samchain/econo-pairs-v1 huggingface dataset:
In the August 2018 Inflation Report, the MPC set out its framework for thinking about the equilibrium interest rate, which is also described in further detail in a background paper coauthored with Bank staff that will be published alongside this speech. [3] That framework decomposes the equilibrium real interest rate, sometimes called r*, into the sum of two components. The first component, called the ‘trend real rate’ or upper-case R* for short, is driven by long-term structural factors. The second component of (lower-case) r* reflects the effects of cyclical shocks to both aggregate demand and supply and so can vary substantially over the short to medium term. [4] My focus today is on the structural narrative that shapes the policy landscape in the long run. Accordingly, I will look at the trend real rate (upper-case R*) and in particular at its determinants at the global level over the past sixty years or so. For an open economy like the United Kingdom, the trend real rate is pinned down by global forces; as capital is free to move around the world, interest rates would depend on the balance of savings and investment in other countries as well as the United Kingdom. Global R* thus acts as a long-term anchor for the UK’s domestic equilibrium real interest rate. Understanding the relative importance of the different secular factors that drive Global R*, therefore, sheds light on the forces that may ultimately shape the evolution of domestic real interest rates.

If we are to prevent another crisis, action is required on both of the fundamental causes. First, we need to resolve the problems caused by massive capital flows from poor to rich countries. Yet the imbalances are growing again. This problem can be tackled only by international cooperation – most obviously through the G20 – and I hope that the trade union movement will continue to engage with that process. Second, our financial system needs radical reform. Slowly but surely, we must move towards a banking system that does not put both the economy and your members’ livelihoods at risk. In the long run, banks will have to hold much more capital and be much less highly leveraged. Part of the answer is improving the way we regulate banks, and devising policy tools to control the risks taken by the financial system as a whole. The aim should not be to prevent all bank failures. Just as with every other company in the economy, banks that get it wrong must be allowed to fail, without risk to ordinary depositors or taxpayers. In 2008, banks were bailed out not to protect them but to protect the rest of the economy from the banks. That may not seem fair – and it isn’t – when other companies, such as Jaguar, had to stand on their own feet or go to the wall. So banks too must face market discipline. But we need to do more than reform our banking system.
The differences compared with developments during the inflationist and unstable 1970s, often entitled “The Great Inflation”, have been so notable that this development has been awarded its own title in academic research – “The Great Moderation” 6 . Although the reasons for the greater real economic stability are not entirely clear; there are hypotheses that economies have undergone various types of structural changes which have subdued the fluctuations – such as improved stock management among companies and financial innovations – or that the shocks to the economies have quite simply been smaller than during the 1970s. However, it is most likely that a better monetary policy has played some role in the increased real economic stability. We have thus established what a central bank’s primary tasks should be: to maintain price stability, to promote stability in the financial system and – as long as the nominal anchor formed by the price stability target is not threatened – to try to stabilise the real economy. There may nevertheless be reason to provide an example of what is not an appropriate objective for a central bank. As I have tried to emphasise, the real economic objectives that central banks have entail stabilising real quantities such as production and employment. By stabilising I mean that one tries to reduce the fluctuations around the long-term trend. However, it is important to realise that this long-term trend development is not something that monetary policy can directly influence.

High inflation therefore erodes price competitiveness of our export sector which is perhaps the economy’s only reliable growth engine at the moment. In the current environment where trying to squeeze more growth from domestic demand could lead to the situation of wage-price spiral where wage and price increases feed in each other, the MPC’s latest decision could thus also be viewed as an attempt to maintain growth along with price stability. While there are certain limits to what inflation targeting can achieve, after all it is not a cure all medicine, the focus on price stability makes the regime suitable to the rapidly changing global environment. Just a few years ago, supply expansion in countries like China and India contributed to a downward pressure on global prices. Today, the tide has turned and it is now strong demand in these countries that fuel rising energy and commodity prices. Going forward, it is expected that global price swings may become more unpredictable, in terms of duration and turning points. In this context, anchoring of inflation expectations offers the economy some protection from global price volatility. Ladies and Gentlemen, Let me turn to address the second question on the future dynamism of Thai economy. In this regard, I would like to emphasize that the situation in Thailand is not as bad as you might think. In fact, the fundamentals and room for maneuvering the right policy mix remain strong. Allow me to elaborate. First, Thailand continues to preserve a strong external position.
It is worth noting that the transmission mechanisms under study do not stem from the traditional recommendation of Friedman (1959) in his famous A Program for Monetary Stability, where the focus is on money demand stability and the role of money as a price anchor, and whose analytical base is the quantitative theory of money. Actually, recent works that assign a role to money, and to credit in general, do so because it can reveal future inflationary pressures or because it can contribute to achieve increased stability (Christiano et al., 2007; Goodfriend and McCallum, 2007; Kilponen and Leitemo, 2008). Nonetheless, the empirical evidence on the ability of money to provide information to forecast inflation is not so favorable to monetary aggregates. 5 It is more promising to conceive monetary and credit aggregates as indicators of potential distortions in financial markets, an issue I will discuss in the next section. In this review of inflation targeting regimes it is worth to bear in mind that they are subjected to stress when inflation is of external origin and corresponds to a cost (or supply) shock. A cost shock that increases inflation may require a restrictive monetary policy in order to prevent relative price increases from snowballing into an inflationary spiral. In any case, and to avoid costly repercussions in terms of output losses, a horizon is established to correct deviations, which permits relative price changes to occur without requiring sharp monetary policy adjustments .

