samchain/econo-pairs-v1 huggingface dataset:
Given that objective, the determinants of aggregate demand, and a short-run trade off between output and inflation, the monetary policymaker is assumed to proceed by setting interest rates in the light of the outlook for demand relative to supply and for inflation. The central bank decides a nominal interest rate, which it establishes in the money markets 3 . As the prices of many goods and services are sticky, this has the effect of enabling the central bank to move  1  Some of the points made here were prefigured in my written submission to the House of Commons’ Treasury Select Committee ahead of a confirmation hearing on my reappointment to the MPC. See ‘Treasury Committee Questionnaire ahead of appointment hearing for Mr Paul Tucker’, The Monetary Policy Committee of the Bank of England: appointment hearing, First Report of Session 2005-06, Volume II. 2  ‘Inflation targeting and the IMF’, International Monetary Fund, March 2006. 3  A completely new framework for doing so in the UK was introduced last week. See ‘The Framework for the Bank of England’s Operations in the Sterling Money Markets’ (the ‘Red Book’), May 2006. BIS Review 46/2006  1  around the actual short-term real rate of interest relative the ‘natural’ or ‘neutral’ real rate 4 that would prevail in the absence of those frictions. Broadly, another consequence of prices and wages being sticky, together with some inertia in inflation, is that when shocks hit the economy, the central bank cannot get inflation to return to target instantly.

In a world where attention to our analysis is limited, it may be preferable to keep our ‘audience’ focused on the MPC’s analysis of the outlook for output and inflation. Sometimes that analysis lends itself naturally to a contingent statement, by individual members, of a possible path for policy. I have already referred to one such example around the end of 2003/beginning of 2004. In a similar vein, circumstances may arise where we explained the broad path for inflation we were trying to deliver. For example, a shock to the economy might be sufficiently nasty that returning inflation to target on the usual timetable would threaten undesirable volatility in output. We might then want to set policy in a way that accepted deviations from the inflation target for a period, while committing to achieve the target in the medium run. Related to that, our mandate makes specific provision for communication if inflation outturns were to miss our target of 2% by more than one percentage point. In those circumstances, the Governor of the Bank would be obliged, as part of the Committee’s public accountability, to write an open letter to the Chancellor of the Exchequer explaining why inflation had deviated from target, the Committee’s plan for returning to target, and its time horizon for doing so. Such circumstances have not yet arisen, but they illustrate that provision is made for theCommittee to explain what commentators would call its strategy.
One argument in favour of the trade imbalances being sustainable is that the higher growth in GDP and income from foreign ownership in the United States make it possible to continue to finance interest expenditure on the foreign debt. The reform process for increasing potential production in Europe and Japan is still proceeding slowly, which could indicate that growth differences will remain for some time to come. Other people, including me, consider that the imbalances comprise a serious risk to the world economy and that the longer they remain, the greater the risk of negative effects arising from a correction. The most probable scenario in the near future, according to the Riksbank and most other analysts, is that there will be an orderly, gradual correction of the imbalances with manageable effects on the world economy. In the long term, demographical factors, such as a larger percentage of elderly people in the population of the rapidly-growing Asian countries, also argue in favour of a correction taking place in the form of reduced private saving. However, one cannot rule out the possibility of a more abrupt adjustment of the imbalances, which could have considerable negative effects on the world economy. There are two possible scenarios that could trigger a more abrupt adjustment. One is that the US households choose to rapidly increase their saving, for instance, out of worry over future financing of general government healthcare and the pension system.

2  BIS Review 35/2006  Globalisation involves both challenges and opportunities The increasing competition from, for instance, China, India and eastern Europe means that there is increasing pressure on the early industrialised nations to transform their trade and industry structure. This structural transformation will affect people, places and regions in different ways. However, history shows that free trade and increased economic integration lead to increased economic welfare for the world as a whole. The international division of labour that follows in the wake of globalisation leads to lower production costs and productivity gains, which in turn means that labour and investment in the industrialised nations can be moved to other sectors with more refined products and services. In that sectors and companies that are not internationally competitive are knocked out, scope is created for new employment in areas where different countries and regions have comparative advantages. However, for an individual country or region to benefit in this process, the “creative destruction” entailed in the structural transformation must lead to new jobs with a higher value added factor being created at the same rate as the old ones disappear. Effects on the labour market China’s and India’s integration into the world economy is sometimes described in the debate as a supply shock in the global labour market, which will result in rapidly-falling wages in the western world.
See Lipsey, R and Lancaster, K (1956), “The general theory of the second best”, Review of Economic Studies, 24(1). 8  Arrow, K and Debreu, (1954), “Existence of an equilibrium for a competitive economy”, Econometrica, 22 (3). 4  BIS central bankers’ speeches  Then they can trade contracts and insure each other against risks they are unwilling to bear. A moment of introspection reveals the absurdity of these assumptions as a description of the actual world. More often than not, even describing the universe of possible outcomes is beyond the means of the mere mortal, let alone ascribing subjective probabilities to those outcomes. That is genuine uncertainty, as opposed to risk, a distinction made by Frank Knight in the 1920s. 9 And it means that market outcomes reflect individual choices made under a pretence of knowledge. The swings in sentiment that result – pessimism one moment, exuberance the next – don’t reflect nature’s odds, but our own assessments of them, inevitably distorted by Keynesian “animal spirits”. 10 In the end, belief in the second lie that “markets always clear” meant that policymakers didn’t play their proper roles in moderating those tendencies in pursuit of the collective good. Lie III: “Markets are moral” Despite these shortcomings, well-managed markets can be powerful drivers of prosperity. By financing firms to hire, invest and expand, they drive growth. By opening up cross-border trade and investment they create new opportunities for businesses and savers.

