samchain/econo-pairs-v1 huggingface dataset:
Building on the work of Michael Woodford in collaboration with my former colleague and mentor Julio Rotemberg (who very sadly passed away a few years ago),11 linear approximations of these models around the inflation target steady state, in conjunction with quadratic approximations of social welfare derived from the household preferences upon which the model was based, defined the system within which model-optimal monetary policy could be determined. Over the past quarter of century, a lot of ink has been spilt in academic journals, doctoral theses, and central bank working papers exploring the features and implications of this general framework in great detail. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  For those of us schooled in modern macro using Thomas Sargent’s Macroeconomic Theory textbook,12 this linear / quadratic (or LQ) framework was associated with one important result: certainty equivalence. In other words, within the LQ set-up defined by Rotemberg and Woodford, the optimal monetary policy rule governing how the policy interest rate should respond to changes in the state of the economy is invariant to distribution of shocks to that economy. This does not mean that uncertainty does not matter. On the contrary, shocks are the drivers of economic fluctuations. The welfare losses associated with inflation volatility stemming from those shocks provides a rationale for the stabilisation of inflation that underlies the adoption of inflation targeting.

And it is differences in those judgements across the members of the MPC that lead to the finely balanced vote outcomes like that we saw last week. Guiding monetary policy by the stars In discussing those judgements – and, in particular, in converting them into monetary policy decisions about Bank Rate – I am often confronted by questions about ‘starred variables’ in the standard new Keynesian model. In highly stylised form, three starred variables lie at the heart of these models: Pi-star, the steady state rate of inflation; R-star, the Wicksellian neutral real rate of interest; and Y-star, the potential level of economic activity. Pi-star is the easiest to dispose of. Within an inflation targeting framework, the steady-state level of inflation is determined exogenously by the central bank’s mandate. In that context, the inflation target should be as clear as possible: uncertainty about the target only adds unnecessary – and costly – volatility into the economy. The UK’s inflation targeting framework delivers on this score. The inflation target is defined as an annual rate of CPI inflation of 2%, which is given primacy in the remit delivered to the Bank of England by the Treasury and deemed to hold at all times. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9  While there are inevitably times – like those we are experiencing today – when unforeseen shocks to the economy drive inflation away from target. These circumstances beg questions about how quickly it is feasible and/or desirable to return inflation to target.
But it should be acknowledged that they have undertaken what are, in many cases, politically difficult and technically complex reforms. Irrespective of the identifiable aspects of these reforms that could be improved, they have prevented the situation from worsening considerably and have laid the foundations for the incipient recovery we are witnessing today. BIS central bankers’ speeches  1  In this respect, let me begin by mentioning the role of the European Central Bank which, in my opinion, has successfully lived up to its responsibilities. From the onset of the crisis, the ECB applied a series of measures with a three-pronged aim: to relax the monetary policy stance in order to accommodate it to the cyclical circumstances of the economy; to prevent liquidity tensions from triggering bouts of instability that would have compounded the loss of output and employment; and, at the height of the tensions, to dispel the risk of the euro area potentially breaking up, a risk that was very real in 2012. The monetary policy measures adopted involved both conventional actions and exceptional measures, tailored to the circumstances experienced over the course of the crisis. As regards conventional measures, the ECB has progressively cut official interest rates, placing them at an all-time low 400 bp below the September 2008 levels. As you know, the latest cut was just a week ago.

