samchain/econo-pairs-v1 huggingface dataset:
This is the right time to be discussing this topic, as we are experiencing the aftermath of one of the largest macroeconomic disruptions of the century. In the last three years, we lived through one of the most challenging times for policymakers, where governments and central banks were pushed to deploy everything at their hands to content the health and economic consequences of the pandemic, and lately to contain inflationary pressures. During these years we have learned that the effects of the Pandemic differed significantly between economies but also within households and firms of heterogeneous characteristics. The different exposure that households and firms have to credit conditions, supply chains, and final demand, affected their reaction to the original shock and also to the different policies. Firm size and household income distribution were important sources of heterogeneity to consider as well. Having widespread access to information regarding these dimensions was critical to develop sound policies. In response to these very challenging times, academia also reacted. Since early 2020, we witnessed an explosion of applied research that incorporated the lessons learned in the last 35 years in terms of the importance of considering firm and household heterogeneity to better understand the transmission mechanisms of fiscal and monetary policies. 1/5  BIS - Central bankers' speeches  This process of knowledge spillover from academia to policymaking is not something new.

Therefore, the effect of monetary policy depends on the distribution of firm-level financial conditions and how these conditions change with the business cycle. The two examples I have just referred to are very influential in the way we assess the macroeconomic implications of monetary policy. This is the place where academia and policymaking meet. As a matter of fact, policymakers around the world are in the process of introducing these new technical developments. The ECB stated in 2021 that it is committed to analyzing the implications of HANK models for the understanding of monetary policy transmission, focusing on the role of households and labor market heterogeneity. On the other hand, the Bank of Canada is working on the groundwork for such a model that includes heterogeneity in the income process of households, and its implications for optimal monetary policy. In addition, the Federal Reserve has already included analyses based on HANK models in their Federal Open Market Committee meetings as part of their review of their monetary policy strategy, tools, and communication practices. In our case, the Central Bank of Chile is already developing a HANK model to study how the distribution of income and wealth affects the transmission mechanisms of aggregate shocks and the conduct of monetary policy. And, as you will see in the next few days, we have given important steps towards that goal. 4.
The extent to which international inflation is affected by one’s own increases in interest rates is not usually taken into account, since the effect is assumed to be negligible. To use an economic term, individual central banks do not internalise the effects of their own actions on international inflation. However, as all central banks raise their rates simultaneously, international inflation is dampened quite significantly. The results of not taking this effect into account could be that all central banks go a little further in their policy rate hikes than they need to. This in turn may lead to the whole world economy becoming weaker than necessary.8  7 See, for example, Obstfeld (2022). 8 Another mechanism that could lead to overall excessive interest rate increases is if central banks try to bring  about lower inflation by strengthening their own currency. This requires the interest rate being raised more than in the rest of the world, which may lead to an international race toward higher interest rates. 6 [15]  This is an interesting hypothesis worth considering, although it is not easy to see how it could be taken into account in practical policy. Formal international coordination of monetary policy is probably not on the cards, and without this it is natural that each individual central bank continues to focus on inflation in its own country.

It has never been a question of inflation having to be 2 per cent just for the sake of it, but because this is a way of ensuring that 2  7 [15]  per cent remains the long-term anchor for price-setting and wage formation in the economy. In the same way that high inflation risks affecting economic agents’ long-term inflation expectations, too low inflation also risks doing so. Since nominal interest rates include compensation for inflation, these rates will on average be lower, the lower the average and expected rate of inflation is. Moreover, there is an effective lower bound for the policy rate, where the positive effects of further cuts cease and the negative ones begin to dominate. The combination of a low average interest rate and a lower bound for the policy rate means that the scope for cutting the interest rate will be limited.9 Monetary policy’s ability to stimulate the economy in serious economic downturns, when this is really needed, will thus be reduced. The fact that monetary policy has sufficient scope to do this is of course important, but it is perhaps not something that people notice in their everyday lives, in the same way that they notice if prices rise in the shops.
In the globalised world, such co-operation is more important than ever if our economies are to be able to meet future challenges successfully. I have been asked to give a brief overview of Hong Kong, with particular emphasis on how this city is developing its Islamic finance capabilities. Hong Kong’s strength as a free and open international financial centre has helped nourish its deep and liquid financial markets. Yet maintaining a free and open market in such a turbulent world is not an easy task. It is therefore reassuring that Hong Kong’s monetary and financial systems have continued to be sound and robust, reinforced by a number of recent contingency measures to strengthen financial stability. There are many factors that underline the resilience of Hong Kong's financial markets: I would like to highlight two. First, even when extreme volatility prevailed in the global foreign exchange markets following the collapse of Lehman Brothers, the exchange value of the Hong Kong dollar remained firmly anchored even as other major currencies suffered wide fluctuations, causing a ripple effect to other currencies in the region. Several reasons accounted for this extreme global volatility: the repatriation of large amounts of capital to the US to rescue the market; repositioning by those outside of the US who came to realise the severity and the contagiousness of the crisis; and deleveraging of large amounts of exchange and interest rate arbitrage activities triggered by the financial crisis. These volatile conditions should, in theory, be destabilising for the Hong Kong dollar.

