samchain/econo-pairs-v1 huggingface dataset:
So, although some trade is always better than none, there are settings in which – given the existence of trade – changes in relative productivity can worsen a country’s welfare. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  But you do see something in employment and participation. Relative to others, regions with larger-thanaverage clothing sectors in 1981 experienced slightly lower growth in employment, and slightly greater rises in economic inactivity, over the following ten years (Charts 8a and 8b). Even in the 2011 census (Charts 9a and 9b) there still seems to be something of an echo of the pattern of employment thirty years earlier. Chart 9a: Even after 30 years the negative  Chart 9b: Same goes for inactivity  correlation with employment still exists  Source: UK Census, Nomis  Source: UK Census, Nomis  From such bare-bones relationships any conclusion can only be tentative. They don’t control for any other differences that might have existed in 1981 and it’s possible the correlations are picking up something other than the size of the local clothing and textile industry. However, the results do happen to accord with other, 6  much more careful studies. In the United States, David Autor and co-authors have found that individuals working in industries and regions more exposed to trade with China have subsequently seen longer than average periods of non-employment. This is particularly true for those at the lower end of the distribution.

Øystein Olsen: The role of monetary policy revisited – welcome address Welcome address by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Norges Bank conference “The role of monetary policy revisited”, Oslo, 26 September 2013. *  *  *  It is a great honour and pleasure for me to welcome you all to this Norges Bank conference: The role of monetary policy revisited. In his famous 1967 presidential address before the American Economic Association, Milton Friedman set out to answer three interrelated questions. What should be the role of monetary policy? What can it contribute to achieving the major goals of economic policy? And how should it be conducted to contribute the most? Five years after the onset of the global financial crisis, these questions are yet again at the forefront of our minds. The crisis and subsequent recession have presented substantial challenges to monetary policy. Central banks have responded with great activism and have resorted to unconventional policies such as quantitative easing and an increasing use of forward guidance. And the crisis has led to a review of monetary policy frameworks. Successful as monetary policy has been in safeguarding low and stable inflation, many argue that it should take risks to financial stability into account. Moreover, a new set of macroprudential policy tools has been proposed to address systemic risks in financial markets directly. In Norway, inflation targeting was introduced in 2001.
For example, the five-year forward measure of breakeven inflation generated from differences in the nominal Treasury yield curve and the TIPS yield curve has shown a modest rise since mid-2010 back into the range that has generally been in place for the past decade (Chart 29). Second, the long-term inflation expectations of professional forecasters have been very stable. As shown in Chart 30, the median long-term inflation forecast in the Professional Forecasters’ survey remains around 2.1 percent for the PCE deflator. In terms of household expectations, there has been an increase in short-term expectations. This typically occurs when commodities such as gasoline go up sharply in price. However, even here longer-term expectations remain well-anchored. As shown in Chart 31, the University of Michigan median five-year inflation expectations measure remains around 2.9 percent – comfortably within its normal range and historically consistent with slightly lower realized inflation. To summarize the main points, we have a considerable amount of slack, little evidence of discontinuous speed limit effects, and little inflation pass-through from commodities into core inflation when inflation expectations are well-anchored, which is currently the case. This suggests that the biggest risk in terms of higher underlying inflation over the next year or two is that inflation expectations could become unanchored. This might occur, for example, if there were a loss of confidence in the ability and/or willingness of the Federal Reserve to tighten monetary policy in a timely way in order to keep inflation in check.

