samchain/econo-pairs-v1 huggingface dataset:
In particular, we did not want our monetary policy to be driven predominantly by movements in one single price indicator, to an extent that we ignore other important risks such as asset price bubbles and the destabilising unwinding of these assets. Second, our experience showed that Malaysia’s episodes of high inflation are typically externally driven, such as through global oil prices. In fact, inflationary episodes in Malaysia have rarely been a monetary phenomenon. That being said, external shocks that drive inflation do not require a monetary policy response if it does not affect domestic demand or cause undue wage pressures. I recall in 2008, that when global oil prices surged to a height of around USD140 per barrel and Malaysia faced strong inflationary pressures that breached 7%, we were perceived as being ‘behind the curve’ for not raising interest rates. Under the inflation targeting framework, on the other hand, logic dictates that in response to this period of supply-driven inflation, raising policy rates by as much as 100 to 175 basis points in some countries were merited. The monetary policy response is premised on the argument that anchoring inflation expectation supplanted every other consideration including the source of inflationary pressures. Allow me to illustrate how inflation expectations work. If you do not believe that the central bank’s monetary policy can bring inflation back down in say, two to three years’ time, then inflation expectations are considered unanchored.

We recognised much earlier on that the inflation targeting framework is not well-suited to our domestic conditions as it can compound the risks of unfettered capital flows. Instead, we believed that destabilising capital flows need to be effectively managed to ensure orderly domestic conditions. It did not help that some economies even hosted illegal NDF activities that had grave spillover implications on neighbouring economies. The fact that multilateral institutions are oblivious to these damaging consequences to some of their member countries is very disquieting. A further point is the dangers that can arise when inflation targeting inappropriately shifts the burden onto monetary policy to solve problems that in reality, require much broader policy responses on the fiscal side. When much needed actions are postponed, it has important consequences for our long term growth potential. Inflation targeting framework falling under heavy scrutiny As it turns out, our choice of not conforming to the norm was not in vain. Inflation targeting is now under scrutiny as its merits are debated widely. Many of these discussions centered on the waning effectiveness of the framework and the need for additional policy instruments to make the framework effective. The sequence of events leading up to the Great Financial Crisis raised the argument that an exclusive focus on achieving the inflation target could cause policymakers to overlook other vulnerabilities, such as credit and asset price bubbles. Delivering on inflation targets itself has also presented new challenges.
Now the public administration has become a client of the system and I think that there are real opportunities to resolve the utility services payments through the banking system. Also, I hope that the system will be aggressive and will keep promises to the public to put its windows at the service of selling Treasury bills directly to the interested public. We, as Bank of Albania, have kept our promises and very soon we will introduce as a first step a commission that is presumed to cover the transaction cost while we will accompany this move by the ban of cash flows receipt at the windows of Bank of Albania. We shall request the individuals that their participation in the auctions, through windows of Bank of Albania, will become possible only upon presentation of a banking document, which certifies that the client has deposited a certain amount as a guarantee in one of the banks pertaining to the system. Another direction on which banks must further focus relates to an aggressivity of broader propaganda and clarification. I think that still the majority of common people show a certain hesitation to refer to banks. I believe that they have a feeling of non-confidence that the bank shall not resolve their problems. Many individuals, though in an absurd way, are still in search of a “friend” to negotiate with the bank.

