samchain/econo-pairs-v1 huggingface dataset:
Although I believe most people would agree that in the period of almost a decade in which it has been implemented, the inflation target has on the whole functioned quite well, it is still important that monetary policy’s analytical framework is continuously discussed. The economy is constantly exposed to complex shocks, with repercussions which are so difficult to predict that we need to develop our thinking all the time. The question I shall be considering initially is whether there are alternatives to the way in which the Riksbank has chosen to conduct monetary policy. Simplifying somewhat, the Riksbank’s approach can be described with a rule of thumb: if the forecast rate of inflation 1–2 years ahead is above the 2 per cent target, then the repo rate should normally be raised and vice versa. The work accordingly focuses on a forecast of future inflation. But as forecasts are liable to be wrong, they carry an element of uncertainty. It can therefore be reasonable to discuss and compare alternative strategies in order to see whether the uncertainty can be reduced. It might be argued that economic science is not sufficiently developed or that the interactions of economic agents and markets are far too complex to be forecast. Since monetary policy is not capable of influencing price developments directly, instead of taking its cue from inflation forecasts, the central bank could choose to set the interest rate in the light of some variable that is currently known.

This focus is helping to contain inflationary pressures in the near term. Indeed, across advanced economies, wage growth remains weak and labour markets soft. Reflecting the combination of improving, but still subdued, demand and considerable, if uncertain, slack, monetary policy remains exceptionally stimulative. Recall that the recent  BIS central bankers’ speeches  1  decision of the Federal Reserve to begin tapering asset purchases meant only slowing the rate of additional stimulus. And that the 7% unemployment rate in the UK is merely the point at which the MPC begins to even think about adjusting policy. The key question for central banks is the expected evolution of the supply side of their economies. This is unusually uncertain at present. We know that our economies are operating well below their, admittedly unsustainable, pre-crisis trends, but we don’t know how much capacity was destroyed following the crisis. We know that depressed business investment is limiting productivity growth in the short term, but we don’t know to what extent and whether such shortfalls can be caught up. From a longer perspective, we know that total factor productivity growth has slowed over the past decade, but given the incredible flourishing of innovation, we don’t know whether this is due to lags, measurement errors or more fundamental factors. Statistical trend measures of labour productivity growth suggest it has slowed in the United States, the euro area (both core and periphery), the UK and even Korea.
Looking beyond the monthly data and the effects of special factors, trends in broad money and loan growth have broadly stabilised over recent months. Overall, the underlying pace of monetary expansion remains moderate. At the same time, monetary liquidity accumulated prior to the period of financial market tensions continues to be ample. Looking at M3 components, the annual growth rate of M1 decreased to 0.9% in July, whereas growth in other short-term deposits remained unchanged at 3.7%. These developments continue to partly reflect the gradual increase in the remuneration of shortterm time and savings deposits over recent months. On the counterpart side, the annual growth of loans to non-financial corporations continued to edge up slightly, from 1.5% in June to 1.6% in July, whereas the annual growth of loans to households seems to have levelled off at around 3%. The overall size of MFI balance sheets has remained broadly unchanged over recent months. Where it is necessary to provide adequate scope to expand the provision of credit to the private sector, it is essential for banks to retain earnings, to turn to the market to strengthen further their capital bases or to take full advantage of government support measures for recapitalisation, in line with the findings of the recent stress tests. To sum up, based on its regular economic and monetary analyses, the Governing Council decided to keep the key ECB interest rates unchanged. Inflation has remained elevated and is likely to stay above 2% over the months ahead before declining next year.

