samchain/econo-pairs-v1 huggingface dataset:
“Human capital”, to use the economists’ terminology, has been growing at a slower rate, particularly compared with the first half of the 1990s. Note the word “partly”. I don’t think this can really be seen as the main, or even a major, part of the productivity puzzle. Even if you’re prepared to view these compositional shifts as some independent phenomenon, unrelated to other things that have depressed productivity growth – and that is questionable – their scale isn’t really big enough to make that much of a dent. That 3% figure, which is probably a ceiling on the true contribution2, compares with a productivity shortfall of over 10% since the recession. The results offer clearer help with a second puzzle, namely the apparent ease with which real average earnings have adapted to lower productivity growth. The two must match each other in the end3. But, in the past, it’s been hard for the labour market to absorb negative  1  The Employment Cost Index (ECI) measures the change in the cost of labour by excluding the influence of employment shifts among occupations and industries. More information about the ECI can be found here In the UK, the ONS has an experimental series – the “Quality-Adjusted Labour Input” – which makes a similar adjustment: the latest release can be found here.

“Education and Lifetime Patterns of Unemployment,” Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S117–31, October. Phillips A. W.,1958, “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957”, Economica. Pissarides, C., 2000, “Equilibrium Unemployment Theory”, Massachusetts Institute of Technology, 2nd edition Slacalek, J., 2005, “Productivity and the Natural Rate of Unemployment”, Department of Macro Analysis and Forecasting, DIW Berlin Solon, G, R. Barsky, and J.Parker, 1995, “Measuring the Cyclicality of Real Wages: How Important is Composition Bias?” Q. J. E. 109 (1994), pp. 3–25. Staiger, D., J. H. Stock and M. W. Watson, 2001, “Prices, Wages and the U.S. NAIRU in the 1990s”, NBER Working Paper no. 8320. 8  BIS central bankers’ speeches  Chart 1: Large flows into and out of  Chart 2: Growth of average wages weak in  employment  2013, 2014 despite low unemployment  Source: Labour Force Survey and own calculations Source: ONS, Bank of England, NIESR and Hills, Thomas, Dimsdale (2010) Note: AEI until 2010 and AWE since; inflation expectations as implied by indexed gilt market; 2014 diamond is for H1.
But the other side of this coin is also important: in years when economic conditions are favourable, when the private sector is at full speed, the government should hold back and put aside reserves to boost its financial strength so that it can provide support when the economy needs it.” Nicolai Rygg (1948), “I økonomisk stormvær” [In stormy economic weather], festschrift for Joh. H. Andresen, also published as an annex to the periodical Statsøkonomisk tidsskrift nr. 3/4 1948, p. 23. In this article, Rygg highlights his assertion that government budgets must balance over the business cycle. 15  Governments consistently overestimate growth in their forecasts (Frankel 2011). But this is difficult; in summer 2008, the average OECD country overestimated the budget situation in 2007 – the year prior to the forecast – in an amount equivalent to 2 percent of GDP (National Budget 2013). 16  In his 1933 pamphlet “Saving and Circulation Regulation”, Frisch proposed the establishment of an advisory committee on the business cycle, composed of economics experts. 6  BIS central bankers’ speeches  In retrospect, we can acknowledge that simple rules of thumb can often be useful. For my own part, many years’ experience of economic policy have led me to notice the prevalence of the figure 4.17 A current account deficit exceeding 4 percent of GDP is often a harbinger of future problems. Spain is a case in point: government finances were fairly healthy, but deficits were building up in the private sector.

