samchain/econo-pairs-v1 huggingface dataset:
I’ll then circle back and discuss briefly the behaviour of the demand for broad money. Page 18  The demand for central bank money. In March 2020, when the world was struck by the pandemic, there were violent moves in prices of financial assets, volatility rose sharply and market liquidity – the preparedness of financial institutions to provide short-term credit – dried up. In order to meet margin calls on derivative positions many investment firms were required to sell even safe assets (government debt). Whatever the underlying vulnerabilities that fed it, this “dash for cash” can be thought of in this context as a sharp increase in the demand for central bank money[10] – in Chart 9, a rightwards shift in the MD line. Though the particular circumstances were different each time I think you can characterise the conditions in early 2009, and again during the LDI crisis last October, in a similar manner. Meeting such demand – matching the rightwards jump in MD with a similar shift in MS – is not monetary easing: it’s the forestalling of a market-induced tightening of monetary conditions. Without that matching supply, bond yields would rise, asset prices would fall and aggregate demand and inflation would weaken (in the IS-LM model, an unmet rise in the demand for money pushes the “LM” curve to the left). And it’s one reason why, in the data, you’d expect – at least occasionally – to see shifts in central bank money that are not then followed by stronger demand and inflation[11].

They inevitably reduce real national income  Chart 16: Monetary policy cannot offset the fall in real incomes caused by a terms of trade shock  Page 27 Sources: ONS, Bank of England, Bloomberg Finance L.P. and Bank calculations. Nominal wages in the chart are private sector regular pay. It’s interesting too to ask what the world might now look like had this very steep path for interest rates been taken – but without any subsequent rise in import prices. The outcome of this experiment is the ‘alternative variant’ line in Chart 17. The predicted result – this despite the prior growth in household deposits – is a steep fall in inflation, well into negative territory. All this makes it a challenge, I think, to argue that the rise in broad money in 2020 is the main (or even an important) contributor to the inflation that’s followed. Chart 17: In the absence of big rises in import prices tighter policy would have pushed inflation into negative territory  Sources: ONS, Bank of England, Bloomberg Finance L.P. and Bank calculations. The ‘alternative variant’ reflects the same monetary tightening imparted in the ‘scenario’ but no increase in the contribution of import prices (energy and other goods) to CPI inflation relative to its pre-Covid average.
And investigations of further cases and criminal actions, in foreign exchange and other markets, remain ongoing. Some of the cases already brought by colleagues at the Financial Conduct Authority have resulted in the publication of truly shocking evidence about the behaviour by some individuals in these markets. What particularly struck me in reading some of that evidence was how casual their attitude appeared to be towards the abuses they perpetrated. In one example, a trader mentioned to his manager that he had asked a colleague to lower the firm’s Yen Libor submission, adding that “every little helps…it’s like Tescos.” Was the  2  BIS central bankers’ speeches  manager concerned? Not a bit of it. “Absolutely, every little helps”, he replied. 1 Some individuals seem to have enjoyed a perverse kind of prestige from their involvement in the process. One Libor submitter was told by a grateful trader for whom he had manipulated a submission that his “name will be written in golden letters” should he ever write a book on the business. 2 As somebody who believes in markets, I find this behaviour outrageous. How did this happen? How did this happen? Some academics I have spoken to think that part of the answer may lie in the field of moral psychology. 3 That view suggests that initial transgressions occur because many decisions taken by those in financial markets are done by way of automatic, fast thinking – “System 1” thinking in the language of Nobel Prize winner Daniel Kahneman 4.