Our Sandbox is unique as it is the first to include Islamic finance. Thus, industry players can be assured of the regulatory support by the Bank in expanding their frontiers of innovation. We would therefore expect to see more technological platforms to be introduced and infusion of technology to take place not only to disrupt the way we do things, but at the end of the day, to be able to significantly enhance values and experience for the consumers. The third and final key area relates to the measurement of the industry’s contribution to society and the wider economy. Islamic finance has more to offer beyond the confines of the conventional parameters of Sustainable, Responsible and Impact Investing (SRI); as well as the Environmental, Social and Governance (ESG) considerations. A natural alignment between Islamic finance and SRI already exist, given that the principles of fairness; equality; and ethics are embedded in Islamic finance which are associated with social well-being of the people. Given these common core values, there are certainly vast opportunities for Islamic finance to broaden its investor portfolio to access the global SRI funds that stands at more than USD3 trillion. In broadening the horizon of Islamic finance by tapping into socially-conscious investments, the industry can actively spearhead efforts to promote and reach out to investors whom are value driven. We envision that investments through Islamic finance products would meet the aspiration and needs of this group of investors.
Zeti Akhtar Aziz: Fostering leadership role in Islamic finance Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of Hong Leong Islamic Bank Berhad - “Fostering Leadership Role in Islamic Finance”, Kuala Lumpur, 19 July 2005. *  *  *  Bismillahirrahmanirrahim Y.Bhg. Tan Sri Quek Leng Chan, Chairman of Hong Leong Bank and Hong Leong Islamic Bank Encik Daud Abdullah, Managing Director, Hong Leong Islamic Bank Ladies and Gentlemen, It is my pleasure to be here today to commemorate the official launch of "Hong Leong Islamic Bank Berhad". This establishment of the Islamic subsidiary represents the on-going institutional transformation in the Islamic banking system in our Islamic financial system. The underlying philosophy for the incorporation of an Islamic subsidiary is for the further strengthening the institutional structure for Islamic banking business operations. The emergence of Hong Leong Islamic Bank in the Islamic financial landscape will further increase the diversity of players in the Islamic financial system and enhance its potential to contribute to the further development of our Islamic financial services industry. Ladies and Gentlemen, Today, the Islamic financial services industry in Malaysia has emerged as a viable and competitive component of the financial system that contributes towards enhancing wealth creation and the nation's economic development. The advancement and progress that have been achieved thus far have opened new frontiers for the Islamic financial services industry.

