samchain/econo-pairs-v1 huggingface dataset:
However difficult the  consequences might be for the economy, the MPC must stay the course and set monetary policy to return inflation to achieve the 2% target sustainably in the medium term, consistent with the remit given to us. With thanks to Rupal Patel for her assistance in preparing these remarks, and to my fellow MPC members and numerous Bank colleagues, including Callum Ashworth, Fabrizio Cadamagnani, Alan Castle, Grace Greer, Thomas Jennings, Josh Martin, Maggie Illingworth, Harry Rigg, Andrea Rosen, May Rostom, Martin Seneca, Bradley Speigner, Boromeus Wanengkirtyo for their many helpful contributions. 1. There is a huge literature on techniques for and applications of the identification of shocks. Different categorisations have been used for a variety of policy purposes. For example whether shocks are common or idiosyncratic was a key consideration for HM Treasury’s 2003 Five Tests assessment of whether the UK should join the Euro. Other common categorisations include are they exogenous or endogenous, are they temporary or permanent and are they positive or negative. 2. I am grateful to my MPC colleague Jonathan Haskel for this international comparison. 3. The latest of a series of puzzles about the structural behaviour of the UK economy. The most well-known is the productivity puzzle which has spawned a huge literature including my own contribution, see The UK’s productivity growth challenge - speech by Dave Ramsden (bankofengland.co.uk). 4.

Prospects for ASEAN economies ASEAN is currently one of the most dynamic and fastest-growing regions in the world economy. The region’s GDP is expected to triple to USD3 trillion by 2017 relative to a decade ago. Economic expansion is expected to be sustained at a rate of 5.8% in the next five years, significantly outpacing global growth. In tandem with this, is the notable rise of the middle class population. The Asian Development Bank estimates that the share of ASEAN’s middle class population is expected to increase to 65% by 2030, consequently contributing to altering the global consumer landscape. With a sizeable population of 600 million people, this underscores the evolving role of ASEAN as a significant consumer market base with distinct needs and increasing purchasing power. Given that the share of the working population in  BIS central bankers’ speeches  1  ASEAN is estimated to reach 58% by 2050, ASEAN will benefit from its demographic dividend and abundant workforce. An accompanying trend is the rise of entrepreneurship in the region. The emergence of home-grown businesses with prospects of becoming large national and multinational corporations has generated attention and priority to be accorded to supporting the development of small and medium scale enterprises (SMEs). Currently, SMEs account for 50%–85% of domestic employment in ASEAN economies and 30–50% to GDP. Given the substantial contribution to income and employment generated by this sector, its development will be vital in creating employment and sustainable long-term growth in the ASEAN economies.
A further risk compensated by the risk premium derives from the expected volatility of an asset price during its lifespan. As monetary policy affects asset prices, it can also impact the expected volatility of asset prices and, in turn, again affect the risk premium. The link between the monetary policy instrument and any one financial market price is subtle and variable. Central banks would face an exceedingly difficult task if they had to rely on a single price to transmit monetary policy impulses to the real economy. The fact that monetary policy works simultaneously through several financial market prices reinforces the precision and the impact of monetary policy. So far, I have tried to outline how monetary policy impulses are transmitted to financial markets. The monetary policy instrument itself, typically a short-term interest rate, has only a limited impact on the real economy. Monetary policy works through its aggregate impact on financial markets. Monetary policy impacts financial markets mainly through expectations. Indeed, Michael Woodford (2004, p.16) argues that "for not only do expectations about policy matter, but, at least under current conditions, very little else matters". Expectations influence financial markets in two ways: first, directly via the yield curve, i.e. through expectations about the future evolution of the monetary policy instrument, and second, indirectly, via the expected effect of monetary policy on the real economy, which then feeds back to financial market prices. In practice, it is difficult to distinguish between direct and indirect effects.

