samchain/econo-pairs-v1 huggingface dataset:
As always, what I have to say reflects my own views and not necessarily those of the FOMC (Federal Open Market Committee) or the Federal Reserve System. My attention today will be on three important questions: •  Why has the U.S. recovery been so sluggish and consistently weaker than expected? •  What should we, as monetary policymakers, do it about it? •  What other policy actions are needed to help ensure a timely transition to strong and sustainable growth? The disappointing recovery Turning to the first question, U.S. economic growth has been quite sluggish in recent years. For example, annualized real GDP (gross domestic product) growth has averaged only about 2.2 percent since the end of the recession in 2009. As a consequence, we have seen only modest improvement in the U.S. labor market. Not only has growth been slow, it has also been disappointing relative to the forecasters’ expectations. For example, the Blue Chip Consensus have been persistently too optimistic in recent years. This is illustrated in Exhibit 1 which shows how private sector forecasts for 2008 through 2013 have evolved over time. Two aspects of this exhibit are noteworthy. First, forecasters have consistently expected the U.S. economy to gather momentum over time. Second, with only one exception, the growth forecasts for each year have been revised downward over time, as the expected strengthening did not materialize. In contrast, as shown in Exhibit 2, there has been no notable pattern of forecast misses for inflation.

In 2013 a joint venture for production of banknotes was set up by the BNB Printing Works and one of the world’s leading banknote printers François-Charles Oberthur Group, France, and thus Bulgaria became an important player in the banknote industry. It is interesting to note that over its 137-year history the BNB has organised the production, issue and circulation of more than 500 types of coins, including commemorative coins and medals produced by the Bulgarian Mint in Sofia. You know that a few months ago, on 7 December, the new 2 leva coin came into circulation. The design of that coin enjoys enormous public approval. But let’s come back to our exhibition. Along with the coins struck after Bulgaria’s liberation until now, the visitors will be able to catch a glimpse of the history of money on the Bulgarian lands going back centuries. I am convinced that the displayed items can tell a lot about the  BIS central bankers’ speeches  1  long history and background of the economic and political life on the territory of today’s Bulgaria. I wish much success to this exhibition. I hope many citizens and guests of Burgas will come to see it, to learn more about the money used on the Bulgarian lands, and to feel, as we do today, deep respect for the history and accomplishments of our ancestors. 2  BIS central bankers’ speeches
Inflation in the past twelve months In the third Inflation Report last year the Riksbank’s growth forecast for Sweden in the coming years was revised upwards. This mainly mirrored a more favourable outlook for international activity; it also seemed likely that domestic demand would be stronger than had been expected earlier. Our overall growth forecast agreed with most other observers. Some predictions, however, did include an even stronger increase in household consumption, the reason being that rising asset prices in general and the stock market boom in particular were judged to lead to a markedly increased consumption propensity. Our higher growth forecast was accompanied by little change in the assessment of inflation we had presented earlier in the year. Thus, we judged that the relationship between growth and inflation would be more favourable than we had previously calculated. In this respect we differed from many other observers and that occasioned a good deal of discussion. The background to our forecast was that inflation’s path had been surprisingly favourable and that, instead of being just a result of occasional factors, this had to do with more fundamental features in the economy that would continue to influence inflation up to our two-year horizon. Here is a picture of our inflation assessment last October and the outcome (Chart 1). I have chosen to present it in terms of UND1X because that is the indicator of inflation on which monetary policy has been focused in the past year.

But even with a growth rate of just over 3%, the Swedish economy would be expanding more rapidly than we believe it is capable of in the longer run. Econometric estimates of the output gap. Per cent of potential GDP 4  4  2  2  0  0  -2  -2  PF HP UC  -4  -4  -6 -8 1980  -6 -8 1984  1988  1992  1996  2000 Source: The Riksbank  Let me conclude by underscoring what I mentioned initially, namely that forecasting inflation proved difficult in the 1990s, in Sweden as well as elsewhere. There have been substantial changes in our economies, partly because policy now focuses on stability and competition has become stronger in various ways. Inflation in Sweden has been a positive surprise in recent years even though activity has been rising strongly, so further positive surprises should naturally not be ruled out. Still, there are now many indications that resource utilisation is relatively high and will go on rising. That implies that, little by little, inflationary pressure will grow. We will be presenting a comprehensive assessment of inflation prospects in the December Inflation Report. In that context we will also be deciding the repo rate. Recent developments have not altered the picture I formed in October. Although it is still too early to specify when, there will presumably be grounds for increasing the repo rate in the future. BIS Review 107/2000  6
Market-based Capital Ratio = Market Capitalisation/Risk Weighted Assets  Chart 12: Estimates of implicit subsidy Value of implicit subsidy, £  Notches of ratings uplift 4 3 2 1 0 2010  2011  2012  2013  Quantity of implicit subsidy (RHS)  2014  2015  50 45 40 35 30 25 20 15 10 5 0  2016  Average ratings uplift (LHS)  Sources: Moody’s, Bank of America and Bank calculations. Notes: Includes Barclays, HSBC, LBG and RBS. Calculated by multiplying the spread between indicative bonds at standalone and supported credit ratings by the volume of ratings-sensitive liabilities; end-year data. Published in: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/capital-andresolution/written/69208.pdf  46  All speeches are available online at www.bankofengland.co.uk/speeches  46  Chart 13: Long-run UK and US leverage ratios Per cent 25 (d)  (c)  United States(a)  20 15 10  United Kingdom(b)  5 0  1880  1900  1920  1940  1960  1980  2000  Sources: United States: Berger, A, Herring, R and Szegö, G (1995), 'The role of capital in financial institutions', Journal of Banking and Finance, Vol 19(3-4), pages 393-430; SNL and Bank calculations.

