samchain/econo-pairs-v1 huggingface dataset:
More precisely, whilst 𝜔𝑖𝑡 is unobserved to the econometrician directly, it is assumed to consist of two components: a part that’s observable to the firm (but not to the econometrician) and a part that’s unanticipated to the firm itself when it makes its input demand choices. The key identifying assumption is that we can express 𝜔𝑖𝑡 as a function of inputs (one of which is a so-called control variable, in our case COGS), i.e. 𝜔𝑖𝑡 = ℎ(𝑣𝑖𝑡 , 𝑘𝑖𝑡 ). We don’t know what ℎ(⋅) is, but we can approximate it as a high-order polynomial (in our case, of order 2). The estimation approach, which we run separately for all observations in a given 2-digit industry since 𝜷𝑗 are assumed to be industry-specific, relies on two stages: 2 First stage: In the first stage, we run a regression of 𝑦𝑖𝑗𝑡 on 𝑣𝑖𝑡 , 𝑣𝑖𝑡2 , 𝑘𝑖𝑡 , 𝑘𝑖𝑡 , and 𝑣𝑖𝑡 𝑘𝑖𝑡 . Note that – to the extent  that 𝜔𝑖𝑡 depends linearly on 𝑣𝑖𝑡 and 𝑘𝑖𝑡 – the estimated coefficients on these two variables will subsume the coefficients corresponding to these inputs and how 𝜔𝑖𝑡 depends on them. This step allows us to control for unobserved productivity (up to our approximation) and obtain an estimate of expected output, 𝑦̂𝑖𝑗𝑡 , and an estimate of the measurement error, 𝜖̂𝑖𝑡 . Since we have arguably controlled for unobserved productivity, our 𝑦̂𝑖𝑗𝑡 should be a consistent estimate of 𝐸(𝑦𝑖𝑗𝑡 ).

The larger the mark-up, the greater the degree of market power, whether at the firm, sector or national level. Mark-ups also have the benefit of being the relevant measure of market power in the workhorse models of the macro-economy used by policymakers. 4 5  Excluding financial services firms. See, also, Bell and Tomlinson (2018). 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  In that spirit, a number of recent papers have estimated measures of mark-ups based on individual company accounts data. These cover a wide range of companies, sectors, countries and time periods (for example, Díez et al (2018)). The findings from these studies are, in macro-economic terms, both quite striking and quite strikingly uniform in the broad trends they reveal. For example, De Loecker and Eeckhout (2018) have recently calculated mark-ups for around 70,000 firms 6  across 134 countries over almost four decades. Since 1980, they estimate that the sales-weighted mark-up 7  for the average firm across countries has risen by a remarkable 50 percentage points. Table 1 shows their mark-up measures for the G7 economies over the period. Though there is cross-country variation, average mark-ups have risen significantly in every G7 country, by between 30 and 150 percentage points. Taken at face value, the macro-economic implications of these shifts in mark-ups could be very large. The most direct and immediate impact would be on measured inflation rates.
Evidence shows that high and prolonged inflation feeds back over time through indexation and the evolution of expectations. A situation where this dynamic intensifies not only makes it more difficult to bring down inflation, but also increases the costs of doing so. For some time now, the inflation expectations of finance and economics professionals have that they foresee a slower convergence of inflation than projected by the Bank and, more recently, household and business inflation expectations have risen, a phenomenon that no doubt calls for us to be very careful about downplaying our efforts to contain inflation. Against this background, I can only stress once again the importance of our economy being able to address the imbalances that have accumulated over the past year. The government is making a very important effort to address the most urgent needs in a targeted manner and within a budgetary framework that also seeks to stabilize public spending at levels consistent with the long-term fundamentals of the economy. It has thus expressed the importance of reestablishing macroeconomic balances in order to be able to build on them to find sustainable solutions to the multiple problems it faces. At the Central Bank, we are primarily responsible for bringing inflation down to levels in line with the 3% target.

