samchain/econo-pairs-v1 huggingface dataset:
This could have had hysteresis-like effects by shifting the Phillips curve inwards and permanently lowering the inflation rate, towards which the economy gravitates once all shocks have dissipated. Fortunately, survey-based measures of medium-term inflation expectations have consistently remained close to our definition of price stability. But the concrete anatomy of labour market dynamics and the possible effects of hysteresis arguably become more important in informing monetary policy decisions at later stages of the easing cycle or at turning points. With the recovery in the euro area now fully underway, policymakers must judge at what point they expect inflationary pressures to emerge in a sustainable manner that would warrant a gradual withdrawal of policy accommodation. Conditions in the labour market are, of course, an important part of this discussion. Wage developments are a key driver for service price inflation and, thus, for headline inflation. The amount of slack we expect to see in the economy, and in the labour market in particular, therefore has an important bearing on our stance. For example, were we to ignore the facts that I just presented, namely that labour market slack 6/9  BIS central bankers' speeches  may be larger than is suggested by headline unemployment measures, we could run the risk of tightening policy prematurely. Choking off growth too quickly would lead to us failing on our medium-term inflation mandate and would needlessly keep people out of work.

The Federal Reserve is an active participant in international efforts regarding payment systems via the Committee on Payments and Markets Infrastructures (CPMI) at the BIS. The CMPI collects best practices and issues recommendations for managing payments, clearing, and settlement risk across financial market utilities. At present, a high-priority area of study for the CMPI is coordinating the development of 24/365 RTGS systems – like FedNow – globally. Innovation in cross-border settlements will reduce liquidity outlays and settlement risks, leading in turn to cheaper cross-border payments. The New York Innovation Center and Project Cedar In the remainder of my remarks, I'd like to focus on an example of ongoing innovation research that is currently underway at the Federal Reserve Bank of New York. To further enhance our ability to contribute to financial innovation globally, the New York Innovation Center, or NYIC, was established in 2021. The NYIC bridges the worlds of finance, technology, and innovation. Through technical research, experimentation, and prototyping, our team generates insights into high-value central-bank-related opportunities, enabling stakeholders and the central bank community to enhance the functioning of the global financial system. 3/5  BIS - Central bankers' speeches  Project Cedar is the inaugural project of the NYIC and represents the first stage of the NYIC's research efforts into CBDCs, the NYIC's biggest focus area in 2022. A goal of the NYIC is to progress CBDC research with an objective of defining a technical design for a CBDC addressing the wholesale market in the Federal Reserve context.
Sixth, financial conditions have become increasingly accommodative, as monetary easing has passed through to a broad range of financial asset prices. Credit spreads have narrowed and the U.S. equity market has risen sharply (Exhibit 7). The price and availability of some types of consumer loans, notably auto loans, has also improved. So why isn’t the U.S. economy growing more quickly? The fact that fiscal policy has turned significantly more restrictive is the most important reason. The impulse from state and local governments that subtracted from growth earlier in the recovery has gone from negative to close to neutral. But this has been overwhelmed by the sharp shift in federal fiscal policy from mild restraint in 2012 to much greater restraint in 2013 (Exhibit 8). The increase in payroll tax rates, the rise in high income tax rates, the increase in taxes associated with the Affordable Care Act, and now the sequester – if sustained – will result in fiscal drag of about 1 3/4 percentage points of GDP in 2013.2 I view this as an unfortunate outcome. While the U.S. must put its public finances on a sustainable footing, this should be done in a manner that best achieves both our near-term and long-term objectives. In my opinion, a U.S. fiscal policy well-suited for the current set of circumstances would start with a very mild degree of restraint in the near-term that would credibly build to substantial consolidation over the next several decades.

