samchain/econo-pairs-v1 huggingface dataset:
Since this is not the main topic of our discussion today, I will simply give a brief reminder of the facts.   The role of central banks in markets stems from their objectives, the primary one incontestably being to ensure price stability. But this is not their sole objective. As we know, the Fed operates under a “multiple mandate” that is, and I quote, “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates” whereas most other central banks, and in particular the ECB, have a “hierarchical mandate” that places the price stability objective above all other policy goals. More specifically, the Maastricht Treaty states that “without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community”. In that perspective, one of the objectives of the Community that we must support is to “promote solidarity among Member States”.   In order to fulfil its mandate, central banks must be credible and thus independent. If economic agents have the least doubt or the least suspicion that the institution might have an incentive to surprise them by allowing high inflation, they might adjust their behaviour as a precaution and thus “create” higher inflation by increasing their wage claims, thereby triggering a wage-price spiral; or by demanding greater returns on their savings, which pushes up long-term interest rates and weighs on growth.

In a world in which the credibility of the central bank to keep inflation low is well anchored, the solvency of most agents is taken for granted and markets are well organised and hence liquid, interest rates remain low across the whole maturity spectrum and valuations high; changes in key rates do not affect inflation expectations that remain low and changes in real interest rates allow monetary policy decisions to be effectively transmitted to the economy. In normal times, interactions between central banks and markets are therefore important but fairly unintrusive:   Central banks influence markets through changing the level of short-term interest rates; they explain the rationale behind their interest rate decisions in order to improve the quality of economic agents’ expectations; they put in place technical mechanisms to promote liquidity on certain key market segments, for example by establishing the list of assets eligible as collateral in their refinancing operations or by setting up a discount window that ensures that banks with unexpected temporary requirements can refinance themselves.   While markets listen to central banks, central banks also listen to markets since the price formation in markets reflects agents’ expectations, in particular concerning inflation, and their assessment of risks; central banks require such information to make their analyses and take their monetary policy decisions. The smooth functioning of markets and financial stability are therefore essential for the effective transmission of monetary policy.
Although the turmoils in global financial markets that started in July have been reduced by the determined actions taken by the central banks of industrial countries, especially the Fed, risk aversion is still high, credit maturity has been reduced considerably and, except for prime firms, financial conditions have narrowed around the world. It is foreseen that turbulences in global financial markets will have effects on the perspectives of the world economic growth. In any case, this adjustment comes at a time in which most firms and the banking sector around the world are on solid footing, perhaps with the sole exception of some economies in Eastern Europe. The epicenter of this trembling is in the United States, which economy already was experiencing an important adjustment in its housing market, now expected to be more intense and extended as a result of the deterioration in the credit conditions that experiences its mortgage market. At the same time, the drop in US housing prices and the less favorable financial conditions faced by US consumers will affect the dynamism of private consumption. Although the deterioration of financial conditions has no direct effect on prime firms, their economic perspectives have been negatively affected by lower dynamism expected for consumption and by more restrictive financial conditions faced by their consumers and suppliers. Nevertheless, it is important to emphasize that the indicators of real activity of the third quarter have shown a surprising strength of the labor markets and consumption.