These very solid foundations will help Hong Kong cope with the challenge of a possible rise in non-performing financial assets and losses in the financial markets. They also supply the conditions for moving beyond crisis towards opportunity, and for exploring what seems set to become one of the strongest and more interesting of growth engines in markets in this region and beyond: Islamic finance. Like most other asset classes, the growth of Islamic finance decelerated last year as a result of the global credit crunch and unfavourable economic conditions. New sukuk issuance retreated to $ billion last year, down from a high of $ billion in 2007. 1 And without a doubt, there will continue to be great challenges in the coming year. Market participants are reportedly expecting a slowdown in annual growth in global Islamic banking assets to 10-15% in 2009, compared with a growth of 20-30% last year. 2 Even so, a growth rate of 10-15% is robust by any standard, and especially so when set against the strong shrinkage in other areas of finance. There remains a healthy stock of sukuk issuance in the pipeline for this year, thus providing a good market to tap: one report conservatively estimates planned or announced sukuk for 2009 as being in excess of $ billion. 3 As a new asset class, Islamic finance practices banking and investments in compliance with the principles of Islamic Shariah law, which prohibits excessive leverage, risk-taking and uncertainty, and promotes ethical practices.
Larger institutions would therefore be in a better position to reap the benefits of greater economies of scale, and would also increase their financial muscle to withstand potential shocks. Unfortunately, however, there are no free lunches in the economy and it seems that financial integration can also have negative effects on financial stability. Therefore, fully integrated financial markets pave the way for shocks to propagate more quickly among market participants, thereby affecting a wider range and number of them. Contagion becomes more likely. In the same way, the larger an institution, the higher is the probability that it becomes systemically relevant, which would clearly have implications for financial stability in the event that it runs into problems. 2  BIS Review 118/2006  And, the more institutions operate across borders, the more the risks associated with their business extends across these borders. Despite these challenges for financial stability of an increasingly integrated financial system, let me stress that, so far, the experience both for Spain and the Global Economy seems reassuring, but these aspects clearly need further investigation. And the immediate and obvious question that arises is the following: can we mitigate the potentially negative effects of integration on financial stability in order to take full benefit of the advantages that I mentioned earlier in my intervention? It is the supervisory authorities who are responsible for dealing with the risks I have identified. But this is not an easy task.

