samchain/econo-pairs-v1 huggingface dataset:
Benito and Mumtaz (2009) estimate between 20–40% of UK households display such “excess sensitivity”. See Bachmann, R, Berg, T and Sims, E (2015), “Inflation expectations and readiness to spend: cross-sectional evidence”, American Economic Journal: Economic Policy, 7(1); Hori, M and Shimizutani, S (2005), “Price expectations and consumption under deflation: evidence from Japanese household survey data”, International Economics and Economic Policy, 2; Benito, A and Mumtaz, H (2009), “Excess sensitivity, liquidity constraints, and the collateral role of housing”, Macroeconomic Dynamics. BIS central bankers’ speeches  3  world, where private debt levels remain very high relative to history, including the UK (Chart 3). When a household takes out a mortgage or a firm secures a loan, the amount owed is denominated in cash terms – that is, not adjusted for inflation. Unexpected, generalised, and persistently falling prices then mean the real value of debt increases: the same amount of money is owed, but that money now buys more goods and services. As a result, more consumption or investment needs to be foregone to service the debt. This debt-deflation dynamic was at the core of the Great Depression7 and in the Japanese malaise following the collapse of the asset bubbles of the 1980s. It would be a particular concern if the pace of wage growth were to follow prices down. There is no evidence of that in the UK, where wage growth has picked up over the past six months.

Central banks took greater, though not total, mastery over their monetary destinies. With increased global integration of capital, goods, and labour markets, inflation stabilisation has faced powerful countervailing forces. Perhaps as a result, advanced economy inflation rates have moved more closely together under Inflation Targeting than under Bretton Woods. The correlations between inflation rates in major economies grew in the wake of the crisis (Chart 5 (d) – see annex). As they have written their monetary scripts, central banks have at the very least had an editor. If they are not careful, they could become ghost writers. 7  First identified by Irving Fisher (1933), “The debt-deflation theory of great depressions”, Econometrica. 8  See IMF (2013), World Economic Outlook, Chapter 3, April. 9  In the UK, “the framework for monetary policy was, at best, opaque”, according to King (1997), “The Inflation Target five years on”. 4  BIS central bankers’ speeches  3. Why is inflation low globally? Of course, an important global factor behind current low headline inflation has been the sharp fall in the price of oil, which has been driven primarily by large increases in its actual and potential supply. This means that while it’s been a short-term drag on inflation, it’s good news for growth. The Bank estimates that lower oil prices will boost the level of UK-weighted global GDP by a little under 1 percentage point over the next three years, with a consequent boost in demand for UK exports of around 2 ½ %.
Conclusion I would like to conclude my speech by quoting Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”3 The Banque de France tries to heed this warning. Although we do belong to the (very) “old world” – the Banque de France was created more than 200 years ago by Napoleon –, as any incumbent, we need to adjust and adapt to the “new world”. In order to do so: We have adapted our organisation and governance with the creation of a Fintech hub within our supervisory function, the appointments of a Chief Digital Officer and a Chief Data Officer, and the launch of a Lab to foster innovation within the Banque. We experiment with new technologies: the Banque de France was the first central bank to implement a full-scale project based on DLT which is fully operational 4 and we successfully run eight artificial intelligence projects. We also host discussions between regulators, academics and industry: for example, the ACPR task force on artificial intelligence delivered an issue paper last December for a twomonth consultation period (ending 28 February). But this call for action is addressed to everyone, and especially to you, the new generation.

 Completion of important files, such as the prudential treatment of banks’ exposures to sovereign risk (the bank-sovereign link), EDIS (European Deposit Insurance Scheme), euro area reforms.  2020 budget – better use of resources.  Aligning the budgetary provisions of the NATO with those of the EU. Exemption of the rise in military expenditure, for NATO countries that are EU Member States, from the EDP (excessive deficit procedure) rule and from the MTO (medium-term objective).  Monetary policy normalisation and fiscal policy sustainability. 4
Inflation rose from just over 2 per cent at the end of 2002 to just below 3.5 per cent in February, after which it fell back again. One reason that inflation rose so sharply at the beginning of the year was that electricity prices increased due to weather-related supply problems in hydroelectric power stations, while oil prices increased at the prospect of war in Iraq. During the spring energy prices then declined, as did inflation. However, it was not only developments in energy prices that caused inflation to decline during the year. The fall in prices was broader and probably due in part to lower resource utilisation and higher productivity growth. Of even greater importance, however, were falling import prices, which were a result of both weak international economic activity and the appreciation of the krona. Our forecast at the end of last year was that inflation would continue to fall over the coming months due to a return of energy prices to more normal levels. In the late spring 2004, however, inflation was expected to rise again, partly because the restraining effect of energy prices on inflation would diminish. The rise was also due to expectations of a slight rebound in import prices. However, domestic cost pressure was only expected to contribute marginally to the increase. UND1X inflation excluding energy, which at the time was considered to be the best indication of the more cyclical inflationary pressure, was forecast to be in line with the inflation target both one and two years ahead.

