samchain/econo-pairs-v1 huggingface dataset:
Over 2017 as a whole, euro area inflation should reach 1.5%, against just 0.2% in 2016; for the coming years, we foresee inflation at 1.2% in 2018 and at 1.5% in 2019 – with a change in composition: less “energy” inflation, more underlying inflation. This represents a first success: our monetary policy measures have succeeded in warding off the risk of deflation which was still threatening the euro area last year – we mustn’t forget that inflation was declining, standing at 0.2% in April 2016. That said, despite the progress made towards our target, it is still too slow. The underlying trend in inflation is still not strong enough to support prices in the medium run. Underlying inflation, excluding energy and food, has admittedly increased – rising from 0.8% in the first quarter of 2017 to 1.2% in July and August 2017 – but it still remains at subdued levels, despite the strong 1/4  BIS central bankers' speeches  recovery in activity and employment. A significant factor is the relatively low nominal wage growth. Among the cyclical factors, I would like to mention two in particular: first, persistent slack in the labour market – the unemployment rate has fallen sharply in the euro area, to stand at 9.1% in July 2017, but it is still too high; [slide] second, backward looking wage bargaining, which means that low past inflation is feeding through to wages today. The influence of these two causes should nevertheless diminish with the recovery in economic growth and inflation.

Where the recovery in demand outstrips supply, it is entirely possible that we will witness temporary periods of excess demand, or what more commonly we might describe as “bottlenecks”. This is especially likely within particular sectors, given the uneven nature of the recovery. In a “normal” recovery, signs that cost pressures were increasing and firms were experiencing capacity constraints, would be a clear warning sign that demand was returning close to potential supply. However, this is not necessarily the case now, because we expect both demand and supply to continue to recover towards their pre-pandemic levels. Consistent with this, we are seeing rebounds and normalisation of some commodity prices, though oil prices are now if anything rising above their averages of the last 5 or so years, while, for instance, in the US, lumber prices having risen sharply, are now retracting a sizeable part of that rise. There are plenty of stories of supply chain constraints on commodities and transport bottlenecks, much of which ought to be temporary. There are shortages of some products, notably semi-conductors, some agricultural commodities, and some end user products such as fitness equipment and home and garden furniture – the stuff we take solace in during a time of lockdown. Many of the factors behind these constraints are global in nature, reflecting shortages of products and transport capacity, set against the strength of the recovery to date and expectations of strong future growth.
The appreciation of the krone and high wage growth led to a considerable deterioration in the competitiveness of Norwegian enterprises - and made imported consumer goods cheaper. Norges Bank has no set target for the level of the exchange rate. Developments in the krone exchange rate are nevertheless important in interest rate setting. The response to a change in the exchange rate will depend on its expected impact on inflation. This requires an evaluation of the reasons for and the duration of the change. Short-term fluctuations in the krone exchange rate tend to have very limited effects on economic developments, while long-lasting changes can have an impact. High wage growth over several years has eroded the competitiveness of the Norwegian business sector. Last year, the effects of high wage growth on export industries were amplified by the changes in the krone exchange rate. The krone has now reverted to around the level prevailing in the mid-1990s, while labour costs in manufacturing have increased by almost 15 per cent more than among our trading partners in the same period. The appreciation of the krone proved to be reversible, but the loss of competitiveness and jobs caused by relatively high domestic wage growth is difficult to recoup. A precondition for a considerable improvement in competitiveness is that real wage growth is lower than productivity growth in the business sector for a period. Experience shows that this only occurs in periods with low resource utilisation.

