samchain/econo-pairs-v1 huggingface dataset:
On the other hand, a central bank like the Riksbank has considerable responsibility with regard to managing the consequences of a financial crisis and can therefore also be assumed to have a strong interest in preventing such crises from arising. At the same time, a central bank does not have so many instruments to try to influence developments such as credit growth and asset prices. The policy rate is a fairly blunt instrument in this context. This does not mean that financial indicators are not taken into account in interest rate decisions, which has been the case in Sweden on a number of occasions. But there is also reason to consider the possibility of using other tools than the policy rate. In this speech I shall begin by describing the causes behind the crisis. In this context I will explicitly discuss the question of to what extent monetary policy in the early 2000s might have contributed to developments. I shall argue against the opinion that monetary policy was a crucial factor behind the financial crisis. This does not mean, however, that I do not consider there are arguments in favour of central banks being more active when there is a risk of bubbles building up. I shall attempt to develop these arguments here today. A financial crisis with substantial consequences for the real economy The financial crisis that escalated in autumn 2008 in connection with the Lehman Brothers bankruptcy is the largest since the Great Depression at the end of the 1920s and early 1930s.

There should thus be a better system with regard to the link between the analysis from a macroeconomic perspective and the measures taken for the individual banks. One can therefore wonder whether there might not be better organisational solutions for maintaining financial stability in Sweden. It is difficult to say exactly how this would look. There may be several possible solutions. Finansinspektionen could be given greater resources to monitor systemic risks in a macroeconomic perspective. Another solution might be to extend the Riksbank’s power of authority to be able to initiate cases at Finansinspektionen. A third solution could be to link the work of Finansinspektionen and the Riksbank more closely together and increase cooperation between the two authorities. Regardless of which solution is chosen, I believe that it will lead to positive effects for the Riksbank’s possibilities to take measures if one sees a risk that a bubble is developing on the financial markets. But there is also a tool that the Riksbank already has at its disposal, and which can be used to counteract excesses in the housing market, for instance, namely the repo rate path. The fact that the Riksbank publishes a forecast for the development of the policy rate makes it easier to clearly communicate the longer-term outlook for interest rates. This can reduce the risk of banks and households being led to believe that a low policy rate as a result of a downturn in the economy will continue to apply for several years to come. 12  Giavazzi and Mishkin (2006).
In the decade prior to the crisis, in both the euro area and the UK, inflation was low, stable and predictable. Inflation targets were achieved without causing undesirable volatility in output and employment, the so-called “divine coincidence”.1 Both regions experienced continuous expansions in activity. It is not entirely surprising that “end of history” declarations of the Great Moderation were increasingly commonplace. But such nominal stability masked growing financial imbalances and increasing strains in competitiveness. The financial crisis would expose how a healthy focus on price stability had become a dangerous distraction. Central banks had won the war against inflation only to lose the peace. When the music stopped, the consequences for the real economy were dire. In both the euro area and UK, output fell by around 6% and unemployment rates rose initially by 2½ percentage points. It took 7 years for GDP per capita to recover to pre-crisis levels. In response, the financial system and the institutional architecture have been fundamentally reformed. The capital requirements of large global banks are ten times higher than the pre-crisis standard. Liquid assets – 1  See Blanchard, O., and J. Galí (2007). "Real Wage Rigidities and the New Keynesian Model". Journal of Money, Credit, and Banking, 39(1), pp. 35-65. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  relative to liabilities that can readily run – are also tenfold higher now than before crisis. We are ending too big to fail and transforming the resilience of financial market infrastructure.