At the same time, there is a need for increasing the awareness of the basic principles underlying the surveillance and enforcement process. Ultimately, this requires striking a delicate balance between the sovereignty of national governments, the responsibility of the ECOFIN Council for enforcing the Pact and the independence of the Commission, the latter being essential for an effective assessment of national budgetary positions. The ECB has always considered the fiscal rules enshrined in the Treaty and the Stability and Growth Pact as an essential element of Monetary Union. These rules already contain significant scope for flexibility. While the implementation of the preventive arm of the Pact could no doubt be strengthened, in particular to enhance incentives for compliance in good times, we reject proposals that would undermine the Pact’s corrective arm and the excessive deficit procedure contained in the Treaty. If all policy areas concerned respect the aforementioned allocation of objectives and responsibilities and act accordingly, they will already be making the best possible contribution to the Community objectives. 3. A sound institutional arrangement  A clear allocation of responsibilities is essential for well-designed policy-making, especially in a complex institutional set-up as the one governing monetary union in Europe. At the same time, a continuous dialogue between different policy actors on the basis of the allocation of tasks is also important for effective governance.
With the advance of the euro area economy’s position in the cycle, according to the ECB’s latest estimates, there will be a progressive pick-up in inflation levels to close to 2% in the coming years. Indeed, at its meeting on 14 June, the ECB’s Council reached the conclusion that the progress to date towards a sustained adjustment of inflation has been substantial, which gave rise to a gradual reduction in net asset purchases, duly confirmed by subsequent successive meetings of the Governing Council. The anchoring of long-term inflation expectations, the sound underlying firmness of the euro area economy and the maintenance of a high degree of monetary accommodation offer reasons to believe that the sustained convergence of inflation on the Governing Council’s objective will continue in the coming months, and that it will be maintained even after the finalisation of the net purchase programme, in line with the – very gradual – normalisation of monetary policy announced by the ECB’s Council. Fiscal policy should resume the fiscal consolidation process, given that both the public debt/GDP ratio and the structural deficit are holding at levels some distance off the limits set in the Stability and Growth Pact (see Chart 12). In recent years notable headway has been made in correcting some of the imbalances in the Spanish economy, such as the restructuring of the financial system, private-sector deleveraging, the recovery in competitiveness and the attainment of persistent currentaccount surpluses, and the adjustment of the real estate sector.

13/14  The materialisation of some of the risks to the economy that were discerned six months ago only adds to the importance of the challenges for the medium and long term highlighted in the Report and, as I have tried to stress today, to the need to address these challenges speedily and with sufficient resolve. 14/14
I think this is something we may now need to reconsider for at least a couple of reasons. Monetary policy and fiscal policy are probably more dependent on each other than we usually think, and this dependence has become even clearer as the macroeconomic environment has changed quite a lot in recent decades. For quite long periods, it may indeed work well if monetary policy is focused on maintaining the inflation target and fiscal policy on keeping track of public finances – that they manage their own business, so to speak. Indirectly, the two policy areas nevertheless provide valuable support to each other. Assume, for example, that inflation begins to rise rapidly and risks becoming persistently too high, and that the central bank therefore raises interest rates in order to dampen demand in the economy. The higher interest rate increases government interest expenditure and weakens public finances. Of course, how much depends, among other things, on how large the debt is from the start and by how much the central bank raises the interest rate. If the economic agents trust that fiscal policy will stabilise public debt, they will expect taxes to be raised or expenditure to be reduced, or both. They will adjust their behaviour accordingly and  9  A policy regime with active monetary policy and more passive fiscal policy is sometimes called a regime with ‘monetary dominance’; see, for example, Leeper (2018, 2021). 6 [17]  hold back on their consumption and investments in preparation for the expected tightening.

In the justification for its new strategy, the Federal Reserve notes that the level of the policy rate that is compatible with maximum employment and 4 For a more detailed account, see for example, Jansson (2020). 5 It is difficult to know exactly where this bound lies, but my guess is that, in Sweden, it is slightly lower than –0.5  per cent, as the Riksbank’s repo rate was for a period, and it probably also depends on how long the repo rate remains at negative levels. 4 [17]  long-term price stability has fallen relative to its historical average. The policy rate will therefore be limited by its lower bound more often than has been the case in previous periods. In order to anchor long-term inflation expectations at 2 per cent and prevent them from falling below this level – which would make the lower limit binding even more often – it has chosen to specify the target as an average of 2 per cent. This makes it clear that ‘bygones’ are not ‘bygones’: if inflation has been below the target for a period, this must be compensated for by inflation then being above target for a period.6 In turn, as I have just mentioned, the ECB has moved on to a symmetrical target of 2 per cent in the medium term. In practice, this means that the target has been raised slightly, as previously inflation should have been “below, but close to, 2 per cent”.
It worked well for a long while, and some call the period from 1950 to 1970 the golden years. Yet there were inherent flaws in this set-up that contributed to its demise in the early 1970s, not least the well-known Triffin dilemma regarding the conflict between the domestic economic objectives of the country providing the main reserve currency and the required international supply of that currency. Then capital accounts were opened up, with strong momentum in the 1980s and early 1990s. Capital controls were increasingly undermined by technology and financial innovation, and strong arguments were being made to the effect that open capital accounts would bring significant benefits. After all, ongoing real economic integration at a global level demanded at least some degree of global financial integration. As the BIS reminded us in its latest Annual Report – and Jaime Caruana might touch on in his keynote speech later in this session – trade and finance tend to go together. Freer capital movements in turn undermined pegged exchange rates and thus contributed to the spread of flexible exchange rate regimes and inflation targeting. 1  There can be little doubt that both real and financial global integration have brought enormous economic benefits. Still, it has been increasingly questioned of late. We partly understand why. We know that there are significant gains from real integration but that there are winners and losers. The losers can be compensated in principle, but in practice this does not always happen.

