samchain/econo-pairs-v1 huggingface dataset:
To avoid ending up in a such a dilemma in future, we can decide to take into account inflation developments after the target horizon. From what I have said until now, it is evident that our monetary policy decisions are normally based on the main rule that says that we should aim at keeping CPI inflation at two per cent 1-2 years in the future. However, on every occasion when decisions are made, we must consider how to relate to the guidance provided by this simple decision-making rule. This assessment is based on the extent to which the main rule leads to unacceptable macroeconomic costs in the form of fluctuations in employment and output. However, departures from the rule must not damage credibility in the inflation target or lead to inflation expectations being affected. As we have gained experience and increased our knowledge, we have clarified how we intend to apply our decision-making rule. We will in all probability, continue to obtain new insights and be confronted by unexpected events. This means that we must continuously evaluate and review our strategies. Independence requires openness A very important part of our strategy, which I have not taken up before, is openness and transparency as to how monetary policy is conducted. This part can hardly be reconsidered. The Riksbank’s independence creates good conditions for achieving and maintaining credibility for the price stability target.

In order to counteract, for instance, that certain changes in charges lead to CPI exceeding the target, we would be obliged to carry out a monetary policy that would either lead to the use of resources in the economy being too low or too high. Provided that inflationary expectations are not affected, we can, to avoid unnecessary fluctuations in output, therefore decide in certain cases to conduct a monetary policy that leads to the CPI target not being achieved in a 1-2 year time perspective. For instance, we have normally decided to disregard certain factors that affect CPI by focusing monetary policy on UND1X - a price measure that disregards housing costs and indirect taxes and fees. Concern for macroeconomic stability can in certain cases also justify our extending or shortening the time horizon. It is, for instance, conceivable that it may be justified to extend the target horizon if we make the assessment that there is a risk of a substantial increase in inflation immediately after the normal horizon. If, in such a situation, we wait to increase the interest rate and thus comply with the main rule, we could subsequently end up in a situation where we were forced to increase the interest rate very sharply to avoid inflation expectations accelerating and persisting when inflation rises  BIS Review 98/2000  4  rapidly. However, a large interest rate increase would have negative effects for output and employment in the short term.
This means that any reforms to the MA will be a key determinant of success against all three of the government’s objectives for the Solvency II Review. My colleague Charlotte Gerken discussed in April how we use the MA as part of our supervisory approach, and I won’t rehearse the points that she made today4. As a regulator, we have long believed in the core concept behind the MA. We firmly supported its inclusion in Solvency II, and we brought in a similar mechanism in our previous Individual Capital Adequacy Standards (‘ICAS’) regime. There has been a lot of feedback about broadening of the asset eligibility criteria for the MA, and about simplification of the application process. We have heard this feedback, and are confident that the review can achieve improvements in these areas. If we get these changes right, the path can be smoothed for insurers to invest for the long term in a way which supports innovation and growth and is sustainable. Of course as I said earlier, unless there is adequate policyholder protection, any such changes will not meet these objectives. So through the QIS we will be gathering data around how the MA could be calculated, so that we can be sure that the reformed MA provides adequate protection given the wide range of assets annuity writers hold. Changes on eligibility and process don’t so easily lend themselves to a QIS, but they can be designed to ensure that the MA meets the government’s other objectives for the review.

To build as accurate a picture as possible of the impact of reforms, we need high-quality data. In particular we are asking firms to validate internally the data they submit to us. Other aspects of the review There are some aspects of the review which are important but which do not lend themselves to being tested quantitatively through a QIS, and I wanted to touch briefly on a few of these. To support thinking about asset eligibility criteria for the Matching Adjustment, there will be some qualitative questions about this in the QIS, alongside the main part of the exercise. The Solvency II review also presents an opportunity to simplify the regime, not just for the MA but more broadly: streamlining of the process for approving internal models and model changes, for example. And there are some simplifications that can be made by the PRA even within the existing framework: we plan to produce a consultation paper on simplifications to the Solvency II reporting process. Together, these changes will allow our supervisors to increase their focus on the big risks that matter, while reducing cost, and increasing flexibility for industry. LIBOR The building work for the Solvency II review is important, but insurance isn’t the only sector with construction work going on. And as is so often the case, the building work next door is affecting us too. Sterling Libor is ceasing at the end of this year.
Herein lies the tale of the recent long-term policy and strategy statement issued by the FOMC at the conclusion of its meetings last week. The recent pronouncements of the FOMC Many of you may have read that the FOMC did three things after its two-day meeting Tuesday and Wednesday a week ago. First, the committee issued the usual policy statement, stating that it “currently anticipates that economic conditions … are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”5 There are presently 17 participants in FOMC meetings: the 12 Federal Reserve Bank presidents and the five current governors. Ten out of the 17 people get to vote in any given year, with the governors and the Federal Reserve Bank of New York always having a vote. I voted last year, and you may recall that together with Mr. [Charles] Plosser of the Federal Reserve Bank of Philadelphia and Mr. [Narayana] Kocherlakota of the Minneapolis Fed, I resisted the notion of a need for a statement indicating that monetary accommodation be tied to a specific date, be it in mid-2013, late 2014 or any other. Instead, I feel that the key should be to calibrate monetary policy according to the state or condition of the economy.

