samchain/econo-pairs-v1 huggingface dataset:
Whether inflation is actually an efficient tax – whether the economic harm it causes is worth the fiscal benefit – is far from clear. Certainly an extra bout of inflation that’s fully anticipated, and that therefore raises nominal interest rates and bond yields in advance, does very little to improve the government’s financial position, and even less now than in the past. That’s because the public sector has almost nothing in the way of zero-interest liabilities. If higher inflation and nominal growth pushed up the demand for physical cash the government might make a little more from that source. (The economic value of cash is higher than the cost of producing it. The difference, known as “seigniorage”, is a source of revenue for the public sector3). But the sums involved are 2 On their own, the instruments of policy are not a reliable way to discern whether there’s “monetary finance” of the government. But they may be more informative alongside other information. For example, if the central bank is easing policy in the face of clear inflationary pressure that might suggest it’s putting weight on some other objective: the joint behaviour of instrument and target can be informative. It might also tell you something if the central bank eased policy and, at the same time, the authorities introduced restrictions to limit or prevent people from selling the government’s debt. That way, the central bank might be able to reduce borrowing costs for the government alone – i.e.

Reflecting the Federal Reserve’s historical interest in the mitigation of settlement risk, and in anticipation of the emergence of real time retail payments in the United States, we are currently exploring an expansion in operating hours of the National Settlement Service to support the final and irrevocable settlement of interbank positions in central bank money. We are pursuing this interest in three phases. In 2015, we expanded the NSS operating window modestly, opening an hour earlier at 7:30am and closing a half hour later at 5:30p.m. Subsequently, we announced our readiness to open NSS as early as 9:00 p.m. on the prior calendar date, consistent with the operating window of the Fedwire Funds Service, if requested. Finally, we are currently evaluating prospects for weekend settlement hours, perhaps encompassing a 24x7 operating window for NSS, for which we are validating demand prior to finalizing our direction. It is critical to consider these matters in advance of the advent of real time retail payments to anticipate the needs of customers and to respond to the interests of policy makers. The Federal Reserve’s Strategies for Improving the Payment System also aspire to achieve greater end-to-end efficiency in cross-border payments, an historical pain point for end users. In support of this interest, and following an exhaustive season of consultation with industry leaders, we are currently in the midst of a multi-year effort to adopt the ISO 20022 payment message formats for the Fedwire Funds Service.
It goes without saying, however, that as a result of the rapid development of technology, especially in the ICT area, which drastically lowered the cost of the said exchange, the international integration of trade, investment, financial and other services is now more advanced than it has ever been before. The Economic Policy Committee of the European Union 3 points out four factors that have lead to the rapid development of globalisation over the past years: •  multilateral trade liberalisation; the average customs duty has been lowered by ca. 30%  •  successful economic reforms in many developing countries, especially in China and India  •  the technological advancement, especially in the ICT sector and transportation, which has significantly lowered the cost of trade. To give you and example, fees for sea, land and air transportation, telephone calls and satellite calls went down by 21%, 30%, 95% and 88%, respectively. •  the technological advancement has blurred the borderline between what can and what cannot become subject to international trade. Globalisation may create new macroeconomic interdependences to replace the traditional ones that we know from the books on economics. The majority of economists, politicians and investors may still not quite keep at pace with the “seismic changes” that take place in the economy 4 . However, if we really are witnesses to “seismic changes” in the economy, it may be worthwhile to have a closer look and think about their meaning. Globalisation and its impact on the economy may be viewed from different perspectives.

Role of the financial system in supporting green technology The financial system has played an important role over the last few decades, in facilitating the economic transformation and growth of the real economy, by channelling investments into productive sectors. This role has been significantly fortified by a strong and well-capitalised financial system in Malaysia, that has been built through comprehensive reforms undertaken over the last decade. Our financial system today is characterised by solid financials, and strengthened risk management and governance practices. Combined with ample liquidity and improved credit infrastructures, the financial system is well-positioned to support new areas of growth that are viable and promising, including those in the green technology sector. To meet the needs of the green technology sector, I would like to highlight two points that might reduce the information asymmetry between financial institutions and businesses, a pre-requisite for building a sustainable financing ecosystem for this sector. Firstly, financial institutions must have the capacity and capabilities, to assess the viability of projects despite the complex, diverse and rapidly-changing nature of green technology. Secondly, green businesses need continuing advisory support as they may be technically strong, but lack the capabilities to develop comprehensive business plans and cash flow projections, needed to demonstrate that a project is viable to financiers.
It calls for an incomes agreement between workers and employers under which everyone emerges better off in the medium-term, although everyone must take a hit in the short term. The widespread use of automatic indexation clauses in public expenditure must also be avoided. In a climate as uncertain as the current one, an agreement of this nature would provide a very valuable dose of stability and certainty, allowing the duration and costs of the current inflationary shock to be kept to a minimum and paving the way for the necessary economic adjustment, generating more jobs and improving the welfare of the general public. The performance of our economy in the coming years in large part rests on our ability to reach these difficult agreements. 10

