samchain/econo-pairs-v1 huggingface dataset:
Covid and the composition of spending Speech given by Ben Broadbent, Deputy Governor, Monetary Policy  Bank of England webinar 12 January 2021  I’ve received helpful comments from colleagues at the Bank of England. I’d like to thank Cristiano Cantore, Rupert de Vincent-Humphreys, Pavandeep Dhami, Federico Di Pace, Riccardo Masolo, Silvia Miranda-Agrippino, Mette Nielsen and Carleton Webb for their help in preparing the speech. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Financial Policy Committee or the Monetary Policy Committee. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction  Good morning. Thank you for making the time to attend this talk. It is dispiriting to have to give it as we enter another national lockdown. But the mass vaccination programme now underway also provides genuine hope that this latest set of measures may be the last. And in the meantime, as far as the economic effects of the pandemic are concerned, we should take the opportunity to learn from what happened in 2020. In this respect I want to focus today on one particular aspect of the experience last year, namely the huge shifts in the pattern of consumer spending. Chart 1 is one place to start. It plots annual growth in GDP, from one fourth quarter to the next, against the same for retail sales1.

On this occasion it happened in a matter of weeks. The idea that consumer spending would come back quite quickly once infection rates had begun significantly to decline – faster, in particular, than in the “average” economic recovery – was something built in to the MPC’s “scenario” last May, early on in the pandemic. At the time, there was quite a bit of scepticism about this and many judged it to be too optimistic. For my part I think there was every reason to expect a relatively sharp recovery – slower, perhaps than the precipitous drop but nonetheless faster than in a typical economic upswing. In the event spending came back even faster during the summer than we’d expected in May. The same was true in other countries. And the interesting thing about these simple simulations (to the extent one attaches any credence to them) is that they suggest that the initial downturn in aggregate spending may have been as sharp as it was precisely because it was likely to be short-lived. The role of the furlough schemes was obviously critical here. One of the reasons “normal” recoveries in consumption are more protracted is because drops in output feed through to household incomes, via hits to employment and wage growth. This feedback slows down the dynamics of the average cycle. The schemes helped to interrupt that loop.
To determine the impact of the illiquidity premium and inflation risk premium on these results, we decomposed our ex-ante analysis, comparing the breakeven rate of inflation excluding the illiquidity premium in TIPS yields 3 to the SPF forecast. This comparison yields an  2  In addition to these primary factors, TIPS yields also reflect the taxation difference between TIPS and nominal issues, the convexity difference between real and nominal yields and the price of the embedded deflation floor. 3  We used the illiquidity premium in TIPS yields estimated in D’Amico, Kim and Wei (2008). D’Amico, Kim and Wei calculated the liquidity component for five- and ten-year TIPS yields, which we used to adjust the auction prices for 5- and 10-year TIPS issues. For twenty- and thirty-year TIPS issues, we assumed that the liquidity component is equal to the component for a ten-year security, which in the event that these securities are less liquid than the ten-year note, understates this effect and thus underestimates the risk premium at this horizon. For further information, see Dudley, Roush and Steinberg Ezer (2008). BIS Review 14/2009  3  estimate of the premium investors were willing to pay for inflation protection at previous TIPS auctions. We found an average risk premium estimate of 47 basis points over our sample period. This suggests that the TIPS program does satisfy a real demand that is not met by nominal Treasuries.

Let me conclude with a reflection on monetary policy. The economy is bouncing back rapidly, which is good news. With that has come a rise in inflation, and we expect that rise to continue in the near term as we go through the rest of this year, such that CPI inflation is expected to pick up further above the target, owing primarily to developments in energy and other commodity prices. I have set out the reasons why we expect this rise in inflation to be a temporary feature of the bounce-back. The reasons for taking this view are well-founded, it is not a vain hope or a matter of whistling in the wind. It is important not to over-react to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions. But it is also important that we watch the outlook for inflation very carefully, which of course we do at all times, particularly for signs of more persistent pressure and for a move of medium term inflation expectations to a higher level. And if we see those signs, we are prepared to respond with the tools of monetary policy. Over the last sixteen months we have used monetary policy decisively to respond to an unprecedented crisis which was disinflationary. We were able to act in this way because the framework of monetary policy and the record of its use are robust. This credibility gave us the scope to act in a crisis.
Consequently, the need and the potential for mitigating the accumulation of systemic risk through regulation raises a number of questions with regard to the specific design of such regulation. Where do we start? How do we set priorities? Which principles should we abide by? The number of regulatory solutions that have been proposed are as numerous as the possible triggers of systemic crises. Often, individual solutions focus on one specific cause. In my opinion, there are so many possible causes of a systemic crisis that it is insufficient to focus on just one specific cause when drawing up possible regulatory solutions. It would be an illusion to think that the issue of systemic risk could be totally eliminated in the long-term with such an approach. Consequently, I believe it is important that the problem be approached in a systematic manner, and that comprehensible criteria for a list of measures that is likely to be effective be drawn up. Unless a roadmap is drawn up based on principles which guide us in the handling of the challenges we encounter in regulating systemic risk, there is a danger that decisions on the requisite measures will be made arbitrarily, that solutions lacking substance will be implemented or that nothing at all will be done. From the viewpoint of systemic stability, the result would be suboptimal. I will now talk about the criteria for assessing regulatory measures. Do the measures ensure market discipline?

