samchain/econo-pairs-v1 huggingface dataset:
In this period there have been only two occasions when the krona has fluctuated more than 2 per cent against the German mark. Managing transitory effects The subject of the Riksbank’s attitude to the inflation target is also raised from time to time in the media. It has been claimed that the Riksbank shows less concern about inflation moving outside the tolerance interval’s lower limit than it does about the upper limit being exceeded. That is not the case. A couple of years is too short a period on which to base arguments that deviations from the targeted rate are a sign that policy has not been symmetric. Monetary policy work involves a lot of uncertainty, which is no doubt inevitable when the interest rate has to be set on the basis of forecasts that extend several years into the future. At present, moreover, assessments are particularly difficult so soon after the changeover to a low-inflation regime, with all that this may involve in the form of altered behaviour by households and firms. Another complication is that in recent years, inflation throughout the world has been lower than expected. Another aspect of this issue is the Riksbank’s choice of a target variable. Every conceivable indicator of inflation has its shortcomings and these have to be weighed against the advantages when choosing monetary policy’s target variable. The consumer price index (CPI) has the advantages of being well-known and established among economic agents and people in general as a measure of inflation.

In work at the Riksbank on monitoring prices in the Swedish economy, we could not fail to notice some positive changes in competitive conditions and pricing in recent years, as well as some more negative patterns that seem to be persisting. BIS Review 47/1998  -4Let me take the positive aspects first. One is the favourable price trend for imported goods in recent years. This is particularly notable in that for much of this period the exchange rate has been comparatively weak, which by itself should push import prices up. A favourable price trend has also been observed for food products, for example; this seems to be a consequence, at least in part, of Sweden’s membership of the European Union. Today, moreover, there are many indications that the combination of European monetary union and increased IT-based trade, for instance, will make competition even stronger. There is a general difference between the development of administered prices and market prices for goods and services. The administered prices have risen faster. This may be a result of increased fee setting in the public sector in recent years, both in connection with structural moves away from tax financing and to fill existing “holes” in public finances. Then there is the classic explanation that it is not so easy to raise productivity growth in some parts of the services sector. This no doubt applies in particular to a number of the services that are mainly provided under public auspices, such as medical care and care of the aged.
The SNB has therefore emphasised the importance of diversification and limiting the concentration risks of our foreign currency investments. Today, 53% of the SNB’s FX reserves are invested in euro-denominated securities. This is in line with the share of Swiss exports to the euro area, and only five percentage points more than our allocation three years ago, though the size of our FX reserves, excluding swaps, increased from CHF 50 billion in 2008 to over CHF 225 billion by the end of September 2011. In order to promote further diversification, in 2010 the SNB added four new currencies to its reserves, namely Australian and Singapore dollars, Danish krone and Swedish krona. As a result, in addition to euros and these four currencies, the SNB’s portfolio is now composed of 26% US dollars, 9% Japanese yen, 5% pounds sterling and 4% Canadian dollars. Central banks generally have large holdings of government bonds due to their need for liquidity. As is widely known, in recent months the ratings agencies have been reviewing or have downgraded the credit ratings of many sovereign bonds. Despite this turn of events, approximately 96% of all our investments in fixed-income assets are rated AAA or AA. In closing, I would like to emphasise that we are actively exploring and monitoring new asset classes and currencies in developed and developing markets. The aim of this process is to continually reduce concentration risks and to further diversify the SNB’s FX reserves.

Regardless of whether you have decided to pursue your studies in economics or start a professional career, I am sure that the knowledge and habits you have acquired in the past two years will prove to be extremely helpful in your endeavours. I wish you every success in your careers. Thank you very much. 2/2  BIS central bankers' speeches
Finally, I would like to close my remarks by thanking our speakers, discussants, the chairpersons, as well as the Bank of Albania's staff for dedicating your time and efforts to this important activity. I kindly invite you to actively participate in and conduct a very lively and fruitful debate. I truly believe that the productive discussions which will certainly take place during these two-day workshop, will contribute to strengthening further cooperation among researchers, and between the institutions. Thank you! 4/4  BIS - Central bankers' speeches