The citizens of Texas and the Eleventh Federal Reserve District operate under the same monetary policy as do the rest of our fellow Americans. We have the same mortgage rates, pay the same rate of interest on commercial and consumer loans, and earn returns and borrow at the same interest rates as do our brethren in the rest of the country. Which raises an important question: If monetary policy is the same here as everywhere else in the United States, why does Texas outperform the rest? The answer is no doubt complicated by the fact that we are blessed with a comparatively great amount of nature’s gifts, a high concentration of military installations and other “unfair” advantages. But one cannot avoid the conclusion that one of those “unfair” advantages is that we have a Legislature, based here in Austin, that under both Democrat and Republican governors has over time crafted laws and regulations that encourage business expansion and job creation. They have conducted the fiscal affairs of the state so as to maintain confidence in the future. One might draw two lessons here: first, that Germany’s finance minister, Wolfgang Schäuble, is right when he says, “If you want more private demand, you have to take people’s angst away” by having responsible and disciplined fiscal policy;4 and second, that fiscal policy either complements monetary policy or retards its effectiveness as a propellant for job creation.
The assessments emphasised the cultural similarity of the countries in our region to the west European countries, relatively low barriers to business activity for West European companies as well as high qualifications of our employees. While comparing the abovementioned countries it has been indicated that the grade for Poland is slightly lower than for the Czech Republic as regards the infrastructure and respect for intellectual property rights. Offshoring in its broader scope constitutes a new idea of innovation in enterprise management 27 . While as a result of production relocation the company may lower its costs substantially, a much more important advantage of offshoring is that it may become an incentive to change production processes. In extreme cases this may lead to a situation where a company divests itself of all processes that have no direct connection with production or services rendered. 23  However, relocation of manufacturing to countries with lower labour costs need not to be a rule. Research by Aubert and Sillar (2005) indicated that between 1995 and 2001 in France less than a half of all relocated jobs (on the offshore basis) in manufacturing were moved to countries with low production costs. According to the authors, such results rather to a motive of enterprise restructuring, whereas the phenomenon of offshoring is limited primarily to large enterprises employing over 500 persons. See P. Aubert and P . Sillar , „Offshoring and Job Losses in French Industry”, April 2005, OECD working paper. 24  OECD, “Growth in Services.

Apart from preferential trade agreements, a factor of vital importance to the liberalisation of global flows of goods are multilateral agreements within the WTO/GATT forum. Thanks to GATT agreements, there has been a sharp reduction in customs tariff rates from ca. 40% after WWII to 6% in the early 1990s and to 4% at the turn of the century 19 . A gradual reduction of barriers to trade is a slow process; however, it brings permanent benefits to each of the interested parties, as it leads to specialisation in production, which brings notable benefits in the form of maintaining a competitive position on the global market. Proofs of growing links among economies can be found e.g. in the world trade statistics, according to which exports of goods and services have increased fivefold since 1980 20 . In 2005, the value of global exports corresponded to 29% of the global GDP, compared to 20% in 1980. This also indicates that trade develops at a much higher rate than the global domestic manufacturing. In the new EU Member States the export-to-GDP ratio has increased by 15 percentage points only over the past 10 years 21 . Changes in the growth rate have been accompanied by changes in the structure of exports, which have been significantly influenced by the foreign direct investment. Specialisation of production, as a prerequisite for competitiveness, leads companies to seek adequate locations allowing them to gain a competitive edge over rival companies.
For example, the Riksbank in Sweden reports to the Swedish Parliament’s Finance Committee on the conduct of monetary policy at least twice a year. Canada has a similar arrangement. The Bank of England must write an open letter to the Minister of the Exchequer if inflation deviates from the target by more than one percentage point. In the letter, the bank must explain why the target has not been reached and what measures will be initiated. In Norway in the summer of 2003, the Ministry of Finance asked Norges Bank to provide a more detailed account of actual price developments in relation to the monetary policy target. At that time, inflation was more than one percentage point below the target. Many central banks are required to inform the Ministry of Finance concerning their use of monetary policy instruments. The formal frameworks vary. The central banks in Australia and Canada have regular consultations with the government authorities concerning monetary policy. In Sweden, the central bank informs the authorities in advance about important monetary policy decisions. This is also the practice in New Zealand. Norges Bank has provided information to the Ministry of Finance in special meetings ever since the Bank received instrument independence in 1986. The Ministry can then also express their view. This procedure does not reduce the Executive Board’s responsibility for their decisions. In some central banks, government representatives can participate in monetary policy committee meetings, as a rule without voting rights.