In the consultation document, we ask whether that process should go further, whether through industry-led standardisation, removing barriers to entry for new electronic trading platforms or utilities, or further transparency enhancements to practices such as new issue allocation. Or could imposing standardisation or transparency standards in excess of those already in place harm, rather than enhance, market functioning and risk transfer? Do practices such as ‘internalisation’ – where banks match off client orders internally – pose any challenges? 2. Competition and market discipline  The second structural category is competition and market discipline. Concentration in some FICC markets is relatively high both amongst intermediaries and amongst the major asset managers, and has risen further since the financial crisis. For example, the top six dealers account for over 60% of the UK interdealer FX market. In some cases, firms have also engaged in horizontal or vertical integration – raising potential conflicts of interest and concerns about information asymmetries. A number of recent misconduct cases have involved attempted collusion, abuse of market power or inadequate management or control of conflicts. The ability of FICC market participants to exercise market discipline against those engaging in misconduct may also have diminished somewhat in recent years. At the same time, the market maker system has delivered important benefits, including tight pricing and deep and near-continuous liquidity in a wide range of market conditions.
Inadequate or inconclusive data in areas such as measuring financial literacy, consumer awareness and financial education means that it is difficult to assess the cost and benefit of the proposed policy framework and its impact on financial inclusion. Conclusion Allow me to now conclude my remarks. The successful implementation of policy work in the area of financial inclusion requires the availability of quality data. The fact that this area still remains relatively unexplored, compared to the availability of data for corporate business, financial markets and other more sophisticated aspects of finance, clearly suggests that much work remains to be done. The magnitude and scope of the topic also requires a diverse group of policymakers to collaborate on a long-term basis. The establishment of a working group to improve the quality of financial inclusion data is therefore most timely, and will benefit policymakers in making better and more informed policies, as well as tracking the outcome of policy initiatives. In addition, it may also serve to increase the visibility new issues areas which are currently not being given sufficient priority by policymakers. I would also like to encourage the working group to consider, in the longer term, the development of some form of a composite financial inclusion index. The composite index will  2  BIS Review 88/2010  benefit everyone by providing a broad measure of trends, facilitate comparisons between distinct segments and create a benchmark for policy work in financial inclusion.

On the demand side, economic activity relied mostly on foreign demand and public spending, while private sector contribution was low. Indirect data support the assessment for a weak private consumption performance during 2011 H1. In spite of increased available income and improved bank lending – as indicated by higher employment, real wage and consumer and house-purchase loans – consumer confidence was low. The Albanian consumer continues to be cautious in spending, displaying added saving preference over a number of quarters. Naturally, this behaviour is a structural correction of the consumption model shown over the past years, but the slow performance of consumer spending reflects, also, added uncertainty about the future. While the first component is welcomed, in the context of preserving macro- and micro balances, the second component may and should be corrected: households consumption has the potential to grow and be stimulated in the short and medium run. Taking into account the significant impact of consumption on the GDP, its performance will substantially condition economic growth during this time span. 2  BIS central bankers’ speeches  Private investments increased at moderate pace during 2011 H1 as illustrated by higher loans for investment and imports of capital goods. Although financial terms – availability, liquidity and bank interest rates – are significantly improved, the existence of spare capacities in the economy limits the demand of businesses for investment. In the short run, the position of economic activity operating below its potential conditions a slow performance of investments.
Rather, the purpose is to overcome weaknesses in our analytical tools related to the possible buildup of financial imbalances resulting from keeping interest rates low over time. Monetary policy will continue to react to shocks that affect the medium term path for inflation, output and employment. After a decade of learning, inflation targeting has become more flexible. Flexibility is good to have, and easy to lose. The inflation target has to be reached over time, otherwise our credibility is put at risk. In assessing various considerations, monetary policy must be geared to meeting its primary objective of low and stable inflation. There are limits as to how many goals monetary policy can meet. Other instruments must be used to attain other objectives. To ensure that new or further financial imbalances do not build up we also need a tighter international overarching policy framework to address the stability of the financial system as a whole. A macroprudential policy framework should be part of this new framework. Macroprudential policy framework Financial market participants can trigger self-reinforcing economic fluctuations. Individual banks and investors do not necessarily take into account the overall risk in the financial system. The consequences became clear during the financial crisis: banks had inadequate equity capital, relied excessively on short-term wholesale funding and had insufficient buffers of liquid assets. 2  BIS central bankers’ speeches  The new international regulatory framework is intended to remedy this situation.

