samchain/econo-pairs-v1 huggingface dataset:
The Bank’s most recent interest rate decision must be seen in this light. The rationale behind it was explained in a press release issued by the Central Bank this morning [May 18, 2006]. As I mentioned, the rise in the housing component explains the bulk of recent increases in the CPI. So it is not surprising that people have wondered whether the housing component should be included in the index on which the inflation target is based. The Central Bank has held this view, partly because changes in housing prices tend to be a leading indicator of private consumption and inflation, and also because over the years the CPI excluding the housing component has been more volatile than with it. Including the housing component in the CPI in effect makes the index less volatile. Of course it is natural to ask whether the right reference is being used for the inflation target and the Central Bank is obviously open for such discussion. However, it is absurd to change the CPI or strip it of certain components that become temporarily troublesome. The monetary policy framework and its implementation must not be changed except when the economy is in balance, and then only on the basis of long-term perspective, not vague short-term interests. Financial stability Over the past weeks and months, the Icelandic financial sector has been in the spotlight domestically and, not least, internationally. Not all of this publicity has necessarily been worth striving for.

But the second is likely to be variable and sociological. In other words, agents’ responses to infection, or indeed the fear of infection, are often crucial in determining its rate of transmission. In practice, these behavioural responses typically take one of two forms: “hide” or “flight”. For example, the response to the SARS epidemic in the 21st century was a “hide” response, with people self-quarantining by staying at home and with flight, in this case literally, prohibited. But the response to yellow fever in North America in the 19th century was “flight”, with half the population of Memphis fleeing in 1878. 15 Either response is rational from an individual perspective. Both responses have the aim of removing that individual from circulation with other, potentially infectious, agents. But the implications of these responses for infection rates across the system are potentially very different. Hide responses tend to contain infection locally, thus protecting the system globally. This was the SARS experience. Flight, by contrast, tends to propagate infection globally. This was the yellow fever experience, as incidence of the disease followed the railroad line out of Memphis. 16 During this financial crisis, faced with fears about infection, similar sets of behavioural responses by financial institutions have occurred. Only the names are different. The “hiding” has taken the form of hoarding, typically of liquidity. And the “flight” from infected cities has taken the form of flight from infected assets, as institutions have sold toxic assets.
Salaried employment is growingly concentrated in bigger companies (more than 50% of total). 6. Chile's real wages have increased significantly for all income brackets but high dispersion remains associated with employment duration. 7. Women's incomes are smaller and grow more slowly, even after controlling for features such as education, occupation and expertise. 8. Women have a lower probability of holding their jobs, and a greater propensity to go from unemployed to inactive. 16  Table 4 Mobility, income profiles and aggregate productivity  1. A labor mobility paradox is that, although more often than not a job change is associated with a wage gain (54%), many (46%) are not. 2. This paradox is more prevalent among workers that exhibit high turnover and low income. 3. Those lower-turnover workers have significantly larger wage gains over time, reflecting the value of developing employer-specific human capital as well as higher gains from direct transitions between jobs. 4. High turnover workers obtain smaller gains from staying in the job and from direct transitions, and exhibit slower growth in income throughout their working lives. Tabla 5 Cyclical adjustment of the labor market  1. The Chilean labor market has multiple adjustment margins to respond to cyclical shocks, reducing the impact on employment: the composition between salaried work and self-employment, changes in participation rates, high turnover rates and rapid transitions between salaried jobs, job creation in new firms and the wage flexibility of hired work. The wage flexibility of hired work is present mainly in transitions to new jobs.