“credere”) supports regaining the trust in the financial system and in the banks as institutions that 2/3  BIS central bankers' speeches  ensure the allocation of funds to the private and the public sector. Companies in Romania, as beneficiaries of European funds, need to respond to some pressing issues such as inadequate management and financial discipline. Only around 15% of small and medium companies are eligible for financing, with a management team capable to conduct a lucrative activity that reflects in a sound set of accounting documents, like the balance sheet and the P&L account. These companies too, can be affected by the contagion effect, for instance when their projections and cash flows are subject to repayment from other companies, with delays. To support these companies and to ease the access to finance, one needs to improve the policies and continue the financial reforms to create a more adequate and flexible frame for investments and the multiplier effect of co-financing. The European Investment Bank has been a strong pillar for this strategic economic development, channeling investments towards the crucial sectors of transport, digital infrastructure and the new technologies, education for skilled labour force, healthcare, or agriculture. The European Investment Bank contributes to creating the right mindset and responsible attitude of assuming calculated risks. It supports the communication of sound public policies and priorities for Romania’s economic and social development, to continue and expand the European integration and economic convergence.
We must also work to mitigate any effects and try to ensure that crises which do occur are not as extensive and economically costly as those we have experienced in recent years. The objective, in other words, must be to combine the necessary regulation and supervision of the markets with the benefits that a well developed financial system can confer. The regulation and supervision of financial firms are necessary for various reasons. But these functions must be carried out in such a way that they do not throttle the potential that can contribute to greater prosperity in the global economy. Conclusion Many countries have deregulated their financial systems in the past two decades. For the first time since the outbreak of World War One, capital is again more or less free to move across national borders. Moreover, major changes in communications and information technology have provided new methods and instruments for risk management. As a result of all this, today the financial system is more extensive and globalised than ever before. This holds even though capital flows relative to GDP were also large at the turn of the nineteenth century. At the time, however, it was other countries that received the flows, which also took a somewhat different form. The rapid pace of financial developments and internationalisation is really a logical consequence of the globalised production of goods and services, with the strong growth of cross-border trade in the world economy. These developments have accentuated the need of new financial solutions for firms and households.

From the point of view of the Eurosystem, this was a very important attribute, on top of the fact that covered bonds are akin to our traditional repurchase operations. Since the announcement in May there has been a wave of new issuances. As Spanish banks have traditionally been significant issuers of this type of securities, developments in Spain are representative. The issuance volume of Spanish banks between the time of the announcement and the end of October has reached 16 billion euro. It is now around 20% of the total euro area issuance. Spreads have declined in tandem. In Spain they are now more than 100 basis points lower than the level they reached at their peak. Liquidity has returned to the market, with tangible reductions in bid-ask spreads in secondary transactions. We interpret these developments as a confirmation that our purchase programme, although measured in size, has been effective in bringing new life to an important segment of the European financial market. Overall, we are very satisfied with the effectiveness of this programme. II. Lessons: present and future  What lessons can we draw from the financial crisis that has occupied all of us for more the last two years? The crisis has exposed the fundamental fragility of the international financial system. No segment of the market or category of players has been spared. Therefore, we have to re-consider all aspects of finance as a precondition to reform.
People do not spend as much as before when their wage drops, and they spend more if they have higher wages. While this is intuitive and apparently well explained, everything is related to wage flows and to wage dynamics. We hold that we should account the stock as well, meaning the cumulative gap between current levels and past reference levels of income. Cumulative wage gap is a better predictor of inflation than output gap because it is observable and it refers to past consumption and price levels; while output gap is nonobservable and it makes conservative assumptions for the future. Past wages are the minimum potential wages in the mind of wage earners. We assume that people judge their consumption decisions based on the relation between their current wages and their past wages, adjusted for inflation. The cumulative real wage gap, instead of nominal wage, is the explanatory variable in our new Phillips Curve. The dependent variable is the inflation gap, which refers to the gap between inflation and the inflation target (or, in the absence of a target, an average value of inflation over a longer time-span). Inflation gap is a more relevant variable for policy makers than the inflation rate because it puts inflation in relation to a desired level. A negative inflation gap means more demand-side measures are needed. A positive inflation gap means that the risk of overshooting is already present and policy tightening is required.

