samchain/econo-pairs-v1 huggingface dataset:
I want first to review why that historical performance has been so sluggish, before turning to look at how things are changing, and fast, under the influences of shifting public policy and consumer behaviour, and the physical realities of a changing planet. I will focus mainly on developments in private financial markets, but will also touch on some of the ways that we in the UK public sector can contribute, as market participants in our own right. Why markets have struggled to price climate risk: externalities, horizons and opacity Given the sheer scale of the climate challenge, it is at first glance surprising that financial markets have struggled to reflect it in asset pricing. The reasons for that failure are threefold. First, it is in the nature of climate change that many of the costs of failing to address it, and the opportunities for positive change, fall to society as a whole, rather than specific individuals or companies. The freedom to emit unlimited amounts of carbon is one example. Markets are notoriously poor at pricing such ‘externalities’. Not all climate risks are externalities, of course. Investor activism can bring consequences to bear on firms viewed to be responsible for climate harm.8 And climate-related natural disasters – already three times more frequent than 40 years ago – fall on real individuals and real companies.

9 For a recent discussion of these issues, see https://www.bankofengland.co.uk/speech/2020/anna-sweeney-moodys-the-resilience-ofinsurers-in-a-changing-climate 10 For a recent central banker’s perspective on these points, including the case for establishing a global price for carbon, see the speech by Isabel Schnabel of the ECB at https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200928_1~268b0b672f.en.html 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  that Mark Carney has called the ‘tragedy of the horizon’.11 But here, too, things are changing. Climate risk doesn’t seem so hypothetical or far off to those gazing at red skies over San Francisco, fleeing their burning homes in the Australian outback, baling out flooded villages in the UK, or contemplating big writedowns in the value of their businesses (as the boards of Ford, VW, BP and Shell, to name but a few, have done). Here, a combination of consumer action, government policy, and financial market pricing are bringing the future into the present. The final issue is the most prosaic, but perhaps also the most important from a financial markets perspective – and that is the historic absence of robust measurement. Measurement of how much pollution specific companies, their supply chains and consumer markets, produce. And measurement of the extent, and efficacy, of remedial action. While financial performance and risk is measured, and audited, to the nth degree, climate risk has historically been a void. What isn’t measured can’t be priced, traded or risk managed. This is perhaps where change has been most profound, as I will discuss shortly.
Lars Heikensten: Introduction on monetary policy Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at The Riksdag Committee on Finance, Stockholm, 14 October 2004. *  *  *  Let me begin as usual by thanking you for the opportunity to come here and give an account of the Riksbank’s monetary policy. It is ten years now since my predecessor Urban Bäckström was here for the first time to attend a hearing under such transparent and public conditions. At that time the inflation target had only recently been introduced. Given that this is the tenth anniversary of the hearings in their current form, I think it is appropriate to begin by looking back on the past years. One conclusion is that much has gone well; the inflation rate has been low and stable, and growth in both real wages and the Swedish economy in general has been high. Employment growth has not been quite as robust, however. Against this background, I will be focusing particular attention today on the issue of monetary policy’s ability to influence employment. By way of conclusion, I intend to touch upon the Riksbank’s outlook for economic developments and inflation in the years ahead and to comment on the decision we made yesterday regarding the repo rate. Ten years of low inflation New policy The crisis at the beginning of the 1990s was a dramatic, tragic conclusion to almost twenty years of stabilisation policy problems in the Swedish economy.

