samchain/econo-pairs-v1 huggingface dataset:
On inflation, we are also falling short, but by a considerably smaller margin. As a consequence, we need to keep monetary policy very accommodative. I do not claim that there are no costs or risks associated with our unconventional monetary policy regime. But I see greater cost and risk in moving prematurely to a policy setting that might not prove sufficiently accommodative to ensure a sustainable, strengthening recovery. 8  BIS central bankers’ speeches  I remain confident that the benefits of a stronger and earlier economic recovery will trump the costs associated with our unconventional monetary policy measures. Thanks for your kind attention. I would be happy to take a few questions. BIS central bankers’ speeches  9

First, and most importantly, unlike in the US, allowing inflation to overshoot our price stability definition for the sole purpose of bringing more people back into employment would not be consistent with our primary mandate. The “divine coincidence” applies only insofar as employment developments are consistent with our definition of price stability. Beyond that there is no room for trade-offs. Second, there are doubts as to the likely efficacy of such a policy. We have seen some evidence in the United States that the participation rate can become partially endogenous to demand, as discouraged workers return to job-seeking in a strengthening labour market. But we have seen no such evidence in the euro area. Our participation rate has continued to increase over time. So the question in the euro area is much more whether, or not, long-term unemployment is likely to be amenable to continued policy accommodation. The evidence raises at least doubts. For example, although many claim that monetary policy was too accommodative during the boom years of 2005 and 2006 – as also evidenced by policy rates often being lower than what standard Taylor rules would have predicted – the share of long-term unemployed in the euro area has remained fairly constant over this period. So, even if the desired effects of accommodative policy lead to more investment and employment, it remains questionable whether employers will respond by taking on chronically unemployed or whether they would instead rely on “insiders” whose pay has been stagnant or, alternatively, on fresh university graduates.
4  BIS Review 7/2002  The uncertainty associated with the analyses is one of the reasons that we normally proceed gradually 5 in adjusting the interest rate to the inflation target. In this way, we have the possibility of utilising new information that becomes available along the way. Most central banks have chosen such a model in their use of instruments. In exceptional cases, situations may arise that demand strong and immediate reactions. An example of this is the situation in Norway in the autumn of 1998, when there was unrest in the financial markets and a rupture of confidence in the Norwegian krone. Another is the Federal Reserve’s interest rate cuts in 2001. Even in these cases, however, the entire interest rate adjustment was not made immediately. In an uncertain world, central banks cannot guarantee that a process of increasing or decreasing the interest rate will necessarily continue. New information may require an adjustment of the projections. Nor can ”gradual” be construed to mean that an adjustment to a new interest rate level will be achieved by changing the interest rate at every monetary policy meeting. ”Gradual” may also imply that we want some time to evaluate new information or are awaiting further information before making a move. Transparency about intensions, strategies and implementation of monetary policy makes it easier for economic agents to assess monetary policy. A monetary policy that is understood and predictable may contribute to improving the efficiency and impact of monetary policy.

Philipp Hildebrand: The global financial crisis – analysis and outlook Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the NZZ-Podium, Zurich, 5 February 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  We are currently experiencing the most severe and most complex financial crisis in several decades. It has affected many people around the globe, and finger-pointing and casting blame happen all too easily. Yet only a careful investigation of the responsibilities is likely to point to ways in which our financial system, and ultimately our economy, can be made more resilient once this crisis has been overcome. Financial markets react to incentives, and these incentives were misplaced in the past. It is in our power to start lobbying for clearly defined and risk-limiting conditions. If the responsible authorities wish to enact more stringent regulation, we ought to give them our unconditional support. The National Bank is determined to employ all the means at its disposal to ward off an economic contraction. BIS Review 12/2009  1
The new agreement governs the amount of the annual distributions to the Confederation and cantons for the financial years 2020 to 2025. It is based on the tried-and-tested principles of the previous agreements, while also taking into account the more recent developments. This new agreement takes into account not only the marked expansion of the SNB’s balance sheet and the associated increase in earnings potential, but also the pronounced growth in the distribution reserve stemming from the extraordinary investment results in recent years (Slide Page 5/7  5). These two developments have made it possible to increase the maximum annual distribution, and to already apply this to the 2020 financial year. The maximum annual distribution is now CHF 6 billion, instead of CHF 2 billion and CHF 4 billion under the previous agreements. 2 The actual amount of the distribution depends on whether the net profit exceeds certain thresholds (Slide 6). For the maximum distribution of CHF 6 billion to be made, the net profit must be CHF 40 billion or higher. Setting a maximum distribution of CHF 6 billion per year is based on carefully considered earnings forecasts. These take into account the lower yields expected in the coming years. Bonds make up about 80% of our foreign currency investments, and most of them are government bonds. At present, around 50% of the bonds we hold have a negative yield to maturity in local currency terms (Slide 7).

