samchain/econo-pairs-v1 huggingface dataset:
According to recent analysis of the Banque de France, a powerful narrative then emerges by comparing the average contribution of each of these factors between 1999-2007 and 2013-19: In the second period, macroeconomic shocks have turned disinflationary relative to the first decade of the Euro, pushing down inflation despite a partial offset by unconventional monetary policy. Page 4 sur 9  The unexplained or residual part of the inflation decline has averaged about 0.3 percentage points since 2013. Yet this share has been growing, suggesting that we need to pay close attention to its potential causes. Across the euro area in recent years, higher wages have been partly offset by squeezing corporate margins, particularly in market services. Another factor may be the possibility of a downward drift in long-term price expectations that could have followed from the prolonged period of low inflation. Last, but not least, structural changes may have impacted the process of price and wage formation, in the context of increased digitalisation and globalisation of our economies, and diminishing bargaining power of workers. Still, the quantitative weight of these structural factors is less than clear and has not achieved consensus among economists. I.B. The future: the return of inflation? The current debate on a potential return of inflation may be legitimate in the US ii, but not in the Euro area. In the US, the ongoing recovery is much faster than what was observed after previous crises and the output gap is projected to close and become positive in the course of 2021.

Second, because both climate change and financial instability may threaten our ability to deliver on this primary mandate, we shall take their consequences into account, but with full credibility and transparency in our  Page 9 sur 9 models and actions/tools. Third, we should take care to avoid overpromising, as there is no world in which central banks alone can address those issues, starting with the absolute necessity of an adequate carbon price. Central banks have increased capacities, but they still have limits. This is a piece of wisdom we must never forget. A standard Phillips curve approach provides a simple narrative of the path of euro area inflation over the last 20 years. Let me describe you briefly the exercise: HICP inflation is regressed on (i) a variable of economic slack, (ii) oil prices in euros, (iii) the prices of agricultural commodities in euros, and (iv) a lagged term of inflation measuring its inertia. In two separate specifications, the economic slack variable is (i) the output gap estimated by the European Commission, or (ii) the unemployment rate (ILO concept). The equations are estimated on quarterly data ranging from 1998 to 2019. For more details on reduced-form Phillips curve models used at the Banque de France, see Chatelais, De Gaye and Kalantzis (2015) “Low inflation in the euro area: import prices and domestic slack », Rue de la Banque 6, and Berson, De Charsonville, Diev, Faubert, Ferrara, Guilloux-Nefussy, Kalantzis, Lalliard, Matheron and Mogliani (2018) “Does the Phillips curve still exist?”, Rue de la Banque 56.
This mismatch in durations, together with low interest rates, means we have a growing problem. 16. We cannot address this fundamentally through changes in asset allocation strategy among insurance and pension funds, taken as a whole. There have been recent shifts towards alternative assets. There has been a search for yield, and some funds have seen improvement in their return on their assets. But we have to bear in mind that globally, there is a limited supply of quality alternative assets. Funds are moving into private equity, real estate and some other alternative assets but more money going into these assets doesn’t raise yields. It can only mean a lower return on these assets over time. The search for yield doesn’t raise yields overall, it just redistributes yields among different players. So there are limits to this strategy for the pension and insurance fund industry as a whole. 17. I should note that the challenge we are talking about in retirement security is not a problem only for the advanced economies. Several emerging economies too are entering a phase where their societies are ageing, and some are quite unprepared for it. 18. Brazil is the most pronounced case, where the unsustainability of its social security system is reaching crisis proportions. Past promises have not been funded, are soon going to have to be funded, and they are not going to be able to fund it. China has also begun ageing.