The majority of advanced countries have not come close to experiencing aggregate credit booms in the post-crisis period. When it comes to assessing the efficacy of these tools, it has largely been a case of ‘learning by doing’. Cerutti et al (2017), Kuttner and Shim (2013), Crowe et al (2013) and Boar et al (2017) provide evidence on the impact of tools using cross-country panel studies. Aikman et al (forthcoming) and Banerjee and Mio (2017) study the UK’s experience with the CCyB and with macroprudential liquidity actions respectively. And He (2013) considers the impact of the HKMA’s use of LTV limits. Overall, however, the evidence base on the transmission of macroprudential tools remains fairly slim. There is also relatively little guidance from the literature on tool strategy, selection and interaction. One exception is work assessing the role of monetary policy in leaning against financial cycles. A paper by the Federal Reserve Board (Ajello et al (2016)) analyses the costs and benefits of using interest rates to lean against vulnerabilities in the financial system. In the baseline calibration of their model, the costs of using monetary policy in this way are large relative to the benefits: the optimal adjustment in interest rates in the face of financial stability risks is in the order of 3 basis points.
CIX will draw on technologies such as satellite monitoring, artificial intelligence, and blockchain to distill key data on emission reduction and removal projects to verify the quality of the credits that they generate. Singapore as a Carbon Services and Trading Hub Singapore is a good place for CIX to realise its vision to be a global carbon exchange and marketplace. We have a sound infrastructure, good governance, and a premium on trust – critical ingredients for a marketplace. Singapore is located at the heart of Southeast Asia which is fertile ground to harness the potential of nature-based solutions. Southeast Asia holds more than one-third of the world’s mangroves. It has about 120 million hectares of land suitable for re-forestation. If we are able to harness the potential of nature-based solutions in Southeast Asia, we can move the needle on carbon sequestration efforts. Proximity to Southeast Asia will enable CIX and its ecosystem partners to work closely with project developers to procure a supply of high quality carbon credits. Singapore is well-positioned to be a carbon services and trading hub. We are strengthening the carbon credit value-chain. This includes growing capabilities to develop projects, conduct certification and validation of project design, and monitor and verify project outcomes. We are also a trusted international centre for financial services, professional services, and commodities trading. As a country, Singapore is committed to sustainable development and our aspirations are reflected in the Singapore Green Plan 2030.

Singapore is attracting companies to anchor their R&D activities here to develop new sustainability solutions, including technologies such as carbon capture, utilisation and storage. MAS’ Green Finance Action Plan has a focus on building strong capabilities in green finance. This includes initiatives to anchor in Singapore providers of sustainability rating and verification services, centres of excellence to undertake Asia-centric green finance research, and funding support for Green FinTech projects. I believe Singapore has what it takes to anchor a thriving carbon marketplace at the heart of a vibrant carbon services hub, supporting Asia’s transition towards greater sustainability. 4/5  BIS central bankers' speeches  Conclusion Let me thank all our industry partners for making CIX possible. Together, let us work towards a low carbon future. 5/5  BIS central bankers' speeches
However, although there are elements that cause concern, there is also a lot to indicate that the process of price formation has changed. The most important change since the 1970s and 1980s is probably the change in the target for monetary policy and the support and credibility attained by the inflation target. I am convinced that the Riksbank’s inflation target is understood and accepted by trade union members, officials and leaders. Knowledge about the inflation target and the role of monetary policy has become widespread in a quite different way to the fixed exchange rate norm. The fixed exchange rate regime basically required that wage cost increases should be adapted to the surrounding world in order not to affect employment negatively. When, despite this, wages rose more than in our competitor countries, employment was saved by recurrent devaluations. The high level of activity in the Swedish economy during the latter half of the 1980s also played an important role. No wage formation system would have coped with the overheating that existed at the end of the 1980s. The insight that excessively high wage increases rather quickly lead to growth being dampened and an increase in unemployment with a monetary policy focused on an inflation target, probably serves to have a restraining effect on wage formation. BIS Review 20/2000  4  Large increases in real wages with low inflation have probably increased insight into the value of price stability.