There should thus be a better system with regard to the link between the analysis from a macroeconomic perspective and the measures taken for the individual banks. One can therefore wonder whether there might not be better organisational solutions for maintaining financial stability in Sweden. It is difficult to say exactly how this would look. There may be several possible solutions. Finansinspektionen could be given greater resources to monitor systemic risks in a macroeconomic perspective. Another solution might be to extend the Riksbank’s power of authority to be able to initiate cases at Finansinspektionen. A third solution could be to link the work of Finansinspektionen and the Riksbank more closely together and increase cooperation between the two authorities. Regardless of which solution is chosen, I believe that it will lead to positive effects for the Riksbank’s possibilities to take measures if one sees a risk that a bubble is developing on the financial markets. But there is also a tool that the Riksbank already has at its disposal, and which can be used to counteract excesses in the housing market, for instance, namely the repo rate path. The fact that the Riksbank publishes a forecast for the development of the policy rate makes it easier to clearly communicate the longer-term outlook for interest rates. This can reduce the risk of banks and households being led to believe that a low policy rate as a result of a downturn in the economy will continue to apply for several years to come. 12  Giavazzi and Mishkin (2006).
Despite the unfavorable developments in food prices, almost a year after monetary tightening, core inflation indicators displayed a significant deceleration starting from the second quarter of 2007. The effects of tightening were clearly visible on the prices of durable goods and services consistent with the slowdown in the economic activity in the related sectors. The weaker demand, coupled with a strong domestic currency, helped durables inflation to come down significantly (Figure 8). In this respect, services inflation also eased remarkably, declining by 3.6 percentage points throughout 2007. The improvement in  BIS Review 20/2008  5  services inflation spread across all sub-items. Especially, the fall in rent inflation, the stickiest component of services inflation, was significant (Figure 9). Figure 8: Durable Goods Prices (Annual Percentage Change)  18 15 12 9 6 3 0 -3 -6 -9 -12  1007  0707  0407  0107  1006  0706  0406  0106  Durables (Excl.Gold) Furniture Electrical&Non-Electrical Appl. Automobile  Source: TURKSTAT, CBRT. Figure 9: Services Group Sub-Items (Annual Percentage Change)  20  2006 2007  16 12 8 4 0 Transport Services  Rent  RestaurantsHotels  Other Services  Source: TURKSTAT, CB. The significant deceleration in the core inflation indicators set the ground for a relatively less restrictive monetary policy. Hence, we decided to start the measured easing cycle in September 2007 with a 25 basis-points cut, while continuing with 50 basis-points in the consecutive three meetings.

Esteemed Press Members, Overall, we expect aggregate demand conditions to support the downward trend in the underlying inflation, i.e., inflation excluding items beyond the control of monetary policy such as energy, food and tobacco prices. Hence, barring new supply shocks, headline inflation should continue to move towards the target. The speed of the convergence to the target, however, will depend mainly on the course of food and energy prices. Distinguished Guests,  10  BIS Review 20/2008  Our forecast in the 2007 October Inflation Report incorporated two main assumptions: The assumption for oil price was set as 70 USD per barrel. Observing the high base created by the unusually elevated food prices in 2006, we assumed food inflation to correct towards the values consistent with medium term inflation in 2007. However, food and energy inflation turned out to be more persistent than we had envisaged, as the prices of oil and agricultural commodities continued to rise throughout 2007. These developments not only led to an undershooting of our inflation projections for end-year 2007, but also necessitated an upward revision in our medium term forecasts. In this framework, we revised our assumption for oil prices from USD 70 to USD 85 per barrel in 2008. Higher oil price assumption added about 0.5 percentage points to the end2008 inflation forecasts.
Financial liberalisation has further taken this process of financial intermediation to the international level, in which, for example, UK pension funds are invested in Thai equity and US depositors are funding infrastructure investments in the Philippines. And this is not a one-way process either. A large part of Asian savings - to the extent that they are increasingly allowed, by the relaxation of exchange controls - to be invested overseas, have been funding the budget deficits of developed 3  BIS Review 120/1999  economies and providing capital, for example, for Microsoft, Citibank or British Telecom. Indeed, the Asian miracle would not have been possible without the advent of international finance. But, alas, it was also international finance that was responsible, at least in part, for turning the Asian miracle into Asian misery. International financial architecture In the history of this world, it has not been unusual to see the riches of a family surpassing the wealth of a poor nation. However, with a free and open global trading system, economic differences generate opportunities for business interactions of mutual benefit. The sharing of that benefit has nevertheless been the subject of controversy, where the distinction between doing business and exploitation is blurred. But then this is a fact of life, with different perspectives when viewed from different angles. And so arguments arising from such issues as protectionism and dumping remain, and there are established institutions and mechanisms, as part of the global trading system, to tackle them at the international level.