In exceptional circumstances, like Brexit, when the economy is facing profound structural change, the MPC can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity. After all, even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU, it can influence how this hit to incomes is distributed between job losses and price rises. This flexibility cannot be used without limit of course, and the MPC has set out its framework for managing the trade-off including guidance for its tolerance of the overshoot of inflation.3 Developments in monetary policy In response to the challenging post-crisis environment, the conduct of monetary policy has made important advances that have helped to shape the expectations of both market participants and the public we serve. 2  The ECB also has flexibility to pursue its inflation target, but given the absence of trade-off inducing shocks has not yet had cause to use it. The ECB General Council adopted a quantitative definition of price stability in 1998 as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%; and from 2003, they clarified that this objective was to maintain inflation rates below, but close to, 2% over the medium term. 3 See Carney M (2017), Lambda, speech given at the London School of Economics, 16 January 2017.
These near miss events are a window into vulnerabilities that could cause an adverse impact in the future. The risk and control self-assessment process establishes a methodology for business areas to periodically assess their operational risks and ensure that appropriate mitigation is in place for key business processes. Importantly, the Central Operational Risk area is responsible for synthesizing the outputs of these two processes, along with follow-up discussions with business areas, to identify significant Bank-wide residual operational risks. We have found it useful to view operational risk through the lens of processes, risks, and controls. We have defined a comprehensive set of processes to characterize the Bank’s primary services and transactions. Along with that, we have articulated a standardized set of risk drivers, risk events, risk event impacts, and, finally, controls that prevent, detect, or mitigate the consequences of a risk event. We are using this risk taxonomy on a forward-  3  https://www.newyorkfed.org/aboutthefed/audit.html. BIS central bankers’ speeches  3  looking basis to assess the risks of Bank processes and as an analysis tool to investigate risk events after the fact. Using standardized process, risk, and control types allows us to aggregate as well as slice and dice our risks around dimensions of interest. For example, we identify processes associated with the highest levels of residual risk and the largest number of risk events as areas for additional attention. It may be the case that additional mitigation is required or there are weaknesses in controls.

There is a risk the bank will fail and be unable to repay its debts to depositors. Similarly, when a bank lends money to buy a home or start a business, there is a risk that the borrower will default. 2/7  BIS central bankers' speeches  In the United States, these risks are mitigated through a combination of public laws and internal controls, including deposit insurance and lending guidelines that, since the financial crisis, have become more stringent. Those are simple examples of risks taken by banks, and there are relatively straightforward ways to mitigate those risks. But the more complex banking activity becomes, the more difficult it is to identify and manage risks. And the more connections exist in a global financial system, the more risk can be distributed or amplified, and the greater the opportunity for new systemic risks to emerge.2 Banks can face risks from employees, some of whom are located in offices in financial centers around the world. Some risks are, again, inherent. We are all human, which means we sometimes make honest mistakes. There is also a risk from intentional employee misconduct. For example, a trader may seek personal gain by taking undue risks in investing someone else’s money. An analyst may disclose confidential information without permission. Or, more simply, in an institution that deals with money, some people may decide to take some for themselves. In some of these cases, the bank may be the victim of the crime.
BIS Review 7/2007  1  Other strategies include the following: Improvements to public service •  addresses issues relating to public service and improve the delivery mechanism. About 15% of govt. revenue has been provided for administrative, regulatory and other services and improvements to the public service delivery programme to make it more responsive to public needs. In delivering public services the budget advocates to use e-governance structures which are speedier than the present rule based structures. •  promotes productivity and request public service to eliminate waste and duplication while encouraging to complete activities which have already begun by spending agencies before venturing into new areas. To further facilitate the completion of unfinished work, the budget enables the roll over of all unspent provisions of previous years to the ensuing year. •  addresses the welfare issues of selected community groups and measures to extend the safety nets. Reopening of closed factories and revival of failed businesses In the 2007 budget, the fiscal arm has been extended to promote the re-opening of closed factories, abandoned companies and business entrepreneurs which can be revived through provision of debt relief, 3 year tax holidays and an exemption from economic services tax for a period. The budget proposes to grant Rs. 2 bn. to Lankaputhra Development Bank which will provide equity or debt to such factories on the basis of solid restructuring plans. These efforts will also increase employment throughout the country.

