samchain/econo-pairs-v1 huggingface dataset:
Chart 10 Survey measure of businesses’ price expectations Balance of respondents expecting higher prices, BCC Survey Manufacturing  50  Services  40 30 20 10 0 -10 -20 -30  1997  1999  2001  2003  2005  2007  2009  2011  Source: British Chamber of Commerce  7 8  12  See Sentance (2011) for example. For example, Orphanides and Williams (2005) argue that changes in the unemployment rate provide a better guide to demand pressure than the level of unemployment because of uncertainty about the equilibrium rate of unemployment. BIS central bankers’ speeches  What we can observe more clearly is how the pricing intentions of businesses and the rate of price increases they are able to secure are responding to changes in the demand climate. And this evidence does not seem to support the view that the pressure of demand is bearing down heavily on inflation at present in the UK, even when allowance is made for cost increases. Chart 10 shows a survey-based measure of pricing intentions from the surveys conducted by Chambers of Commerce around the UK. This shows that expected price increases are currently running at relatively high levels in both manufacturing and services, and that there has been a significant turnaround in the pricing climate since the trough of the recession in 2009. Another indicator which suggests that domestic demand pressures are exerting limited downward pressure on inflation at present is the rate of inflation in the services sector.

Christian Noyer: Monetary and financial research – its impact on policies and society Opening and closing speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Conference for the 20th anniversary of the Bank of France Foundation, Paris, 14 September 2015. *  *  *  Opening speech Ladies and Gentlemen, I will now switch to English, given the international audience and speakers that we are quite lucky to have today. I would first of all like to express the great pleasure I have to open this conference for the twentieth anniversary of the Banque de France Foundation for Monetary, banking and financial economic research. I welcome the prominent speakers who made us the honor of joining us today – Yann Algan from Sciences Po in Paris and Luigi Zingales from the University of Chicago Booth School of Business – and all our chairs and discussants who also are renowned economists in their respective fields. A few words about the topic of this conference now. The idea of this conference is to take a step back and some time to reflect on monetary and financial research in general, and its impact on policies and society. We will thus evoke the role of economics and economists within our society. The two provocative papers discussed today provide a very nice opportunity for such a discussion. They both point out several concerns about economic research and finance.
The MPC’s minutes also explained that the Bank would be taking forward operational work to assess the feasibility of implementing negative interest rates, should this be required in future. Commencing that operational work underlines the MPC’s commitment to having negative rates as a potential tool in the monetary policy toolbox. Some commentators have interpreted the start of this work as conveying a signal about the likelihood of the MPC introducing negative rates in the near-term. The minutes contained no such signal. The operational work necessary to assess the feasibility of negative rates is likely to take a number of months. After that work is complete, judgements on negative rates will depend on the economic outlook at the time and in particular on whether that necessitates further monetary stimulus. If that condition was satisfied, any decision on negative rates would then depend on whether the balance of costs and benefits from using this tool was positive and whether this cost/benefit balance favoured negative rates over other monetary tools. All three of these conditions would need to be satisfied before negative rates became a reality. At present, none of those conditions is in my view satisfied. Conclusions The economy faces uncertainties that are extraordinarily large and risks that are skewed to the downside. In this environment, caution is natural and understandable. It is important policymakers are vigilant to these risks and uncertainties and responsive to them with their policy actions.

They also depend upon other key players like the Ministry of Finance and they depend upon the efficient working of the financial markets. Other preconditions for Inflation Targeting can partly be met by the Bank of Albania. The full implementation of Inflation Targeting can therefore take place ONLY conditionally. One can compare this situation with the tailoring of a suit for a special occasion. Let me make this comparison. One can find a good tailor and ask him to make a suit for a special occasion. All measures can be taken, such as the length of the arms and the length of the legs. The suitable materials can be found. One needs the appropriate fabric, in the appropriate color. Upon all these preconditions of (1) the good tailor (2) the precise measures (3) suitable materials, the tailor can start the tailoring of the suit. But, there is still no guarantee that the suit will fit you perfect. Or, it may happen that you look appealing in the tailor-shop, but not at the day of the special occasion. For instance, the temperature may have fallen so that you need an additional coat, or even a different fabric. Or, the environment of the special occasion may make you look overdressed. You tried to make it perfect, but the environment is lagging behind. Factors that you could not influence yourself can make you look different from how you had wished to look with the new suit.
And we have a very international business community, reflecting the UK’s position as a major trading and commercial centre dating back to the late 17th century, when the Bank of England was founded, and the leading role that Britain played as the pre-eminent industrial power in the 18th and 19th centuries. When I joined the Committee in 2006, it struck me that most of the shocks and disturbances that the MPC had had to deal with – even in the less turbulent times of its first decade – had emanated from the global economy. The MPC came into being in 1997 just as the Asian crisis was unfolding, and the response to that period of global turbulence was a key issue dominating the first two years’ of the Committee’s life. Then followed the dotcom boom and bust centred on the US economy and the global political turbulence following the 9/11 attacks, including the effects of war in Afghanistan and Iraq. Then, as the global economy recovered in 2003/4, the emerging issue was the upward pressure on oil and commodity prices and these global inflationary forces were a major preoccupation until the middle of 2008 and have re-emerged as a serious concern as the world economy has recovered from recession. The global financial crisis from 2007 to 2009 was the most extreme of these international economic shocks affecting the UK economy.