Eric S Rosengren: A look inside a key economic debate – how should monetary policy respond to price increases driven by supply shocks? Remarks by Mr Eric S Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, to the Massachusetts Chapter of NAIOP, the Commercial Real Estate Development Association, Boston, 4 May 2011. *  *  *  Of course, the views I express today are my own, not necessarily those of my colleagues on the Board of Governors or the Federal Open Market Committee (the FOMC). I would like to thank David Begelfer and his colleagues at NAIOP Massachusetts for inviting me to join you today to discuss the economy and monetary policy. I am happy that financial markets and the economy have made significant progress since the depths of the financial crisis, but I am far less happy that the recovery to date has been so undesirably slow and anemic. In my reading of economic history this is, unfortunately, typical of economic downturns that are accompanied by severe financial disruptions. The debate I’d like to focus on today is the one over the likely impact of recent increases in the prices of food and energy, and how monetary policy should respond. The Fed’s policy stance, as you know, is currently very accommodative – a stance that I believe is appropriate given the tentative recovery and still-high unemployment.
This is why in the more recent period, as a central bank, we strive to gather as much as possible micro information, for the corporate sector in particular. One of the important steps was the launch of the first Survey on Wage and Price Dynamics, similar to the survey conveyed for the euro area, which provided one of the most comprehensive overviews on the behavior of corporates in terms of wage and price adjustments. The results of the survey, and the subsequent research, gave valuable information. It pertains to information on the nominal and real wage rigidities, and the way the corporate sector adjusts  BIS central bankers’ speeches  3  its balance sheet in response to different shocks. All of this supports the understanding of the monetary policy transmission and calibrating economic models that incorporate heterogeneous agents. One of the lessons from the crisis was that not many central banks had enough granular data on the corporate sector. As mentioned, granular data serve as an important analytical tool for assessing the potential vulnerabilities in the economy, and thus as an important input in the monetary and financial analysis of the central bank. We recognized the importance of the corporate sector data quite early, in the context of detected financial stability risks in particular. Aggregate balance sheets of the Macedonian corporate sector have been transmitted from Macedonia’s Central Registry to the central bank since. Yet again, it was recognized that the aggregation loses information, and a more disaggregated approach should be employed.

Unconventional measures have varied across countries depending on many country specific factors including real and financial sector imbalances built-in in the run-up to the crisis and fiscal and monetary policy buffers. Still, given that many of the unconventional instruments were more targeted at specific segments of the markets/economy, in principle the traditional data sets may not be fully fit for the purpose entailing a need for additional information to make a good diagnosis, prescribe a proper medicine and finally evaluate the success of the treatment. This is especially the case if the unconventional measures become conventional or new unconventional tools emerge along the horizon, which is not to be excluded. Thus, again a move from traditional aggregate-based statistics to a granular multi-purpose statistics  4  BIS central bankers’ speeches  seems a way forward. Going back to our experience with non-standard measures, given the shallow and underdeveloped financial market, we did not face with the same data challenges as central banks in more advanced economies. Yet, in terms of the unconventionality, efforts were made to affect the distribution of the already solid credit growth, by supporting credit to corporate sector, to net-exporters and energy producers in particular. These were identified as segments that on a longer term can support the external position of the economy. In addition, measures were undertaken, supportive to the financing of the corporate sector through the issuance of longer-term debt securities, as alternative source of financing.
If you read just a few of the comment letters on our website, you will see that many of the latest suggestions from the industry would tend to increase the complexity of the New Accord even further. Still, we know that it is easier to enforce a simpler rule than a complicated one. As we complete the text of the new rules, we will continue to simplify and streamline the framework. Conservatism and the balance between soundness and conservatism A second issue that respondents to the proposals have raised is the sense that the New Accord may be highly conservative in its assumptions about how much risk exists in certain exposures. Questions about conservatism matter to us because we are trying to align capital more closely to risk and in a way that is conceptually sound. A good example would be the treatment of retail exposures, including the small and medium enterprises that fall into this category, where the Committee found persuasive economic evidence to support a significantly lower requirement compared to earlier drafts of the new rules. Another example we are evaluating currently concerns the treatment of credit losses for banks adopting one of the more sophisticated approaches to credit risk, the “internal ratings-based” or “IRB” approach. Our current rules for the IRB approach derived capital charges on mathematical estimates of a bank’s credit losses - both those that could be anticipated versus those that could not.