Lessons from the pandemic: Has the simpler post-2008 financial system held up? And where do we go from here? Speech given by Christina Segal-Knowles Executive Director Financial Market Infrastructure Directorate  Official Monetary and Financial Institutions Forum 29 January 2021  I am grateful to Stephanie Haffner, Paul Brione, Pavel Chichkanov, Sarah Crowley, Harpal Hungin, and Barry King for their help in preparing these remarks. I am also grateful to David Bailey, Paul Bedford, Lee Foulger, Andrew Hauser, Matt Roberts-Sklar, Nick Jackson and Gerardo Ferrara for their helpful comments 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  The topic of my talk today is lessons we can draw from the market turbulence we saw in March and April 2020. But before we get there I want to talk about an earlier crisis. Let’s rewind to 2008. On September 15th, Lehman brothers collapsed taking with it one side of $ trillion in derivatives contracts. Most of these derivatives were bilateral contracts – a spaghetti bowl of interconnectedness. As Lehman collapsed and others teetered near the edge, no one knew who was holding the bag. The result was panic, which, as explained by Ben Bernanke, may have been a key driver of the severity of the Great Recession. Its early stages would have been significantly less severe without the confidence collapse on Wall Street.1  1. Simpler Now let’s fast forward to 2020. Pandemic. Economic crisis. Market turbulence. But no panic in the banking system. There were a number of reasons.
The third type of criticism is that monetary policy has recently been unclear and difficult to understand. Inflation targeting’s most important contribution But before I move on to the different types of criticism, I would like to dwell a little longer on the situation twenty years ago. When analysing the inflation-targeting regime, I believe that it is important to remind oneself of the situation when it was introduced. Why was there such strong support for defending the krona, even though it meant high interest rates in the middle of a recession? What were the problems policymakers were so anxious to resolve? As I have already mentioned, the recession in the early 1990s can be regarded as a setback following an excessive credit expansion, similar to the situation in many European countries today. The regulation of the Swedish credit market was phased out in the mid-1980s. Combined with a tax system that encouraged borrowing and an overly expansionary stabilisation policy, this contributed to creating a property market bubble. When the bubble burst in the early 1990s, it led to a banking crisis. As this coincided with an international economic downswing, the recession in Sweden was particularly severe. But there was also a deeper and more fundamental problem in the Swedish economy at that time. Sweden had been caught up in what might be termed a devaluation cycle since the early 1970s. Fixing the exchange rate is equal, at least in theory, to setting a target for domestic inflation.

I have no doubt that such scepticism also exists in the monetary policy committees of other countries. As far as I know, there is no central bank that literally conducts and describes its monetary policy in accordance with the simple loss function that I showed earlier. The central bank that comes closest is probably Norges Bank, but it too has recently taken some steps away from a too theory-based interpretation of practical policy in terms of the simple loss function.21 An incorrect estimate of the equilibrium level leads to incorrect policies One of the risks of a policy that ambitiously tries to stabilise the real economy around a numerical, long-term target for, for instance, production or employment, is that the estimate may be incorrect. If so, this will lead to policy being conducted incorrectly. If the estimate of the long-term sustainable rate of production or employment is too high, monetary policy will be too expansionary, which can lead to problems with the nominal anchor. It has been claimed that this is an important explanation of the high rate of inflation in the United States during the 1970s, the period of the “Great inflation”. It is claimed that the Federal Reserve pursued a too activist stabilisation policy at that time, based on a too-high estimate of the long-term sustainable rate of production.22 Before I go on, I would like to emphasise that theoretical research has been valuable for the development of the monetary policy framework that we have today in Sweden and many other countries.
Economic theory can contribute insight into the factors that determine the equilibrium rate, but attempts to quantify the equilibrium interest rate based on theory yield a broad interval for a possible level. Quantification also presents problems, as estimates must be made for unobserved variables such as consumer impatience. An estimate of the equilibrium interest rate in industrialised countries presented in the publication Penger og Kreditt 2/003 indicate an interval of 3-9 per cent. The upper limit in particular seems unreasonable in relation to observed real interest rates, for example. An alternative is to use historical average interest rates on the basis of an assumption that actual real interest rates will vary around the equilibrium interest rate. This method also poses problems. Each historical era will, for example, be affected by the specific characteristics of that era. Credit rationing, for example, has influenced interest rate formation for long periods. In addition, both population and productivity growth have varied over time. Throughout the period 1870-2003, the average for long-term real interest rates in Norway has remained close to the average in the UK and the US: Norway 2.2 per cent, the UK 2.0 per cent and the US 2.8 per cent. The economy has changed substantially in this period. Thus, the average for this period probably provides little indication of what a long-term equilibrium interest rate is today.

