samchain/econo-pairs-v1 huggingface dataset:
And that’s part of what the econoME materials will teach young people. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  To really bring the Bank’s work to life and give students a chance to hold us to account, colleagues below director level from around the Bank are heading into classrooms across the country. These Bank Ambassadors will visit over 200 state schools over the next twelve months. The feedback from the first 30 visits to state schools has been terrific. Central banks are not often associated with the words “positive”, “appreciated” and “inspiring” so you can imagine how invigorated our Ambassadors are when they hear them. They’ve also been challenged with the length and quality of the questions they have had to face from some students who appear to be candidates for future Treasury Select Committee membership. Our third reason for creating an education strategy is to inspire economists of the future and thereby improve diversity in finance, business and economics. We hope to convince young people of the value of studying economics. We may be a bit biased but we know it’s a fascinating subject and one that teaches skills that can open doors to a huge range of rewarding careers. And it’s achievable. As Keynes observed “the study of economics does not seem to require any specialised gifts of an unusually high order.” Yet, economists are still a rare breed. Last year, less than 0.1% of all GCSE students and 4% of A-level students studied economics.

I will turn to the question of three of the new expectations on central banks, that we at the ECB are currently discussing as part of the Strategic Review rightly initiated by Christine Lagarde. I. Inflation remains the principal edifice of the Central Bank's Construct I.A. The past: had inflation disappeared? When it comes to inflation, the last decade left economists and central bankers confronting a number of puzzles. The Great recession of 2008-09 exhibited a “missing deflation”, when the important contraction of output was not associated with a consequent fall of prices. The recent years, on the contrary, were characterised as a period of “missing inflation”. The vanishing level of inflation has been a pervasive and global phenomenon. It can be grasped with a simple comparison of the inflation rates in the first and the second decades of the 21st century. Page 2 sur 9  The inflation rate of the Euro area was 2.1% on average from 1999 − when the euro was created − to 2007 − when the financial crisis started. It dropped to 1.0% over the period 2013−19 following the double dip recession and until the current pandemic. At more than one percentage point, this is a substantial decline between the two periods. Headline inflation in the US experienced a similar decline, having dropped from 2.7% to 1.6% between the two periods. In the early 2000s, the euro area’s inflation rate was in line with the ECB’s price stability mandate, defined as a target of “below but close to 2%”.
These developments, besides their positive contribution in enhancing the financial intermediation speak for a better perception of the investing potential from banks, in Albania. An outstanding development is mainly related to the client service, which is accompanied through electronic terminals by the increasing number of electronic cards in circulation. Banks offer already debit and credit cards in co-operation with international companies such as Visa and MasterCard. Six banks provide the ATM service and the number of ATMs reached 108 by the end of February 2005. The banking system results to have a profit level, which has been increasing to Lek 5.1 billion. Return on equity (ROE) was estimated at 21 percent while problem credits represent only 4.2 percent, from 4.6 percent in the previous year. On the other hand, for the rest of the financial sector the FSAP reports indicates many problems, which simultaneously contain many themes including essential issues such as their supervision. Although, due to their small dimensions, these problems do not present imminent risks for the time being, they still should be carefully examined and resolved. Returning to the assessments made under FSAP in other countries similar to Albania (I mainly refer here to South East European Countries, SEEC) and to many other financial reports referring to this region, we realize that these problems are similar and these countries suffer more or less similar symptoms. If one has a look back at the history, it realizes that it can not happen differently.

