samchain/econo-pairs-v1 huggingface dataset:
Indeed, in some advanced economies, central banks have  “over-achieved”, with inflation consistently undershooting their targets over the past decade. Chart 3 plots the price level in the US, euro-area and the UK over the period since 1997, when the UK commenced inflation-targeting. It also shows the price level path implied by meeting a 2% inflation target. In the US and euro-area, the price level has drifted below this path over the past decade, as inflation has undershot a 2% target. Cumulatively, these deviations have been significant, with the level of prices in the US and euro-area 6% and 10% below their 2%-consistent paths respectively. 4  See BIS Annual Economic Report 2019. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  Chart 3: Price level in US, EA and UK 5  170  Jan 1997=100  160 150 140 130 120 110 100 1997  2001  2% trend  2005  2009  US PCE price level  2013  2017  EA HICP level  2021  UK CPI price level  Sources: ONS, FRED, ECB Statistical Data Warehouse and Bank calculations. Interestingly, the UK experience has been rather different. Over the period since inflation-targeting was introduced, the UK price level has not deviated significantly or persistently from its 2% trajectory. Unlike in the US and euro-area, the MPC has neither consistently over-achieved nor under-achieved on its inflation objective. That is consistent with the UK’s inflation target being a symmetric one.

With regard to “internal” equity, that is self-financing, the outlook is improving. For SMEs in particular, self-financing is crucial as it is still the method of choice for financing investment, even when companies have access to debt. The decline in French corporate profit margins since 2008 is a source of concern in this respect. However, the issue has been clearly identified and steps have been taken to tackle it, with the Tax Credit for Competitiveness and Employment or CICE, and the Responsibility and Solidarity Pact. These reforms are expected to boost the average corporate profit share from 29.5% in 2014 to over 32% in 2017. In terms of “external” equity, of course, here at Euronext you’re at the heart of the action. As the leading pan-European stock exchange, you have a central role to play in enabling firms to access capital market financing, in the form of debt, of course, but above all in the form of equity. In this respect, I’d like to acknowledge Euronext’s efforts – under the supervision of the AMF with which the Banque de France has an excellent working relationship – to draw investors back to the bourse, and to encourage firms of all sizes and all sectors to tap capital markets. In the first three quarters of 2015, Euronext helped 38 companies carry out an initial public offering, raising a total of EUR 82.9 billion of equity and debt capital in both primary and secondary markets.
16  We also used crisis dating from Lopez-Salido and Nelson (2010) for the US. BIS Review 168/2010  15  Table 3 asks what proportion of crisis years occurred within 5 years of the peak in the credit cycle in those countries. On average, more than half of all financial crisis years across the 12 countries appear to have been preceded by a credit boom. Among Anglo-Saxon countries, such as the US, UK and Australia, closer to 75% of crisis years occurred following a credit boom. This is relatively concrete evidence of the credit cycle having real and damaging effects on output. 17, 18 4.  Credit cycle spillovers  This empirical evidence to date, operating at a macro-economic level, is consistent with the model in Section 2: a credit cycle is clearly discernible; its frequency is different and its amplitude larger than the business cycle; and its fluctuations may exacerbate the business cycle. But the model also has implications at a micro-economic level, arising from strategic complementarities, or spillover effects, across firms. In this section we consider empirical evidence on such credit spillover effects. The model implies that the cross-sectional distribution of returns to banking should be compressed during a credit boom, as banks seek to keep up with competitors by collectively boosting returns. This is a time-series phenomenon. A second implication is that the dispersion in returns may be smaller for financial than for non-financial companies to the extent that former are more susceptible to risk illusion. This is a cross-sectional phenomenon.