Although history never repeats itself exactly, some key features recur: one recurring feature is that boom periods are confused with an increase in the economy’s growth capacity. Good times are mistakenly interpreted as perfectly normal.15 When times are good, it is difficult to gain acceptance for setting aside funds. There are always unsolved tasks in a society, and these tasks attract attention. In the 1930s, Ragnar Frisch understood that it is difficult for politicians to recognise good times at the time. He believed that it was the task of economists to ascertain the cyclical situation.16 When the crisis arrived in 2007, government finances were in disorder. Deficits and debt rose to such high levels that it was difficult for many countries to borrow money. When credibility is lost and lenders draw the line, Keynesian policy has reached its limit. These countries now have no other choice than to cut welfare schemes and public spending. The political fury we are now witnessing in Athens, Madrid and Rome is being directed at today’s political leaders. Perhaps their rage should be directed at those who were in positions of responsibility in the good times, instead of at those who are now left with the washing-up. We have furthered our understanding of economics over the many decades since Keynes, Frisch and others laid the basis of modern economics after the 1930s crisis. Theories have become more advanced, and methods and calculations far more complex. We have reams of regulations.
Some companies already actively support firms in their supply chain to help improve their productivity, the fruits of which can then be shared. A set of structured projects are underway nationally, co-ordinated by Be the Business, which aim to use the supply chain infrastructure to disseminate knowledge and best practice across companies in the long tail. As another example, I recently visited a company which had invested in a new technology centre. This enabled them to simulate all of the processes and products in their complex business. They had created, in effect, a “digital twin” of their business. This technology allowed them to evaluate the impact of potentially productivity-improving changes to their business model, cheaply and quickly. Indeed, it was being used in just this way to drive through those changes. Once established, this digital twinning technology can be applied to any business, large or small, simple or complex. Indeed the company I visited was doing just that, inviting in companies from their supply chain to help them understand and improve their business productivity-wise, in a way which benefitted both sides. If that digital twinning model could be introduced across greater numbers of companies and lengthier supply chains, it could serve as a very effective diffusion engine for innovation. One way of doing so, recently proposed by academic and inventor Philip Bond, would be to create a central digital-twinning infrastructure that could be available to any company across the UK.

7 The gap in manufacturing is around 50%. 8 UK estimates of firm-level productivity dispersion are based on Bank of England analysis of ONS data, whereas non-UK estimates of productivity dispersion are provided by the OECD. Differences in underlying data used may therefore play a role in Charts 5 and 6. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  low road. Capitalism always of course throws up winners and losers, hares and tortoises, gazelles and snails, upper and lower tails. In the UK, however, these differences are far-larger, and have increased by more, than elsewhere. And therein, I would argue, lie the roots of the UK’s productivity gaps. Let me start with the good news, focussing on companies on the high road. The first and most important point to make is that the UK does not lack for innovative, high-productivity companies. If you tour the UK, as I do, you find these “frontier” companies in every region and every sector. Their productivity is world-leading, their technology world-beating, their managers and workers world-renowned. They are inspirational. Micro-analysis of UK companies confirms this anecdotal impression. Chart 7 plots the distribution of UK 9  relative to French and German companies. There are more UK companies in the upper tail than in Germany, with its much-vaunted industrial reputation, and France. The top 10% of UK companies have levels of productivity at least 100% above the median.
Finally, an important dimension of flexibility in our monetary policy that we should not overlook is the focus on avoiding financial fragmentation in the euro area, in particular when the impact of the pandemic has been and remains very heterogeneous across countries and sectors. In December last year, we decided to retain this flexibility in the PEPP reinvestment phase, which was extended until the end of 2024. We should now use this  13  flexibility proactively and monitor whether it is sufficient to ensure our monetary policy is appropriately transmitted across the euro area. 4 Conclusions Let me conclude. I am convinced that the ECB’s new monetary policy strategy, which I have briefly sketched in this talk, constitutes a solid basis for the conduct of our monetary policy. This is so, not just looking ahead to the coming decades, but also for coping with the current high-inflation episode. In this respect, I believe that, in a highly uncertain environment, a careful assessment of the implications that current developments have on medium-term inflation expectations is key, and that the optionality and flexibility that we retain should be exercised gradually and predictably. The direction in which we need to head is clear, but we should not draw premature conclusions as to the time frame. The process will be both gradual and data-dependent. Thank you for your attention. 14  References Ajevskis, V. (2018), "The Natural Rate of Interest: Information Derived from a Shadow Rate Model," Working Papers 2018/02, Latvijas Banka.