Meanwhile, we are in the process of negotiating with National Bank of Bosnia and Herzegovina, National Bank of Serbia, etc. I estimate that regional co-operation is an important forerunner of the integration process of the region with the rest of Europe; therefore I will not stop working to encourage a regional co-operation of high standards among the financial systems of Balkan countries. I hope that you share the same opinion with me, because only in this way, our region will be more credible and efficient to have its European dream. On the other hand, a developed and financially integrated region will be more attractive for foreign strategic investors, opening up the path toward regional development projects, particularly infrastructure ones where region’s banks might be the financing and co-financing ones. Further on I would like to give you an overview on some different issues of importance for the future of the Albanian banking system. In diverse meetings organised by the Bank of Albania with the banking community and other actors on relevant opportunities, a range of problems were highlighted and evidenced of which I think there is still room for a joint commitment, of both the Bank of Albania and, of course, the banking system. In my capacity of Governor of the Bank of Albania I would like to ensure the banking community that the institution I govern is open for an institutionalised co-operation with the banking system by channeling it through the Albanian Association of Banks.
With the scorecard, remuneration of intermediaries will be more closely aligned to the suitability of products for prospective customers and the overall quality of service. I believe that such a shift in incentive structures will encourage advisers to build more enduring relationships with customers. More can be done beyond the realm of regulation. In other countries – such as Australia, United Kingdom and India – financial advisers are voluntarily adopting a fee-based model. The combined effect of increased customer awareness and bargaining power are also pushing financial advisers to reduce their commission-based income. In India for example, several firms have successfully shifted to largely fee-based models. This is, however, not a painless transition. In doing so, some have parted ways with customers who were unwilling to pay these fees. I believe that the move towards a fee-based model is an important signal that the advisers’ incentives are aligned with those of their customers. To ensure a successful transition to a feebased model, financial advisers will need to enhance their value proposition to ensure that customers receive the standard and breadth of advisory services that would be worth paying for. 3/5  BIS central bankers' speeches  This is no easy undertaking, but I am confident that it is one that our financial advisory firms will be able to achieve. Adaptability to change At the beginning of my remarks, I had highlighted three key trends affecting the industry. How well financial advisers respond to these developments will determine the industry’s relevance in the years to come.

It is not possible to see the road ahead clearly and nor is it possible to know exactly what will happen if one puts one’s foot down on the accelerator pedal – only that the effect will come after a fairly long period of time. Why haven’t we cut the interest rate? Let me now return to the present situation and the question of whether it is reasonable to lower the interest rate in order to rapidly bring the present low inflation rate back in line with the target. The Executive Board’s reasoning at its most recent monetary policy meetings has been roughly as follows. Firstly, as I mentioned at the beginning, the Swedish economy has developed at an increasingly strong rate in recent years, and our analyses during the winter and spring have come to an assessment that this will continue. We have thus seen a rise in inflationary pressure at the end of the forecast horizon. If our assessment during this period had been that demand was declining, I believe the situation would have been different. Secondly, the present low inflation rate can be largely explained by what is known as positive supply shocks, such as increased competition, lower import prices and surprisingly rapid productivity growth. These factors benefit economic developments. To attempt to push up prices for domestic goods and services to counteract a decline in prices for imported goods is not necessarily a wise choice. Thirdly, monetary policy’s impact comes through influencing demand, primarily corporate investment and household consumption.
I have just explained how we are currently addressing this issue ;    In the longer run, ageing and slower innovation may push up saving rates and bring down the return on capital. Therefore, the ultimate response to the risk of secular stagnation is to improve the return on investment, thus pushing the natural interest rate back into positive territory. Again, this is not only a European problem. But we do have difficulties in this regard. Structural reforms are not easy. Many, however, are currently being implemented. France, although at too slow a pace, is reducing taxes on labour and has somewhat improved labour market flexibility. Adjustments efforts conducted by several countries, especially in Southern Europe, are starting to pay off. Competitiveness gaps between Northern and Southern Member States have been reduced, notably through real wages decreases in countries like Spain or Portugal, which are exporting more and more. This builds the way for a healthy growth in peripheral countries, which are experiencing a trade surplus of 2% of their GDP on average, and a moderate public deficit, taken down to 3%. III. Short-term policy challenges and responses  The main challenge, of course, is low and declining inflation, with inflation expectations in the euro area drifting downward at short to medium-term horizons. This prevents adjustments in relative prices, – an important mechanism to eliminate gaps in competitiveness – and increases the risk of outright deflation, should a negative shock occur in the future.