It is necessary to continue strengthening the robustness of these methods to evaluate situations of extreme tension. Starting tomorrow, the Central Bank of Chile will hold its Annual Conference, and this version will feature frontier work in this area. From the regulatory standpoint, supervision must consider the macroeconomic impact of financial activity. In the months to come, we will have to analyze also the potential procyclicality of the Basel II capital requirements, as well as the modeling and quantification of liquidity risk. A regulatory framework will be necessary to ensure the building of sufficient reserves in the boom phase of the cycle in order for the financial system to be well capitalized when the bust phase comes. 9 One of the most recurring sources of financial stress in the past few years in emerging economies are periods of euphoria or pessimism, which trigger movements in their exchange rates beyond what their fundamentals would justify. For example, when economic expectations are good, foreign exchange appreciations can arise with symptoms of bubbles in favor of all the domestic assets. As I discussed before, a first line of defense for specific asset prices, stocks or housing is to raise the interest rate. However, in the area of exchange rates this may trigger more pressures to appreciate and exacerbate financial imbalances.
More people could be put to work on a sustainable basis, enabling them to gain opportunities not just to earn greater income, but also to develop their skills and grow their human capital. Before I go further, let me say a few words about the impact of Hurricane Harvey. The massive flooding in Texas has been a tragedy for countless people. My heart goes out to all who have suffered and face a long and difficult recovery. While the human toll of such a storm is immense, past disasters such as Hurricane Katrina and Superstorm Sandy have shown that the impact on the national economy tends to be modest and transitory. At first, activity dips as normal commerce is disrupted. But later, when rebuilding gets underway in earnest, economic activity receives a modest boost. Although I expect that the Texas floods will make it more difficult to assess the economic data in the months ahead, I do not expect it to fundamentally alter the underlying trajectory of the national economy. Of course, for parts of Texas, sadly, the consequences will be immeasurably greater. Monetary Policy Outlook As I noted earlier, I still anticipate that above-trend growth will lead to higher utilization of the economy’s resources, and that, over time, this will help push inflation higher. Thus, even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate to continue to remove monetary policy accommodation gradually.

In general, credit terms should be calibrated to the quality of the information provided by the hedge fund counterparty. To the extent this is done generally across those funds that are less transparent, have weak risk management disciplines and/or inadequate operational infrastructure, they will be able to take on less leverage, which would limit the potential risk they may pose in a disruptive event. As these points suggest, it is not enough to simply manage the firm’s direct potential future credit exposure to hedge funds within prudently low limits. This has to be complimented with a more exacting approach to the evaluation of a firm’s overall vulnerability to market risk that includes full consideration of the potential impact of a large shock, including one that involves hedge funds. Alongside these enhancements to risk management practices, we believe that market participants should also intensify their efforts to improve the underlying infrastructure of the markets in which hedge funds are important. Weaknesses in close-out procedures for OTC derivatives were among the areas singled out by the CRMPG for collective action in the wake of LTCM, and important progress has been made in this area since. In addition, there are potentially valuable efforts underway to standardize documentation and improve the confirmation and execution process in these markets.
15 Assets that would qualify as sufficiently liquid should be easily sold in the market – also in stress situations. The financial crisis showed that many assets held by banks for liquidity purposes were not particularly liquid. In the UK, the authorities will only accept that banks’ liquidity buffers include government bonds of high quality and deposits in the central bank. Norges Bank’s macroprudential supervision – use of stress tests Through recent decades, financial stability analyses have become increasingly important in many central banks. An important element in the analysis is to assess the vulnerability of the financial system to macroeconomic disturbances. Stress tests are commonly used in this exercise. Norges Bank uses stress tests to assess the consequences for Norwegian banks of several risks having a negative impact simultaneously. We will develop this tool further and take account of the experiences of other countries. We will seek to be transparent about the assumptions and results. Asset prices, credit and monetary policy There is a division of roles in economic policy. Fiscal policy, through growth in public spending, influences the real krone exchange rate and the size of the international exposed business sector in the long term. Monetary policy steers inflation in the medium and long term and can in addition contribute to smoothing fluctuations in output and employment. 13  See European Central Bank, December (2008): “Covered Bonds in the EU Financial System”. 14  Basel Committee on Banking Supervision (2009): “Comprehensive Response to the Global Banking Crisis”, press release of 7 September.

