samchain/econo-pairs-v1 huggingface dataset:
After the end of our net asset purchases, the primary instrument to steer our monetary policy stance is again our key interest rates. And as far as their path is concerned, we continue to expect them to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. This rotation of instruments from net purchases to the rate path has been implemented in such a way as to preserve our accommodative monetary policy stance. We have thus not tightened our monetary policy. Moreover, we have made it clear that, in any event, we stand ready to adjust all of our instruments, as appropriate, to ensure that inflation continues to move towards our inflation aim in a sustained manner. President Mario Draghi always stresses that the toolbox is full. But with interest rates at or even below zero and the asset purchase programme at its self-imposed limits, what else is really left? If there is a problem, there needs to be a careful assessment to establish the cause. A financial shock, for instance, is something different from a slowdown in growth for fundamental reasons. In the case of an economic slowdown, interest rates are generally the instrument of choice. If the euro area economy were to slow more sharply, we could adapt our forward guidance on interest rates and this could be complemented by other measures.

In such a context there is a risk that the banks could act even more procyclically than they usually do and would amplify the cycle. To be clear, the uncertainties and the economic slowdown have so far not caused banks to tighten their lending conditions or to grant less credit. But we need to keep a very close eye on how this evolves. How will the banks behave if the economic slowdown continues? Would you say that financing conditions in the euro area as a whole have already tightened significantly? Financing conditions have tightened somewhat in recent months, but not significantly, thanks in part to our forward guidance on interest rates. This partly compensates for such effects. But you’re absolutely right, we as central bankers must always ask ourselves whether our monetary policy stance is appropriate for us to attain our objective. And what is your answer at the moment? We have revised our assessment of risks to growth downward. I would say that is a clear indication that the level of alert is higher than before. 2/5  BIS central bankers' speeches  Three quarters of below-potential growth, higher risks and at least slightly tighter financing conditions – what does that signify for the inflation outlook? Is the ECB’s Governing Council losing its confidence in reaching the target of 2% over the medium term? Three quarters of below-potential growth are certainly not good news. But we have a medium term perpective.
This is in line with the latest Updated Budgetary Plan for 2017, which anticipates a slightly contractionary fiscal policy stance for the current year, in contrast to the expansionary stance of the last two years. Naturally, any downward deviation in growth or inflation, or any increase in financing costs, would make fiscal consolidation more demanding. With regard to subsectors, the draft budget includes the stability targets approved by Parliament in December 2016. The budget deficits projected for central government and the Social Security system are 1.1% and 1.4% of GDP, respectively, as against the actual deficits of 2.7% and 1.6%, respectively, recorded in 2016. The deficit targets for regional and local government are 0.6% in the case of regional government (0.8% in 2016) and a balanced budget in that of local government (as against the surplus of 0.6% recorded in 2016). According to these plans, central government agencies will account for most of the improvement in the total deficit in 2017. Achievement of the budget deficit target is a result, first of the State spending ceiling, approved in December, which excludes spending under the financing arrangements for local and regional government; and second, of the growth in public revenue. The most important measure on the expenditure side, in relation to personnel costs, is the increase of 1% in the compensation of public sector employees, in line with that approved last year.

The other option, described by Kohn as the “extra action policy”, allows for a deviation of current inflation from a level determined as stable in return for improvement of the perspectives of achieving price stability in the future. However, the extra action policy does not mean piercing the speculative bubbles by central banks, and means rather “taking out” of additional insurance against possible negative shocks, which may happen in the future. In Kohn’s opinion, the extra action policy may be run very rarely and only where the three conditions are met: •  the central bank must be able to identify asset bubbles in a timely manner and high certainty as to the correctness of analysis conclusions;  •  there must be a high probability that a slight tightening of the monetary policy will be able to stand against the speculative activity on a given assets market;  •  the expected improvement of the future economic situation resulting from a smaller speculative bubble must be significant and higher than the costs incurred by the economy in the aftermath of running the extra action policy. To recapitulate this train of thought, Kohn was very sceptical whether the three above-mentioned conditions can be sufficiently met; however, he did not preclude that in the future, the understanding of economic processes will improve as much as to enable running the extra action policy where reasonable.
To come up with its forecast, the MPC has to reach a view based on all the information available to us: data, theories, a variety of models, business and market intelligence, our own experiences and judgement and so on. But there are huge uncertainties within the information set and so there must be equally great uncertainties about the resulting judgements. That is why the one, indeed the only, thing we know for certain about any forecast of the economy is that it will be precisely wrong. That is also why the MPC puts little weight on its central projection, and chooses to communicate its judgments to the public by focusing on the range of possible outcomes and the balance of risks, as summarised in the fan chart.7 What this means is that setting monetary policy is about decision making under uncertainty. It isn’t clean. In fact it’s very messy. But nobody has a working crystal ball. The important question for us is not whether we got the central projection right but whether we set the right policy, given what we knew at the time. Crucially, we are accountable to the public, including via the Treasury Select Committee, for our policy decision. I do not think I have heard many argue that we should have done something materially different with policy during the depths of the recession in 2009 (i.e. to the extent necessary) in order to generate a different outcome for inflation now.