Christian Noyer: Challenging times for finance and banking in Europe Keynote address by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Paris Europlace International Financial Forum, Paris, 8 July 2014. *  *  *  Ladies and gentlemen, dear Arnaud, I am pleased to be able to give this keynote address today for our Paris Europlace International Financial Forum, before the round tables begin. These are challenging times for economic policy-makers, central bankers and professionals working in the field of finance and banking in Europe I will address three questions: is the euro crisis over? Does Europe face the prospect of a lost decade? What short-term policy challenges are we facing today? And I will finally say a few words about recent changes in our communication strategy. I. Is the euro crisis over? Less than two years ago, the euro area was fighting for its existence. Euro pessimists were questioning its ability to survive. Not anymore. Analysts may be questioning Europe’s ability to grow. But the challenges that we are facing are different. They are macroeconomic, not existential or systemic. Thanks, mainly, to the Eurosystem’s actions, financial conditions are normalising. Spreads in peripheral countries have been dramatically reduced. Soon, budgets will be reasonably balanced and there will be no more fiscal drag on the economy. Households and corporates have strong balance sheets.
We have seen that the long-term real interest rate in Sweden largely follows international levels, but that there can be some deviations. This could be a sign that domestic factors also play some role for the long-term level. One such factor could be indebtedness in relation to other countries. If the indebtedness is very high in relation to income (production), it is likely that investors will demand compensation for the extra risk that high levels of indebtedness imply. The long-term real interest rate in a small open economy like Sweden’s is therefore the sum of the global real interest rate plus a risk premium 𝜌𝜌, that is to say, 𝑟𝑟 ∗ = 𝑟𝑟 ∗𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 + 𝜌𝜌  A complete adjustment of the long-term real interest rate to international levels thus only occurs when the risk premium is zero. In principle, the risk premium could be both positive and negative. Small open economies with a very high level of saving abroad could have a negative risk premium, which could be expressed as a lower long-term real interest rate than the global one. In Sweden we have had large surpluses in the current account. This means that we have built up large net foreign assets. Given this, our risk premium should not be very high, but one cannot rule out the possibility that other factors may also affect the risk premium.

This was in connection with a discussion on the general increase in prices that was expected to happen in the United States: Even those who tend to agree with the concept of a rough balance between supply and demand (i.e. no inflationary or deflationary gap), point out that there is still a huge money supply— and that is the hard core of inflation…. In time, this concept began to be used increasingly often, especially when inflation began to rise at a rapid pace in the beginning of the 1970s (see Figure 1). 4 According to Gordon (1975a), the higher rate of inflation was due to a number of factors: That food prices had begun to increase faster as a result of supply factors in the United States and abroad, that the oil price had risen as a result of production restrictions introduced by the OPEC oil cartel, that the Nixon administration had introduced price and wage freezes and the devaluation of the dollar in 1971 and 1973. Now a need arose to distinguish temporary price increases from more lasting ones. 3 See, for instance, Rogers (1998) for a discussion of how central banks use the concept. The next reference in the same text search of Wynne is Sprinkler (1975). He writes: “Recent price increases of 10-12 percent annually were about double the hard-core inflation”. 4  3 [19]  Figure 1. CPI inflation in the USA Annual percentage change.
For the first 60 of those years, real pay growth grew steadily at over 2 ¼% on average each year. Over the past 10 years, real pay growth has averaged minus 0.4% – a “lost decade” for the average worker. Despite some recovery recently, that leaves the inflation-adjusted pay of the average UK worker still over 5% lower today than it was just prior to the crisis. You have to go back to the 19th century to find a similar period of stasis in UK living standards. The UK’s jobs bonanza has been accompanied by a pay disaster. Chart 7: Real pay Index, 2007 = 100 120 100 80 60 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Sources: ONS, Bank of England Millennium of Data and Bank of England calculations. Notes: Data at annual frequency using AWE deflated by CPI. Prior to AWE and CPI we use AEI and RPI, respectively, to extend the series backwards. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  These falls in real pay have been widely spread geographically. Chart 8 compares average real wage rises across UK regions in the ten years either side of the global financial crisis. In the ten years prior to the crisis, all regions experienced annual rises in real pay, averaging between 1.3% (Wales) and 2.2% (London). These pay rises were roughly in line with pre-crisis economic growth rates.

