samchain/econo-pairs-v1 huggingface dataset:
For house prices the average fall in real terms is 35 per cent over a six-period and for shares it is 55 per cent over three and a half years. •  Secondly, financial crises are associated with large declines in production and employment. On average, GDP per capita falls by 9 per cent over two years and unemployment rises by an average of 7 percentage points over four years. •  Thirdly, national debt almost doubles, but not primarily as a result of the costs of recapitalising the financial system. Instead, the main causes are reduced tax income and costs for fiscal policy stimulation. Experiences from earlier financial crises thus show that they are usually followed by a prolonged period of low growth and falling employment, falling asset prices and a substantial deterioration in public finances. This time the crisis is a global one, while most of the earlier crises have been of a national or regional nature. In my opinion, this indicated at the most recent monetary policy meeting that there is a risk that the economic downturn will be more prolonged than in the main scenario and that 2010 will also be a year of weak growth in the world economy. An important condition for growth in the world to pick up again is that the situation in the world’s largest economy, the United States, stabilises and in particular that the US housing market shows an upturn.

BIS Review 25/2009  5  Several companies state in the Riksbank’s company survey, which was carried out in December and January, that they have not experienced such a sudden slowdown in the economy as during the final months of 2008. The companies also say that they have found it increasingly difficult to finance their operations. But no clear credit crunch is yet visible in the official financial market statistics. Lending to companies increased by 0.3 per cent in January compared with the previous month and by 10.6 per cent compared with the same month last year. Our most recent forecast is that GDP will fall by 1.4 per cent this year. Towards the end of the year GDP is expected to begin to rise again. But as with international economic activity, there is a substantial risk that Swedish developments will also be poorer than in our main scenario. The GDP forecast for this year has been revised down substantially since last autumn. In September 2008 the Riksbank forecast growth this year of 0.9 per cent. It is very rare that forecasts are changed so much in such a short time. The revision is way outside the 95 per cent confidence interval that usually applies to our forecasts. It is also the reason why monetary policy has changed so radically since last autumn. The weakened economic activity is now also having an increasingly clear effect on the labour market. Employment has begun to fall and unemployment has begun to increase.
The Bank has just begun to put in place a system for measuring the socio-economic background of its recruits. In future, that might help in sketching the contours of the Bank’s own experiential diversity map. Some organisations have taken more purposive action still to promote social mobility. For example, some have set themselves recruitment targets for employees drawn from lower socio-economic groupings. Others have put in place so-called “contextualised” recruitment, adjusting their entrance requirements to prevent filtering out of candidates based on their socio-economic background. The Bank has also made some initial steps in the direction of contextualised recruitment, as well as signing up as a member of the so-called Social Mobility Compact, which promotes social inclusion and mobility in the UK. 67  Heckman (2006) finds that very early intervention for disadvantaged children is crucial in order to affect outcomes. Intervening when a child is over the age of six has comparatively little effect. 68  Attanasio and Blundell (2014). 69  Feinstein (2003). 70  Commission on Child Poverty and Social Mobility (2014). BIS central bankers’ speeches  13  Across all organisations and institutions, there is plainly much further to go. This new dimension to the diversity debate could, if the evidence is even half-right, yield high organisational and societal returns from a modest investment in better measurement and in different approaches to recruitment and performance. (c)  Recruitment strategy  Recruitment is typically a singular pursuit. The successful candidate is typically the one deemed to best meet the job requirements.

Recruitment policy might usefully follow in the footsteps of regulatory policy if it, too, is to maximise the organisational and social externalities of diversity. To see how and why, consider a simple example. 71 There are two candidates for a position, A and B. They do a test based on the attributes useful for the hiring organisation. These tests might be state of the art, including all of the diverse attributes one would wish in an organisation – cognitive, interpersonal and experiential skills. In this test out of 10, candidate A scores 8 and candidate B scores 4. Which one should be hired? The answer is easy. The evidence points strongly to A as the candidate best meeting the requirements for the job. They have, quite literally, ticked the right boxes. But let’s add a twist. What if the answers A gets wrong are the ones B gets right? And what if the questions existing employees get wrong are also the ones B gets right? In other words, what if candidate B brings skills to the organisation which otherwise do not exist. The right recruitment decision for the organisation is then to choose B rather than A. Candidate B adds more to the collective ability of the organisation, even though they are weaker individually. The question is, how often would existing recruitment practices deliver such an outcome? In practice, I think rarely. Individuals are typically judged on the alignment between their skills and those of the existing organisation.
When Norges Bank had finished collecting the silver tax around 1820, the Bank’s silver holdings came to somewhat more than 50 grams per inhabitant, which is the equivalent of about one silver spoon. The value of the Fund has just recently exceeded NOK 5 trillion, or about NOK 1 million per inhabitant. It is the political authorities – the Government and the Storting – that define the investment framework for the Fund. Norges Bank is charged with the operational management of the Fund and ensuring compliance with the guidelines. Within the framework established by the Ministry of Finance, Norges Bank shall aim to achieve the highest possible return. The investment management function has to a large extent been delegated from Norges Bank’s Executive Board to Norges Bank Investment Management – or NBIM. Chart 8: Cumulative value of the Government Pension Fund Global (GPFG) The Fund’s results have been favourable. Since 1998, the cumulative return on the Fund has been close to NOK 1 800 billion, which is more than a third of the Fund’s total value. So far, our nation has earned a solid return on its investments. Chart 9: Real return on the GPFG and estimated spending High returns in recent years have contributed to an average annual real return since start-up of close to 4 percent, while the spending of petroleum revenues over the fiscal budget accounts for a smaller percentage of the Fund than earlier.