The second corner of the triangle is related to the exit from our exceptional measures. The time to exit has not yet arrived. We will continue PEPP net asset purchases “until at least the end of March 2022 and, in any case, until [we] judge that the coronavirus crisis phase is over” v. We still have ample time to judge and decide; nevertheless in our present baseline scenario this crisis phase will be over by March 2022. But the possible end of net purchases under PEPP by that date would not imply an abrupt tightening of our monetary policy. Reinvestments under PEPP would remain significant, net purchases would continue under the APP, possibly somewhat adapted. Hence we could still play the full “quartet” of our  Page 6 sur 9 accommodative monetary policy instruments, adding negative rates, liquidity provision, and forward guidance. The third corner of this triangle could indeed be an enhancement of our forward guidance consistent with the symmetry of our inflation objective. Rather than flexible average inflation targeting, which leaves many questions unanswered, my preferred option would be the use of a strengthened and non-linear forward guidance, mentioning explicitly our tolerance for inflation overshooting, with reference to past inflation shortfalls. It is the combination of these three levers that should be used as the foundations of the “equilibrium triangle” of our monetary policy in this next phase of the Covid crisis. II. Wider expectations are emerging Let us return to the question of broadening public expectations of central banks.
Similar policy recommendations follow from another paper 6 prepared by IMF staff, which was presented in Session 2 and sought to identify the features that distinguish “good” credit  2  Neagu, F., Mărgărit, A., Copaciu, M., Racaru, I. Mircea, R., Andrassy, A.: Non-Government Credit in Romania: Perspectives and Implications, National Bank of Romania, Occasional Paper No. 4, June 2006. 3  Ramanauskas, T: Interest Rates, Credit and Macroeconomy – a Small Structural Model for the Lithuanian Case, mimeo, November 2006. 4  World Bank EU8+2 Regular Economic Report, Special Topic: Credit Expansion in Emerging Europe: A Cause for Concern?, January 2007. 5  Bems, R., Schellekens, P.: Finance and Convergence: What's Ahead for Emerging Europe?, IMF Working Paper No. 07/244, November 2007. 6  Barajas, A., Dell’Ariccia, G., Levchenko, A.: Credit Booms: the Good, the Bad, and the Ugly, mimeo, November 2007. 2  BIS Review 137/2007  booms from “bad” ones, i.e. such that probably eventually lead to a banking crisis. The analysis has shown, inter alia, that better banking supervision lowers the probability of a crisis. It has also established that booms that coincide with current account imbalances seem less dangerous (a finding that may seem counter-intuitive at a first glance), that trade openness is another factor that makes a crisis less probable, and that the more prolonged booms as well as those accompanied by high inflation or slow economic growth are the “bad” ones. Another important topic raised during the conference was housing.

And the policy, even if pursued, would risk being self-defeating. So there is both an institutional and a market discipline at work to mitigate this risk, which means that – while this risk does exist and it is encouraging that it is being scrutinised – in practice it is very unlikely to come to pass. And to be clear, there is no signal on policy in what I have just said. There is one further part to the recent context which is relevant to the institutional set-up of central banks with respect to monetary policy. I mentioned earlier that in the last ten to fifteen years, the shocks to which central banks have had to respond – to which we apply stabilisation tools – have got larger. I well remember that in the very early days of the MPC we had some monthly outturns for inflation which were exactly at 2.5% (2.5% was the original target on a different measure of inflation). Now, in most circles this would be a cause of celebration – we’ve hit the target, and again. As I remember, there were some smiles, but – being central bankers you might say – there was a concern that it could unduly raise expectations on the accuracy of the policy process in terms of outcomes. For the record, it didn’t last, as we knew it wouldn’t.
According to an assessment by the IMF Mission that visited Samoa earlier this month, about a quarter of the tourism sector’s capacity was destroyed by the tsunami. Beyond tourism, the IMF Mission noted that the widespread damage to physical infrastructure implies that other sectors such as commerce, transport, and communication have also been directly affected. In the seven months to end January 2010, tourist arrivals increased. On the surface, any increase is good news. However, a significant number of the visitors were volunteers and overseas personnel who came to assist with the tsunami emergency and recovery efforts. Many of these people stayed in makeshift camps in the tsunami affected areas, resulting in a reduction in paid hotel accommodation. This, combined with a general decline in the other categories of tourist expenditures, saw total tourism earnings in the period under review fall 5 percent to $ million. Private remittances, which is one of the major sources of income for our people, was also affected by the recession and tsunami. In the early months of the current financial year, private remittances were well on their way down, due to the global recession. However, the huge inflows following the tsunami outweighed the earlier reductions resulting in an overall increase to $ million, in the first 7 months to end January. 2  BIS Review 49/2010  Exports rose slightly in the period under review, reflecting increases in exports of fish, coconut oil, copra meal, nonu fruit and bottled water.

