samchain/econo-pairs-v1 huggingface dataset:
A predictable monetary policy, focused on a clearly defined inflation target, provides good guidance for wage negotiations. One of the main reasons why wage formation did not function satisfactorily during most of the 1980s was probably that stabilisation policy did not work. Inflation exceeded the official target on several occasions in that period and the labour market organisations had difficulty in discerning the rules of the game. One example of this is the government ambition of bringing inflation down in the mid-1980s: a crisis package was presented in 1983, aimed at inflation rates of 4% in 1994 and 3% in 1995; when inflation exceeded these targets, the employee organisations considered that a 5% ceiling on wage increases was no longer acceptable. Today’s confidence in the Riksbank’s current inflation target facilitates wage negotiations. The 1997 wage round, for instance, took the 2% inflation target as a starting point. The development of wages is always a central factor in inflation assessments, but the difficulties involved in forecasting wages are considerable. The indicators used by the Riksbank include data on wages and unit labour costs, shortage figures (bottlenecks) at industry level, wage drift and unemployment relative to unfilled job vacancies. Another factor of importance for monetary policy is the equilibrium level of unemployment, that is, the level of unemployment that is compatible with stable inflation. Attempts to push unemployment down below the equilibrium level with the aid of monetary stimuli are liable to just boost inflation. Maintaining an expansionary monetary stance cannot therefore generate permanently higher employment.

This calls for an adjustment of demand to the economy’s productive capacity. It is important that structural measures which primarily improve the workings of the economy are implemented in good time. The good consumption trend can then be met by rising output and high growth can be maintained without this necessarily leading to unduly high inflation. As I have already made clear on several occasions, I consider that tax cuts, in tune with the established guidelines for budget policy, are motivated. The tax-to-GDP ratio has risen in recent years as a consequence of the growth of private consumption and rising wage bills; today the ratio is above 50%. The Swedish economy would probably function better with lower taxes. The reforms that are needed in the tax system – as well as those I consider should occur in the labour market – can be arranged, however, in such a way that they promote the aims of stabilisation policy. Tax cuts in Sweden are probably needed that confer long-term benefits on both the supply and the demand side of the economy; a long-term tax reform with those ambitions would be desirable. In the present situation, however, with growth seemingly reaching around 3.5% this year and 3% in 2000, tax cuts and labour market reforms that primarily favour the supply side would increase the opportunities for good growth without contributing to increased inflationary pressure. That would lessen the risk of overheating and facilitate the interaction of fiscal and monetary policies.
They cut back spending 16  more sharply as incomes and house prices fall, amplifying any downturn ; 17  Distressed sales of homes drive house prices down ; 18  Reliance on foreign capital inflows can expose the economy to global risks ; 19  And credit booms overseas can translate to crises at home . All of this economic analysis would still not have told us what would happen in 2007. It would not have allowed us to predict the roll of the economic dice. But it would have revealed that a bad roll would have very serious consequences. The financial system could have been stress tested against that. Its resilience could have been reinforced. It could have been prepared. What became a disaster could have been contained to a downturn. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Now, with my second principle ringing in our ears, the toughness of our stress scenarios reacts not to whether a downturn is likely to unfold but to how deep it could be if it did. So when all appears bright – as real estate prices rise, credit flows, foreign capital inflows increase, and the last thing on people’s minds is a downturn – our stress scenarios get tougher. And my first call to arms for academia this evening is for further research into indicators that can help to guide us in asking how bad it could be.

That was not just deeply regrettable for the institutions concerned, but also it damaged a proud and long tradition of sound banking in Scotland. It pained me, in my role as the person responsible for resolving a number of these problems, to see the lack of regard for the basics of a well run bank, the foundations which must be there to be sound and successful. I have spent the last seven years also responsible for the Bank of England’s banking operations, and I know from this experience that unless you really understand your balance sheet and its risks, the systems and control environment that supports the balance sheet, and you have the basics needed well covered – the reconciliations work, the right management information available promptly – you aren’t doing your job. It isn’t sexy or headline grabbing, but it is surely what the good Scottish bankers of the past taught us to do, and what I hope is back with the current generation. The financial crisis has moved on since those earlier days. Over the last twelve months, concerns with both sovereign states and their banking systems have intensified in other parts of Europe. Recently, the IMF and European authorities have moved to put in place a substantial package of support for Ireland.
3.3  Other economic policies  The fact that I have referred first to the role played, in combating the crisis, by macroprudential and microprudential policies and monetary policy – instruments that, moreover, fall within the remit of the institution I lead – does not in any way imply that fiscal policy is not playing an important role. On the contrary, it seems to me that, from the standpoint of economic policy, budgetary policy is our main means of defence against the consequences of COVID-19. And this instrument has been deployed decisively since the outbreak of the crisis in Spain and in other countries. First, steps have been taken to increase the budgetary resources assigned to health in response to the pandemic. Second, since the start of the period of induced hibernation of the economy, various actions have been taken to make up for the loss of employment income and corporate revenues. Notable, in particular, are the temporary employment adjustment programmes and the public guarantee schemes for credit institutions’ lending to businesses, which I have already referred to. As you well know, the aim of these actions is to facilitate the preservation of employment relationships when the measures restricting activity and personal mobility are lifted, and to support the viability of non-financial corporations which, despite being solvent, have seen their liquidity position deteriorate as a consequence of the crisis.