Academic research is progressing on this front and, hopefully, at some point in time, workable and operational models will be developed that allow for more realistic settings where the complex interactions between the real and financial sectors of the economy are acknowledged in full and where financial variables (notably money and credit) play an active role in the monetary transmission mechanism. When this has been achieved, it will be possible to turn the two pillars of our analysis into a larger, single pillar as Vice President  BIS Review 132/2007  5  Lucas Papademos 7 has put it. Or, if you prefer another metaphor, we could join the two pillars with an arch, thus forming a solid bridge to support our monetary policy decisions. But policy is an ongoing activity. Policy-makers cannot afford the luxury of waiting for research advances to happen. Empirical evidence supporting these advances is itself frequently uncertain and provisional, open to revisions. Constantly confronted with the burdens of judgment, we are very much like sailors in Neurath’s boat. And, in this respect, I believe that the Eurosystem’s monetary policy strategy has been particularly useful in helping us navigate through the deep waters of pervasive uncertainty and to make decisions in real time. In my view, the Eurosystem’s concept has clear strengths. It permits a diversified approach to the assessment of economic developments and the outlook for price stability. It encourages cross-checking between different forms of analysis. It is a pragmatic and robust approach intended to help avoid major policy errors.
I am therefore delighted that we were able to organise this colloquium with such a set of distinguished speakers, all of which have their exceptional professional standing deeply associated with the financial crisis, either as policy-makers, crisis managers, academics or proponents of regulatory initiatives. My introductory remarks this afternoon are organised around the title of this colloquium. My aim is to review policies in the last few years and draw some policy conclusions. I will first touch upon some of the lessons for financial stability, where Lucas’s contribution was especially important, as responsible for the financial stability function, and then turn to the experience with monetary policy. Lessons for financial stability The financial crisis erupted in August 2007, when off-balance sheet vehicles that had been set up by banks to manage portfolios of complex structured credit securities ran into funding liquidity problems. Although initially a liquidity squeeze, concerns about counterparty credit risks quickly spread as uncertainties intensified about the nature and extent of exposures of banks to what we now call “toxic assets”. And, as we know, these escalating tensions culminated in the bankruptcy of Lehman Brothers in September 2008, an event which triggered an unprecedented surge of volatility across mature-economy financial markets and a broad-based decline of asset prices. With this, an adverse feedback between the condition of the financial system and real economic performance was unleashed, contributing to a sharp economic slowdown across the developed economies.

Let me now turn to seven more awkward questions for us. First, how do we square the principle of proportionality with the steeper slope of regulatory requirements this inevitably causes for growing firms? This arises in many ways, where we take a softer approach for smaller firms but this has to be withdrawn as they grow. One example is the steps in our Systemic Risk Buffer regime, which we’ve debated with Sir John in the past – it’s true these could be smoothed to some extent by greater granularity and/or an ‘income tax’ approach, but the basic problem of gradient remains. This issue also arises on the resolution side, which is of course outside the scope of the competition objective – it must be right that we exempt small firms from bail-in debt, but this inevitably leads to a moment when successful firms stop being small and need to start issuing. Second, and related to the first, although we have in my view been pretty successful in encouraging new entrants, it is so far notable that no small bank has successfully become a large bank. Perhaps this will change through time, and it may have much more to do with behavioural stickiness of current accounts than regulation, but it would be complacent to be relaxed about it. As an aside, there may be lessons to be learned here from the general insurance market: it is notable that some of today’s largest GI firms started as small challengers within the last 20-30 years.
Svein Gjedrem: The macroprudential approach to financial stability Keynote address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the conference entitled “Monetary Policy and Financial Stability”, hosted by the Oesterreichische Nationalbank (Austrian National Bank), Vienna, 12 May 2005. Please note that the text below may differ slightly from the actual presentation. The  Charts in pdf-format can be found on the Norges Bank’s website. *  *  *  Introduction First of all I would like to thank the organisers for inviting me to this conference. It’s a great pleasure to be given the opportunity to share with you some views on financial stability issues. Financial stability has become an increasingly important objective in economic policymaking during recent decades. In the 1980s, direct regulation of credit markets and capital flows was dismantled in many countries. This has prepared the ground for an expansion of the financial system at a faster pace than other parts of the economy. In this process, the financial system has gone through important structural changes and become more complex. The instruments have become more intricate, the activities more diversified and the risks more mobile. As a result of increasing cross-industry and cross-border integration, financial systems have also become more interwoven, both nationally and internationally. In parallel with the strong growth of the financial system, we have seen more frequent instances of widespread financial distress. The resulting macroeconomic costs have often been sizeable.