Now, interest rates are believed to have reached their lowest level and are expected to remain at 1 per cent until the end of 2003, with only a gradual rise thereafter. Interest rates were also expected to increase markedly in  2  BIS Review 50/2003  Europe in summer 2002. Instead, interest rates were also reduced here and expectations were revised downwards substantially. The lower projections for growth reflect the effect on the world economy of a number of negative shocks, such as the war in Iraq and the SARS outbreak. It may have taken longer than first expected to correct imbalances generated by overoptimism in sectors such as the IT industry. High oil prices may also have contributed to restraining growth. The combination of low international interest rates and weak cyclical developments contributed to high interest rate differentials against the krone and the strong exchange rate. Activity in the global economy has picked up from the low level prevailing last winter, primarily reflecting high growth in the US and some Asian economies, including Japan. Recent statistics show that the annual rate of GDP growth in the US was 7.2 per cent in the third quarter of 2003. Strong growth in private consumption and a rise in business investment are evidence of a gradual and broadbased upturn. Employment figures are also showing a positive trend and unemployment is falling.
That said, low inflation in the eurozone adds some additional pressure on the adjustments of the Spanish economy. The recovery of activity has proceeded alongside significant employment creation. Employment grew at an annual rate of 3.2% in January. Social security affiliates have increased by more than half a million people in 2015, a figure closely in line with the latest numbers provided by the labour statistics. The unemployment rate stood at 20.9% at the end of last year, 2.8 percentage points lower than a year earlier and 5.4 percentage points below the peak at the beginning of 2013, but this is still a very high figure comparing it with Europe or the Eurozone. BIS central bankers’ speeches  1  The favourable dynamics of the labour market since the start of the recovery can be explained, at least partially, by the process of wage moderation which, in turn, is associated with the effects of the 2012 labour market reform. Balance of payments The performance of the external sector in recent years has been remarkable. In terms of the current account balance, Spain has successfully addressed deficits around 10% of GDP at the beginning of the international financial crisis turning them around to surpluses above 1% of GDP since 2014. Exports of goods and services have been a key driver of these developments, with sales abroad growing well in excess of export markets themselves.

Bandid Nijathaworn: Rethinking the role of financial soundness – financial infrastructure and long-term sustainable growth Remarks by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the 8th Bank Indonesia Annual International Seminar 2010 on “Rethinking Macroeconomic and Financial Policies”, Jakarta, 22 October 2010. *  *  *  Thank you Chair, Let me begin by thanking Bank Indonesia for the invitation. It is a pleasure to be here. On the issue of financial soundness, it is certainly hard to overstate the importance of a sound financial infrastructure. In normal times, the financial sector plays a critical role in driving the real economy. But during times of stress, having a sound financial infrastructure is all the more important, because it is the viability of financial institutions that typically draws the line between a mild economic setback versus a full-blown crisis. But what are the essential features of a sound financial infrastructure? Let me highlight three key elements that I believe constitute financial system soundness. First is the efficiency aspect. The financial sector must perform its core functions efficiently. To this end, substantial progress has been made in Asian emerging markets, partly by default as globalization and the rapidly growing economies in Asia have raised competition among financial institutions, and also by design given the continuing efforts by the authorities to deregulate and develop the financial sector. Making further headway on these fronts, therefore, should be a continuing process. And I think this is what Bank Indonesia is doing.
In addition, households that fear high inflation are expected to reduce the amount of money they hold and keep more of their wealth in real assets such as land or gold, which are considered better hedges against inflation. Inflation also raises the effective tax rate on income earned from investing and saving. As a result, people may invest less and save less. However, at present there is little direct empirical evidence of the strength and nature of these theoretical links. These are important questions, and a variety of approaches can be brought to bear to answer them. Surveys, field experiments and experiments in the lab can all be very useful to further our understanding of these issues, which lie at the heart of the mandate of any central bank. Of course many economists are perhaps appropriately sceptical about whether the results from many experiments can be generalized. Some recent results from our survey might reassure some of these economists. Working with the Rand Corporation, which runs the Internet survey for our inflation questions, we designed an experiment involving nominal future payoffs to assess whether the responding households would behave in ways consistent with their reported inflation expectations. The results confirmed that on average households used a real interest rate based on their reported inflation expectation in choosing between the nominal future payoffs. Thank you for listening to me today. I would be happy to take some questions on our research on inflation expectations.

