samchain/econo-pairs-v1 huggingface dataset:
But that knowledge is required also for a forecast for inflation, and so the NAIRU itself provides no additional information over that contained in the forecast. Indeed, estimates of the NAIRU could be described as a by-product of the process of forecasting inflation. As an example, consider the impact of the appreciation of sterling from mid-1996 until late 1997. Retail price inflation can be thought of as a weighted average of domestic and imported inflation. The substantial real appreciation of sterling since mid-1996 has for a while reduced the imported component of UK inflation and so, in turn, retail price inflation, below the level that it would otherwise have reached. In essence the NAIRU fell relative to the natural rate. That restraining effect on inflation will gradually wear off and begin to be reversed if sterling continues to fall. The issue of whether the domestic inflation component would fall to a level consistent with the inflation target by the time this temporarily depressing effect wore off was central to the monetary policy debate during the summer. The example of sterling’s appreciation shows how a macroeconomic shock, entirely independent of the labour market, can affect the relationship between the rate of unemployment and the rate of inflation. The rise in sterling is likely to have reduced the NAIRU via two separate channels. First, in the short run, the relationship between domestically generated inflation – of which wage inflation is a substantial element – and retail price inflation shifts because of lower imported inflation.

This differs from the natural rate when macroeconomic shocks affect the rate of inflation corresponding to any degree of excess demand in the labour market. Since the NAIRU represents the current reduced-form relationship between inflation and unemployment, it is possible to calculate the prospects for inflation without any need to refer to such a variable as the NAIRU. It is a convenient shorthand concept for purposes of exposition, but not a necessary tool for operational decisions on interest rates. Second, the contribution of monetary policy to employment objectives is to promote economic stability in its broadest sense. I referred at the outset to Keynes’ view that the “triple evils” of an unequal distribution of income, instability of expectations and unemployment were all related to an unstable and unpredictable monetary standard. The solution, Keynes suggested, was to set monetary policy to hit a target for prices, or a low and stable inflation rate. He argued 75 years ago that monetary policy should be devoted to regulating the supply of money so that “the index number of prices will never move far from a fixed point”. Keynes went on to say that: “The Bank of England since the war has always done exactly the opposite of what the latest science recommends. I conclude from this that their opposition comes, not from mere obstinacy BIS Review 103/1998  – 10 –  or conservatism, but from their not yet understanding the point.
We hit it off immediately. It just so happened that both of us had been thinking about the natural rate of interest. And since Governor Meyer had raised the subject, we moved quickly to develop an approach to answer his questions. Although we didn't know it then, we were following exactly the problem the other John Williams laid out in 1931.3 Simply put, Thomas had a hammer. And we found a new nail. The hammer was the Kalman filter, which is about inferring the behavior of an object from its effects on other objects. And the nail was r-star. A Fast Start On December 14, 2000, after a few short months of working together, we wrote our ideas and results in a memo to the Board of Governors.4 The memo started with the bold declaration: "This memo is a first report on a broader project to study alternative definitions and estimates of the equilibrium real rate (R*) and to evaluate their usefulness in the conduct of monetary policy." And the Laubach-Williams (LW) model was born. Starting in May 2001, r-star estimates made their way into the staff Bluebook prepared for the FOMC.5 Looking back, I am struck by how quickly these ideas came together. I must also acknowledge the unwavering support we received from senior leadership to bring this new research to policymakers. Within a year of writing the memo, we put out the academic version of this work.6,7 The original paper included a section on timevarying r-star's implications for monetary policy.

