samchain/econo-pairs-v1 huggingface dataset:
There is a practical reason for such a review: we need to formulate the monetary policy that will take over from the IMF programme because the current arrangement will not suit once the capital controls have been lifted and Iceland has re-established its financial links with other countries. But there are also lessons to be learned from monetary policy implementation during the upswing and in the run-up to the financial crisis. The inflation target and the floating exchange rate did not cause the banks to collapse; after all, if they had, many more banking systems around the world would have fallen. But monetary policy was part of the chain of events here in Iceland, and a  8  BIS Review 39/2010  number of difficulties emerged in monetary policy implementation under the conditions then reigning. There will be opportunities to discuss this in greater depth later, but in my view, the inflation target as such was not the problem, as studies show that countries with inflation problems are likelier to be hit by banking crises, and fare worse in the event of such a crisis, than their counterparts without problem inflation. The problem was rather that the various elements of economic policy did not interact as they should have, and it has come to light that implementing a floating exchange rate regime is complex and difficult in very small, open economies with strong financial ties to other countries.

Financial performance has been good, recording average levels of return on equity and on assets, respectively over 20 per cent and 1.5 per cent. Over the years, the banking system has chosen to capitalise the majority of its profit in order to best support its activity with liquidity and capital. During this period of a rapid and qualitatively better expansion of the banking activity, the Bank of Albania found it necessary to revise the supervision philosophy. The main ambition was its orientation towards sources of risk, in other words to strengthen control over banking activity. For that reason, at the end of 2006 a new law “On Banks” was adopted. This law imposed, on the banking industry, more contemporary standards as regards realisation, direction, and control of the banking activity. The main concerns consisted in high crediting levels, significant concentration of crediting in foreign currency, and the absence of sectorial diversification. Consequently, at the end of 2006, the Bank of Albania introduced a number of regulatory amendments aiming at slowing down crediting growth levels, through imposing higher capital requirements on more aggressive banks. These measures were further supplemented in 2008, targeting more directly cases when borrowers had no income in foreign currency. Another strategic move during this period was integration of banking supervision and financial stability with monetary policy decision-making. This action is as bold as it is innovative in establishing more optimum equilibriums between our function of drafting and implementing the monetary policy and that of maintaining the system’s financial stability.
At a premium, businesses can hedge against short-term fluctuations in the krone exchange rate. The fluctuations are not greater than in other countries with a floating exchange rate. In 1996 and in the autumn of 1998, Norges Bank attempted to attenuate movements in the krone exchange rate through exchange market interventions. On both occasions, interventions prompted a game situation between the central bank and market participants, as was also the case during the currency crisis in the autumn of 1992. When a central bank trades its own currency, market operators make a play for profits on the premise that the exchange rate does not reflect market fundamentals. In a world where capital flows freely, this game situation can quickly trigger large capital movements. The experience of the 1990s shows that Norges Bank does not have the instruments to fine-tune the krone exchange rate. Today’s monetary policy The objective of monetary policy is exchange rate stability against European currencies, defined as the euro from 1 January. Norges Bank’s mandate - which is the Exchange Rate Regulation - takes into account that the krone may remain outside its normal range. The Exchange Rate Regulation states that “in the event of significant changes in the exchange rate, monetary policy instruments will be oriented with a view to returning the exchange rate over time to its initial range”. The concept “significant changes” is not quantified and must be given an economic content.