Conducting a monetary policy that ensures price stability while taking due account of economic developments is therefore our goal, rather than generating a profit or making it possible to pay a distribution. The SNB’s monetary policy mandate always takes precedence. And there can also be times when we have to accept losses to perform this mandate. The SNB’s total assets have multiplied since the outbreak of the financial crisis in 2008 (Slide 1). With this larger balance sheet, the earnings potential has increased in absolute terms, but so too has the risk of loss. In fact, given that a large part of the balance sheet growth is attributable to foreign exchange market interventions, the increase in risk exposure has been particularly strong. Let me briefly explain why. When expressed in Swiss franc terms, our foreign currency investments are subject to pronounced fluctuations in value. Such fluctuations can result not just from changes in share and bond prices in local currency terms, but also from exchange-rate movements. Because our transparent accounting approach books assets at their market value, any valuation changes are directly reflected in the income statement. To illustrate what this means in concrete terms given the current size of our balance sheet, I would like to give two examples. First, assuming nothing else changes, a 1% appreciation of the Swiss franc against the major currencies would immediately lead to a loss of CHF 10 billion. Second, a 5% rally on the equity markets would result in a profit of CHF 10 billion.
This would be a natural extension of the risk-based approach to supervision that is already applied and it should be viewed as a means of fostering closer interaction between the industry and the regulator, rather than an imposition of regulations. To enable the process, CBSL has begun to examine the legal requirements in this regard. The internal capital adequacy assessment processes (ICAAP) of banks should cover the identification and measuring of the risks and assessing how much capital is needed to support such risks. After implementation, the CBSL will review banks’ ICAAP as part of the risk-based supervisory process. In addition, there will be an ongoing evaluation of the capital adequacy of banks, including stress tests. In the process of evaluation, CBSL will review and evaluate the risk profile of the banks, the adequacy and reliability of the ICAAP, and identify any weaknesses or inadequacies and necessary prudential measures. Pillar III – market discipline The purpose of this Pillar is to complement Pillars I and II by encouraging market discipline through the public disclosure of key information on risk exposures and capital adequacy. Disclosures are applicable at the bank level as well as supervisory level. The level and content of Pillar III disclosures will vary according to the measurement and calculation approaches adopted by a relevant bank. In terms of Basel II, the disclosures would have to be made on an annual and semi-annual basis. The implementation process will be developed in 2007 along with the Sub-committee appointed for the purpose.

The flow of corporate euro bond and equity issuance has grown significantly, though it is important to keep this in proportion: the stock of issuance outstanding in both cases is still - by some margin - lower than the US. (Domestic debt securities in the euro area, taking governments and corporates together, amount to the equivalent of around $ trillion, compared with some $ trillion in the US. And the equity market capitalisation of companies in the euro area amounts to the equivalent of around $ trillion, compared with some $ trillion in the US.) Since the launch of the euro, the focus of risk assessment in the corporate debt market has shifted from currency risk towards credit and liquidity risk. A growing number of companies in the euro area have been seeking external credit ratings. And an equity culture is beginning to take root in the euro area, despite the volatility in TMT stocks over the past two years. In Europe as a whole, for example, there were over 17,000 M&A transactions with a combined value equivalent to $ trillion last year. The second change concerns the integration of euro trading and settlement. Trading has increased in most euro markets, and dealing spreads have narrowed. Electronic trading and communication  2  BIS Review 11/2001  networks have greatly increased the reach of traditional financial markets, while allowing new providers to enter at relatively low cost.
In just one-and-a-half decades, those ratios have converged, reflecting the cumulation of efforts made over preceding decades: The proportion with less than secondary education has dipped below 30%; While the proportion of the university-educated has more than doubled to nearly 30%. The effects of this transformation in human capital will continue to be felt in the productive capacity of the workforce. With higher levels of education, the ability of the workforce to take on more complex tasks and to leverage on technology is substantially stronger. There is more to come. The share of the university-educated may not continue to as rise sharply but there is still plenty of scope to increase the share of those with secondary, post-secondary and diploma & professional qualifications. • They will be better placed to transform the nature of many jobs, raising standards and quality, thus enabling productivity and wages in these occupations to rise. Second, there is scope to improve the quality of the foreign workforce. We should increasingly be concerned about the skills of the foreign workers that we take in, rather than just the numbers. In fact, more skilled foreign workers will mean that we will need less of them. The trend of improving quality in our foreign workforce has already begun. The proportion of work permit holders has declined by about 10 percentage points over last 10 years, while the proportion of S Pass and employment pass holders has 13 / 17  BIS central bankers' speeches  increased by around 10 percentage points.

