samchain/econo-pairs-v1 huggingface dataset:
It is in this context where the topic of this year’s conference falls right into the core business of central banks: understanding inflation dynamics, and how they influence monetary policymaking. 1  Central Bank of Chile October 2018  Indeed, throughout the post crisis period we have observed a puzzling behavior of inflation in many developed countries, as standard Phillips curve approaches have done a rather poor job predicting price pressures. During this period, the unemployment rate has reached historically low levels, but inflation has remained low. Economists have referred to a “twin puzzle” in inflation dynamics and several explanations with different policy implications have been put forward. Some have pointed to the existence of “hysteresis” as causing a drop in potential output and, consequently, smaller gaps in the economy after the crisis. Others argue that the weakening of the relationship between activity and inflation responds to structural changes, like globalization forces pulling wages down, or technological innovation prompting changes in industrial organization. Another alternative, a sort of “catch 22” for central bankers, is that the flattening of the Phillips curve may be the consequence of the success of central banks in targeting inflation. Measurement issues should not be ruled out either. Measuring a common movement of prices throughout the economy has never been a straightforward task, but this may be getting harder as standardized goods take a smaller and smaller share of household consumption compared to services and to goods that are subject to fast change.

Central Bank of Chile October 2018  Central Bank of Chile’s Twenty-Second Annual Conference: “Changing Inflation Dynamics, Evolving Monetary Policy” Opening remarks by Mario Marcel, Governor of the Central Bank of Chile October 25, 2018 – Santiago, Chile Welcome remarks Good morning everybody and welcome to the Twenty-Second Annual Conference of the Central Bank of Chile. It is a pleasure to host this event that every year gives us the opportunity to reflect and discuss about issues that have direct implications on our work as central bankers and stimulate the related academic agenda. I am looking forward to active discussions today and tomorrow on this year’s conference theme: changing inflation dynamics and its implications for monetary policy. This conference is being followed online via live streaming on our website. Inflation dynamics and monetary policy in recent years The last ten years have been an extraordinary time for macroeconomics. The deepest financial crisis since the Great Depression was followed by an unprecedented bold, coordinated, unorthodox and persistent response by central banks in advanced countries. In all, a decade in which the world economy stood a long way from normal and, as it depended so much on emergency support, it was not easy to detect how much the economy was changing underneath. So it is perhaps not that surprising that once the same central banks began to envisage a gradual, cautious and well communicated approach to monetary policy normalization, some challenges appeared on the road.
Mr. Carse reviews the impact of the Asian crisis on the Hong Kong banking sector Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the Sixth Conference on Pacific Basin Business, Economics and Finance in Hong Kong on 28/5/98. I am pleased to have the opportunity to talk to you about the impact of the Asian financial crisis on the Hong Kong banking sector. The Asian financial crisis is one year old this month, though this is a birthday that we do not want to celebrate. The crisis can be dated from late May when the Thai Baht came under severe pressure. A renewed attack in early July, while we were celebrating the success of the Handover in Hong Kong, led to the floating of the Baht, which promptly plunged in value. The contagion then spread to neighbouring economies, and although Hong Kong was for a time immune, it eventually reached us too. Explaining the origins and causes of the Asian crisis has become a major growth industry and I have no intention of adding to the debate today. Suffice to say that one point on which almost all the commentators are agreed is that weakness in banking systems in the region has been one of the main reasons which explains the intensity of the crisis and the speed with which it took hold.

It also BIS Review 48/1998  -3-  reflects the fact that some banks are wanting to cut back on their Asian exposure and Hong Kong is one of the few markets where it is possible to do so. This will have the benefit, from the local banks’ point of view, that it will push up lending margins; and over time this will attract more banks back into the market and encourage them to lend. But the appetite for new lending is likely to remain subdued in the short-term. As already mentioned, the fear of increased bad debts is another factor which is making the banks wary about increasing their credit exposure. The combination of regional difficulties and domestic slowdown makes it inevitable that asset quality will deteriorate this year. In the first quarter of the year there was a noticeable rise in loans overdue for more than 3 months, although as a percentage of total loans the figure for the local banks (less than 2%) is still reasonable by international, let alone, regional standards. As to how much worse the situation will get as we go through the year, it is difficult to say. But we can take comfort from the fact that although loan arrears in the all-important residential mortgage market are creeping up, the amounts involved are still very small in percentage terms (only around 0.3% of the local banks’ mortgage portfolio at end-March).
However, activity is expected to continue to be dampened somewhat by the process of balance sheet adjustment in various sectors. This assessment is also reflected in the June 2011 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP growth in a range between 1.5% and 2.3 % in 2011 and between 0.6% and 2.8% in 2012. Compared with the March 2011 ECB staff macroeconomic projections, the range for 2011 has been revised upwards, while the range for 2012 remains broadly unchanged. The June 2011 Eurosystem staff projections are broadly in line with recent forecasts by international organisations. In the Governing Council’s assessment, the risks to this economic outlook remain broadly balanced in an environment of elevated uncertainty. On the one hand, favourable business confidence could provide more support to domestic economic activity in the euro area than currently expected and higher foreign demand could also contribute more strongly to growth than expected. On the other hand, downside risks relate to the ongoing tensions in some segments of the financial markets that may potentially spill over to the euro area real economy. Downside risks also relate to further increases in energy prices, protectionist pressures and the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation was 2.7% in May according to Eurostat’s flash estimate, after 2.8% in April. The relatively high inflation rates seen over the past few months largely reflect higher energy and commodity prices.

