samchain/econo-pairs-v1 huggingface dataset:
The reason is that it has proved difficult in practice to lower nominal wages. If inflation is low and nominal wages cannot be lowered, it becomes difficult to adjust real wages among different professions, companies and sectors. This can ultimately bring about both higher unemployment and poorer productivity growth in the economy. These problems can be mitigated if there is some inflation. Another advantage of a target of 2 per cent, which has been particularly apparent in recent years, is that a very low average rate of inflation would make it more difficult for monetary policy to counteract recessions. If inflation on average is very low in a world of low real interest rates, like today, the average nominal interest 8 [21]  rate will also be very low. The lower the interest rate is in normal conditions, the less scope there is to lower it before it reaches its lower bound. It will thus become more difficult to counteract future economic downturns with interest rate cuts. Thus, if you do not like negative interest rates, you should not advocate a lower inflation target, as that would involve the repo rate needing to be negative more often and for longer periods. There is a widespread international discussion on whether a target of 2 per cent, which most developed countries have now, really provides sufficient scope to conduct a monetary policy that is as expansionary as it sometimes needs to be.

Giavazzi, Francesco and Mishkin, Frederic S. (2006), “An evaluation of Swedish monetary policy 1995-2005”. Report from the Riksdag 2006/2007:RFR1, Sveriges Riksdag. Goodfriend, Marvin and Mervyn King (2016), “Review of the Riksbank’s Monetary Policy 2010–2015”, Reports from the Riksdag 2015/16: RFR 16, Sveriges Riksdag. Goodhart, Charles and Rochet, Jean-Charles (2011), “Assessment of the Riksbank’s monetary policy and work with financial stability 2005-2010”, Reports from the Riksdag, 2010/11:RFR5, Sveriges Riksdag. 16 [21]  Gourio, Francois, Anil K. Kashyap and Jae Sim (2018), “The trade offs in leaning against the wind”, IMF Economic Review 66 (1), 70¬-115. Heikensten, Lars (2008), More To It than Just ’Leaning Against the Wind’. Article in the Financial Times, 5 June 2008. Ingves, Stefan (2007), Housing and Monetary Policy: A View from an Inflation-Targeting Central Bank. In Housing, Housing Finance and Monetary Policy, Jackson Hole Symposium Conference Proceedings, 433-443, Federal Reserve Bank of Kansas City. Ingves, Stefan (2012), “Stora risker med alltför låg ränta” [“Major risks in excessively low interest rate”], debate article, Svenska Dagbladet, 18 October. International Monetary Fund (2015), “Monetary policy and financial stability”, IMF Policy Papers. Jansson, Per (2013), “How do we stop the trend in household debt? Work on several fronts”, speech at SvD Bank Summit, Stockholm, 3 December. Jansson, Per (2014), “Swedish monetary policy after the financial crisis – myths and facts”, speech at SvD Bank Summit 2014, 3 December. Kockerols, Thore and Christoffer Kok (2019), “Leaning against the wind: macroprudential policy and the financial cycle”, ECB Working Paper Series No. 2223.
This is explained by foreign investors also expecting a high return from investing in American shares and a large capital flow has strengthened the dollar price. Low import prices and high productivity are some of the explanations to inflation not accelerating. The low inflation has led to the American monetary policy being relatively expansive in the light of the long, strong cyclical upswing. It is only in retrospect that it can be established with certainty that a financial imbalance has been built up. This applies for instance to the assessment of the durability of the debt ratio for a country or households. This means, for instance, that a balance of payments deficit cannot necessarily be automatically interpreted as an imbalance. It is only later if it is shown the burden of interest and amortisation payments is too high in relation to the growth of incomes and production that problems arise. Effects of Swedish asset prices in Sweden today? There is nothing to indicate that the debt ratio among the households is too high today. However, during the past year, we have seen a development that resembles the American in some respects,  3  BIS Review 33/2000  although we have still not seen as high productivity improvements as in the American economy. Asset prices have risen strongly, household indebtedness has increased and interest in foreign investors in purchasing Swedish shares also seems to be very great. Household indebtedness is, however, considerably lower than at the end of the 1980s.