The conditions for understanding and evaluating our actions were probably improved further when the Riksbank in 1999 began to publish the minutes from its monetary policy meetings. Now it is also possible to examine the arguments put forward. Were they the right arguments or not in the light of what has happened? On the whole, I believe that we have laid a solid foundation during these years for an in-depth assessment of our decisions. Inflation and inflation expectations So how well has the Riksbank succeeded in achieving its target in the past ten years? (Chart 3.) Looking at the average inflation rate since the target was introduced in 1993, CPI inflation has been 1.8 per cent, while the measure of underlying inflation that we in practice have used over a large part of the period to explain our policy, UND1X, has been 2.1 per cent. If we instead make the comparison from 1995, the year when policy began to have its full impact, the corresponding figures are 1.4 and 1.9 per cent, respectively. Even when average inflation has stood fairly close to the target, sharp deviations can of course occur periodically. This has also been the case; during shorter or longer continuous periods inflation has been above or below target. At the same time it is also evident that the size of the deviations depends somewhat on the inflation measure in question. UND1X has fluctuated less as it is not affected as much by changes in interest rates and taxes.
To the extent that this allows skills to be retained and reduces costs of replacing  3  In economists’ jargon, the extent to which potential supply is endogenous. This opens the possibility of there being “multiple equilibria”, something my colleague David Miles has reminded us was a central message of Keynes but that has been lost to much of the latest generation of New Keynesian modelling. See “Monetary Policy and Forward Guidance in the UK”, a speech by David Miles, available at: http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech681.pdf. 4  David Reifschneider, William L. Wascher, and David W. Wilcox (2013). “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”, Finance and Economics Discussion Series 2013–77. Board of Governors of the Federal Reserve System (U.S.). http://www.federalreserve.gov/pubs/feds/2013/201377/201377abs.html. 5  See Alina Barnett, Maria Barriel, Adrian Chiu and Jeremy Franklin. “The Productivity Puzzle: Firm-Level Perspectives”, Bank of England Working Paper, forthcoming. 4  BIS central bankers’ speeches  particularly skilled employees as the recovery takes hold, the recovery could generate greater supply capacity and real wage growth as it proceeds. It would be unreasonable to expect these positive outcomes to materialise immediately. Weak growth may have meant that companies have missed out on productivity advances that would otherwise have been made through learning by doing. Skills have atrophied through underemployment rather than unemployment. The recovery will therefore need to be sustained for a period before productivity – and real wage – gains can resume in earnest.

Sources: Bloomberg and Bank calculations  Chart 3:  Chart 4:  Measures of uncertainty in the UK have fallen sharply1  US unemployment rate has fallen by more than UK  Standard deviations from mean (1985-2012)  5  14  4  12  3  10  2 1  8  0  6  -1  4  -2  2  -3 -4 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Swathe of uncertainty indicators First principal component 1  For further details, including of the indicators used and sources, see Haddow, A, Hare, C, Hooley, J and Shakir, T (2013), “Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?”, Bank of England Quarterly Bulletin, Vol. 2, No. 2, pages 100–109.
CPI inflation still reflects the effects of the previous repo-rate increases on housing costs. Various measures of underlying inflation show that inflationary pressures are moderate (see Figure 21). As economic activity recovers, underlying inflation will gradually rise towards 2 per cent in the years ahead. Continued low repo rate will facilitate stable development Our forecast for the repo rate is that it will remain unchanged until sometime next year and that monetary policy will continue to be expansionary — the repo rate is low in an historical perspective (see Figure 22). This will contribute to a gradual normalisation of inflation. Apart from stabilising inflation, monetary policy also aims to stabilise the real economy. Stabilising the real economy means, in more concrete terms, stabilising resource utilisation, that is the deviation of production and employment from long-term levels. Resource utilisation can be measured in many ways, but our overall assessment is that it is somewhat below normal at present. An ongoing expansionary monetary policy may also help to normalise resource utilisation during the forecast period. As resource utilisation and inflationary pressures increase, the need for an expansionary monetary policy will decline. There will be a need to gradually raise the repo rate to bring inflation close to the target and to stabilise resource utilisation. As the situation is highly uncertain, however, things may develop in a different direction than we expect. We see two main risks at present.

