samchain/econo-pairs-v1 huggingface dataset:
10 We used to think that the output gap, as a proxy for marginal cost, is what affects inflation, but the Chilean experience was more of a large swing in the growth of domestic demand rather than output. However, the connection from domestic demand to inflation is less clear than that of the output gap. Finally, the degree of openness and competition in the Chilean economy may increase the sensitivity of prices to demand conditions. More work would have to be done to fully understand the dynamics of inflation, but still the inflation targeting framework has been very useful to conduct monetary policy and to stabilize inflationary expectations. 6. Concluding remarks  Although more often than not, central banks have an explicit financial stability objective, for many years, and within a context of strong GDP growth and sound balance sheets of banks and firms, this was a second-class issue. Now things have changed dramatically. As of last year, financial stability became the protagonist in monetary policy management in developed countries. 11 Central banks need to oversee price stability and financial stability. To pursue two objectives, one instrument, namely the interest rate, is not enough. Indeed, a well functioning financial system strengthens the transmission mechanism of monetary policy. There may be exceptional occasions in which both objectives may collide, for example when monetary policy requires an increase in the interest rate, while financial stability calls for a reduction. Another example could be a bubble in the exchange rate with high inflation.

Here we can see that while sovereign debts have increased considerably in the United States and the euro area in recent years, Sweden’s sovereign debt has decreased more or less continuously over the last 15 years. 4  BIS central bankers’ speeches  This indicates that the economic-policy framework in Sweden has worked well. The framework reflects the lessons we have learned from our own problems in the past, not least during the 1970 and 1980s, and we should build on this. The framework largely addresses three areas: fiscal policy, wage formation and monetary policy. The first area, fiscal policy, had to be changed following the crisis of the 1990s as the problems with Sweden’s public finances became acute. At the same time as austerity packages were implemented, great importance was attached to not ending up in the same situation again. The introduction of surplus targets, expenditure ceilings and the stipulation that municipalities should have balanced budgets also contributed to increased stability in public finances. A number of important reforms were also implemented that significantly improved the budget process. Figure 14 clearly shows the positive effects of all this on the budget. The second area is wage formation, which has also improved considerably since the mid1990s. The Industrial Agreement and the setting up of the National Mediation Office are two important factors behind this improvement. Nominal wage increases have been significantly lower over the last 15 years than in the 1980s.
And it applies to small and large banks alike, though for large banks there is not only the question of ensuring access in domestic systems but also ensuring that payment services that are provided on a cross-border basis or require access to financial market infrastructure in other jurisdictions can be maintained. The Bank is considering how best to address these issues both domestically and, alongside Canada and other countries, at an international level. Looking forward, there are three issues around the core payments systems that the Bank is beginning to look at. One relating to risk, specifically cyber risk; one about infrastructure provision, in terms of reviewing the operating hours of the UK’s RTGS system; and one in the field of regulation, which is focused on the changing regulatory landscape for payments in the United Kingdom. Although cyber risks have long existed, over the past year or so in UK circles they have rapidly become a central issue, so much so that, in June the Bank’s Financial Policy Committee made a formal recommendation to put in place a new program of work on cyber security for key UK financial infrastructure1. The Bank of England has set each scheme a specific priority regarding cyber risk and we and the payment schemes need to deepen our resilience to cyber risks. The prompt for this change is probably obvious: the evidence shows that cyber attacks on the financial sector have increased markedly in frequency and sophistication over the past two years or so.

