samchain/econo-pairs-v1 huggingface dataset:
This is a reason why the central bank should act with foresight and be alert to the development of inflation expectations. BIS Review 8/1997  -2-  The potential for influencing fluctuations in activity around the trend is dependent on people’s appraisal of the central bank’s determination and ability to maintain price stability. Central bankers talk of the importance of credibility, by which is meant the extent to which people expect inflation to be in line with its targeted rate. The degree of credibility is conditioned by, for example, the historical record of inflation and the existence of government financial deficits. Weak credibility calls for caution in monetary policy, just as higher credibility confers more room in which to manoeuvre. Experience has shown, moreover, that even in the shorter run, the possibility of influencing employment and unemployment via monetary policy is very limited. Limited fluctuations around the growth trend are by no means sufficient condition for a smooth development of employment and low unemployment. Comparisons between countries and regions reveal that a similar growth pattern, even over a considerable period, can involve markedly divergent effects on employment and unemployment. This highlights the function of the labour market. It is there that measures must be taken in order to tackle problems with employment and unemployment. I want to underscore some conclusions from this discussion. Monetary policy cannot have growth as the primary objective because it is not capable of influencing growth in the longer run.

In order to clarify our deliberations in the assessment of future inflation, the Riksbank presents an inflation report four times a year. A number of indicators are reviewed in these reports, together with an assessment of future tendencies and a discussion of risks and opportunities in the field of inflation. Simplifying somewhat, an inflation forecast can be said to rest on two factors in particular: one is the relationship between supply and demand and the other is expected inflation. The difference between the actual level of demand and the potential level of production that can be combined with an unchanged rate of inflation is commonly referred to as the output gap. As BIS Review 8/1997  -3-  this gap is a notional variable, it is difficult to calculate exactly. We therefore use a variety of indicators to check for consistency of the assessments. The inflation target is symmetrical; that is, preventing inflation from falling below the target is as important for the Riksbank as stopping it from rising above the target. Over time, the economy will then expand at its potential rate. The inflation targeting approach accordingly has a built-in control mechanism. If the monetary stance is unduly tight, bringing economic activity below the potential level, inflation will decrease and sooner or later fall short of the target; and vice versa. This calls for a calibration of the output gap, a new inflation forecast and an adjustment of monetary policy.
The normal functioning of the banking system relies on a safe and effective payment infrastructure, which, in Albania, is operated by the central bank. Over 2013, the Bank of Albania focused its efforts on improving AIPS and AECH systems. Moreover, in order to render the financial markets infrastructure complete, we are working to establish the Central System for the Settlement and Registration of Securities. This system will provide possibilities for the further development of the secondary market and will guarantee the settlement of transactions in this market, conform to international standards. In 2013, the approval of the law “On Payment System” was finalised. This law provides a special legal framework for regulating, licencing and overseeing payment systems by the Bank of Albania. It aims at minimising the systemic risk, which is related to the participation in payment and security settlement systems, and risks related to the insolvency of participants in the system. The passing of this Law implies the liberalisation of the payment systems market through the establishment of private payment systems. Furthermore, to encourage the use of electronic payment instruments and reduce the use of cash in the economy, the Bank of Albania has adopted the regulatory framework for using these instruments, by reflecting the principles of the relevant EU directive.