We will test separately these two assumptions: the shape of the curve and the break in the slopes. In terms of methodology, the analysis covers the OECD countries over the period 19902017, except for the United States where the data covers the period 1989 – 2017. Data sources for wages and inflation are the OECD and the FRED databases (for US), annual data. The reason for this selection is the availability of long-time data series on wages at OECD (they are only available since 1990), while for US the FRED database allows us to start from a known peak year, which was 1989. We used the following date: the average annual wage in 2017 constant prices at 2017 USD PPPs, exchange rate (national currency units/US dollar) and inflation (CPI) – annual growth rate, from the OECD database, and the real median household income in the United States, 2017 CPI-U-RS adjusted dollars, from the FRED database. We transformed the average annual wage into local currency for ensuring comparability with the inflation rate, which reflects changes in local prices. Data sources for the inflation target of central banks are from the respective central banks’ websites. If a central bank targets a corridor rather than a level of the inflation rate, then the midpoint of the target band is considered. The year T0 is the peak year. We define a wage adjustment episode the adjustment in real wages that follows after the peak year.
Inflation and the Great Moderation’, Geneva Reports on the World Economy 19. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Business cycles can be first amplified and then imperilled by growing imbalances in the real economy, such as over-investment in capital and housing, debt-fuelled consumption, or, particularly in emerging economies, excess current account imbalances that can lead to sudden stops.7 And imbalances can manifest themselves in rising inflation. In those advanced economies closest to full employment like the US and the UK, wage pressures have picked up as slack has been absorbed. A similar pattern is observable in the euro area (Chart 5). In the UK, private sector wage growth has increased from around 1% five years ago, to 2% 3 years ago; 2½% last year to 3 ½ % today as unemployment has fallen below its natural rate.

Digitalisation driving development The rapid decline in the use of cash in Sweden is part of a broad digitalisation trend that affects society as a whole. Technological advances have given us, for instance, new more efficient payment solutions such as real-time payments with the Swish mobile application, which is used for transactions that used to be mostly cash-based. Similarly, mobile phones can function as card terminals, which gives small business owners increased opportunity to accept cards. Swedish banks also have a tradition of cooperating with one another when innovative payment solutions are introduced on the market. In this way, they can make better use of network effects and more quickly attain a critical mass of users. Moreover, Sweden has a highly-educated population that is willing to adopt innovations in the IT field. Technological advances that lead to more efficient payments, cooperation between producers of services who make it possible to fully utilise the network effects, changed consumption patterns and a technology-friendly population are a powerful combination when it comes to creating changes in payment habits! In an international perspective, Sweden and the other Nordic countries are way ahead in this change process. However, the trend is global – an increasing number of people want to use digital solutions to pay and fewer want to use paper-based payments, including banknotes and coins. In particular, the younger generations are quick to adopt digital technology. It is probably therefore only a question of time before more countries find themselves in the same situation as we have in Sweden today.
Moreover, these transfers have taken place, not only through OTC contracts, but also through securitised debt instruments, of various credit quality. In my view, this opacity is not conducive to long-term confidence in the strength of the industry. And, it certainly doesn’t contribute to overall systemic robustness. So this is the second area where gaining better understanding of the potential vulnerabilities before we face adverse outcomes could be of real value. Supervision and regulation Obviously, it’s pretty easy to make lists of risks and potential vulnerabilities. Central bankers are meant to be especially good at it! But I’ve already referred to the significant benefits of risk transfer. They include wider distribution of risk, and potentially at lower cost to buyers of protection from those risks. That’s got to be of real value. The question is: can these gains be achieved efficiently whilst at the same time mitigating the risks? My suggestion here relates to the environment in which the industries operate: the general infrastructure I talked about earlier. If we want to get the full benefits of risk transfer, but with the vulnerabilities contained at acceptable levels then it’s worth reflecting on the value of co-ordinating some major elements of that environment: supervision, regulation and accounting, as they relate to the worlds of banking and insurance. I can’t help feeling that a genuine effort and real engagement in this area will help develop a better understanding of where risk really resides. In turn, that would mean greater predictability, enhanced confidence and better business opportunities.