v.  Monetary and financial statistics  Last year was a successful one for the Bank of Albania in its role as one of the three national agencies producing statistics. Expanding statistical information, and perfecting some of the methodologies underlying the statistical product of the Bank of Albania have been evaluated positively by international institutions, making thus significant progress towards the approximation with Eurostat and IMF standards. In 2015, the Bank of Albania published, for the first time, the annual information on the flow of foreign direct investments by country, flow of foreign direct investments by economic activity and situation of foreign direct investments by country and economic activity. vi. Research  During 2015, the Bank of Albania completed over 20 empirical studies and analyses dedicated to problems and potential solutions for issues related monetary policy effectiveness and safeguarding financial stability. During 2015, the revaluation of the Macroeconometric Model of the Albanian Economy was completed. The process improved the identification and interpretation of cause-effect macroeconomic correlations. Research work has been presented in various events and conferences, including those organised by the Bank of Albania, notably, the 9th Workshop of Economic Research in  6  BIS central bankers’ speeches  Southeastern Europe “Rethinking Economic Policies and Central Banks’ Methodologies”, where 20 research papers were presented by central banks, academic institutions and the Bank of Albania. vii. Communication  Enhancing the transparency is a constant priority of the Bank of Albania. During 2015, we have aimed at establishing permanent channels of communication with the public.
Sir Andrew Large: Monetary policy - significant issues of today Speech by Sir Andrew Large, Deputy Governor of the Bank of England, to West London Business, London, 1 December 2005. *  *  *  Introduction This is the last official speech I will make while at the Bank and a member of the Monetary Policy Committee (MPC). So perhaps as my term draws to a close you will permit me to make a few personal observations, both on the process of the MPC itself and on a few of the significant issues we face  The process You cannot fail to be impressed by the integrity and substance of the framework. It has a well defined and measurable target. It is independent of Government. Each of the nine members is chosen for their particular area of expertise and to give breadth of experience. They are individually accountable. And a real strength is the transparency of the process. Communication through the publication of the minutes of each meeting, including details of each member’s vote, Treasury Select Committee appearances, the Inflation Report, and speeches such as this today provide the markets and the public with an understanding of decisions and, importantly, how they are reached. Furthermore, it has delivered: however much we are aware of perils that could blow us off course. For me being a member of the MPC has been a steep, but incredibly rewarding, learning curve. The process itself poses some challenges.

