samchain/econo-pairs-v1 huggingface dataset:
The three darkest of these clouds come from the rising number of Covid infections and the accompanying re-tightening of some lockdown restrictions across the UK; the threat from further job losses, including from the closure of the CJRS; and the risks from the transition to the UK’s new trading arrangements with the EU at year-end. All three of these risks - the unholy trinity - are clear and present dangers to the UK’s recovery. They are the reason why, in its August projections, the MPC included a significant downside skew to demand. At the same time, these risks need to be put in proportion and in context. While recognising their gravity, my concern is that perceptions of these risks among household and businesses are, at present, exaggerated. By creating excess caution, this has the potential to restrain unnecessarily the recovery. Levels of anxiety among the general public ratcheted-up dramatically in March and April, by a factor of twothirds. Despite falling gradually, anxiety has remained at elevated levels, a third above pre-Covid levels (Chart 1). Measures of confidence among businesses and households have followed a similar pattern,  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  spiking sharply downwards and largely remaining at those low levels, despite the sharp economic recovery (Chart 2). This suggests a persistent, and perhaps puzzling, degree of pessimism.

Crucially, independence allowed monetary policy to respond boldly and effectively to the biggest financial crisis in a century. And it leaves the Bank well placed to address a range of possible developments around Brexit. 1  As former Governor Eddie George once remarked, in the half century that followed its nationalisation in 1946 “the Bank operated under legislation which, remarkably, did not attempt to define our objectives or functions.” They were, instead, “assumed to carry over from [the Bank’s] earlier long history.” George, E (2000), ‘Central bank independence’, speech at the SEANZA Governors’ Symposium, 26 August 2000. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Over the past twenty years, we have also learned a few important lessons. Allow me to highlight three. First, the financial crisis exposed how a healthy focus on price stability became a dangerous distraction. Central banks had won the war against inflation during the Great Moderation only to lose the peace as vulnerabilities built inexorably. Now monetary policy isn’t best placed to address risks to financial stability but the challenge is that the necessary financial policy decisions are also subject to time inconsistency problems. Financial lobbies are strong, and the temptations of a dash for growth are powerful. Conversely, there are no obvious or immediate rewards to the tough decisions necessary to avoid future crises. In the world of financial stability, success is an orphan.
One mechanism is the wealth effect, which  US Stock Market Prices 450  450  400  400  350  Index: 1990-1999  350  300  300  250  250  200  200 Index: 1980-1989  150 100 50 0  150 Index: 1970-1979  3  100 50 0  BIS Review 128/1999  means that households consume more since rising asset prices make them feel richer, and vice versa. Another factor - which many regard as at least as important - has to do with the interaction between the credit market and companies’ balance sheets. When asset prices rise, the value of the collateral that households and enterprises can provide when they borrow for consumption and investment rises too. Higher assets make it easier for them to borrow, or to borrow at lower cost, as a result of which aggregate demand increases. Large fluctuations in asset prices can have substantial effects on the real economy. Why should a central bank worry about the development of asset prices? One obvious reason is that it is natural for a central bank with a declared inflation target to follow asset price trends since, as I just mentioned, they can affect aggregate demand in the economy. And changes in demand in turn ultimately affect inflation, as we all know.

More international banking activity is booked in London than anywhere else, and the UK is host to the world’s third largest insurance sector as well as its second largest asset management industry. UK markets matter for global commerce. But above all, our markets matter for our prosperity. BIS central bankers’ speeches  1  Markets are a major part of the UK economy. 350,000 people are employed in financial services in London alone, and 1 million across the UK as a whole. Across the country, their enterprise contributes £ billion to our national income and £ billion to our exports. On current trends, the UK-based non-bank financial system would increase from around six times UK GDP to nearly fifteen times by 2050. Most fundamentally, our markets serve our real economy. By financing firms to hire, invest and expand, our markets help drive UK growth. By opening up cross-border trade and investment, our markets create new opportunities for UK businesses and savers. By transferring risks to those most willing and able to bear them, our markets help UK households and businesses insure against the unexpected. Much of this activity depends on fixed income, currency and commodity markets. These FICC markets establish the borrowing costs of households, companies and governments. They set the exchange rates we use when we travel or buy goods from abroad. They determine the costs of our food and raw materials. And they help our companies manage the financial risks they incur when investing, producing and trading.
Later on, payment instruments issued by the private banks took ever greater market shares and the use of cash has declined steadily since the 1950s as a proportion of GDP. During the 1990s, electronic alternatives such as card payments also gradually started to replace cash for purchases in shops. Money is now electronic and is created by banks When we talk about money, many people probably envisage a banknote in one currency or another. But in today’s digital society, cash forms a very small part of the total amount of money, only about 2 per cent. 11 The overwhelming majority is completely electronic. Neither is it the case that the Riksbank or other central banks are normally the ones who create new money these days. 12 Many of us have been taught that, when banks get new deposits, they can create new loans, but it actually works the other way around. At present, it is the banks that create new money when they issue new loans. If I approach my bank with a request for a new loan for a home and the bank grants me credit, I will receive a liability in my account with the bank. At the same time, the money I have borrowed is transferred to the seller of the property, who deposits the money in his or her bank account. So new loans  10 Eichengreen, B and Temin, P. (1997) ”The gold standard and the great depression”. NBER Working Paper 6060.