In addition, monetary policy can affect some commodities to the extent that their prices may reflect a change in inflation expectations. Last, but not least, monetary policy affects housing prices. In general, the transmission from monetary policy to housing prices tends to be stickier than is the case for other financial market prices. This is because real estate is not a standardised good which is traded on organised markets. Nonetheless, at least in theory, the transmission from monetary policy to housing prices is relatively straightforward:  2  See Rich (2000) for an overview of the SNB's experience in monetary targeting since 1974 and the reasons for the transition to a new strategy in 2000. 2  BIS Review 30/2006  Real estate, like a long-dated bond, has a very long maturity, as the yield it returns, namely housing, will accumulate for several decades. Monetary policy affects the discount rate which must be used to discount future yields. Apart from that, the medium-term real effects of monetary policy may affect demand, rental prices and thus house prices. An important determinant for the price of all long-dated assets is the risk premium. One of the risks compensated for by the risk premium is purchasing power risk, i.e. the risk arising from the uncertain purchasing power of future expected proceeds from an asset. Since it is monetary policy which ultimately determines the purchasing power of money, monetary policy affects the perceived purchasing power risk.
Bank of Albania’s international reserve remained almost unchanged at EUR 1.9 billion, sufficient to cover 4.4 months of imports of goods and services. In line with the economic activity performance, employment figures showed gradual signs of recovery in 2011. According to INSTAT’s data, the average number of employed people increased by 1.7%, mainly as a result of higher employment in the private non-agricultural sector, while the number of people employed in the public sector maintained the downtrend that had begun in the last quarter of 2010. The number of unemployed people remained almost unchanged from the previous year. Despite the higher employment in the economy, unemployment rate dropped slightly by only 0.2 percentage points to 13.3% at end-2011. The presence of the negative output gap and the incomplete utilization of capacities kept the unemployment rate above 13% over 2011, thereby conditioning the dynamics of nominal wage increase in economy. Monetary indicators in 2011 were in line with the real-economy developments, featured by a moderate monetary supply growth, low demand of the economy for funding and steadily high propensity of consumers to save. The broad money increased by 9.2%, y-o-y. Stimulating measures taken by the Bank of Albania, along with good liquidity condition and well capitalisation of the banking system, supported the increase of lending to the economy in 2011. Private sector credit was up by 11.7% on average, improving from a year earlier. Nonetheless, the increase in bank lending remains contained due to supply and demand factors.

The coal and iron deposits found here were critical to the Industrial Revolution, and it was the output of nails and bolts, screws and fasteners produced from those ceaseless blast furnaces that made the Black Country synonymous with manufacturing prowess around the world. But that is not the whole story. Just as important were the innate qualities of doing it yourself and perseverance which characterise the Black Country. There is no finer example than the Iron Bridge – the world’s first – at Coalbrookedale, built in 1779. As one commentary noted, it stood as “indisputable proof of the abilities of our mechanics and workmen”. It reflected not just the local availability of coal and iron, but also the skills of those who built it. And it is those same skills that we celebrate tonight. Local business success, recognised by these ‘Best of the Black Country Awards’, is the story of the Black Country being born again. The products of the 21st century may not be the nails and bolts, screws and fasteners of the past, but they will require the use of manufacturing know-how and business ingenuity to service the needs of consumers. I have been struck, as I travel to a different part of the country each month, by how many firms are producing imaginative and innovative products for which there is a real demand around the world. By this I do not mean that all successful firms are making high tech products.
True, at the root of the crisis as it initially unfolded, various macroeconomic imbalances of a fiscal, financial and competitiveness-related nature built up by some economies played a pivotal role. Yet, at the same time, the very accumulation of these imbalances and the difficulty of devising a widely accepted strategy to redress them in an orderly fashion within the euro area highlighted the existence of substantial weaknesses in the European economic governance framework. These included most notably the absence of a powerful and flexible crisis-management mechanism to provide financial support to members in difficulty. These mechanisms are essential for heading off tensions at a sufficiently early stage in the process, which is when tackling them is less difficult. The duality of the problems, with one purely national component and another genuinely European one, coupled with the growing interrelatedness of euro area economies as a whole, created a breeding ground in which the tensions took on a systemic nature. Moreover, it is widely known that, to correct the weaknesses detected in the initial design of the euro project, the Member State governments have embarked on a thorough revision of the mechanisms for European governance. This process has already yielded some results, including the legislative initiatives adopted in what is known as the “six plus two package”; the Treaty establishing the European Stability Mechanism, the new permanent European crisis-management mechanism; or the Treaty on Stability, Coordination and Governance in the euro area.