True, there are other external factors that generate what is occasionally unwarranted mistrust of the Kingdom of Spain. Undoubtedly, factors such as market irrationality, herding or procyclicality are significant, but they will not foreseeably change. There are also other factors, such as the mistakes made by European Union Member States when attempting to resolve their problems, that are no doubt also responsible for this higher cost, and the proof is that the sense of incapacity being conveyed to the markets does not only affect our country, as shown by the abnormally high level of most euro area countries’ CDSs. But it must also be accepted that the possibility of improving economic governance in Europe is in the hands of many other countries and not only Spain. This is why we should focus on easing the concerns of the markets, which do largely depend on us. These concerns are those that I have mentioned: there are doubts as to whether we will be capable of seeing through the fiscal adjustment, concluding the restructuring of savings banks and changing the institutional framework in a way conducive to job creation in Spain. As to the fiscal adjustment and to financial restructuring, I believe the means and the schedule set by Parliament are correct, and now it’s a question of complying.
This effect tends to wear off over time as the securities portfolio held by the central bank ages. Thus, our future PEPP reinvestment policy will be key to continuing to provide an accommodative monetary stance even after the end of the net purchase phase. Second, the PEPP’sflexibility both across asset classes and among jurisdictions is a powerful and innovative way to achieve the adequate transmission of our monetary policy. This allows us to intervene more effectively in specific market segments when it is most needed, and to prevent unwarranted fragmentation, such as during the March 2020 turbulence. Such conditions may of course 3/5  BIS central bankers' speeches  arise again in the future, irrespective of the context of the Covid pandemic. Therefore, it could be worth examining if and how at least some elements of this PEPP flexibility should be kept in our “virtual” toolbox. Their mere existence, the theoretical possibility of their use, would mean that we would probably not have to actually use them. An additional key feature of the PEPP was to announce a total envelope of potential purchases, also incorporating a third flexibility feature regarding the timing of purchases within this total envelope. By contrast, the APP is currently operating with an open-ended flow of EUR 20 billion of additional net purchases per month. The APP might benefit, still more than from increased fixed volumes, from adding some forms of flexibility of purchases over time.

But we are carefully monitoring inflation developments. If ever inflationary pressures should turn out to be long lasting, we would have the means and the willingness to anchor inflation at 2% in the medium term. III. Some reflections accordingly on our instruments This brings me to the last part of my talk, about the use of our instruments consistent with the new strategy and the inflation outlook. Some of our instruments were designed to be temporary and to respond to specific risks associated with the pandemic, such as the Pandemic Emergency Purchase Programme (PEPP). The Governing Council will probably decide on the future of its monetary policy instruments in December. So we have significant time left to monitor economic and financial data; and one shouldn’t give too much credit to rumours and speculations floating at present, including on an allegedly earlier calendar of ECB rate hikes. However, I would like today to dispel some misperceptions about how our instruments might evolve and mention some of the lessons I tend to draw from our successful crisis management. 1. The transition out of temporary anti-crisis measures is not the end of our  accommodative monetary policy Let me start by recalling that the transition out of the PEPP itself is different from our other instruments because it is conditioned on the end of the coronavirus crisis rather than on the inflation outlook, which guides our other instruments.
An ordinary person, with a few hundred or a few thousand dollars to invest, may find it perfectly convenient to invest in currency, and to store most of it in a safety-deposit box, one that the person may well have already rented to store important papers or other valuables. A large corporation, in contrast, likely would find dealing in  BIS central bankers’ speeches  3  currency extremely costly. So the proposition may be refined further to state that different economic agents will be more or less willing to invest in negative rate investments to the extent that diseconomies of scale make their costs of handling currency higher or lower than others’. Vaults introduce some additional considerations affecting the costs of holding currency. Often, the costs of holding currency securely, by having a safety deposit box or a vault, are fixed costs. Once one has a vault, or has rented a safety deposit box, the costs of storing additional currency in it, up to its capacity, is nil. This suggests that there is a dynamic element to the economics of avoiding negative interest rates: the longer the negative rates are expected to persist, and the lower they are, the more favorable are the returns to investing in a vault. Once the vault investment has been made, maintaining negative rates would likely become more difficult.

Done well, this can have a long-lasting effect on behavioural change towards greater adoption of e-payments. To strengthen this proposition to customers, financial institutions should continuously enhance their security features, and put in place while actively promoting their product arrangements that will give customers the peace of mind. This may include strengthening the effectiveness of fraud detection and prevention engine using the latest technology such as artificial intelligence and machine learning. Additionally, offering liability protection programs and a commitment to resolve disputes within a stipulated timeframe would go a long way in providing assurance to customers. Supporting this, financial institutions’ mobile applications and Internet banking channels must provide seamless ways for users to track their expenses. This would include budgeting features, instant notifications and possibly smart money management tools. Some of these enhancements may be small tweaks with a potentially big impact to get users to be more comfortable with e-payments. Going beyond payments to enhance value proposition to end-users This brings me to second key priority – the need to go beyond payments in response to certain “new normals” in the payments landscape. Today, customers increasingly expect payments to be fast, frictionless and free. Competition has also heightened. Non-traditional players such as fintechs and bigtechs are increasingly relying on payments as entry point into financial services. Against this backdrop, payment service providers must rethink their strategies to remain relevant and be sustainable in the long run. Today, going cashless is more than just e-payments.
Regardless of the specific details, the key is that differences across individuals can be important for understanding how the economy works, even in the aggregate. For all these reasons, the Research group at the New York Fed is committed to continue our work on heterogeneity, across several dimensions of what we do. We are always looking for ways to expand and deepen our knowledge, to enhance the data that is available to our economists and others to do deep, sophisticated research on these topics, and, critically, to publish the work so that we are adding to the store of knowledge both among academic researchers and among policymakers. We are well-placed to understand what the important questions are, to generate the data needed to answer them and to speak to diverse audiences about the results. This webinar and blog series are important parts of our strategy for communicating about our work and for advancing thought about the critical role that heterogeneity plays in our economy. Thank you. 2/2  BIS central bankers' speeches