You have provided exemplary leadership, driving progress on improving the functioning of payments systems and broader financial market infrastructure, both within the euro area and internationally. If anyone has prepared us to withstand the coming deluge, it’s you. Whether my remarks leave you seeing the world’s glass as half full or half empty, I’d ask you to charge yours now to toast, Benoît Cœure. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9
Banks too are also seeking to apply these tools and techniques to the range of their activities, many of which used to be seen as the preserve of experts: from risk assessment, to financial crime prevention and trading in the financial markets. These trends are likely to accelerate. Banking supervisors need to adapt to technology too. Supervisors need to stay abreast of how technology is changing the risks the banks are running and how they are being controlled. And just as advanced analytics are opening an ever wider range of banks’ activities to automation, so too are they creating new possibilities for us to supervise banks more efficiently and effectively. But until machines can fully replicate human cognition – a remote possibility for the foreseeable future – supervisory judgment will still have a central role to play. My central expectation is that over coming years the PRA will develop a form of ‘’cyborg supervision’ ‘ involving humans and machines working ever more closely together and leveraging their comparative strengths. 10  Bholat, D., Brookes, J., Cai, C., Grundy, K., and Lund, J (2017) 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Figures Figure 1: The quantity and cost of data  Source: Financial Stability Board (2017)  Figure 2: Textual complexity of the PRA rulebook  Source: Amadxarif et al.

It’s easy to think of the Fed as just setting interest rates, and of course that’s a major part of what we do. But we do so in order to achieve two goals set by Congress: maximum employment and price stability. In Fed-speak it’s called the dual mandate. There are serious debates taking place amongst economists and policymakers about what maximum employment actually looks like, and they probably deserve another speech of their own. But I promised not to deluge you with numbers, so I’ll focus on a few highlights. The unemployment rate last year averaged just under 4 percent, the lowest such annual figure since 1969. The latest jobs numbers also showed very strong growth, with over 2.6 million jobs added last year. The ongoing strength in the labor market has led to encouraging gains in wages. No matter how you cut it, the labor market is strong, consistent with our maximum employment goal. When we say price stability, our goal is to keep inflation around 2 percent.1 Those of you who are of my generation will remember the runaway inflation of the 1970s and early 1980s. Obviously that’s something we must avoid repeating. But the challenge of more recent years actually hasn’t been too high inflation. Instead, it’s been inflation that’s persistently too low. Over the past decade, inflation has more often than not come in below our goal. But things are looking better.
So, even if increased trade with the more rapidly growing markets in the BRIC countries may boost Sweden’s export industry somewhat, we can also expect negative thirdcountry effects from a slowdown in the United States and the euro area. Financial channels However, it is not only through trade that Sweden is affected by weaker economic development abroad. We are also affected through the financial markets. These markets have become increasingly interlinked, which is illustrated not least by the recent turbulence on the stock market. As Figure 6 shows, share prices on the various stock markets are highly correlated. Share prices have fallen on the stock markets of the world recently. However, the fall has been particularly substantial on Stockholmsbörsen, which has fallen by 21 per cent since the turn of the year, while the Dow jones index and S&P 500 index have fallen by 1 and 4 per cent respectively. The Swedish households’ holdings in shares in companies listed on Swedish market places have increased by over 475 per cent since the early 1990s.4 This means that the fall in share prices entails a reduction in wealth, which has a certain restraining effect on Swedish household consumption. This in turn has an impact on growth and employment as household consumption, adjusted for its import content, constitutes around 35 per cent of GDP in Sweden.