At the end of 2022, the COVID-adjusted level of potential output (the black line) is 4.2 percent below the pre-pandemic projection for the fourth quarter of 2022, with nearly half of that shortfall explained by the COVID shock measure and the remainder a permanent change in the natural level of output (the gold line). In summary, according to the model estimates, the main longer-term consequence from the pandemic period is a reduction in potential output, but the imprint on r-star appears to be relatively modest. Importantly, there is no evidence that the era of very low natural rates of interest has ended. The Future of R-star? These estimates indicate that r-star today is about where it was before the pandemic. But where is it headed in the future? Of course, this is impossible to know with any certainty. One way to gauge how forecasters perceive the future of r-star is to use forecast data to estimate it. Figure 5 shows the HLW-based estimates of r-star in the U.S. through the end of 2024. It uses published data in the first quarter of 2023. The May 2023 Blue Chip forecasts for inflation, GDP, and interest rates are used as proxies for data from the second quarter of 2023 through the fourth quarter of 2024. The resulting estimate of r-star is about ½ percent in the first quarter of 2023, and subsequently falls to slightly below zero. Evidently, the value of r-star implied by private forecasts is, if anything, even lower than today's estimate.
Consistent macro-economic stability is perhaps the greatest contribution that the authorities everywhere can make to financial stability. Of course that is easier said than done. While it is true that sharp changes in economic conditions, and asset prices, may be home-grown - often as a result of allowing domestic demand to outstrip the supply-side capacity of the economy to meet that demand, it is also true as we saw very dramatically two or three years ago that instability can be internationally contagious - especially in today’s world of financial globalisation. A great deal of work has gone on internationally over the past few years to improve our understanding of how national authorities can better protect their economies against shocks of this kind. It has resulted in a plethora of internationally agreed standards and codes of best practice ranging from transparency in the conduct of monetary, financial and fiscal policies, through financial regulation and the collection and dissemination of statistics, to various aspects of the financial infrastructure, including the legal and accounting framework, corporate governance arrangements, payments systems and so on. The emphasis now is on implementation and the IMF has the task of encouraging and assisting all of its members to step up their efforts, as best they can given their particular  1  BIS Review 66/2000  circumstances, in all of these respects. This is in the member countries’ own individual interests, but it is equally in the interest of greater stability of the global economy.

She then pivoted to a role in sustainability, advising clients on developing their sustainability strategies and carbon credit verification projects, a role that drew on her audit skills and new knowledge acquired from completing a master’s degree in Environmental Management. Edris is now Head of ESG Research at Maitri Asset Management overseeing the firm’s ESG investment framework. MAS, Workforce Singapore (WSG) and the Institute of Banking & Finance (IBF) have been working together to support more systematically such mid-career transitions to the financial sector. One key initiative is the Technology in Finance Immersion Programme (TFIP), which has seen promising results. 90% of the 2019 cohort who were from non-tech jobs completed the programme and have taken on good tech jobs in financial institutions. Another 530 are going through the programme from the 2020 and 2021 runs. I am pleased to say that IBF is launching the fourth run of this programme this year, with close to 700 training places – which is double the number offered last year. IBF and WSG will also launch a new Wealth Management Accelerator Programme (WMAP, pronounced as “We-MAP”). WMAP targets mid-career professionals with a passion for customer relationship management and an interest in pursuing a career in wealth management. The three-month programme will include structured and on-the-job training to provide participants with the skills to be licensed and hired into relationship management roles. Seven major retail banks are participating in this inaugural programme, to fill close to 200 job roles.
Már Guðmundsson: Iceland’s crisis and recovery – facts, comparisons, and the lessons learned Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the Institute of International and European Affairs, Dublin, 27 April 2015. *  *  *  Accompanying charts can be found at the end of the speech. Chairman, Ladies and Gentlemen, It gives me great pleasure to speak here at the Institute of International and European Affairs in Dublin about Iceland’s crisis and recovery and some of the lessons that could be learned from this experience. This is not least because of our historical bonds and the affinity that I feel exists between our people, to which we can now add the common experience of being hard hit by the Great Financial Crisis. It is well known that Iceland was the first advanced country to experience a full-scale banking crisis during the autumn of 2008, when its three big cross-border banks failed. It was also the first advanced country to go on an IMF programme. What is probably less well known is that at that point, Iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005–2007 and a currency crisis in the first half of 2008. The banking collapse and the associated wealth loss and further currency depreciation made the recession significantly worse, of course, as did the recession that hit the global economy in the fourth quarter of 2008.