The establishment of a national platform for processing card payments - would to provide a direct impact on reducing high costs and improving the current card processing practices, due to the extended cycles and involvement of more actors in the process. Such a platform would also support innovative services, such as mobile payments and e-wallet. The Bank of Albania is analysing the possibility to develop instant payment in our market as well. The implementation of such a project is deemed to have a direct impact on financial inclusion and on providing services at low cost. I invite you to actively participate in  discussions, in order to benefit as much as possible by the experience of other countries, and to analyse the possibilities presented by service providers that are invited to discuss on these topic in the afternoon session. Furthermore, regarding financial inclusion, the strategy pays special attention to the establishment of the concept of “basic” bank accounts with low costs, for the financial inclusion of all levels of population, irrespective of their economic situation. Last but not least, innovation in public services. The initiatives that digitalise and automate public services need coordination and access to various data electronic platforms, such as data of: citizens; addresses; and payments for these services. Any development should be accompanied with financial education of the population, as a precondition for success.
Ben Broadbent: Monetary policy, asset prices and distribution Speech by Mr Ben Broadbent, Deputy Governor for Monetary Policy of the Bank of England, at the Society of Business Economists Annual Conference, London, 23 October 2014. *  *  *  I would like to thank Alina Barnett for research assistance and I am also grateful for helpful comments from other colleagues in particular from Richard Harrison, David Learmonth and Gareth Ramsay. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. A few years ago, I used to take the overground train into work. The line was cluttered with stations – mine was barely 400 yards on from the previous stop. So you can understand why my fellow commuters were less than convinced one morning when, seeking to explain why our train was 20 minutes overdue, the driver said this was “because we left the last station late”. It raised a smile. But it wasn’t an explanation. I confess I have a similar reaction to accounts that seek to “explain” low interest rates, and the behaviour of asset prices more generally, solely by reference to what central banks have done. This is especially true when those accounts go on to attribute significant and lasting redistributive effects to these policies. For example, and at least when they happen to be going up, it’s quite common to hear that equity markets are benefiting from “easy money”.

Chart 4  Chart 5  Real interest rates have also declined at longer horizons  Longer term yields insensitive to policy surprises  Source: Bank of England  Source: Bank of England and Bank calculations  QE is a different matter. As has been well documented elsewhere, announcements of asset purchases did have statistically significant effects on longer-term interest rates. Work at the Bank suggests that the combined effects of the various stages of QE reduced 10-year gilt yields by as much as 100bp. But it’s not clear for how long that effect has persisted: there are reasons to believe that asset purchases have a greater impact when markets are more illiquid, and have less capacity to absorb the flows. Most of the decline in longer-term real interest rates occurred before the crisis. And, in any event, the first point above still applies: judging by the subsequent behaviour of inflation, QE looks simply to have brought forward a decline in real interest rates that would have occurred anyway, only more painfully so. As the Bank of England explained in a Quarterly Bulletin article a couple of years ago, without QE we’d have experienced higher unemployment, lower wages and lower inflation. It’s hard to see bond yields rising in such an environment.
Hong Kong How does the present situation in Hong Kong match up against these various considerations? Hong Kong is in several respects exceptional, if not unique. It has no specific central bank law of the type common in other jurisdictions (although a number of laws, such as the Exchange Fund Ordinance and the Banking Ordinance, govern particular aspects of the Monetary Authority’s functions). It has no mainstream government debt. It operates a currency board rather than a discretionary monetary policy. And it has only quite recently become familiar with the idea of a budget deficit persisting for longer than an isolated year or two. Although the absence of a law to explicitly prohibit monetary financing of the budget deficit – of the sort which has been adopted in many economies, both new and old, in the course of the past couple  BIS Review 70/2002  3  of decades – may be thought a weakness, it need not be so in reality. Whether or not it has a formal legal basis, the proscription of monetary financing has nowadays become so firmly established as part of the policy landscape in the developed financial economies, that any of them which dared breach it would be immediately crucified by the markets, the world media, the IMF and so on. One could class this as a sort of de facto law of nature, which is likely to be at least as effective and durable as any law passed by a legislature, if not more so.