A small purple foil on the reverse side of the note echoes the spiral staircase at Tate Britain, which holds most of the Turner Bequest in the Clore Gallery. The main foil of the note contains an image of Turner Contemporary in blue. And the shape of the window around the foil is based on the Trafalgar Fountains, which are an iconic feature in the square outside The National Gallery where The Fighting Temeraire hangs. The purpose of design features like these is not simply to make the banknotes beautiful but also to strengthen their security. The new £ will be our most secure note yet, featuring several innovative elements. For example, rather than having a single foil element – the Turner Contemporary in blue – there is an additional foil in a second colour: the Margate Lighthouse in gold. And there is a second transparent element in the bottom corner of the note, inspired by the windows of Tintern Abbey, which was a popular tourist spot in Turner’s times and which he memorialised in another of his great watercolours in 1794. These security features are made possible by printing the new £ on polymer, rather than paper. Polymer banknotes also remain in good condition for longer, meaning the new £ will be safer, cleaner and stronger. 2  The self-portrait is currently on display in Tate Britain, and The Fighting Temeraire can been seen in The National Gallery. P. Ackroyd, Turner (Vintage, 2006) page 136. 4 See: http://news.bbc.co.uk/1/hi/entertainment/4214824.stm.
In theory, the market should respond to a breakdown in monetary or fiscal discipline by demanding higher risk premium for the sovereign debt issued by those countries that are not behaving in a prudent manner. However, market discipline also seems to have broken down in many instances. For example, right after Greece joined the Euro Zone, the market was somehow attracted by the so called convergence play and for 8 years from 2001–2008 it ignored the fundamentals of Greece and its Single A rating and traded Greek sovereign debts as a Triple A credit, with a spread of as low as 8 basis points above German Bunds in February 2005. Looking back, the rationale for this kind of convergence play defies common sense and any analysis of fundamentals. However, the breakdown of the market discipline had played a key role in encouraging and facilitating continued erosion of fiscal discipline of the national authorities by conveying the wrong signals about the market tolerance, and appetite for their sovereign debts. As an illustration, the sharp fall of interest cost (10-year government bond yield) from over 10% in the mid 1990s to a low of 3% in the mid-2000s had also helped lower the cost of Greek Government borrowings and created the illusion of the affordability and sustainability of the rising pile of government debts. There are many reasons why market forces are failing to impose discipline when national authorities or firms fail to behave prudently.

BIS central bankers’ speeches  3  In conclusion, I wish to leave with you the following message: the breakdown of monetary, fiscal and market disciplines has contributed to the deepness and severity of the latest crisis in the advanced economies. In my view, there is unfortunately no easy way out or clever solution that could avoid the need and thus the pain of structural adjustments that would redress the imbalances built up in the last decade or two. Going forward, we must realise that we have to restore the 3Ds or three Disciplines, without which the conditions for sustainable economic recovery would not exist. Are we now in an era of awakening? I am not totally sure but I think, or at least I hope, we are. If not, then market forces would eventually push all of us into that position, except that the later the awakening occurs the heavier the price we will have to pay. 4  BIS central bankers’ speeches
GDP gap refers to the percentage deviation of GDP from the Riksbank’s assessed trends. Right-hand graph. Net figures. Sources: National Institute of Economic Research, Statistics Sweden and the Riksbank  For future inflationary pressures, the situation on the labour market plays a particularly significant role. The tighter the labour market, the higher the pressure on wage development. In our assessment, the situation on the labour market is tight. An indication of this is that labour shortages – as reported by companies in National Institute of Economic Research surveys – are at record-high levels (see Figure 2). The effect of the labour market situation on wage and price development tends to occur with a certain time-lag. There is hence good reason to believe that wages and prices will increase more rapidly in the period ahead. Our previously established criteria for starting to increase the interest rate have been met Inflation and inflation expectations close to 2 per cent and the healthy economic activity are in themselves arguments in favour of slightly reducing the support from monetary policy. But what prompted us to take this step just now? In conjunction with the two previous monetary policy decisions in September and October, we said that we would initiate slow increases in the repo rate in December or February if economic developments continued to “support the prospects for inflation”. It is, in other words, a forward-looking perspective on inflation that guides monetary policy. And in this context, not so much has actually changed since the beginning of autumn.