Since 2000, and especially in recent months, the picture has changed. The mines have opted for another strategy and have cut back on price hedging. This strategy change can be partly attributed to more positive expectations regarding the gold price. As a result of the central bank agreement on gold sales, producers no longer fear large-scale sales by the central banks. Moreover, it seems that producers have recently become more upbeat in their assessment of private investment demand. It is interesting, in this respect, that gold producers' hedging activity tends to accelerate market trends. When they expect price decreases, prices do in fact decrease faster as a result of hedging, and when they expect price rises, prices do rise faster owing to the decrease in hedging. Such strategy changes, which are always due to changed market expectations, have to be reckoned with in future as well. •  Reviving private investment demand in the industrialised countries has also contributed to giving the gold price a boost. This phenomenon has been particularly pronounced in Japan, but Europe and the United States have also seen gold demand booming. Economic imponderables, concern over the financial health of some companies, heightened political tension in different parts of the world, the terror attacks of September 2001 and concomitantly subdued stock markets have caused investors to increase their holdings of the  BIS Review 39/2002  1  yellow metal. It seems as if gold is, for the time being, once again assuming its role of a safe haven investment.
Negative interest has led to a decline in interest rates on the money and capital markets, which has been quite substantial in some cases. Mortgage rates have only dropped slightly, however. Fritz Zurbrügg and Andréa Maechler will discuss interest rate developments in more detail later. After the discontinuation of the minimum exchange rate, the Swiss franc appreciated significantly in trade-weighted terms. This was partly due to the fact that the euro had reached a low point in early 2015 in the context of the Greek crisis. Our expansionary monetary policy has since helped to weaken the Swiss franc. Since January 2015, the franc has offset about half of the effective appreciation. It nevertheless remains significantly overvalued. Monetary policy outlook Ladies and gentlemen, let me summarise my main points. Our monetary policy is based on two key elements – the negative interest rate and our willingness to intervene in the foreign exchange market. Unlike during the period when the minimum exchange rate was in force, we now decide on a case-by-case basis when – and on what scale – we will intervene. Our monetary policy aims to have a stabilising effect on the price level and to support the economy. The negative interest rate and our willingness to intervene make the Swiss franc less attractive and thereby help to achieve these goals. The persistently low interest rate environment presents a challenge for savers and investors. However, it is important to emphasise that negative interest is an absolutely essential instrument at this point in time.