This proposal will enhance worker remittances into the country and help to finance the widening trade deficit and maintain a positive balance of payment position. The budget reiterates the need for permitting professionals to earn in foreign currency and retain such funds in foreign currency accounts within the country. The budget also allows expenditure incurred on acquiring international accreditation as a deductible expenditure from taxation. These measures are expected to enhance foreign currency earnings and further facilitate the management of foreign reserves. The down-side risks Effective policy coordination is certainly the way forward as set out in the budget 2007 and it is interdependent on action by all policy-making authorities. If one or two policy areas lag behind, then the sustainability of achievements over the long term will become an issue. The monetary policy has to play its part to bring down inflationary expectations, while the investment policy has to attract FDIs and  BIS Review 7/2007  3  other investment flows. The reserve management policy should attempt to enhance foreign reserves through increased worker remittances and other flows. Pushing all these policy fronts to work within the open economic policy framework and keeping pace with each other is critical to the success of the medium term development plan. Very close coordination is essential for it and it is certainly a challenge. At the same time, the fiscal policy should make all attempts to stick to its revenue and expenditure targets.
Developments since May The MPC’s next Monetary Policy Report is not published for another three weeks, and we have not yet begun to discuss what our updated August forecast might look like. What I am going to discuss today will be the MPC’s initial assessment, as set out in the minutes of our June meeting, of what we had learned about the economic outlook since our May MPR, as well as my own interpretation of the very latest data which have come out over the last three weeks since the June MPC meeting. Global growth appears to have been somewhat stronger than we expected in May, largely due to upside news in the euro area. Activity in the US so far looks to have been broadly in line with expectations; but CPI inflation in the US has now reached 5.4% - its highest level since 2008, and 0.5pp above market expectations at the time of release. Despite that, global yield curves, led by US Treasuries, have first risen and then fallen back in recent weeks; the ten year gilt yield is now 10bps lower than at the time of our May forecast, while ten year US Treasury yields are 20bps lower. Bank staff models suggest US factors have been the dominant driver of the movements in UK yields since May.

The economy has proved remarkably resilient to the effects of Covid, and the impact on the supply side has so far been smaller than we might have feared at the aggregate level. That partly reflects, however, the fact that most of the government support schemes for businesses, in particular the furlough scheme, remain in place. As those schemes come to an end it is likely that at least some businesses turn out no longer to be viable, and there is a risk of more substantial impacts. If the effect is unbalanced across sectors then there may also be more substantial labour market hysteresis than assumed in our central May forecast. In addition to any Covid effect, the long run effects of Brexit on the supply side of the economy, in particular on productivity, are largely yet to come through;  One additional supply uncertainty that has emerged has been the question of whether temporarily inactive workers will resume their search for jobs – if inactivity remains at a persistently higher level that would reduce the supply of labour and could contribute to wage pressures. Again it is likely that we will not know the answer to this for some time. But it is the balance of demand and supply that will ultimately determine the medium term inflation impact – my third consideration. Inflation expectations  One final risk that I will be monitoring closely is the risk that the expected transitory increase in inflation and wages generates expectations of a more sustained rise in inflation.
The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25 million jobs disappeared worldwide. And unemployment in Britain rose by over a million. To many of you this will seem deeply unfair, and it is. I can understand why so many people are angry. It’s vital that we learn from the crisis. A good place to start is to ask, as the Queen famously did, “Why did no-one see this coming?” The answer is extremely simple: no-one believed it could happen. Recessions were supposed to follow booms and high inflation, not periods of steady and sustainable growth with low inflation. There seemed to be no reason to expect the worst recession since the 1930s. After the ravages of inflation in the 1970s – younger listeners might need to be reminded that inflation hit 27% in 1975 – it was I think understandable that we focussed on the need to bring inflation down. But conquering inflation was not enough to ensure stability. Although inflation was under control, fragilities were building in the banking system. On all sides there was a failure of imagination to appreciate the scale of the fragilities and their potential consequences. No-one could quite bring themselves to believe that in our modern financial system the biggest banks in the world could fall over. But they did. That isn’t to say we were blind to what was going on.

In the movie, several millions of refugees fled their villages and towns to go to Xi’an（西安）, where they hoped they could find food and help, but most of them did not make it and perished during the long journey. In desperation, many parents sold their children for a tiny sum of money or just a bowl of rice in order to survive a few more days. The movie presented graphically a shocking story, a tragedy of the very harsh reality and unspeakable human sufferings endured by our parents’ generation not that long ago. 3. Well, this very depressing and horrible scene was only a movie. We now live in a comfortable world in which food is abundant and there is no shortage of daily necessities. Most of us take good lives for granted. The ugly and unpleasant scenes of parents selling their children as depicted in the movie “1942” were something of the past and do not seem to have any relevance in modern times. Is it so? 4. For those of us who are parents, we are absolutely convinced and determined that we will do our utmost to protect our children. We will give them nothing but the best that we can afford so that they have a good life and a bright future. All of us here would find it unthinkable why any parents would want to give away or mortgage their children. So, why should I choose this subject for tonight’s theme?
I am not so pessimistic as to imagine that the best one can do, over the next twenty years, is the negative real return offered by indexed gilts. But one can’t make these predictions with any great confidence. And if that sounds rather non-committal, then it only underlines the point I’m trying to make. Whatever does cause a sustained rise in real interest rates – a lasting solution to the arrangements of the euro area, perhaps, or renewed optimism about global productivity growth – it is unlikely to be the arbitrary whim of central bankers. Those betting on long-term movements in interest rates will have to work a little harder than just listening to people like me. And that sounds like a good place to end. Chart 10 Despite low rates equities have performed poorly over the past 15 years  Source: Bank of England  References Baldwin, R., and Teulings, C., 2014, “Secular Stagnation: Facts, Causes and Cures”, VoxEU, http://www.voxeu.org/content/secular-stagnation-facts-causes-and-cures Bank of England, 2014, May 2014 Inflation Report, http://www.bankofengland.co.uk/ publications/Documents/inflationreport/2014/ir14feb.pdf Banks J., R. Crawford and G. Tetlow, 2010, “What does the distribution of wealth tell us about future retirement resources?”, A report of research carried out by the Institute for Fiscal Studies on behalf of the Department for Work and Pensions. Barro R., 2009, “Rare disasters, asset prices, and welfare costs”, American Economic Review 2009, 99:1, 243–264.