Zeti Akhtar Aziz: Bank Negara Malaysia LINK Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of Bank Negara Malaysia LINK, Kuala Lumpur, 25 February 2005. *  *  *  Yang Amat Berhormat Dato' Seri Abdullah Ahmad Badawi, Perdana Menteri Malaysia dan Menteri Kewangan Malaysia, Tetamu-tetamu Kehormat, Tuan-tuan dan Puan-puan, The Central Bank engaging with the public is what Bank Negara Malaysia LINK is about. It is my great pleasure and honour to welcome you to the official launch of the Bank Negara Malaysia Laman Informasi Nasihat dan Khidmat or the Bank Negara Malaysia LINK. The Bank Negara Malaysia LINK aims to enhance the effectiveness of Bank Negara Malaysia's interface with the public. Bank Negara Malaysia LINK is established as a centralised point of contact with the public on issues that relate to our operations, our policies, the financial sector and consumer education in the area of finance. We believe this continuous engagement with the public will not only enhance awareness, understanding and appreciation of the issues at hand but also contribute to facilitating the efficient functioning of the financial system and ensure the effectiveness of policy. Bank Negara Malaysia LINK will also centralise all interface with the SMEs on issues that relate to matters on access to financing and thereby contribute towards enhancing their value added to the economy.
The Fed System is comprised of the Board of Governors in Washington, D.C. – a federal agency currently led by Chairman Ben Bernanke – plus 12 regional Reserve Banks that span the country. For example, the district overseen by the New York Fed includes all of New York, the 12 northern counties of New Jersey; Fairfield County, Connecticut; Puerto Rico and the U.S. Virgin Islands. Each Reserve Bank is distinct, with its own charter and a board of directors drawn from its district, but overseen by the Board of Governors. The law that created the Federal Reserve made the central bank independent so that policymakers could make decisions about monetary policy – such as whether to adjust interest rates – in the national interest, somewhat insulated from political pressure. However, the Fed is accountable to Congress. Congress has set an explicit objective for monetary policy: To pursue the highest level of employment consistent with price stability. This objective is often referred to as our “dual  BIS central bankers’ speeches  1  mandate,” because it combines two goals: high employment, and low and stable inflation. In order to promote these objectives, we also pay close attention to financial stability, because without financial stability, it is very hard to achieve our goals for jobs and inflation. The Federal Open Market Committee consists of the Board of Governors plus the presidents of each of the 12 district Banks.

Chart 11: Household debt and house prices Monetary policy aims to be robust by, among other things, taking into account the uncertainty associated with economic driving forces and the functioning of the economy. In addition, in the conduct of monetary policy we seek to take into account the risk of a build-up of financial imbalances. After rising sharply over many years, house prices flattened through 2013. In recent months, house prices have shown a renewed rise. Household debt has increased at a faster pace than household income over several years. A robust monetary policy aims to provide an improved path for inflation, output and employment over time. A lower key policy rate can push up both inflation and demand for goods, services and labour in the short run. On the other hand, a lower key policy rate would have augmented the risk of a further build-up of financial imbalances. A persistently pronounced increase in house prices and debt may lead to a build-up of financial imbalances that may trigger or amplify an economic downturn – with high unemployment as a result. This suggests a gradual approach in interest-rate setting. Robust banks and financial sector regulation are crucial for financial stability. Increased capital requirements for banks are now being phased in. In 2013, the Ministry of Finance assigned Norges Bank the task of providing advice on a countercyclical capital buffer for banks. In December, the Ministry set the buffer rate at 1 percent, in line with the advice issued by Norges Bank.
Accordingly, 8,417 persons have been served by a bank branch in the Western Province, while the banking density in the Western Province has been 11.89. 50% of people are within one mile from a bank and with ATM facilities within a radius of 2-3 miles. In contrast, according to latest available data, the Northern and Eastern provinces accounted for a share of 2.9% and 4.7% of the GDP during 2006. These two provinces had 61 and 80 branches, respectively, serving 19,000 and 18,662 persons per branch. The banking density in the two districts was at a low level of 5.26 and 5.36, respectively. Given the conflict in these two areas, the limited branch network, outreach and lower banking density are understandable. It is now time to enhance financial inclusion in the recently liberated Eastern Province. What action is needed and how quickly it can be implemented are challenging tasks, but financial inclusion, in general, and for women, in particular, is an area that should be given priority.