Growth will also slow down due to the recent financial turmoil.   A lower rate of growth in Europe and the United States will slow down growth in Sweden too, as these regions constitute such important export markets for Swedish companies. This is one reason why monetary policy in Sweden was made more expansionary September.   We can expect monetary policy to remain expansionary in the United States, the euro area and the United Kingdom as it may be necessary to compensate for the fact that several countries will need to implement fiscal policy tightening in a relatively weak economic climate.   In my view, expectations that monetary policy will continue to be expansionary in the United States, the euro area and the United Kingdom have also had an expansionary effect on Swedish monetary policy. When the repo rate was set in September, I supported the decision to leave the repo rate unchanged and advocated a larger downward adjustment of the repo rate path than the majority. One of the important factors behind this stance was my view that Swedish interest rates cannot deviate too much from foreign rates without affecting the exchange rate, and the exchange rate is of great importance to inflation. Slowdown in economic activity abroad During the summer the financial markets have been characterised by considerable turbulence as a result of the sovereign debt problems in the euro area and the United States.
20  The algorithm also puts some weight on smoothing of the interest rate path. For more information on COMPASS, see Burgess et al (2013). BIS central bankers’ speeches  17  Chart 29: Simulation of Bank rate and CPI inflation Path for Bank rate  CPI inflation  Per cent 1.5  Per cent 3 2.5  1  2 1.5  0.5  1 0  2013  2014  2015  2016  2017  -0.5 2013 2018  0.5 2014  2015  2016  0 2018  2017  February IR Simulation with a lower bound at 0% Simulation with a lower bound at 0.5%  February IR Simulation with a lower bound at 0% Simulation with a lower bound at 0.5%  Source: ONS and Bank Calculations. Simulations show optimal policy under full commitment. Were downside risks to inflation to materialise, this case is strengthened. Chart 30 shows the optimal policy paths if we assume the starting level of slack is larger in line with Chart 18. The interest rate path now implies that rates should be cut and held at their lower bound for longer. This alternative policy path returns output and inflation to target sooner, at the cost of a more significant over-shoot.

Chart 16: IMF estimates of global price Phillips curve slopes Interquartile range  Median 2.0  1.5  1.0  0.5  0.0 1961 1967 1974 1980 1986 1993 1999 2006 Sources: IMF (2013). Chart 17 shows the results from this exercise. Wages and prices are both weaker throughout: at the two-year horizon, wage growth is 0.6 percentage points lower than in the February Inflation Report, while inflation is 0.2 percentage points lower. In other words, a flatter Phillips curve would generate a downside risk to the inflation outlook at the policy horizon. A final explanation for the wage puzzle is that weak wages are signalling that the output or unemployment gap is larger than currently estimated. There are a number of potential sources of such additional slack, including greater spare capacity in firms, a greater willingness among workers to increase their average hours, or a lower long-term rate of unemployment than is currently estimated by the Bank.10 How much additional slack? Imagine you asked yourself how much slack would be needed to resolve the wage puzzle of the past few years. Even with a very conservative estimate of the Phillips curve slope, the implied degree of slack could be somewhere close to 4%, materially above the MPC’s current central view of slack of around ½%.
The reasons for the modest forecast is partly that such a move is associated with costs, that the same rules apply for immigrants and domestic workers in the labour market, and last but not least that mobility is fairly low in the new member states, for cultural and housing reasons among others. A big problem in countries with very high regional unemployment, such as Poland, is that people are not even moving within the country, in spite of vacant jobs and wage differentials of over 50 per cent. Even though six months is undeniably too short a time for assessment, it has been recorded in Swedish media that not a single person from the new member states to date has applied for social welfare or other form of benefit for living in Sweden. Looking for work or applying for benefits in another EU country is both associated with more bureaucracy and rules and is more costly in terms of living and housing than what many people who have never been in that situation know. This is a problem because the labour in the new member states is needed in the old ones. The old countries in the EU have presently a highly unfavourable demographic situation, as previously broad age groups are retiring and the base of active people to support them is being reduced. In Sweden today, each person in the active population supports 0.29 people over 65; by 2030 this ratio is estimated to have risen to 0.42.