I am even more pleased to see how many of them are old colleagues and friends. The speakers will all be properly introduced in their sessions. Let me just note that the relevant international organisations are represented at a high level. We have a General Manager of the Bank for International Settlements for the first time in Iceland. We have also a chairman of the Basel Committee for Banking Supervision for the first time in Iceland, as far as I know, although Stefan has of course been in Iceland several times with other hats. We have Deputy Managing Director of the IMF for a second time in Iceland. We have two current governors (not counting me) and two former governors. We have three former deputy governors from G20 countries and we have prominent academics. As you have probably realised there is some double counting in this, which just goes to show the quality of the speakers. Before I make my final remarks, I would like to remind us all that this is a closeddoor invitation-only event. There is no press here, and we are under modified Chatman House rules, which imply that you may use what you hear in your work and even speak about the event, but without attributing to or quoting individual speakers. We wanted to have it this way in order to facilitate frank and open discussion of a difficult topic that many of us are trying to get a handle on.
I am encouraged by the fact that the Basle Committee has recently intensified its efforts to reach out beyond the G-10 countries and to take a more proactive leadership role in helping to strengthen banking supervision in all countries. In particular, the recently issued consultative paper on Core Principles for Effective Banking Supervision is an important milestone. The Core Principles are intended to establish minimum requirements which would apply in all supervisory systems. It is intended that supervisory authorities around the world should use them as an agenda against which to assess the adequacy of their own systems and to press for changes to address any deficiencies. The Core Principles will also increasingly become the standard by which outside commentators, including other supervisors, judge the supervisory framework of individual countries. This external discipline will help to provide an additional incentive to improve supervisory systems. The Hong Kong Monetary Authority is proud to have been one of the supervisory authorities which participated in the drafting of the Core Principles. We were also members of the Working Party of both G-10 and non-G10 countries which recently prepared a report on measures to foster financial stability which was submitted to the meeting of G-7 Finance Ministers last month in Washington. This includes recommendations not only on the formulation of sound principles and practices, but also on how these can be effectively implemented, including the role of international financial institutions in this respect.

I am not denying that a capital regime to cover market risk is necessary, particularly for those countries like the United States whose banks are heavily involved in trading activities. We are intending to introduce the regime in Hong Kong by the end of this year, and a number of countries in the Asian region are intending to do the same. However, they are doing so largely to be seen to be adhering to international standards, rather than because their banks are running substantial trading risks. Even in Hong Kong, which has the fifth largest foreign exchange  BIS Review 55/1997  -3-  market in the world and the seventh largest derivatives market, the incorporation of market risk will have only a minor impact on most banks’ capital adequacy ratios. The concentration on market risk has perhaps led to other supervisory areas not receiving the attention which they deserve. In particular, credit risk still remains the main risk facing most banks, and it is therefore disappointing that there are still no internationally agreed guidelines in areas such as loan classification, bad debt provisioning and non-accrual of interest on non- performing loans. Most countries in Asia, including Hong Kong, do have their own rules in these areas but the lack of an agreed standard makes it difficult to undertake cross-country comparisons of asset quality. I hope, therefore, that this is an area which can be addressed by the Basle Committee in the near future.
Currently, this scheme counts 6 member banks. The number of cards in circulation has increased by 9 times during 2006, compared to 2004. The addition in cards number counts 127,552 cards compared to 2005, i.e., about 56 percent. Parallel to increased number of cards, the number of ATMs and POSs has also increased, respectively by 130 and 404. International integration and cooperation The Bank of Albania’s obligations stemming from the SAA relate to the meeting of the economic criteria of Copenhagen, guaranteeing the right of establishment and freedom of services for banks and other communautaire financial services, liberalizing capital movement and current payments between Albania and the EU, and approximating Albanian legislation to that of the acquis communautaire in these areas. One of the most important developments during 2006 regarding the approximation of national legislation to that of the acquis was the drafting of the Law “On Banks in the  10  BIS Review 80/2007  Republic of Albania”. This Law has adopted the largest part of the provisions of the 2000/12/EC Directive, with regards to initiation and continuation of credit institutions activity. On 8 November, 2006, the European Commission published the Albania 2006 Progress Report. The European Commission evaluated in the report the policy followed by the Bank of Albania in terms of cooperating with international financial institutions and maintaining inflation under control, contributing to keeping a steady macroeconomic environment in the country.

