samchain/econo-pairs-v1 huggingface dataset:
Central banks took greater, though not total, mastery over their monetary destinies. With increased global integration of capital, goods, and labour markets, inflation stabilisation has faced powerful countervailing forces. Perhaps as a result, advanced economy inflation rates have moved more closely together under Inflation Targeting than under Bretton Woods. The correlations between inflation rates in major economies grew in the wake of the crisis (Chart 5 (d) – see annex). As they have written their monetary scripts, central banks have at the very least had an editor. If they are not careful, they could become ghost writers. 7  First identified by Irving Fisher (1933), “The debt-deflation theory of great depressions”, Econometrica. 8  See IMF (2013), World Economic Outlook, Chapter 3, April. 9  In the UK, “the framework for monetary policy was, at best, opaque”, according to King (1997), “The Inflation Target five years on”. 4  BIS central bankers’ speeches  3. Why is inflation low globally? Of course, an important global factor behind current low headline inflation has been the sharp fall in the price of oil, which has been driven primarily by large increases in its actual and potential supply. This means that while it’s been a short-term drag on inflation, it’s good news for growth. The Bank estimates that lower oil prices will boost the level of UK-weighted global GDP by a little under 1 percentage point over the next three years, with a consequent boost in demand for UK exports of around 2 ½ %.

On “lowflation” and deflation  Why do we target the low, but positive, inflation rate of 2% rather than a zero or even negative rate? The simple answer is because it’s our job, given to us by the democratically elected representatives of the British people. We are accountable to Parliament for meeting it. On the occasions when inflation moves by more than 1 percentage point away from the target, we are required to explain publicly why that’s happened and what we’re doing about it in an open letter to the Chancellor. Before this year, that had happened 14 times in the past when inflation has been too high. The particularly subdued January inflation rate meant I had to write the 15th open letter, the first to address these points with respect to very low inflation. It is likely that I will have to write a few more of these over the course of the year. Our remit for 2% inflation reflects the lessons of the past, including the fight against high inflation in the 1970s and 1980s, as well as the deflationary disasters that have followed past financial crises. Low, stable and predictable inflation helps to stabilise households’ and firms’ expectations about future price increases. That helps them plan their spending, investment and hiring decisions. In short, the Bank of England worries about inflation so that everyone else doesn’t have to. High inflation damages growth, in part, because high inflation also tends to be volatile, generating uncertainty that makes important economic decisions more difficult.
The pursuit of credible and reassuring fiscal adjustment measures will contribute to the consolidation of the recovery because such measures inspire confidence in all those on whom economic prosperity depends. But has sufficient account been taken of the social risks involved? The main problem consists of the level of unemployment. As I said, a return to confidence, in particular fiscal confidence, is essential for the consolidation of the recovery and thus for the creation of lasting employment. The confidence to which you refer is measured in particular by the credit rating agencies. Isn’t it necessary to reassess their role? Why can’t the EU have its own credit rating agency? This is one of the major areas that is being looked into at the global level. Past events have shown how risky it could be to rely blindly on the analyses of the credit rating agencies. Financial institutions and investors must assume overall responsibility for the decisions that they take. How can monetary policy and EU economic policy be better coordinated? We have a monetary federation, which has provided monetary stability on a continental scale for 330 million citizens. Necessarily, this must be accompanied by very close monitoring of fiscal policies and strict compliance by fiscal policies with the reference framework that we set ourselves. On behalf of the Governing Council, I have always asked for strict compliance with the Stability and Growth Pact and the introduction of closer monitoring of developments in competitiveness within the euro area.