These foreign inflows were sufficient to cover the current account deficit and provided the premises for a stable exchange rate. During 2013, the gross foreign currency reserve hiked by about EUR 42.5 million, settling at EUR 2,015 million, sufficient to cover 4.6 months of imports and  BIS central bankers’ speeches  1  170% of the short-term foreign debt. In spite of improvements, the balance of the external sector remains fragile. I would like to reiterate our appeal for taking the measures to boost the competitiveness of Albanian products and create a favourable climate to attract foreign investments. During 2013, the Government pursued an expansionary fiscal policy, providing a positive impulse to economic activity. In annual terms, budget expenditure increased 4.7%, whereas revenues fell 0.5%, from a year earlier. Government’s fiscal behaviour increased the budget deficit to ALL 65.4 billion, standing 42.7% higher than a year earlier. Last year’s fiscal expansion increased the public debt and public finance’s fragility, adding thus concerns over fiscal sustainability in the medium and long run. Considering the public debt as one of the biggest structural weaknesses of the Albanian economy, we have called for measures to be taken for ensuring the long-term soundness of public finances, and eventually welcomed such measures. In this context, we think that there is still much to be done, especially with regard to adopting a transparent and efficient fiscal rule. Financial markets were characterised by good liquidity conditions and low inflation risk premia.
I would like to specifically point out that the interest rate on housing mortgage loans extended in October fell to 9.4% vs 10.6% in May. At the same time, real deposit rates remain positive taking into account inflation forecast, which supports the attractiveness of savings. Our estimates suggest that there is still a certain potential for a further decrease in loan interest rates. We will assess further adjustment of monetary conditions, in particular, gradual changes in interest rates in various market segments as well as monetary indicators. Their further effect on economic indicators and price dynamics. This is a lengthy and gradual process. Our further monetary policy decisions will depend on its development and consistency with our expectations. The most important factor that we analysed today is the situation in the economy. We expect that GDP growth rates will be closer to the upper bound of our forecast range of 0.8–1.3%. The Q3 results show that economic growth accelerated to 1.7%. Industrial output keeps growing. In October, after a prolonged slowdown, we saw an increase in annual retail sales growth. This was supported by an acceleration in real wage growth largely due to inflation slowdown amid relatively unchanged nominal wage growth. Starting in September, we have observed a notable increase in budget spending on national projects. In the second half of the year, government investment started to support economic growth. At the same time, we have yet to estimate the stability of higher economic growth rates. Demand remains contained in general.

We will then have detailed data on GDP for the third quarter, preliminary data on the balance of payments for the entire 2019, as well as current economic statistics for December and first data on inflation in January. We will adjust our mid-term forecast based on this information. Winding up, I would like to get back to the signal of our future actions. We have said today that we will consider the necessity of a further key rate reduction in the first half of 2020. Noting that, after similar signals in the past, it was twice that we cut the key rate already at the next meeting, namely in October and today, and anticipating your clarifying questions, I would like to point out the following. This wording means that we still see room for a slight decrease in the key rate. But both in February and at the next meetings we will comprehensively assess the reasonableness and relevance of such a decision taking into account the entire range of new data that will be available by that time. Our signal does not imply that we will necessarily lower the key rate in February or in the first half of 2020. A further key rate cut will become possible only if our analysis confirms that this is needed to bring inflation back to the Bank of Russia’s 4% target. 3/3  BIS central bankers' speeches
As the financial condition of some of the major securities dealers worsened, the clearing banks became more  2  BIS Review 48/2009  reluctant to return the cash that the triparty repo investors had invested the prior evening. The clearing banks were worried that if a dealer were to fail, they could be stuck with a large obligation. The nervousness of the clearing banks, in turn, spilled back to the investors. If there is some chance that I might not get my cash back and instead be stuck with the collateral, do I really want to make the loan in the first place? The Primary Dealer Credit Facility essentially broke this dynamic by putting the Federal Reserve in the position of lender of last resort in the triparty repo system. With the Federal Reserve willing to lend against collateral, the clearing banks no longer have significant intraday risk exposure. The triparty repo investors have been reassured that they would be paid back. As a consequence, they were willing to keep investing. The TAF and the dollar facilities offered by foreign central banks provided the same antidote to rollover risk in the interbank funding markets. Banks that were reluctant to lend to one another because of rollover risk became willing to reengage because they knew that the Federal Reserve and foreign central banks would lend against high-quality collateral. By eliminating rollover risk, the CPFF also helped to restore market function in the commercial paper market.