And retail spending may be slackening, though heavy discounting has clouded the underlying picture. There are clearer signs that the slowdown in the housing market is gathering pace. But the impact of this on consumer spending and ultimately on inflation is highly uncertain. And that is what matters for monetary policy. So growth does now seem to be slowing. But what is less clear is whether the scale of this easing is likely to be broadly what we need to keep inflation on target in the medium term – neither too much nor too little. That’s not just because we don’t know how much slowing is in the pipeline. There are a couple of other important uncertainties too. First, it’s hard to judge the underlying strength of inflationary pressures. When inflation picked up quite sharply last winter, there was a lively debate about how far this reflected strong monetary growth, and how far it was due to the temporary effect of a very big jump in gas and electricity prices. Although inflation has now come down sharply, there is still room for debate about the margin of spare capacity in the economy. Various indicators seem to be telling slightly different stories. On the one hand, overall wage growth seems to have been moderate, by past standards. On the other hand, business surveys of capacity pressures and price expectations remain above average. Second, there is a lot of uncertainty about the risks to inflation, if oil prices do continue at their present levels.
3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  happened over the past year isn’t a surprise, given the drop in employment (Chart 2 provides the comparison). Whatever their contribution to recent rates of inflation we can at any rate expect the effects of lower participation and the CJRS to fade soon enough. The participation rate is likely to rise again as the labour market recovers and the furlough scheme is being wound down. So today, in the interests of thinking about what might prove more persistent sources of inflation, I want to concentrate on other things, stuff that’s not directly evident from the aggregate data. In doing so I’ll be expanding on a theme – the broad description might be “mismatch” – that I touched on in a talk earlier this year and that my fellow MPC members Michael Saunders and Jonathan Haskel have also developed in their recent speeches3. One of the things I pointed out at that time was that, despite the weakness in aggregate UK consumption, some areas of spending had been pretty strong. Broadly speaking, and for understandable reasons, the pandemic had induced a sizeable shift in UK consumer spending from services to goods. And shifts in spending of this sort, at least until (and unless) they’re met by matching shifts in supply, tend to push up average prices. In part that’s just because retail goods prices tend to be more flexible than those of services.

They’re more likely to narrow (we may already be seeing some signs of that correction in the data). 19  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  19  Particular glitches aside – and some of those are also the result of the pandemic – supply in many of these markets is also reasonably responsive to higher prices. For this reason, periods of rapid inflation in most non-oil commodities, and in manufacturers’ input prices in general, tend to be followed not just by lower but by below-average rates of inflation. The retreat of pandemic-related shifts in demand would also help to correct any mismatch in the domestic economy. And in the past, the UK labour market has often proved sufficiently flexible to absorb shocks, and reallocate resources – for example after the financial crisis – without a significant and lasting effect on the NAIRU or on wage growth. However, these judgements get progressively more uncertain as one goes down the list. Even if the heat comes out of some of the final demand for goods, there’d probably be pressure on suppliers for a while afterwards, if inventories need to be restored. With vaccination rates in much of Asia lagging those in the rest of the developed world there are still risks to global supply chains from potential outbreaks of the virus. And, even if a reduction in domestic mismatch is more likely than the opposite, we can only be unsure about the time and expense required to address it.
25  All speeches are available online at www.bankofengland.co.uk/speeches  25  Chart 18: Sensitivity of UK 3-year government spot interest rates to economic surprises Rolling 1-year sensitivity 95% CI  0.8  UK 3-year  0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 2004  2007  2010  2013  2016  Source: Bloomberg and Bank of England calculations. Notes: The chart shows the rolling 12 month beta coefficient of a regression of the UK Economic Surprise Index (ESI) on daily changes of UK 3-year interest rates, with a 95% confidence interval. The ESI is calculated as the weighted sum of data surprises across the UK, US, euro area, Japan and China. The data series included in the ESI, and the estimated weights are based on their historical relationship with daily changes in UK interest rates. The axis shows the impact of a 1 standard deviation data surprise on UK 3-year interest rates. The dashed line shows the 2004-2017 average for the beta coefficient. 26  All speeches are available online at www.bankofengland.co.uk/speeches  26  References Abel, W, Burnham, R and Corder, M (2016), ‘Wages, productivity and the composition of the UK workforce’, Bank of England Quarterly Bulletin, Q1, pp. 12-22. Bank of England (2016), ‘Factors affecting the prospects for long-term supply following the EU referendum’, Bank of England Inflation Report, August, pp. 29. Blanchflower, D (2007), ‘Entrepreneurship in the UK’, speech at the Max Planck Summer Institute on Entrepreneurship Research.