And, in line with this objective, foreign investments abroad by residents have been discouraged, to ensure that there are sufficient funds available for domestic investments. This stance of monetary policy will be reviewed when Government’s Budget for 2010/11 is finalized in June this year. Now let me say something briefly about interest rates. BIS Review 49/2010  3  4. Interest rates and bank fees  Ladies and Gentlemen, in the past twelve months or so, there has been much criticism by the private sector and the public at large of our relatively high interest rate environment. This debate has been ongoing since the outbreak of the global recession two years ago. Reflecting the continued easing of monetary policy, the Central Bank’s official interest rates have declined steeply to record low levels. Consequently, the commercial banks’ deposit rates have also fallen sharply. In the event, the commercial banks’ weighted average lending rate has declined to 10.7 percent in January this year, from 12.5 percent in March 2008. The commercial banks have undertaken to effect further reductions in their lending rates in the near future. These further reductions reflect the maturity of several long term wholesale deposits which have been reinvested at lower rates. In the medium to long term, the Central Bank is aiming at reducing the interest rates in Samoa, to be closer to those of our major trading partners (such as Fiji).
And the Obama administration is seeking to inject a further fiscal stimulus, incorporating not only the widely expected extension of the Bush administration tax cuts, but also a temporary cut in payroll taxes. The extension of the Federal Reserve’s large-scale asset purchase programme has proved controversial, with some US critics asserting that it is inflationary and policymakers in some of the emerging  2  BIS Review 169/2010  economies claiming that it is both an attempt to engineer a beggar-my-neighbour devaluation and that it will boost capital inflows and foster asset-price bubbles. These criticisms seem to me mostly off the mark. Central banks undertake asset purchases financed by the issuance of central bank money in order to boost nominal spending. They do that by depressing a range of longer-term real yields and raising asset prices. The earlier phases of quantitative easing both here and in the United States indeed appear to have lowered longer-term nominal and real yields below where they would otherwise have been. 2 This time around, the transmission channel has been rather different, as after falling on the anticipation of further asset purchases, longer-term US yields rose. But the policy should only prove inflationary in the medium to long run if it results in excessive nominal spending growth, which hardly appears likely at the current juncture. Only if the Federal Reserve fails to tighten policy promptly as the recovery takes hold is excessive inflation likely to be a problem. The criticisms from outside seem to me almost as misplaced.

But given the very high degree of uncertainty, there is little that the MPC can do to deal with this risk ahead of crystallisation. While UK output growth has come in much in line with our expectations, the same cannot be said of our primary objective, inflation. Back in August of last year, our central projection was for CPI inflation to be around 1.5% now. But inflation has been markedly stronger than that – 3.2% on the latest reading. Why has inflation been so much higher, especially given that our expectations for growth have largely been fulfilled? There are three factors that account for this. 3 First, energy and non-oil commodity prices are substantially higher than in the summer of 2009. By convention, we base our forecasts for these variables on futures prices, which were relatively flat at that time. The buoyancy of commodity prices since then reflects the rebound in global activity, and especially the strength in the emerging economies. In addition, temporary supply factors have boosted the prices of some agricultural commodities. At present there appears to be a margin of spare capacity in the oil market, so that may permit global growth to remain strong without putting further upward pressure on energy prices immediately. But a low elasticity of supply of other commodities means that their prices, relative to those of finished goods and services, may continue to drift upwards. That would constitute an additional headwind for the United Kingdom.
I think that the ring fence as proposed by the Independent Commission on Banking is a better way to achieve sensible and safe separation of functions within a bank while not causing great disruption to the overall financial system. Interestingly, the argument against narrow banking from the “big” equity school is that narrow banking exports all of the risk in the financial system to so-called shadow banks, thereby making them a danger to the system 4. Again, this amounts to an argument that unmanageable risk should be kept in banks which must therefore attract substantial equity funding. It’s not a winner I’m afraid. This brings me right back to the argument for what we are doing today, namely to strengthen the loss absorbency, risk management, governance, supervision and resolvability of the banks we do have. I do not accept the proposition that we can only abandon all hope of understanding the risks in banks. Likewise, I do not agree that large banks are unsupervisable and ungovernable. And, I do not concur with the view that large banks can never be resolved, thus leaving too big to fail always with us, and with the answer then to either require a lot of equity funding or to hope that the shadow banking system does not cause risks that threaten the whole system. Let me finish by focussing on resolution and supervision.