Unfortunately, not only has the contribution of women not been highlighted or fully appreciated, but there has also been no focused attention to enhance access to finance by women or to increase financial inclusion of women. Of the approximately 20mn population in Sri Lanka, 50% are females. The same ratio is found in all provinces according to latest data. For 3 consecutive years, the country has achieved a growth over 6% and a growth rate of 6.8% has been recorded for 2007. However, women’s contribution in this 6.8% is hidden. As at the end of 2007, we have exceeded a per capita income of US $ 1,600. The system of National Accounts or other systems that set standards in the compilation of National Income have recognized the need for separating women’s contribution to GDP but, so far, there is no acceptable formula for achieving this. Similarly, the gender budgeting that started in Australia and South Africa has not been followed or continued by many countries. Sri Lanka too recognized that there is a need to separately account for gender contribution in the budget. In that regard, some of us managed to include a couple of paragraphs announcing the gender budgeting policy in the 1999 Budget, but there has been no follow up since then. Drawbacks in financial inclusion and uneven ground situation The banking and financial sector in the country must be strong for financial inclusion to take place. Our banking sector has been showing advancement and growth. The financial system is stable and resilient.
Unconventional policies during the challenging times fast reaching limits At the onset of the Global Financial Crisis, immediate policy responses were largely targeted towards stabilising the financial markets. As volatility began to subside, and as financial institutions and markets were stabilised, the policy focus subsequently shifted to rejuvenating growth and raising employment. An immediate policy challenge facing crisis-affected countries was that conventional policy responses of expansionary monetary and fiscal policies have fast reached significant constraints. Let me elaborate. 1/8  BIS Central Banker's Speeches  In the aftermath of the crisis, public debt in crisis-affected countries reached very high levels, in large parts due to the high cost of bailing out financial institutions. In the advanced economies, public debt grew by almost half within the span of 5 years from 2007 to 2012. For Europe, it even culminated in the European Sovereign Debt Crisis. The enlarged public debt levels and fiscal deficit put a hard limit on current governments’ ability to spur real activity, even as growth falters. Many governments of crisis-affected countries undertook austerity measures to avert financial market backlash. This, of course, have had a further dampening impact on growth. In short, fiscal policy has lost its ammunition and has been rendered impotent in many countries. In many of the economies, monetary policy became the only feasible stimulus tool, so called ‘the only game in town’. However, substantial easing by major central banks has led to global policy rates reaching historically low levels.

Indeed it has been argued that rising income inequality is a direct and unavoidable consequence of the advent of technological revolution and the expanding process of globalisation. Thus, in this new economy, one of the pressing challenges may come down to reconciling the benefactors of technology and globalisation with those who are excluded, with the intention of keeping inequality at bay. This brings me to the second paradox. Despite all the technological advancements that we have experienced in recent years, labour productivity has not risen in tandem. The world is now at the cusp of path-breaking and fundamental technological changes – in the area of artificial intelligence, bio-technology, advanced analytics or ‘Big Data’, and fintech, just to name a few. But at the same time, labour productivity has been anaemic in major economies since the global financial crisis, which in the US, is currently experiencing the longest run of declining worker productivity since the 1970s3. Tangible slowdown in productivity is also prevalent in many emerging economies since the global financial crisis. This is a disconcerting trend, as productivity growth is the bedrock of sustained improvements in standards of living and income. To borrow Paul Krugman’s quote, “productivity isn’t everything, but in the long-run it’s almost everything”. It’s a real challenge, to truly understand why this is happening.