The key to high-performance economy inevitably lies in supply-side policies that raise the economy’s potential growth. BIS Review 98/2008  5  The fact that supply-side policies take time should urge the government to hasten such policies. However much conflict of interest between a fixed-term government and long-term policies may be, it is important to realize that raising productivity, and hence the economy’s potential output, is ultimately the key to raise economic performance without provoking subsequent instability. As mentioned earlier, Thailand needs to be more resilient to oil shocks. For example, it is now a good opportunity to shape up our logistic system. Much integration needs to be done to coordinate the use of rail, road, river, and air transportation. Ladies and Gentlemen, My main message for you this evening is that the key for a successful economy is to preserve competitiveness and to grow at the potential rate as well as raising the potential output. This is to ensure both the performance and the sustainability of an economy. Many central banks are doing this through inflation targeting. At present, the risk of political uncertainty not only lies in terms of consumers and businesses’ confidence, but also in the efficiency of the government to pursue policies that raise productivity. As negative supply shocks persist, the better the job done by the government to enhance productivity, that is, to secure our potential output, the lesser the cost of economic stabilization. Thank you very much for your attention. 6  BIS Review 98/2008
The Bank of England has taken a leading role in discussion with other governments and central banks, and with the private sector market participants, to find a more orderly approach to crisis situations and to avoid the kind of damaging scramble to withdraw funds from emerging market economies that marked the Asian Crisis. BIS Review 102/2000  4  The second area of Bank involvement is market infrastructure, the payments and settlements systems that underpin financial markets. Given the size of payment flows, domestic and cross border, the importance of robust and reliable systems is paramount. Any failure in payment systems would result in gridlock and widespread disruption. The Bank has an operational interest, closer to home, in that payment systems, especially in the wholesale market, often rely on the transfer of payments across central bank accounts. Because of this, under the MOU the Bank is explicitly given responsibility for the systemic oversight of payment systems. In carrying out this responsibility, we take a close interest in the interaction of these systems with other parts of the infrastructure - settlement systems and clearing houses. This interest extends to exchanges and the dizzying process of alliances, mergers and failed bids that has marked the attempt to consolidate global equities markets, especially in Europe where, despite EMU, trading is still widely split between markets. The third area of Bank involvement is regulatory policy.

There is often considerable uncertainty about what the current situation is - a particular problem relating to Q3 as we try to assess the impact of the petrol price crisis in September. Even the past is uncertain and we regularly receive from the ONS revisions to past data about growth of different parts of the economy. As I look at the data each month, knowing that some of the dials are misreading, I am reminded of the saying: that the intelligent man knows that half the data he is looking at is false; the brilliant man knows which half! More seriously we need to have in our mind a view about which data series are reliable and which are particularly erratic. Happily the RPIX data, our goal, is easily observable. But, by way of example, wages, which are a key piece of data, are much less easy to observe. And as we look at the average earnings data, we need to recognise that, not only is it difficult to measure and calculate, it will also occasionally exhibit “noisy” features that may obscure what is going on in the real economy. Indeed, over the Millennium period, as special Y2K bonuses were being paid, it was very difficult to determine what represented real “news” about the economy, and what was mere “noise”. Sitting at the controls of the aircraft, trying to pilot a sensible middle course between the extremes of unsustainable take-off and hard landing, we need “eyes and ears” on the ground.