Our banking system is sound and safe, despite a challenging operating environment: capital and liquidity levels remain well above global standards; loan quality and profitability compare favourably with global peers. We do not take this for granted. We are keenly aware that Hong Kong as an IFC plays an outsized role not only in supporting the local economy, but also in underpinning trade and investment activities across the region. Our banking assets are 9 times our GDP; the equity market 16 times; and assets under management 13 times. Hong Kong is the largest US dollar funding centre in Asia, and is second in the world only to London and New York. In a highly interconnected global financial system, where so much depends on the stability of IFCs, we strive to be a responsible stakeholder. We seek to achieve this — by putting in place mechanisms to closely monitor market developments and behaviours; by continually improving our regulatory regimes to mitigate risks in the financial system; by building buffers and planning for contingencies on sunny days, and by swiftly implementing contingency plans when storm clouds approach; and by contributing to policy deliberation and standard setting at international regulatory forums. We also build resilience by enabling market participants to seize new opportunities to deepen and expand Hong Kong’s role as an IFC. This brings me to my third word: opportunity. Opportunity For many decades Hong Kong has been intermediating the trade, investment, and financial flows between China and the world.
These forces, which are partly external and partly domestic, have masked the relationship between economic slack and inflation, and have been reinforced by a weakening of inflation expectations. 2 1/5  BIS central bankers' speeches  Forces slowing down inflation in the euro area economy2 The euro area recovery has been characterised by a disconnect between economic activity and inflation – which some have referred to as a “missing inflation puzzle”. This disconnect becomes visible, for instance, when comparing actual growth and inflation outcomes for 2016 with those anticipated in the ECB staff macroeconomic projections of March 2014. The real GDP growth rate, which stood at 1.7% in 2016, essentially confirmed the March 2014 projection. HICP inflation, by contrast, turned out to be more than 1 percentage point below the rate projected in March 2014; and measures of core inflation, which strip out the direct disinflationary impact of the collapse of commodity prices over this period, have remained at 0.9%, about half the rate projected earlier. This picture points to pronounced disinflationary forces that have confounded attempts to forecast the impact of improved economic conditions on inflation. Where do these forces come from? Do they pertain to cyclical influences that monetary policy can offset? Do they reflect broader structural shifts in the economy that the central bank is forced to watch as a bystander?

This strongly implies it is not the greater incidence of ideas-fuelled booms after 1750 that accounts for the growth inflexion. The explanation lies instead in the dramatic fall in both the probability and cost of GDP contractions. Recessions have occurred only 30% of the time since 1700 and only 17% of the time since 1900. During these periods, growth has averaged minus 2.2% per year since 1700 and minus 3.4% per year since 1900. Since 1750, recessions have become far less frequent and less painful. It is the avoidance of deep recessions that differentiates the Golden Era from its Malthusian predecessor. Where does this leave our story of growth? Well, the story that better fits the facts appears to be one in which the conveyor belt of ideas and innovation has been continuous over the centuries, causing lengthy if lumpy ideas-fuelled expansions. But whereas prior to the Industrial Revolution this conveyor belt was regularly halted by recessions, more recently these interruptions have been far fewer and less costly. Put differently, the real revolution in living standards after 1750 came about not exclusively, or perhaps even mainly, from the surge in ideas and technologies. Rather, it resulted from societies having found some means of avoiding the subsequent recessionary bullets. Prior to the Industrial Revolution, these killed expansions dead. After it, societies appear to have found some effective means of dodging them. A Second “i” on Growth  To understand growth, then, we need to explain why economies become less recession-prone after 1750.
And the gold standard, which had functioned as a highly disciplined system for monetary policy, was a thing of the past. New, costly problems were encountered, as is clear from the numerous bank crises that occurred around the world in the 1980s and 1990s. It is in the light of these experiences that we are now engaged in erecting, step by step, a new financial architecture that will work in a world where capital adequacy requirements for banks are relatively limited at the same time as the financial system is rather free and open. Increased importance of risk management One function of a bank’s capital base is to act as a buffer for absorbing various types of disruption and risk. The greater the difficulty a bank has in identifying the numerous types of risk involved in financial activities, the larger its capital base needs to be. Otherwise, a sudden increase in risk may quickly render the bank insolvent. By the same token, the lower the stipulated capital requirement for financial operations, the more important it is to have efficient systems for risk management. The capital base in banking has, in fact, been strengthened to some extent in the past decade. When minimum capital adequacy standards for banks were specified in the Basel regulations in the late-1980s, they were met by protests from banks in Sweden as well as elsewhere. One of the criticisms was that the regulations would be costly.