The US  2  BIS central bankers’ speeches  economy was in many senses the epicentre of the financial crisis. There are a number of problems that need to be dealt with. First, many households in the United States have fallen into difficulties because their debts exceed the value of their homes. The households have therefore needed to increase their saving, which they have done. As a result, private consumption has grown slowly for some time but does have the potential to recover in the period ahead. Second, public finances are weak in the United States too (see Figure 9). The situation became more dramatic in the summer when the country’s credit rating was reduced. The political deadlock in the US Congress was one of the main reasons for this. A major advantage in the United States is that, so far, government bond rates have remained very low (see Figure 2). However, it is important that these problems are resolved so that this positive trend can continue and so that interest rates do not begin rising as they have done in several countries in southern Europe. There are, however, a number of bright spots with regard to the US economy. One is that the companies are making good profits. We have to go all the way back to the early 1950s to find as high a level of profits in relation to GDP as there is now. When confidence returns there is therefore every chance that investment and employment will recover.
Step 2 relates to the potential for market participants, acting on their own or in concert with the authorities, to reduce vulnerabilities by strengthening market-wide infrastructures or practices. The recent proposal by Darrell Duffie to mandate central clearing of US government bonds is an example of this type of work.3  But my topic today relates to Step 3: the role that central bank balance sheets should play in dealing with market dysfunction. I deliberately come to this last, because, while it is central banks’ job to restore financial stability where self-insurance is too socially costly, they should be backstop providers of liquidity, not a first port of call. In that sense, their tools should complement, not substitute for, the other vertices of the triangle. Outside of pandemics, massive doses of system-wide anti-inflammatories do not meet that design brief. Long-term protection requires a more targeted remedy, as the Bank’s Financial Policy Committee concluded last October.4  2  https://www.fsb.org/2020/11/fsb-acts-to-address-issues-highlighted-by-march-market-turmoil/ https://www.brookings.edu/research/still-the-worlds-safe-haven/ 4 ‘The FPC considers it important to examine whether central banks should have facilities to provide liquidity to the wider financial system in stress, in order to support market functioning. Any such backstop of liquidity would need to be provided in a way that is not just effective and efficient but that also, through appropriate pricing and accompanying regulatory requirements, reduces incentives for excessive risk taking in the future’ (https://www.bankofengland.co.uk/financial-policy-summary-and-record/2020/october-2020). See also Box 7 of the August 2020 FSR (https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2020/august-2020.pdf) and the Governor’s remarks at Jackson Hole (https://www.bankofengland.co.uk/speech/2020/andrew-bailey-federal-reserve-bank-of-kansascitys-economic-policy-symposium-2020).

In this respect, banks and financial market participants that act independently, and take responsibility for their actions, remain a prerequisite for a stable and secure system, even if it is well-regulated and supervised. Thank you for your attention. BIS central bankers’ speeches  5
Fritz Zurbrügg: A new premise for Swiss National Bank monetary policy? Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the KOF Forecast Conference, Zurich, 1 October 2015. *  *  *  Ladies and Gentlemen I would like to thank you for your invitation to the KOF Forecast Conference. Economic forecasts play an important role in investment and consumer decisions. They are also a central parameter in the economic decision-making process of public institutions. At the same time, we know that economic forecasts are associated with considerable uncertainty. Even comprehensive models only represent a very simplified presentation of a complex reality. Assumptions based on the forecasts can quickly be overtaken by events. In this regard, 2015 is a very special year for the forecasting institutions in Switzerland. The decision by the Swiss National Bank (SNB) of 15 January to discontinue the minimum exchange rate of CHF 1.20 to the euro and to lower the interest rate on sight deposit accounts at the SNB to –0.75% rendered important assumptions of the existing forecast obsolete. After the decision, the Swiss franc appreciated sharply. At the same time, interest rates in the money and capital markets continued to fall and are now predominantly in negative territory. Some market analysts have asked themselves whether this situation has brought about a fundamental change of premise or creates an entirely new set of parameters for the Swiss economy and the SNB’s monetary policy.

Fadilj Bajrami: ECB regional cooperation programme with central banks in the Western Balkans Address by Mr Fadilj Bajrami, Vice Governor of the National Bank of the Republic of Macedonia, on the occasion of the third Programme Steering Committee Meeting of the ECB Regional Cooperation Programme with central banks in the Western Balkans, Pristina, 27 March 2015. *  *  *  Dear Governor Hamza, Dear Deputy Governor Gjoni, Dear Mr. Fehlker, Dear Mr. Chlad, Representatives from central banks, Ladies and Gentlemen, I am glad to be here, in Pristina, with you today, on the occasion of the third and final meeting of the Steering Committee, to officially mark the successful completion of the joint cooperation programme between the ECB and the national central banks of the Eurosystem, on the one hand, and the central banks of the Western Balkans, on the other. The inclusion of the three central banks in this programme, which aims to strengthen their institutional capacity and align their operations with the central banking standards of the EU, is of enormous importance for the region, given the role of central banks in the EU accession process. Namely, this regional approach of the ECB allows raising the level of compliance with the EU standards and policies, but also creates an opportunity to advance the cooperation between the central banks in the region and the central banks of the EU.
Mr. Duisenberg’s opening statement at the meeting of the Governing Council of the European Central Bank Introductory statement by the President of the European Central Bank, Dr. W. F. Duisenberg, at the press conference held in Frankfurt on 11/9/98. Ladies and gentlemen, the Vice-President and I are here today to report not only on the outcome of today’s meeting of the Governing Council of the European Central Bank, but also - as you are already aware - on the outcome of the meetings of the Governing Council and the General Council that took place on 1 September 1998. It was in view of the short time span between the two sets of meetings that we decided that it would be more efficient to hold only one press conference to provide you with a summary of our deliberations. It is my intention to continue this practice for the remaining meetings of this year. In this regard, the Governing Council will meet, not only as scheduled on 13 October, 3 November and 1 December 1998, but there will also be an additional meeting on Tuesday, 22 December 1998. By this time, the bulk of nearly five years of preparatory work - including the “EMI years” - will be behind us and I envisage that the Governing Council’s final meeting before the start of Stage Three of Economic and Monetary Union (EMU) will be devoted to fine-tuning its last-minute preparations. You will recall that monetary policy decisions remain a national competence until 31 December 1998.

