samchain/econo-pairs-v1 huggingface dataset:
However, as we saw in the mid-2000s, there is also the associated risk of upward pressure on inflation from global energy and other commodity prices, if the momentum of world growth becomes too strong. Fourth, the high degree of stimulus provided by fiscal and monetary policy to combat the recession will need to be withdrawn over a period of time. Returning budget deficits to a more sustainable level will require a prolonged tightening of fiscal policy in many countries, including the UK. Monetary policy can provide an offset by continuing to support the growth of private spending – though the appropriate degree of monetary stimulus will need to be continually reassessed in the light of the progress of the recovery at home and abroad and its impact on inflationary pressures. Given the turbulence we have seen in the major economies of the world over the last two years, it is very natural to worry about setbacks to the recovery, both in the UK and overseas. In the past, economic recoveries have not been smooth and linear. So we should expect to see some variability in growth rates, both at home and abroad, as this recovery develops. However, looking through this data volatility, there are also good grounds for expecting the growth of the world economy to continue to provide a healthy support to the UK’s economic recovery over the years ahead.

The euro area repo market has also been largely unscathed by the pandemic, remaining a fully functional market even at the peak of the crisis. According to data from the International Capital Market Association (ICMA), the total value of the outstanding repo contracts has barely changed from December 2019 to December 2020 at EUR 8,300 billion (including both repo and reverse repo transactions). This is an all-time high with a repo market size up by more than 40% in 10 years. However, the euro area repo market can be affected by collateral scarcity and seasonality, especially at the end of the year, considering also the important share of Hold-to-maturity investors. In this regard, Eurosystem has made available government bond holdings for securities lending since April 2015. The Eurosystem securities lending programme has been successfull in helping to normalize market rates and in acting as a backstop facility for market participants. For instance, in April 2021, EUR 71.5 billion of public sector bonds were lent out on average with a breakdown of EUR 59.5 billion against securities and EUR 12.0 billion against cash collateral. Another key feature, which has helped to support the liquidity of the euro area repo market, is the dominant share, two-third, of repo market trading cleared via central clearing counterparties (CCP), despite the absence of any mandatory clearing on these instruments.
First, financial inclusion is an international agenda that has captured the attention of many governments which has national importance The 2.5 billion unbanked and underserved remains a global challenge. A significant portion of them are from countries with predominantly Muslim population, thus there is an urgency to address imbalances among the “ummah”. For comparison, 2.5 billion people is equal to the population of China and India combined or is equal to 8 times the population of USA. Financial inclusion can only be achieved with the collective effort of all countries. Peer-topeer learning and sharing of best practices can help countries leapfrog the trial and error stages in designing and implementing financial inclusion policy, without having to reinvent the wheel. For example, when we introduced microfinancing, we made a tour to Indonesia to learn about how Indonesia actually implemented microfinancing. With that knowledge, we implemented microfinancing in Malaysia and it has been very successful. When we wanted to introduce agent branch banking, we went to Mexico and Brazil to learn on how they actually use agent branch banking as effective means to expand financial services. We learnt and implemented some of the measures on financial inclusion. We avoid unnecessary mistakes and reduce cost in implementing of those policies.