This results in an output potential that over time satisfies demand without generating pressures in the economy. The equilibrium interest rate is determined by long-term phenomena associated with the structure of the economy, while the neutral rate is defined on the basis of its influence on pressures in the economy and thereby on inflation. In the long term, the neutral interest rate will correspond to the longterm equilibrium interest rate in the economy. The long-term equilibrium interest rate is determined by fundamental structural relationships in the economy, such as consumer impatience and the economic growth rate. Rising population growth means that a larger labour force must be equipped with real capital. Fixed investment and saving must increase. Higher population growth will therefore require a higher equilibrium interest rate. The higher productivity growth is, the higher future gains from today’s investments will be. This also provides the basis for a higher equilibrium interest rate. The long-term equilibrium interest rate cannot deviate too much between countries over time. With liberalised capital markets, capital will move towards those countries that can provide the highest return. Substantial interest rate differentials between countries cause fluctuations in the exchange rate and will not be compatible with a long-term equilibrium. Thus, we may refer to a global equilibrium interest rate for open economies, although perhaps with an added national risk premium. The interest rate has thus several roles to play in the economy and these roles should be fairly closely linked.
In the decade before the pandemic, this debate occurred in the context of inflation running persistently below the FOMC's long-run 2 percent target.4 On one side, there were those who argued that an extended period of accommodative policy aimed at boosting inflation would contribute to a buildup of asset prices, leverage, and risk-taking that would ultimately undermine financial stability. They concluded that policy should lean against the wind of financial stability risks, even at some cost to achieving the price stability goal. On the other side, I and others have argued that using monetary policy to address longer-term financial stability considerations could come at a high cost in terms of current economic activity and could also undermine credibility in the central bank's longrun inflation goal. For example, based on the estimated effects of monetary policy on GDP and house prices, using monetary policy alone to fully deflate the housing bubble that preceded the global financial crisis would have caused a decline in output much larger than the one that occurred during the recession of 2007-09.5 Today we are seeing this debate resurface, but in a very different economic reality. Some now argue that there is again a trade-off between price stability and financial stability goals, but this time it is because large and rapid shifts in monetary policy may contribute to stresses and expose vulnerabilities in global financial markets. Investors  2/4  BIS - Central bankers' speeches  and financial institutions need to adjust to a rapidly changing and highly uncertain environment.