As Fehrenbach puts it, the key to overcoming the odds in the Lone Star State has been that “the Texas ethic and Texas society rewarded enterprise,” ... “work was the real virtue.” … “We chose this land; we took it; we made it bear fruit.” We are a people, in Fehrenbach’s words, for whom “the cult of courage was obvious.”1 And he distills the Texas spirit that prevails to this day in one sentence: Here, “men who exist get overrun by men who act.”2 It is time for our great Latino population to have the courage to face the facts: They must do a better job as families and within their communities to dedicate themselves to educational achievement. And it is time for all Texans, Hispanics and non-Hispanics, to act to create the conditions that will safeguard and nourish the prosperity of all our children and that of our children’s children. ¡Ándale pues! Delve into the Hispanic experience. Help us understand through this conference and your various studies how to advance Hispanic prosperity. For in doing so, you are helping us advance Texas and the nation. Thank you. 1  Lone Star: A History of Texas and the Texans, by T.R. Fehrenbach, New York: Macmillan Publishing Co., 1985, pp. 708–12. 2  See note 1, p. 717. 2  BIS central bankers’ speeches
4  Principal component analysis is a statistical technique for compressing information, reducing the number of variables and examining systematic variations in data. The method entails calculating new latent variables, principal components, which can explain most of the variation in the process. 5  The flexible-price output gap is mentioned in modern research into monetary policy, where one often talks about flexible-price production instead of potential GDP. Flexible-price production means the production that would arise if both prices and wages were entirely flexible. However, determining this gap is sensitive to how one models the economy and interpretation may be difficult in the absence of in-depth knowledge of the model's properties. For a discussion of the flexible-price output gap and monetary policy, see Jonsson, M., Nilsson, C. and Palmqvist, S. (2008), “Should monetary policy stabilise resource utilisation?” Economic Commentaries 1, Sveriges Riksbank. 6  Öberg, S. (2007), “Productivity and monetary policy”, 7 June 2007 and Öberg, S. (2008), “Monetary policy and productivity”, 29 January 2008. 7  Reinhart, C. M. and Reinhart, V. R. (2010), “After the Fall”, National Bureau of Economic Research Working Paper No. 16334. See also Reinhart, C. M. and Rogoff, K. S. (2008), “The Aftermath of Financial Crises”, National Bureau of Economic Research Working Paper 14656. BIS Review 130/2010  3  lower at the end of the forecast period than we expected two years ago. Lower productivity is responsible for virtually the entire decline, while the number of hours worked is estimated to remain largely the same.

Besides these welfare-enhancing effects on the “domestic” economy of the euro area, the new setting also has far-reaching consequences for the world economy and the international community. Let me shed some light on the international ramifications of Monetary Union by highlighting three interrelated aspects. First, the use of the euro as an international currency in the global financial system; second, the growing role played by the Eurosystem in international policy cooperation; and, third, relevant aspects of the exchange rate of the euro. Before dealing with these points in turn, I should like to recall some key economic features of the euro area. Key economic features of the euro area Let me begin by putting the euro area into an international perspective. The euro area represents a large and relatively closed economy. Given its population of almost 300 million people and its significant weight in the global economy, the euro area is broadly comparable with the United States. As regards its size and structure, the most striking fact is that the euro area economy has a share of world output of around 16%. This is more than three times that of its largest national component (namely Germany, which accounts for 4.7%), significantly higher than that of Japan (which accounts for about 8%), while being lower than that of the United States (which stands at 21%).
The increase in the number of employed has been relatively low throughout the upturn. Employment has shown a smaller rise than in previous cyclical upturns in the 1980s and 1990s. Both official statistics and Norges Bank’s regional network indicate that many enterprises have been reluctant to recruit new employees. There are now some signs of a change in this attitude. Growth in LFS employment has picked up in recent months. A larger share of the contacts in our regional network are considering increasing their workforces and fewer are considering a reduction. In the first quarters of the current upturn productivity growth was high, measured as GDP per personhour. The number of person-hours worked gradually increased substantially, particularly because of the sharp fall in sickness absence through 2004. However, the use of overtime has also increased to a fairly high level. This may indicate that the use of resources is somewhat higher than implied in isolation by the level of employment and unemployment. Nor do wage developments point to any substantial pressures. So far, there are few signs of an acceleration in real wage growth. The use of foreign labour has increased in the year that has passed since the enlargement of the EU. The scope is relatively moderate, but appears nonetheless to have reduced bottleneck tendencies in some industries where demand has increased sharply. Traditionally, many workers from our neighbouring countries have contributed when the labour market in Norway has been tight.