Likewise, many married couples want to have children – not for GDP but because children are a source of joy and fulfilment of love. Government policies on marriage and parenthood are guided by this higher purpose. And of course, a growing labour force is a happy, economic by-product. We must make balanced choices in addressing the trilemma. We must accept a slower rate of labour force growth. The underlying demographic slowdown is so severe that it is neither feasible nor desirable to try to completely offset it through immigration or foreign workers. But we must also allow a certain rate of net immigration to augment our resident population. This is not just about numbers but about rejuvenation and expanding our talent base. 8 / 17  BIS central bankers' speeches  And while we cannot keep increasing our share of foreign workforce indefinitely, we must be flexible in allowing fluctuations in the ratio according to economic cycles, changing circumstances, and opportunities. Finally, we must reframe our question on foreign workers. It is not about how many foreign workers industry wants or society can afford to have, but what number and kind of foreign workers we need to maximise the job and wage opportunities for Singaporeans. Foreign workers must be a complement to the local workforce. Let me move on to the second broad theme: that demographics is not destiny. We can sustain our economic dynamism in the face of demographic change.
Figure 3 shows the consequences, expressed as a percentage or percentage per year, of a reduction of the repo rate path by 0.25 percentage points over four quarters on quarterly inflation, the real repo rate, the real exchange rate, four-quarter inflation, production and hours worked. The solid curves show the effect of an anticipated reduction, while the dashed curves show the effect of an unanticipated reduction.6 We see that, all else being equal, such an anticipated reduction of the repo rate leads to an increase in inflation of just over 0.4 percentage points, an increase in output and the output gap of just over 0.4 per cent or percentage points, respectively, and an increase of the number of hours worked of approximately 0.35 per cent. If employment varies one-to-one with hours worked, which is realistic in a year or a couple of years’ time, employment will then increase by approximately 0.35 per cent. 5  One can also calculate the alternative forecasts for inflation and resource utilisation using so-called unexpected deviations from the main scenario’s repo rate path. This corresponds to a remarkable situation in which the Riksbank misleadingly announces the main scenario’s repo rate path but plans in a later monetary policy decision to surprise the market and the economic agents by deviating from the announced repo rate path. This would be the opposite of the transparent and clear monetary policy that the Riksbank says that it should conduct and does conduct.

This development has caused some analysts to talk about “the missing deflation”.5 The so-called Phillips curve, which shows the relationship between the rate of inflation and economic activity, appears to have flattened compared with before.6 One possible explanation for this development is that the monetary policy conducted in recent decades around the world – where independent central banks have primarily focussed on attaining low and stable inflation – has gradually succeeded in anchoring inflation and inflation expectations. This has meant that the Phillips curve has stabilised in a situation with low average inflation. It is not entirely clear why this would also have contributed to reducing the slope of the Phillips curve, but we cannot rule out the possibility that if expectations are anchored better, price-setting and wage formation will be less sensitive to changes in economic activity. So, even if a monetary policy aimed at keeping inflation low and stable was perhaps not the main explanation for the Great Moderation, it is possible that it made an enduring impression in the form of a flatter Phillips curve. We cannot know whether this phenomenon is temporary or permanent. But if it is the case that we have had a fundamental change in the way the economy functions, it is also possible that this should lead to the central bank adapting, at least to some extent, the policy it conducts. A flatter Phillips curve implies that inflation has become less sensitive to the domestic demand situation – that it varies less with cyclical phases.
But, for my part, I think it is more likely that we will achieve our employment mandate before inflation is clearly headed back to 2 percent. Conceptually, this could raise a policy dilemma – achieving our inflation objective would call for strong accommodation, while achieving our employment target usually would call for earlier policy normalization. However, the story is even more complicated than that because important risk factors also come into play. In some ways the insights from Nobel laureates Lars Hansen and Tom Sargent regarding robust control evaluations help form my assessment. 14 I see two important and divergent ways my forecast could go wrong. One is that I may be overestimating the underlying strength in the real economy and its ability to exit from the ZLB. Guarding against this risk calls for a more patient removal of accommodation. The second is that I may be wrong about the inflation outlook, and we could be poised for a much stronger rise in inflation than I am forecasting. This risk calls for more aggressive rate hikes. 12  Krueger, Cramer, and Cho (2014). This same result appears for the price Phillips curve, as shown, for example, by Gordon (2013). 13  Aaronson and Jordan (2014). The medium-term unemployed are those unemployed five to 26 weeks. Persons involuntarily employed part time for economic reasons (such as slack work or unfavorable business conditions) are those who want and are available for full-time work but have had to settle for a part-time job. See also Kiley (2014).