Practice and model diversity is a challenge, but not an obstacle for implementing efficient resolution strategies We have heard today that DGSs may still be very diverse in terms of their status, functions, design, size, etc. This is also the case for supervisory and resolution regimes even though the international standards-setters have made considerable progress in terms of harmonisation. Let me take the example of banking resolution: one of the (many) remaining challenges is to make sure that the adopted resolution strategies will be recognised and applied cross-border. Under the aegis of the FSB, several initiatives have been taken (e.g. ISDA protocol for financial contracts) but this is not the end of the story and many further discussions will be necessary to remove all the obstacles to implementing, inter alia, a single point of entry resolution of a GSIB. In the EU we have now a common legal resolution regime and even a common resolution authority for the Banking Union but resolution measures continue to be implemented at the national level because insolvency regimes within Europe are not unified. Being optimistic, I would say that these difficulties are not an impediment to resolution, because the most important thing is to be mindful of such a difficulty and to deal with it.
This brings me to the Basel III which not only addresses the shortcomings of Basel II but goes far beyond by introducing a variety of new concepts which have raised the bar in terms of global supervisory standards. Some of these concepts emerged from the various lessons learned exercises that were carried out following 2007, while others are a product of serious research and reflection by the global banking supervisors. Basel III has introduced some fundamental reforms such as elevating the status of Common Equity capital as the key component of Core capital. It also has introduced the concept of a conservation capital buffer and even more importantly an additional countercyclical buffer on top of the minimum capital  BIS central bankers’ speeches  1  requirements. Also Basel III has recognized that liquidity is as important if not even more important than capital for safety and viability of banking institutions. It has recognized that there must be limits on leveraging by financial institutions so that bankers are restrained from excessive risk taking. Basel III also has taken a serious and perhaps a much needed closer look at risks in trading and investment activities and particularly for derivatives and off balance sheet transactions. In July 2009, as an interim measure, Basel Committee had issued a document addressing the market and trading book weaknesses in Basel II for immediate implementation. This document is known as Basel II.5. Basel III goes much further with refinements in areas such as counterparty credit risk, Credit Value adjustments, etc.

The flow of corporate euro bond and equity issuance has grown significantly, though it is important to keep this in proportion: the stock of issuance outstanding in both cases is still - by some margin - lower than the US. (Domestic debt securities in the euro area, taking governments and corporates together, amount to the equivalent of around $ trillion, compared with some $ trillion in the US. And the equity market capitalisation of companies in the euro area amounts to the equivalent of around $ trillion, compared with some $ trillion in the US.) Since the launch of the euro, the focus of risk assessment in the corporate debt market has shifted from currency risk towards credit and liquidity risk. A growing number of companies in the euro area have been seeking external credit ratings. And an equity culture is beginning to take root in the euro area, despite the volatility in TMT stocks over the past two years. In Europe as a whole, for example, there were over 17,000 M&A transactions with a combined value equivalent to $ trillion last year. The second change concerns the integration of euro trading and settlement. Trading has increased in most euro markets, and dealing spreads have narrowed. Electronic trading and communication  2  BIS Review 11/2001  networks have greatly increased the reach of traditional financial markets, while allowing new providers to enter at relatively low cost.
Among others, the finance industry is one with many untapped opportunities. Currently, a wide group of people in our countries still needs a better access to finance and there are still lots of demand for financial services to be met – be they savings, loans, insurance products, or payment services for both domestic and crossborder transactions. By applying the airline industry’ experiences for policymakers, let me lay out five key conditions necessary to developing domestic financial systems and nurturing financial connectivity in the CLMVT in the periods ahead. Analogous to the “Open Sky Policy”, the first factor is to promote domestic financial liberalization policy and a well-integrated regional financial system. The financial liberalization policy should aim to lessen the degree of domestic financial repression, thereby strengthening financial institutions’ performance, and broadening their offer of financial  2  BIS central bankers’ speeches  products and services. This can be done along with the policy to enhance financial connectivity by promoting the presence of capable players with regional focus. Under our mandate, the Bank of Thailand aims to promote financial connectivity through more connected banking networks and more integrated payment systems. Under the ASEAN Banking Integration Framework, countries in the CLMVT should gear up efforts to strengthen regional banking networks, which will serve a diverse range of businesses and local people to gain more access to high quality banking services at fair prices.

Ultimately, being open means pitting oneself against the very best, irrespective of the region they belong to, since only if we compete against the best, will we be one of the best in the future. Consequently, it would be wrong for Switzerland to limit its openness to a given geographic region. Openness must be the fundamental principle governing all of its economic policies. Even in the changing global environment of intensive competition, Switzerland can increase its prosperity if it rethinks its economic policy direction and embraces former tried and tested virtues such as openness, freedom and personal responsibility.