And I trust the Germans as well as the Italians, the French, the Spanish, the Dutch and all other fellow citizens were all aware of this aspect when they joined EMU. By the way Germany demonstrated how attached it is to the single currency when it argued in favour of the Stability and Growth Pact, which is precisely based on peer responsibility and peer pressure and is a vivid illustration of how our destinies are interconnected. Therefore, yes, I believe that Germany is fully aware of the fact that we are sharing a common destiny. Remember in the run up to the Maastricht treaty: both Helmut Schmidt and Helmut Kohl were at the forefront of European integration with their peers, following in the footsteps, in particular, of Robert Schuman and Alcide De Gasperi. Il Sole 24 Ore: Regarding Germany, the French finance minister did criticize its economic model based on exports rather than internal demand, pointing out that its partners cannot count sufficiently on German imports. Are you in agreement with Christine Lagarde? Trichet: No, and for a number of reasons. Firstly, had Germany not increase its competitiveness in the first 11 years of EMU by keeping its costs and inflation under control, the euro area as a whole would have had the threat of higher inflation and therefore a tougher monetary policy. Secondly, Germany, with a large current account surplus, is financing the current account deficit of other countries members of the euro area.
Another conclusion from the Swedish case is that international reactions are not necessarily a bad thing; they can be just what is needed to overcome a political deadlock and pave the way for necessary changes. When foreign creditors turned down Swedish banks, we were forced to take resolute measures to resolve the bank crisis. This has not yet happened in Japan, presumably in part because there is not the same dependence on foreign capital; the crisis in Japan has therefore been more protracted and costly. A tax on currency transactions (a so-called Tobin tax) has been proposed in the globalisation debate as a way of curbing capital movements and reducing the risk of international financial crises. A tax would restrain these flows; its effect would depend on the size of the levy. It is by no means certain, however, that it would be just the more speculative flows that are checked; it could equally well be the more stabilising regular currency flows. There is, in fact, little indication — either in theory or in experience from earlier centuries — that an economy with sand in its wheels works better than one that is well-oiled. Just rejecting a Tobin tax won’t do, however, at least not if one considers, as I do, that, notwithstanding the problems, free capital movements are good for the global economy. Other methods must be found to reduce conceivable negative effects. Much is being done in this respect in various international fora where I represent the Riksbank.

Our sights should be raised instead to achieve an order whereby those who are worst off benefit more than others, so that gaps in the world are narrowed. Today I shall begin with some reflections about the concepts of democracy and market. I am prompted to do so in that those who arranged this seminar first asked me to speak about “a democratic world economic order”. Then I shall concentrate on some of the issues of a mainly economic nature that have featured in the debate in recent years on globalisation. In doing so I will be drawing on some of my personal experience of economic cooperation. Then I shall sum up and draw some conclusions. Democracy and markets In my opinion there is no contradiction between democracy and markets. It is rather the case that they are two complementary components of a viable social system. A market economy is the form for organising economic activities that in almost every situation has proved superior to other alternatives, such as a centrally planned economy. Democracy is seen today as the self-evident form for political decision-making. One of the points about a market economy is that it allows for decentralised decisions about economic matters — agents can conclude agreements that are mutually beneficial. Political intervention is normally warranted only when a third party stands to lose. However, such situations are relatively common, for instance in environmental questions.
If the tightness in UK labour markets owes to less immigration or greater early retirement – or in  Page 9  other words, to a deterioration of labour supply – one might expect that over time the implications for inflation would be self-correcting through the operation of Say’s Law. Famously, Say’s Law states that ‘supply creates its own demand’ or – more accurately in this case – the lack of supply creates its own lack of demand. If Say’s Law holds, then fewer immigrants or more retirees implies less domestic spending and thus no excess pressure on resources that would drive up inflation. But even if Say’s Law holds over the longer term, it is unlikely to hold immediately. During a transition period, reduced supply may not feed through a balancing reduction in demand. Early retirees may sustain their spending as they run down the excess savings accumulated during lockdown that encouraged them to retire early in the first place. EU immigrants may have spent or sent their earnings to their home countries, such that their departure weighs on supply but not demand. Judging how quickly supply and demand will move together becomes a key question in assessing how persistent excess demand and inflationary dynamics will prove to be. Similar considerations come from terms of trade effects. Higher energy prices create inflation directly and the potential for inflationary pressures via second round effects. But they also squeeze household and corporate incomes, weighing on domestic demand.