About our external scenario, incoming data show improved performance of exports across sectors (figure 9). Still, examining numbers of the first half, we foresee that the export volumes will contract during the year. However, by 2018 they should recover thanks to improvements in the world economy, which coupled with better prices increase our estimated 5  trade balance for next year. The low comparison base due to the Escondida mine strike downtime early this year will also result in higher mining exports in 2018. Thus, in 2018, the current account deficit should be lower than we expected in September, close to 1% of GDP, similar to our 2017 projection. At trend prices, the current account deficit remains at 2.6% on average in 2017-2018 (table 1). Aside from the scenario I have just described for domestic activity and spending, the convergence of inflation to the target also considers a mild depreciation of the real exchange rate that will cause it to converge from where it was at the closing of this Report to its longterm equilibrium within the projection horizon. The baseline scenario also contemplates that the prices of foods, particularly fresh fruits and vegetables, will return to their normal patterns, so their annual inflation will be rising over the course of 2018. About monetary policy, the Board estimates that in the baseline scenario the surprises that have pulled inflation down below expectations do not compromise the convergence of inflation to the target.
Conceptually we can split the obligations of a Defined Benefit pension scheme into two components: pension obligations to current and former staff that have already been accumulated; and new obligations arising from the additional pension rights earned by the current staff in the current year through additional service and any increase in pay. The first component will dominate in the case of anything other than a very new scheme, so let me concentrate on that for now. In turn, I will consider the impact on: a fund that is balanced and hedged; one that is initially in balance but exposed to market risk; and one that is initially in deficit, as well as being exposed to market risk. Now the existing pension obligations will typically be for a fixed flow of real income, that is the pension entitlement will be adjusted for inflation. In principle, an employer could therefore exactly match his pension obligations by holding a portfolio comprising indexed government debt of appropriate durations.5 In this case, a change in the yields on government bonds as a result of QE, or indeed on any other assets, would not alter the position of the fund one iota – its obligations would still be completely covered. In this case, the change in the valuation of the liabilities is exactly matched by a change in the valuation of the assets. Of course, most pension funds do not seek to match their assets exactly to their obligations in this way.

Financial inclusion is supported through a number of strategies amongst which includes increased access to financial services, access to financial information and advisory services and consumer education. Currently, 98% of the adult population in Malaysia have a savings account. Given this greater financial inclusion, banks need to recognise their role and their special relationship with their customers. Customers expect banks to provide relevant financial information to them to ensure that they will be able make informed judgments. Avenues for the public to seek redress is also an important part of the financial safety net. The Financial Mediation Bureau provides an alternative redress mechanism between the service providers and consumers on financial disputes. In addition, with the objective of promoting prudent financial management, the Credit Counselling and Debt Management Agency offers free advisory services. This is to ensure the sustainability and resilience of the household sector. In addition, there is also the BNMLINK and BNMTELELINK at the Central Bank to provide a further interface with the public. The objectives of financial inclusion can also be met with the support of banking institutions as the benefits would justify the effort. Banks and other financial institutions that approach their business strategies responsibly and with the consumer interest in mind will stand to reap long-term gains from enhanced franchise value, a strong reputation and positive association with socially responsible values that will engender public trust and confidence. Public confidence is an important pre-condition for financial stability.
Nature’s education website declares: “Ignoring Population Structure Can Lead to Erroneous Predictions of Future Population Size.”[11] The lesson is no different in markets – underlying market structures matter. CCPs – who are in the risk management business – can help with this by understanding and managing the markets in which they operate. This includes client positions and the role of physical delivery. The recent events in the nickel market are a good example. The historic price moves I just spoke about can be the result of things completely outside of the financial system – weather, plagues, and invasions. But they can also be exacerbated or even driven by market structure. In the case of nickel, much of the price move was related to the build-up of a very large position in the form of a tangled and opaque web of derivative exposures involving a single client. We have seen these before: Archegos, Long Term Capital Management. This time, while the bulk of the contracts were bilateral, many were centrally cleared. There will be important lessons learned from the events in nickel – both with respect to the specific incident and more generally,[12] and I am sure I will have more to report following the conclusions of the independent review we have commissioned. Page 6  When it comes to this early lesson, CCPs could form part of the solution.