But I will approach these questions with three words: ecosystem, resilience, and opportunity. Ecosystem Let me start with the ecosystem. By this, I mean the various components, mechanisms, and interactions within the financial system. But I also refer to the larger environment in which the financial system operates. These two domains are intricately connected with each other. Without a favourable operating environment an IFC cannot flourish. Hong Kong’s financial services are now broadly based and well established, reinforcing our status as a global centre on many fronts. We are also championing emerging trends that shape the future of finance – notably fintech and green finance. All of this results from the hard work of our financial practitioners, supported by world-class professional services in fields ranging from accounting to risk management and compliance. Hong Kong has a fully bilingual legal system, rooted in the common law, with an independent judiciary and a strong legal profession. Our financial regulatory regime is internationally recognised for its open and progressive approach. These are tried and tested elements of a rules-based system that offers a level playing field for market participants from all over the world. Our world-class universities continue to produce outstanding professionals who are highly competitive by any standard. Hong Kong is also a magnet for talented people from all corners of the world.
And that task has certainly become much tougher. At the aggregate level - looking at the economy as a whole, while no-one - and I mean no-one, whatever they may claim - knows with any great precision just where current demand and output is in relation to the underlying supply capacity of the economy, there is no doubt that we are now at least much closer to full capacity output than we have been - and the actual rate of growth  BIS Review 55/1998  -2-  over the past year was, on almost anyone’s calculation, above the rate of underlying capacity growth. So we have been at greater risk of overheating than for some time. The consequence - if we were to overheat - is quite clear. Inflation would accelerate and we would then need to impose an abrupt slowdown on the economy to bring it back under control - to meet the Government’s inflation target. It was, of course, to avoid accelerating inflation and the associated need for an abrupt slowdown that the members of the Monetary Policy Committee last year had no difficulty in agreeing upon a significant policy tightening. But there was - and is - a significant complication. The aggregate position takes no account of the serious imbalance within the overall economy between external and domestic demand.

My appeal today for you is to embrace a different philosophy of thinking and acting, more modern and forward-looking, obviously always capitalising on our best national values and traditions. My advice is: never absent yourselves from knowledge and books. Education is a never-ending experience and process, and will accompany you throughout your carrier, notwithstanding your specific engagement, a bright member of the academia, a successful entrepreneur in the private sector or an expert of important public or international institutions. To be on the top list, you should always update your knowledge on the most recent theories, trends and findings, which explain the most basic laws and functioning of markets and economy. As the administrator of an important institution in the field of the economic and financial policies decision making, I have always believed and supported the involvement of the new generation in the daily activity of the institution. Beyond the fact that the new generation dominates the human resources in the Bank of Albania, we try to maintain the interest and the inclusion of students in our everyday activity, through a range of various educational and informative programs. The Bank of Albania is open for all students studying in finance and economics or other related fields for internships, continuously supporting the scientific and research work of the students.
I believe many of those present here have a special interest in developments in the exchange rate, and will therefore discuss this in more depth towards the end of the address. The economic situation and the orientation of monetary policy The Norwegian economy is now in a cyclical upturn. Over the past three years, mainland GDP has grown by approximately 4½ per cent annually, and the strong growth has continued in 2007. In the first half of the year, annualised growth was close to 6 per cent, and even if GDP growth in the third and fourth quarters should be zero, annual growth will be well over 4 per cent. As the chart shows, there have not been four consecutive years with such strong growth since 1971. At the same time, productivity growth in the Norwegian economy has been strong, and the supply of labour has been ample. The growth capacity of the economy has therefore been high. Low interest rates, growth in public demand and in petroleum investment and vigorous international growth have resulted in high income growth in the household and business sectors. Moreover, low interest rates have made it more profitable to bring forward consumption. In addition to contributing to the increase in actual income, the sharp improvement in the terms of trade may have raised households’ income expectations. On balance, this has boosted demand for goods and services. So far, there are few signs of a slowdown in the Norwegian economy.