The flexibility of their wages and prices makes them therefore unusually well-suited to a currency union like EMU. At the same time, these countries have not shied away from reforms that many leading EU countries have not yet been able to bring about. Estonia, Latvia, Lithuania, Hungary and Poland have, for example, carried out comprehensive reforms of their pension systems, which now resemble the Swedish model with savings partly invested in funds. In these areas in particular, it is rather the EU that has something to learn from the candidate countries than the other way around. It is as Pope John Paul II said, that now finally can “Europe breathe with both lungs”. The new member states enrich the EU, not just economically but also intellectually, and of course also culturally and in human terms. The enlargement puts the EU in motion; not just the trade and investment, but also the institutions and the ideas. BIS Review 51/2004  5
Debit and payment card transactions have become faster and cheaper – in part due to regulation.11 As a result, new actors, including non-banks, have emerged – transforming the UK payments system landscape. These have added new services or functionality to existing payment systems or taken over some of the functions previously performed by banks. 10 HM Treasury has established and will chair the JACS Group, bringing together the Payment Systems Regulator (PSR), the Financial  Conduct Authority (FCA) and the Bank of England (BoE). This is within the context of the Government’s policy to safeguard access to cash for those who need it, whilst supporting digital payments. See the ToR at https://www.gov.uk/government/publications/joint-authorities-cash-strategy-group-terms-of-reference 11 Examples include the EU Interchange Fee Regulation and moves by the European Commission against certain card providers, aimed at promoting competition and reducing the cost of accepting cards for merchants. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  These include the so-called ‘E or electronic money’ providers who provide online payment services. The Bank of England is supporting these innovations. We are carrying out a major renewal and upgrading of the real time settlement system (RTGS), the central payments infrastructure which sits at the heart of all the UK commercial bank money payment systems. This will enable us further to support innovation and future developments in retail payments. We have already opened up direct access to the existing infrastructure from 21 firms in 2006 to 216 today, which now includes non-bank providers of payment services.

Bruno Gehrig: Moving among currency giants – a Swiss perspective Speech by Prof Bruno Gehrig, Vice Chairman of the Governing Board of the Swiss National Bank, at the Swiss-American Chamber of Commerce, Zurich, 16 January 2001. *  *  *  First of all, I should like to thank you for the pleasure and delight of being invited to speak to you today. At the same time, I should like to emphasise how much I appreciate the exemplary and highly successful activity of the Swiss American Chamber of Commerce. Your organisation plays an invaluable part in the economic, political and - most important of all - in the personal relations between US and Swiss citizens. In my speech entitled "Moving among currency giants" I should like to outline a few ideas under four different headings. I shall start out with a few remarks on the system of floating exchange rates, which we have more or less learned to live with since 1973, the time of the breakdown of Bretton Woods. This will be followed by some considerations on the always topical subject of short- and medium-term currency movements. After this bird's eye view of general developments, the frog perspective will be highlighted. I will deal with the special features of our small currency, and end by drawing a few conclusions for the SNB's monetary policy.
The aim of such rules would be, in a crisis situation, to split off those units of a bank that are important for the functioning of the economy and wind down the rest. This does not mean, however, that this type of approach would question the universal bank model as such. The SNB is aware that rules governing the organisational structure of large financial institutions are not easy to draw up. Legal and operational aspects would therefore need to be analysed with the requisite care and any regulations drawn up in close collaboration with the banks affected. We are convinced that everything needs to be done to implement one of these approaches for facilitating the wind-down of large financial institutions. If significant progress is not achieved within a reasonable time frame, measures that address the size of the banks should also be examined. One way in which the size of a bank can be influenced is through capital regulations. Capital requirements that are dependent upon size reduce a bank’s incentive to inflate its balance sheet without restraint. Measures with a direct impact on the size of banks are also conceivable. A size restriction would of course be a major intervention in an institution’s corporate strategy. Naturally the SNB is aware that there are advantages to size. For this reason, the advantages and disadvantages of such a measure would have to be examined and weighed up very carefully.

Their capital base is high by historical standards and they were able to build up their liquidity reserves last year. However, for these banks, too, the economic downturn will represent an increasing challenge. The outlook for the banks is also shaped by the negative forecasts for the entire world economy. These suggest a substantial deterioration in credit quality – including for  1  The figures published in our publication, Banks in Switzerland, are reported at parent company level, not at group, or consolidated level. According to these figures, the total loss for the big banks amounted to some CHF 38 billion. Cf. press release of 18 June 2009 on Banks in Switzerland for further details. BIS Review 77/2009  1  Switzerland. Consequently, increasing loan losses, substantial reductions in earnings and a deterioration in the capital situation may be expected for a large number of banks. However, cantonal, regional and Raiffeisen banks appear in relatively good shape to withstand these negative developments. The situation for the big banks appears more difficult. In addition to the still sizeable market risks, they face significant credit risks overall. Simple comparisons with earlier crisis periods show that potential losses on traditional lending are high, when set in relation to the capital cushion. The longer and deeper the recession, the greater these potential losses will be. In our basis scenario we expect the economy to recover gradually as of 2010, both internationally and in Switzerland.