In this respect, in the opening months of this year, the Government set in train various regional and local government support mechanisms in order to smooth the refinancing of their existing debts or payment to trade creditors. The financing mechanisms agreed also require fulfilment of adjustment plans. It is now crucial to insist on strict compliance so that this type of aid does not provide inappropriate incentives. The consolidation strategy must, finally, be completed while keeping in mind the mediumand long-term factors affecting public finances, particularly those deriving from the pressure  6  BIS central bankers’ speeches  exerted by population ageing on certain items of expenditure. In this connection, following the enactment in July 2011 of the Social Security Reform Law, an appropriate definition of sustainability is needed as soon as possible so that the system’s parameters may be automatically adapted to demographic changes. In short, the current budgetary imbalance has become one of the main obstacles to growth of the Spanish economy. Correcting it is urgent and unavoidable. What is thus needed is a fiscal adjustment strategy based on commitments made at European level. This strategy has to be accompanied by a strengthening of the national budgetary framework, as reflected in the constitutional reform, and by the application of the medium and long-term reforms that enable the challenge of population ageing to be addressed.
7  The Desk also has the ability to execute agency MBS trades by other means. 8  Of course, this maturity distribution could change as part of the Committee’s ongoing assessment of the efficacy and costs of asset purchases. 9  For more information on the TBA market, see Vickery and Wright (2013). BIS central bankers’ speeches  3  MBS backed by new loans into the TBA market because of the market’s liquidity and because the TBA market is a forward market, which allows originators to hedge the risk associated with locking in loan rates with new borrowers.10 The Desk concentrates its TBA purchases in “production coupons,” since the yields and prices for production coupons are directly related to the primary mortgage rate. In general, the Desk purchases MBS in the TBA market across different agencies, maturities, and coupons in amounts that are roughly proportional to anticipated issuance of those securities. Issuance of new TBA securities varies over time, based on the level of refinancing and home purchase activity. Moreover, because the coupon at which new MBS are originated depends on the overall level of interest rates, the possibility of future fluctuations in the primary mortgage rate makes it difficult to determine well in advance which coupons will be issued. As a result, the Desk is not able to provide the same detailed guidance about the composition of its MBS purchases as is possible with Treasury purchases.

As a result of these decisions, the Federal Reserve is currently adding $ billion in longer-term securities each month to its holdings, in addition to reinvesting principal payments from its holdings of agency MBS and agency debt securities into agency MBS.1 Under this program, we have bought about $ billion in Treasury securities since January and about $ billion in agency MBS since mid-September, bringing the total par value of the Federal Reserve’s SOMA (System Open Market Account) portfolio to over $ trillion.2 In my comments today, I will describe the key differences and similarities between the recent policy action and previous programs and discuss how the Desk implements these asset purchases. As always, the views expressed here are my own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.3 Outcome-based purchases The FOMC’s current asset purchase program has some key differences from earlier policy initiatives. When announcing previous programs to change the size or composition of its balance sheet, the FOMC communicated an expected total size of each program and an anticipated date by when it would be completed. Under the current asset purchase program, the FOMC has announced only the monthly pace and composition of purchases and noted that purchases will continue until there is a substantial improvement in the outlook for the labor market in the context of price stability.
The problems are tackled by strengthening Eurostat and allowing it to make methodological visits in the member states, to discuss budget issues. A new high level group with a mandate to advise Eurostat will be established. As Eurostat monitors the member states’ compliance with the agreed practice, the high level group also, indirectly, advises the member states. My view is that all the reforms in this area of the Stability and Growth Pact go in the right direction since they encourage fiscal prudence. However, given the complicated process and the short time since the Pact was changed, it is too early to determine whether the changes have been a complete success. Changes in the preventive arm Changes in the preventive arm have been made in the area of medium term objectives (MTO) for the budget balance. Member states are divided into groups depending on their debt level. Stricter MTOs are required for countries with higher debt. The MTOs for the euro area and the ERM2 countries range from a deficit of 1% of GDP to balance or surplus depending on the debt level. The countries that have not achieved their MTOs are supposed to follow an adjustment path to the objectives. The path requires more consolidation in good times. For the euro area and ERM2 states, the adjustment requirement is a yearly improvement of the cyclically adjusted deficit net of one off effects by 0.5% of GDP.