There are nominal and real factors that affect commodity price developments. The most important real factor is due to the low price elasticity of not only supply of but also demand for these items. Because of low elasticity, a minor change in supply has the potential to affect market prices significantly. Likewise, a minor change in future real growth prospects has the effect of shifting the demand with a potential of large market price changes. This explains the real sources of commodity price volatility which is recently observed. Regarding nominal sources of volatility, most commonly cited explanations are related to monetary policies of major central banks and the structure of financial markets in commodities. I will elaborate more on real factors that is the lack of sufficient real supply increase in order to meet booming real demand from the developing world. The high growth potential in developing countries suggests that demand pressures are likely to stay with us over the years to come. Combined with the massive financial flows fueled by the exceptionally loose monetary policies, commodity price volatility will probably remain as a major challenge in the years ahead. I believe the key solution here lies in productivity increases in agriculture and energy in the medium term. Regarding agriculture, this necessity is much more evident in emerging markets – in order to keep up with the demand growth, considering the higher share of food in the consumption basket.
Further, since the start of 2013 liquidity conditions at Spanish banks have improved, and there has been a re-balancing of their funding sources. This is the outcome of the diminished tensions on the sovereign debt markets and of improved confidence, along with the lesser fragmentation of euro area money and capital markets. In this respect, retail deposits, which fell, especially in the summer months of 2012, have since been faring better. Since early 2013, they have been posting positive rates of change. The pick-up in deposits has seen the retail funding gap – i.e. the percentage of credit that banks cannot cover with deposits – narrow. That allows them to reduce the need to resort to less stable funding sources, such as the wholesale markets. Against this backdrop, the resort to Eurosystem funding, though holding at still-high levels, has diminished most significantly from its peak last summer, registering a decline of 31% in the first eight months of 2013. In terms of profitability, the exceptional drive by banks in 2012 to comply with provisioning requirements exerted a significant impact on their profit and loss accounts. Indeed, for the year as a whole, losses of over € billion were recorded. The first half of 2013 has marked a change in this tendency. Banks' consolidated profit rose to somewhat more than € billion, despite the fact that provisions continue to adversely affect profit and loss accounts in a period in which the proportion of non-performing assets remained high.

I would like to emphasize once more that the whole legal framework of the banking system is a topic largely discussed nowadays, not only in Albania, but in international levels as well. Nowadays, risk management has turned into a primary issue and is in the focus of national and international institutions. In this way, regulatory systems are advised to be reviewed and elaborated to be better adapted to current developments and to financial system’s perspectives. The financial system does not operate in the vacuum. It functions under real conditions and our task is to adapt to best experiences. I think our task is to identify the best practices and to try to adjust them to the real conditions of our economy, because by adjusting them to the whole regulatory framework and banking activity, we come to a motif and motivation: the European Community. I am confident that you will use this seminar to find out joint elements in the activity of your institutions, as well as to identify the distinctions. I think it would be valuable to identify also the cases that represent what is regarded as the “best practice” in deposit insurance area. In this way, it would contribute to the achievement of the objective to standardize the regional insurance practices and to create a clearer vision on the insurance activity performance in the future. The activity of the Albanian Deposit Insurance Agency is new. As such, its capability of operating in extreme cases is not proved yet.
It is only very recently that the explicit mandate of promoting price stability has been introduced in the Swiss National Bank Act. But central bank independence requires more than just an appropriate legal framework. What are the necessary elements? I see three of them. First of all, to avoid any ambiguity as to what the ultimate goal of policy really is, price stability must be clearly defined. In other words, at some point, a nominal anchor has to be set. This can be an inflation target approved by the government, or a definition of price stability adopted by the central bank. A clear definition of the central bank’s goal underpins expectations and allows an objective assessment of the implemented policy. It also protects the central bank from counterproductive bargaining concerning the appropriate direction of its policy. Secondly, monetary policy must be forward-looking. Because monetary actions affect prices only after long lags, the central bank’s policy must be pre-emptive. This implies that in certain circumstances, policy decisions taken in order to guarantee price stability in the long run may be difficult to communicate, or even unpopular. It is thus of key importance that the goal and the strategy of the monetary authorities are well understood by the market and the public. This leads me to two of the most important aspects of modern central banking: accountability and transparency. For sure, central banks have to be independent in order to fulfil their job of maintaining price stability in the long run.

But in a democratic society, each institution must be held accountable for the consequences of its policy decisions. The central bank is no exception. I am deeply convinced that its independence might be in danger if the general public perceived monetary policy as not in line with the central bank’s mandate. To guarantee their independence in the long run, central banks must therefore invest a lot of energy in communicating and explaining their decisions. Although this might appear constraining, it is in their own interest if the general public has a proper understanding of the monetary action. I also believe that transparency is not only necessary for the accountability of a central bank’s action, but that it also has its own merits: transparency reduces any uncertainty surrounding monetary policy and the future course of interest rates; it makes private planning easier and enhances overall efficiency. Transparency reinforces both the central bank’s independence and the market’s support for monetary policy. Is there any chance to survive outside monetary policy blocks? I would like to conclude these remarks by addressing the more fundamental question of the feasibility, or even desirability, of pursuing an independent monetary policy in the vicinity of a large monetary zone. Is it realistic to assume that the SNB, for example, can follow a monetary policy that differs from the one set by the ECB? Wouldn’t it be preferable to have a fixed exchange rate between the Swiss franc and the euro?