samchain/econo-pairs-v1 huggingface dataset:
The third factor emphasised by this type of pricing model is the mark-up over costs included in the final selling price which governs the return firms make on capital. As I will discuss later, there is some evidence to suggest that movements in this mark-up have been different in this recession than in previous ones. The final set of factors determining pricing decisions are expectations of future costs and prices. Most companies change prices infrequently and as such their pricing decisions today are based on expectations about how their costs and their competitors’ prices are likely to vary in the future. Similarly, pay awards are likely to be affected by firms’ and employees’ expectations of future inflation. I will use this broad framework to consider why inflation has been above the 2% target for much of the past four years and why inflation was higher than expected for much of this period. Price level shocks It is not difficult to find factors that have pushed up inflation over the past few years. The economy has been hit by a series of large price level shocks – to oil and other commodity prices, to VAT and to the sterling exchange rate – which have raised companies’ costs and  1  The key intuition of this model is based on work such as that by Marshall (1920), Chamberlin (1933), Spence (1976) and Salop (1979), among many others who contributed to this now well established literature. 2  BIS Review 122/2010  put upward pressure on prices.

The answer to both these questions is emphatically “No”. The MPC remains as committed as ever to meeting the inflation target. It is our job to achieve the target and we are accountable to Parliament for doing so. To borrow from a phrase of a previous Prime Minister, ask me my three main priorities for monetary policy and I will tell you: inflation, inflation, inflation. Maintaining low and stable inflation is the best contribution that monetary policy can make to the long-term health and prosperity of our economy. But I recognise that reassuring words and good intentions are not enough. We need to understand better the factors causing inflation to be above target. And we need to learn from  BIS Review 122/2010  1  the upside surprises in inflation we have experienced recently. That is the topic of tonight’s talk. I will argue that it is not difficult to explain the past strength of inflation. In fact there is a surplus of explanations. But there are important lessons to learn from the recent behaviour of inflation. And I will explain to you why – despite inflation being above target and expected to remain so until the end of next year and monetary policy being at unprecedented loose levels – the MPC has not gone soft on inflation. What determines inflation? To help structure the discussion, I want to frame my comments in terms of a simple model of pricing behaviour, in which companies are assumed to set prices as a mark-up over marginal costs.
However, to the credit of Exter, many safeguards, checks and balances were added to the law establishing the central  2  BIS Review 92/2007  bank to prevent such undisciplined monetary management by the new central bank. The absence of even a single episode of hyper-inflation or crises of monetary nature during the past 57 years of existence of the central bank is testimony to the efficacy of these measures added to the law. The role of the new central bank The mandate given to Exter was, inter alia, to “report on the organization and functions of a Reserve Bank with a view to ensuring, within the limits of monetary action, full employment of the economic resources of the country, and, if need be, on the promotion of supplemental credit institutions in furtherance of this policy…”. The mandate itself had recognized that the central bank should facilitate economic development “within the limits of monetary action”. This meant that, though short-term economic stimuli could be provided by raising money and credit, the bank should not do that, since it leads to the abandonment of price stability. Any stimulus to be provided by the central bank should, therefore, be practised cautiously and with due regard to its impact on price stability. While emphasizing on the importance of money and credit on an economy, Exter referred to this as “stable money which is essential to performance under contracts and to the equitable liquidation of debt”.