Charles Bean: Quantitative easing and the economic outlook Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, to the Scottish Council for Development and Industry, Glasgow, 21 February 2012. *  *  *  Good evening! I doubt that many of you will be aware that the Bank of England was actually founded, in 1694, by a Scotsman named William Paterson. Our original purpose was to raise the funds to enable the King to finance his foreign military adventures. But Paterson soon parted company with his fellow directors, leaving the Bank the following year. Rather more of you may be aware that same William Paterson became the financial brains behind the Darien scheme, a project to establish a Scottish colony in Panama that could act as trading post between the Atlantic and the Pacific. Unfortunately, just about everything that could go wrong with the project did, resulting in not only the deaths of many of the colonists, but also substantial financial losses for the many Scottish people who had backed the scheme. According to historians, the Darien disaster and its financial consequences contributed directly to the pressures leading to the 1707 Act of Union between England and Scotland. The possible dissolution of that union is, of course, now on the agenda. Whether or not Scotland becomes an independent country once again is a matter for the Scottish people to decide.
It is because any responsible central banking institution must have an idea of what conditions might be like under an alternative system - if only to clarify its understanding of, and justify its adherence to, the present system. And any organisation must have contingency plans to deal with the unexpected and the unintended. We do not, of course, make public our contingency plans, though we do, as I have mentioned earlier, make public a great deal of research carried out within the HKMA or under our auspices on issues surrounding the Link. What, then, might happen if Hong Kong were to depeg? The answers would, of course, depend on what monetary policy was adopted in its place. It would also depend on domestic, and particularly external, conditions at the time. The outcome could, I think, even with the most benign conditions and the best-judged strategy, be summarised in two words, "uncertainty" and "instability". Uncertainty, because the Hong Kong dollar would become a magnet to speculators eager to test the limits and the weaknesses of the new regime, with all the instability that would bring. Uncertainty in the effects on  BIS Review 88/2001  5  business and on daily life, if, as a result of that instability or of a general fall in confidence, the value of the Hong Kong dollar depreciated dramatically and, in consequence, the price of our imports increased sharply.

I have no doubt that they will act equally positively on the proposed $ billion loan guarantee scheme for small and medium enterprises recently announced by the Government. Such schemes, like the various other relief measures announced in the annual policy address a couple of weeks ago, will provide some palliative, and perhaps some stimulus, during hard times. Ultimately, however, sustained recovery will come only when the external situation improves. In the meantime, we should take what measures we can to control the damage, maintain stability and strength in our financial and banking systems, and position ourselves as best we can to get the best advantage out of recovery. BIS Review 88/2001  3  The link One question, raised by a few commentators, is whether Hong Kong would be benefited if we were to change, or even abolish, the Linked Exchange Rate system. Some have simply recommended a thorough, but not urgent, review of the system. Some have suggested a repegging - at a lower value or an abandonment of the peg when times are less unstable or when the economy is booming again. Others have called for action now. Still others, though not very convincingly, and not very constructively either, have criticised the Government for not introducing changes in the 1990s. The reasoning behind most of these commentaries claims that the Link hinders Hong Kong's competitiveness, and therefore our recovery; that the Link removes from us control over our monetary policy; and that the Link is fuelling deflation.
Christian Noyer: The euro in 2000 - principal features of the European Central Bank’s monetary policy  Speech by Mr Christian Noyer, Vice-President of the European Central Bank, at the Recoletos Forum, held in Madrid, on 29 June 2000. *  *  *  Ladies and gentlemen, It is a great pleasure for me to speak to you here at the Recoletos Forum in Madrid. In order to provide you with the perspective of the European Central Bank (ECB) on the performance of the euro as the single currency of the euro area, it will be helpful if I begin with a review of the objective of the single monetary policy and its underlying strategy, as well as the operational framework of the Eurosystem (ie the ECB and the 11 national central banks of the countries which have introduced the euro). After I have made some comments both on monetary and economic developments which have taken place in the euro area and on the risks to price stability as they have appeared in the first months of 2000, I shall outline the responsibilities of the individual policy areas in achieving and sustaining high growth in an environment of price stability. I shall then discuss the euro’s role in the financial markets. Finally, I shall conclude with a view on the general prospects for the euro area and its single currency. The monetary policy objective, strategy and operational framework As is well known, the main objective of the Eurosystem is the maintenance of price stability.