In a context of persistent recession, this strategy would have important benefits, in the form of an increase in the economy’s potential growth, generated by the reforms, and an improvement in the credibility of the sustainability of public finances in the medium term, which would in turn expand the fiscal headroom available and boost the expansionary effects of the current fiscal actions. In short, to have the fiscal space necessary to be able to expand the support measures for the economy should the course of the pandemic make this necessary, the reform agenda needs to be implemented decisively, fiscal consolidation  5  See R. Blanco, S. Mayordomo, A. Menéndez and M. Mulino (2020), Spanish non-financial corporations liquidity needs and solvency after the COVID-19 shock, Occasional Paper No 2020, Banco de España. 17  needs to be planned and support instruments need to be reformed to make them more flexible and focused. In the case of structural reforms, the Annual Report, which I am presenting to you today is a veritable catalogue of the main challenges that, in the opinion of the Banco de España, the Spanish economy faces in order to raise aggregate well-being. These challenges are wide-ranging in type and require the following issues to be addressed: low productivity growth, labour market duality, high unemployment, population ageing, inequality, climate change action, changes in the globalisation model and the speed of digitalisation of the economy.
Hence, as an important step, the approval of the Cabinet of Ministers was obtained in principle to introduce comprehensive amendments to the MLA, particularly in the areas of strengthening Central Bank independence and facilitating the adoption of FIT as the monetary policy framework, in addition to other amendments to improve governance of the Central Bank, strengthen financial sector oversight and also to boost fiscal-monetary coordination. Accordingly, the Central Bank, 14  assisted by legal experts from the International Monetary Fund (IMF), is in the final stages of drafting the revisions to the MLA, which will address long standing concerns, such as the focus on non-core and quasi-fiscal activities, monetary financing as well as limits to Central Bank autonomy by way of clearly demarcating the powers and functions related to monetary policy. In addition, the remit of price stability will be elevated to the status of the prime objective of the Central Bank. The revised legislation will also facilitate institutional arrangements for setting inflation targets and improvements to monetary operations, as well as macroprudential tools. These legislative amendments would not only improve the overall focus of the mandate but would also boost the credibility of the Central Bank through an enhanced governance framework and autonomy as well as greater accountability and transparency of the Central Bank. We expect to submit the amended MLA to the Cabinet of Ministers and the Parliament for approval this year.

On making this announcement, it is crucial that I explain again the role which staff macroeconomic projections play in the ECB’s monetary policy strategy. The ECB’s primary objective is the maintenance of price stability in the euro area. Given the lags in the transmission of monetary policy to the price level, monetary policy must be forward-looking. Therefore, all analysis undertaken at the ECB is focused on the risks to future price stability. The analysis underlying monetary policy decisions is organised within two frameworks, which we refer to as the two pillars. The Governing Council’s forward-looking assessment of the economic situation and the outlook for price stability is based on both a prominent role for money, denoted as the first pillar, and a broadly based assessment of other economic and financial indicators, labelled the second pillar. The projections that will be published by the ECB as from December are, as with any conventional macroeconomic forecast or projection, derived from analytical frameworks in which money plays only a limited role, if any. Hence such projections, which mostly reflect developments in variables other than money, naturally form part of the second pillar of the ECB’s strategy. The projections help to underpin the forward-looking orientation of monetary policy. They summarise and synthesise a large quantity of information that might otherwise be too unwieldy to form a sensible basis for policy discussions.
15  Chart 6: MPC has managed the trade-off  16  3.0 November 2016  Inflation (%)  February 2017 2.5  August 2016 May 2017 August 2017 -1.5  -1.0 August 2016, no stimulus  November 2017 February 2018  -0.5  Excess demand (%)  May 2018  2.0 0.0  0.5  1.0  1.5  Preferred trade-off if λ=0.1  1.5  Preferred trade-off if λ=1 1.0  Since then, the Committee has managed policy to diminish steadily the trade-off, increasing employment, using up the expected degree of spare capacity in the economy, and reducing the expected overshoot of the inflation target. Throughout this period, inflation expectations have remained well anchored,  17  the volatility of interest rates  very low, and financial conditions highly supportive. Over the course of 2017, the steady absorption of slack and the prospect of moving into excess demand by Year 3 – evident in the dots showing the successive Inflation Report projections in Chart 6 – reduced the degree to which it was appropriate to accommodate an extended period of inflation above the target. As a consequence, the MPC began to remove some of the stimulus policy had been providing raising Bank Rate to ½ percent last November (the pink dot in Chart 7). 15  Calculations at the time suggested that returning inflation to target at a conventional horizon could have cost ¼ million jobs and widened the output gap to 1½%.