Notes: Line thickness is proportional to total goods trade between regions. Circle size is proportional to regions’ total goods trade with the other regions shown in the chart. Data based on nominal US dollars. These concerns about global trade, output and asset prices have had significant knock-on effects to global financial conditions. Expectations of short-term interest rates in the major advanced economies have fallen by around 60 basis points, and global bond yields by around 70 basis points, since the start of the year.27 This leaves global financial conditions 0.9 standard deviations looser than at the end of last year (Chart 29). 27  Global taken as simple average of UK, US and euro-area 3-year and 10-year forward rates, respectively. 26  All speeches are available online at www.bankofengland.co.uk/speeches  26  Chart 29: Global financial conditions index  Standard deviations from average 2.5 2 1.5 1 0.5 0 -0.5 -1 -1.5 2011  2013  2015  2017  2019  Sources: Bloomberg Finance L.P., Eikon by Refinitiv and Bank calculations. Notes: Financial conditions indices (FCIs) estimated for 43 economies using principal component analysis. The FCIs summarise information from the following financial series: term spreads, interbank spreads, corporate spreads, sovereign spreads, long-term interest rates, equity price returns, equity return volatility and relative financial market capitalisation. An increase in the index indicates a tightening in conditions. Series shows the average of all country FCIs, weighted according to their shares in world GDP using the IMF’s purchasing power parity (PPP) weights.
Signs of a turnaround Purchasing managers’ index, index above 50 indicates growth 70  70  65  65  60  60  55  55  50  50  45  45  40  40  35  35  30  30  Sweden Euro area USA  25  25 20  20 00  01  02  03  04  05  06  07  08  09  10  Sources: Institute for Supply Management, NTC Research Ltd and the NIER  14  BIS Review 98/2009  15. Employment Thousands, EU definition, 15-74 years of age, seasonally-adjusted data 4800  4800  4600  4600  4400  4400  4200  4200  4000  4000  3800  3800 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12  Note: The dotted line indicates the Riksbank’s forecast. Data prior to 2001 has been chained by the Riksbank  Sources: Statistics Sweden and the Riksbank  16.

The Bank of Albania will support this process by cooperating with the banking industry and improving the regulatory and supervisory framework. For the supervisory authorities of the financial system, the recommendations relate to strengthening the preventive and management framework of risks and, in this regard, improvement of the legal, operational and inter-institutional cooperation infrastructure is recommended. Concluding, I would like to reiterate our message: the prospects for Albania’s development remain positive. The economic and financial stability, geographical position and natural resources, and integration with the European Union make us optimistic about Albania’s future development. I invite you all to share in this vision and work together to make it a reality. I assure you that the Bank of Albania, as the supervisory authority, will undertake all the necessary actions, under its scope of activity, to support the industry to successfully overcome these challenges and ensure that the sector remains well capitalised and liquid. Thank you! BIS central bankers’ speeches  3
The second half of my contribution will address in particular why an appropriately defined range for price stability and a narrow mandate are key factors in being able to conduct effective monetary policy over the longer term in an ever-changing environment. Here I will draw especially on the SNB’s experience, taking the Swiss perspective of a small open economy with an important currency. I. Aftershocks of the global financial crisis In the two decades prior to the global financial crisis, the nominal interest rate level had declined worldwide. On the one hand, central banks’ success in combatting inflation, coupled with cheap production opportunities resulting from an increasingly integrated global economy, had led to falling inflation rates. On the other hand, the real rate of interest had declined in many countries due to structural factors such as decreasing productivity growth and the ageing of the population. When the global financial crisis and the associated economic slump required a decisive easing in monetary policy, many central banks quickly reached the zero lower bound on interest rates. To continue to ensure an appropriately expansionary monetary policy in this situation, ‘unconventional’ measures then had to be introduced. Switzerland, too, was unable to escape these international developments. As a small open economy, in the wake of the financial crisis it was hit hard by the slump in global demand and the turbulence on the international financial markets. Our country’s situation was exacerbated by strong upward pressure on the Swiss franc.

Furthermore, the SNB is obliged to give full account of its actions. This serves to make its decisions readily understandable for the general public, and to show whether and to what extent the targets have been met. The phrase ‘the overall interests of the country’ means that monetary policy is to be focused on the economy as a whole, rather than individual interests. It does not provide a basis for pursuing other objectives with monetary policy, even if the desired goals – as in the case of climate protection – are right and important for society. The SNB will remain committed to maintaining the current institutional framework in the future. Price stability is the most important contribution monetary policy can make with regard to growth and prosperity. This can also be seen in the current situation. High inflation has quickly pushed other important problems down the list of societal and political priorities. Ensuring price stability is thus also a prerequisite for successfully tackling other challenges facing society. Page 11/16  V. Concluding remarks The environment in which we conduct our monetary policy has changed. In recent years we have been concerned about inflation being too low; now we are concerned about it being too high. In this difficult and changing environment, a narrow mandate and a definition of price stability that anchors inflation expectations at a low level while at the same time allowing a certain amount of leeway with regard to the accepted level of inflation are important factors for a successful monetary policy.