An illustration of this can be found for instance in the Memorandum of Understanding on high-level principles of co-operation in crisis management situations that have been agreed on, in March 2003, between the EU banking supervisory authorities and central banks. Third, because banking supervision ultimately ends up into the surveillance of individual institutions, supervision at the national level and the role of domestic supervisors remain strategic. The specificity of this domain calls for the preservation of two major principles: the participation of supervisors and central banks to the drafting of regulation on the one hand, the permanent improvement of an efficient decentralised and highly co-operative supervisory approach on the other hand. Again, Memoranda of Understanding (MOU) currently organise the bilateral exchange of supervisory information, for instance covering the special information needs in case of financial troubles. 2.3 Second, I would like to focus on the necessary restoration of public confidence in financial markets. Over the past year, in both the United States and Europe, reforms have been undertaken in the area of corporate governance and financial disclosure with a view to restoring investor confidence in listed companies. These legal and regulatory reforms mainly concerns three areas: External and internal audit, financial transparency.
Eddie Yue: Opening keynote speech at HKIB Annual Banking Conference 2020 Keynote speech by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at HKIB Annual Banking Conference 2020, Hong Kong, 28 September 2020. * * * Mr Patrick Fung, distinguished guests, ladies and gentlemen, 1. I am delighted to be with you here this morning for the annual banking conference of the Hong Kong Institute of Bankers (HKIB). It is great to see everyone in person, and I am grateful to the organisers for the hard work they have put into making this possible. 2. The past year has been a testing time for Hong Kong as it faced challenges on three fronts. We experienced prolonged social unrest of a kind not seen for many decades. Geo-political tensions and trade wars have raised fundamental questions about globalisation. And, as in the rest of the world, the COVID-19 pandemic is causing severe disruptions to our economy and threatening people’s livelihoods. 3. All this turmoil has put our institutions, not least our banks, to the test; they have had to adapt rapidly to constantly changing conditions. Hong Kong’s banking sector has largely met these challenges and continues to be resilient. 4. This resilience stems from the fact that our banks entered the current crisis with some of the strongest fundamentals in the world. Through sheer hard work and by learning from past experience, banks have been able to respond to operational challenges posed by both the pandemic and the social unrest.

These taxonomies help mobilise capital by reducing the need for financial institutions to conduct their own assessments of environmental impact. At present the two leading taxonomies are those recently developed by the Mainland and by the European Union. The two taxonomies differ in some important aspects, including definitions of economic activities eligible for green investment. Such differences could present impediments in tackling what is a global challenge: this has particular relevance for Hong Kong, which is a regional hub for global institutions committed to responsible investment. 24. It is therefore gratifying to know that in May this year, the Mainland authorities have taken important steps to reconcile some of the critical differences between the two taxonomies. For example, clean coal is no longer considered green in the revised bond catalogue. We 3/5  BIS central bankers' speeches  expect more harmonisation work to be done by the two sides, though this may take a bit of time. 25. We are making progress on “harmonisation” within Hong Kong, too. This year, the HKMA, together with other financial regulators and relevant Government bureaux, formed the Green and Sustainable Finance Cross-Agency Steering Group. The Steering Group has two main aims: to co-ordinate management of climate and environmental risks to the financial sector; and to help accelerate the growth of green and sustainable finance in Hong Kong.
4 In simple terms, this measures how much the average person has available to spend on the good things in life. If asked, most people would say this is a decent, if partial, proxy for their overall economic health, even if they express bafflement at the concept of GDP. Aggregate GDP is far from being the only possible proxy for economic health. The lived experience of most people depends on more than their income. A rich strand of literature has developed alternative measures of people’s well-being. As well as economic and financial health, these measures include physical and mental health, their families, friends and communities.5 This work tells us that people’s sense of well-being, if not their GDP, is shaped by local factors, underpinned by the Third Pillar. Another reason why aggregate GDP may not chime with most people’s lived experience is because, by definition, most people are not “average”. Economists use the idea of the average or representative agent as a convenient shortcut. But that agent is a fiction. People’s lived experiences often differ very materially, even within a single country or region – spatially, socially and financially. For most people’s everyday lives and everyday decisions, all economics is local. These imperfections in GDP are well-understood. They certainly do not fatally undermine its usefulness as a means of keeping economic score. They do, however, suggest it can usefully be complemented by looking at the economy through different lenses.

Nevertheless, the Report notes that productivity growth slowed down; hence, the firm dynamics is identified as one of the main issues that should concern our region. The main reasons of these developments seem to derive from some factors: First, the low capacity of markets and firms to regenerate, decelerates the replacement of non-productive firms with new innovative ones, and hinders the efficient allocation of resources. Second, small firms do not succeed in increasing their output or the number of employees. Studies show that their productivity is rather lower compared with larger firms. Smaller firms make up the majority of producing entities – around 80% in EBRD region, and 95% in Albania. For this reason, more should be done for the integration of smaller firms into global production networks, finding human capital, access in the financial system or capital markets. The Bank of Albania deems that the development of the financial system is indispensable for the economic development of the country. In this regard, through our policies, we are trying to encourage a more efficient allocation of bank lending, in order for it to be less fragmented or concentrated in certain sectors of the economy. Also, we are closely monitoring the financial and borrowing situation of micro-economic firms, including those in the agricultural sector. These firms have a considerable share in the gross value added and in the number of employed persons in Albania.