To achieve the 2% inflation target over the medium term but at the cost of an avoidable depletion of the economy’s supply capacity would not be congruent with the MPC’s Remit, which includes supporting growth and employment in so far as that is consistent with the overriding goal of price stability. I was glad that the “effective supply” way of thinking about this was reflected in our latest Inflation Report. But I would readily concede that we must not lose sight of the potential “speed limit” effects that featured in our November Report. Given the need for some rebalancing in the pattern of demand and activity, and the likely lags in firms bringing even suspended capacity back on-line, bottlenecks are a distinct possibility. We will need to be especially alert to messages from the Bank’s Agents, to survey evidence, and to data on productivity, wages and prices for any sign of inflationary pressures. Volatility of inflation, and inflation expectations The Committee’s strategy has warranted maintaining the very substantial monetary stimulus notwithstanding the marked pick-up in inflation over recent months. As the Governor explained at our press conference a fortnight ago, we think that the recent rise in inflation is accounted for mainly by the increase in petrol prices, the restoration of VAT to 17.5%, and lagged effects of sterling’s substantial depreciation. But we can’t be, and aren’t, comfortable about it. Not least because the country has to trust us that these will be temporary disturbances.
This is an area where students exercise their own judgment. But let me tell you what my own experience is. Whether a teacher belongs to the economists driven by “social enthusiasm” (Pigou), by the wish to find out “how society functions” (Marshall) or by the “pursuit of the unknowable” (Solow), to teach is not only challenging but also most rewarding. First, one has to define the contents of a course and then how to present it. Then, one has to find out how to stimulate curiosity because this is the best motivation for learning. One has to understand how students react to complexity, and one has to be prepared to answer their questions as they arise. Ideally, a professor is able to take his students on a journey of learning that never ends. Once the course is over, a student should know more than before, have an interest in applying what he or she has learned and never forget the most important lesson: what she or he was taught is never a recipe, but only a first step in an ongoing sequence of learning, collecting experience and further learning. If you think this sounds too good to be true you may have a point. So let me end this section by painting a bleaker type of university economist: the university economist is a master of his profession who prefers not to apply his knowledge to the resolution of real-life problems, but to improve his knowledge further in order to impress his peers.

If it cannot be helped, he shares part of his riches with his students. - You might find this type of economist too, but only very, very rarely! 3. Economists in government  “Give me a one-handed economist! All my economists say, ‘on the one hand … on the other’.” - You surely know this quote which goes back to the late Harry S. Truman (1884-1972), when he was President of the USA. It is an expression of the impatience that befalls politicians when they call on economists for advice. Another quote by the same man is: “If you can’t stand the heat, get out of the kitchen.” The two quotes describe better than almost anything the challenges an economist has to face when he chooses to work for the government. Politicians are usually confronted with sensitive questions. The replies are decisive for a politician’s success. Frequently time is short and straightforward answers are preferred - as long as they fit the preferences. Politicians have a natural predisposition to seek advice that is compatible with their political needs. Economists acting as civil servants or as government advisers are therefore quite naturally tempted to behave opportunistically. This will not pay since in the long term a serious loss of professional reputation is inevitable. Economists must not let themselves be carried away by a desire to please. Their added value lies in an objective application of their analytical and empirical tools. Economics is, not without justification, sometimes called the “dismal science” (Thomas Carlyle, 18201905). Economics is about tradeoffs.
Sir Philip said: “I have frequently described the Government’s economic policy stance as being one of “positive non-interventionism”. Not surprisingly, perhaps, some have claimed that this is really just a fancy term for laissez-faire or, less kindly, that it covers up a “do-nothing” approach. This is simply not so: positive non-interventionism involves taking the view that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the Government to attempt to plan the allocation of resources available to the private sector and to frustrate the operation of market forces, no matter how uncomfortable may be their short term consequences.” Sir Philip added: “But in my description of our economic policy stance, I do qualify the term ‘non-interventionism’ with the adjective ‘positive’. Perhaps in the past I have not spelled out the implications of this adjective clearly enough. What it means is this: that the Government, when faced with an interventionist proposal, does not simply respond that such a proposal must, by definition, be incorrect. Quite the contrary. “Generally speaking, or so I would like to argue, the Government weighs up carefully the arguments for and against an act of interventionism in any sector of our economy and on the demand or supply side in the light of present and likely future circumstances. The Government then comes to a positive decision as to where the balance of advantage lies.