But the longer it persists, the more likely it is that sterling prices will adjust to euro prices, creating the potential for quite long term impacts on UK inflation relative to the euro area. That is what we appear to be seeing at the moment, with the historic relationship shown in Chart 6 suggesting that UK inflation could run 1 to 2 percentage points above euro area inflation for a considerable while unless there is some noticeable appreciation in the value of the pound. The counterargument to this view is that the recent substantial depreciation of the pound against the euro and other currencies is needed to support a rebalancing of the UK economy and sustain the growth of UK manufacturing and other internationally competitive sectors of the economy. But the extent of the depreciation of sterling since 2007 has been much greater than we have seen in previous rebalancing episodes, such as the mid-1990s – which raises the question whether sterling has fallen much further than needed.5 And it is not clear  5  8  See Sentance (2011) for a comparison of the recent fall in sterling with previous episodes. BIS central bankers’ speeches  that the export-based manufacturing activities which could benefit from a large depreciation have the capability to respond quickly by scaling up output – particularly when their demand is already being boosted by a recovery in global demand.
But our present degree of knowledge means that, in the terminology of Frank Knight (1921), there is both risk, which can be quantified, and uncertainty, which cannot. The extent of past uncertainty about life expectancy can be seen in the revisions to its forecasts made over the past 20 years by the Government Actuary’s Department. Nor has the financial sector itself proved better at forecasting. Chart 5 shows successive forecasts of expected length of life for men aged 60 published by the Actuarial Profession, a body of life assurance companies and annuity providers. It shows how reductions in mortality were expected by the industry to lead to rises in length of life. For example, the pink line shows the Actuarial Profession forecast made in 1980 that a man who was 60 in that year could expect to live another 20 years. At that time, it was thought that someone who reached 60 in 1999 would live a further 21 years. But by 1999 the forecast was that a man of 60 would live another 26 years. Over a twenty year period, expected length of life was revised up by 5 years. Length of life has risen faster than the industry anticipated, as can be seen by the  5  The first estimates of mortality rates using bills of mortality from the City of London were published by John Graunt in 1662.

In his book Reckoning with Risk, Gigerenzer argued forcefully that risks should be presented not as probabilities but in terms of natural frequencies, which correspond to our experience in counting events. Although people do understand probabilities in familiar contexts, such as betting on horse races or tossing a coin, it is not easy to calculate odds when the context is unfamiliar. (b)  Explaining probabilities  How then can we best present information about risks to the public? Both the Monetary Policy Committee and the Met Office face this problem almost every day: the former in explaining the outlook for inflation and the latter in forecasting the weather. Both have independently developed similar visual representations of forecasts that avoid the use of the word “probability”. Chart 6 shows the forecast for inflation over the next three years published by the Bank of England in its latest Inflation Report on 10 November 2004. It is in the form of a ‘fan chart’. We do not say that in our view inflation will be 2%, or any other number. Such a statement is incoherent because a forecast is inherently probabilistic. So we represent the uncertainties by the coloured bands in Chart 6.14 Their interpretation is as follows. If we found ourselves in economic circumstances identical to today’s on 100 occasions, we would expect that inflation would lie within the darkest central band on only 10 of those occasions.
In the context of the banking industry, corporate governance involves the manner in which the business and the affairs of the individual banking institutions are being governed by their board of directors and senior management, how the economic returns are generated to the owners, the day-to-day running of the operations of the business and the consideration of the interests of recognised stakeholders including depositors; and how they behave in a safe and sound manner, in compliance with applicable laws and regulations. In this context, the transparency in the conduct of banking institutions, facilitated by the proper accounting standards that reflect the true and fair value of banking operations would lead to greater accountability and responsibility of the part of the bank’s management. Islam strongly advocates all forms of positive governance. These values and ethical conduct have already been in built and inherent in the Muslim community. Islamic corporate governance serves through its underlying principles of economic well-being of the Ummah, universal brotherhood, justice and equitable distribution of income. Therefore, while the virtues of Islam have always advocated corporate governance, the challenge to us lies in its application. For Islamic banking institutions, good corporate governance should have already been embedded in all aspects of their operations. The issue of corporate governance is therefore not foreign to Islamic banking. In Malaysia, the principles of corporate governance have been well documented and applied across all business entities, particularly public listed companies.

