samchain/econo-pairs-v1 huggingface dataset:
In both the SPD and the SMP, many of the questions are tailored toward matters that are of policy relevance at the time of the survey. Further, we use the fact that the respondents are market professionals with a good understanding of finance and economics to ask direct and at times technically complex questions. In this regard, the surveys contrast with the SCE, which uses language that is accessible to respondents with no economic or financial training.41  37  See Armantier et al. (2016). 38  Using a standard test of the difference between two distributions, the change from September to January is significant at the 1 percent level. The change from April to May has a “p-value” of 16 percent. 39  This dispersion implies that random samples of small size (less than one thousand) will exhibit variability even if the underlying population distribution of inflation expectations remains constant. 40  Correia-Golay, Friedman, and McMorrow (2013) provide an introduction to the SPD. 41  Many surveys of market participants do not use their technical sophistication to the extent necessary to produce robust measurement of expectations. For example, currently many surveys ask market participants to identify the FOMC meeting at which the next increase in the fed funds target range will most likely occur. This question implicitly assumes that the next rate change will be an increase; moreover, eliciting expectations about the most likely meeting when the number of future meetings is large is particularly uninformative.

When choosing between the two investments, the respondent seeking to maximize her payoff should switch investments at most once, and if so, should switch from the one yielding a nominal return to the inflation-protected investment sooner, the higher her inflation expectations.31 We found that the choices in the financially incentivized experiment were indeed meaningfully related to respondents’ inflation expectations, on average. Differences in reported uncertainty were also associated with different choices in the experiment, in the direction predicted by theory. Deviations from expected utility maximization were more likely  29  The observed heterogeneity of expectations is important for policy purposes, since we find that agents with different characteristics act on their inflation beliefs and update their expectations in distinct ways. 30  Armantier et al. (2015). 31  This is an agent’s optimal choice under expected payoff maximization. We also show that the respondent should switch sooner to the inflation-protected investment, the higher her risk aversion and the more uncertainty she expresses in her inflation expectations. BIS central bankers’ speeches  9  to occur for respondents with low education, as well as those with low numerical and financial literacy. We were able to repeat the experiment with the same respondents six months later. We found that individual changes in expectations were significantly associated with changes in how early respondents switched between investments, and that not only the direction but also the magnitude of these changes was consistent with a simple expected utility maximization framework.
On the demand side, should emerging countries decouple to a large extend from the United States, their contributions would then be sufficient to maintain a significant pace of commodity prices growth. On the supply side, unexpected climate or geopolitical disruptions may lead to shocks on production, as in the past few years. On top of both factors, in the current context of raising inflation and troubled financial markets, commodities attract a growing part of investment, speeding up sometimes rather artificially their price increases. Second, the triggering of possible second round effects is a well known source of concern for the Governing Council of the ECB. The common desire of firms and households to offset  BIS Review 32/2008  1  profit margin and purchasing power losses stemming from inflationary shocks may lead to a wage-inflation spiral, ending in deteriorated output prospects and welfare losses to all parties. One should however note that nothing significant has materialised at this juncture. On the contrary, remunerations have remained well in line with productivity gains with, to take an example, reference wages increasing by 0.3% in France during the fourth quarter of last year. From this point of view, protracted shocks to food and commodity prices put the anchoring of inflation expectations and the credibility of monetary policy to the test. The recent upward trend in European household and market expectations may be of some concern.

However, most of the burden lies on central banks, as “inflation is always and everywhere a monetary phenomenon”. The current “two pillar” approach of the Governing Council with a crosschecking between the economic and the monetary analysis has, I believe, permitted us to deliver a stance of monetary policy which has been totally appropriate to the situation of the euro zone. The anchoring of inflation expectations at a level consistent with price stability, which is currently observed in the financial market, is therefore completely justified. The years to come will give to the central bankers the opportunity to demonstrate that these years of “great moderation” are not just the result of lucky circumstances but are largely due to an improved monetary policy framework. 4  BIS Review 32/2008
The Central Bank continued to withdraw the excess liquidity in the market mainly via New Turkish Lira deposit transactions in the Interbank Money Market within the CBRT and repo transactions in the Repo and Reverse Repo Market of the Istanbul Stock Exchange, on an overnight basis. However, when the excess liquidity withdrawn via overnight operations increased, the Central Bank has started to issue liquidity bills from July onwards in addition to its overnight operations in order to increase the flexibility and efficiency of liquidity management. Overnight interest rates in the market were generally around the borrowing rate of the Central Bank, depending on the withdrawal of the excess liquidity by the Central Bank via overnight operations. Hence, the borrowing rate of the Central Bank has continued to be an indicator for money markets. BIS Review 4/2008  7  Based on the information currently available, i)  The increase in base money,  ii)  Coupon and principle redemption by the Treasury to the Central Bank,  iii)  Treasury’s being net foreign exchange debt payer,  will have a lowering effect, while; iv)  The Central Bank’s net foreign exchange purchases,  v)  Interest payments to be made by the Central Bank for required reserves and excess liquidity absorbing transactions,  vi)  The decline in Treasury cash accounts within the Central Bank  will have an increasing effect on the level of the liquidity in the market in 2008.