In this case, we need to conduct a bit more research before we implement any macroprudential policies. The caps on financing tenure, together with requirements to comply with responsible financing practices (including adoption of prudent debt service ratio (DSR) threshold and  BIS central bankers’ speeches  1  definition of income and debt obligations for computation of DSR), were not limited only to banks. The caps were also imposed on non-regulated entities in order to avoid regulatory arbitrage or shifting of risks to these non-bank lenders. Third, preserving appropriate discretion for authorities to act is important, with respect to the timing, mix and calibration of measures. We do not adopt a rule-based approach to the implementation of macroprudential measures. The reason is that, it can avoid a “self-fulfilling prophecy” if the formula for determining the timing, quantum and criteria for the deployment of macroprudential policies are made public or applied in mechanistic way – unintended consequences could arise or systemic risk could suddenly build up right before the effective date as economic agents try to “beat the clock” by getting ahead of the implementation. This approach provides us with greater flexibility to use an optimal mix of macroprudential and other measures under varying circumstances – this is different from the UK where legal constraints limit the choice of macroprudential instruments that can be used, or compared to Turkey which uses quantitative triggers for the new reserve requirement framework.
This is an important issue, and one that matters if we are to have growing challenger banks. We want to put such a regime into effect, and thus demonstrate that at the PRA we are very serious about our competition objective. I hope the European authorities will likewise pursue this important change. We will also be arguing in Basel and in the EU to narrow the gap between standardised and internally modelled capital requirements for prime mortgages including by having more risk sensitivity in the standardised approach. And, we have also tightened the standard for models. I also want to be clear that we welcome internal model applications by smaller banks and we will do what we can to help them meet the required prudential standards, which are largely set out in the EU legislation. Lord Mayor, a year in your office is never dull, and likewise our world is certainly full of interest. I have ranged quite widely this evening to give a report on a number of our key areas of activity. There are however some very important core principles at the heart of our work, getting the incentives right for firms and individuals, and establishing the importance of personal  BIS central bankers’ speeches  5  responsibility within an appropriate setting. I have been blunt on one or two points and this may provoke debate.

The PRA has authorised ten banks in the last two years, and currently we have a substantial pipeline of interested parties. We are thinking about competition in our domestic work, but also about how we approach international policy issues. For instance, this week our response to the European Commission’s consultation on the impact of the new capital regime has been published. It is quite often said that aspects of the capital regime discriminate against smaller banks and building societies that use the so-called standardised capital approach versus larger banks that use their own models. The consequence of this is that smaller banks and building societies cannot compete effectively in lower risk asset markets such as prime mortgages because the capital requirements are too far apart and in favour of large banks. This forces them into riskier assets and undermines their position. This is an area where the leverage ratio acts to counterbalance the difference, a point that is not well enough understood. But in our response to the European Commission we said that while the financial stability benefits from regulation of large, internationally-active banks mean these firms should meet global standards, a differentiated approach for smaller firms would recognise the high costs and smaller benefits of applying global standards to them, and should enable us to find ways to create a regime which is more simple and which reduces their reporting burden. This would help to foster competition and would be good for the European Single Market.
This was due to exchange rate losses on the foreign currency holdings. These had increased substantially in the course of our foreign exchange market interventions, which we carried out in order to counter the deflationary threat identified by us. The loss and the increased risk in our central bank balance sheet is a matter which we take very seriously. The annual loss has provoked critical remarks, in particular as regards our independence and our ostensibly far-reaching powers. It is understandable that people will question the extensive measures we had to take to manage the financial crisis. That is all part of life in a democratic society. I am therefore grateful for this opportunity to present to you, in the next few minutes, my thoughts on the essence, the boundaries and the pitfalls of our independence. I hope I will be able to clarify one or two misunderstandings in the process. The reason why the SNB is independent is not because it happens to suit the members of the Governing Board, which is the body responsible for monetary policy. I can assure you that it would sometimes be easier if we could just accept instructions from a higher body. What actually happens is that we have to bear responsibility ourselves for the monetary policy decisions we take, and we take them – typically – under a veil of uncertainty. The reason why we are independent is so that we can better fulfil our mandate. In other words, our independence is purely a means to a higher end.