They have also documented the substantial heterogeneity in the formation and updating of expectations across demographic groups. To facilitate further research, we make the survey data available in the Center for Microeconomic Data section of our website. Each month we also illustrate the trends in our expectations series through easy-to-use, interactive charts. Further, a number of our Liberty Street Economics blog posts describe the data and the analysis we have conducted. We do this because we want researchers, policymakers, commentators and the general public to understand the data and to follow our updates. Let me now describe our Survey of Consumer Expectations in more detail. 1/3  BIS central bankers' speeches  The Survey of Consumer Expectations Following extensive design and testing, we launched the Survey of Consumer Expectations in June 2013. The survey has a number of innovative and unique features, three of which I would like to highlight today. First and foremost, as I mentioned earlier, it collects households’ subjective expectations and intentions on a wide range of economic outcomes and behaviors. In addition to short- and medium-term inflation expectations, it collects data on households’ expectations regarding the housing, labor and credit markets, as well as households’ financial situations and a host of other macroeconomic variables of interest. For example, the survey elicits beliefs about future wage growth, house price appreciation, job search and labor market transitions, households’ spending and income growth, and credit applications.
In Minsky's theory of endogenous financial booms and busts, prosperous times lead to an excess availability of credit and the gradual development of credit-fuelled asset-price bubbles. Financial crises result when those debt levels become excessive – a so-called “Minsky” moment. A credit crunch then ensues leading to a downturn in the real economy. Much of what I have said this evening contains echoes of Minsky's theory. As a student at Harvard, Minsky was a protege of Schumpeter, whose teaching influenced him greatly. Schumpeter viewed credit as an essential ingredient of the capitalist machine. He would surely have regretted the downplaying of financial intermediation in macroeconomics over the past forty years. And he would surely endorse the need to rectify that omission now. So let me leave the final words to him: “Credit creation [is] the monetary complement of innovation. This relation…is at the bottom of all the problems of money and credit.” (Schumpeter, 1939, p.111) Bibliography Adrian, T. and Shin, H.S. (2008), “Financial intermediaries, financial stability and monetary policy”, in Maintaining Stability in a Changing Financial System, pp. 287-334. Federal Reserve Bank of Kansas: Kansas City. Aikman, D. and Paustian, M. (2006), “Bank capital, asset prices and monetary policy”, Bank of England working paper 305. Akerlof, G. A. and Shiller, R. J. (2009), Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton University Press: Princeton.

As a consequence the prices are apt to drop sharply with changing perceptions of the underlying default rates, a feature that has been apparent during the crisis. A typical CDO comprises a large number and variety of RMBS, including a mix of prime and sub-prime mortgages from a variety of originators. On the face of it, this might seem like a good thing as it creates diversification. However, even more than with plain vanilla RMBS, it becomes impossible to monitor the evolution of the underlying risks – it is akin to trying to unpick the ingredients of a sausage. That may not matter too much when defaults are low and only the holders of the first, equity, tranche suffer any losses. Holders of the safer tranches can in that case sit back and relax – a case of rational inattention. But once defaults begin to rise materially, it matters a lot what such a security contains. And with highly nonlinear payoffs, returns can be extremely sensitive to small changes in underlying conditions. When defaults on some US sub-prime mortgages originated in 2006 and 2007 started turning out much higher than expected, there was a realisation that losses could be much greater on some of these securities than previously believed. And a growing realisation of the informational complexity of these securities made them difficult to price in an objective sense.
(b) Data on portfolio equity inflows from the Institute of International Finance. Data on equity market capitalisation from Thomson Reuters Datastream. Chart 3 Emerging market equity prices and gross inflows(a) to emerging markets MSCI EM $ index (LHS) Gross inflows to EM $ 1,400  500  1,200  400  1,000  300  800  200  600  100  400  0  200  -100  0  -200 Q1 1990  Q1 1994  Q1 1998  Q1 2002  Q1 2006  Q1 2010  Source: IMF and Thomson Datastream. (a) Includes portfolio inflows, foreign direct investment and bank flows. BIS central bankers’ speeches  11  Chart 4 Cross-border asset holdings (1980–2005) 1980  1985  1990  1995  2000  2005  Source: Kubelec and Sa (2010) and Bank calculations. Advanced economies  Emerging market economies  Financial centres (Hong Kong and Singapore)  Notes: Widths of links are proportional to the log dollar value of cross-border asset holdings. Each arrow denotes ownership, with the arrow pointing away from the holder of the asset and toward the issuer of the liability. Sizes of nodes are proportional to the log dollar value of the sum of all of the country’s cross-border asset holdings and liabilities issued (i.e. equal to the sum of incoming and outgoing links).