The Islamic financial system also needs to include the capital market to provide an alternative source of financing, as well as to create broader and more diverse Islamic financial instruments for investors. The equity and bond markets will provide a more balanced allocation of financial and economic resources. This would result in a more efficient distribution of risks within the system, thus creating stability in the system. The equity and bond markets would also provide an avenue for raising long-term capital. With a wider spectrum of instruments in the market, fund managers would be able to manage their portfolios better and spread their risk according to their desired risk tolerance, thereby contributing toward greater stability. Complementing these financial markets is the development of non-bank Islamic financial institutions. Takaful, or Islamic insurance, provides the risk protection to its policyholders and serves as an important mobiliser of long-term funds. In addition, development financial institutions, savings institutions and housing credit institutions need to be developed to meet the diversified customer demands. These specialised institutions will meet the different requirements of the economy. IV. Malaysia’s experience in the development and management of the Islamic finance  The strategy adopted by Malaysia has been to develop a comprehensive Islamic financial system. Malaysia started with the establishment of one Islamic bank to spearhead the introduction of Islamic banking products and services, and at the same time, identified the relevant financial segments that were required to support the expansion of Islamic banking activities.
Chart 5  Chart 6  Changes in international equity indices since trough(a)  European corporate bond spreads  Interest rates Expected earnings  Implied risk premium Total  Per cent 100  Basis points (log scale) Illiquidity premium (a) 10,000 Compensation for credit risk (b) Great Depression (c) Current (d)  80 60 40  1,000  20+ 0 20  100  EuroStoxx  S&P500  FTSE 100  40  Current  March  Current  March  Current  March  Current  March  Current  BIS Review 10/2010  March  Sources: Bloomberg, IBES, Thomson Datastream and Bank calculations. (a) Based on a three-stage dividend discount model. See Panigirtzoglou, N. and Scammell, R. (2002), 'Analysts' earnings forecasts and equity valuations', Bank of England Quarterly Bulletin (Spring), pages 59-66. (b) Taken as 9 March 2009. 10  Sources: Citigroup, Moody's Investors Service, UBS Delta and Bank calculations. (a) Spread of iBoxx € corporate bond index over iTraxx Europe credit default swap index. (b) iTraxx Europe five-year credit default swap index. (c) Credit risk premium for realised default rates on US corporate bonds issued in 1931. (d) Credit risk premium for Moody's current default probability forecast for European corporates.

A normalisation of long-term interest rates would increase UK companies’ debt servicing costs from 17% of profits currently to around 33%. 6  Reinhart, C M and K Rogoff (2009), This Time is Different – Eight Centuries of Financial Folly, Princeton University Press. 7  Data are not available for all ten countries, so period averages are based on slightly different samples. 8  Bank of England Financial Stability Report, December 2009. 4  BIS Review 10/2010  That is significantly below the levels reached in the early 1990s, when debt servicing peaked at 58% of profits. But the distribution of debt across companies again paints a less promising picture. In 2007, around 25% of UK firms made insufficient profits to cover their interest payments (Chart 11). This is a long tail. For sovereigns, debt servicing costs among the G7 economies are currently low, at around 3% of GDP. But were medium-term interest rates to normalise, against a backdrop of rising debt ratios, the combined effect would be significant. Over the medium term, debt servicing relative to GDP in the G7 economies would double. Finally, banks’ refinancing burden in the next few years has grown as a result of a shortening of debt maturities during the crisis. The average maturity of US banks’ rated debt is estimated by Moody’s to have fallen from 6.7 years to 3.2 years since 2005. Among UK banks, it has fallen from 6.8 years to 4.3 years.
With inflation at 1.6%, continuing downward pressure from the appreciation of sterling, and with slack remaining, the current inflation environment is benign. But it will not remain benign if we do not increase interest rates prudently as the expansion progresses. Our latest forecasts show that, if interest rates were to follow the path expected by markets – that is, beginning to increase by the spring and thereafter rising very gradually – inflation would settle at around 2% by the end of the forecast and a further 1.2 million jobs would have been created. In other words, we would achieve our mandate. There is, as always, uncertainty about the future. But uncertainty does not mean stasis. You can expect interest rates to begin to increase. The exact path will depend on the economy. Our assessment will undoubtedly change as the economy evolves and policy will of course be adjusted if geopolitical events have a material impact on the outlook. If indicators suggest the economy is moving more slowly towards our goals, we will have learned that we are further from sustainable capacity. Prospective wage and unit labour cost growth will be weaker. Rates will go up later and more gradually. And should we see faster progress, prospective wage and unit labour cost growth will be stronger, which will suggest we are closer to maximum capacity and that the economy can sustain higher rates sooner. In all events, rate rises can be expected to be gradual and limited compared to the experience of the UK in the past.