Between these two extremes – the US and the no-hoper – there are of course many cases where the situation is less clear-cut or less predictable. Euroland provides an interesting example. Given the careful steps which were taken before the advent of the euro to ensure the insulation of monetary from fiscal policy and to outlaw monetary financing of budget deficits, we might wonder why the news of impending budget overruns should cause the euro to weaken. It seems that not only do credit spreads faced by individual deficit countries widen (presumably for fear, however slim, of sovereign default), but also the currency weakens for fear of governments conspiring with the central bank to abandon its mandate against inflation or to break the rules against monetary financing. A rather different interpretation could be that foreign exchange markets are merely exhibiting a pavlovian reaction: having been brainwashed to the effect that a deficit is inherently bad if it surpasses certain preannounced limits, the reaction when such a breach does occur is bound to be negative, even if analysis of the substance underlying the breach provides little or no justification for such a reaction. In the context of trying to identify a relationship between the fiscal position and the exchange rate, these examples demonstrate that there is no simple, pre-ordained relationship. The outcome depends on a wealth of factors, including the nature of the disturbances affecting public finances, the policy regime and policy responses, and the state of sentiment in financial markets.
In line with the new Government’s announced policy, the Central Bank now gives the priority to it to have due justice to the depositors. We need to fix the finance companies sector and their risky business models through strong regulation and market discipline. Otherwise, this sector will pose risk to the financial system stability in next 10 years. Another regulatory intervention that created immense macro economic consequences was the attempt to appreciate and maintain the currency highly over-valued during the period 2009 – 2012 at around Rs. 109 – 110 per US Dollar. For this purpose, the Central Bank lost about $ 3.5 billion of foreign reserves leading to a foreign exchange crisis. Finally, crisis was managed by raising a loan of $ 2.6 billion from the IMF to restore the international reserve and allowing a sharp depreciation of the currency to around Rs. 134 per $ in June 2012. This intervention led to raise interest rate, control credit and raise fuel prices which had dampening impact on the growth of the economy reducing to 6.3% in 2012. In this regard, although some raise concerns over current intervention in the exchange rate, we are comfortable with current level of international reserve, pending already arranged inflow of foreign resources to strengthen the reserve. Another case in point is the Pramuka Bank failure in 2002 – 2004.

Within the context of the exercise of the asset quality review the non-performing exposures of the banks were increased by € billion, out of which come, of course, the € billion that have to be adjusted. Another measure of the strictness of the exercise is given by the fact that the combination of the AQR with the stress test results in a drop in the median capital ratio of the banks of 4 percentage points, which is higher than in previous exercises. And in terms of billions, this means that the exercise leads to a decrease of € billion overall for all the banks, out of which € billion corresponds to the capital shortfall, meaning the banks that came below the threshold of 5.5%. But this is a measure of the strictness of the exercise that it had such an impact on the balance sheet of the banks, and it’s a usual measure of the impact of such types of exercises. But it’s also a measure of the resilience of the system because, in spite of this drop of € billion, the vast majority of banks stayed above 5.5% and were able to support such a shock, and still have a capital ratio above the threshold. And let me underline that the threshold of 5.5% is well above the regulatory minimum, because as you know the regulatory minimum for common equity capital ratio will be in 2018 4.5%, so we have chosen a more demanding threshold.
In practice what that would be likely to mean in our present situation is substantially lower interest rates: the intended effect would be to stimulate external demand, but it would inevitably also involve further stimulus to domestic demand. In effect, it implies that we should acquiesce in increasing overall demand pressure leading inevitably to faster inflation. That might conceivably even BIS Review 31/2000  2  provide some relief to the suffering sectors in the short term. But increasing demand pressure, including labour market pressure, and accelerating inflation would - as we’ve repeatedly seen in the past - ultimately need to be brought back under control, involving a more abrupt tightening of policy. That frankly would not do the suffering sectors themselves much good at least for very long - and it would have a potentially serious destabilising effect on the economy as a whole. That is precisely what we are trying to avoid. And there, I do rest the case for the defence - at least in relation to the principal charge of malice aforethought - or even malice as an after thought. Just as some of you would like to see the euro strengthen from your microeconomic standpoint, so too would I, from a macroeconomic perspective, because it would help to restore a better, more sustainable, balance within the economy.

