under control in the face of destabilising events. However, the unusual degree of stability, and the prestige it has conferred on central bankers, may also have bred some less helpful attitudes: such as complacency about the ease with which the economy can absorb shocks, and unrealistic expectations about what monetary policy can achieve. Just to be clear: monetary policy can pin down average inflation over the medium term. It can not deliver inflation at target at all times and in all circumstances, and certainly not in combination with rock-steady growth in output. Let me illustrate these points by looking more closely at one of the key challenges I mentioned earlier, the impact of higher energy prices over the past two years.
Beyond 18, at university and college level, student numbers in economics have also been rising rapidly, with the number graduating reaching 9,000 in 2016/17, a rise of over a third in the past six years ago. This has increased the fraction of university-level students taking economics to over 2%, similar to subjects such as politics and accountancy. It is still of course only a tiny 1% of the total population in this age range. If we look in greater detail at just who is taking economics, the selectivity bias is more acute still. At ages 16 to 18, around 22% of economics students are drawn from independent schools, more than double their population averages. At university, around a fifth of economics students are drawn from independent schools. So not only are economics student numbers pretty small, they have a heavy socio-economic slant. 58  The same may well be true of other subjects. 53  National Numeracy (2017) See https://www.nationalnumeracy.org.uk/research-skills-life-survey-2011 Money Advice Service (2017). 56 PSHE Association (2017), Practitioner Survey 57 Perhaps reflecting that, there is strong support among parents for PSHE having statutory status (PHSE Association, Parent Survey). 58 There are also strong gender and ethnicity biases in the study of economics. There are discussed in, for example, Crawford, Davies and Smith (forthcoming), Tenreyro (2017) and Blackaby and Frank (2000). 54 55  14  All speeches are available online at www.bankofengland.co.uk/speeches  14  Economics also appears to have a heavy regional slant, probably for related reasons.

Andrew Bailey Governor, Bank of England  ©2023 Bank of England
But when the new EU resolution framework is completed and working properly, such concerns about depositors should be allayed. The Bank Recovery and Resolution Directive already places depositors at the top of the creditor hierarchy in resolution. And the new minimum requirements for own funds and eligible liabilities should ensure that there is a sufficient buffer of loss-absorbing capacity to make depositor bail-in extremely unlikely.23 What is still missing, however, is a backstop for the Single Resolution Fund. Resolution needs financing24, and the Resolution Fund, which is funded by banks, will ensure that it is paid for by the private sector. But in a very deep crisis, the resources of such funds can be depleted. That is why in all the other large jurisdictions, such as the US, the UK and Japan, resolution funds are backstopped by the fiscal authority. The aim of such backstops is not to bail banks out: any funds borrowed are repaid by the private sector over time. Rather, the aim is to create confidence that bank resolution can always be enacted efficiently, which has a stabilising effect in a crisis and prevents more banks from being dragged into difficulties. In other words, policies that reduce risks for the banking system as a whole will also lead to larger risk-reduction for individual banks. A good example of this is the Federal Deposit Insurance Corporation (FDIC) in the US, which is also the resolution authority, and is backstopped by a credit line with the US Treasury.

26 Ellis, D. (2013), “Deposit Insurance Funding: Assuring Confidence”, FDIC Staff Paper. 27 For a review of the interactions between public and private risk-sharing, see Ioannou, D. and Schäfer, D. (2017), 8/9  BIS central bankers' speeches  “Risk sharing in EMU: key insights from a literature review”, SUERF Policy Note, Issue No 21. 28 For example, cross-border banking mergers and acquisitions in the euro area have been on a declining trend  since 2007. 29 See Draghi, M. (2017), “Structural reforms in the euro area”, introductory remarks at the ECB conference  “Structural reforms in the euro area”, 18 October 2017. 30 Eurobarometer 88. 31 Parlemeter 2016, Special Eurobarometer of the European Parliament, November 2016. 9/9  BIS central bankers' speeches
To sum up, supervision is something that must work based on a regime of verification, analysis and conclusion. It is important to highlight the intensity and deepness of government-owned banks supervision, which brought us the knowledge of their existing problems and the costs involved in their recovery. Significant restructuring has been carried out in federal banks, after deep and comprehensive general consolidated inspections done by the CB. The adjustments that were made aimed at making the government-owned financial institutions sounder, more efficient and more competitive, rendering them apt to meet the same requirements faced by the private financial system. The maintenance of this behavior will reveal the true costs of governmental programs and will avoid recursive expenditures, which could become skeletons (hidden liabilities) in the public accounts. The continuation of reforms is important in other areas of the CB. In the external area, the CB must aim at intensifying transparency and communication with the markets and investors, while seeking to increase flexibility and to simplify the regulations on foreign currency operations, within a process intended to increase the country’s participation in world trade and international financial markets. In the banking area, the restructuring of the Brazilian Payment System improved risk reallocation, and favored a higher efficiency of the system. This is due to the fact that the Central Bank no longer has any role in financing the institutions that did not have the necessary funds for their operations, reducing moral hazard.

Henrique de Campos Meirelles: Inauguration speech Inauguration speech delivered by Mr Henrique de Campos Meirelles, Governor of the Central Bank of Brazil, at the Ministry of Finance in Brasilia on 7 January 2003. *  *  *  I am honored to take up this position that requires permanent and rigorous defense of the currency. In these past elections, society expressed its legitimate wishes. We all want high economic growth, low inflation, a stable exchange rate, high levels of international reserves, a low external deficit, low interest rates, abundant credit, and a fair distribution of income. These are certainly goals of both the government and society at large. The ultimate target of any policy is economic growth and social welfare. Among the several government entities and institutions that seek to fulfill society's wishes and achieve the government's targets, the task assigned to the Central Bank is to maintain a low level of inflation. The outgoing government chose price stability as a priority target, or at least that is what was perceived by society. There were several consequences of this choice, among which we highlight the extraordinary public attention drawn to Central Bank's role. We will work to keep price stability as a centerpiece of the Brazilian economic landscape, and we will work with resoluteness and long term horizons. President Luis Inácio Lula da Silva's government has clearly stated its objectives of economic growth and social inclusion. Many misunderstood this as a precipitously abandonment of monetary discipline and fiscal austerity.