If we do the exercise of asking ourselves where would the lending rate be in a hypothetical scenario without the global financial crisis, we find that it would be between 50 bp and 350 bp below its present level, with the larger effect on the interest rates on commercial and consumer loans. In the specific case of mortgage loans, the increase in the interest rate occurred between September and December 2008 can be largely linked to the implications of the external conditions on the local perception of risk (figure 4). All the above is a clear illustration of how the severe uncertainty and high risks that were unleashed last September are affecting the domestic economy. Non-bank financing sources Notwithstanding the key role played by domestic banks in funding households and firms, especially smaller ones, for the bigger companies there are other equally important credit sources. Thus, around 45% of total corporate borrowing is non-bank, with external debt and domestic bonds at the top of the list. Therefore, it is important to understand the behavior of the interest rates on these credits before offering a global outlook of financial conditions. The Central Bank of Chile has no direct effect on external financial conditions. Like banks, Chilean firms have seen their borrowing conditions tighten under the changed state of affairs. Still, our banks and firms continue to enjoy normal access to world financial markets, owing  2  Berstein and Fuentes (2003). 3  Becerra et al. (2009).
In the period leading up to the crisis, what was missing clearly was the recognition of the implications that a stable growth and inflation environment could have on developments in the financial sector in terms of its impact on risk perception and on the risk-taking behavior. As it turned out, the reduced volatility of growth and inflation did not tell a complete story. In addition, the intellectual underpinning of central bank’s approach to policy, based on efficient market hypothesis, did not encourage policy makers to look beyond the focus on inflation risk. As a result, the interaction and feedback between the real economy and the financial sector were not given the needed attention in the deliberation of monetary policy. A case in point is the typical absence of the financial sector, especially banks, in the macroeconomic models used in the analysis of monetary policy. This absence leaves a big gap in our understanding of the interactions between the financial side and the real side of the economy which, as a result,  BIS Review 8/2010  1  can lead to an underestimation of risk in the good time, and an overestimation of risk in the bad time. The third lesson is that monetary policy is a powerful tool for managing growth and stability, but it can also be a double-edged sword.

Combining macroprudential measures with inflation-targeting is one area that flexibility can be added. The Bank of Thailand is one central bank that has pursued this line of flexibility since 2004. Another approach is to have greater flexibility in the setting of the inflation targets, in terms of the choice between core and headline inflation, as well as the level of the inflation targets itself, so that monetary policy will have greater room to maneuver in responding to shocks. If done carefully, the room for flexibility can be added without undermining the credibility of the inflation-targeting framework. But whatever flexibility we add, it is most important that the long-term objective of monetary policy in sustaining a low and stable inflation environment and in anchoring inflation expectations over the cycle is maintained and not compromised. BIS Review 8/2010  3
A large currency area, furthermore, means deeper and more liquid financial markets, which allow participants to diversify their risks and, in the absence of currency risk, to focus more on credit risk. Another contribution which EU membership should make to financial stability in accession countries stems from the increased competition which will result from the entry of foreign service providers, particularly if this induces indigenous institutions to find innovative ways to hedge risks and diversify asset portfolios, and to adopt international best practices generally. While cross-country studies on this 4 aspect remain sparse, a recent World Bank study reveals instances where foreign bank entry did lead to improved operations and to greater access to foreign capital. Drawing on data for 80 countries, this study also shows that foreign bank entry does tend to reduce domestic bank profitability, non-interest income and, to some extent, overall expenses. Coupled with the finding that the presence of foreign banks contributes to a higher level of loan-loss provisioning, this leads the authors to conclude that, through its effects on competition, foreign bank entry improves the efficiency and functioning of indigenous banks. While there is nothing automatic about the realisation of such benefits, one might reasonably expect that in the long run the completion of the Single Market in financial services should contribute to the emergence of a healthier financial system in the accession countries.

From a broader policymaking perspective, moreover, there is also the question about the role that financial stability concerns should play in the formulation of macroeconomic policy more generally. I am sure that the second seminar session will provide further insights in this regard, when the interrelationship between fiscal policy, monetary policy and financial stability will be considered. Policy transparency, good governance and market discipline The relationship between macroeconomic policy and financial stability also serves to highlight the importance of policy transparency and good governance, both at the national and corporate level. In fact, it is generally agreed that the likelihood of disturbances to the financial system can be greatly diminished if the authorities manifest their policy intentions clearly, and explain the rationale behind policy measures once decisions have been taken. This helps to reduce the chances of investors and creditors making uninformed decisions, only to reverse them later. This aspect has become especially relevant in the context of capital account liberalisation, particularly in those countries that operate variants of fixed exchange rate regimes. It is even more so in countries which are simultaneously engaged in efforts to place public finances on a stable footing and to gain credibility for the central bank’s monetary policy. Here, a sudden shift in investor confidence could have serious repercussions, not only for financial stability but also for the conduct of monetary and fiscal policy.