Information about future demand and supply levels ought to be reflected in the current price and in the prices of commodity futures. But the increases from Autumn 2010 onwards were largely unexpected, and have been a genuine surprise for our forecasts. For example, spot oil and gas prices have risen very substantially since their low points in 2009.2 Spot oil prices are well above the levels implied by futures prices at the time of the February Inflation Report (Chart 2). Gas futures prices have also moved markedly higher since then (Chart 3). Chart 2  Chart 3  Sterling oil prices(a)  Sterling gas prices(a)  Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. Each futures curve assumes that the sterling-dollar exchange rate remains constant at its average during those periods. (a) Futures prices for February and May are averages during the fifteen working days to 9 February and 4 May respectively. (b) One-day forward price of UK natural gas. (b) Brent forward prices for delivery in 10–21 days’ time converted into sterling. Third, we have been experiencing the ongoing effects of sterling’s fall during 2007 and 2008, when the nominal effective exchange rate fell by around 25% (Chart 4).
And independence counts for little if the government persists in running a deficit while non-monetary means to finance it have yet to be developed. If we look at five of the central European countries where reform is most advanced - the Czech and Slovak Republics, Slovenia, Hungary and Poland - the first two have succeeded in bringing annual inflation down to single figures, while inflation in Hungary and Poland is just below 20%. All except Hungary monitor an intermediate monetary target, but these targets have proved unreliable friends in the transitional economies generally. It has been far from easy to predict the velocity of money when the economic and financial structure is in turmoil. The more important success factor appears to be exchange rate policy. The Czechs and Slovaks have been able to hold their exchange rates fixed against a Deutsche Mark/US dollar basket. This has not been sufficient to deliver the inflation rates of 1-3 % seen in Germany and the United States, as the transition economies are experiencing faster rates of growth in productivity in tradables; they need to permit their currencies to appreciate if they are to lower their inflation rates further. But their fixed exchange rates have cemented and enhanced the credibility of the sound monetary and budgetary policies being followed. Yet fixing the exchange rate is not the only route to lowering inflation. Slovenia has succeeded with a managed float, though a key factor has been its willingness to keep their real exchange rate relatively high.

These considerations can provide a rationale to use public resources to assist firms with a high level of debt produced by an exogenous shock, such as the current pandemic, but which are viable based on their medium-term perspectives in terms of profitability and productivity. However, the design of public support programmes to help viable firms improve their solvency position poses serious design challenges, related to the selection of the firms receiving the aid and the design of a structure of incentives for those firms participating in these programmes. Without adequate selection criteria, there could be a poor redistribution of limited productive resources, keeping low-productivity firms running or providing support to companies that do not need it. Also, an inadequate design could leave aside viable firms that face solvency problems. 1/2  BIS central bankers' speeches  This calls for a careful design of these programmes and a permanent real time evaluation of them, which, in the end, requires close monitoring of the financial situation of both non-financial firms and banks. In this regard, the Banco de España has exerted much effort in recent months in assessing the implications of the COVID-19 shock for the corporate sector. New tools based on micro simulations have been developed, making an extensive use of our micro databases, including our Central Balance Sheet Data Office database, which contains information of the non-financial sector, and the Spanish Central Credit Register, which contains information on all loans provided by Spanish banks to firms.
So, in short, in Sweden a situation has prevailed where subdued inflationary pressures have called for an expansionary monetary policy, while, at the same time, property prices have been surging in a fashion that in no way can be deemed as sustainable. How can, and should, a central bank in a small open economy with an inflation target deal with such a situation? The first thing a central bank can do is to engage in “open-mouth operations” and constantly remind everyone of the existence of the risks through speeches and documents. One publication that can prove particularly useful in this regard is the Financial Stability Reports, which are now published by an increasing number of central banks. By taking a systemic view of the financial system, the Financial Stability Reports investigate the collective impact stemming from the actions of individual financial institutions. By communicating these findings to market participants and the general public, the central bank can raise awareness of risks to financial stability, which might otherwise go unnoticed. BIS Review 101/2007  3  But, at times, all this may not be enough, and then the inevitable question begs to be answered – How, if at all, should a central bank let changes in asset prices influence its monetary policy? The Riksbank runs a flexible inflation target, which means that we also take the real economy into account when we set interest rates.