The figures in Table 1 have been updated with details for 2017. 11 These calculations only show interest payments and ignore effects on interest income. 9  9 [13]  Table 1. Households more affected more by interest rate adjustments than previously Interest payments for a typical housing purchase, SEK per month Sweden Greater Stockholm Housing price (SEK million) Debt (SEK million) Interest rate (%) Interest payments Increase in interest payments (+1%)  2004 1.3 0.8 3.7 1793 485  2017 3.0 2.0 1.6 1814 1161  2004 2.6 1.6 3.7 3452 934  2017 6.0 4.0 1.6 3643 2351  Note. The amounts have been adjusted for tax relief on interest payments. The table does not include amortisations. Sources: Finansinspektionen, Statistics Sweden and the Riksbank  Rate increases in line with the Riksbank’s forecast are expected to have minor cashflow effects on households as a whole ... In the Monetary Policy Report in December, our assessment was that total disposable household income would slow by about 1.3 per cent in a three-year perspective as a result of rising interest rates. 12 This must be considered a minor effect, especially bearing in mind that rising wages, among other factors, will contribute about 4 percentage points a year to the growth in disposable household income in the coming years. Total disposable income, according to our forecast, will continue to grow at a healthy rate in the years to come, despite rising interest rates.
To ensure smooth operation of the New Turkish Lira money markets and to contain the potential volatility in short term interest rates, the Monetary Policy Committee, judging that inflation will display a more rapid fall than envisaged before, has lowered the borrowing rates by 50 basis points and the lending rate by 100 basis points on November 19, 2008. This allowed the margin between the lending and borrowing rates to be reduced by a further 50 basis points. BIS Review 153/2008  1  We are also aware of the significance of foreign exchange liquidity in the banking system and progressively put into effect necessary measures in order to get through this period with minimal damage. To that end, we have resumed our role to act as an intermediary in the FX deposit market as of 9 October 2008, and later doubled the transaction limits to 10.8 billion USD. During times of confidence breakdowns among the participants of the financial markets, central banks can serve as a blind broker to intermediate in the foreign currency lending market. In this FX deposit market, banks can post their bids for foreign exchange without disclosing their identities. It also acts as a market of last resort as the banks can borrow directly from the Central Bank.

They include the need to designate a Euro area finance minister with her own budget for macroeconomic stabilisation, a rainy-day fund with or without the possibility of issuing debt, a European unemployment (re-)insurance scheme, and so on. Views on these proposals, however, differ in terms of size, allocation of competences, political feasibility and in many other respects. According to Banco de España simulations, the effective design of any of the proposals needs to be sizable enough to provide stabilizstion for an economy facing a recession, even a large economy facing a deep recession. The trigger mechanism must be clear and smooth to ensure a timely response. But it should also address legitimate concerns over moral hazard and permanent transfers. The phasing-out should ensure that fiscal transfers will not be permanent so as to avoid undue redistribution across member states. To preserve sound incentives, in my view, countries with access to this instrument must comply with fiscal rules and with the rules of the Macroeconomic imbalances procedure. Even countries with a good fiscal record can fail to deal with sizable shocks, but ex ante compliance with fiscal rules –and a transparent process- is necessary to dispel doubts about the behaviour of the country under stress, while also providing flexibility for national fiscal buffers. The Banco de España simulations show that, with an annual contribution of 0.35% of GDP per country, it is possible to design a fiscal capacity with a risk-sharing capacity similar to that of the existing instruments in the US.
One example is found in the high and smoothed payout ratios to both executives and shareholders of public companies even when underlying company profitability is low, perhaps even negative. Another is that longer-term cashflows from company projects appear to be “excessively” discounted (Davies et al (2014)). This can lead to projects which boost the long-run value of the company being wrongly rejected. Consistent with that hypothesis, privately-owned companies seem to invest more than otherwise-identical public companies (Davies et al (2014)). There is some debate about where the blames for this corporate myopia problem may lie. Some place it at the door of shareholders, driven to demand short-term returns by short 4  BIS central bankers’ speeches  holding periods. Others blame management for seeking short-term financial gain given their short tenure. This distinction may anyway be artificial. In a world where executive compensation is largely in stock, the two are one and the same, their incentives largely indistinguishable. So how does all of this link to inequality? If impatient (money-scarce) individuals are failing to invest sufficiently in skills, and impatient (short-termist) companies are failing to invest sufficiently in capital, this is a recipe for weak (human and physical) capital accumulation. This will show up in weak long-term investment and skills deficits. The most likely casualties from this are productivity and growth. If there are legs to this story, then one important element is corporate governance. This defines decision-making within firms – how much to invest, how much to distribute, and to whom.