This is particularly important during large structural or regime shifts when uncertainty is high. In the wake of financial crises or advance of wholesale changes to trading relationships, people’s expectations for monetary policy can understandably diverge from its most likely path to the detriment of the economy’s performance. Guidance is most useful at such turning points. The views of economists and financial market participants are, of course, central to the transmission mechanism from Bank Rate, set by the MPC, to the various interest rates facing households and businesses and to asset prices more generally. Guidance can reinforce the transmission mechanism by reducing unnecessary uncertainty – not eliminating 3  all uncertainty. It is not the same as guaranteeing the future stance of monetary policy. Indeed, market participants can be expected to pay the closest attention to any explicit conditionalities around guidance and should usually be the first to update their expectations of policy as the outlook for the economy changes. Finally, guidance should be seen in the context of a series of MPC initiatives to increase transparency. In recent years, the MPC has made major structural changes to our communications ranging from publishing statements each time we meet to the simultaneous release of Minutes, Inflation Reports and Monetary Policy Summaries on Super Thursdays to the provision of the detailed assumptions underlying our projections. And last year, we introduced layered communications, with simpler, more accessible language and graphics to reach the broadest possible audience.
It also raises questions about the operation of anti-money laundering and other regulation to prevent illicit finance. An alternative to allowing tokenised deposits to circulate freely and be directly transferable would be to require transactions on new forms of ledger, for example transactions in smart contracts involving tokenised deposits, to be settled ultimately by the adjustment of bank ledgers as happens now. In other words a transfer of tokenised deposits on one set of ledgers would trigger the adjustment of individuals’ bank account balances and be settled by a transaction between the banks involved. In that case, deposit money issued by a bank could only ever be held in an account at that bank. It is important that as we develop the regime for payment stablecoins, we also develop the approach for tokenised bank deposits. This will allow, banks and non-banks alike, that want to develop payment solutions using new technologies to understand clearly what is possible and what is required in the respective regulatory regimes. The PRA intends to set out its approach in this area alongside the Bank’s consultation on the payment stablecoin regime. It is of course possible that commercial banks might wish to offer payment stablecoins as opposed to tokenised bank deposits. In such cases, I think we will need to be very alive to the risks of confusion on the part of customers as to protections they are entitled to and confusion of business models within the bank itself.