I would then like to turn to the opposite question: whether in some circumstances the new proposals will achieve too much risk sensitivity, and to discuss this question in the context of the debate about whether internal ratings will amplify procyclicality. I shall also say something about the implications of this for lending to small and medium-sized companies. Finally I would like to end by saying a few words about forward-looking provisioning and liquidity. These are, to my mind, important adjuncts to the regulation of capital and it is important that they are not overlooked in the current focus on capital adequacy. Risk sensitivity in the new Accord The common theme behind the revisions to the Basel Accord is greater risk sensitivity. This is a move we strongly support; risk insensitive capital requirements lead to some very perverse incentives and have contributed to a number of real-world problems. This has been less the case in this country, where of course the FSA supplements the crude minimum Basel requirement with tailored capital ratios, than in some other countries, but we have not been immune even in the UK. Certainly I wonder if over-investment in highly-speculative real estate development, a common precursor to a number of banking crises, would have been quite so prevalent if capital requirements had better reflected the often-volatile nature of such lending.
This is the central role assigned to the Euro Retail Payments Board. Later on this morning, Yves Mersch will give us further insights into the work of the ERPB. Allow me now to conclude briefly by expressing again my gratitude to all the speakers, panellists and participants who are present today to share their thoughts on a wide variety of subjects of topical interest. I wish you extremely fruitful discussions throughout the whole day. Thank you for your attention. 3/3  BIS central bankers' speeches

11.05.2023  The financial system: current situation and challenges IE University – Banco de España – Federal Reserve Bank of Saint Louis Conference: Current Challenges in Economics & Finance Madrid Pablo Hernández de Cos Governor  Thank you very much to the organisers for inviting me to this conference. Today, I will be addressing you in my capacity as Chair of the Advisory Technical Committee of the European Systemic Risk Board (ESRB),1 a role which brings a deep EU-oriented perspective, complementary to my regular responsibilities as Governor of the Banco de España and member of the Governing Council of the European Central Bank. The macrofinancial risk landscape and the banking sector The macrofinancial risk landscape has changed in recent months and continues to evolve. In a relatively short period of time we have moved from low inflation and low interest rates to persistent high inflation and rising interest rates. This shift poses new and enhanced risks to financial stability. To heighten awareness of these risks the ESRB adopted a Warning2 on vulnerabilities in the EU financial system in September 2022. This is the first general warning (i.e. addressed to all EU Member States) that has been issued by the ESRB since its establishment in 2010. Over the last seven months some economic developments have surprised to the upside, while some vulnerabilities timely identified in the Warning have come to the fore.
I would hope that the insurance industry, and the liquidity and investment funds you run, might be investors in such paper, whose liquidity would receive some underpinning. Certainly you will  1  For example, see Buiter W (2009), “Central banks and financial crises”, paper presented at the Federal Reserve Bank of Kansas City’s symposium at Jackson Hole, Wyoming and Tucker (2009), “The repertoire of official sector interventions in the financial system: Last resort lending, market-making and capital” paper presented at the 2009 International Conference: Financial System and Monetary Policy Implementation, Bank of Japan. 2  BIS Review 71/2009  be an important part of the Bank’s consultative process led by my colleagues Paul Fisher and Sarah Breeden. Addressing trade and working capital finance has become all the more important given the reduction in the availability of trade-credit insurance, which our regional Agents hear quite a lot about. We therefore welcomed the initiative of that relatively concentrated industry to release a code of conduct, supported by the ABI, for handling difficult cases where unnecessary firm distress could be avoided. The Bank has followed this carefully given our role as midwife for the London Approach designed to help facilitate the orderly resolution of creditor/debtor problems. In a few cases over recent months, as well as over the trade-creditinsurance code, my colleague Andrew Bailey has played a behind-the-scenes role – the traditional role of providing the Bank’s good offices where (and only where) we can help, and where help is desired by those involved.