As this has been the system for a very extended length of time, one ends up with a lot of people being paid a lot and doing very little. As such, people don’t move on in jobs or move out of jobs if they are not competent as might happen with a proper pay system. However, a problem identified is halfway solved as the saying goes. And I am happy to note that outsiders and stakeholders who have had to work with the Bank of Thailand lately are very receptive to the change and are saying much nicer things about us and our work. I also sense that the staff are seeing that things are better and will probably give enough support to the restructure. BIS Review 86/2000  4  Ladies and gentlemen, To get back to the topic of the economy: two years ago I said that we would reduce interest rates as the basic strategy for saving the country. This we have done and now the 14-day RP, the monetary instrument we use to transmit monetary policy to the general economy, is at only 1.5%. The lowest lending rate is 7.5% - what a difference from when I talked to you two years ago. The currency is now at around 42 baht to the dollar, which some people consider weak. Yet when compared to the 22 competitor countries, it has not much depreciated in the last two years.
For a more detailed analysis, see Banco de España (2020), “Recent developments in the most important Latin American banking systems for Spanish banks”, Box 2, “Report on the Latin American economy. Second half of 2020”, Analytical Articles, Economic Bulletin, 4/2020. 8 For a stress test analysis of the 61 largest banks in Latin America, see Annex 4 of the IMF’s Regional Economic Outlook (2020), Pandemic Persistence Clouds the Recovery. 9 See A. Werner, A. Ivanova and T. Komatsuzaki (2021), Latin America and Caribbean’s Winding Road to Recovery, IMF blog. 5  First, in addition to the human cost in lives, the effects on poverty and income distribution have been very severe.10 Indeed, during 2019, bouts of political tensions and social unrest in several countries, partly related to this situation, fuelled economic uncertainty; this in a region where numerous elections are due to take place in the coming quarters. A second challenge is that posed by shrinking fiscal space following the increase in government debt in the region during 2020, positioning it as the emerging region with the highest government debt-to-GDP ratio and, where debt refinancing is concerned, leaving it highly vulnerable to changes in investor sentiment. Against this background, monetary policy is supported by the accommodative policies of the main developed economies and by low inflationary pressures.

25.02.2021  Latin American economies: developments and challenges Consejo Empresarial Alianza por Iberoamérica (CEAPI) Pablo Hernández de Cos Governor  Ladies and gentlemen, good afternoon. First of all, I would like to thank the Consejo Empresarial Alianza por Iberoamérica (CEAPI) and its President, Núria Vilanova, for the kind invitation to participate in this event. I should also like to take this opportunity to acknowledge the role that the CEAPI plays to support the business and investment of Spanish, Portuguese and Latin American firms. As you all well know, Latin America is a very important region for Spain owing to our close cultural and economic ties. It is likewise important for the Banco de España, as evidenced by one of the initiatives in our Strategic Plan for 2020-2024:1 positioning the Banco de España as a leading central bank for Latin America. This objective entails engaging in a series of actions, such as organising events, entering into and implementing cooperative agreements with central banks and institutions in the region, and the provision of services and international cooperation, all with a medium and long-term strategic view. It also means working to extend and improve our institution's analytical capacity and its visibility vis-à-vis the region’s economies and financial systems. Fortunately, it is already viewed as a benchmark in this regard within the Eurosystem.
The FOMC has not specified how large the balance sheet should be at that point, other than an expectation that the level of reserve balances will be appreciably below that seen in recent years, but larger than before the financial crisis. My colleague Lorie Logan spoke in May on the many technical drivers of this ultimate level, which include the mode of policy implementation that the FOMC chooses in the longer run, possible increases in recent years in the financial system’s demand for reserves and Federal Reserve reverse repo liabilities owing to new financial regulations and other factors, and the long-term evolution of demand for paper currency.10 Let me spend a few minutes discussing the importance of gradualism and predictability. Gradualism The case for gradualism in reducing the Fed’s securities holdings rests on evidence, as well as potential risks, that an overly fast flow of securities into private hands could be disruptive to market functioning, as well as the FOMC’s confidence that it can adjust its policy stance as needed through changes in the federal funds rate. In particular, there is evidence that the agency MBS market, due to the nature of its trading conventions, is prone to dislocation when market participants expect large transitions in central bank agency MBS flows.11 Such concerns can be self-fulfilling: if market participants are concerned that an abrupt shift in flow might be disruptive, they might, for example, withdraw from liquidity provision.