For these situations, the members of the Committee have long expressed their views that those banks and supervisors should concentrate on the fundamentals first. Banks in those countries should work toward developing an adequate understanding of the risks they face and a sense of the best practices in use worldwide. For example, banks should develop their understanding of the credit underwriting cycle, skill at credit analysis, and insight into the dangers posed by operational risks. They should nurture a healthy environment for corporate governance, such as by strengthening their systems of internal controls, by promoting robust internal and external audit processes, and by adopting sound standards for accounting, loan analysis and classification, provisioning and reporting. In turn, supervisors who are still fortifying the foundation of their banking systems may consider a variety of approaches to capital regulation. For some countries, the application of the simplest approaches from the New Accord may be appropriate. But others may feel that their banks are not yet ready and may decide, after careful review, that it would continue to apply the 1988 Basel Accord for several more years as banks continue to strengthen their risk management capabilities. I want to emphasise that the Basel Committee supports the decisions of those supervisors who believe that their markets may not yet be ready. We would encourage those countries that choose to remain on the 1988 Accord to look to the principles of the New Accord, and especially to strengthen the second and third pillars.
Work on the supply sides revolves around issues of tax, legal and regulatory as well as accounting and should receive endorsement from the highest levels of government following the adoption of the Chiang Mai Declaration on the Asian Bond Market Development. Demand side development: establishment of the Asian Bond Fund On the demand side, central banks in the region have been working closely under the Executives Meeting of East Asia-Pacific Central Banks – or EMEAP – to establish an Asian Bond Fund. Under this initiative, central banks will set aside a fraction of their reserves into a pool that will be invested in bonds issued by Asian governments and government enterprises, with an ultimate aim to provide a catalyst for private investors to consider investment in Asian issues EMEAP has worked out the details and modalities of the operation of such a Fund and will announce details to the public shortly. Approaches to regional cooperation: work on developing the supply side ASEAN+3 and APEC are both working on the development side of bond markets, including the removal of barriers impeding the issuance of bonds both in the regional and domestic contexts respectively. In addition, there has been cooperation in setting up the necessary infrastructure for such a regional bond market, including a regional credit rating agency, as well as credit enhancement facilities.

Another user-aid which we have done, but have not had the time nor resource available to make it really effective, is having a separate English and Thai language webpage. We have instituted this dual webpage, but unfortunately the English translation is quite frequently not available. We will try to have more of an equivalence between the two services. But the English language, not being the language of choice in Thailand, we expect that the word “available only in Thai text” is going to reign supreme for a very extensive part of the alphanumeric system. A webpage might seem only a small matter to bring up for this speech, but actually an organisation’s webpage signals its attitude towards advance technology and its intent to be transparent, so it is an important item and is useful to look at for a quick checking into the attitude of people you don’t know well. More importantly the central bank itself has been undergoing a structural revamp which I shall speak about only shortly as I have spoken on this many times before. Basically the six levels of management and one level of operation have been transformed to have only two levels of management and two levels of operations, with each level having people of different ranking depending on the size of the job. This is the usual broad-base horizontal organisation that modern businesses have, not surprisingly proposed by A T Kearney, our consultant.
Second, in light of the diverse financial systems in the GMS, domestic regulations and policies need to converge to create a more integrated market. Take the payment systems, for instance. Currently, different systems among our countries mean that payment connectivity is not seamless. In other words, “PromptPay” does not speak “Wave” and “Wave” does not speak “Wings”. Adhering to harmonized standards and ensuring that each system is more able to link within an interoperable environment can help overcome this challenge. As a result, I encourage GMS policymakers to cooperate on diverse aspects of banking businesses. At the end of the day, this will make financial transactions within the subregion much easier. ***  4  Ladies and gentlemen, In the current VUCA world, with rapid technological changes, we, as policymakers or central bankers, would need to adapt ourselves and ensure smooth transition into this new business-driven paradigm. We therefore welcome those who want to seize these opportunities in the GMS. A solid platform of road, ports, power grids, and tourism infrastructures already exist in the GMS. Going forward, it is time to envision the GMS that is integrated in other dimensions too, particularly finance. This is why I view that financial connectivity is an important element in the next chapter of the GMS. As I mentioned, I see the GMS as a fresh graduate. At 25 years old, a great future is awaiting. Let us walk with her, help her unlock her potential, and lend her necessary supports to ensure her success and prosperity.

I thank Euromoney once again for organizing this conference. I wish you productive and engaging sessions today. Thank you. 5