At the same time, we shall also need to monitor fiscal intentions in the euro area Member States, as they will become more transparent over the autumn. If governments merely adhere to previous deficit targets for 1999, the structural position of budgets in quite a number of countries would effectively deteriorate. This would entail that they would move farther away from, rather than BIS Review 72/1998  -3-  approach, the requirements of the Stability and Growth Pact, which calls for the achievement of a budget close to balance or even in surplus. In addition to the review of economic developments, a number of organisational issues were settled. (i) The General Council adopted its Rules of Procedure, which will be published in the Official Journal of the European Communities. You will recall that I informed you that the Governing Council’s Rules of Procedure were adopted in July. (ii) The General Council also decided that the non-euro area national central banks shall pay up 5% of their subscriptions to the capital of the European Central Bank (ECB). However, the four national central banks concerned will not be asked actually to pay in their share as the amount due is less than they can expect to receive as their share in the proceeds of the liquidation of the European Monetary Institute (EMI). Further details on the actual amounts involved are provided in the separate handout that will be issued to you this evening.
At the same time, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2%. Broadly in line with this assessment, the December 2013 Eurosystem staff macroeconomic projections for the euro area foresee annual HICP inflation at 1.4% in 2013, at 1.1% in 2014 and at 1.3% in 2015. In comparison with the September 2013 ECB staff macroeconomic projections, the projection for inflation for 2013 has been revised downwards by 0.1 percentage point and for 2014 it has been revised downwards by 0.2 percentage point. The risks to the outlook for price developments are seen to be broadly balanced over the medium term. Upside risks relate to higher commodity prices and stronger than expected increases in administered prices and indirect taxes, while downside risks stem from weaker than expected economic activity. Concerning the staff macroeconomic projections, let me inform you that the Governing Council has decided to publish more details as of December 2013. You will receive this material today after the press conference. Turning to the monetary analysis, data for October confirm the assessment of subdued underlying growth in broad money (M3) and credit. Annual growth in M3 moderated to 1.4% in October, from 2.0% in September. This moderation was partly related to a base effect. Annual growth in M1 remained strong at 6.6%, reflecting a preference for liquidity, although it was below the peak of 8.7% observed in April.

In that speech, he argued that “there is evidence of deep-seated culture and ethical failures at many financial institutions.”4 More recently, our current President John Williams concluded that “we have not yet fully addressed the root causes of many of the problems that have plagued the financial sector” and that there was still a “sense of urgency in addressing banking culture.”5 Over the past five years, the New York Fed has focused on shining a spotlight on culture, behavior and conduct concerns, and pushed the industry to address these issues through a range of activities: Engaging with diverse thinkers on governance, culture and organizational behavior to better understand the complexity of culture reform; Convening academic experts, and leaders in finance and the official sector through conferences and workshops on culture and behavior reform;6 Facilitating discussions among the supervisory community on assessing and influencing industry culture-related efforts; Building a platform for a partnership between business schools and industry representatives to influence culture reform through training of future leaders in finance; and Publishing a white paper on “Misconduct Risk, Culture and Supervision” that discussed a range of market failures that provide a conceptual rationale for intervention by bank supervisors.7 Our white paper also summarizes work of supervisors from multiple jurisdictions around the world who are increasingly focused on the risks posed by poor culture and misconduct, and have developed a broad assortment of new tools and practices for identifying and supervising for misconduct risk.