Both are intended to make Swiss franc investments less attractive, thereby easing pressure on the franc. This is important given that the franc remains significantly overvalued. Our expansionary monetary policy is aimed at stabilising price developments and supporting economic activity. Our new conditional inflation forecast suggests that inflation will rise faster over the coming quarters than we predicted in March, principally due to the significant increase in oil prices in the intervening period. The effect of this oil price rise on annual inflation vanishes after the first quarter of 2017. The new conditional forecast moves closer to that of the last quarter from then on, and is in line with it from 2018. This forecast shows that our expectations for the medium-term development of inflation and the Swiss economy remain essentially unchanged. At –0.4%, our inflation forecast for the current year is 0.4 percentage points higher than in March. For 2017, we expect inflation to be 0.3%, somewhat higher than assumed in the previous quarter. For 2018, we continue to anticipate inflation of 0.9%. The conditional inflation forecast is based on the assumption that the three-month Libor will remain at – 0.75% over the entire forecast horizon. Global economic outlook Since the assessment of the inflation and economic outlook for Switzerland is heavily influenced by economic developments abroad, let me now present our assessment of the global economy. The moderate recovery in the global economy is continuing, supported by ongoing highly expansionary monetary policy worldwide.
The right hand panel, which describes the situation in recent years, after the Great Financial Crisis, shows that Asian economies are much closer to the regression line than they were in the 1990s. This looks encouraging in terms of balanced growth. One caveat, however, is that Asian dots are located closer to the zero-vertical line as well: total factor productivity growth is generally lower than it was in the 1990s. In other words, economic growth appears to be more balanced, but it may have also lost some strength. This is a bit disturbing because population aging is about to accelerate in some countries, with stronger demographic headwinds therefore to be expected. Remember that once a country falls into demographic onus, it needs to offset negative demographic forces with higher growth in total factor productivity just to maintain per capita growth, and hence living standards. This is exactly why total factor productivity growth is the crucial issue for a number of Asian economies. The next question then is, how do we raise total factor productivity growth? The answer may be a pessimistic one if we think that productivity growth is only exogenously determined. If this is the case, all we can do is hope that some exogenous shock, or just pure luck, will raise productivity. We would have to admit that there is an element of truth in this explanation if we look at the history of prosperous cities, as highlighted by Enrico Moretti, an expert in urban economics.

Generally speaking, structural reforms are always and everywhere difficult to implement in the face of vested interests. Depending partly on where you are in the business cycle, there is often a strong temptation to defer them to a later date. This is because of concerns about short-term negative impacts on the economy. Despite all those downsides, however, I still believe that there is no better time than now to put necessary reforms in motion. Short-term negative impacts are often overstated. They should not be used as an excuse to oppose reforms. If structural reforms are well designed, they will increase rather than decrease current demand, because they improve the prospects of future profits for businesses and hence permanent income for households. 19 That’s all from me tonight. Once I have completed my assignment to talk about growth in Asia, I need to put on my central bank governor’s cap again. If I may use Professor Lucas’s quote again with a slight modification, “Once one starts to think about deflation or inflation, it is hard to think about anything else.” Therefore, please give me your comments and questions before I put my central banker’s cap back on. Thank you. 19  Benoȋt Cœuré, “Structural Reforms: Learning the Right Lessons from the Crisis,” Speech at the Bank of Latvia Economic Conference, October 17, 2014.
Financial education and the Bank of England Speech given by Ben Broadbent, Deputy Governor Monetary Policy  Helping children and young people learn about money conference, London 3 July 2019  I am grateful to Mette Nielsen and Ratidzo Starkey for their assistance in preparing these remarks. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Financial Policy Committee or the Monetary Policy Committee. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Welcome Hello and thank you for asking me along today. These are very important issues and I’m grateful to be able to talk to you. My purpose today is to set out a few things we’ve been doing at the Bank to help schools with economics education. Some of this, I should say, is self-interested. Over time, we benefit from having a large and diverse pool of well trained economists who might consider working for us. The same is true of many other institutions. More significantly, public understanding of what the Bank of England is for, and what it does, is very important. It matters because it is the general public that constitute our ultimate and most important stakeholders. Although the public already hold us to account via parliament, it’s important that we can explain ourselves, and in turn listen to people’s concerns, people, more directly.