That is why today’s conference is conceived to bring together academic research and central bank practice. The conference structure reflects an understanding that the global financial cycle affects the euro area and its monetary policy, which in turn affects the financial cycle in Europe beyond the euro area. Therefore, the first session of the conference is on the current phase of the global financial cycle which is to a large extent driven by the US monetary policy. We recall from the 2007/2008 crisis how the financial disruptions originated and triggered a full-scale global crisis. The second session is focused on the euro area financial cycle, as influenced by the global financial cycle, and its implications for asset prices and financial stability. Since the ECB policies also shape the financial cycle in Europe outside the euro area through economic and financial channels, although divergences do exist, our third session is devoted to the financial cycle in the non-euro area EU member states. By way of example from Bulgaria, the BNB recent research and relevant estimates for the local financial cycle indeed show that we are currently in the upward phase of accumulation of cyclical risk. We have, correspondingly, decided to activate and then raised the rate of our countercyclical capital buffer. Turning to actual policy reactions in dealing with financial cycles, our conference ends with a panel where Governors will share with us their views. Dear colleagues and guests, In conclusion, let me sum up my main points.
The cumulative output decline was 24%; unemployment peaked at 20%. Compared with this economic collapse, even some of the euro area peripheral countries were faring relatively better. Keeping the euro peg was considered by many as a “mission impossible”. External devaluation was presented as the only way forward. But Latvia did not choose the easy “quick fix”. It embarked on a courageous fiscal consolidation path and structural reforms. Two years later, the speed of the economic rebound is as extraordinary as the depth of the recession. Against all the odds, Latvia recorded a real GDP growth rate of 5.5% in 2011. While domestic demand was the main driver of growth last year, exports have also recovered very strongly. Evidently, Latvia’s competitiveness has improved, even though many challenges still lie ahead. The economic dynamics behind this swift stabilisation and recovery merit close examination. Equally interesting is the political economy of the Baltic adjustment. Jean-Claude Juncker once said: “we all know what to do but we don’t know how to get re-elected afterwards”. This saying, often referred to as “Juncker’s curse”, unfortunately seems to be confirmed by the crisis in vast segments of the euro area. Italy, Greece, Ireland, Portugal: in all of these countries the government fell directly as a result of its handling of the economic crisis. Latvia seems to be the exception to the rule. Despite harsh austerity measures the Prime Minister managed to get re-elected twice. Many ruling politicians in Europe these days may look upon this with incredulous admiration.

“credere”) supports regaining the trust in the financial system and in the banks as institutions that 2/3  BIS central bankers' speeches  ensure the allocation of funds to the private and the public sector. Companies in Romania, as beneficiaries of European funds, need to respond to some pressing issues such as inadequate management and financial discipline. Only around 15% of small and medium companies are eligible for financing, with a management team capable to conduct a lucrative activity that reflects in a sound set of accounting documents, like the balance sheet and the P&L account. These companies too, can be affected by the contagion effect, for instance when their projections and cash flows are subject to repayment from other companies, with delays. To support these companies and to ease the access to finance, one needs to improve the policies and continue the financial reforms to create a more adequate and flexible frame for investments and the multiplier effect of co-financing. The European Investment Bank has been a strong pillar for this strategic economic development, channeling investments towards the crucial sectors of transport, digital infrastructure and the new technologies, education for skilled labour force, healthcare, or agriculture. The European Investment Bank contributes to creating the right mindset and responsible attitude of assuming calculated risks. It supports the communication of sound public policies and priorities for Romania’s economic and social development, to continue and expand the European integration and economic convergence.
A single, over-arching, regulator will mean a clear line of responsibility and accountability, and it should also help to bring about greater consistency of regulatory approach. In relation to banking supervision in particular there seem to me to be real advantages in separating out the central bank’s responsibility for the stability of the financial system as a whole from the supervision of individual banking institutions. In the latter case, we have seen during the twenty or so years that the Bank has had statutory responsibility for BIS Review 18/1998  -6-  banking supervision how the public policy interest in our activities has increasingly focused on consumer protection. That is not at all a natural habitat for a central bank. It may indeed produce a conflict of interest if it causes the central bank to become over-protective of individual institutions, giving rise to moral hazard in the system as a whole. We were conscious of these tensions in the “old” Bank, although we found effective, informal, ways of reconciling them. There are therefore powerful reasons for including banking supervision among the responsibilities that are to be transferred to the FSA. The trick will be to ensure that the Bank’s capacity to identify and address emerging “systemic” financial problems - that is those which may have a significantly disruptive effect on the financial system as a whole rather than just on individual financial institutions - is not damaged in the process.