These risks have failed to crystallise, first in the Netherlands, most recently in France and most probably in Germany later this year. This is not to suggest geo-political risk has disappeared, merely that some important risks have failed to come to pass. Alongside upgrades to growth, this fall in political risk seems to have contributed to a rise in global asset prices and a fall in global risk premia. Equity prices in the US and euro area have each increased by around 8% since the start of the year. The VIX, a measure of uncertainty in financial markets, has fallen to levels not seen since 2007 (Chart 14). Media-based measures of uncertainty remain elevated. But these measure political news, of which there has been plenty, rather than political uncertainty. And it is the latter, rather than blogs, tweets and news feeds, that matter to most people when making decisions about spending. Third, as the world economy has gathered pace and resilience, there are signs downside risks to global inflation have also eased. In the middle of last year, the balance of inflation risks in the major regions seemed to be skewed to the downside. Financial market expectations of inflation 5-to-10 years ahead were below their historic averages in the US (by around 80 basis points), the UK (40 basis points) and the euro-area (40 basis points). Fears of deflation were, if not quite stalking the planet, then making a nuisance of themselves in a number of countries.
To briefly illustrate the current state of play of our supervisory practices, I would like to mention the “suptech” approach underway at the ACPR: the supervisory authority’s aim is to take advantage of innovation to better carry out its missions at the best cost for the community and thus prepare the supervision methods for tomorrow’s financial processes. To date, four tools developed in intrapreneurship with the support of the Banque de France’s Lab, our space dedicated to innovation, have been created and should concretely increase the efficiency of our supervisors. But I would like to focus for a moment on the contribution that we can make, as a central bank and supervisory authority, to the development of the regulatory framework. In this area, I think it is important to recall a few principles that underpin our vision as a supervisor and central banker with regard to the changes in the regulatory framework of the financial system. First of all, I would like to stress that no regulatory framework is set in stone. We must keep an open mind, and have the necessary understanding and lucidity to adapt frameworks to technological evolutions - or even revolutions -, as well as to their challenges and associated risks. Secondly, this adaptation must, in my view, preserve and consolidate two fundamentals of financial sector regulation: the financial stability objective and the principle of monetary sovereignty.

For all its problems and obstacles, the year has laid bare the degree to which financial institutions and banks are prepared for unexpected circumstances. The resilience of banks and other financial institutions, and their so-called ability to adsorb the shocks the epidemic has brought about, suggest that rehabilitation of the Russian financial sector is an accomplished fact. This is why recent months have seen — despite the difficulties — the financial sector evolving and carrying on with providing support to the economy, as borrowing from banks has been on the rise, and the stock market has been growing at a faster pace. Our current priority is to strike the right balance between the objectives of supporting economic recovery and long-term projects as part of our national development agenda. It is essential to ensure that a maturing financial market relies on the principles of trust and competition and — this is of paramount importance — the principle of customer interest protection (rather than only on a short-term gain strategy). You are aware that lending continued this year, unlike in prior times of crisis. More so, we have seen record growth in mortgage lending, which is the point the Speaker has made. For all these welcome developments, our central focus should remain with the real target, which is to make housing more available to people, and not to stage a kind of race for records.
I want to briefly describe some ways of trying to calibrate the costs and benefits of higher capital requirements – which do not assume the MM theorem holds. The method I use follows that outlined in the recent Bank of England FSR 7. The methodology followed in the FSR seems to me very sensible. The idea is to calculate the impact of a given change in equity capital – that is an equity for debt swap – on a typical bank’s cost of funding. I assume, as in the FSR, the higher cost of bank funding is passed on in the form of a higher cost of bank loans. To assess what effect that has on the wider economy we then make an educated guess at the effect of a rise in the cost of bank loans on the overall required return on investment. That in turn will affect the stock of capital and economic activity. This impact on economic activity is the cost of higher capital requirements. The illustrative estimates in the FSR indicate that conservative assumptions about effects of higher bank capital on the costs of bank funding and lending generate a marginal cost of about 4% of annual GDP, in present value terms, for a 1% of risk-weighted assets rise in capital. The FSR notes that by relaxing these assumptions the cost may be lower, so that the estimates are probably an upper bound 8. The starting point for my calculations is the case presented in the FSR.