21  NOU (Official Norwegian Report) 1999: 27 “Ytringsfrihed bør finde Sted (There shall be freedom of expression)”. Sejersted was awarded the Ossietzky Prize for his contribution to freedom of expression in 2008. 22  In the Norges Bank Act of 1985, Norges Bank is required to “inform the public of the assessments on which monetary policy decisions are based”. In October 2009, a new government communications policy was laid down by the Ministry of Government Administration and Reform, promoting transparency as an important principle of good communication. The government’s communication is required to be open, clear and accessible. The government is also required to ensure that relevant information reaches the relevant parties and that the information is adapted to the relevant target groups. BIS Review 140/2009  5  Modern economic theory argues in favour of transparency I mentioned that the previous view was that monetary policy operated by surprising economic agents, while the prevailing view is that it works best by being predictable. According to modern economic theory, economic decisions are heavily influenced by expectations. 23 This has also become an important economic policy recognition. Today’s key rate is important, but even more important is the expected key interest rate ahead. When the owner of a firm takes up a loan to build a new factory, the expected interest rate over the life of the loan is taken into account.
6/6  BIS - Central bankers' speeches

In the years leading up to the start of the crisis there was a dearth of prudential supervision, but I am quite prepared to acknowledge that there have been periods where the opposite has been true. My point here is that I don’t think the system of integrated regulation demonstrated the ability to deliver a stable equilibrium of conduct and prudential supervision. Third, there is something of an inbuilt tendency within integrated regulation to play down the active debate of issues where conduct and prudential regulators find themselves with potentially conflicting objectives. Of course, it can be said that the “twin peaks” approach that we are introducing could lead to endless debate and no outcomes. My own view is that that is not correct, and that the benefits of clarity in defining the objectives of the PRA and the new Conduct Authority, the FCA, will dominate any other consequences. There are several important reasons why reform of financial regulation will, in my view, be an important step forward, starting with establishing very clear public policy objectives for financial regulation to which we, as the regulators, are fully committed. For both banks and insurance companies, the PRA will have the objective of promoting the safety and soundness of firms. Consistent with this objective, it will focus on the potential harm that firms can cause to the stability of the financial system in the UK. We define a stable financial system as one that is resilient in providing the critical financial services that the economy needs.
Such payments services  4  BIS central bankers’ speeches  make the payments safer and faster. Payments are the circulation of money which is the life blood of the economy. Sixth, agent of the government This is the function that leads to a lot of criticism on the independence of the Central Bank. Six most important agency functions are the management of public debt, fiscal agent, official depository, financial adviser, management of Employees’ Provident Fund and Administration of Exchange Control Act. The most important agency function of the Central Bank is the financial/economic adviser to the Government. In this regard, as the Central Bank is responsible for the monetary policy in its entire scope and escalation. Conventionally central banks have had the responsibility to advise the Government on fiscal and other operations to the extent that they impinge on the economy and advise as to what should be the best course of policy action for the economy. Given the nature of the central banks’ functions, advance access to macroeconomic and financial information and their expertise, central banks are the closest economic advisers to the Government. The Central Bank statutorily submits a number of reports such as the Central Bank Annual Report as part of this advice. In addition, the Central Bank provides advice on various policy matters on an on-going basis to the Government. However, central banks world over are blamed for not providing constructive and impartial advice because of the independence issue. I will talk on central bank independence in a moment.

I would pray that you, after reading the Exter Report, may not complain that Central Bank has not done enough to Sri Lanka economy and economic welfare of the public in terms of the mandate given to it by the public. The Central Bank’s all powers and functions center around two objectives. Those are the securing of economic and price stability and financial system stability with a view to encouraging and promoting the development of the productive resources of Sri Lanka. This is not the forum for me to define technically each objective as there is no single accepted definition. However, those objectives in nutshell mean securing stability of the economy. Economic and price stability means the economy running on a sustainable growth path with a supportive low rate inflation. Financial system stability means financial institutions and markets operate without bubbles or contagious failures where the trust of the public in the financial system is maintained, stability of the Economy, prices and the financial system are inter-dependent. The stability of the Economy helps the public to make and keep their plans for the future which ultimately encourages and promotes development of productive resources of Sri Lanka. This is what will promote living standard of the public by increasing production, employment and real income. This is what the MLA has empowered the Central Bank to do. Thus, you may understand the enormous national interest entrusted to the Central Bank.
William C Dudley: New York City's return from the brink Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Lotos Club, New York City, 19 October 2016. * * * It is a great pleasure to have the opportunity to speak here this evening at the Lotos Club, one of America’s oldest and most distinguished literary clubs. I am, of course, very happy to participate in tonight’s public affairs dinner and to accept the Lotos Award of Distinction. Tonight I would like to take a moment to discuss some of New York City’s recent history and its return from the economic brink. Aside from being a story of historical interest, I believe there are lessons embedded in New York City’s experience that are relevant to other cities and municipalities that find themselves struggling today. As always, what I have to say reflects my own views and not necessarily the views of the Federal Open Market Committee or the Federal Reserve System.1 Given the historical relevance of today’s date, it seems appropriate to start by recalling what happened on this day 29 years ago. In what has come to be known as “Black Monday,” the U.S. equity market suffered one of its steepest one-day drops in history, with the Dow Jones Industrial Average falling 508 points—a decline of more than 20 percent. This capped one of the worst weeks ever for the U.S. stock market.