In 1979, Compuserve opened up electronic mail to a rising community of personal computer users. In the same year, two graduate students at Duke University, Tom Truscott and Jim Ellis, developed Usenet, allowing users to post messages to (a precursor of) internet forums. By 1983, after more than a decade of evolutionary development, a universal Internet Protocol was agreed. This provided infrastructure and common technical standards for this evolving communications network. But the languages of the internet remained technical and diffuse. That meant it largely remained the domain of the nerds – libraries and universities. In March 1989, Tim Berners-Lee, a British software engineer working at CERN, the Geneva-based nuclear research lab, wrote a memo to his boss Mike Sendall.7 It was a suggestion for improving information management at CERN, replacing the silo-ed approach to information storage and search with a more interconnected approach. Sendall described the proposal as “vague but exciting”. A year on, Berners-Lee made his proposal less vague and more exciting. A paper with Robert Cailliau proposed the development of a World Wide Web, with links between and within documents creating a web-like information network.8 At the centre of this web was a  6  World Trade Organisation (2011). 7  Berners-Lee (1989). 8  Berners-Lee and Cailliau (1990). BIS central bankers’ speeches  3  common language – Hyper-Text Markup Language (HTML). This was a new lingua franca for computers, allowing them to communicate irrespective of their operating systems and underlying technologies.
We can expect other events to occur with a greater or lesser degree of probability. Historically, the deviation between actual underlying price inflation and our projections has been within an interval of +/-1 percentage point. When we later report on the implementation of monetary policy, we will place special emphasis on analysing the causes when deviations from the target are more than +/- 1 percentage point. 1  “Box: Effects of a change in interest rates” in Inflation Report 4/2000, Norges Bank. 2  Economic models of the Bank of England, Bank of England (1999). 2  BIS Review 7/2002  Normally, we make projections with a time horizon of about two years. During this period, a number of events will necessitate a revision of the projections. A number of uncertainties will be clarified along the way. New information about how the economy functions may be revealed. As we approach the period for which the projections apply, the uncertainty surrounding the projections will diminish. The chart shows how the projections for the rise in the CPI from 2000 to 2001 have changed from December 1999 to the end of 2001. Through 2000, the estimate was revised upwards by more than 1 percentage point. The most important factor influencing this adjustment was an upward revision of the projections for oil and electricity prices in 2001. We see that from the end of 2000, the deviation of estimated price inflation from actual price inflation, which was 3 per cent, was modest.

The actual return on the Fund in 2001 will not be included in the calculations until the budget for 2003. Moreover, attempts shall be made to curb the impetus from particularly large fluctuations in the phasing-in rate implied by the main rule: “In the event of extraordinary, substantial changes in the Fund’s capital or in the structural, non-oil deficit from one year to the next, the change in the use of petroleum revenues must be distributed over several years based on an estimate of the size of the real return on the Fund a few years ahead” (Report no. 29 to the Storting 2000-2001, p. 7). This means that fiscal policy can still be used to stabilise economic developments. This is a sound Norwegian tradition, but may be demanding. At last year’s seminar, the Central Bank Governor stated: “In Norway it is important that the annual budgets are anchored in a long-term strategy which takes into account that oil revenues may fluctuate from one year to the next”. The guidelines satisfy the requirements of this long-term strategy. Consensus concerning the guidelines and adherence to them will create confidence in the long-term formulation of fiscal policy. This also provides a stable framework for monetary policy. Under such conditions, the effect of monetary policy instruments will be more predictable. The uncertainty facing economic agents is reduced through the establishment of credible fiscal policy guidelines. A stable operating environment is an important precondition when decisions that have long-term consequences shall be taken.
Obviously this will depend on the availability of telephone lines and personal computers. There is also the crucial issue of public acceptance of the new technology. Such issues mean that a wholesale shift to electronic banking will not happen overnight. However, banks would be unwise to ignore the longer-term opportunities as well as the threats. If the new delivery mechanisms do develop, this will result in increased competition including from new entrants as barriers to entry are reduced. The potential for foreign banks to provide cross-border banking services, such as private banking, through the internet will also increase. In other words, foreign banks may no longer need to be physically located in a particular country in order to tap its market. This will pose interesting challenges to regulators as well as the banks. The response to the challenges 23. What then should be the response of banks to these challenges? Despite the diversity of banking systems around the Asian region, I think it is possible to draw some broad conclusions. 24. The key point is, I think, for banks to realize that, even if they are stateowned, they are ultimately responsible for their own destiny. The Commercial Banking Law of the People’s Republic of China sums up the point well in its Article 4.