Indeed, after the Global Financial Crisis, the US suffered its worst recession since the Great Depression of the 1930s. In a desperate bid to stave off the recession, the US literally moved mountains, including introducing the unprecedented QE policy and splashing out $ trillion between 2008 and 2010 to cut taxes and implement other fiscal policy measures to prop up the economy. However, as we can see from Chart 1, the current recovery has been the weakest of all the economic cycles in the past 55 years. The average growth rate is just 2.2%, half the average rate of 4.6% in the previous recovery cycles. (Chart 1) 5. As for employment, the US has lost a total of 8.7 million jobs during the financial crisis and recession, with the unemployment rate peaking at 10%. Although employment bottomed out in 2010, and some 13 million jobs have been created since then, this only represents 4.3 million more jobs compared with the peak eight years ago in early 2008, and way behind the 8.8 million people who have been added to the labour force over the same period. In other words, while the US unemployment rate has declined to 5% recently, it does not mean the labour market has fully recovered. One of the main reasons for the faster-thanexpected drop in the unemployment rate is the dwindling labour force participation rate, from an average of 66% in 2007 to the current 62.4%, the lowest since 1977.
For central banks or prudential authorities, three questions arise: that of financing –and interaction with monetary policy–, that of information – and of disclosure–, and lastly that of time horizons –and stress tests–. 1. The question of financing: what interaction with monetary policy? Climate change is likely to affect the price of goods and services. It has a direct impact on food prices. But it will also more generally affect growth and the allocation of resources. Against this backdrop, central banks should remain vigilant about, and possibly monitor the economic consequences of climate change. And monetary policy will have to play its role of contributing to a smoother rebalancing of price structures, in line with its price stability mandate. Article 2 of the European System of Central Banks statute states: “Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community, with a view to contributing to the achievement of the objectives of the Community [economic activities, sustainable and non-inflationary growth respecting the environment…the raising of the standard of living and quality of life]. Some would like to go a step further, using the quantitative easing tool to help finance the energy transition, purchasing “green” assets, granting favourable treatment to green assets that are eligible as collateral, or setting up dedicated long-term facilities; the list of possibilities is long. However, we must bear in mind the ultimate aim of monetary policy. It is designed to achieve macroeconomic objectives, not sector-specific goals.

This is precisely one of the objectives of the Institute of Bankers, and with its newly launched Representative Office in Beijing, the Institute will extend its existing good work to the Mainland. It will help promote the training of bank employees on the Mainland, thereby contributing to the effective financial intermediation and smooth functioning of this crucial part of modern economy. The economies of the Mainland and Hong Kong are now highly interdependent. The Institute’s Beijing Representative Office will not only serve to enhance professionalism of the Mainland’s banking sector as a whole, but also contribute to the financial stability and development of both the Mainland and Hong Kong. Let me end this address by wishing the Institute’s Beijing Representative Office every success in its future endeavours. BIS Review 45/2005  1
Overall wage growth may then be lower than projected and provide the basis for an easing of monetary policy. The global economy appears to be vulnerable to new disturbances. Since summer 2002, international financial market developments have been marked by increased optimism concerning the growth outlook. Equity prices and long-term interest rates have risen. The increase has been uneven, however, and there have been wide fluctuations between major currencies. This may be a reflection of the uncertainty about the strength of the global economic recovery. Developments in the krone exchange rate represent a source of considerable uncertainty. The relationship between the krone exchange rate and the interest rate differential against other countries  6  BIS Review 50/2003  is not necessarily stable over time. Themes in international financial markets shift. We may not yet have seen the full effects of the interest rate reductions on the krone exchange rate. Even though Norges Bank is forward-looking in its conduct of monetary policy, thorough knowledge of the current economic situation is extremely important. An up-to-date and correct picture of the current situation is necessary to make accurate projections for the period ahead. In autumn 2002, Norges Bank established a regional network as a tool to gauge the level of activity in the Norwegian economy. Official statistics and evaluations of developments in financial markets will continue to be the main basis for our assessments, but due to the time lag and revisions of such statistics, supplementary information is useful.

Apart from the EU countries participating in ERM II, a number of countries – mainly in Central and Eastern Europe and in Africa – have unilaterally decided to peg their currencies either to the euro or to one of its legacy currencies. Other countries are pursuing managed-float policies, with the euro as the main reference currency, whereas another group of countries is pegging their currencies to baskets of currencies, such as the Special Drawing Rights containing the euro. Against this background, the use of the euro is likely to increase both as an intervention currency and as a reserve currency. As a matter of fact, just like private international investors, central banks may find it convenient to diversify their portfolios to incorporate a currency offering broader investment opportunities than its legacy currencies. Apart from the existence of a large, liquid and integrated capital market, another major prerequisite for the substantial use of a currency by foreign investors is confidence in the long-run stability of its purchasing power. In this regard, internal price stability should provide a sound basis for the development of the euro’s external value in the medium term. By maintaining price stability, the Eurosystem is contributing to the emergence of a solid and stable currency over the medium term, thereby fostering the euro’s international role. Conclusions Coming to the end of my speech, let me quote Mark Twain by saying that predictions should be avoided, particularly those about the future.
6  BIS central bankers’ speeches  Accordingly, we based the projections on a stronger domestic demand outlook for the first half of 2013 compared to the previous reporting period. On the other hand, external demand remains subdued. This period did not see a notable change in global growth projections; hence there was no significant revision in exportweighted global growth index (Chart 19). Accordingly, our forecasts are based on an outlook that entails a mild increase in exports driven by market and product diversification as in the previous report. Chart 19. Export-Weighted Global Economic Activity Index* (2008Q2=100)  * For methodology, see Inflation Report 2010–II, Box 2.1 “Foreign Demand Index for Turkey”. Source: Bloomberg, Consensus Forecasts, CBRT. In short, in line with the developments in domestic and external demand, the contribution of aggregate demand conditions to disinflation is envisaged to be larger in the second quarter of 2012; but smaller at the start of 2013 compared to the previous report. Overall, given the lagged effects on inflation, I would like to state that the revision in the output gap did not bring about a noticeable effect on the end-2013 inflation forecast. As you all know, food, energy and import prices also play a great role in inflation forecasts. Therefore, before moving on to forecasts, I will briefly talk about our assumptions regarding these variables. The outlook for import prices did not exhibit a notable change in the interreporting period (Chart 20).