Vítor Constâncio: We need a coordinated European NPL strategy. How to deal with Europe’s market for lemons? Opinion piece by Mr Vítor Constâncio, Vice-President of the European Central Bank, 5 July 2017. * * * One of the most pressing issues for euro area banks is the nearly € trillion of non-performing loans (NPLs) on their balance sheets. While the average euro area NPL ratio has declined gradually from a peak of 8% in 2013, it still remains at 6% and differences across countries are marked: six countries still have NPL ratios of more than 10%, significantly more in some cases. This is not just a problem for banks. The flip side of NPLs is over-indebtedness among households and firms, and this poses a macroeconomic challenge – banks restrict credit supply and distressed firms curtail investment, which in turn hampers economic growth. Asset quality issues were exacerbated by the global financial crisis. When the crisis hit, the surge in NPLs blocked the ability of many banks to deal with distressed debt. NPL resolution, though not a panacea for all banking problems, could bring significant benefits. It is not easy to estimate the effects of resolving NPLs. However, scenario-based analysis indicates that replacing NPLs with performing assets could increase the aggregate return on equity of euro area banks by more than 1 percentage point, with some countries’ banking sectors gaining up to 5 percentage points.
Inflation risks Let me start by looking at some of the factors that create risks for the inflation outlook and explain why I’m nevertheless fairly optimistic that inflation will moderate over the next few years. Of course, oil prices do pose an inflation risk. The price of oil has just about doubled over the past two years, from the low $ range to around $ per barrel recently. Higher oil prices are reflected in higher “headline” inflation. And they have been passed through to some extent to core inflation as well, but, unless they rise further, the effect on core inflation should begin to dissipate next year. Another risk relates to labor compensation, which is the single largest component of business costs. Recently, one measure of compensation per hour jumped abruptly. Here, too, though, I am not terribly worried because a good part of the jump is probably accounted for by one-time events, such as bonus payments and the exercising of stock options. This interpretation is supported by readings from an alternative measure of labor compensation, the Employment Cost Index, which excludes these items and has recorded only modest increases. I’m also quite encouraged by several developments that portend a moderation in inflation going forward. For example, even with the recent revaluation of the Chinese renminbi, the dollar has increased by 7½ percent against major currencies so far this year, which should take some of the pressure off of import prices.

Much has been said, and, more importantly, achieved in the area of transparency in recent years. There has been an explosion of codes and standards on different aspects of economic and financial policy in recent years. So much so, that some countries are claiming that the process needs to slow down. It is certainly important to recognise that the appropriate codes and standards for a country at one stage of economic development may not be appropriate to countries at other stages. I say advisedly "may", because in each individual case the argument has to be made. But if it is accepted that codes and standards are likely to reflect different stages of development, then it is even more important that countries make clear to which codes and standards they are actually adhering. That is why countries should not be able to opt out of "transparency about transparency". Following the production of pilot transparency reports on a number of countries, including the UK and Argentina, the IMF has now made rapid progress in producing reports on the observance of standards and codes (ROSCs). As of April 2001, 110 ROSC modules had been completed for 43 countries, of which 76 have been published covering 31 countries. India has recently had a ROSC published on fiscal transparency. It is critical that monitoring of the observance of standards and codes be fully integrated into IMF surveillance under Article IV. Here implementation is urgent.
Inclusive communications  Diversity also means engaging with all our stakeholders, internal and external, and being aware of the many ways in which the economic situation affects different people. Active engagement between Bank officials and a range of expert and non-expert stakeholders across the UK has always been important, but it is taking on new prominence in the information age. Our agents and Bank officials meet thousands of business contacts across the UK each year to take the temperature of the UK economy. Our new Open Forum and Future Forum events do this on a large scale by bringing together thousands of people from the community to discuss the economy, the financial system and the Bank’s role in promoting the good of the people of the United Kingdom. We listen to the views and concerns of local business leaders, technology developers, representatives from the voluntary and education sectors, unions and the wider public and explore how the Bank can maintain stability and reduce uncertainty. The 2015 Open Forum event attracted 10,000 webpage views, 11,000 playbacks of our YouTube content and 3,000 tweets, while our 2016 Future Forum event saw almost 140,000 twitter impressions. In reality, we can’t always be there face to face. And this requires more tailored content. Deploying social media, including Facebook and YouTube, delivers our messages directly to a broader audience. New digital products, such as KnowledgeBank, use accessible language and engaging visuals to help us tell a story about what the Bank does.