The economy remains tied to the extraordinary and unpredictable nature of the pandemic. But with continued progress on the economic recovery and a reversal of some of the pandemic’s unusual dynamics, I anticipate that we will soon reach a time when business will be more like usual. I look forward to the Q&A portion of today’s program, and very much look forward to seeing many 3/4  BIS central bankers' speeches  of you when we are able to be together again. 1 See Hobijn, Bart, and Ayşegül Şahin (2021), “Maximum Employment and the Participation Cycle,” paper  presented at the 2021 Jackson Hole Economic Policy Symposium, August 27. 2 Olivier Armantier, Fatima Boumahdi, Leo Goldman, Gizem Koşar, Jessica Lu, Giorgio Topa, and Wilbert van der  Klaauw, “Have Consumers’ Long-Run Inflation Expectations Become Un-Anchored?,” Federal Reserve Bank of New York Liberty Street Economics, September 24, 2021. 3  Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement, December 16, 2020. 4/4  BIS central bankers' speeches
These weeks have also seen declines in stock markets and reductions in the prices of some commodities (figure 9). The degree of uncertainty regarding the evolution of the global financial situation is significant. The authorities of the countries involved quickly adopted decisions to contain the impact of these episodes. Of particular note are the coordinated actions taken by central banks to safeguard the provision of liquidity in the markets. Private banks have also made efforts, 4  particularly in the United States. However, there is still anxiety among market agents and volatility remains high. The Chilean banking system is subject to robust regulation and supervision, which prevent situations such as those that triggered the current episode of uncertainty in international banks. The dominant banking business model in Chile is a traditional one. It is focused on granting credit on a more diversified basis of financing and adequate management of maturity mismatches. The regulatory framework has been updated and considers Basel III capital and liquidity standards for all banks. All of them are subject to continuous risk management, capital adequacy, liquidity and transparency supervision processes. In addition, both the Central Bank and the Commission for the Financial Market, CMF, permanently monitor the banks' capacity to withstand adverse events through stress tests. In any case, the shift in the external scenario will have an impact on the local economy.

It is worth noting that the annual variation core CPI has hovered around 11 percent for several months now, despite the fact that most inflation fundamentals have been easing. While the Chilean peso has appreciated around 11.5 percent with respect to the statistical close of the December Report, global cost pressures have decreased. The prices of commodities, including copper, have dropped, supply chains have normalized and transportation costs have fallen too. All in a context in which monetary policy has maintained a clearly contractionary stance (figure 2). In addition, compared to the projection of the last MP Report, the core part of the CPI accumulates an important upward surprise, around one percentage point. Most of the difference lies in the prices of non-volatile goods. In any case, services inflation also showed higher-than-expected increases. In annual terms, it has risen to maximum levels (figure 3). One important factor behind the persistence of high inflation has been the slow unwinding of the high levels of private consumption of previous years. The revised National Accounts that we published on March 20th showed that between 2020 and 2022 household consumption exceeded our forecasts by about 4.3 billion dollars. With this, national savings figures were revised downward and the current account deficit increased, indicating that macroeconomic imbalances were larger. Meanwhile, data for late 2022 and early 2023 show that the pace of reduction in private consumption has been slower than expected (figure 4).