A few days prior to the monetary policy meeting we have another formal Executive Board meeting where we go through the text of the report in detail and where the report is tabled. However, the forecast can be changed as late as during the monetary policy meeting. It is not until the monetary policy meeting that the text and forecasts of the Monetary Policy Report are finally determined. The Executive Board makes interest rate decisions through a majority vote The Executive Board holds six monetary policy meetings a year. If necessary we can meet more often. The number of meetings is not stipulated by law, but is determined by us Executive Board members. We make decisions on the current level of the repo rate at the monetary policy meetings. We also agree on which interest rate path is most appropriate at the present time. The decisions are made through a majority vote, where the Chairman of the Executive board has a casting vote, and they are announced in a press release. In addition to the Executive Board members, a number of employees from the Monetary Policy Department and the Communications Secretariat take part in the meeting, as well as some advisers and legal advisers. In addition, the Chairman and Vice Chairman of the General Council regularly take part in the meetings and thus obtain a good insight into the work of the Executive Board. They both have the right to express opinions, but not to put forward proposals or take part in any decisions.
As a result, banks in some jurisdictions quickly accumulated significant exposures to local assets (such as real estate), and when the crisis hit, cross-border funding was quickly withdrawn and sizeable losses had to be absorbed within national borders. Looking ahead, lack of genuine financial integration and low resilience will always expose us to systemic risks. The crisis has also exposed our lack of some fundamental analytical tools and policy instruments The complexity and sequencing of the crisis, as well as its morphing over time, have also exposed our weak understanding of micro- and macro-fundamentals. Here, I am talking about basic notions, not only more advanced concepts and elements. Few economists saw the financial crisis coming, understood the serious risks generated by persistent imbalances and recognised the deep changes in economic structures and financial markets that were under way during the build-up to the global financial crisis and the sovereign debt crisis in the euro area. With EMU, the nature of prevalent shocks has changed to slow moving processes that are more difficult to tackle with the few adjustment mechanisms at the disposal of stressed countries. Facing this crisis, we were armed with a toolkit that was suited to a previous era: i.e., inadequate models and limited monitoring tools to support EMU. It is thus understandable that the crisis has also heralded a “renaissance of research”, with both positive and normative implications. One of the least acknowledged outcomes of the crisis is the enrichment of our professional toolkit to conduct economic, monetary and financial analyses.

One area that would definitely benefit from the implementation of such reforms is the labour market, at a time when the Romanian one faces challenges that are certainly not new or uncommon. Given our status of an open catching-up economy, within a European Union which has at its core the free movement of capital and labour, we were bound to end up sooner or later in somewhat of a dilemma. To be more specific, there are various opinions in our economy about where wages should be: on the one hand, they should be governed by productivity dynamics, so as not to lead to an erosion of the competitive position, yet on the other hand, they cannot be significantly below what is available in other economies, as it would simply lead to a labour force drain, with dramatic consequences if not addressed quickly. We are actually dealing with an emigration problem today, as more than three million Romanians (a significant percentage of the population) have left their homeland for other EU Member States. In order to mitigate this, wages should go up. As noted above, the only way to do that without upsetting competitiveness is to boost productivity. This can be done along a number of avenues, many of them involving, however, a significant amount of time (for example, one cannot solve the population-aging problem overnight). Foreign direct investment in recent years helped total factor productivity, but employers are currently being challenged by the shortage of labour force, in part determined precisely by the significant emigration.