: Quarantines begun in Santiago East  1  5  +116 3 %  Pharmacies  3  0  7  Department stores  Mar. 03  May 05  (*) Percentages show variation between 30 July and 26 August. Source: Central Bank of Chile using Internal Revenue Service data. 17  Jul. 07  1 0  Figure 11  Evolution of local assets v. baskets of comparable countries (1) Tipo de cambio (index, 17/April/2020=100)  102  10-yr sovereign bonds' interest rate (dfiference w/respect to 1/June/2020, percent)  102 0.4  0.4  0.3  0.3  0.2  0.2  0.1  0.1  0.0  0.0  -0.1  -0.1  98  98  94  94  90  90  86 17-04 17-Apr. 86 -0.2  Jun. 06 17-08 17-06 17-Jun. 17-Aug. Comparable basket (2) Sep.  Jul. 07  Aug. 08  09  -0.2  Chile  (1) Vertical lines from left to right mark the dates of: the June monetary policy meeting (June 16), approval in Congress of the idea of legislating on a bill that would allow the withdrawal of 10% of the AFP funds (July 8), and first announcements by the Central Bank of Chile (July 20). (2) The basket of comparable economies is made up of a combination of Latin American assets and commodity exporters (Australia, Brazil, Colombia, Mexico, New Zealand and Peru). Source: Bloomberg.
However, the banking system’s relative well-being does not mean that the banking sector resolution is over. Problems accumulated by banks turned out to be more significant than we expected. As I have mentioned, here belong sizeable loans to companies connected with banks’ owners. Not all of these companies are successful, and their projects remain unimplemented for years. Similar to owners, large creditors often use their funds deposited with banks to fund projects of their owners or chief executives, shifting all the risk to the banks. Complications in obtaining relevant information from a foreign jurisdiction by the supervisor allowed banks to accumulate sizeable assets abroad (loans to non-residents, large correspondent account balances with foreign banks, securities in foreign depositories, letters of credit and other transactions outside the RF jurisdiction). A detailed inspection reveals that most transactions with non-residents are of fiduciary nature, and a foreign company or bank is not the ultimate recipient of funds. As a result of such transactions, funds are ultimately used for loans to owners or fictitious increase in the bank’s capital. Currently, the supervision’s main objective is to timely reveal such fiduciary transactions which undermine financial stability of credit institutions. Today, we are completely rebuilding the whole system of bank supervision, accelerating supervisory decision-making, and, moreover, striving to enhance the proactive nature of the supervision.

While banks, as regulated, transparent and supervised institutions, play an important role in this objective, they are not the sole institutions. A no less important role play other institutions, especially those of tax collection or other institutions of services. Special attention should be paid to the supervision of market segments out of the banking system but within the scope of law. The terms of executing different payments, on a household or company level, should favour the usage of bank instruments (like electronic cards, wires, etc.) and in some transactions (where involved big amounts) payments in cash should be completely forbidden. There are exactly these transactions that may represent the biggest risk of money that is laundered from illegal activities, including fraud and tax evasion. I believe that the preference of holding cash money is deep in our society’s mentality and is also linked to a relatively low level of the average salary in the country. As a result, one can say with an appropriate level of confidence that most of the money that circulates in cash, is in the hands of many people, hence it represents a relatively low level of ML risk. We have also discussed about costs that are encountered when adopting full compliance with the requirements of the regulatory and the legal framework.
1 But did we pay too high a price for this achievement in lowering inflation? After fifteen years of apparent success, the past five years of financial crisis and turmoil in the world economy have raised serious questions about the adequacy of inflation targeting. We don’t have to look far to see that the costs of financial instability are huge. In Britain, total output is today some 15% below an extrapolation of its pre-crisis trend, and that gap is likely to persist for some time yet. 2 In the light of such costs, should monetary policy go beyond targeting price stability and also target financial stability? And should the present financial crisis lead us to question the intellectual basis of monetary policy as practised in most of the industrialised world today? Those questions are the subject of tonight’s lecture. The story of inflation targeting But let us start at the beginning. Shortly after the adoption of inflation targeting, my predecessor but one, Lord Kingsdown (Robin Leigh-Pemberton as he then was), gave an important speech at the London School of Economics – indeed in this room – entitled “The Case for Price Stability”. 3 I remember it vividly – for I had been involved in drafting it. It was an exciting time; we were reconstructing British monetary policy after the trauma of forced exit from the ERM. In those days, of course, the Chancellor set monetary policy and the Bank of England played only a behind the scenes role.