Sarah Breeden: Climate action - approaching a tipping point? Speech by Ms Sarah Breeden, Executive Director for Financial Stability Strategy and Risk of the Bank of England, at Chapter Zero's fourth anniversary dinner, hosted by the Global Association of Risk Professionals, London, 18 April 2023. *** Firstly, thank you Chapter Zero and GARP for hosting me today, and for the opportunity to reflect on our collective progress in the transition to net zero. It is timely to do so. The latest IPCC synthesis reportOpens in a new window provides yet another stark warning of the impact that climate change will have on our planet. We are now a third of the way through the decisive decade; a decade where we will need to cut global emissions by over 40%, if we hope to limit warming to 1.5C.1 And yet global CO2 emissions continue to rise.2 For us to meet this challenge, we need to collaborate and to take individual responsibility for the role we each play. For the Government, it is to set out the pathway to net zero. For each of you here today – and the firms you represent – it is to apply those pathways in boardroom decisions; decisions that will not only help facilitate an orderly transition, but also help ensure the long-term relevance and value of the companies you lead. For the finance sector, it is to support and enable that transition.
Economic growth has been just as high, if not higher, since inflation came down to a low level, compared with the years when inflation was high and at times at double-digit levels. Chart: Monetary policy model requirements For the model to be relevant it should build on long-term relationships that we believe to be valid and it should be consistent with data. For example, the model’s relationships should describe how the interest rate works, in line with relevant empirical observations of the Norwegian economy. It is also of considerable importance to us that the economic mechanisms in the model should be understandable and easy to communicate. The model apparatus is to function as a useful tool, both in the internal process ahead of the monetary policy meetings and in Norges Bank’s external communication. Chart: Quote George Box A model will never be able to provide an exhaustive description of reality. In 1979, the British statistician George Box stated: “Essentially, all models are wrong, but some are useful”. Models can help to identify key driving forces, ensure a valid line of reasoning and consistency over time. This will enable the model to play an important role in the analytical basis for interest rate setting. At the same time, we must use common sense and experience when evaluating the model-based results and supplement these results with our own professional judgement. In this respect, the Bank has a pragmatic attitude regarding the use of models.

There are certain similarities between projecting developments in the Norwegian economy in the coming months and forecasting the weather. Meteorologists have observed that averaging a large number of forecasting models generally produces more accurate forecasts. 1  Ysander, Bengt-Christer, “Award Ceremony Speech”, Royal Swedish Academy of Sciences, 10 December 1989. BIS central bankers’ speeches  1  To project consumer price inflation in the coming quarters the Bank has developed a system for averaging forecasts from about 170 different statistical models, all of which are intended to project inflation in the Norwegian economy in the very near term. The models are grouped into three classes, and the models within each class may contain different variables or be variants of one another2. The weights are continually adjusted on the basis of historical accuracy, so that models with better predictive power are given greater weight in the subsequent round. The Bank has a similar system including almost 250 models for forecasting mainland GDP. The projections from these systems of models extend four quarters ahead in time and are published at regular intervals on the Bank’s website. We call this apparatus SAM (System for Averaging Models). For projections with slightly longer horizons, the Bank parts company with weather forecasters. While meteorologists are unlikely to influence the weather with their predictions, Norges Bank’s interest rate setting can actually influence economic developments in the medium term. This places particular demands on the system of analysis and involves other demands than if the sole purpose were to make forecasts.
This includes regular press conferences by the Fed chair following FOMC meetings; the publishing of growth, inflation and short-term rate forecasts of FOMC participants; and a concerted attempt to lay out the guideposts that the FOMC will look at to assess progress toward our mandate. We are, though, still learning how to more effectively communicate, especially given our new and expanded set of policy instruments. A second area in which we can and must collectively do better is safeguarding global financial stability. Simply put, we failed to act both early enough and decisively enough to stem the credit excesses that spawned the financial crisis and the Great Recession. While the U.S. was not alone in this shortcoming, given our position in the global financial system we especially should have done a better job. We’ve taken important steps through new legislative mandates and a broader effort to rethink our regulatory and supervisory framework. In particular, systemically important banking organizations must now hold higher amounts of capital and liquidity that are better aligned with their risk profiles and the official sector is making progress in ensuring no financial firm will be too-big-to-fail. Although this remains very much a work in progress, these efforts should help us to avoid repeating the mistakes of the recent past, and enable us to be more proactive in mitigating potential future vulnerabilities. Of course, we at the Fed are not alone here.

If this labor market improvement continues and the FOMC is reasonably confident that inflation will move back to our 2 percent objective over the medium term, then it would be appropriate to begin to normalize interest rates. At their March meeting, the FOMC removed language from the statement that indicated that we would be patient in beginning the process of normalizing monetary policy. But, as Chair Yellen remarked in her most recent press conference, removal of the word “patient” from the statement does not indicate that we will now be “impatient” to begin to normalize monetary policy. Rather, the timing of normalization remains uncertain because how the economy evolves is also uncertain. When, hopefully, the data support a decision to lift off later this year, it does not mean that U.S. monetary policy will be tight. Rather, we will simply be moving from an extremely accommodative monetary policy to one that is only slightly less so. I would view this as a positive signal about the progress we have made in restoring the U.S. economy to health. It is important to remember that near zero short-term interest rates and the large expansion of the Federal Reserve’s balance sheet were designed to be a temporary extraordinary treatment to help the economy regain its vitality, and not a permanent palliative. I remain confident that when the FOMC decides to begin to remove policy accommodation that we have the requisite tools to support this decision.
We know that the ability of a country to benefit from globalisation very much depends on the quality of its institutional and structural environment. All economies – including advanced ones such as the euro area – have to adapt to the changing needs of the world economy. Structural reforms in the labour, goods and capital markets are a key element of any long-run strategy to improve investment, growth and employment prospects, and are essential in order to face successfully the challenges ahead of population ageing, technological change and globalisation. The euro area has indeed undergone and will continue to undergo substantial structural changes, all of which are necessary and beneficial if the euro area is to secure a leading role in the global economy. Member States, therefore, need to stick to the implementation of their agreed reform agendas. The impact of globalisation is also apparent in the sharp increases in cross-border portfolio flows observed since the beginning of the 1990s, a process that continues to be encouraged by the substantial number of bilateral investment treaties, the liberalisation of capital accounts, and technological advances in payment, settlement and trading systems as well as financial information systems, which tend to reduce information asymmetries. Since the beginning of the 1990s, countries have accumulated foreign portfolio assets equivalent to almost half of the annual world GDP, up from just one-third in 1997, and a small fraction in the 1970s and 1980s.