What implications will these changes have for the entire payments ecosystem? And what further adjustments will the cashless payment system have to undergo if it is to remain efficient and secure in the future? 4 5 6 7  Allsopp, Peter et al. (2009), The evolution of real-time gross settlement – access, liquidity and credit, and pricing, The World Bank Financial Infrastructure Series – Payment Systems Policy and Research, February 2009. Interbank payments comprise payments relating to FX operations or money and capital market transactions, but also large-value payments transacted by the non-bank sector. PostFinance’s decision in 2016 to settle all of its domestic payments via SIC in future has also significantly increased the volume of retail payments in the SIC system. The recent SNB survey on payment methods shows that cash continues to play an important role in payments in Switzerland. However, a large proportion of payments by households is now conducted via credit card, and above all via debit card. Swiss National Bank (2018), Survey on payment methods 2017 – Survey on payment behaviour and the use of cash in Switzerland. Page 5/9  Before turning to these important questions, I should emphasise that I will not be talking about cryptocurrencies such as Bitcoin or Ether. 8 The question I will focus on today is: how is digitalisation changing payment systems? One important finding is that the changes being wrought by digitalisation are affecting the entire payments ecosystem.
So the recent political agreement on an implementation period is welcome. There was always going to be an interlude between political agreement and legal certainty. So authorities here have done what our mandate to keep the system capable to serving the economy implies. Regulatory underpinning has been given to the political agreement. European firms can assume they’ll be able to operate in – and serve clients in – the UK, much as they do now, until the end of 2020. 5  5  See update on the regulatory approach to preparations for EU withdrawal, 28 March 2018, at https://www.bankofengland.co.uk/news/2018/march/update-on-the-regulatory-approach-to-preparations-for-eu-withdrawal 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  And that commitment is backstopped. The UK government has committed to legislate, if necessary, to allow European firms to operate and serve end users in the UK temporarily after Brexit. The economy of the UK, at least, can be confident that – whatever happens – it can access financial services as it does now. But still more action is needed because existing contracts could be disrupted. Uncleared over-the-counter derivative contracts, with a notional value of £ trillion, could be affected. That’s around a quarter of derivative contracts entered into by parties in both the UK and EU. Novation of contracts on that scale risks disruption, particularly if it were to take place in a short time frame. As with the flow of new services, a backstop would have benefit. It would need two parts.

In the realm of monetary policy, the conventional wisdom before the crisis, based on the long-standing success of former Fed Chairman Alan Greenspan, was that monetary policy should stay away from direct financial stability responsibility, particularly the management of asset price bubbles, and let the financial markets take care of themselves. And if things go wrong, policymakers can always clean up the mess after a bubble has burst by cutting interest rate aggressively. As we all know, the severity and the costs of this global financial crisis have very much discredited the so-called Greenspan Doctrine. Talk of risks to financial stability has now been mentioned frequently in several central banks’ monetary policy statements. Equally important, signs of financial imbalances have become parts of a watch list for many central banks. These developments stood in sharp contrast to the pre-crisis orthodoxy where financial stability would factor into monetary policy decisions only to the extent that it affected growth and inflation. The changing consensus on monetary policy does not mean that central banks will be using interest rates aggressively to fight off asset price misalignments and financial imbalances, however. By all means, interest rate policy is probably too blunt to be a “corrective” tool for financial stability given that, to materially impact asset prices, a substantial increase in the interest rate is required. Using the policy interest rate to actively steer asset prices would therefore have adverse consequences on the economy as a whole.
If the credit risks disappear from the banks, where do they go? Today I intend to speak a little bit about the risks involved in credit derivatives, which so far mainly concern the international market. Here in Sweden the use of credit derivatives is still limited, although increasing. Then I intend to mention the opportunities I see in Sweden. But let me first run through how credit derivatives are used and how the market has developed in recent years. 1  How do credit derivatives work? A credit derivative is a financial contract between two parties. It insures the buyer of the contract against the credit suffering a credit event during a predetermined period. The credit event quite simply defines what the insurance covers, in roughly the same way as the conditions in a normal home insurance. I shall return to this shortly. Take, for instance, a company like TeliaSonera. Then imagine a bank that has loaned money to this company. This may involve a lot of money as TeliaSonera is a large company. Although Telia’s ability to pay is good when the loan is taken, the bank is exposed to the risk that it may deteriorate in the long term. If the bank considers the credit risk to be too high, it may choose to "sell" part of it to another investor. Then the bank can use the credit derivatives market. For the bank, which in this case is the seller of credit risk, the credit derivative functions roughly like a normal insurance.