In Hong Kong, banking, in a rather narrow definition, is estimated to contribute about 7.5% to gross domestic product and about 3.5% to employment. Despite the withdrawal of a number of individual banks, particularly Japanese, from Hong Kong in the late 1990s, the share of banking in GDP appears to have remained roughly stable for a number of years now. However, the share in employment has declined somewhat of late – as has also been evident in, for example, the USA and UK over a slightly longer period. This implies that there have been significant productivity gains, including no doubt those arising from the process of consolidation, which has been evident among international banks with presences in Hong Kong for some time and has now been spreading to the local banks. Permit me one further historical reflection, related partly to my earlier comment about attitudes towards banking. When I first studied economics, there was a respected body of literature which argued that productivity growth in manufacturing would always outstrip that in other sectors because manufacturing was more amenable to the application of new technologies and economies of scale. In services, output was regarded as too firmly dependent on the specific input of labour for there to be much scope for productivity gains.
Trends in College Pricing, last accessed February 5, 2015. BIS central bankers’ speeches  3  levels more than double those at public institutions, average net tuition and average loan sizes were considerably higher at for-profit educational institutions. In addition, a much larger proportion of students at for-profits took out subsidized direct loans. [Chart 4] Returning now to the surge in aggregate student debt, an increase in borrowing for college is not by itself a concern, given the high average lifetime payoff to college. In fact, in part the increase in debt reflects an arguably sensible increase in educational investment during a period of weak labor market opportunities. However, the growth in debt has important implications for the overall economy, and there are several worrisome aspects of the increase in student debt. Many of these problems have to do with the high rates of delinquency and default on student debt, and the generally low repayment rates on these loans. Over the past eight years there has been a considerable increase in payment difficulties for student loan borrowers. The most common measure of inability to meet the debt obligation is the proportion of borrowers 90 days or more past due on their payments. We refer to this as the “measured delinquency rate.” As of the fourth quarter of 2014, about 17 percent, or 7.3 million borrowers, were 90 days or more delinquent on their student loan payments; see the left panel of Chart 5.

Federal and State funding of subsidized higher education is heavily reliant on tax revenues and competes with other forms of public spending, and within education budgets competes with pre-school, elementary and secondary education spending. During the recession we saw severe revenue declines at the federal and state levels. Being highly credit constrained, with university subsidies being part of operating budgets which must be funded with current tax revenues, many states cut planned education funding while allowing public universities to increase tuition levels. This in turn contributed to a significant shift of education cost to students and parents. In research conducted at the New York Fed, we found that since 2007 those states with the largest funding cuts also had the highest tuition increases, with an average annual tuition growth rate of 3.4 percent. As shown in Chart 2, this compares to an annual average tuition growth rate of 1.7 percent during the 2007–2010 period for all other states combined. That is, we observe an economically meaningful relationship between public funding and public institution tuition changes since 2007. Higher tuition has forced many students to take on larger student loans. Student debt and tuition increases were not limited to public institutions. Research conducted at the NYFed found that over the same period there was even larger tuition and student loan growth at forprofit institutions. [Chart 3] Despite larger average support through Pell grants, with tuition  1  National Center for Educational Statistics, 2012. “Digest of Education Statistics”. 2  College Board, 2013.
Pay pressures in the labour market are muted, reflecting in part the need of employers to adopt a tough stance in wage bargaining when faced by such large increases in other input costs. Companies facing higher costs for energy, raw materials and other inputs, have been willing to offer only moderate wage increases in  BIS Review 52/2006  3  order to minimise the squeeze on their profit margins. The rapid rise in input prices and the muted degree of pay pressures are not independent of each other. Inflation expectations – whether measured by household surveys or implicit in government bond yields – have moved up during the course of this year. Although not of serious concern as yet, the MPC will monitor inflation expectations carefully. Inflation itself remains volatile as increases in oil and natural gas prices pass through to household bills. Those increases will dampen the growth of real household disposable incomes and moderate consumer spending. So the economic outlook is far from certain. In these circumstances the Monetary Policy Committee must examine carefully all information, learn and, if necessary, revise its judgements, and question all received wisdom. In other words, it must be enlightened. The Scottish Enlightenment, it is generally agreed, began and ended in the 18th century. Our present framework for monetary policy is of more recent vintage.

Focussing too much on short-run movements in demand may lead it to misjudge the outlook for inflation. It is not possible to form a view about the extent of spare capacity in the economy – the so-called output gap – without explicit judgements on how much the economy is capable of producing. But it is really quite difficult to disentangle movements in the output gap from changes in supply capacity. One economist’s output gap is another economist’s change in supply potential. That issue has been central to the deliberations of the Monetary Policy Committee in recent months. The current outlook for inflation – and hence interest rates – depends not only on the prospects for demand but also upon whether the changes to the supply capacity of the economy that we observed in the past will persist or reverse. Over the past year or so, a degree of uncertainty has entered the economic landscape on both the supply and demand side. So what is causing this uncertainty? On the supply side, inflows of migrant workers from the new member countries of the EU remain high. That may or may not continue, and we cannot be sure that migrants would stay in the UK if the labour market were to turn down. And it is also unclear whether businesses will be able to recruit staff as easily as in the past when, as the prices of imported goods and services fell, the real value of take-home pay rose without higher wage settlements.
And to be effective, it would need to be able to directly issue common debt – for the future – and/or raise taxes. Obviously this would be a “quantum leap” in the nature of our Union, which would require resolute political will, but this is our chance to make a real difference. *** Ladies and gentlemen, let me conclude by quoting a British citizen, who happened to be one of the greatest Europeans of the past century. Winston Churchill said in August 1949 10: “I am certain that it is within our powers to overcome the dangers still before us, if we so wish. Our hopes and our work point to an era of peace, prosperity and abundance and the inexhaustible wealth and genius of Europe will turn it once again into the very source and inspiration of the world’s life.” The European Union remains to this day a unique political and economic experiment that has no equivalent in modern history. And we have from 2017, following the electoral cycle in Europe, a unique window of opportunity. Nothing should be taken for granted, but much is open. We should not let this opportunity pass us by. Thank you for your attention. 1 “Tommaso Padoa-Schioppa: Economist, policy-maker, citizen in search of European unity”, Speech by Lorenzo  Bini Smaghi, European University Institute, Fiesole, 28 January 2011. 2 Source: European Commission, Reflection paper on the Deepening of the Economic and Monetary Union, May  2017. 3 European Commission, Standard Eurobarometer 86, Autumn 2016.