Ljube Trpeski: Goals and objectives of the monetary policy for the year 2001 Address by Ljube Trpeski, Governor of the National Bank of the Republic of Macedonia to the Parliament of the Republic of Macedonia on 6 February 2001. *  *  *  Honorable, According to Article 3 of the National Bank of the Republic of Macedonia Act, the Central Bank is responsible for the stability of the domestic currency, the monetary policy and the overall domestic and international payments liquidity in the Republic of Macedonia. Furthermore, the National Bank, within its rights and duties, is responsible for providing and preserving sound banking system of the Republic of Macedonia. Given such defined legal duties and taking into account achievements in this area, it may be concluded that in 2000 the National Bank of the Republic of Macedonia, acting in compliance with the given rights, accomplished its legal duties. Stability of the domestic currency The stability of the domestic currency may be observed from two aspects: •  Stability of the internal value of the Denar. It is expressed through its purchasing power, i.e. the price stability in the Republic of Macedonia; and  •  Stability of the external value of the Denar. It is expressed through the stability of the exchange rate of the Denar, i.e. its preservation at adequate level against other currencies. The preservation of the price stability is the primary objective of the monetary policy of the National Bank of the Republic of Macedonia.
As I have mentioned before, with an amendment made to the Central Bank Law in 2001, the primary objective of the Bank was set as achieving price stability and the Bank was granted the direct authority to draw up monetary policy and choose monetary policy instruments at its own discretion in order to achieve price stability. Achieving central bank independence is in fact a very important structural reform in the economy, but unfortunately merely passing the law is not enough in itself for its success. Therefore, the real challenge is to make sure that every section of the public is aware of the rationale behind independence and to create a common understanding of these reforms before their success can be realized. Although we have observed significant progress pertaining to independence, we are aware of the fact that there is still a long way to go and we know that there will always be room for improvement. . The criteria set by the European Central Banking System regarding central bank independence will be provide significant guidelines in this field. Another important point I would like to mention is that the more independent central banks are, the more transparent they become. Central banks share more information with the public about the design and implementation of policies and they attach great importance to having an efficient communication policy. Now let me draw your attention to central bank accountability and further consider the transparency issue. The provision of independence obliges central banks to explain themselves to the public.

In market economies, the aggregates that can be controlled by authorities are set as targets while designing the policies. In our country, under the current economic conditions, these aggregates include consumer price inflation and the ratio of primary surplus to national income. Other variables, such as the growth rate, real interest rates, and producer price inflation are the outcomes in this sense and can only be forecasted. That is why I believe that the difference between the concepts of macroeconomic targets and forecasts should be taken into account in the opinions expressed. Direct foreign capital investments and competition As I have mentioned earlier, in order to achieve high rates of sustainable growth, the domestic savings gap should be offset by external resource inflow, namely, direct foreign capital investments. Historically speaking, it is clear that Turkey has displayed poor performance in attracting direct investments despite its large domestic market, proximity to developing-strategic markets owing to its geographical position, developed infrastructure and young population. As a matter of fact, net direct foreign capital investments to Turkey in the 1995-2000 period amounted to US dollar 1 billion on average. This corresponds to only 4 per thousand / 4 %0 of Turkey’s GDP. The developments of the following years do not point to a lasting improvement in Turkey’s performance in this sense either.
The combination of low unemployment and weak wage growth might qualify as one, but I think low productivity growth can explain quite a bit of that particular puzzle. We’ve had only limited data since productivity flattened out, a few years ago, and if you estimate a Phillips curve only over that period the resulting estimates are bound to be imprecise. But, to my mind, the basic judgement in the MPC’s forecast – that, for given productivity growth, less slack leads to faster wage growth – still looks reasonable. 11  Some people came back to me claiming this wasn’t a word. It is. Those readers who’ve got this far deserve some light relief. Thanks to the wonders of technology I found a long list of “imponderables” on the internet, compiled by an engineer in New Mexico – see http://www.unm.edu/~jerome/imponder.htm. I don’t know that these are any more or less insoluble than the impact of Brexit on interest rates, but they’re certainly (at least) as entertaining. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  The effects of Brexit on inflation, and ultimately on the appropriate level of interest rates, are altogether more uncertain and more complex. They’re certainly too complex to justify the simple assertion that Brexit necessarily implies low interest rates. The MPC eased policy in August 2016 not because of the referendum result but because of the steep fall in measures of business and consumer confidence that followed it.