We are currently considering which of these options is most appropriate. In doing so, we will need to take two important considerations into account. The first is that, unlike commercial bank money which is protected by deposit insurance up to £ it will not be possible – initially at any rate – to give stablecoin holders industry funded protection against failure of the coin. This reinforces the need to ensure that the backing assets are at all times of sufficient value to meet redemption requests. And it also highlights the potential role of capital requirements. The second consideration is that the underlying objective of the legislation and the ensuing regulation is to open further the frontier for safe and sustainable innovation and competition in payments. Stablecoin business models should in general reflect this and be grounded in improved payments efficiency and functionality rather than in maturity transformation. There are other important questions to be resolved, such as whether there should be limits, initially at any rate, on stablecoins used for payments. While, from a public policy perspective, we want competition and innovation in payments we need to guard against rapid, disruptive change that does not allow the financial system time to adjust and could therefore threaten financial stability. The risks to financial stability from the development of digital money issued outside the banking system has been the subject of extensive analysis. The Bank of England’s assessment is that over time, the financial stability risks should be manageable including risks from the impact on the banking system[15].
Christian Noyer: Challenges ahead - the accession process Speech by Mr Christian Noyer, Vice-President of the European Central Bank, at the Foreign and Commonwealth Office, London, 12 November 2001. *  *  *  Ladies and gentlemen, It is a great pleasure for me to be able to be here today at the Foreign and Commonwealth Office to share with you some thoughts on the process of EU accession and the challenges that this process poses for the accession countries. While recognising that this process raises challenges for the EU itself, I will not elaborate on those in my speech today. Undoubtedly, the enlargement of the European Union to embrace a number of countries from central, eastern and southern Europe and the Mediterranean constitutes, after the changeover to the euro banknotes and coins, one of the main challenges currently faced by European policy-makers. However, I would be giving a somewhat misleading impression if I devoted my speech today solely to the “challenges ahead” without first mentioning the very foundations of the European structure. The latter form the basis for our capacity to actually meet those challenges. EU enlargement rests on the proven success of European integration. The European Union constitutes an unprecedented framework for the successful development of regional co-operation.

The exchange rate is generally a more potent transmission channel of monetary policy decisions than domestic interest rates, and it also plays a crucial role in explaining the pass-through to price developments in most accession countries. Thus, in order to achieve further disinflation and sustainable growth, excessive exchange rate fluctuations need to be avoided. In our view, and this view is supported by our previous experiences with the EMS/ERM framework, ERM II provides a useful mechanism to anchor exchange rate expectations. At the same time, ERM II, with its adjustable central rate and its current fluctuation band of ±15%, provides accession countries with the same degree of flexibility as the EMS/ERM following the decision to widen the fluctuation band in 1993. This may be suitable for accession countries. Given that accession countries still need to complete the process of restructuring their economies and catching up in terms of real income, the flexibility inherent in ERM II and its wider fluctuation bands provides accession countries with sufficient scope to accommodate these reforms. Bearing in mind that ERM II constitutes a multilateral arrangement, and that it is consistent with the regional integration process in which all accession countries are deeply involved, ERM II is likely to have fewer potential weaknesses than other alternative exchange rate arrangements have shown over recent years. Of course, as for any exchange rate arrangement, coherence between macroeconomic policies must be ensured for successful participation in ERM II.
But it is no stranger that we should revise our view of the future development of the repo rate than that we should revise our view of growth, employment or inflation when new information is received that changes the outlook. Nor is it stranger for the central bank to revise its forecasts than for other analysts to do so. What is important is that we can motivate why we are revising our views and that we can do so in an understandable manner. This is linked to the fact that it is difficult to make forecasts, not merely for interest rates, but also for other macro economic variables. The fact that it is difficult to make forecasts for the interest rate is illustrated clearly in the development of, for instance, forward rates over time. The figure (figure 1) shows implied forward rate curves calculated on the basis of bank papers from the middle of each quarter. Expectations of the development of the repo rate have varied substantially over time when measured in this way. During the years the interest rate has gradually been cut, expectations according to implied forward rates have substantially overestimated the level of the repo rate. After we began to raise the interest rate one and a half years ago, there has rather been a tendency for the repo rate path to be slightly underestimated. It can thus be noted that market agents have had difficulty in forecasting interest rate developments.

To ensure the soundness and stability of the Islamic financial system the regulatory and supervisory framework has also been improved for the Islamic financial institutions, with the incorporation of stronger standards for corporate governance, transparency, disclosure, accountability, market discipline, risk management and customer protection. In addition, the payment system has also been continually upgraded to ensure efficient and effective clearing and settlement of payments. It is now highly automated with the ability to handle scriptless debt securities trading, processing and settlement. By providing a real time settlement system for inter-bank fund transfers, the credit and settlement risk in the Islamic financial system has been minimised. Attention has also been given to human talent management to create a sufficient pool of competent bankers essential to spearhead innovation in Islamic financial products and services. To meet the increasing manpower requirements, institutions of higher learning and the Islamic banking and finance institutes have also initiated new programmes on Islamic finance. Leading initiatives in the global integration Islamic finance in Malaysia has now taken on a new dimension to become more internationally integrated. This is part of the strategy to evolve Malaysia as an integrated international Islamic financial hub that will have a greater role in facilitating international economic and financial flows. 2/5  The liberalisation of the Islamic financial system in Malaysia commenced in 2004 with the issuance of three new Islamic bank licences to foreign Islamic financial institutions.