The experience of continuing stability may have sowed the seeds of its own destruction. That idea has been explored recently in an interesting new book by Nassim Taleb. 18 He argues that the opposite of fragility is not resilience or robustness, but “antifragility”, that is a state in which people or institutions thrive on volatility, shocks to the system and risk. We go to the gym to stress our muscles in order to strengthen them; occasional seismic activity may prevent a more damaging earthquake. Frequent exposure to shocks and surprises may improve the way people learn about and manage risks. In a complex world, we are “better at doing than we are at thinking”, in Taleb’s words. Unless we train and practice at coping with bad outcomes we may fail to respond in the right way to adverse shocks when they come. “Antifragility” does not imply that it might be desirable to engineer small recessions in order to head off a deep depression. We know far too little about the economy to attempt any such strategy, and in a world of intrinsic uncertainty we rely on heuristics – simplified rules of thumb – to guide our behaviour. But it offers a warning of the dangers of believing that the role of monetary policy is to offset all shocks.
It seems to me that this phenomenon has benefited not just Switzerland, but also many other countries with their own independent currencies, such as the United Kingdom, Canada, Australia, New Zealand, Singapore, and Norway. This evolution might not last. Perhaps it is the outcome of chance, but it has been persistent enough over the past few years to be noticeable. Maybe one day some smart graduate student will write a thesis on this topic, and confirm or falsify my hypothesis, but in the meantime let me outline why I believe that there are some good reasons for the assumption that the stability of the international monetary system has been enhanced by the creation of the euro. I do not think that anybody would argue that the world as a whole makes up an optimal currency area. Our planet is not yet ready for a single currency. We are therefore bound to live in a world with n, n greater than one, currencies. For the second half of the 20th century, we lived with one dominating currency, the U.S. dollar, and many less important currencies, such as the British pound, the Japanese yen, the German mark, the Swiss franc, and so on. Moreover, the United States is a largely closed economy, so it could regard fluctuations in the external value of the dollar with benign neglect. Of course, most other countries, being rather small and quite open, were fully exposed to turbulences in foreign exchange markets, but there was not much they could do about it.

This is not about to happen in Switzerland, which has the best record of price stability in Europe! The fear of losing our monetary independence was misplaced as well. Over the past five years the SNB has demonstrated that it can act decisively and independently, often well before the ECB. Given its openness, Switzerland was badly affected by the world slowdown. The situation was made worse by the fact that our main trading partner, Germany, was itself severely hit, and to compound our difficulties, the worldwide capital overhang had a very adverse effect on our exporters, many of whom are specialized in the production of capital goods. Special circumstances require special action. From March 2001 to April 2003, the SNB cut interest rates aggressively, lowering the target range for our reference rate, the three-month Libor, by 325 basis points, from 3.5% to just 0.25%. If anything, the differential between Swiss and euro interest rates has slightly widened, putting all fears of a rapid loss of our interest rate advantage to a rest. What about the stability of the external value of the Swiss franc? Here, I must say, our fears proved not just to be unfounded, but the reality turned out to be even more favourable than we could have hoped for. The exchange rate of the Swiss franc against the euro ended up being much steadier than expected, in fact even steadier than it used to be against the German mark, not to mention the French franc and the Italian lira.
As can be seen from Chart 2, inflation climbed rapidly from below 2 per cent in 1997 and 1998 to a peak of 9.4 per cent in January 2002. At the same time the short and medium term growth prospects of the economy deteriorated. Facing conflicting demands, from the inflationary pressures stemming from a weakening currency on one hand and the outlook for a slowing economy on the other hand, the Central Bank opted to lower interest rates by ½ percentage point when the new monetary framework was announced. But that cut was made from a very high level as the policy rate had peaked at 11.4 per cent. The Central Bank kept a tight monetary stance until the spring of 2002, when it was clear that inflation would decline. Within less than one year, inflation was reduced from nearly 10 per cent to the target of 2½ per cent, and even below it for a while. Furthermore, the current account deficit disappeared in a matter of two years, partly due to the depreciation of the króna. This turnaround was much more rapid than might have been expected and is almost unparalleled among the developed countries. The economy is currently in a relatively good balance. But once you are in calm waters new challenges usually emerge. Ahead are new investments in the aluminium sector and related power plants, that will commence in 2003 and most likely continue until 2010.

The reform of the financial legislation and its framework in line with that in other European states has facilitated the export of financial services by Icelandic financial institutions and the establishment of operations abroad. You will hear more about this process from the next speaker, Director Sigurdur Einarsson. Foreign direct investment regulations are now liberal with the most important exception that such investment is not permitted in the fishing sector. Foreign direct investment is most noticeable in power intensive industries, such as the production of aluminium, which is based on Iceland’s abundance of renewable energy resources. Recent changes in corporate taxation in Iceland, lowering them to among the lowest to be found, serve to attract foreign business to Iceland and encourage Icelandic companies with international operations to favour Iceland as the base of their operations. Director Garðar Ingvarsson will probably give you more detail on this later this afternoon. Direct investment by Icelandic companies abroad has risen rapidly in recent years and in a variety of areas, such as fisheries and fish processing, pharmaceuticals, retail commerce and as mentioned earlier, financial services. These developments also benefit the Icelandic economy in the long run as they integrate Iceland further into the global economy, allow Iceland to draw more easily on the experience of others and bring in dividends. During the 20th century, Iceland tried almost every type of exchange rate policy, from a monetary union with Denmark to a managed float.