There are some very good arguments for that. II. Economy  The best argument lies in the Estonian economy. Regardless of the lingering global uncertainties, economic growth in Estonia has been strong - 5.8% in 2002. That means a growth figure approximately 4% higher than that of the euro area. It could even be said that during the last two years Estonian economy has had to face something akin to a positive external shock as the EU membership became more and more of a certainty and the risk margins correspondingly lower. And there was also a parallel negative economic shock - the continuing weakness of external markets. All that has meant certain advantages - for instance, lower interest rates and significant inflows of foreign direct investment, but there are also certain risks involved. Estonia's high economic growth of the last year and a half is mainly based on high domestic demand. High domestic demand, a continuously strong inflow of foreign investments and a lower than expected export growth have resulted in a significantly high current account deficit - an estimated 14% or more of the GDP by end-2003. Of course, it could be argued that the present external imbalance is, to a certain extent, 'an attendant phenomenon of success'. FDI inflows having been strong through the entire transition period, reinvested earnings and dividend payments have become increasingly important among the factors determining the current account balance in Estonia.
6  BIS Review 67/2009  Table 2: Monetary Policy Committee (MPC) Decisions in 2008 and 2009 MPC Meeting Dates  Decision on Interest Interest Rate Rates (Percentage points)  17 January 2008 14 February 2008 19 March 2008 17 April 2008 15 May 2008 16 June 2008 17 July 2008 14 August 2008 18 September 2008 22 October 2008 19 November 2008 18 December 2008 15 January 2009 19 February 2009 16 April 2009  -0.25 -0.25 No change No change +0.50 +0.50 +0.50 No change No change No change -0.50 -1.25 -2.00 -1.50 -0.75  15.50 15.25 15.25 15.25 15.75 16.25 16.75 16.75 16.75 16.75 16.25 15.00 13.00 11.50 9.75  Source: CBT. Benchmark bond rates came down significantly driven by the policy rate cuts and the partially easing tensions in global financial markets (Figure 10). Moreover, the signal given by the Central Bank for possible necessity of maintaining downward flexibility for a long period of time coupled with moderate recovery in risk perceptions contributed to the decline in market interest rates. Figure 10: Interest Rate Developments (Percent) 27  ISE Bills and Bonds Market Interest Rate (Benchmark, Compounded)  25 CBRT Overnight Interest Rate (Compounded) 23 21 19 17 15 13 11 9 05 07  07 07  09 07  11 07  01 08  03 08  05 08  07 08  09 08  11 08  01 09  03 09  Source: ISE, CBT.

In this scenario, commodity prices are envisaged to go below the assumptions presented in the baseline scenario; credit conditions are projected to remain tight for a while and recovery in foreign demand would be a prolonged and slower process due to the late recovery in the global economy. Meanwhile, crude oil prices are projected to drop to USD 45 per barrel and remain at this level throughout the forecast horizon. This projection is above the one presented in the January Inflation Report, as OPEC announced that it would not allow sharp falls in oil prices. Meanwhile, it is foreseen that food prices inflation would remain below the baseline scenario and therefore will become 5.5 percent by the end of 2009 and 5 percent afterwards. Against this background, assuming that measured policy rate cuts continue throughout 2009, it is projected that with 70 percent probability, inflation will be between 3.9 and 6.5 percent with a mid-point of 5.2 percent at the end of 2009, and between 2.7 and 6.3 percent with a mid-point of 4.5 percent at the end of 2010. Furthermore, inflation is expected to go down to 4.2 percent by the end of 2011. To sum up, these forecasts indicate that in the case of a longer-than-expected slowdown in global economic activity, inflation would remain below the medium-term forecasts even if the measured policy rate cuts continue throughout 2009 (Graph 28).
This will cause major oil exporters to run either smaller budget surpluses or bigger budget deficits. In the aggregate, the swing from oil producers to consumers is quite large. For example, a $ per barrel decline in global oil prices results in an income transfer of about $ billion per year from producers to consumers.2 This understates the total effect because it does not include any knock-on reductions in other energy prices – such as for natural gas – that, outside the U.S., often are linked to oil prices. Obviously, if the oil price declines were to both intensify and persist, this would have negative implications for oil and gas investment in the U.S. At a minimum, as cash flows fall, some producers will cut back on their drilling activity rather than plug the shortfall with outside financing. Nevertheless, there are several reasons why I don’t think this risk should be overstated, especially if oil prices stabilize around current levels. First, even after the large gains in recent years, oil and gas investment remains a small fraction of GDP. Second, domestic natural gas investment should be relatively unaffected because U.S. natural gas prices are largely insensitive to global energy price developments. This reflects the high costs associated with exporting natural gas and the fact that most of our oil production is used for transportation purposes. Thus, the ability to substitute lower cost natural gas for oil is limited. Third, extraction costs vary appreciably across the different major oil fields.