But on many occasions, and compared with this simple representation, experiments suggest that people focus excessively on the present. It’s not just that they generally place higher value on getting something sooner rather than later: people seem to put a particularly high weight on current outcomes. They seem to discount the importance of what comes tomorrow, relative to today, more heavily than they do any two successive days further into the future. This is referred to in the economic jargon as “hyperbolic discounting” and by psychologists as “present bias”. It helps to explain why we often put things off right until the last minute, even if the cost of doing it is much higher by that time. It means it can be advantageous to commit to things that are good for you over the longer term – regular saving, or signing up to a gym programme – but that, when the time comes, you might be tempted to avoid.2 And it can also explain why people borrow money, and roll over those debts, even at very high interest rates. This borrowing can take many forms, including foregoing opportunities to reduce the longer-term cost of something. In their recent book “Scarcity”, economist Sendhil Mullainathan and psychologist Eldar Shafir give the example of rag collectors in India – people who rely on collecting discarded clothes and selling them on. It is an ardous job with very little reward.
It involves a Star Trek chair and a bank of monitors. It would involve tracking the global flow of funds in close to real time (from a Star Trek chair using a bank of monitors), in much the same way as happens with global weather systems and global internet traffic (Haldane (2011)). Its centre piece would be a global map of financial flows, charting spill-overs and correlations. Such a global financial surveillance system could serve a number of policy ends. It would allow policymakers to monitor the evolution of the financial system in real time, as it expanded, contracted and changed shape. It would also allow them to simulate and stresstest this system to help detect impending financial cliff-edges. The IMF would be the natural guardian of this global-financial-map-cum-stress-testing-machine. To give this concept some (literal and metaphorical) colour, Chart 18 shows a bank of heatmaps of correlations across a wide range of assets (safe and risky) and a large set of countries (advanced and emerging). There are shown at three dates – a pre-crisis period of calm, the Lehmans Brothers crisis of 2008 and at present. These correlations are grouped in two ways, by asset class and by country. The correlation matrix broadly matches the patterns from the earlier heatmaps. Temperatures appear to be rising over time, with flare-ups at times of crisis. With this map now encompassing a wider range of assets and countries, the strength of these correlations underscores the genuinely global nature of today’s international financial system.

In France, the ACPR contributes actively to the discussions of the Haut Conseil de Stabilité Financière (High Council for Financial Stability – HCSF) chaired by the Minister for the Economy and Finance. In the face of rapid and excessive growth in the debt of several large corporations, the HCSF has adopted a measure which comes into force on 1 July; it imposes on French systemic banks a limit to their exposures to the most leveraged large non-financial resident corporations. The HCSF nevertheless remains vigilant in the face of the rapid increase in bank lending to the private sector, which stood at +5.5% in the first quarter of 2018. French private debt reached 130% of GDP at end-2017, the highest of the large countries in the euro area. Since 2014, it has risen by more than 9% of GDP, while it has declined by 5.4% of GDP on average for the euro area. The HCSF stated on 29 March that it stands ready to act. In particular, if we have to decide, at our next meeting, on a countercyclical capital buffer, that would evidently not be in order to stop the lending today: it would be – as the name suggests – to avoid a credit crunch tomorrow when there is a cyclical downturn in the economy, particularly for small and medium-sized enterprises. Should banks lack sufficient capital, they could manage the heightened risks thus materialising in their balance sheets by restricting new lending.
In these context there are reasons to remind that it is normally the case that financial crises are caused by increases in house and property prices rather than increases in share prices. The actions of the Riksbank should also be put into proportion. The fact that prices on the Swedish stock exchange have both risen and fallen more strongly than many other stock markets has little to do with Swedish monetary policy. Of course, the Riksbank could have raised interest rates during 1998 and 1999 in order to dampen the effects of share price increases. But I have difficulty in believing that increases within reasonable limits would have had any notable effect on the share prices of IT companies and telecom companies. The Riksbank is certainly an important institution. But sometimes there can be reasons to emphasise the limits of our effectiveness. To sum up, the conclusion is the same as in the previous section. Under certain conditions it is quite possible to deviate from the normal guidelines. For example, as regards taking care of price developments in the long-term, or financial stability, or real stability. But the arguments should be good ones. 3. The exchange rate  Now, some words about the importance of the exchange rate as regards our view of monetary policy. In this area, opinions have changed a lot within the Riksbank after the first years with an inflation target.

At any rate, this is the picture given by analyses in Sweden, the United Kingdom and Australia, for example. Despite periods of severe weakening of the krona, price trends have been restrained. However, no one knows whether this will continue in the future in exactly the same way. Against this background, the Riksbank is primarily interested in the exchange rate in the same time perspective as applies to inflation. That is, one to two years ahead. We do not normally react to exchange rate movements in a shorter perspective. We all know that this has not given us a particularly stable krona, but as far as we can see, the krona has not fluctuated noticeably more than other currencies during the last five or six years. Nor has it been easy to make good forecasts regarding the exchange rate. But it is difficult to see any really good alternative to this way of doing things. Experience of trying actively to guide the exchange rate towards some given level has not been particularly promising. In this context it is worth pointing out that the central bank which in many respects works most closely to the way we do – The Bank of England – continually struggles with the opposite problem. That is, an exchange rate which is too strong. This is one indication that it is not primarily the way monetary policy is formulated which is the problem. During the first years of floating exchange rates, the Riksbank used something called the Monetary Conditions Index (MCI).