François Villeroy de Galhau: Digital innovation - what role can we play as central banks? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Singapore Fintech Festival, 8 November 2021. * * * Ladies and Gentlemen, It is always a great pleasure for me to have the opportunity to speak at the Singapore Fintech Festival, and I wish to thank Ravi Menon and the Monetary Authority of Singapore for organizing it. Although I am joining from Paris today, I look forward to coming back to Singapore soon to continue exchanging. Innovation may not be the first thing that comes to mind about central banks. After all, our institutions have been around for quite some time: MAS just turned 50 – and I take this opportunity to congratulate this golden Jubilee –, and Banque de France is more than 2 centuries old. We are more associated with stability than disruption… Yet the blossoming of digital innovation has the potential to transform the financial system in its entirety. We have to embrace these changes, but there are also things that we need to preserve in this process: the stability of the financial system. Innovation and stability can appear as contradictory in the short run; but they are complementary through a common value; a keystone: trust. Trust of the public in money. To be implemented effectively, these dual principles of innovation and stability require a cooperative setting.
Mervyn King: The Monetary Policy Committee - five years on Speech delivered by Mr Mervyn King, Deputy Governor of the Bank of England, to the Society of Business Economists, at the Royal College of Pathologists, London, 22 May 2002. I would especially like to thank Claire Lombardelli, James Proudman and James Talbot for their expert help in conducting and analysing the experiment reported in this paper. I have also benefited from useful comments from Charlie Bean, Mark Cornelius, Spencer Dale and Peter Rodgers. Richard Geare provided help with the data. *  *  *  Five years ago, the power to set interest rates in this country was given to a new Monetary Policy Committee (the MPC). That decision is still widely regarded as the most important taken by the incoming new Labour Government. At the time, the decision to create the MPC was controversial. That is hardly surprising. Few decisions have as much economic impact as the level of short-term interest rates. They attract the interest of politicians and the media, yet when the MPC sets interest rates, it acts independently of government. The government sets the target, but the Committee sets interest rates to meet that target. Compared with many other countries central bank independence in the UK is relatively recent, although not unprecedented.

Commentators and others may form their own views about the likelihood of various economic shocks occurring, and in that respect it is more important for them that the Committee explains its policy reaction function than attempts to provide guidance on the likely future path of interest rates. And when the Bank of Canada tried to anticipate the likely future path of monetary conditions, it found that, despite its clear explanations of why the future could not be easily anticipated, markets took those anticipations as commitments, and were surprised when unforeseen events resulted in different policy outcomes. In contrast, the MPC does not attempt to anticipate its own decisions. In addition to explaining the Committee’s views on the economy, and the balance of risks to inflation, there is a second important role for communication. That is to explain the views of the nine individual members of the Committee so that they can be held accountable for their judgments. There is, therefore, an inherent tension between a system of nine individually accountable members, with their associated views, and a Committee from which a single decision emerges that requires a clear explanation each month. The former produces, as I have argued, better decisions; the latter is important for the predictability and thus the efficiency of monetary policy. The communication strategy of the MPC must provide a balance between these two objectives, a point acknowledged in the report by Don Kohn on the procedures of the MPC.
Market participants weigh the interest rate differential between Norway and other countries against the likelihood of a depreciation of the krone in the future. Cyclical divergence can cause the krone to overshoot its future level in the short term. However, in the long term, the krone cannot remain this strong. This would require a substantial improvement in our capacity to generate income. What are the factors behind the wide interest rate differential? With the krone exchange rate prevailing at end-January, competitiveness had weakened by a little less than 25 per cent since 1996. The krone had appreciated by almost 10 per cent. Chart 8. Relative labour costs 120  120  31 January 2003 110  110  Local currency  100  100  90  90  Common currency 80  80 1990  1992  1994  1996  1998  2000  2002  Sources: TRCIS/IMF, Ministry of Finance and Norges Bank  In the same period, wages in Norwegian manufacturing increased by close to 15 per cent more than wages among trading partners. In the years around the millennium, the depreciation of the krone veiled the underlying deterioration in competitiveness. In May 2000, the krone hit its lowest level in six 1 years . The krone has since appreciated, and the effect of high wage growth has gradually come into evidence in company accounts. In the ten years that have passed since the banking and currency crisis in 1992, the economy featured a long period of balanced growth.