In addition, household net worth has recovered sharply, boosted primarily by higher financial asset valuations, but also by some recovery in home prices. Third, the fiscal restraint that has held back growth in recent years has ended, with the federal budget deficit now at a level consistent with a stable to slowly declining federal debtto-GDP ratio. In the aggregate, state and local governments have also ended their retrenchment. One important piece of evidence in this regard is the fact that state and local  1  See, for example, the latest Blue Chip consensus survey (volume 39, no. 11, November 10, 2014). The median real GDP forecast for 2015 (fourth quarter over fourth quarter) is 2.9 percent. BIS central bankers’ speeches  1  government employment is now rising at between 5,000 and 10,000 per month, after generally contracting during the 2009 to 2012 period. Now that these headwinds have subsided, buoyant financial market conditions spurred, in part, by a very accommodative monetary policy should do more to support economic activity. In particular, compared to historical patterns, the current household net worth-to-income ratio is high relative to the personal saving rate. This suggests some scope for a decline in the household saving rate. If this were to occur, consumption growth would outstrip income growth. Similarly, financial market conditions are conducive to sustained gains in business fixed investment. Equity prices are high, borrowing costs are low, cash flows are strong and corporate balance sheets are healthy.
As discussed earlier, no issue is more important than a credible commitment for getting our fiscal house in order, but at a pace that does not forestall a sustained economic recovery. What is needed here is fiscal consolidation that begins slowly, builds over time to substantial magnitude, and is difficult to dismantle – i.e., it requires the commitment of both political parties. The decision of how big the U.S. government should be and what functions it should perform is a political decision that I leave to the voters and our legislators. However, as a nation we need to acknowledge that we must be willing to pay for whatever government services and transfers we want to have. We should not assume that an excess of global savings will always be available to easily finance our public deficits. 5  To be more precise, as of the first quarter of 2011 with statistical discrepancy of 1.2 percentage points attributed to private balance, the figures are as follows: government balance –9.5 percent + 6.3 percent private sector balance equals current account balance of –3.3 percent. BIS central bankers’ speeches  5  The choice of fiscal sustainability is not a political one, it is an economic one and if we do not act voluntarily and preemptively, the market will inevitably force the outcome later – most likely in a much more difficult and messy fashion.

Over the past decade,1 excluding China, the emerging world has grown at a 4.7 percent annual rate – its fastest rate on record. The EME world is, of course, not monolithic. There are the dynamic large economies, EMEs that are broadly complementary to them, and some countries that are both less complementary and less competitive than their peers. Happily, for the most part, EME success is proving mutually reinforcing, as witnessed by growing intra-EME trade. 1  Based on the International Monetary Fund World Economic Outlook database, covering the period 2001 through 2011 (forecasted). BIS central bankers’ speeches  1  As EME output has grown rapidly, their share of the global economy has increased markedly. EMEs now account for 38 percent of global gross domestic product (GDP), up from 23 percent in 1990. And it is the EMEs, not the developed economies, that have been the engine of global growth in recent years. For example, during the 2000s, EME growth accounted for 59 percent of global growth, up from 33 percent and 25 percent, respectively, in the two preceding decades. By other measures, the EMEs have been even more important. For example, EME growth has been very commodity intensive. Thus, while China is still only two-fifths the size of the United States in GDP terms, it dwarfs the United States in terms of its demand for some key commodities. The growth momentum among the EMEs is the result of years of tough choices and sound decisionmaking across the emerging world.