The text has also benefitted from helpful comments from Andrew Bailey, Ben Broadbent, Fabrizio Cadamagnani,  Page 11  Jonathan Haskell, Josh Jones, Catherine Mann, Rhys Phillips, Dave Ramsden, Andrea Rosen, Martin Seneca, Fergal Shortall and Silvana Tenreyro for which I am most grateful. Opinions (and all remaining errors and omissions) are my own. 1. See Money Marketeers of New York University  . 2. Another – and, in my view, largely equivalent – way to characterise this process of ‘normalisation’ is as an ‘exit’ from the exceptional and unconventional policy measures introduced in the face of the global financial crisis and its aftermath. From the introduction of those measures, it was recognised widely in the central bank community that such exit would pose challenges for the design, implementation and communication of monetary policy. 3. Moreover, the large portfolio of asset purchases accumulated as a result of QE has been run down in parallel with the rise in Bank Rate. Since March 2022, the Bank of England has ceased to reinvest the proceeds of maturing bonds held in its Asset Purchase Facility (APF) used to house the QE portfolio. As of November 2022, the Bank has sold gilts from the APF to the market. Corporate bond holdings in the APF have been reduced by similar means. 4. The concept of a ‘neutral’ balance sheet remains even more elusive than that of a ‘neutral’ interest rate at both empirical and conceptual levels, so I focus on the interest rate dimension here. 5.
27  The examples are the following articles: N. Roubini “Why Central Banks Should Burst Bubbles”, mimeo, Stern School of Business and Roubini Global Economics, January 2006, and A. Posen “Why Central Banks Should Not Burst Bubbles”, Institute for International Economics Working Paper WP 06-1, January 2006. 28  Bernanke B. “Reflections on the Yield Curve and Monetary Policy”, Remarks by Chairman Ben S. Bernanke Before the Economic Club of New York, 20 March 2006. 8  BIS Review 57/2006  resulting from the entire yield curve. While it is difficult to assess which hypothesis is correct, central banks, as sailors did in the old days, should apply two iron rules: firstly, frequently determine their position, secondly, use as many waypoints as possible. This means that, especially where new phenomena emerge or there are structural transformations, the monetary policy must not be described using just a few simple indicators, as e.g. inflation and output gap in the Taylor rule. Monetary policy decisions should rather be a product of a complex analysis of a number of indicators and data and cross-checked with qualitative information. In turn, another Federal Reserve governor, Donald Kohn 29 , devoted his recent address to the analysis of when and on what conditions the central banks should respond to rapid changes of asset prices. In Kohn’s opinion, there are two possible approaches.

Let us have a step-by-step look at these channels of influence of globalisation on the monetary policy. Re 1) The growing share of international trade in the global output as well as the increasing international capital flows cause a situation, where the growth rate of a national economy depends increasingly on the developments of the global economy. To illustrate the impact of globalisation on the economic prospects, attention should be drawn to the hot topic in the macroeconomic policy, namely the problem of global imbalances. To give you some facts, the US current account deficit had been growing gradually over the past years to exceed USD 800 billion, i.e. 6.5% of the U.S. GDP, last year. This deficit, which represents import of savings from the rest of the world to the USA, is financed by the Asian central banks, for example the Peoples Bank of China, and by oil-exporting countries. The available forecasts show that the deficit will continue to grow. An animated debate is currently underway to determine whether this is a steady situation that simply reflects the new principles in the global economy 5 , or whether this trend is bound to stop and reverse sooner or later, which may entail a significant increase in the US long-term interest rates, a strong depreciation of the US dollar and a serious slowdown in the global economic growth. The majority of empirical and theoretical studies indicates a growing probability of the latter scenario, especially if no due steps are taken in many countries.
Company failure rates are normally pushed up by a recession and in the early 1990s the liquidation rate peaked at close to 3% of the number of UK companies. However, as Chart 5 shows, the failure rate of businesses has remained below 1% in this recession and has recently turned down as the economy has begun to recover. Even adjusting for changes in the legal framework for insolvencies in the mid-2000s, the rate of company liquidation is lower than in the last recession and the increase during the recession has been much lower than expected when the recession first hit. With the pressures on the banks following the financial crisis, we might have expected the opposite result. If the banks had quickly sought to realise value from bad loans made in the global credit boom, we might have seen more business failures. One reason that this has not happened is because of government interventions in the banking sector which have encouraged UK banks to sustain lending to companies from which they might otherwise have withdrawn support. Another mitigating factor against business failures in the recent downturn has been the willingness of the government to allow greater flexibility for companies in  9  The Bank of England Agents’ Report for November shows investment intentions back to the level last recorded in late 2007 and early 2008, before the recession. For more details, see the Bank of England website: http://www.bankofengland.co.uk/publications/agentssummary/agsum10nov.pdf.