This is precisely why it is the job of the authorities to “take away the punchbowl as the party gets going”. I just cannot see how we could calibrate ex ante rules for the increase in capital requirements or whatever that would be needed to do that, but we would of course need somehow to find a way of sensibly constraining the discretion at the core of the alternative approach. Even if we could resolve all those issues, a fifth big issue is how far individual national authorities would be able to operate in this field on their own, given free flows of capital internationally and cross-border banking. These big questions are, of course, inter-related. Most obviously, how far we could get in designing an instrument(s) and a process for its deployment will affect whether the objective should be to ameliorate the effects of economic shocks on the banks or also the effects of the credit-creation process on the economy. And the objective will have a bearing on whether it is host or home authorities who need to constrain a bank’s lending growth. That is a formidable agenda, and it underlines just how much there is to do. Macroprudential: markets and infrastructure as part of the transmission mechanism But if we are to deliver and maintain stability, a macroprudential agenda cannot focus only on countercyclical capital (or margin) requirements. We need to focus on how large shocks might be transmitted through the financial system. Again, there is an analogy with monetary policy.
I see it as a “strategic square”, the four parts of the system to be solved for delivering a European strategy: i) Cross border payments shortcomings, ii) BigTech’s global projects in the financial sector (including stablecoins), iii) The developing European Payment Initiative and iv) The potential Central Bank Digital Currency (CBDC). •  Indeed, the current digitalization triggers at least two important risks. o The risk (in red) that BigTechs, leveraging on their global reach, will build private financial 1/3  BIS central bankers' speeches  infrastructures and “monetary” systems, competing with the public monetary sovereignty since they will position themselves as issuers and managers of a universal “currency”. CBDC could then be issued but at the “backend” of this “currency”. o The symmetric risk (in blue) that some jurisdictions judge that the only way to respond to the otherwise overwhelming private payments’ wave would be to issue and spread on a domestic but also a global basis, “their” CBDCs. This could, if not sufficiently coordinated within the global financial community, set precedents as to the features of the CBDCs and their articulation with the private projects, with no say for other central banks. The way forward for Europe (in green) could be different and could rather disseminate central bank money in a retail form with the intermediation of the private sector and ensure interoperability between EPI and other non-European payment solutions. 2.

2/3  BIS central bankers' speeches  ** Since we are in Berlin, allow me to conclude with a European perspective: Europe has not developed global social networks like some important countries. This raises the stakes for the European authorities, if they want a stronger, more autonomous and more innovative European financial sector, to succeed in developing a coherent strategy. We do not have much time to decide this consistent European payment strategy, including EPI and a possible CBDC: one to two years. This makes our today’s discussion still more welcome. 3/3  BIS central bankers' speeches
A termination or reversal of this trend would tend to raise the NIRU, at least temporarily.” It is ironic that two of the most prominent economists of countries synonymous with art and beauty – Italy and Greece – (one a future Nobel prize winner and the other a future central bank governor) should have given birth to an unattractive acronym that has spawned so many even more unappealing cousins. The first, and most feted, offspring – the NAIRU – was introduced by James Tobin five years later. NIRU, NIIRU, NAIRU – tongue twisters for the Financial Times Christmas quiz, or measures of the Inflationary Trigger Point? Take your choice. For the sake of simplicity I shall adopt the conventional term, NAIRU, to represent the entire family. So what is the relationship between the natural rate of unemployment and the NAIRU? The natural rate of unemployment and the NAIRU are quite different concepts. The former describes a real equilibrium determined by the structural characteristics of the labour and product markets – the grinding out of Friedman’s Walrasian general equilibrium system (modified, if necessary, by non-Walrasian features of labour markets such as imperfect competition, search behaviour and efficiency wages). It exists independently of the inflation rate. In contrast, the latter, as well as being affected by these structural characteristics, is also affected by the gradual adjustment of the economy to past economic shocks that determine the path of inflation.

As a Committee, we discussed at some length during the spring of this year why the changes in the quantity measures had not fed through to higher earnings growth. We discussed whether the natural rate of unemployment (and the NAIRU) might have declined due to an increase in trend productivity or improvement in the functioning of the labour market. We also considered whether there had been independent influences on the NAIRU stemming from falls in inflation expectations or the effects of sterling’s appreciation. It is against this background that the MPC’s decision to raise rates in June should be seen. The increase in headline earnings growth to 4.9% in February, from an upwardly revised 4.6% the previous month, appeared consistent with other labour market indicators. But we were fully aware of the evidence suggesting that the rise in earnings growth had been, and for a couple of months would continue to be, affected by unusually large bonus payments. If this was true, earnings growth might well have fallen back once the bonus effect had dropped out. Given the uncertainties in this area, the Committee concluded that it should not place too much weight on the latest numbers. Instead, it stepped back and examined the underlying trend in the labour market over the previous two years. We noted that private sector earnings growth had been rising throughout this period and that reported wage settlements displayed a similar profile.