Mr. Bernanke’s quote recognises the channel between the stock-market boom and incipient inflationary pressures.7 Mr. Issing focuses attention on financial imbalances on the grounds that strains in the financial system may conflict with price stability in the long run.8 Mr. Heikensten calls attention to the possible repercussions of financial imbalances on the real economy in a situation where the household debt burden is high and interest rates are increasing rapidly.9 Seen from an institutional perspective, flexible inflation targeting is becoming an increasingly common monetary policy regime. With a target horizon that is forward-looking and sufficiently flexible, it is possible to take into account the impact of potential financial imbalances on future inflation and output. However, it is important to keep in mind that the unwinding of financial imbalances may lay many years ahead, well outside the horizon for the inflation target. Some situations may require a careful weighting of the probabilities and costs of not reaching the inflation target within a medium-term horizon against possible economic turbulence further ahead. In the worst case, this turbulence may result in the actuation of a financial crisis. Another interpretation of the role of monetary policy is that it demands that financial instability is taken into account beyond its impact on inflation and output. For instance, structural costs may arise as a result of incorrect decisions by economic agents, based on incorrect information in the period characterised by financial imbalances.
My understanding of the present debates leads me to the following four pragmatic suggestions that I hope can stimulate your discussions: 1. Remain very clear about your objectives – uncertain times are not the right ones to create additional doubts about, say, your inflation target – and about your capacity and determination to use your tools in a predicable sequence. 2. But, whilst being consistent with your guidance, be very flexible in the precise calendar and calibration of your implementation. In short, be as predictable as possible, but never be precommitted. 3. Act to prevent the worst outcomes occurring but without supplying complete insurance, which would create moral hazard. 4. Never base policy on only one expected path for the economy. In conclusion, we cannot seek to control, or avoid, uncertainty; instead we must implement strategies that are the most robust to it. The French philosopher Edgar Morin put it nicely: “La connaissance progresse en intégrant l’incertitude, non en l’exorcisant” – “knowledge advances by integrating uncertainty, not by exorcising it”. With that in mind, let me wish you all a very productive symposium with lively and enlightening exchanges of views. Christine, the floor is yours. 3/3  BIS central bankers' speeches

Dimitar Radev: Accession to the euro area - a catalyst for social and economic prosperity Summary of a statement by Mr Dimitar Radev, Governor of the Bulgarian National Bank, at the Annual Government Meets the Business conference, Sofia, 29 January 2019. * * * During the Annual Government Meets the Business conference dedicated to Bulgaria’s path to the eurozone, the Bulgarian National Bank’s Governor, Mr. Dimitar Radev, outlined the activities of the central bank in this process and the anticipated effects for the economy and the business from the national currency’s entry into the Exchange Rate Mechanism (ERM II) and the adoption of the euro in Bulgaria. Provisionally, the work will be conducted in two stages: a short- and long-term. The short-term stage is linked to the preparation for simultaneous accession to the Banking Union and lev’s entry into ERM II. The second stage is Bulgaria joining the euro area. Mr. Radev underlined that the BNB is currently focused on the first stage, the outcomes of which will determine the next steps to follow. In terms of content, the first stage consists in joining the Single Supervisory Mechanism and the Single Resolution Mechanism. As regards the Single Supervisory Mechanism, the BNB is concentrated on three work blocks. The first one is creating the necessary regulatory framework. Overall, work in this direction was completed with the adoption of the necessary package of legislative amendments by the National Assembly at the end of last year.