History has taught us that Malthus and its intellectual descendants have always been proven wrong. The whole process of economic growth was borne out of the ability of mankind to overcome scarcity through human inventiveness and technical progress. It won’t be different this time. I am also very optimistic in the long run on the fundamental rebalancing of the world economy. Income per capita levels in the emerging world will progressively converge to those of the advanced economies and this will present gigantic market opportunities for producers in those countries. At the same time, tensions and insecurity created by differences in income and productivity levels will abate and disappear. The transition process, however, may be bumpy. Unavoidably, advanced economies, especially in Europe, will have to adjust to the permanent shift in world comparative advantages. They will have to increase flexibility and, above all, develop and preserve their most precious resource – human capital – through education and excellence in research. Emerging economies will have to face the dual challenge of aging and reducing inequalities. During that transition period, which may last several decades, it is important that the whole process is not derailed by shocks and crisis borne out of imbalances in the world economy. This is where the twin questions – (1) of the level and distribution of global demand and (2) the level and allocation of world savings – may matter most. Inside the G20, there is broad agreement on the need to rebalance aggregate demand.
Regularly canvassing the views of the public, on the economy and on the setting of monetary policy, would be one way of harnessing that wisdom. This would allow central banks to listen to a potentially much wider and richer array of views on the setting of policy, in particular from those who might otherwise be distant, disenfranchised or distrustful of central banks and their actions. It would open central banks’ ears (and eyebrows) to a wider range of societal stakeholders when setting policy. The information provided from the public could serve as another input to the policy-setting process, much as monetary policy rules (and other data) do today. What are the public telling us about the right setting of policy and why? Clearly, neither rules nor polls should be followed slavishly - the scope for misinformation and mishap is simply too great. And the whole purpose of delegating policy to an independent third-party is to avoid the short-termism that may sometimes affect the general public. Nonetheless, if crowds, like rules, sometimes contain wisdom – different perspectives, different views, different narratives – then harvesting this information could be an important additional input into the policy 79 80 81  Earle et al (2016). Mackay (1841). Tetlock and Gardner (2016). 26  All speeches are available online at www.bankofengland.co.uk/speeches  26  process. It would help reach, and solicit direct feedback from, those parts of society otherwise out of central banks’ reach. And it may, as a by-product, also improve public understanding of policy and the economy.

42  Economists were towards the  bottom of this list, well below scientists, historians, weather forecasters and even sports commentators  39  Akerlof and Shiller (2009), Shiller (2017). Shiller (2017). Elsewhere, I have called this widening trust gap the Great Divide (Haldane, 2016). 42 YouGov (2016). 40 41  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  (Chart 11). There is always someone worse off than you – in this case it was politicians – but the overall picture is discouraging. If trust in institutions is low, and if trust in economists is low, the backdrop is not propitious for institutions containing (lots of) economists. So it is with central banks. Chart 12 shows some measures of trust or confidence in the four major central banks over the past decade. In the UK, the US and the euro area, trust has fallen over that period, often coincident with the global financial crisis. The Bank of Japan has been an exception, although its financial crisis came rather earlier. If we turn from trust to understanding, the picture is similar. In 1997, Robert Shiller conducted a survey of public attitudes towards inflation. He concluded then: “there will probably always be a communications gap between economists and the public. But there appears to be rather more of a gap than most of us would have expected”. 43  In the period since, there is little evidence this gap has closed.