Otmar Issing: Globalisation, EMU and the euro Speech by Mr Otmar Issing, Member of the Executive Board of the European Central Bank, at the 34th Economic Conference 2006 on “Globalization: Opportunities and Challenges for the World, Europe and Austria”, Vienna, 22 May 2006. References to the speech can be found on the website of the European Central Bank. *  *  *  Introduction Let me first extend a warm thank to the Oesterreichische Nationalbank (OeNB) for inviting me here today to share a few thoughts on globalisation and the role played by the euro and the European and Economic Monetary Union (EMU). In the last decades, Austria hosted a number of distinguished economists, such as Carl Menger, Friedrich von Wieser, Ludwig von Mises, Joseph Schumpeter, Friedrich von Hayek, who shaped the economic thought worldwide. In the context of this conference, it is useful to mention the “creative destruction” term, coined by Joseph Schumpeter in 1942 at Harvard after his migration to the United States. Schumpeter argued that the process of industrial mutation, which is intrinsic to capitalism, “revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” 1 No doubt globalisation has a big “destruction” potential. To benefit from the global changes, countries need to be flexible and quick enough at adopting and spreading new technologies, risking in moving into new areas with big market opportunities in the future, which then translates in new jobs and higher economic growth.
The new act was also needed to adapt the Riksbank’s activities to the requirements ensuing from Sweden’s membership of the EU. 8 How was the increased independence felt by the Riksbank? When one talks about central bank independence, one usually distinguishes between goal independence and instrument independence. This may sound cryptic, but goal independence means that the central bank determines its own operational target, which is to be attained to meet the legislator’s intention of price stability, for instance an inflation rate of 2 per cent. Instrument independence means 3 See Jonung et al. (2003). As early as in 1931-1937, the Riksbank was the first central bank in the world to have a price stability objective. After that, however, followed a period of 50 years with various fixed exchange-rate regimes. 5 See, for instance, the classical articles by Kydland and Prescott (1977), Barro and Gordon (1983) and Rogoff (1985). For more descriptive and explanatory reviews, see Apel and Viotti (1998) and Heikensten (2005). 6 A classical article on this subject is the one by Alesina and Summers (1993). 7 See, for instance, Fischer (2015) and Bernanke (2017). 8 The requirement for independent central banks follows on from Article 130 of the Treaty on the Functioning of the European Union and applies to all EU member states. The motives behind the EU legislation were in turn based on academic research and the experiences of ‘The Great Inflation’, the period when inflation rose in many parts of the world during the 1970s.

This is not the case for our economy. People remember the huge inflation of the 1990s and the high inflation of the 2000s. Therefore, when prices, especially for food and everyday goods, are up, they expect inflation to continue to rise. What does this mean when inflation expectations rise, that is, when people expect inflation to rise? People start to spend more, if they can, and save less, afraid of money devaluation. They tend to make large purchases faster, which translates into demand for durable goods. People even take out large loans on the expectation that the goods they need might go up in price, thus pushing inflation upwards, while production cannot adjust quickly enough to rising demand. This feeds though to prices. Therefore, we must definitely reduce inflation and household inflation expectations as soon as possible. Our immediate task is to prevent the economy slipping into 1/5  BIS central bankers' speeches  an inflationary spiral. We can see the positive impact of confidence in steadily low inflation on financial markets. For example, investors’ inflation expectations are anchored as they expect inflation to return to target, which makes it possible to maintain quite steady long-term rates on OFZs. Although we have started to raise the key rate since March, the cost of ten-year OFZs is still roughly level with March. Indeed, market participants believe that we will bring inflation back to target. Why am I talking about long OFZs?