As supervisors we do not think in terms of countries, but of banks’ business and risk profiles. Each bank operates differently and therefore has to face different problems; it would be unwise not to see them individually. BIS central bankers’ speeches  3
36  20  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  20  These visits have subsequently become an established part of the Bank’s engagement programme.40 We now have a well-developed network of Citizens Panels across all regions of the UK, as well as a Youth Forum. These meet regularly, hosted by senior Bank staff with an independent chair, and comprise a diverse spectrum of the public. The issues raised at these fora are published annually. We also have a programme of Community Forums, which engage with local charities and community groups on local issues. Complementing these engagement initiatives, I have helped oversee the Bank’s educational engagement programme over the past few years, including the development of curriculum materials for 11-16 year olds (EconoMe) and 8-11 year olds (Money and Me), the latter in partnership with the Times Educational Supplement and the Beano. This has given the Bank a face and a footprint among millions of early learners. That, I hope, will bear longer-term fruit for both those learners and the Bank. Finally, I set up and ran the Bank’s Flagship seminar programme. This has brought in a diverse set of inspirational speakers – from Grayson Perry to Michael Holding, from Prue Leith to Doreen Lawrence, from Trevor MacDonald to Billy Bragg. It has provided Bank staff, and the wider public, with a wider angle lens on the most pressing societal issues of the day.

We would experience a Minsky Moment for monetary policy, a taper tantrum without the taper.10 This would leave monetary policy needing to play catch-up to re-anchor inflation expectations through materially larger and/or faster interest rate rises than are currently expected. Even if this scenario is a risk rather than a central view, it is a risk that is rising fast and which is best managed ex-ante rather than responded to ex-post. If this risk were to be realised, everyone would lose – central banks with missed mandates needing to execute an economic hand-brake turn, businesses and households facing a higher cost of borrowing and living, and governments facing rising debt-servicing costs. As in the past, avoiding that inflation surprise is one of the central tasks of central banks. These near-term inflation concerns also have a bearing on the medium-term risks facing central banks. After the Global Financial Crisis, central banks went in large and fast with QE, I believe rightly, to support the economy. They then withdrew that stimulus slowly, if at all, to protect the fragile recovery – again, I believe rightly. As a result of these actions, central banks’ balance sheets, including the Bank’s, inflated quickly and never subsequently deflated. When the Covid crisis struck, central banks again went in large and fast to protect a collapsing economy, I believe rightly. Balance sheets ratcheted higher. On current expectations, central bank balance sheets are unlikely to deflate any faster than after the Global Financial Crisis. But this time that policy script feels stretched.
balance sheets Risk tolerance  Private financial system  Percentage of annual nominal GDP 120  120  110 100  110 100  90 80  90 80  70 60  Financial institutions - lending to private non-financial sector (a)  50 40 30 20 10 0 2005  Bank of England(b)  2008  2011  2014  Open for business  70 60 50 40  Unconventional Central banks MP  30 20  Normal conditions  10 0 2017  Liquidity crisis  Degree of systemic stress  Sources: Bank of England, ONS (a) Data as at February. Sterling net lending to non-financial corporations and household sector. (b) Data as at February. Final data point shows the latest published balance sheet data, at 29 February 2016, plus the increase in the loan to the Asset Purchase Facility since this time. The financial instruments underpinning these expansions tend not to be particularly complex when compared to those on commercial bank balance sheets. But the Bank of England has also accumulated material new contingent exposures, reflecting its much wider post-crisis range of policy responsibilities, and a more comprehensive liquidity insurance toolkit. The Bank’s new responsibilities for banking supervision, macro-prudential policy and resolution imply a range of potential new calls on its balance sheet.

Chart: Financial stress arises The red lines in the panel again show a scenario where the central bank does take into account the possible effect of monetary policy on financial stress. When financial turbulence occurs, the economic setback is less pronounced and less prolonged than if the central bank had not taken this risk into account in monetary policy, as illustrated by the blue lines. The benefit gained from keeping the interest rate somewhat higher in the short term is in this case a more stable path for inflation and output over time. This framework is highly stylised. In the actual implementation of monetary policy we are faced with a number of difficulties. First, developments in debt and house prices depend on a number of factors in addition to the interest rate. Second, both the costs and the benefits of leaning against the wind are uncertain. What we do know, however, is that the economic consequences of a financial crisis are so serious that an insurance premium is worth paying. Let me now return to the Norwegian economy and to the trade-offs in recent interest rate setting in Norway. As I said earlier, the key policy rate in Norway has in recent years been kept slightly higher than implied by medium-term outlook for inflation and output, in order to mitigate the risk of a build-up of financial imbalances. However, through last autumn, oil prices fell sharply and the growth outlook for the Norwegian economy weakened.