François Villeroy de Galhau: France and Europe - economic developments, reforms and attractiveness Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Paris Europlace International Financial Forum, New York City, 18 April 2018. * * * Accompanying slides of this speech. Ladies and gentlemen, Let me welcome this traditional gathering – Paris Europlace in New York – with a less traditional timing: one year after the French elections. And indeed much happened in these 12 months. In my remarks today, I would like to elaborate on what I call “the French momentum” and more generally the “euro area momentum”. We have a unique opportunity to implement crucial reforms both in France and in Europe that we must definitely seize. So I would like to share with you some thoughts on (i) our cyclical favourable environment (ii) hence, our structural acceleration, and (iii) Paris’ attractiveness, including in the post-Brexit world we must prepare. *** 1.Our cyclical opportunity and the present expansion phase  [Slide 2] The euro area economy is experiencing a strong and broad-based expansion: we have now seen 19 consecutive quarters of positive growth. In 2017, real GDP growth peaked at 2.5% and short-term economic indicators all point to a continued economic upswing. According to the latest ECB projections, real GDP is expected to expand at 2.4% in 2018, above potential. The breadth of this steady economic growth is noteworthy: dispersion across countries and sectors is at its lowest level for two decades.
BIS Review 28/2001  3  Even more importantly, the euro zone is not devoid of mechanisms conducive to an appropriate policy mix. As a matter of fact, monetary policy alone cannot ensure price stability without the appropriate fiscal discipline at the overall EMU level. Indeed, for my part, I would mention three economic justifications for the Treaty provisions that gave rise to the Stability and Growth Pact: –  First, by co-ordinating the fiscal policies of the Member States of Monetary Union, the pact ensures a good policy mix within the Euro area. This is essential for monetary policy, to counterbalance the fact that Europe does not have a significant federal budget, just as it has no federal government. Close mutual surveillance and co-ordination of fiscal policies are the responsibility of the “Euro Group” and of the Ecofin Council. Adherence to the medium-term objective of achieving budgets that are “close to balance or in surplus” means that individual countries must first rely on themselves to withstand possible economic downturns which affect only their own economy, while ensuring a balanced policy mix throughout the euro zone. –  Second, the pact helps to prevent well-managed economies from having to bear an unjustified risk premium by setting up a penalty system for excessive deficits. –  And lastly, the stability and growth pact allows us to disprove the assertion that the euro area has no automatic stabilisers in the event of asymmetric shocks to a member economy.

Jean-Pierre Roth: The economic situation – la vie en rose? Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at a meeting with representatives of Ticino industry, Centro di studi bancari, Vezia, 28 November 2006. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is true that our exports continue to benefit from a buoyant global economy, that areas of concern such as the volatility of oil prices or the possibility of a significant and lasting downturn in the US economy have partially receded, and that the current economic recovery has led to an improvement in the labour market without endangering price stability. Is this la vie en rose (living life through rosetinted spectacles)? A brief outline of the situation in the national and international economies is given, indicating that the overall perspective remains favourable. It concludes with a concise evaluation of the risks, showing that the current euphoria may conceal significant risks that we must not lose sight of. BIS Review 116/2006  1
How innovative is an ECB allowed to be, which as a start-up from the year 1999 is in many ways itself an innovation, and as a custodian of a currency without a state can only partly be compared with other central banks. Of course I can only give you today, less than a week before our ECB Governing Council meeting, some general reflections from my personal point of view. I think we can all readily agree that innovation cannot be an end in itself. The ECB must and will act only in accordance with its mandate. Price stability is the guiding principle of our actions. The definition of our mandate does not allow for innovations. Moreover, in uncertain times of crisis a clear focus is not less, but doubly important. Central banks therefore have a particularly strong understanding of tradition, and for a good reason: monetary policy is all about trust, reliability and consistency. Innovative measures must therefore be judged against our mandate of maintaining and creating price stability. As with any decision, innovation demands a sober analysis of the costs and benefits, the opportunities and risks. Allow me to slip briefly into legalese: innovative monetary policy measures, too, should be suitable to achieve their objective. Since monetary policy measures also have side effects, a central bank should use the mildest means to achieve the fewest possible side effects. Low inflation rates and the catalogue of measures So what does this mean for the current situation? Unanimous monetary policy can and must maintain price stability.