But the Bill, taken together with the MOU which I have described, sets out those wider functions much more clearly than ever before, defining our responsibilities, our powers to exercise those responsibilities, and our lines of accountability to the Government, to Parliament and to the public at large. This is a much more precise framework for the Bank’s operations, but one which I am convinced is more appropriate to our modern times. I was delighted to learn last week that I am to be allowed to continue, for the next five years, to walk out with this attractive New Lady of Threadneedle Street, and I look forward to the challenge of carrying through the very positive changes now being made to the role and structure of the Bank. BIS Review 18/1998
Yes, a big step forward has been made thanks to Next Generation EU, financed by a shared debt instrument. Before thinking of possibly increasing its size, we should accelerate its implementation: speed, even more than weight, is what is currently lacking in Europe. But our real leap forward will come when the existence of a permanent common fiscal capacity, – although less limited in amount, although different from a standing budget because not systematically activated, – allows genuine countercyclical action to be taken. Conversely – and not contradictorily –, adequate fiscal discipline is key to cope with economic reversals. Look at Germany, which fixed the roof while the sun was shining, and made appropriate use of its financial leeway during the crisis. There will be a debate, to be concluded most likely next year after the German and French elections, on the Stability and Growth Pact, following three years of warranted suspension between 2020 and 2022. We should avoid a fruitless confrontation between “illusionists” – who plead for debt cancellation, which is completely out of the question – and “traditionalists” – who want to keep the same old rules as if nothing had changed, including on the level of interest rates. We do still need rules, but revised and simplified ones. Indeed, the current low interest rate environment (with r<g) does not mean that public debt sustainability issues have become irrelevant: it only implies that governments have more time to ensure debt sustainability.

In advanced economies, fiscal multipliers ii are particularly high for public investment:  In this respect, this harsh crisis can also be an opportunity to bridge the skills and innovation gaps thanks to productive investment. But unfortunately, this key debate over the quality of spending is the blind spot in our European democracies. II. Public finance in France Now, allow me to illustrate these principles with reference to the country I know best. In France, we sometimes have a strange relationship with austerity: we are the country that fears it the most but one of those that practises it the least. This unfounded fear distracts us from our real problem: the weakness of our growth and the excessive cost of our public services even though we have the same social model as our neighbours. I strongly believe in our European social model, which is not a handicap but one of our strongest common European assets. And let me be clear: I am not promoting austerity – with cuts in public expenditure – but moving gradually towards a stabilisation of public expenditure in real terms. Our challenge is the 10 percentage-point differential between our government spending-to-GDP ratio and that of the rest of the euro area:  Since 2008, the pace of growth rate in our public expenditure has diverged significantly from that of GDP growth, in contrast to Germany or the rest of the euro area.
The recent IMF report that I mentioned earlier noted the strong performance of Malta’s financial sector but also stressed the importance of strengthening the resilience of the sector. 8  BIS central bankers’ speeches  The elevated levels of credit and concentration risks call for stronger financial buffers, through higher provisioning and retention of profits. Such measures would strengthen the banks’ ability to absorb potential shocks and would also allow them to prepare themselves for compliance with stricter Basel III regulatory requirements. On the positive side, credit risk is being mitigated by prudent credit standards and cautious lending behaviour on the part of the banks. On the funding side, the resilience displayed by the banking system in the face of adverse international conditions is explained by the business model that has been a traditional characteristic of domestic banks, which rely strongly on retail deposits. Another indication of the overall prudent bias of the Maltese domestic banks is evident in the first chart presented earlier, which shows that leverage ratios of Maltese banks are considerably lower than in euro area in general. While the euro area average has declined on account of widespread deleveraging, the ratio remains significantly higher than the Maltese ratio, which has been quite stable. A further indication of the traditional funding model is the loan to deposit ratio, as shown in Chart 8, which is significantly low when compared with the major economies. This business model has served the domestic banking sector well.

Flexible inflation targeting means in practice that the aim is not to bring inflation back to the target as quickly as possible if it deviates from 2 per cent. But a precondition for being able to be flexible is that there are expectations of inflation still returning to target in the longer run. The inflation target has been the nominal anchor in the Swedish economy for so long that it is easy to assume that inflation expectations automatically stay around 2 per cent. But, as developments after 2011 have shown, long-term inflation expectations are not immune to influence. A long period of sub-target inflation caused expectations to creep further and further below 2 per cent. It therefore became increasingly urgent for the Riksbank to focus on reversing the trend and bringing inflation up to the target. This turned out to require major monetary policy efforts over a long period of time. An insight gained in recent years that therefore needs to be highlighted is that confidence in the inflation target cannot be taken for granted. The main task of monetary policy is to maintain the nominal anchor in the economy and the expectations and demands placed on monetary policy should take this as a starting-point. But on condition that confidence in the anchor is not jeopardised, monetary policy has a certain amount of scope to allow deviation from the inflation target to take a back seat in favour of other considerations.