This leads to a collective suboptimal situation: according to a study by Banque de France staff7, the opportunity cost of not sufficiently coordinating our fiscal policies in the aftermath of the crisis may have amounted to 1 to 2 GDP points in the euro area. Moreover, taken together, deficiencies in the coordination of both our fiscal and structural policies may have cost between 2 and 3 GDP points between 2011 and 2013. Although our common monetary policy works well, it cannot be a substitute for economic policy coordination or for the lack of reforms. In Maastricht, our aim was to build an Economic and Monetary Union. We have succeeded in Monetary Union, but we have not delivered on Economic Union. And so, in a nutshell, a new trilemma has emerged. It now seems impossible for euro area countries to achieve their full growth potential – the first point of the triangle –, if they wish at the same time to achieve the two other points of the triangle: on the one hand, keeping the autonomy of their economic policies at the national level; on the other hand, keeping the “Euro framework” of coordination unchanged, that is to say maintaining the status quo, with a cooperation between countries based only on rules without institutions and without a common strategy. We have to drop one of the points of this triangle in order to achieve the other two.
That is why G20 reforms have significantly increased the standards to which CCPs are held, ranging from higher margins and liquidity to better operational and cyber resilience.28 To finalise its policy work, the FSB will report to G20 Leaders next month on the need for guidance on CCP financial resources in resolution.29 Now is the time for FSB members to address any gaps in their supervisory and resolution frameworks for CCPs. For example, some authorities do not yet have all of the resolution powers expected under FSB standards. And it’s time for the FSB (in conjunction with CPMI-IOSCO) to assess whether, when taken together, reforms to resilience, recoverability and resolvability are sufficient and are working as intended. A decade on from the financial crisis, a series of measures are eliminating the fragile forms of shadow banking while reinforcing the best of resilient non-bank financial intermediation. The toxic forms of shadow banking at the heart of the crisis – with their large funding mismatches, high leverage and opaque, offbalance-sheet arrangements – no longer represent a global stability risk (Chart 4). And other, more constructive forms of non-bank finance, including money market funds and repo markets, are subject to new policy measures that reduce their risks and reinforce their benefits. 27  See FMSB Annual Report (2017) for examples of misconduct over two centuries. See CMPI-IOSCO’s Principles for Financial Market Infrastructure (PFMI). 29 FSB Chair’s Letter to G20 Finance Ministers and Central Bank Governors, March 2018.