At the same time, we have the tool of forward guidance, which we have used and later reaffirmed: with regard to the inflation outlook, based on current data we expect that the central bank interest rates in the euro area will remain at the current level for an extended period. In addition we have taken a number of targeted unconventional measures which should improve the monetary policy transmission mechanism. One of these is targeted longer-term refinancing operations (TLTROs), with which banks can obtain liquidity for a fixed interest rate for up to four years. We have drafted two purchase programmes, one for covered bonds and one for asset-backed securities (ABS). The purchase programme for covered bonds started in October. So far purchases of around € billion have taken place. We started the ABS programme just last week. I anticipate that together the longer-term refinancing operations and both purchase programmes will have a strong impact on the balance sheet of the Eurosystem. Innovation or imitation Every month there are fresh calls for further measures. But is it appropriate to contemplate further measures at this moment in time? Under normal conditions, central banks are in a position to ensure price stability in an environment of positive nominal interest rates by means of conventional interest rate policy. Once interest rates are at zero, a central bank is left with only unconventional measures in order to fulfil its mandate. Central banks all over the world have indeed been anything but idle.
Were central banks via tighter monetary policy to attempt to stop such a fundamentally motivated development, it could instead prove costly to the economy. Do asset prices and credit play an independent role for the real economy? Having said this, we must ask ourselves the following questions: (1)  Is there reason via monetary policy to reduce disturbances that can be expected to have a substantial impact on the macroeconomy if this did not affect the forecasts of inflation in the medium term? (2)  Is there any information in asset prices and debt levels that is systematically not taken account of when forecasting inflation? 2  Heikensten, L. & Vredin, A. (2002), “The art of targeting inflation”, Sveriges Riksbank Economic Review  BIS Review 40/2004  3  Allow me to begin with the first question. Besides the task of maintaining price stability, most central banks also have a role as regards financial stability. If systemically important banks are hit by a crisis or by losses large enough to cause a sharp decrease in the credit supply or a disturbance in the payment system, this results in considerable macroeconomic disturbances. If financial stability is threatened by a credit expansion in such a way that systemically important banks have not heeded a macroeconomic risk that has been identified by the central bank, this could therefore need to be taken into account when taking interest rate decisions.

Thirdly, somewhat tighter monetary policy than otherwise would be able to counter an over-optimistic pricing of financial assets and properties. The second argument is therefore based on the idea that the central banks’ normal forecast horizon of two years is too short, while the third argument is based on the assumption of irrational expectations. Lengthening the forecast horizon is relatively simple in principle, but in practice it is more difficult of course. Especially if the models used have some of the shortcomings I mentioned earlier. The third argument regarding irrational expectations is more difficult to adopt a position on. If we seriously believe that it is relevant, a large part of the foundation for the analysis and recommendations on which central banks today base their policy collapses at the same time. However, “Irrational expectations” could be a result of insufficient availability of information. Therefore, it cannot be ruled out that central banks, by pointing out potential problems associated with high debt levels, can contribute to reflection among those agents that otherwise would undertake commitments that they would not be able to meet when conditions change or in banks that otherwise would take on excessive credit risks. Influencing behaviour in this way by spreading information is an important idea behind the Riksbank’s Financial Stability Reports. Those that maintain that there is too much uncertainty to dampen a price rise via interest rate adjustments are thus of the opinion that it is better to wait until asset prices start to decline.
We believe that, after coping with the short-term effects of the international financial crisis and following the improvement of the international economic situation, it is the time for the public authorities at home to initiate a process of assessment for the legal and financial operations framework, with the goal to re-establish appropriate balances in the fiscal, monetary and banking activity, to further sustain a stable economic growth and maintain financial stability. In this regard we consider important for the fiscal policy to take respective correcting measures in order to keep the confidence of the resident and non-resident market agents and investors. At the same time, the monetary policy should assess the possible effects on inflation of the financial incentives it provided to the banking sector and to the economy, and later analyze the possibilities to support the financial intermediation of the banking sector in the economy at a lower cost. To provide a longer-term response to the stable economic growth, public authorities should insist on the compilation and implementation of the strategies for future economic development, which in a medium term shall provide for: a)  the establishment of a better balance on the contribution that different sectors give for the economic growth. In this regard, it is important to increase the support for economic sectors with strong growth potential, like agriculture and tourism;  b)  the increase of our economy’s competitiveness and its further formalization.

In this regard, it is important for the public authorities to start a process that would analyze and assess the impact in their financial industry of the expected and well identified proposed changes. Clearly, the practical adoption of the proposed changes should be driven by the goal for achieving a higher convergence with international standards, but it should be determined by the characteristics of the national or regional financial system, and their development goals. In addition, focusing only at better regulating the financial industry, without addressing other important and probably unsustainable economic developments, is an asymmetric approach that will not deal properly with the risks to financial stability. In this regard, governments, businesses and households, should identify measures and adopt actions to reduce imbalances in their own balance sheets, as this will, on the other side, improve the quality of the financial industry and reduce risk. Dear participants, Let me now focus more on how the Albanian economy and our financial system was challenged by the international crisis, and what are some of the future measures the Bank of Albania believes are important to strengthen the stability of the financial system and of our economy.