In Australia, for example, the 1998 Payment Systems (Regulation) Act gives the RBA powers to regulate the payments system and purchased payment facilities (such as travellers’ cheques and stored value cards). It also allows the RBA to obtain information from payment system participants and to set access regimes and determine risk control and efficiency standards for designated payment systems. The RBA’s responsibilities in this regard are discharged by a Payments System Board. The adoption of Real Time Gross Settlement (RTGS) has been another key risk reduction initiative on the part of many central banks in the past decade and a half. These systems eliminate the build up of settlement exposure and Herstatt risk between financial institutions as a result of the exchange of high-value payments and debt securities settlements. Instead, individual transactions are settled in real time across accounts at the central bank. The availability of RTGS is also an important step in dealing effectively with foreign exchange settlement risk. Finally, no discussion of payments system oversight would be complete without some mention of AntiMoney Laundering initiatives. AML is important for the integrity of payments systems, and thus also has important macroprudential implications. The publication of a Financial Stability Report is the second way in which central banks have given more prominence to their macro prudential responsibilities. The Bank of England was among the first movers and its Financial Stability Report is now a decade old. The report recently underwent a revamp reflecting how rapidly this type of analysis has evolved in that time.
In this scenario, it could be argued that one could relax the policy horizon or the target level to accommodate these inflationary shocks with small output costs. However, based on my previous discussion, this could be very detrimental for the future. Giving up on inflation will lead to losing the inflation anchor on expectations, more backward- than forward-looking behavior of wage and price setters, and an increase in output volatility. In other words, we would be achieving an inefficient outcome for monetary policy and losing the benefits of the Great Moderation. Hence, central banks must carefully monitor inflation expectations. However, in the current juncture of extreme uncertainty and inflation volatility, the breakeven measures that compare nominal and inflation protected securities appear to be excessively high world-wide, thus apparently showing an important increase in inflation expectations, which could even reflect the loss of the nominal anchor. This has also been the case in Chile, especially since the deepness of the market of inflation protected instruments tends to make them the natural safe haven. Therefore, in uncertain times like the ones we are enduring today, breakeven measures may increase without necessarily implying un-anchoring expectations, making their timely recognition more intricate. Some could incorrectly argue that a way to avoid the monetary policy reaction to some specific inflationary shocks is to focus inflation control on core rather than headline measures of inflation.

BIS Review 74/2008  9  Figure 5: Food prices (index, January 2006 = 100)  600  600  500  500  400  400  300  300  200  200  100  100  0  0 48  54 60  66 72 78  84 90  96 02  08  CRB Sp o t Ind ex  CRB Fats & Oils Sub -ind ex  CRB Fo o d s tuffs Sub -ind ex  Reuters -CRB Grains and Oils eed s Sub -ind ex  Sources: Commodity Research Bureau, Reuters and Bloomberg. Figure 6: Inflation: Food, energy and rest (annual change, percent) Food and energy  Non food and energy  25  25  25  25  20  20  20  20  15  15  15  15  10  10  10  10  5  5  5  5  0  0  0  0  -5  -5  -5  -5  -10  -10 -10  -10 00  01  02 U.S.  03 Euro Zone  04 Japan  05  06 Mexico  07 Chile  08  00  01  02  U.S.  03  Euro Zone  04  Japan  05  06  Mexico  07  Chile  08  Source: Central Banks and Bloomberg  10  BIS Review 74/2008
Annual inflation - on the present RPIX target measure - perhaps fortuitously - I don’t really mind averaged exactly 2.5% over the past 10 years. But more than just consistently low inflation, we have also enjoyed continuous quarter by quarter GDP growth, over the 10 years to the first quarter, at an average four-quarterly rate of 2.9% - which is well above its earlier trend. And the rate of employment has recently been around its all-time high, with the number of people claiming unemployment benefit at around a 25 year low - and that’s true for the UK as a whole and in almost every region. Of course it hasn’t all been plain sailing. We’ve had to cope with a painful imbalance within the economy over the past few years as a result of successive storms emanating from overseas. And it has been truly painful for the externally-exposed sectors of our economy. To stay on course while those storms persisted we’ve had to compensate for the external weakness by accepting - indeed positively encouraging through monetary policy - domestic consumer demand growth at a rate that we knew could not be sustained indefinitely. We have been helped more recently - and it’s not often you’ll hear a central banker say this - by a timely increase in public spending, consistent with your own rules designed to ensure medium-term fiscal sustainability. Without that we’d have been even more dependent upon the consumer.

I invite you all to rise and to join me in a toast of good health and prosperity to “The Lord Mayor and the Lady Mayoress”. BIS Review 29/2003  3