After all, notice that the red and green regions of the bull’seye chart show modest inflation above 2 percent is much more acceptable than even 6 percent unemployment. The FOMC should be anxious to get to that bull’s-eye region as quickly as feasible given the long slow path to date. The Fed’s reaction function I’ve spoken so far about how we are missing on our policy objectives. Obviously, the aim of policy is to eliminate those misses. How do we hit the bull’s-eye? What do we do 6  BIS central bankers’ speeches  operationally in terms of policy tools? In normal times, the FOMC moves it’s traditional policy tool, the federal funds rate, in order to influence aggregate demand and with it economic growth and inflation and disinflationary pressures. Many economists have studied the relationship between actual Fed actions and sensible, explicit policy rules that might capture the Fed’s policy reaction function (chart 4). Historically, Fed policy moves have been reasonably well described by simple policy rules, particularly the 1999 version of the so-called Taylor rule, 7 that relate the federal funds rate to the differences of output (a proxy for employment) and inflation from their target levels and a constant term that is meant to capture the equilibrium real interest rate and the Fed’s inflation target. However, this rule does not always describe policy well. For example, given judgmental, but reasonable, choices for the Fed’s inflation objective before it adopted a 2 percent objective, the Taylor rule misses during the 1990s are big.
2  Some of the factors that might have reduced productivity growth might also have affected the skill mix of employment, so it’s not clear whether this can legitimately be seen as independent effect: in the limit, saying productivity growth is weak “because” the economy has created more low productivity jobs has a slightly circular flavour to it. Note too that, at least in the short run, a given compositional effect on wages should not be translated one-for-one into productivity space – you’d expect the latter to be smaller (I explain this point in footnote 10). So the 3% figure should be viewed as a ceiling for the estimated impact of these shifts on productivity over the 2008–14 period. 3  Real wages can diverge from productivity either because average profit margins are changing or because the relative price of what firms produce diverges from the price of what consumers buy. In an open economy, for example, an improvement in the terms of trade will raise real incomes relative to productivity; the upward trend in profit margins in the US has depressed wages relative to national income. There has been no such trend in  2  BIS central bankers’ speeches  shocks to real take-home pay – whether from lower productivity, higher taxes or rises in import prices – without the unfortunate devices of higher inflation and/or higher unemployment.

Political and institutional framework A further prerequisite for Swiss financial service providers to compete on an international level is a sound political and institutional framework. Switzerland has long had stable political relations, legal certainty, efficient authorities, and a solid and secure infrastructure. This constitutes a strong underpinning for financial service providers. But let us not rest on our laurels. We must try to avoid creating any administrative hurdles that neither contribute to stability nor bring any great benefit, but instead unnecessarily restrict the activities of financial service providers. Transfer stamp tax and withholding tax, for instance, curb the potential for growth in Switzerland. The reform of the withholding tax system and the abolition of transfer stamp tax on domestic bonds are expected to strengthen the Swiss capital market. 2 This would not only benefit the financial sector, but also improve the financing options available to companies. It would also benefit small and medium-sized enterprises, for which such opportunities have been very limited until now. 2  Cf. Roadmap for financial market policy Switzerland 2020+, Advisory board for future of Swiss financial centre, 2019. Page 4/5  Open market access Switzerland undoubtedly owes much of the prosperity it enjoys today to open markets and thriving trade. However, for the export-oriented parts of the Swiss financial industry, limited market access continues to be an obstacle restricting growth potential. Market access to some countries has deteriorated since the financial crisis. This especially affects wealth managers who are operating in our relatively small domestic market.
Over time, therefore, we could find that the worst-quality credits could gravitate to those banks which are the least able to assess, price or monitor them. However, I do not wish to suggest such a scenario without also highlighting how we may guard against it. First, of course, the role of Pillar 2 - individual assessment of banks by supervisors with appropriate action to follow - will be extremely important in ensuring that all banks, not just those on the internal ratings approach, have a level of capital appropriate to their risks. Secondly, the Committee has clearly emphasised that the standard 100% risk weight for unrated credits represents a floor. Supervisors are encouraged to increase this risk weight when warranted by the overall default experience in their jurisdiction and for the particular bank concerned for their unrated exposures. And I hope, taking a prudent approach, that the supervisors will do this. Even with the current Accord, there are a number of countries, the UK included, that have applied capital requirements in excess of the minimum risk weights in the Accord and this does not appear to have made their banking systems uncompetitive internationally. Where supervisors do not currently have the types of data that would enable them to form a judgement on the appropriate risk weight for unrated credits, I hope that the disclosure requirements in Pillar 3 of the new Accord will help them.