Furthermore, the most recent data confirm the positive underlying momentum of economic activity in the euro area, while uncertainty remains elevated. Overall, our monetary policy stance remains accommodative, lending support to economic activity. On balance, risks to the outlook for price stability are on the upside. Accordingly, strong vigilance is warranted. On the basis of our assessment, we will act in a firm and timely manner. We will do all that is needed to prevent recent price developments giving rise to broad-based inflationary pressures. We remain strongly determined to secure a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. This is a prerequisite for monetary policy to make an ongoing contribution towards supporting growth and job creation in the euro area. Turning to fiscal policies, all parties involved in the preparation of the 2012 national budgets must ensure that they are fully in line with the requirement to support confidence in fiscal policies. A comparison between the latest economic forecasts by the European Commission and the fiscal plans embodied in the stability programmes points to the need for many countries to underpin their budget targets with concrete consolidation measures in order to correct their excessive deficits by the commonly agreed deadlines. The implementation of credible fiscal adjustment strategies is crucial in view of ongoing financial market pressures.
The Bank of course retains the ability to relaunch the scheme as necessary and in light of that the MPC judges the effective lower bound to Bank Rate to be now close to but a little above 0%. The ECB’s targeted long-term refinancing operations (TLTROs), first launched in 2014, also built on the experience of the FLS, as part of the three-pronged easing strategy, which also included cuts in the ECB deposit rate into negative territory and the launch of asset-backed security and corporate bond purchase programs. The facility was initially launched at margin of 10bps over the ECB’s marginal lending rate, though over time the pricing was reduced and tied instead to the deposit rate. As with the FLS and TFS, higher interest rates for banks that are contracting lending provide an incentive to lend. As with the UK, the TLTRO provided an innovative way to reduce the effective lower bound. With the link to the ECB’s deposit rate the TLTRO provided a way for the ECB to take wholesale interest rates significantly below zero without counterproductive compression to margins in the banking sector (Chart 9).

This has created tensions between short-term output and inflation stabilisation in the UK that have not been evident in other major economic regions. Chart 1: Divine coincidence has continued in the euro area Great moderation  5  Inflation (%)  Financial crisis and after 4 3 8 2 -4  -3  -2  -1  0 1  1  2  3 4 Excess demand (%)  0 -1  3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  But not in the United Kingdom Great moderation  6  Inflation (%)  Financial crisis and after 4  Inflationary, with trade-off  Inflationary, no trade-off  2 -6  -5  -4  -3  -2  -1  0  1  2 3 4 Excess demand (%)  0 Disinflationary, no trade-off  Disinflationary, with trade-off -2  In these circumstances it has been critical for the Bank of England to pursue flexible inflation targeting.2 Since 2013, the MPC’s remit has explicitly recognised that there are circumstances in which bringing inflation back to target too quickly could cause undesirable volatility in output and employment. It directs the MPC to “promote understanding of the trade-offs inherent in setting monetary policy” including importantly “the horizon over which the Committee judges it appropriate to return inflation to target”. The MPC used this flexibility to support activity following the referendum in the wake of the large depreciation.
Some of the results of these analyses have been presented today at this conference. We also plan to regularly update these results to take into account the changing economic environment and outlook. In this regard, let me also stress the relevance of firm surveys as a very useful tool for monitoring real time developments in the corporate sector, especially bearing in mind the long time lags of hard data at the micro level. In this regard, last November the Banco de España launched a new Business Activity Survey to compile first-hand information on a quarterly basis about companies’ activity in the current quarter and about the immediate outlook. The survey compiles qualitative information about firms’ perceptions as to the course of turnover, employment and prices. Given the current economic environment, additional questions were included on the impact of the pandemic, the use of different policy measures and the strategies that businesses intend to adopt in the near term. This new survey is a valuable source of information on how business activity evolves by sector and on other corporate characteristics that will help outline short-term economic developments, but also identify more long-term patterns. As an example, initial results show that the impact of the COVID-19 shock was larger for small, young and less productive firms located in urban areas. Moreover, these firms resorted relatively more to public-guaranteed loans, tax deferrals and ERTEs (furlough schemes).