As early as November 1973, at the Conference on Managers in a Changing Hong Kong Environment, Sir Philip spoke on, amongst other things, the role of public policy. He said that, “the Government must accept such responsibilities as are necessary to ensure that management decisions are not frustrated by imperfections in the operation of the market mechanism, leading to economic inefficiency or social distress which only the Government can remove.” In September 1979, he talked about interventionism and the adjustment mechanism, amongst other things, in a speech on the Hong Kong Economy in Transition. He said that: “A pragmatic view dictates an admission that interventionism can be relevant to the maintenance of economic stability in Hong Kong even in the general context of a philosophy of positive non-interventionism”. In the same speech he cautioned against taking for granted the “efficiency with which [the] essentially automatic adjustment mechanism operates in restoring equilibrium”. He then went on in the same speech to identify areas that could be collectively referred to as market imperfections which justifies market intervention. BIS Review 67/1998  -2But it was the speech he made to the Federation of Hong Kong Industries in December 1980 (and as Principal Assistant Secretary for Economic Services then it was my honour to have a hand in drafting part of the speech) in which he made abundantly clear his stance on the policy of positive non-interventionism. Here I quote two paragraphs of his speech in full.
Efficient and well balanced financial system will allow the system to better manage and absorb shocks as the market would be less prone to one-way market conditions and possesses greater liquidity. A well balanced financial structure contributes positively to information processing, price discovery, and risk management. The experience of the Asian crisis, for example, points to the critical importance of the development of long-term local currency debt market, to increase the depth and the breadth of financial market. In relation to this, BIS identified that the lack of diversified structure and market may lead to increased risk from concentration of credit and maturity risks in the banking system as lack of markets may lead to the mispricing of risk and excessive delay in correcting large exposures, as well as increased vulnerabilities from capital inflows. The second point we want to make is the importance of strong financial market infrastructure. One of the key issues for emerging markets is the structural weaknesses which can create disincentive and moral hazard. The presence of such distortions contribute to built-up of financial vulnerability, hinder growth of market solution for tackling risk, and complicate policy actions in events of crisis management. Progress in correcting these weakness however may be slow.

While it is unclear how effective domestic monetary policy can be in checking excessive asset price volatility, the threat of financial instability has given rise to a more prominent role for macro-prudential measures to reduce the procyclicality of the credit market. As we see it, the primary challenge in this respect is how best to move forward. Combining the use of prudential measures with monetary policy is a useful policy option, but it is still an unsettling issue because of the concern for efficiency. In practice, discretionary prudential measures pose difficulty in the  4  BIS Review 89/2007  form of potential regulatory forbearance, market distortion, timing effectiveness, and the difficulty in modeling early warning system. Rule-based prudential measures, on the other hand, pose difficulty in policy calibration. This is to say calibrating this type of policy tools has so far proven difficult for emerging market where data availability is limited and large structural breaks are usually present. Turning to longer-term perspective, the attainment of monetary and financial stability is determined predominantly by embedded structural features of the economy. This points to the importance of pursuing long run structural reforms. On this issue, we discuss the role that financial sector development and policy institutions and framework can play in this respect. First, financial development The first point we make on financial development is the importance of a well-balanced financial structure.