In the years ahead, the multilateral trade system is at risk of being undermined, which may leave us with a more fragmented system. This may adversely affect small countries in particular. In that situation, it would be injudicious for Norway to compromise its current agreements with Europe. Climate change requires structural adjustments The world needs more cooperation, not less. We are facing a climate crisis that can only be addressed by engaging in a common global effort. Last year’s report from the UN climate panel was alarming. If work to reduce greenhouse gas emissions is not intensified, global warming could spin out of control. A warmer planet will have serious consequences. Major changes in production methods and consumption patterns are needed in order to mitigate global warming. Measures taken must lead to concrete reductions in global emissions and should be cost-efficient. Emissions pricing is essential to reducing greenhouse gas emissions. The polluter must pay. The consequences of not having applied this principle at a global level are now coming into evidence. To quote one of last year’s Nobel laureates in economics, William D. Nordhaus: “The result is too much burning of fossil fuels, too much climate change, and too many harms to humans, wildlife, ecosystems, and more.”2 It is a demanding task to put into place adequate measures. The gains from lower emissions are shared by all - also by those who do not contribute. This creates a free-rider problem both at the global and national level.
But we must continue pressing on with the reform effort and not let reform fatigue get in our way. I need not remind you that Britain herself undertook deep and painful reforms during the 1980s. To a great extent, I believe the golden age the British economy is enjoying today reflects the hard work of not so long ago. Ladies and gentlemen, Globalization is a long and difficult road. We all know the rewards are considerable and the journey worthwhile. But sometimes the obstacles may seem discouraging, even insurmountable. The risks may seem too great. Nearly twenty years ago, the Thai economy was staggering from a global oil crisis. Ten years ago, Thailand was at the epicenter of the Asian financial crisis. Today, we face the challenges of global imbalances and high oil prices. I am optimistic that Thailand will once again overcome these challenges as it overcame those in the past with experience, lessons learned and foresight. The future will bring with it a new set of challenges. I cannot tell you the shape or form that these future challenges will take. But I can tell you this: ten years from today, when my successor addresses the distinguished members of the British Chamber of Commerce, I expect that this room will not be  4  BIS Review 64/2007  large enough for such a gathering. Your membership will have grown by leaps and bounds together with your enterprises. Ladies and Gentlemen, The road ahead still beckons. We have come a long way together.

Tarisa Watanagase: The Thai economy – monetary policy and the challenges of globalization Speech by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the British Chamber of Commerce Luncheon Talk, Bangkok, 11 June 2007. *  *  *  Chairman Bain, Mr. Ambassador, Ladies and Gentlemen, I would like to begin by thanking Chairman Bain for his kind invitation for me to speak at this luncheon before all of you: the distinguished members and guests of the British Chamber of Commerce. As Thailand’s oldest chamber of commerce, you have shown your commitment to the Thai economy. As Thailand’s largest non-Asian chamber of commerce, you represent a significant economic force. And most importantly, the gathering here today demonstrates your active participation in the future of Thailand. It therefore gives me great pleasure to share my views on the prospects of the Thai economy with you today. I particularly look forward to your questions, your comments, and a lively exchange of views. Distinguished Guests, Following mass street protests against the previous administration, a military coup and the annulment of the 1997 constitution in September last year, we continue to see heightened political uncertainty. Much has happened over the past six months. On the political front, the recent historic ruling by the Constitutional Tribunal removed some political uncertainty. But until a new constitution and a democratically elected government are firmly in place, political uncertainty is bound to remain a factor that affects Thailand’s near-term economic prospects. Economic uncertainty has also increased.
Japan and the euro area have faced similar challenges in terms of sustaining inflation at their goals. One reason it’s been hard to sustain inflation at the target rate is that persistently low inflation due to policy being constrained by the ZLB can feed into inflation expectations. If inflation gets stuck too low—below the 2 percent goal—people may start to expect it to stay that way, creating a feedback loop, pushing inflation further down over the longer term. 2/4  BIS central bankers' speeches  The lower average level of inflation translates into a lower level of interest rates cuts available during a downturn, making it even harder for policymakers to achieve their goals.6 In 1980, when core PCE inflation reached a peak of 10 percent, it was hard to conceive of a world where inflation that’s too low would be the preoccupation of central banks. But the 10 years since the Great Recession demonstrate just how much low r-star has changed the economic environment. Unprecedented monetary stimulus in advanced economies supported economic recoveries and significant declines in unemployment, with unemployment rates today near, or in many cases well below, those seen before the crisis. 7 Bold monetary policy actions surely played an important role in averting far greater catastrophes and aided economic recovery. Despite these actions and this success at bringing unemployment to low levels, inflation rates have persistently been below central banks’ goals.