Comparison of October 2012 and January 2013 Inflation Report Forecasts Inflation Forecasts  Source: TurkStat, CBRT. Output Gap Forecasts  Source: CBRT. The same slide presents the revision in the output gap forecasts. We revised the output gap upwards for the first quarter of 2013 due to recent acceleration in capital inflows and credit growth. However, we assumed that the policy measures would drive the output gap and credit path closer to the October forecast in the second half of the year. BIS central bankers’ speeches  9  We can summarize the main message of the forecast regarding the monetary policy as follows: a cautious monetary policy stance should be maintained to keep inflation close to the target at the end of 2013. It is important that the CBRT does not disregard excessive volatility in credit and exchange rates, for macro financial risks to be contained. It should be kept in mind that keeping credit growth at healthy and reasonable levels will support both price stability and financial stability. In fact, notwithstanding the recent faster-than-expected growth in credit, we envisaged that credit growth would hover around 15 percent. I would like to once more underline that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. Therefore, assumptions regarding the monetary policy outlook underlying our inflation forecasts should not be perceived as a commitment on behalf of the CBRT.
This theory, which Rey formulated with emerging markets in mind, could very well also be correct and relevant for more developed economies, like Sweden. My interpretation of such arguments is that monetary policy in Sweden then cannot deviate too far from monetary policy in the United States and the euro area without giving rise to an unjustified appreciation of the krona.23 Misinterpreted: Inflation is also low in countries with more expansionary monetary policy Inflation is also falling now in countries and currency areas where the central banks have conducted a more, sometimes much more, expansionary monetary policy than the Riksbank. I have sometimes heard these observations put forward as arguments proving that a more expansionary monetary policy would not have much impact. This is not a very convincing conclusion. To begin with, it is only a year or so ago that there was much international discussion as to why inflation was so surprisingly high.24 The background to this discussion was that the weak economic developments in many parts of the world did not appear to have any great effect on inflation. Despite the low demand in the economy and high unemployment, inflation remained at levels that did not appear compatible with historical patterns. 25 To some extent, one can probably say that monetary policy abroad was more successful in stabilising inflation than economic activity, at least for a period of time. Without the powerful monetary policy stimulus, inflation would probably have been much lower.

Two of them focus on improving cross-border payments by working on interoperability between CBDCs with innovative solutions, such as a liquidity management tool based on decentralised finance technology (AMM, automated market maker), which we upgraded in the first half of 2022. The third experiment aims at deepening previous ones on the use of central bank money as a safe settlement asset for tokenised securities, together with other European partners. It involves issuing and distributing tokenised bonds on a blockchain. ***  Let me conclude by recalling that in the 1980s it was decided to design and build a large glass pyramid in its courtyard of the Louvre. This disruptive architecture by I.M. Peï was first met with outrage, as critics considered it incompatible with classical style. It was nonetheless built, and has since then become a cherished symbol of the Louvre. I hope that we central bankers will find our way to make tokenisation fit in the existing architecture, while regulating it to the extent necessary. Thank you for your attention. And I would now like to hand the floor over to Ms Mairead McGuinness. Page 6 sur 5 Villeroy de Galhau, F., Central banks and finance in the face of a triple revolution, speech, 25 November 2021 Villeroy de Galhau, F., Ethics of currency: a possible guide for central bankers?, Michel Camdessus Central Banking Lecture, 14 September 2022 iii See for instance Waller, C.J., CBDC - A Solution in Search of a Problem?
Constâncio, V. (2016), “Margins and haircuts as a macroprudential tool”, remarks at the ESRB international conference on the macroprudential use of margins and haircuts, Frankfurt am Main, 6 June 2016; Constâncio, V. (2017), “The future of finance and the outlook for regulation”, remarks at the Financial Regulatory Outlook Conference, Rome 9 November 2017. Da Rin, M., G. Nicodano and A. Sembenelli (2006), “Public Policy and the Creation of Active Venture Capital Markets”, Journal of Public Economics 90:1699–1723. ECB Opinion on 20 April 2016 on a proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014 in order to establish a European Deposit Insurance Scheme (CON/2016/26). European Commission Report (2015), “Completing Europe’s economic and monetary union”, by Jean-Claude Juncker in close collaboration with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz (the Five Presidents’ Report). European Systemic Risk Board (ESRB) (2017), “Sovereign bond-backed securities”, ESRB High-Level Task Force on Safe Assets. 7/9  BIS central bankers' speeches  Fernald, J. (2015), “Productivity and Potential Output Before, During, and After the Great Recession”, NBER Macroeconomics Annual 29:1–51. Furceri, D. and A. Zdzienicka (2015),“The euro area crisis: need of a supranational fiscal risk sharing mechanism”, Open Economies Review 26(4):683–710; previously published in 2013 as IMF Working Paper 13/198. Hsu, P., X. Tian and Y. Xu, (2014), “Financial Development and Innovation: Cross-Country Evidence”, Journal of Financial Economics 112: 116–135.