We are mindful that for the NDF market to truly reduce in significance and adverse influences, the onshore market must become highly competitive, not just the foreign exchange market but also all aspects of the financial market. We are determined to realise the idea of having a market that possesses the breadth and depth to cater to the increasingly complex and diverse needs of the economy, and a market that is able to sustain and weather volatilities that contribute to the overall wellbeing of the economy. The early positive results of the measures speak for themselves. The onshore foreign exchange market now regularly records a healthy daily volume. In addition, the ringgit exchange rate has remained stable with volatility reducing by half since the introduction of these measures. The domestic bond market is now more resilient as speculative positions have mostly exited the market. There is a larger composition of stable and longer term investors. This fact is much more important than just looking at the percentages or size of non-resident holdings. Our experience suggests that there is a threshold where non-resident investors will become a destabilising force. The success of our measures and our continued faith in the market mechanism is now validated and restored. Ensuring trust, confidence and integrity of the financial market There are many lessons that we ought to learn. Some of the disruptions were caused from the uncompetitive market behaviors and questionable conduct by players.
•  Basel III calls for an increase in both the quantity and quality of capital that banks must keep as a buffer against unexpected loss. •  Basel III will also put in place a new global liquidity standard. Banks will be required to hold enough liquid assets to survive a 30-day period of cash outflows. There are also efforts underway in advanced jurisdictions to reform banking structures. The details vary but the overall thrust is to separate retail banking from riskier activities like proprietary trading and investment banking. The objective is to simplify business models and facilitate the resolvability of large and complex banking groups. On the whole, the reforms will help to make banks safer and financial systems stronger. But they are not without some negative consequences, and their distributional impact is uneven. For many global banks, the new regulatory standards and reforms to national banking structures will mean a fundamental review of their organisation and activities. In fact, the international operations of global banks are already being affected. •  According to the IMF, direct cross border lending as a share of total banking assets has declined, mostly due to the retrenchment of Eurozone banks. For many Asian banks, the transition to the new regulatory standards will probably be less demanding. First, many of them had already bitten the bullet after the Asian Financial Crisis and built up their capital and liquidity buffers. They are thus starting from a stronger position to meet the new standards.

Just to give you an example, we do not have enough accountants in the government service. When I talk to the police, the CID, the Attorney General’s Department, all these departments they do not have accountants. They cannot analyze when they see a balance sheet in any corporate case, they do not know how to handle it. There is a desperate shortage of manpower, partly because the accountants in this country can get much better salaries when they work for the private sector. Now how do we bridge this gap? I think given that the Central Bank is a very secure service – maybe we do not pay as much as the private sector but we do give security of tenure, you all get EPF and pensions – these sort of long-term prospects will attract good people to this institution on continued basis. I have tried in my own way to fight with the government to get increases in wages for all of us and also reinstating the pension and I hope that will make it much more attractive for people to work for this institution and keep you from moving away into the private sector. But in the process we also have to develop our skill sets and really organize and prepare ourselves for the challenges of the future. The future I think is going to look very different from the past in this country. We are now reaching a level of normalcy which most of us have never experienced in our lifetimes.
A further interest rate increase will stabilise growth in output and employment. Capacity utilisation may in time be brought down somewhat and stabilise. This will curb the rise in inflation, so that it stabilises close to target. Developments in inflation and capacity utilisation seem to provide a reasonable balance between the various objectives of monetary policy. The interest rate is sufficiently low for inflation to approach the target of 2.5 per cent while avoiding a capacity utilisation level that is too high. Projections are uncertain. We have illustrated this uncertainty in the projections for the interest rate, the krone exchange rate, inflation and capacity utilisation using fan charts. The width of the fan is based on historical disturbances. However, there is no certainty that future disturbances will be of the same character or scale. The wider the fans, the more uncertain the forecasts are. In other words, uncertainty with regard to the interest rate reflects the monetary policy response to unexpected disturbances in inflation, output and the exchange rate. BIS Review 35/2006  5  When the interest rate, as forecast in the baseline scenario, is raised to a more normal level, Norges Bank will be able to assess the effects of interest rate changes and other new information about economic developments. According to our projections, inflation will be close to target three years ahead.

In contrast, bank deposits are claims on private banks. CBDC raises some fundamental questions as to the role of central bank money. This is much more than a question of technology. Chart 4 Central bank digital currency Norges Bank is not alone in assessing the need for central bank digital currency. Many central banks are engaged in similar research. Several are in the process of testing technical solutions. Both Sveriges Riksbank and the central bank of China launched pilot projects earlier this year. The European Central Bank (ECB) signalled last month that it was stepping up its research on a digital euro. Central banks are considering introducing a CBDC for a variety of reasons. In emerging economies, the focus is on financial inclusion and low-cost payments. In advanced economies, the focus is more on the role of cash and the emergence of new monetary and payment systems. A trend specific to Norway and some of our neighbouring countries is the low and falling level of cash use. Users increasingly choose solutions offering contactless payments and payments via smartphone apps. These solutions use bank deposits as the means of payment. At the same time, cash has some unique characteristics that could be important to preserve in the payment system of the future: Cash is part of the contingency arrangements if the electronic contingency solutions fail. Cash is a credit risk-free alternative to bank deposits and can promote competition in the payment market. 2/6  BIS central bankers' speeches  Cash is legal tender that is widely accessible.
On 22 May 2013, the Chairman of the Federal Reserve, Ben Bernanke, first mentioned the possibility that the ongoing third quantitative easing programme might be tapered off. The possibility that the Federal Reserve might announce a reduction in the monthly bond purchase programme sparked an increase in long-term US interest rates, which had risen by over 100 basis points by the beginning of September (cf. chart 4). All other major markets reacted in the same way – this included interest rates in Germany – despite the fact that the course of monetary policy in the euro area actually pointed to sustained expansion. The tapering debate coincided with a more favourable economic outlook in the advanced economies. This, in turn, increased uncertainty with regard to the future monetary policy path of the major central banks, and term premia – which form part of bond yields – rose. However, at the same time, short-term interest rates stayed firmly in place. Despite the recent increase, bond yields in advanced economies are at a very low level in historical terms. The impact on foreign exchange markets varied. The currencies of the emerging economies reacted particularly strongly, with capital outflows exerting very substantial downward pressure, as can be seen in chart 4. This shows that a number of emerging economies are still vulnerable to foreign portfolio investments, or hot money flows. The G4 currencies, by contrast, have been largely unaffected by the tapering debate (cf. chart 5). In trade-weighted terms, the US dollar has gained very slightly.