To grow out of the crisis and survive the shocks from outside, Thailand must look within and unleash domestic engines of growth. Long-term investment in productive infrastructure is one key engine of growth. Another is domestic structural change spurred by two drivers of change in the region. The first driver of change is growth in China and the attendant rise of the Chinese middle class and demand for a broader range of imported goods and services. Chinese exports will also grow in sophistication. The second driver of change is trade liberalization in the region – such as free trade agreements with China and India as well as the ASEAN Economic Community, or  2  BIS central bankers’ speeches  AEC. AEC, in particular, goes beyond free trade and also has the potential to foster not only goods and services integration but also cross-border labor and investment flows. Because of the sheer size of these markets – China, India and AEC – the regional pattern of production will change considerably to cater to new demands while leveraging on new comparative advantages and supply chain synergies. Uncompetitive firms have to either upgrade themselves, or close down and free up labor resources to more competitive firms. This reallocation process implies that the country makes better use of labor resources and achieves higher productivity. Ongoing financial sector reform will also build financial sector resiliency. Thailand’s Financial Sector Master Plan, now in its second phase, continues, and focuses on liberalization through increased competition, raising efficiency, and strengthening the financial infrastructure.
Exceptionally low short-term interest rates have alleviated some of the burden borrowers face in servicing their debts. Low long-term interest rates – partly a consequence of Quantitative Easing – will have given a lift to asset prices, and so to wealth and the cost of capital. It is arguable that this defers some of the rebalancing needed in the real economy, but overall it reduces the risk of unnecessary destruction of the economy’s productive capacity. That stimulus can be sustained only so long as medium-term inflation expectations remain anchored to our target of 2%. We must be alert to the need gradually to withdraw stimulus as and when recovery builds. And we must be alive to the possibility that the alleviation of current macroeconomic problems could sow the seeds, somewhere in the financial firmament, of the next set of imbalances. Where risks to stability do emerge, we must use what other instruments we have to try to temper them. This can never be perfect, but it can be better. BIS central bankers’ speeches  11  Chart 1:  Chart 2:  Spain’s net external balance sheet  Italy’s net external balance sheet  Source: Eurostat  Source: Eurostat  Chart 3:  Chart 4:  Gross external liabilities  10-year spot real interest rates  Source: International Financial Statistics. 12  Source: Bloomberg.

Had the West’s current account deficits been financed by inflows of equity, would the eventual “adjustment” have been less destructive? The flows were, of course, of debt. The accumulated “excess” savings in the East were largely held in official, risk-averse portfolios, notably central bank fx reserves. Their investments concentrated on fixed-income instruments: initially government bonds, but later mortgage and some corporate securities (broadly matching the composition of capital flows into the US, Chart 6). Combined with demographic shifts in the West pushing pension funds into fixed-income, this might have increased global demand for bonds relative to equities, driving down credit and term premia (relative to equity risk premia). For a while there was probably excess – that is to say, unsatisfied – demand for bonds, and that in turn probably had two effects. The generation of new types of supposedly “safe” bonds through securitisation and, in particular, eventually synthetic securitisations.8 Separately, there was arbitrage across asset classes, effected by firms borrowing to buy back their own equity and to acquire others via leveraged buy-outs. In summary, while the ex ante global savings/investment imbalances plausibly drove down equilibrium world risk-free interest-rates, the precise composition of the resulting capital flows will have affected risk premia too. Monetary policy, international banking flows, and global liquidity The other story aired about macro drivers is the possible role of monetary policy and private sector credit creation. And that too points to a role for risk premia.
Even in Japan, where the direct impact of the turmoil has been relatively contained, the economy remains fragile and prospects have deteriorated. The emerging market economies stand in sharp contrast with this gloomy outlook, as their growth forecasts have been revised down only marginally. In fact, one of the most surprising features of the recent developments in the world economy has been the resilience of most emerging market economies to the unravelling of the global turbulence. This feature is even more remarkable taking into account their recent history of financial and economic instability. If we look at basic financial market indicators of risk – such as the sovereign spreads, exchange rates or equity markets – what we observe is that, overall, they have behaved significantly better than comparative asset classes in the industrial economies over the past  BIS Review 56/2008  1  nine months. In addition, credit has generally continued to be available in these economies – albeit, admittedly, at a somewhat higher cost – and creditworthy emerging market borrowers have not been shut out from international markets, contrary to what used to happen in the past. It is true that issuance abroad has been reduced notably since the beginning of the turbulence, and that those borrowers with relatively low credit ratings may have been shut out completely from international markets.

As a result, markets should work better to reward prudent and profitable performance, and appropriately penalise risky and poor performance. This is positive both for financial stability and the efficient allocation of economic resources. Improving alignment between business units and financial management Bank Negara Malaysia also expects IFRS 17 to be a key catalyst for insurers to review, if not overhaul, business processes across the organisation. This will be driven by at least three factors. First, the need for business units to capture broader and more granular information required for financial reporting. Second, changes in the way performance is measured under the new standard. And third, increased opportunities for institutions to differentiate themselves from the competition, helped by a more integrated view of performance. These considerations will have wide implications for insurers’ organisation structures, data capture, infrastructure and systems, 2/5  BIS central bankers' speeches  risk management, and product design and development. At present, many insurers are operating on multiple, fragmented legacy systems – including largely separate systems supporting the finance, investment and actuarial functions. Systems for regulatory reporting and compliance are also often separate in a number of institutions. As insurers begin to prepare for the reporting of insurance liabilities under the new regime, IFRS 17 will create both a need and the opportunity for insurers to strategically re-think information flows across the organisation – not only to improve efficiencies in financial reporting and mitigate operational risks, but also to capture synergies that will improve business and compliance outcomes.