As the cycle, or perhaps I should say if the cycle, becomes synchronized all over the world, the need for independent monetary policies may fade away. Gradually, the number of currencies in the world will decrease through time. This is not economic fiction: a tendency in this direction is already present among smaller countries in Latin America with large trade and investment relationships with the United States. However, a world tendency to a significant decrease in the number of currencies is probably a very long run one, where Keynes’ dictum on the long run comes to mind. In any case, I am convinced that, 5 as Rogoff argues in a recent paper , it may not be desirable to pursue currency consolidation all the way. Meanwhile, in the short and medium run, the increase in productivity provides more room for monetary policy to maneuver. Productivity growth alleviate inflationary pressures providing more room for monetary policy to exert its short run influence on the real economy. 5. Flexibility  The key word for an emerging economy in a changing world is flexibility: in exchange rates and interest rates, to accommodate shocks without concentrating their effects in one particular market; in factor markets, both labor and capital, to minimize the cost of transition from one state of the economy to another. The task before us, in an emerging economy like Chile, is to increase flexibility in all markets.
It needs to break out of the shadows of insurance by evolving new business and operating models. Concepts in takaful with rich potential, such as mutual takaful remain largely untested. The mutual model has a long history. It is also enjoying a resurgence with the rise of new online, peer-to-peer insurers in other countries. This is just one model. There might be others. Boards and senior management should lead the way in exploring these developments and charting new territory. This will require more active engagement of shareholders to develop a clear vision for the company and enlist support for bold strategies that will change the status quo for the better. 4/6  BIS central bankers' speeches  Various programmes such as FIDE and FIDE Forum already include content to help prepare directors in future proofing their institutions. The focus will be even stronger going forward. We are also pleased to announce that a specialised executive Islamic finance education programme tailored for directors of Islamic banks and takaful operators will be launched in the first half of this year. It will equip directors with an appreciation and knowledge of Islamic finance by incorporating practical business perspectives. With this, directors are better able to contribute towards growth and innovation, beyond their roles in ensuring that their institutions operate within sound Shariah and risk management parameters. At the level of employees, the reality is that good talent is in short supply. And so, the industry must take a longer view in its human capital strategies.

Moreover, we should be aware that convergence is a continuous process, which will last even after the accession to the Eurozone; this is a lesson we should learn from the failed experience of other countries which considered that joining the euro is the end of the line. Second, while the nominal convergence criteria are deeply rooted in the minds of policymakers, the Maastricht Treaty explicitly stipulates that “a high degree of sustainable convergence” is needed. Yet, this requirement seems to have been overlooked sometimes. In this context, I want 1/2  BIS central bankers' speeches  to highlight that there are four types of convergence that must be taken into account: nominal, real, institutional and structural. Nominal convergence is easily quantifiable, as the specific criteria are clearly defined in the Maastricht Treaty. But we also have to ensure the compatibility of our institutions with those in the euro area and this is the essence of institutional convergence, a process where the central bank and its independence are particularly important. While structural convergence focuses on adapting the structure of our economy to that of the euro area, real convergence, measured by GDP per capita (at PPS) as a percentage of euro area/EU average, is the best proxy for the development level of a nation. So, when talking about convergence towards euro area enlargement, it is important to keep in mind all these valences of convergence. Third, we are very interested in learning the experience of our Bulgarian colleagues, and I am looking forward to their presentations.