In the UK, however, core inflation is now more than 1.5 per cent and seems to be on the rise. So far, moderate wage growth in both Europe and the US suggests that employees have not been compensated for the rise in energy prices. If the increase in oil prices is perceived as long-lasting, this may result in higher inflation expectations, higher wage demands and a more pronounced pass-through to other prices. Over the past few months, key rates have been raised in the US, Canada and New Zealand, while the UK key rate has been reduced by 0.25 percentage point. Key rates remain low among many of our trading partners. Market participants seem to expect a gradual increase in key rates in the period ahead, and at a somewhat faster pace than expected last summer. Towards the end of 2006, key rates in the US and the UK are expected to be around 4½ per cent. For the euro area and Sweden, key rates are expected to be considerably lower, at a little less than 2¾ per cent and 2½ per cent respectively. In recent months, global long-term interest rates have also edged up again somewhat. This reflects stronger inflationary impulses as a result of high energy prices. Market participants’ long-term inflation expectations, measured as the difference between nominal and real government bond yields, have shown a small increase since last summer. Low interest rates and expectations of continued low real interest rates are sustaining the cyclical upturn in Norway.
The Bank of Canada, on the other hand, has a short maturity on its holdings, which means that selling them has not been judged to be appropriate.22 The Federal Reserve has a very long maturity on its holdings of mortgage bonds, which has led the Monetary Policy Committee to begin discussing active sales of those assets in the future, to achieve the long-term goal of primarily owning government bonds.23 Figure 9 shows how our aggregate holdings of securities would develop if no further purchases are made after 2022. Please note that this should be seen as a simple projection and not a forecast. As early as the forecast period up to the second quarter of 2025, the holding may well have been halved through maturities. This means that we do not have to consider active sales in the same way as, for example, the Bank of England to reduce the holding at a relatively rapid rate. I mentioned earlier that there are no reasons for the Riksbank to have any major holdings of private assets as the financial markets are functioning normally. Figure 20 See Bank of England (2021, 2022). 21 See Office for Budget Responsibility (2021). In addition to government bonds, the Bank of England has pur-  chased corporate bonds for a small amount, with sales of these starting in the second quarter of this year. 22 See Bank of Canada (2022). 23 See Federal Reserve (2022b). 8 [19]  10 shows the distribution of the securities held by the Riksbank.

Looking at the sector beyond Nationwide – and I do this not to ignore Nationwide but because its size means that it has a large impact on averages – the average Core Tier One Capital ratio at the end of last year was over 17%, and the average leverage ratio was around 6%. The overall quality of capital is in our view in a good place and you have taken the implementation of Basel 3/EU CRD4 in your stride. In the four quarters to the end of last year, the societies (again not including Nationwide) contributed 22% of net new mortgage lending in the UK, which compares with a 9% share of the stock of lending. Arrears on first charge mortgages continue on a downward trend that we have seen for at least the last five years, and the building society arrears rate on average is lower than the average for all mortgage loans. All societies are meeting their liquidity requirements and quite a few of you choose to hold higher liquid asset buffers than our requirements, which is perfectly acceptable as a choice. Access to Bank of England liquidity facilities, which is an important form of insurance, has increased in terms of the number of societies having reserve accounts and preparing for the use of lending facilities should that be needed at some point in the future. Unsurprisingly, therefore, the overall position on ratings for those societies that have them has improved. So, it’s true, Harrogate really is the happiest place in England.
Mr Yam on Europe and the euro: the view from Asia  Speech by Mr Joseph C K Yam, Chief Executive of the Hong Kong Monetary Authority, at the XII International Frankfurt Banking Evening, on 14 March 2000. *  *  *  Introduction Mayor Roth, President Welteke, President Duisenberg, Governors, Excellencies, Ladies and Gentlemen, There can be few things more irritating than foreigners coming to your country and lecturing you on how much better things might be for you if only they were in charge. In my particular experience as a central banker there is no shortage of gratuitous advice on how one’s monetary and exchange rate policies might better be conducted. Of course, I have encountered a number of visiting bankers, businessmen and academics coming to Hong Kong who are particularly well informed, who have thought carefully through the issues, and whose advice is consequently much to be valued. But I fear that they may be in the minority. So, I certainly feel a bit awkward standing here. I don’t consider myself to be an expert in matters relating to the European economy or the euro, so I beg your forgiveness right from the start. My only defence is that you did actually invite me, so what I have to say is not entirely unsolicited. This speech is going to be largely about perceptions, or rather misperceptions, and how they may contrast with reality. Why? As I said, I am not an expert on the euro.

Conclusion My theme today has been that perceptions may be at variance with reality, but it is often perceptions that drive financial markets. Economic fundamentals can probably explain some of the euro’s weakness over the past 14 months, but not all of it. I have tried to be frank in my assessment of the way in which the euro is viewed from Asia. I hope I have not been so frank as to be discourteous. Sentiment does appear currently to be somewhat frail and the outlook uncertain. I derive no satisfaction at all from that - we are all in more or less the same boat when it comes to the vagaries of the markets. And as the manager of Hong Kong’s substantial foreign reserves, I am also held accountable for the investment decisions taken. But I am confident that sentiment will improve and our investment in the euro will come good. 7  BIS Review 23/2000