Consider the example of fixed income, currencies and commodities (FICC) markets, which have historically relied heavily on informal codes and understandings.17  12  Recall that the Arrow-Debreu world relies on people being able to calculate the odds of each and every possible scenario. Then they can trade contracts and insure each other against risks they are unwilling to bear. Even a moment of introspection reveals the absurdity of these assumptions as a description of the actual world. More often than not, even describing the universe of possible outcomes is beyond the means of mere mortals, let alone ascribing subjective probabilities to those outcomes. 13 Knight, F (1921), Risk, uncertainty and profit, Signalman Publishing. 14 FA Hayek Nobel prize speech 1974 “The pretence of knowledge”. 15 In Keynes (1936), Chapter 12, he wrote: “Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.” Keynes, J M (1936), The General Theory of Interest, Employment and Money, Palgrave Macmillan.
Steps are currently being taken in this direction via public and private sector solutions, but these remain essentially ad hoc and not part of a well-established framework for maintaining and restoring, when needed, levels of capital commensurate to the needs of the European banking sector. Second: a European framework for micro-prudential supervision A more comprehensive European-wide understanding of systemic risks needs to be complemented by an effective micro-prudential supervisory framework to monitor and prevent these risks. This implies a more consistent set of regulatory and supervisory rules across Member States, together with stronger rules and practices for co-operation between supervisory authorities on cross-border groups, both in normal and crisis situations. In this context, the European Supervisory Authorities have been allocated a significant set of competences related to rule-making, enforcement of rules and co-ordination of supervision. All together, through these tools, the ESAs are expected to develop a single “EU rulebook” which is enforced consistently throughout the single financial market. This should address a major weakness in the current framework, namely the divergences across countries in key regulatory elements – for example the different components of regulatory capital used across Member States. Furthermore, the ESAs have the power to take legally binding decisions addressed to national supervisors or, in case of non-compliance, to specific financial institutions if warranted by financial stability considerations. These powers can be triggered by a breach of EU law by supervisors; disagreement between national supervisory authorities in cross-border situations; and the declaration of an emergency situation by the Council.

The integration of the financial markets caused the crisis to spread swiftly, while the vital role of the credit system in free market economies transformed it into a global recession, hitting the East and South-East European countries as well. The experience gained so far has allowed a better acknowledgment of the causes that led to the crisis and the factors that triggered and accelerated its spreading, and a reassessment of the diverse supervisory and regulatory practices. I would like our discussions on the crisis to focus on two directions: what we learnt and what we could not learn from the crisis. Among the numerous aspects debated at length, I would like to distinguish three of them: the dichotomy between the state and the market, the degree of confidence in the forecast models, and the importance of coordinating the pre-emptive measures. With respect to the “state vs. market” debate, I would like to re-stress my unwavering confidence in the market and our commitment as policy-makers to make it operate by the rules and efficiently 24/24. The last few years have witnessed the rapid development of forest models and techniques. Avoiding the tendency to underestimate their high importance to the day-to-day work of every analyst and policy-maker, we have to be aware of the restraints in these models and of the risks arising from the excessive reliance on them.
But it’s less obvious, at least to me, what macroeconomic developments I should expect if risk premia rose due to an “exogenous” rise, say due to reduced market making, in the volatility of asset prices. We also need to be able to make sense of shifts in relative risk premia on different asset classes. We need models that can say something useful about the compression, and then widening, in credit and liquidity risk premia that in some ways define the current financial turmoil. We need to know whether or not those shifts reflect changes in fundamentals, or unwarranted “exuberance” or “fear” in the markets; and whether or not they have implications for demand and supply conditions in the real economy. Second, very little has been said about how, or whether, the supply of money (or monetary policy) may affect risk premia. Years ago Brunner and Meltzer set out a view 20 of how shocks to the supply of base money were transmitted to the economy through effects on asset prices over and above the impact on the risk-free discount rate, but through liquidity (and maybe other risk) premia. More recently, some policymakers, 21 have conjectured that swings in the supply of broad money (via bank lending) can be associated with shifts in risk premia too. The thought is that in a world in which different assets are not perfect substitutes for each other, whether money is over or under-supplied can affect the relative value of other financial assets.

But there is no denying an adverse feedback loop between tightening credit conditions, the macro slowdown, and the perception that that will in time impair banks’ asset portfolios. So it seems timely to revisit some of the issues of “money and credit”. The Taylor-rule framework for thinking about policy It is well over a decade since John Taylor set out what has become part of the current orthodoxy of monetary economics. His rule looks something like this: *  *  *  i = Π +r + a(Π – Π ) +b(y -y ) t t t t t t t This is, at its roots, a Wicksellian view of the world. 4 By fixing the short-run nominal rate, the central bank can, given stickiness in prices over the short run, shift the short real interest rate – both in absolute terms and, more particularly, relative to the short-run real rate that would equilibriate demand and supply. 5 So that gap between the short real rate and its “equilibrium” can be thought of as representing the stance of monetary policy, which should be chosen by the central bank in the light of the extent to which inflation deviates from target, and to which aggregate demand deviates from the supply capacity of the economy. Implicit in this rule is  3  See Tucker, PMWT (2008) “ Money and credit: banking and the macroeconomy”, Bank of England Quarterly Bulletin, 2008 Q1 pp 96-106. 4  See Wicksell, K, 1898, “Interest rates and Prices”.