But if, over recent years, many companies have been largely focussed on survival, waiting for some of the uncertainty to be resolved before actively considering opportunities to invest and expand, it’s possible that the easing of borrowing costs brought about by these policies has not yet fully translated into spending decisions. As uncertainty lessens, past monetary policy actions may gain greater traction, thus further supporting the recovery. So there are good reasons for thinking that the reduced uncertainty may help to facilitate this handover to business spending we need to see, and that some of those effects may be long lasting. But we also need to be alive to the possibility that the events of the past few years may colour and contaminate business behaviour for many years to come. It may be a long time before companies look ahead with the same confidence that they did during the period of remarkable stability prior to the crisis. Before their trust is restored that the authorities are able to stop really bad things from happening. Before they rebuild their relationships with their banks. On this final point, many companies were let down by their banks during the financial crisis, and I fear that many will be reluctant to return to a business model which relies on their banks providing liquidity and support in times of need. The reluctance today of some companies to borrow from their banks may be less a lack of demand and more a breakdown of trust.
It has contributed to our now being in a situation where household indebtedness and house prices have increased at a more rapid rate than can be regarded as sustainable in the long term. Our assessment at the monetary policy meeting in February was that a slightly earlier increase in the repo rate would reduce the risk of an abrupt adjustment in house prices and household indebtedness further ahead, which might have adverse consequences for both inflation and the real economy. One could say that, bearing this risk in mind, we discussed the appropriate timing of an interest rate increase that we anyway considered necessary with regard to the inflation target. I and my colleagues on the Executive Board of the Riksbank have pointed out in several different speeches that this procedure does not mean that we have introduced other objectives for monetary policy in addition to the price stability target and the aim to contribute to subduing fluctuations in the real economy. We expressed this quite clearly in the special document on monetary policy strategy we published prior to the summer. It therefore surprises me when I still see monetary policy described in some contests in a way that implies that we have other objectives besides price stability when making decisions on the repo rate.

Given this way of thinking, our Inflation Reports contain a special section where we discuss alternative scenarios for inflation and the real economy and the probability that these will materialise. It is the forecast of inflation and the real economy taking into account the risks of alternative scenarios that forms the basis of our monetary policy decisions. Of course, it is not appropriate for a risk analysis to take into account all imaginable risks; not even all those that would have dramatic consequences if they were to materialise. For instance, it is not reasonable, in my opinion, to allow monetary policy decisions to be governed by the risk of global imbalances, as we are unable to affect this development through our own monetary policy. 3 On the other hand, I consider that it is important to always take into account risks that arise from the monetary policy conducted, even if it is sometimes difficult to quantify these risks and calculate their consequences. One problem faced by many central banks with inflation targets, and which relates to this, is the risk of unfavourable developments in property prices and household indebtedness as a result of a long period of expansionary monetary policy. Sweden is no exception here. Both cyclical and structural factors justify the growth rate in household debts and property prices being high over a period of time in Sweden and there is thus reason to take this into account in the normal analysis and forecasting work.
There will be a clear link between the forecasts and the monetary policy considerations made directly in the report in that the forecasts are based on an interest rate path chosen by the Executive Board. A more detailed account of the discussion held in connection with the decision on the level of the interest rate that will apply until the next monetary policy meeting will be included in the minutes of the meeting, which will be published as usual around two weeks after the meeting. In addition, the arrangement of the report will be altered with the aim of becoming even clearer and more efficient in our communication. The purpose is to make it easier for external parties to follow, understand and assess our monetary policy. The report will also have a new, and hopefully more readable, layout. The routines for publishing the report will also be changed slightly. The report will be published, as usual, on the Riksbank’s website the day following the monetary policy meeting, at 9.30 a.m. However, the printed version will be published slightly later, as the report will now contain information on the monetary policy decision and must therefore go to print after the Executive Board meeting. Concluding remarks As I mentioned at the beginning, we at the Riksbank are constantly working on improving our communication and the bases for making our monetary policy decisions. The fact that we are now going to publish our own forecast for the repo rate is an important step in this process.

But banks will need to be careful that this process is handled with tact and sensitivity. Otherwise, they may be open to accusations from sections of the community that they are neglecting their social responsibility by curtailing or increasing the cost of basic banking services to the economically disadvantaged. This was certainly the accusation made against the Australian banks after deregulation there. A further aspect is that the possibility of higher and more extensive charges for banking services will make it all the more important for the banks to deliver sufficient information to their customers about these charges. Let me clarify at this point the HKMA’s attitude to ethical matters and particularly the issue of “fairness” to customers. Our main responsibility under the Banking Ordinance is to promote the general stability and effective working of the banking system. In common with banking regulators in other countries, we interpret this to mean that our principal concern should be to determine that individual banks are financially sound and prudently managed. The aim is to reduce the risk of bank failure that would result in depositors losing money and threaten the stability of the banking system as a whole. We concentrate therefore on checking that the banks have adequate capital and liquidity and effective management and internal controls. However, this is not all that we do.
The Riksbank has the sole right to issue banknotes and coins in kronor. This comprises the single largest item on the liability side of the balance sheet. The size of this item is governed entirely by the general public’s demand for cash. 1  The currency assets in the foreign exchange reserve are invested in foreign fixed-income securities. Just over 90 per cent of the capital is invested in government bonds and the remainder in US agencies. 2  For further reading on the role of the gold reserve, see Henriksson (2002). 3  With the aim of counteracting a fall in gold prices, 15 European central banks agreed in September 1999 that they would regulate the sale of their gold holdings during a five-year period. This agreement was renewed in 2004. 4  For a detailed survey of the Riksbank’s steering interest rate system, see Otz (2005). 5  This works by means of the Riksbank selling kronor for euro on the spot market and investing the euro on deposit. At the same time, a forward agreement is made to repurchase the kronor up to six months later. Forward agreements are signed to eliminate currency risks. The average duration in the swap portfolio should be three months. BIS Review 33/2006  1  We also need our own capital in order to cover losses that may arise in our activities.