4  BIS Review 100/2010  would, to the extent they continued to hold the loans that they make, be more like unit trusts with an origination arm rather than banks. So many – in fact almost all – of the proposals to make banks less fragile will mean they would come to hold more equity capital. I think this is right. And I believe it is the most fundamental response to banking fragility because it directly deals with solvency problems – risks that people who have lent money don’t get it back. I believe that those risks – real or perceived – have been the fundamental drivers of the financial disasters of the past few years. Other problems, which are sometimes described as funding or liquidity problems, often arise because of fears about solvency. I do not want to imply that other measures to make the financial sector more stable – including liquidity requirements and changes to the way asset values are assessed and reported – are not important. But I want to consider whether changes in capital are a powerful tool to make the banking sector robust and whether it is right to see them, rather than monetary policy, as a more natural means to that end. Some are sceptical that higher capital requirements can work because banks may be able to avoid (or evade) them.
These reforms bore more than a passing resemblance to the solutions complexity scientists might have proposed. A new word emerged to capture these reforms - macro-prudential regulation. The macro signalled two important ideological shifts from the past. First, banking needed to be managed at the level of the system as a whole, like any other eco-system. Second, as important as the resilience of the financial system was its interaction with the macro-economy to avoid adverse feedback effects between the two, such as credit crunches. Finance was to be servant of the economy, not master. This, truly, was a regulatory revolution. 21  See https://www.bis.org/bcbs/basel3.htm. 13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  Not all proposals for international regulatory reform found universal favour. In a paper prepared for the Jackson Hole central banking shindig in 2012, I questioned whether the very complexity of financial regulation might have contributed to the increasing fragility of the financial system. As you did not fight fire with fire, you did not fight financial complexity with regulatory complexity. That risked making a bad situation worse, a complexity problem squared rather than halved. To be honest, had I not called the paper “The Dog and the Frisbee” I doubt anyone would have read it. But I did, they did and the result was a sharp intake of collective breath among my colleagues around the Basel Committee table - and beyond.

32  18  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  18  For much of the first few hundred years of the Bank’s history, its public communication largely took the form of an annual speech by the Governor of the day to the bankers and merchants of the City of London at the Lord Major’s Mansion House Banquet, literally a stone’s throw from the Bank. The public audience for this singular act of public communication was about as diverse a set of white, male, middle-aged, slightly-pissed financiers as it is possible to assemble. Body language can sometimes substitute for the spoken word. So it was at the Bank of England in the 1920s, when the Governor’s “eyebrows” famously became one of the Bank’s means of externally communicating. The Governor’s eyebrows were, in a way, a primitive form of emoji: sterling crisis – sad face, bad pre-MPC presentation – very sad face. Nonetheless, for even the most malleable-faced Governor, the eyebrows were an imperfect communications medium. Beginning in the 1960s, a sea-change began in central bank communication practices, at first slowly. Speeches by the Governor and other officials increased, by the 1960s averaging around five per year. They were matched by other communication innovations. December 1960 saw the first edition of the Bank of England Quarterly Bulletin, which is still going strong. There was roughly a doubling in the number of speeches by Bank officials in each subsequent decade.
Concerns persist about the fragility of the Chinese financial system, which together with doubts about the evolution of real-estate prices could limit its future growth prospects. As has been noted before, China’s evolution is cause for unrest because of its weight in world GDP and its impact on the pricing of commodities, copper included. The volatility that financial markets have shown in recent months implies that ending the quantitative easing in the U.S. will not be stress-free, especially because of the difficulty to calibrate the policy actions of this unprecedented process. In this regard, a major risk has to do with its effects on some of the larger emerging economies that have accumulated macroeconomic imbalances and are more dependent on external financing. The risk associated with the complex interaction between weak growth, a frail fiscal situation and financial problems in Europe is still present. At home, headline inflation of recent quarters has been lower than forecast, and the moment when it will expectedly reach the target has been postponed time and again. While the recent cuts to the MPR will help inflation converge to 3 percent, if the widespread slowdown in all the demand components is confirmed, along with longer-lasting low inflation in the rest of the world and maybe a sharper fall in international fuel prices could further postpone such convergence to 3 percent. However, the depreciation of the peso and the still tight labor market could work in the opposite direction.

We, as the Central Bank, will continue to contribute with our assigned duty, that is, to safeguard the stability of our currency and the normal functioning of the internal and external payment system, to Chile’s development and welfare. Many thanks,  BIS central bankers’ speeches  7  Figure 1 GDP growth (annual change, percent) 12  12  8  8  4  4  0  0  -4  -4  -8  -8  -12  -12 07  08  09  10  Natural resources  11  12  13  All other sectors  Source: Central Bank of Chile. Figure 2 Private consumption and investment (annual change, percent) 25  25  20  20  15  15  10  10  5  5  0  0  -5  -5  -10  -10  -15  -15  -20  -20 07  08  09  10  Private consumption  11  12  13  Investment  Source: Central Bank of Chile.