How are credit derivatives used in Sweden? As you may know, Sweden currently has one of the world’s most developed derivative markets. This is seen in relation to the size of the economy and the turnover on the stock market. But when it comes to credit derivatives, the situation is different. Here the trade is much more limited. This is primarily due to our corporate bond market being so small. And without corporate bonds, it has been difficult to trade in credit derivatives. The major Swedish banks base their core activities on long-term customer relations. Credits to small and medium-sized companies are predominant. The banks’ exposures to companies traded actively in the credit derivatives market are relatively small. Moreover, the banks have had plenty of capital and the need to sell credit risk to outsiders has been limited. The number of deals in credit derivatives has increased in recent years, but the total exposures remain small, on the whole. The major part of the trade has been on behalf of customers. This means that the banks mediate deals for customers, for instance, insurance companies, which for various reasons want to buy or sell credit risk. If we look ahead, there is reason to believe that credit derivatives will gain increased significance. This is partly related to the new capital adequacy rules, Basel II. The Basel rules, the old and the new, regulate how much capital a bank needs to cover the risks in its credit portfolio.
A further initiative during the same year was the introduction of the Islamic Financial Stability Forum (IFSF), set up in 2010 to further solidify the global efforts in areas that will contribute towards safeguarding financial stability. Deliberations on wide ranging issues that pertain to risks to financial stability in the Islamic financial system have taken place at this forum. Greater awareness on issues relating to regulation and supervision of Islamic finance have also been raised at international meetings, conferences, seminars, workshops and other dialogues that have been organised by the IFSB in many countries across several continents. BIS central bankers’ speeches  1  The initiatives and milestones achieved by the IFSB have indeed paved the way for jurisdictions across the globe to build a solid foundation for the progressive growth of Islamic finance that is underpinned with stability. Additionally, the early recognition by the IFSB of the increasing interconnectivity in a financial system, the IFSB, unlike other prudential standard setting bodies, has advanced its mission through the development of prudential standards for a broader coverage that includes the banking, capital market and insurance or takaful sectors. The prudential standards issued by the IFSB takes into account the specificities of Islamic finance and the dynamics of the various Shariah contracts used in the wide ranging products offered by Islamic financial institutions. It is within this context that Islamic financial institutions are able to perform its role more effectively as financial intermediaries that are differentiated from its conventional counterparts.

Chart 11: Alternative scenarios a) GDP growth Percentage changes on a year ago 4.0 3.5 3.0 Stronger investment scenario  2.5 2.0 1.5  May 2018 Inflation Report central projection  Weaker consumption scenario  1.0 0.5 0.0 -0.5 -1.0  2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  b) Inflation Per cent 4.0 3.5 May 2018 Inflation Report central projection  3.0 Stronger investment scenario  2.5 2.0  2% target Weaker consumption scenario  1.5 1.0 0.5 0.0 -0.5 -1.0  2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  18  In this scenario, consumers increase saving rates back towards pre-crisis levels, so that quarterly consumption growth is only around 0% – ¼% compared with ¼% – ½% in the May 2018 Inflation Report projections. 17  All speeches are available online at www.bankofengland.co.uk/speeches  17  c) Excess supply / demand Projections 2018 Q2  2019 Q2  2020Q2  2021 Q2  May Inflation Report central projection  -¼  0  0  ¼  Weaker consumption scenario  -¼  -½  -¾  -¾  Stronger investment scenario  -¼  ¼  ½  1  Notes: Per cent of potential GDP.
The retail sales data have been adjusted for the switch to CPI deflation in 2001. Retail sales growth for 2020 Q4 is based on data to November, services growth on data available to date. 1  The series is retail sales excluding fuel, which goes back slightly further (to 1988) than the aggregate figure. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  There are probably several reasons for this anomaly, and in the first part of this talk I’ll briefly go through some of them. Perhaps the single most important factor is the introduction of the various furlough schemes. At the cost of a huge jump in government debt these have shielded household income from the drop in national income seen in the first half of last year. Spending by today’s consumers has in part been sustained and funded by tomorrow’s taxpayers. However, what I want to spend more time on in this talk is something else: the significant shifts across different areas of that spending. Retail sales may have been strong – they’ve grown by more than the historical average and more than household income – but, as you can see from Chart 2, spending on consumer services has been extremely weak. There’s an obvious reason for this, of course: in the midst of the pandemic some activities involve more risk of infection than others. Going to a busy shop may be more risky than shopping online.

Chart 6: Online sales jumped during lockdown  Chart 7: Saving rose and fell sharply during and after the spring lockdown  The share of online retail sales. Source: ONS. Sources: Bank of England, ONS, The Investment Association, and Bank calculations. The blue line includes flows into household deposits with banks, National Savings and Investment  4  I’m not going to distinguish here between consumers’ own inclinations and any additional impact of mandated lockdowns. That the lockdowns have been necessary is clear. While they obviously have an incentive to avoid infection themselves individuals won’t always take fully into account the risk they pose to others, particularly when so many people can apparently be infectious but free of symptoms. In economists’ language there’s a clear “externality” that obligatory lockdowns are seeking to address. For the same reason, it seems very likely that the lockdowns will have had an additional effect on spending, above and beyond those that would’ve resulted from consumers’ own natural caution (although as my colleague Jan Vlieghe recently explained (Vlieghe (2020)), it’s empirically difficult to separate these things in the data because, in most countries, they’ve coincided with each other, both of them responding to swings in infection rates). In the current context you can think of this as a widening in the basket of activities that carry infection risk – and perhaps, more fundamentally, as the result of a model in which individual utility is replaced by some measure of social wellbeing.