The President, in the speech, precisely pointed out that looking to unemployment as an indicator of this slack in the economy, the unemployment rate now is 9.3%, according to the normal international standard of measuring unemployment; but if we adopt, as in the US, a broader concept of unemployment – which in the US they call U6 – then unemployment in the euro area is at 18%, where it is at 9% in the case of the US. Which would imply that the slack is then bigger than we could judge some time ago. That being the case, it justifies fully what the President said at the end of his speech: that we need persistence. If we want to bring inflation to our target of below but close to 2%, then we have to persist in the type of monetary policy that we have been adopting. But looking at the market reaction, the market took the speech quite hawkish, meaning concentrating on the optimistic comments about inflation, the economy, perhaps also the political tailwind. So is the market right to read your communication style as more hawkish than before? Constâncio: It’s always very difficult to interpret the reaction of markets. I will not try to say 1/3  BIS central bankers' speeches  rationalise or explain; the reaction of the market was what it was.
For how can we justify the costs of these efforts, which will have to be borne for at least a generation, without fundamentally addressing the flaws that got us into this terrible crisis in the first place? Ladies and Gentlemen, there are many areas in financial regulation that can and should be improved. Given what is at stake, there is a need to prioritise. I have attempted to lay out to you today where the SNB puts those priorities and where it will focus its greatest efforts in the months and years to come. Together with FINMA, it is our duty to provide robust analysis and to issue sound recommendations that will help put our financial system on a more sustainable foundation. In certain areas, like capital requirements, regulators can issue – and have issued – decrees intended to strengthen the resilience of the financial system. With respect to the “too big to fail” problem, political decisions are required. The topic is crucial. The consequences of not addressing it adequately could be severe in the event of a future crisis. Politicians need to become acquainted with and get involved in this matter. The sooner, the better! 17  17  The Swiss government has recently mandated a group of experts to make proposals to limit the risk associated with large firms. 8  BIS Review 145/2009

The difference is that they are still not done and cannot hope for a rebound that might otherwise be there. 2  BIS central bankers’ speeches
Losses on subprime mortgages in the US shattered confidence in the entire financial system. Financial institutions started to doubt their counterparties and interbank lending came to a halt. Experience shows the need for tighter regulation of systemically important banks. This can for example be achieved by introducing higher bank capital and liquidity requirements for such banks. The capital requirement for mortgage lending should to a larger extent reflect the overall risk of such loans. 1  See Carmen M. Reinhart and Kenneth S. Rogoff (2009): “This Time Is Different. Eight Centuries of Financial Folly”, Princeton University Press. BIS Review 69/2010  9  Justified criticism has been levelled at international banks. The focus is now shifting to government fiscal management in many countries. Fiscal slippage seems to have been considerable in some European countries in particular. EU budget policy guidelines have been diluted and have not been adhered to. Countries have experimented with budget frameworks and have debt-financed public investments, which require operating and maintenance costs but yield little income. With already large deficits, the crisis has destroyed state finances in many countries. Economic developments over the next 5–10 years will be marked by the tightening measures that will now have to be implemented in these countries. However, there are exceptions. State finances in Nordic countries are in order, which provides a better starting point. With ample state coffers, the Norwegian economy was to a considerable extent insulated from the effects of the financial crisis in 2008 and 2009.

In addition, a number of investment projects are extremely foreign exchange-intensive because of imports. The króna could depreciate as a result, with heavy outflows of foreign currency, even if there were ample opportunities for investment. This is the problem the liberalisation strategy is attempting to solve. Emphasis is placed on protecting the foreign exchange reserves by converting short-term claims against domestic entities to long-term investments to the extent possible. The Central Bank acts as an intermediary, and the auction format ensures that only a small portion of the foreign exchange reserves are in play at any given time. The auction format also ensures that transfers of banking system liquidity will not be large enough to jeopardise the system’s stability. The foreign exchange reserves are protected as well by the requirement that investors bring foreign currency into the country and exchange it for krónur in the domestic market. This will offset the foreign exchange outflows that often accompany new investment. Another important aim of the strategy is to ensure short-term Treasury financing. Even though significant progress has been made in controlling the fiscal deficit after the crash and halting the accumulation of unsustainable debt, it is important not to underestimate the current dependency of Treasury financing on the capital controls. More than half – and, in some instances, as much as ¾ – of the stock of short-term Treasury bonds is held by nonresidents.