Fiscal support to preserve real incomes in a supply-constrained economy during a global pandemic must be subsequently followed by timely withdrawal of stimulus and  monetary tightening in the recovery phase to anticipate subsequent inflationary consequences. 7 Researchers can add value to the policy discourse by supplying clearly articulated frameworks that map optimal policy responses to specific shocks and provide guidance on their coordination. Flexibility must also be accorded for individual policy responses across countries reflecting their unique circumstances. 8 The third strand of issues stresses the labour market considerations that have emerged, through the prism of both the micro and macro perspective. During the COVID19 shock, preventing scarring in the labour market was the key concern, inducing policymakers to experiment with innovative policy designs to preserve existing job matches while facilitating some necessary sectoral reallocation over time. Fast forward to today, supply shocks from the Russia-Ukraine crisis can interact with tight labour markets to amplify inflationary pressures. So,” Whither the flat Phillips Curve?” Has the near-term inflation unemployment trade off worsened and will wages and prices start to drive each other higher in a recursive loop. 9 Given the key role of the labour market in recent shocks, the ability to track labour market outcomes in real-time is of substantial value. At the height of the pandemic, Steve Davis, Nick Bloom, and Raj Chetty among others constructed valuable new survey-based frameworks to make labour market data available at higher frequency, and more promptly than official sources.
This program targets the disadvantaged and underrepresented populations within Rochester’s urban center to provide access to skill-based careers. Participants receive intensive developmental education to improve their literacy and math skills before transitioning into one of MCC’s accelerated certificate programs. There are many other good examples of cooperative workforce development programs in the New York Fed’s District. In Buffalo, the Overhead Electric Line Worker training program at Erie Community College (ECC) was created in conjunction with National Grid to address the critical shortage of overhead line workers and technicians. To date, the program has graduated 132 students, including 42 who are currently employed at National Grid. Another example is OnForce Solar, which sells and installs solar energy packages for commercial and residential customers. In 2010, OnForce Solar CEO Charles Feit moved his rapidly growing company to a then unoccupied building in the Port Morris area of the Bronx. After struggling to find skilled workers, OnForce Solar partnered with Bronx Community College to create a $ million technology hub which will be paid for by the company. The partnership was made possible by the Governor’s Start-Up NY Program, which was launched in 2013 to spur job growth in distressed areas by designating tax-free zones at various colleges and universities. OnForce Solar also developed and taught a newly designed technology course at Bronx Community College. Another example is Stevens Institute of Technology in Hoboken, New Jersey. When I visited Stevens in April, I learned how they are preparing their students to meet local workforce needs.

Many of my friends in the real economy say that the Czech Republic is a country where everything is produced, from wings for Airbus and Embraer aircraft (we are also the biggest producer of ultralight planes in the world, for instance), through turbines, cars, buses, locomotives and guns to bearings, brushes and semtex. Whatever you need to produce you will always find at least one factory capable of making it, the anecdotic evidence seems to be suggesting. As exports obviously feed this country, and as we are so close to Germany and the Germanspeaking world, you won’t be surprised to learn that Germany is by far our biggest trading partner, with more than 30% of our exports going there and with the biggest proportion of foreign investment in the Czech Republic coming from Germany. (The UK is roughly the tenth or eleventh biggest source of investment for this country.) But you might be surprised when I tell you that the Czech Republic is one of the few countries in the world that has a trade surplus, not a trade deficit, with Germany. This is also quite unique. But it’s not all about the economy, so let me turn to a couple of small curiosities which might be of interest for this audience. I believe some of you use contact lenses, which were invented by the Czech scientist Otto Wichterle, as well as nylon, for instance. The Czech scientist Jan Jansky was the first to classify blood into four groups.
The second realignment that is taking place is based on the post-crisis realisation that financial stability cannot be secured solely through a combination of macroeconomic policies aimed at price stability and microprudential supervision aimed at the safety and soundness of individual financial institutions. 16. Price stability is not sufficient to achieve financial stability. Sharp increases in asset prices, even in a climate of relatively low consumer price inflation, have typically led to credit booms and risky behaviour that eventually undermined financial stability. Likewise, prudential rules to ensure the safety of individual banks have not been sufficient to keep the banking system as a whole safe. Inter-linkages and common exposures across institutions can multiply aggregate risks and destabilise the system. 2  BIS central bankers’ speeches  17. Hence the resurgence of interest in what is called the macroprudential dimension – policies and tools aimed at containing risks in the financial system as a whole. However, macroprudential policies are still at an experimental stage. Different countries have adopted different measures in the name of sustaining systemic stability, ranging from limits on aggregate credit and caps on debt-to-income ratios to taxes on asset market transactions and controls on capital inflows. 18. Singapore has been experimenting, since 1996, with its own toolkit of macroprudential measures to tame excesses in the housing market. While we do not as yet have a completely coherent policy framework, the main outlines of Singapore’s approach are becoming clearer.