But the fluctuations need not be larger than many other and larger countries appear able to tolerate. Finally, it is appropriate to emphasise that independent monetary policy under a flexible exchange rate regime can take many forms, including different types of price stability target and taking into consideration the role of money and credit in policy formation. It can therefore change from one period to another without necessitating major decisions concerning the currency as such. 1.7  Capital controls and exchange rate regime options  Lifting the capital controls is one of the most important yet most complex challenges facing Iceland at present. The controls have proven an important means of achieving stability in the wake of the financial crisis. Because of this, they were approved by signatories of the EEA Agreement even though they are contrary to the spirit of the Agreement. In the long run, however, it is critical that they be abolished. There are at least two main reasons for this. First, the costs associated with the capital controls grow over time and will ultimately exceed the benefits. Second, they are in contravention of Iceland’s international obligations. For the long term, it will be impossible to retain universal restrictions on capital outflows and remain in the EEA. Iceland must therefore make a genuine attempt to lift the controls. It may prove complicated and time-consuming, but there is no other option. This gives rise to the question of how capital account liberalisation is related to the choice of currency and exchange rate policy.
Mr Roth remarks on the euro and Swiss franc: two sister currencies? Speech by Mr Jean-Pierre Roth, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Swiss Business Association Annual General Meeting, Singapore, 24 February 2000. *  *  *  For more than a year now, the euro has been a reality. It has crowned a decade long process of monetary integration in Europe. The introduction of a common currency in eleven closely related, but independent countries is an unique experiment. It is still too early to assess all the far-reaching implications of this monetary revolution. Therefore, the thoughts and remarks I am going to express today can only be intermediate and provisional. 1. Consequences of the euro for the Swiss economy  Switzerland is not part of the Monetary Union. It is nonetheless deeply integrated in its European environment through its geographic situation and its strong historical, cultural and economic links with Europe. Over 50% of our exports go to countries of the euro-zone, while 70% of our imports come from there. But, besides that, Switzerland has strong traditional links overseas, too. The US, Canada and Japan account for 10% of our imports and 15% of our exports while emerging markets represent 4% and 10% respectively. Although concentrated on Europe, our foreign trade is geographically more diversified worldwide than that of other small open European economies such as Austria, the Netherlands or Belgium.