In particular, it stated that the Committee expects it will be appropriate to maintain the federal funds rate at its current target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.9 By linking future policy actions to economic outcomes and ultimately our dual mandate goals, this forward guidance clearly describes the key elements of the FOMC’s reaction function to economic developments and a changing outlook. Ready to Adapt One of the most important, but perhaps overlooked parts of our August announcement is that we will review our longer-run framework roughly every five years. This represents the Fed’s commitment to transparency and our willingness to continue to adapt to changing circumstances. Reviewing our longer-run framework and approach to our goals more frequently will ensure we are well prepared for the future, whatever it may bring. Conclusion I’ll conclude with this: these are extraordinary times. The announcement of changes to our longer-run framework comes during one of the most challenging periods our country and our economy have ever faced. These changes to the framework mean that we are well positioned to deliver on our dual mandate goals and support a strong and sustained economic recovery. 1 See Board of Governors of the Federal Reserve System, Statement on Longer-Run Goals and Monetary Policy  Strategy, as amended effective August 27, 2020.
Chart: GDP per capita in China The march towards an ever more closely integrated global economy has been particularly fast in recent decades. The growth story that began in the British Isles has reached China, where we have seen a boom without parallel in world history. What took the West more than 200 years, China has achieved in just a generation. Chart: Global manufacturing production China’s economic rise has seen a labour force twice that of the US and EU combined entering the world market. A quarter of global manufacturing production now takes place in the Middle Kingdom. The land that brought us paper, gunpowder and the compass has become the world’s workshop. Chart: Persons living in poverty The benefits for the average Chinese have been immense. Worldwide, more than a billion people have been lifted out of poverty since the early 1980s. Three in four of them have been in China. Trade and technological progress together spell substantial economic gains. But not everyone is a winner. Greater international competition and new production technology also mean that jobs disappear and working conditions come under pressure. In many rich countries, parts of the population have been left behind. For many, the economic downturn following the financial crisis has made things worse. Chart: Income growth in the US The income distribution in the US can serve as an example.

These surpluses have declined in the past few years. Oil and gas production passed its peak more than a decade ago. We may find once again that these resources have been underestimated. But the oil price collapse and developments in the Norwegian economy in the past few years have reminded us of an inescapable fact; we must drive forward a larger non-oil tradable sector. We need more legs to stand on. The needed structural adjustments in the Norwegian economy will have to be dealt with against the backdrop of more global challenges. Demographic changes and sagging productivity growth may point towards persistently low growth in advanced economies. Protectionist tendencies and reduced trade in goods and services could put an additional drag on growth. We must also make changes to consumption and production methods in order to reduce greenhouse gas emissions. This evening I will take a closer look at these challenges. Is low growth here to stay in advanced economies? In the long term, there are two factors that determine how quickly an economy can grow: the 2/9  BIS central bankers' speeches  supply of labour and labour productivity. Chart: Working age population The decline in the working age population is weighing on the growth outlook for many countries. The large post-war cohorts are leaving the labour force, and the consequences of a long period of low fertility rates are becoming increasingly clear. At the same time, the proportion of the population who are employed remains low in many countries.