Price stability, as everyone realizes, may be defined in many ways, with somewhat different consequences for the execution of monetary policy. When the index for measuring inflation is chosen, a number of different considerations have to be taken into account. The index has to be reasonably broad and give a picture of price developments in the economy as a whole. It is an advantage if it is also well established and regularly published with a short time lag. In addition, it is desirable that the index is seldom revised. All these factors bear out the suitability of the consumer price index (CPI) . Thus, the Riksbank’s inflation target has been expressed in terms of a change in the official consumer price index. BIS Review 56/1997  -8-  Figure 5  CPI an d U n d e r lyin g In flatio n Pe r ce n tage 12-m o n th ch an ge 6 .0  6 .0  CP I  5 .0  5 .0  Un derl y i n g do m es tic in fl ati o n  4 .0 3 .0  4 .0 3 .0  2 .0  2 .0  1 .0  1 .0 0 .0  0 .0 92  93  94  95  96  97 -1 .0  -1 .0  Sources: S tatistics S weden and the R iksbank One problem with the CPI is that it is affected by temporary influences on inflation.
It has come back to a significant degree. Before the crisis, some argued that these patterns could be due to common shocks, convergence of monetary policy frameworks, and increased credibility of those frameworks. However, case studies, comparisons of the pre- and post-  3  crisis periods, and other observations make it more and more plausible that global financial integration is the main driver. The bottom line is that it is becoming more difficult to conduct independent monetary policy in small, open, and financially integrated economies, and although a flexible exchange rate is a necessary condition for doing so, it might not be sufficient, especially when we factor in the financial stability aspects. This, I think, is why we find on occasion that we are closer to facing a dilemma than a trilemma. I think it is still a trilemma, but with trade-offs of variable severity.2 What can individual countries do about this? First, those that have the option can enter a monetary union. That has its own pros and cons, as you all know very well. But for a SOE were the MU constitutes the biggest trading partner, issues of excess exchange rate volatility and domestic currency mismatches become much less pronounced. Second, they can give up on independent monetary policy while maintaining their own currency by either pegging the exchange rate or pegging interest rates to those of global rate setters. The problem with the first is that, as history shows, it can be difficult to maintain with free capital movements.

The problem with both is that other policies, such as fiscal policy, will then have to take care of domestic economic stabilisation. But will they? Third, they can use FX intervention to reduce the effect of volatile capital flows on the exchange rate. Fourth, they can increase resilience and the ability to live with exchange rate fluctuations (reduce the fear of floating) by strengthening financial regulation and supervision or employing macroprudential tools. Fifth, if everything else fails, they can introduce tools aimed directly at the financial integration part in order to regain greater monetary independence and shift the effect of monetary policy more to the interest rate channel and towards the non-traded goods sector. These so-called capital flow management measures are probably most needed when countries are faced with large capital inflows at the same time as domestic conditions warrant significantly higher interest rates than among core rate setters. In Iceland, we have used many of these tools in recent years. We have used FX intervention to reduce short-term exchange rate fluctuations and, in recent years, to lean against strong appreciation pressures. We have introduced a liquidity coverage ratio and a net stable funding ratio in foreign currencies. In 2016 we were faced with strong capital inflows that flattened the yield curve as the policy rate was being increased and more was signalled. We then introduced a special 2  Rey (2013) and Obstfeld (2015) analyse this issue and provide somewhat different views on whether it is a dilemma or a trilemma.