Denis Beau: Financial supervisory and coordination - new issues and challenges  regulatory  policy  Contribution to the panel discussion by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Salzburg Global Finance Forum, 22 June 2021. * * * Regulatory policy and Supervisory coordination has always been fraught with challenges. I remember panel discussions with market participants about this very topic at the BIS twenty years ago. No surprise for me that it is still a topic today, because there is a deeply rooted reason for it: the inevitable tension between market forces on the one hand, which push for a borderless financial system in many of its layers, despite step backwards, as we have seen since the Global financial crisis, and on the other hand the jurisdictions in which regulators and supervisors operate, are accountable and must discharge their obligations, which at best are regional for some and most often are national. This observation does not mean that we have not made progress in addressing this tension over the last decades. Nevertheless, I would differentiate between coordination issues to manage large-scale crisis and to prevent those crisis. Regarding the former, I think it is fair to say that the Covid-19 pandemic acted as a test of the resilience of our global coordination framework, which has improved with a strong G20 dimension after the GFC.
Although openness alone cannot provide growth, one fact is clear there are no countries that have achieved wealth through autarchy and isolation from the rest of the world. Openness is thus a necessary condition, but not sufficient in itself, for achieving wealth. Many other policy elements are required, including macroeconomic stability, a good standard of education, legal security, efficient bureaucracy and protection of private property, to create good conditions for broad growth in a market economy. The Peruvian economist Hernando de Soto was a pioneer in the study of practical bureaucracy in some developing countries. His view was that it was not primarily a lack of property that made people poor, but rather a lack of legal property. The problem is that many poor people have no paper to prove ownership of their property, because it is so expensive and complicated to obtain in most developing countries. De Soto showed that, for instance, in Lima, Peru, it took six years and eleven months going through 207 legal stages among 52 different public authority offices to obtain permission to build a house. Obtaining legal permission to start a small company required six hours work a day for 289 days to follow the various bureaucratic steps, and it cost 31 times as much as the monthly minimum wage applying at the time. The fact that poor people therefore cannot formally own their houses or businesses means that they can have them stolen from them at any time, without the guilty parties being punished.

BIS central bankers’ speeches  7  It should already be clear from what I have discussed so far that this is a misleading description. As monetary policy has not leaned against the wind to any great extent, this can hardly have had any particularly devastating effect on the economy. With what is by now a rather worn but at the same time very telling likeness, the Riksbank has not during this period hit the repo-rate brake, but rather eased up on the accelerator somewhat. No deflationist development driven by a weak real economy This picture is confirmed if one examines how, for instance, GDP and employment have developed since the crisis. Figure 5 summarises the percentage change in GDP per capita and the employment rate in relation to the pre-crisis figures in the countries Sweden is normally compared with. As can be seen, Sweden is not right at the top, but nor is it very far from it. There are only a few countries, according to these statistics only New Zealand and Germany, that have had a better development in both GDP and employment, that is, that are above and to the right of Sweden in the figure. Some claim that the development of unemployment has been less favourable. But here we must bear in mind the fact that the labour force in Sweden has increased relatively substantially during the period. This is essentially positive, but in the short run it will also contribute, purely mathematically, to keeping up the unemployment figures.
To minimise hardship on affected customers, I suggest that banks should adopt the good practice of provisionally refunding the disputed amount into their customers’ account if they are not able to complete their investigations speedily. vi. Lastly, to maintain public confidence and trust, we need to step up efforts to reduce cases of ATM robberies, which has spiked up from a total of 5 cases in 2011 to an average of 50 cases in the last 2 years. As at end October 2014, there have been 41 cases of ATM robberies which caused the banking industry to incur a total loss of RM4.4 million. Fortunately, no customer has lost any money. To prevent ATM robberies, the banking industry should quickly adopt the ink-staining technology for new ATMs, which would deter future cases of ATM robberies as the stolen notes will be rendered worthless through the staining technology. In addition, I would like to add that an e-Payment Incentive Fund (ePIF) framework would be implemented on 2 January 2015. This would coincide with the implementation date of the new cheque processing fee of 50 sen which is introduced to reflect its higher processing cost. Under the ePIF framework, banks would channel the cheque processing fee collected from their customers into a fund to be used for infrastructure development and to provide incentives to their customers to adopt e-payments. In other words, the cheque processing fee goes back to consumers for their benefit.

As you know, many individuals inside our member agencies devoted substantial efforts to the Basel II process. We are indebted particularly to the leadership of Bill McDonough, our prior chairman and the former President of the Federal Reserve Bank of New York, who championed this new approach to capital supervision. We appreciate as well the leadership and excellent work of Danièle Nouy, the former Secretary General of the Committee’s highly professional Secretariat, and that of her successor, Ryozo Himino. Given that the capital framework serves as a cornerstone to the safe and sound operation of the banking system, we sought to conduct our discussions in a highly transparent process. We engaged in extensive discussions with many interested parties on the domestic and international levels, and I would like to thank in particular two groups of external organisations and individuals who supported our efforts. First, I should mention the countless representatives of banking organisations, industry associations, and other private sector bodies who devoted time and energy to sharing their views. They offered hundreds of comment letters, as well as data to test the quality of the rules, and they engaged in exhaustive hours of discussion with the Committee, its working groups and member authorities. Above all, banks and other private sector bodies helped us to ensure that supervision would be more closely aligned to sound industry practices.