The alternative to a fund would have been to directly regulate production by putting a conservative upper limit on annual extraction. This was attempted in the 1970s and -80s. At that time, we had a production ceiling of 90 million standard cubic metres per year. This approach was abandoned in the 1980s. Today, the government steers exploration activities  BIS Review 81/2008  1  and awards production licenses, but has no explicit production target. Since the mid-1990s, total petroleum production has been around 250 million standard cubic metres per year. The Fund mechanism The Fund is by law fully integrated with the government budget, and the same priorities are imposed on spending from the Fund as on any other government spending. This means that the entire petroleum revenues are transferred to the Fund. An amount equal to the non-oil budget deficit is then transferred to the fiscal budget. The mechanism ensures that the accumulation of capital in the Fund is equal to government net financial savings. There is no corresponding increase in liabilities. Furthermore, legislation prohibits use of Fund money for purposes not prioritised in the regular budget processes. There is no hidden use of oil money, or any use for special purposes. The Fund is strictly and effectively “out of bounds” to special interests.
Zeti Akhtar Aziz: Global leadership development Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Official Launch of ICLIF Alumni Association and ICLIF Leadership Competency Model, Kuala Lumpur, 30 November 2004. *  *  *  ICLIF Alumni Members, Distinguished Guests, Ladies and Gentlemen, It is my great pleasure and honour to welcome you to the official launch of the Alumni Association of the International Centre For Leadership In Finance (or ICLIF) and the ICLIF Leadership Competency Model (ILCM). ICLIF Alumni Association It was just over a year ago that we witnessed the Official Launch of ICLIF on 28 October 2003. Within this period, ICLIF has already made considerable progress in meeting its objective to provide a more focused and coordinated approach towards the development of world-class leaders in the financial services sector in Malaysia and in the region. To-date, ICLIF has successfully concluded two sessions of its flagship Global Leadership Development Programme or GLDP, in addition to a Directors’ Forum and a seminar on Scenario Planning. Besides providing participants with an opportunity to learn from the “top thinkers” from worldrenowned institutions and industry practitioners and experts, one of the key strengths of ICLIF’s programmes lies with the unique opportunity for the participants to establish strong social and professional networking and build lasting fraternity bonds. The launch of the ICLIF Alumni Association has been designed to play this role.

The preliminary model was further refined in a Validation Seminar attended by visionary and prominent leaders with proven track record of business performance excellence from both the private and public sectors. The Model forms the foundation to guide the philosophy and drive the design and delivery of ICLIF’s leadership development programmes. I wish to take this opportunity to express our appreciation to the industry luminaries who have given so much of their time in participating in the validation seminar for the ICLIF Leadership Competency Model. Let me share with you some of the interesting findings of the consultants in assessing our leaders based on the competencies identified in the Model. Among the positive findings of the exercise was the observation by the consultants that many of the leaders interviewed exhibited strong competencies in the area of focus, drive, execution, negotiations (and deal making) and entrepreneurial drive. These are all competencies resulting from high achievement needs and high achievement values. There is also a high sense of national pride and desire to enable Malaysia to meet the challenges of 2020. Participants also displayed a strong sense of performance drive for excellence. There are areas of competencies that, however, require further development. The review detected some degree of performance complacency by some respondents, as reflected by a lack of drive to achieve and the lack of desire to benchmark against the global best. Participants seemed quite satisfied with what they had personally achieved.
It is true that the opinions on the optimal level and even on the relevance of this factor for successfully joining a currency union are quite diverse. However, to attain a certain degree of per capita income convergence before switching to the euro is essential, as a large convergence gap may complicate business cycle management in the absence of independent monetary policy. But even the countries that are already euro area members should continue to increase their level of real convergence. In my opinion, the direction of the real convergence process and its sustainability and smoothness are just as important as its degree. Romania has certainly come a long way in terms of economic convergence, a process whose inception is tied to the prospects of EU membership, witnessing a significant increase in per capita GDP as a share of the euro area average (based on PPS), from 31.7 percent in 2005 to 58.6 percent in 2017. Peer countries recorded a similar trend: Bulgaria went from about 33 to 47 percent, while the Czech Republic, Hungary and Poland, which started from a more advanced level, added 9 to 20 percentage points to the same indicator during 2005–2017. However, this process is still far from completion in these non-euro New Member States. A smooth convergence path requires a combination of prudent macroeconomic policies (be they monetary, fiscal or macroprudential), even though in practice it is difficult to build support for such policies.

One needs to go back to the Bretton Woods era to get volatility levels as low as at present. 2  BIS Review 124/2006  BIS Review 124/2006  3  Of course the reduction in the volatility of returns – and the lower compensation for future volatility embedded in risk premia – is responding to some real changes in the world. You might break down sources of uncertainty about future returns into three components: macroeconomic risks, financial risks and risks in the broader environment. Macroeconomic volatility has fallen considerably over the last decade in many economies [Chart 5]. In the real economy, greater flexibility in labour and product markets, especially openness to foreign competition through trade and immigration, has enabled smoother adjustment to shocks. On the price side, central bank independence and inflation targeting have contributed to greater price stability. There is also greater depth and sophistication and fewer rigidities in financial markets. Innovation has created a variety of products enabling more and better risk transfer by financial market players and greater choice for end-investors. Greater financial market flexibility can support macroeconomic stability by keeping credit and liquidity available during periods of stress. But risks in the broader environment haven’t gone away. Threats from ecological or biological disasters, fraud, political conflict and terrorism seem as high as ever. And these are risks we have identified. As ever there may be some significant “unknown unknowns”.