Andrew Sentance: Getting back to business Speech by Mr Andrew Sentance, Member of the Monetary Policy Committee of the Bank of England, at the lunch hosted by the Bank of England and the Confederation of British Industry (CBI), Belfast, 24 November 2010. *  *  *  I would like to thank Tomasz Wieladek and Matt Corder for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. It is a great pleasure to be back here in Northern Ireland for the fourth time in my capacity as a member of the Monetary Policy Committee. As a former business economist, I greatly value the opportunity to visit individual businesses and meet with business groups in different parts of the UK, as I am doing on this two-day visit to Northern Ireland. And I would like to thank Frances Hill and her colleagues at the Bank’s Northern Ireland Agency for all the work they do with the business community here and for organising this visit. It is over twenty years since I first came to Belfast when I was working for the CBI in the late 1980s. It was so long ago that Nigel Smyth was not yet then the CBI Director here in Northern Ireland! And it may even have been before Nigel joined the CBI as Deputy Director to Alasdair MacLaughlin, over twenty years ago.
The world economy is recovering at a slower pace than anticipated at the end of 2015, but the global outlook remains positive. We are expecting moderate economic growth in Switzerland for this year of 1–1.5%. Inflation will rise slightly, although the annual average will remain negative at an expected rate of –0.8%. The inflation rate should re-enter positive territory in 2017. As in past years, the economic outlook is fraught with a number of different risks. This applies to the euro area, to the US and to emerging economies. The international financial markets are characterised by uncertainty, which in turn can have adverse effects on the global economy. And last but not least, there are considerable political risks in Europe and beyond. In this difficult environment, we will continue to deploy the instruments available to us to ensure price stability in Switzerland in the medium term. Even though we have already gone a long way with negative interest and our willingness to intervene in the markets, there is still room for manoeuvre in our monetary policy. Ideas for Switzerland: sovereign wealth fund and sovereign money initiatives I would now like to turn in the second part of my speech to the sovereign wealth fund and sovereign money initiatives. The events of recent years have given cause for reflection on the financial system and the role of central banks. As the President of the Bank Council has already described, we welcome such discussions.

Another hope expressed in connection with the creation of a sovereign wealth fund is better management of foreign exchange reserves. However, the SNB already manages its foreign exchange in a professional manner and is considered to be a leading central bank in asset management. We have also invested in a broad range of assets for a number of years now. Our portfolio is diversified over different currencies and asset classes, and we invest heavily in foreign shares and corporate bonds. Equity exposure is 20%, which is high for a central bank. On a long-term average, higher profits are only possible by taking higher risks. This would also apply to a sovereign wealth fund. However, higher risks also mean that profit fluctuations would be greater than before. Of course, a sovereign wealth fund could hedge against certain risks. Exchange rate risk represents the biggest risk for foreign currency investments. But it is precisely this risk that a sovereign wealth fund should not be allowed to hedge, as it would conflict with monetary policy. This is because hedging would result in upward pressure on the Swiss franc, which would run counter to our monetary policy. Incidentally, this is also the reason why a sovereign wealth fund should not be permitted to sell foreign currency. To sum up: a sovereign wealth fund would not make monetary policy easier but more difficult. Sovereign money The other initiative that I would like to talk about today is the sovereign money initiative submitted some time ago. This has two main elements.
Having these in mind, I believe that Romania is in a good position to pursue disinflation by implementing such a framework. Most of the conditions required for a successful implementation of the inflation targeting framework in Romania have already been met: -  by year end 2004, inflation was brought down to single digit levels for the first time from 1990 onwards;  -  since 2004, the National Bank of Romania has benefited from full operational independence, as stipulated by Law No. 312 of June 28, 2004;  -  the success in disinflation over the recent years has strengthened the NBR’s credibility;  1  Frederic S. Mishkin, “What Should Central Banks Do?” Federal Reserve Bank of St. Louis Review, vol. 82, #6 (November/December 2000): 1-13. BIS Review 28/2005  1  -  after five years of continuous development and adequate supervision, the financial sector can undoubtedly be considered sound and stable;  -  fiscal dominance is no longer an issue, witness the afore-mentioned legal independence of the National Bank, a relatively low public debt, as well as the increasingly consistent financial policies mix;  -  inflation targets have been set for the following years in cooperation with the government. The Pre-Accession Economic Programmes underline the commitment to attain these targets;  -  since 2002, an inflation report has been published on a half-yearly basis.

Our last speech for this event will be held by Mr. Cristian Popa, Deputy Governor of the National Bank of Romania, showing you just where we, as central bank and as economy, stand in the preparation of the introduction of inflation targeting. What I do want to mention is the current debate on the appropriateness of adopting inflation targeting in Romania. I am very happy that monetary policy steals the spotlight from football, at least temporarily. Some acknowledged Romanian economists claim that inflation targeting is not needed since future euro adoption requires fulfilling the grueling conditions of the ERM-II framework. In line with this argument, the exchange rate might prove to be a better choice for a nominal anchor. Given the soon to be completed capital account liberalization, I believe that exchange rate management would be very difficult outside a currency board. Although I am confident about our option, I respect all disagreeing opinions. For those retaining their doubts about the benefits of inflation targeting, there is one more argument, courtesy not of a renowned economist, but of the Danish physicist Niels Bohr. When asked why he, an enlightened scientist, kept a horse-shoe on display in his house, his prompt answer was that “it helps non-believers too”. Likewise, provided that the National Bank of Romania has convinced enough people of its commitments, non-believers should also enjoy the benefits of this policy change. Ladies and gentlemen, let me now introduce Rachel Lomax, Deputy Governor of Bank of England and member of the Monetary Policy Committee.