And the key to that is that both the Bank and the FSA should have a clear understanding of their respective responsibilities, and that they should continuously work very closely together to ensure that they keep sufficiently out of each others hair without letting things disappear between the cracks! Our ongoing relationship was formalised during the summer in a Memorandum of Understanding (MOU) agreed between the Bank, FSA and the Treasury. This defines very carefully our respective responsibilities and provides for both the Bank and the FSA to exchange information freely and to consult where our interests interact or overlap. It helpfully establishes a high-level Treasury-Bank-FSA Standing Committee, which will provide a forum in which a common position can be developed in relation to emerging problems. And, as a further means of ensuring that we are aware of each other’s concerns, the Chairman of the FSA will become a member of Court, while the Deputy Governor responsible for Financial Stability will serve on the FSA Board. In the end the success of these arrangements will depend upon the working relationships between our respective staff at all levels, and it is helpful in this context that our own supervisory staff are moving to the FSA which will help to ensure that we establish the right working relationships from the beginning. But we will need to work at these relationships continuously to ensure that they are embedded into the future.
Our respective roles and responsibilities, including in a crisis, are set out in a formal Memorandum of Understanding published in the Autumn of 1997 between the Treasury, Bank of England, and FSA. The MOU also established a Tripartite Standing Committee that meets monthly to exchange information and discuss current threats to financial stability. I like to think that, with the departure of responsibility for day-to-day supervision of individual institutions, the Bank has addressed the issue of systemic stability with a new-found clarity of purpose. That said, we know that there is a huge amount of work still to be done on understanding systemic risk. I see a clear contrast here with the monetary policy field. In monetary policy, we are closer to a general consensus about the policy framework and the objectives of monetary policy, even if at any moment of time uncertainty still surrounds our forecast for inflation and the appropriate policy response. Certainly the UK target for monetary stability (the 2.5% symmetrical inflation target) is clear and transparent. In the field of systemic stability and financial crisis, however, our understanding is at a very preliminary stage. We face an array of fundamental questions: how to define systemic stability; how to measure and predict it; what policy weapons we should employ to achieve it; what the costs are if we fail; and how best to resolve instability if it occurs. We have only partial answers to these questions.

But since the high energy prices were expected to gradually fall back entirely we saw them as temporary and decided to leave the repo rate unchanged. When the current regime of inflation targeting was established in the early 1990s it had been preceded by a long period of high, fluctuating inflation in both Sweden and other countries. Many countries around the world experienced a similar shift in regime around this time. Partly as a result of this, international inflation fell sharply during the 1990s, from about 30 per cent to below 4 per cent a year on average.4 The inflation targeting regime and its practical application has been underpinned by the conviction that high, variable inflation is bad for the economy. Now we are living in a world with very weak price increases, particularly for manufactured goods. Is there anything in the current circumstances that could motivate a change in the Riksbank’s thinking? The integration of China's and India's large, fastgrowing economies into the world economy will most likely affect world growth and inflation for a long  inflation targeting – theory and practice", Sveriges Riksbank Quarterly Review 4, 13-42, for a similar discussion that is linked to the monetary policy framework in Sweden. 3  Read more about this in, for example, Palmqvist S. & Strömberg L. (2004), "Households’ inflation opinions – a tale of two surveys" in Sveriges Riksbank Economic Review 4, 24-43. 4  See Rogoff, K. (2003), "Disinflation: An Unsung Benefit of Globalization?" BIS Review 10/2005  5  time.