One of the purposes of this was to illustrate that it was not possible for monetary policy to maintain inflation at exactly two per cent all of the time. Changes in the policy rate, known as the repo rate in the Riksbank’s case, are a blunt instrument with regard to steering inflation in the short term. It takes time before interest rate changes have an effect and monetary policy must therefore be based on forecasts of the inflation rate a couple of years ahead. In addition, there is uncertainty over how the economy functions. It is therefore impossible to parry all shocks that affect the economy and temporary deviations from target will therefore arise. The tolerance interval also provides scope for temporary deviations from target that may be justified with reference to the stability of the real economy. Let us say that a shock occurs that makes inflation deviate from target. By not aiming to restore inflation to target as quickly as possible, scope is created to conduct monetary policy in such a way as to dampen fluctuations in, for instance, growth and employment. However, for the inflation target to retain its credibility, the deviations cannot be permitted to become very large or prolonged. To create greater clarity, monetary policy is guided by the principle that the Riksbank’s ambition is normally to bring inflation back on target within two years. One might say that this two-year horizon is a restriction that the Riksbank has placed upon itself to maintain credibility for the inflation target.
Banks have progressed in terms of increasing financial capacities and the ability to provide operational continuity in resolution, while we have submitted a set of recommendations to minimise the potential impediments for implementation of the resolution plan. Along with the primary objective of preserving price stability and its role in supporting the financial stability of the country, the Bank of Albania is responsible for other activities as well, which are considerably important for the development and growth of society's welfare. I will provide a brief summary on some of these. 3. Other activities The payment systems managed by the Bank of Albania have guaranteed maximum availability and have functioned safely and effectively throughout 2022. Along with the existing payment systems in lek, in January 2022, the AIPS EURO for the settlement of the domestic euro-denominated transfers started operation for the first time, with significantly lower costs and with shorter delivery times than the previous process. It has been assessed that Albanian businesses and consumers saved around EUR 10 million from the use of this system throughout 2022. In parallel, the development of payment services infrastructure has supported the expanded use of e-payment instruments and the financial inclusion of the population. Our statistics display a growth of 18% in card payments, e-money payments and home banking payments. The use of electronic payments per capita reached 17 payments, though the objective for 2023 was 10 payments, as outlined in the Albania National Retail Payment Strategy (2018 -2023).

This attack led to a rapid spike in food, energy, and commodity prices, and in inflation, jeopardising monetary and financial stability on global and national levels. At the same time, prevailing uncertainty, erosion of purchasing power and tighter financing conditions worsened the world economic outlook. Albania, as a small and open economy, is also experiencing these trends. The external shock was reflected in heightened uncertainty, higher costs of production for enterprises, increased cost of living for households, and an overall rise in interest rates. The external shock had a considerable impact on prices. Average inflation jumped to 6.7% in 2022 from an average of 2.0% in 2021. First, foreign prices fuelled this upsurge, coupled then increasingly by a rise in production costs and inflationary expectations in Albania. Thus, overall inflationary pressures started to appear more broadly and with increasing persistence. These features were reflected in a rapid upsurge in core inflation during 2022. This indicator is the best barometer of more persistent inflationary pressures. In this new economic environment, within our legal mandate of price stability, the Bank of Albania has embarked on the process of normalising our monetary policy stance. The increase in the interest rate to 2.75% as at end of 2022, from 0.5% at the beginning of 2022, led to the realisation of this normalisation.
The stance of each central bank will respect local economic conditions, but the absence of a coordinated action on a global scale cannot be an excuse for a lenient stance on the domestic inflation front. More specifically, the Brazilian Central Bank has not waited and will not wait for other central banks to act in order to start fighting domestic inflationary pressures. Not acting promptly would enable initial specific price pressures to contaminate inflation dynamics permanently, due to deteriorated inflation expectations of both price and wage setters. BIS Review 108/2008  1  In the beginning of 2008, the Brazilian Central Bank stressed in its regular publications that inflation risks had mounted, a fact that could require an adjustment in its monetary stance. This assessment surprised many analysts that expected inflationary pressures to be contained by a spontaneous slowdown in economic activity, an expectation that did not materialize. Other analysts seemed to believe that increases in commodity prices were temporary and that the Central Bank should wait for the complete materialization of inflationary pressures to finally start acting. It is clear now that this complacent approach would have had deleterious and long-lasting consequences for the economy. As repeatedly stressed by the Central Bank, the balance of risks for inflation became less favorable, not only due to external factors, but also – and more importantly – due to domestic factors. On the external front, the contribution of imports to sustain a benign inflation scenario has become less effective.