This has weighed heavily on resident population growth as seen from the relatively close correlation with the TFR. There appears to be three distinct phases in the last 30 years: In the 1990s, both the TFR and resident population growth declined in tandem. In the 2000s, the TFR continued to decline but resident population growth recovered. This reflected net positive immigration as the number of new citizens and Permanent Residents grew. In this decade, the TFR appears to have stabilised at around 1.2–1.3 while resident population growth fell sharply reflecting the tightening of immigration flows. 2 / 17  BIS central bankers' speeches  The next two slides are a thought experiment. They are not a forecast or prediction but aim to illustrate the implications of having very low resident population growth. First, let us assume that we have zero net immigration starting from this year. The resident working-age population – this is defined as citizens and permanent residents between the ages of 15–64 – will begin to shrink from around 2020. The exact year is not key. What is important to note is that it is not far off. By 2035, the working-age resident population will possibly decline by a cumulative 3.5%. 3 / 17  BIS central bankers' speeches  Second, let us assume zero net increase in foreign workers from now on. The overall labour force will decline gradually from around 2022, driven fundamentally by the shrinking resident labour force. These two assumptions taken together – zero net migration (i.e.
Mr Latter comments on the euro: first impressions from Hong Kong Address by Mr Tony Latter, a Deputy Chief Executive of the Hong Kong Monetary Authority, at the seminar entitled, “Five months of the euro: what does it mean for business in Hong Kong?” held in Hong Kong on 11 May 1999. Introduction It’s probably true to say that the arrival of the euro passed without incident and almost without notice in Hong Kong. You might think this a somewhat ungracious statement with which to begin. But it certainly does not mean that the euro is unimportant to Hong Kong. What the statement tells us, first and foremost, is that the preparations for the euro by those sections of the community for which its arrival was of immediate importance - and here I refer principally to the financial sector and parts of the commercial sector - were totally successful in ensuring a smooth and hence unremarkable transition. I would like to congratulate all concerned on that achievement. At the other extreme, my opening remark could also be taken as confirmation that the arrival of the euro was of no direct importance to the man in the street, who may never even have seen a European currency; even if he has, he will not have to confront the euro in physical form until the banknotes appear in 2002. I should like to spend a few minutes discussing two aspects of the euro.

It is my hope that policy makers and financial service providers will utilise this information to develop strategies that will lead to the expansion and improvement of financial access for our people. BIS Review 115/2006  1  In Conclusion – May I emphasise that the nation is looking forward to the findings of the FinScope Zambia 2005 Survey which will help us fully understand the financial landscape in Zambia and therefore open up new market segments and allow us expand accessibility to financial services in Zambia necessary for reducing poverty. The report of the FinScope Zambia 2005 Survey will be posted to the Bank of Zambia website, www.boz.zm, for public information. Thank you. 2  BIS Review 115/2006
The shift towards imports from low-cost countries has moderated. After falling for several years, prices for imported goods are now beginning to rise. Looking back, inflation has varied somewhat. The three supply-side shocks reduced inflation while boosting production capacity. Low interest rates, favourable economic conditions internationally and substantial investment in the petroleum sector increased demand for goods and services. High capacity utilisation gradually pushed up inflation. Now that interest rates have risen to a more normal level and the global economic situation is deteriorating, growth is slowing and capacity utilisation may again seem to be approaching levels that are more sustainable. The impact of the downturn abroad on the Norwegian economy is uncertain, but on balance it now seems that inflation will gradually stabilise near 2.5 per cent without unnecessary wide fluctuations in output and employment. By and large, we must then be able to assert that inflation targeting has served us well during these years. There have been surprises. The growth potential of the Norwegian economy has been very high. It took a long time for employment to rise after the recovery started, and in 2006 – well into the upturn – inflation fell markedly. Over the past year, import prices and food prices have increased, and against this background the monetary stance may have to be on the tight side for a period.

On this score, our experience has been fairly positive with a high level of residential construction in recent years. The tax system should treat investment in residential property neutrally and on a par with other investments. Several official studies in recent decades 7 – from Sekse to Skauge – have shown that the tax system favours residential property consumption and investment. This leads to overinvestment in residential property, displacing other types of investment. At the same time, the tax system makes it more advantageous to own a home instead of renting. Through the years, the tax on the advantage of homeownership has been gradually reduced. In 2005, it was removed. Tax deductibility of debt interest was maintained. In practice, this implies a housing investment subsidy. Homeowners benefit from an income deduction for expenses for income acquisition, but do not pay taxes on the income. In central areas where available sites are scarce, the tax advantage will result in a higher level of house prices. A more neutral taxation of residential property – for example as proposed by the Skauge Commission in 2003 – would also have a stabilising effect on the price level in the housing market. A tax that is based more on market values will increase when house values rise and fall when house values decline. This will curb the willingness to pay when purchasing homes during upturns and sustain it during downturns. The exemption for residential property tax is a source of more unstable house prices and credit cycles.