The major economic policy challenges facing the nation today - pick your favorites among the usual suspects of low public and household savings, concerns about educational quality and achievement, high and rising income inequality, the large imbalances between our social insurance commitments and resources - are not about monetary policy. Poor monetary policy choices would make these problems harder to address, but monetary policy itself can't do much to fix them. The issues about monetary policy regimes we spend most of the time debating these days - such as those involving communications and disclosure and variants on inflation targeting - are high class problems to have. Even if they were resolved in the direction of what seems to be the broad academic consensus, they would still leave us with all the hard questions in monetary policy. The color of truth in monetary policy (apologies to McGeorge Bundy) is often grey, not black or white, and moving further along the spectrum toward greater transparency or more explicit rules, will not make easier the hard choices of what to do in the face of the normal fog that surrounds the forecast. In thinking about the durability of these gains in monetary policy delivered under Volcker and Greenspan, there are a few aspects of our history and about the world today that deserve note. The actions of individual chairmen have been very important in the history of the Fed.
But what is meant by a lesser or greater stability of inflation and resource utilisation? Determining this requires a quantitative measure of stability, the mean squared gap. The mean squared gap for inflation measures how much the inflation forecast deviates from the inflation target. The mean squared gap for unemployment measures how much the rate of unemployment deviates from the sustainable rate. A smaller mean squared gap entails better stability. Panel b in Figure 7 shows the mean squared gaps from the latest monetary policy decision. They are calculated by taking a mean value of the sum of all the squared deviations for the respective target variables and calculating the size of them. The closer to zero the mean squared gap is, the better the stabilisation of the respective target variables; that is, the better the target attainment. Normally, it should be the case that it is not possible to stabilise one of the target variables better without stabilising the other variable less well. Otherwise, monetary policy is not “effective”. Which interest-rate path is chosen then depends on the relative importance one attaches to stabilising the respective variables. Different members of the Executive Board may attach different levels of importance to the two variables and thus advocate different repo-rate paths. The point of the mean squared gaps is that they give us clarity and transparency regarding the various monetary policy alternatives.

It also depends on the political environment within which a central bank operates, since markets are concerned about more than just the formal autonomy of the monetary authorities. They also pay attention to the degree of political acceptance of central bank decisions. If monetary affairs are subject to permanent political debate, this can become a hindrance to credibility. Recognising that monetary matters should be conducted in a relatively calm setting does not mean that the policies adopted by the central bank should escape all democratic controls. Nowadays this form of control is tighter than ever before. Indeed, most monetary regimes now require that the central bank report to the legislative authorities on the execution of its mandate. This is also the case in Switzerland, since article 7 of the National Bank Act requires that we present a report on the fulfilment of our tasks to the Federal Assembly each year. Despite these measures, National Bank affairs are often the focus of animated political debate. Paradoxically, these debates do not relate to monetary policy in the narrow sense of the word, but rather to other aspects of a more operational nature – such as the level of the monetary reserves or the distribution of the profits. BIS Review 34/2006  3  Allow me to give you an example.
The effects of globalisation are also channelled via foreign direct investment (FDI). The role of multinational enterprises in the world economy has similarly grown over the years, as reflected in the expansion of the world’s FDI stock, which is almost equal to the annual GDP of the euro area. In many countries, the operations of foreign affiliates are now extremely important for domestic growth, with rising sales, value added, employment and exports. For the euro area, these international linkages are  4  2  For a comprehensive analysis on the implications of alternative exchange rate regimes, see Issing (2006). BIS Review 43/2006  highly significant, particularly because economies of scale and cross-country technological spillovers support euro area economic growth. Euro area corporate businesses are among the most dynamic in the world, providing more than one-third of the world’s FDI stock. At the same time, almost one-third of world FDI is invested in euro area Member States. Intra-euro area FDI stocks have also grown robustly, increasing from almost 14% of euro area GDP in 1999 to around 24% by 2004. Consumers clearly benefit from greater trade and FDI linkages via greater variety of goods and lower prices. However, adjustment costs, which are often front-loaded and concentrated on specific regions and sectors, also need to be taken into consideration. The change in the structure of the global economy requires individual countries to make structural adjustments through the determined implementation of structural reforms; such reforms are even more vital for countries in a monetary union.

At this point, I have to confess that I too was sceptical for similar reasons, also because I have always argued that unsound government fiscal policies would ultimately discredit the efforts of monetary policymakers to fight inflation. However, at the same time, I also believed that, if all countries did their homework and the Maastricht Treaty criteria were met, I could envisage a successful monetary union – although, to be honest, in the first half of the 1990s I did not think it would be possible for 11 European countries to achieve price stability at the start of Monetary Union. In 1998, at my hearing in front of the European Parliament, I said: “The introduction of the euro will reshape the face of Europe. It is the most significant event in the international monetary and financial world since the end of the Second World War. But the euro will  14  Budget balances for 2005, broadly ranging between a 2% of GDP surplus and a 5% deficit, and debt ratios varying from 7% to 108% of GDP, are accompanied by differences in the interest rates on government bonds of around 30 basis points at most. Ten years before, when spreads still included substantial exchange rate risk premia, they exceeded 600 basis points, with budget balances ranging from a 3% of GDP surplus to a 10% deficit, and debt ratios varying from 7% to 133% of GDP (ECB, 2006).