This is the approach that minimizes costs for economic activity and for the society at large, contributing to consolidate a sound, efficient, and fair economic structure. Thanks for your attention! 2  BIS Review 108/2008
We are on our way up out of the steepest downturn in the economy for decades and the low interest rate is necessary to provide sufficient support to the recovery. But at the same time, we are also approaching a situation where it is time to leave the crisis interest rate behind us and take steps towards an interest rate that is normal for a “regular” economic downturn. We are expecting to begin raising the repo rate with effect from the summer or the beginning of the autumn this year. This is slightly earlier than assumed in our earlier forecast. There are two main reasons why we are revising our assessment somewhat. One is that the situation in the financial markets has become increasingly stable over a long period of time. The other is that the upturn in economic activity has gradually become more evident. Roughly as the long, cold winter has steadily made the ice thicker than last year, developments in the financial markets and the economy as a whole have contributed to the recovery being able to continue on firmer ground. But the road ahead of us is certainly not lacking in challenges. Before we reached agreement on our forecast we took into account a number of different risks and deliberations in the two areas I just mentioned. And I would now like to explain our reasoning to you. Financial markets more stable The situation in the financial markets is becoming increasingly stable.

There is a final twist in this story of the dark side of integration and information. Fat tails and short minds can combine in uncomfortable ways. Myopia generates under-insurance against future risks, especially tail risks which seem remote. Yet, courtesy of integration, these tail risks may be on the rise. In other words, systemic risks may be rising at precisely the time societal insurance against these risks is most needed. Why institutions matter If so, then policymakers face a dilemma – catastrophe risk rising, but catastrophe cover falling. In these circumstances, the public good of system stability, locally and globally, socially and economically, may be at risk. How should policymakers respond? One response would be to turn the tide, reversing the paths of integration and information. Since the crisis, there have been some signs of just that. Chart 2 shows one measure of global capital market integration over the past century – the correlation between national saving and investment rates in a set of countries. A value of one signals financial autarky – countries fully reliant on domestic saving to finance investment. A value of zero signals perfect financial integration – countries financing local investment globally. For much of the 20th century, global financial integration, so measured, was very low. In the early 1980s, after decades of post-war financial liberalisation, this was seen as a “puzzle” (Feldstein and Horioka (1980)). Yet at precisely that point, the puzzle began to unravel. Correlations between national saving and investment began falling.
Households’ gross disposable income fell by 8.8% year-on-year in the first half of 2020. In parallel, lending to households has fallen off in recent months as a result of the decline in new lending business. The reduction has been more marked in the consumer credit segment, while new financing for house purchases fell less sharply. Overall, although the moratoria on loans, which affect 7% of the outstanding balance of lending to households, have checked the decline in lending to this sector by reducing the volume of loan  5  repayments, its year-on-year growth rate dipped to -0.8%, compared with the 0.3% increase in February. This has entailed an increase in the financial pressure borne by households. Thus, for the household sector as a whole, the debt-to-gross disposable income (GDI) ratio rose by almost 4 pp in the first half of the year to 95%. Once again, the intensity of this increase in debt will foreseeably ease to some extent with the GDI data for Q3. The increase in household saving not earmarked for debt service (a consequence of the heavy decline in consumption) appears to have been channelled to bank deposits, which posted a year-onyear increase of 7.1% in July. However, updated information on the distribution of this saving within the household sector is not available, making it difficult to assess to what extent this development is softening the greater degree of financial pressure for certain groups of households.

To a certain extent, the speed of convergence was, in the case of Romania, fueled by the flexibility of our exchange rate regime. The movements in the leu exchange rate cushioned some unexpected shocks that hindered economic growth, keeping it at a higher level and avoiding excessive output volatility. But, besides numbers and levels, I believe that the sustainability of real convergence is essential, especially for EU member states like Romania, for which the obvious next stage is joining the euro area. Indeed, to attain a certain degree of per capita income convergence before switching to the euro is essential, as a large convergence gap may complicate business cycle management in the absence of independent monetary policy. And, unlike the EU, the euro area proved it is not a “convergence club”, as its current members did not necessarily increase their convergence level after adopting the euro. But, while the optimal level of real convergence for a successful euro area entry is still a controversial issue, the consistency and sustainability of convergence are, in my opinion, at least as important as its level. On this convergence path, I believe that it is very important to avoid divergence, even inside the country. In Romania, one can find areas that are comparable, in terms of development and living standards, to Western economies, but also regions that trail well behind: in 2017, the wealthiest region in Romania was almost four times richer than the poorest one (based on regional per capita GDP).