Models and assessments complement one another Let me briefly describe the forecasting process at the Riksbank. 4 The Riksbank uses both models and expert assessments in its forecasting work. The picture of the forecasting process that I had before I came to the Riksbank was one where data are fed into complex models which then spit out forecasts. This is of course incorrect. The Riksbank works hard to spread the impressions we gain at the many international meetings we regularly attend. We also carry out our own company interviews to try to capture development tendencies before they become visible in the statistics. Models are necessary to put together the whole picture of the analysis and are often used to simulate what various risk scenarios might entail for inflation and monetary policy. But they do have their limitations and the analysis must also take into account information beyond what the models can handle. One model that is known outside of the Riksbank is Ramses, which is a variant of the dynamic stochastic general equilibrium models that have become popular in the central bank world. 5 Ramses is an internally consistent model of how the economy as a whole fits  3  By risk I mean here the weighing together of the probability that something will occur and the consequences of its occurrence. 4  For a more detailed description of the forecasting process, see the speech entitled “The monetary policy decision-making process” by Irma Rosenberg, June 2008.
Bank Negara Malaysia is also particularly focused on corporate governance in the light of regulatory changes that are being pursued for the insurance industry. I am referring to the transition from a rules-based system which regulates a number of aspects of insurance operations, to a more principles-based system. This process has already started with the newer guidelines that we have introduced lately, but there continue to be a number of rules applied to the insurance sector which may have outlived their purpose. We are reviewing these. A precondition for this transition is a significant emphasis on a strong system of corporate governance, and one that is actually working effectively within financial institutions. Ultimately, corporate governance reforms are about improving accountability and control, especially where interests and incentives of stakeholders are not fully aligned. We believe that in Malaysia, we have laid strong foundations for sound governance practices within financial institutions. For the insurance industry, the prudential framework on corporate governance for insurance companies and various other guidelines that have been issued by the Bank establish standards that we expect insurers to operate against to ensure the sound and prudent management of insurers. Our supervisory approach has contributed to promoting better governance in practice. And in the last four years, we have focused on providing important support to directors in performing their roles through education initiatives. Forums such as this contribute to that effort. Our continuing work on corporate governance builds on and strengthens this foundation.

There should be wider benefits from contracts based purely on the risk-free rate rather than embodying liquidity premia and credit-risk premia of various kinds. That is something for the industry. But better liquidity-insurance technology and better risk management will not abolish the credit cycle. Looking further ahead, the big question will be whether the authorities can tame the credit cycle without sacrificing the incentives to enterprise that are so important in a dynamic economy. The debate about the micro regulation of banks will need to take account of whether or not we can deliver that macroprudential objective. For too long, the debate has got sidetracked. Into whether we can rely on monetary policy “mopping up” after bubbles burst. Or into whether monetary policy could be used to control asset prices as well as doing its orthodox job of steering nominal trends in the economy, which I should say can include taking account of prospective risks of inflation volatility over the medium term. Ideas circulating already include minimum margin requirements or capital ratios that vary not only across firms but also through time as credit conditions change. We need calmly to explore whether there are also other possibilities. But let me make this absolutely clear: there are formidable obstacles to finding a solution. In the monetary sphere, a regime of floating exchange rates allows individual countries to pursue their own domestic monetary objectives.