samchain/econo-pairs-v1 huggingface dataset:
This differs from the natural rate when macroeconomic shocks affect the rate of inflation corresponding to any degree of excess demand in the labour market. Since the NAIRU represents the current reduced-form relationship between inflation and unemployment, it is possible to calculate the prospects for inflation without any need to refer to such a variable as the NAIRU. It is a convenient shorthand concept for purposes of exposition, but not a necessary tool for operational decisions on interest rates. Second, the contribution of monetary policy to employment objectives is to promote economic stability in its broadest sense. I referred at the outset to Keynes’ view that the “triple evils” of an unequal distribution of income, instability of expectations and unemployment were all related to an unstable and unpredictable monetary standard. The solution, Keynes suggested, was to set monetary policy to hit a target for prices, or a low and stable inflation rate. He argued 75 years ago that monetary policy should be devoted to regulating the supply of money so that “the index number of prices will never move far from a fixed point”. Keynes went on to say that: “The Bank of England since the war has always done exactly the opposite of what the latest science recommends. I conclude from this that their opposition comes, not from mere obstinacy BIS Review 103/1998  – 10 –  or conservatism, but from their not yet understanding the point.

Given this longer-term perspective, the Monetary Policy Committee concluded that capacity constraints in the labour market were threatening the attainment of the Government’s inflation target. Of course, since then, the earnings data have been successively revised, rebased and suspended – a piece of the jigsaw has temporarily gone missing. As you can see from chart 3, the profile of the old series showed a steady rise in earnings growth from around 33% in mid-1995 to nearly 52% or so by the spring of this year. In sharp contrast, the revised and rebased data (before they were suspended) followed roughly the shape of a slightly squashed capital N. From a trough of 3% at the end of 1995, earnings growth was estimated to have risen to a peak of over 53% in February and March 1997 before falling back below 4% in early 1998 and then bouncing back above 5% again by May. How would the MPC’s analysis of the labour market have changed if the revised (but now suspended) data had been available six months earlier? That question is not easy to answer. The quantity data would still have suggested that the labour market was both tightening and, by historical standards, tight. The MPC would therefore have had the unenviable task of trying to understand why the steady tightening in the quantity measures had produced a zigzag path for measured earnings growth.
But, borrowing from the central bank is just a single transaction and the Treasury could use it immediately for making payments. Second, because of the limitations of the tax bases in developing countries, there is resource paucity for governments to undertake much needed infrastructure projects. Hence, it has been argued that the governments in developing countries could initiate the development efforts by mobilizing resources through inflation. The initial inflation so created would get reversed once the new economic development increases the production of goods and services and raises the market supply. So, inflation would become a self-destroying process and, therefore, it is argued that there is no danger of using inflation for economic development. Third, taxes are mandatory payments and therefore, there is resistance on the part of tax payers to pay the taxes. Because of the pressure coming from the lobbying groups, political authorities too sometimes are unwilling to raise the tax rates to generate higher tax revenue. However, the resistance of the citizens to inflation tax is virtually nonexistent. This is because no one realizes that they are paying a tax to the government, when the prices move up. Any resistance by them is not against the  2  BIS Review 64/2007  inflation tax per se, but against the inflation. That again takes place after sometime when they have been very badly hit by inflation. Fourth, inflation is said to be bringing about some salutary effects to an economy from the point of view of its long term growth.

Considering the size of government debt in a number of EU countries, continued adherence to a tight budget policy is to be desired. Such a policy can make further interest rate cuts possible if economic activity slackens and inflation prospects improve. There is a consensus on this today in the European Union but reaching an agreement on how the countries should share the burden of adjustment can be difficult. It will no doubt require many lengthy discussions, which have already begun, between the finance ministers of the euro countries. Consequences for Sweden The Riksdag (Sweden’s parliament) has decided to stay outside the monetary union at present. We are accordingly continuing to conduct our own monetary policy with a flexible exchange rate and an inflation target. The political consequences of being outside the euro area were considered by the Riksbank in its submission on the report from the EMU Enquiry. The conclusion that the consequences would be considerable has been reinforced now that the monetary union has started with eleven countries. This would be even clearer if Denmark and the United Kingdom were to decide to join. It is also clear, from discussions in which I have taken part, that the advent of the euro has been accompanied by closer collaboration on the construction of economic policies in Europe, as well as on Europe’s actions on the global stage. In these respects Sweden now carries less weight.
On the other hand, a flexible exchange rate regime can also work, provided that the policy package is correct and there is a well functioning foreign exchange and financial market. But it would be a mistake to think devaluation can substitute for fundamental policy adjustments to correct a structural external imbalance. Competitive devaluations are “beggar-thy-neighbour” policies that are self defeating. 31. Indeed, the adoption of more flexible exchange rate systems by some Asian economies has not meant they can avoid the adjustments that are currently being undertaken. With a fixed exchange rate under a very strong and disciplined regime in the form of a currency board system, Hong Kong focused precisely on our underlying productivity, maintaining strict financial and fiscal discipline, and also prudent banking supervision, in order to enhance the resilience of the linked exchange rate system, and minimize and manage the downside risks of overheating in the economy. 32. Let me also put the currency adjustments in their proper perspective. In the last few years, the currencies with the greatest adjustments and volatility have been the G-3 currencies, rather than the Asian currencies. The yen has depreciated by 50% against the US dollar from its peak in 1995. The deutschemark has likewise fallen by over 30%. In comparison, the Asian currencies have until recently remained relatively stable. The Hong Kong dollar has been the most stable of BIS Review 91/1997  -7-  Asian currencies, moving less than 1% against the US dollar.

Asian monetary co-operation took quite a significant step forward when the financial package for Thailand organized by the IMF was met with ready willingness by a number of Asian economies, including ourselves. This I believe is the first significant arrangement involving Asian monetary co-operation through the provision of credit. As an international financial centre and an economy with significant interest in the Asian region, Hong Kong is willing to play its part in helping to maintain international and regional financial stability. This is ultimately in our own interest. This accounts for our willingness to join the New Arrangements to Borrow (NAB) to provide additional funding for the IMF. But the credit risks must be acceptable and manageable, and the case justifiable to the public in the overall public interest. Asian monetary co-operation through the provision of credit should therefore be on a multilateral basis and conditional upon the implementation of credible structural adjustment programmes. BIS Review 91/1997  - 11 -  52. At this point, we may well ask whether the present multilateral arrangements to handle international financial crises are totally satisfactory. It has been argued that economies in need should go earlier to the IMF for assistance. However, given the tough medicine that the Fund is well known to prescribe, there may have been a reluctance to approach the Fund, given also the limited resources available for a cure, thus delaying the whole process of crisis prevention and damage control.
Once the testing system is fully operational and we are convinced of its efficiency, these restrictions will be gradually lifted. We believe that at this juncture it is our responsibility to protect our investors. We might as well move forward some of the law regulations — those making customers’ qualification tests mandatory — from April 2022 to at least 1 October 2021. At the time, we went along with market players and provided for a fairly comfortable and soft transition period in the law. We had an extensive discussion with Federation Council members. It stands to reason however that the major shift in the situation calls on us to take meaningful action to protect consumer rights. I admit that financial institutions themselves are unlikely to welcome this proposal, and their feedback will be negative. This is where we count on you to help, just as we have always counted on your support of our initiatives related to efficient consumer right protection in the financial market. The key reason for this is the nature of financial institutions: they are financial intermediaries which should operate in the interest of businesses and consumers, just like the Speaker said. We therefore believe that now is the time for prompt and serious discussion of this matter to make a decision. I am now handing over the floor to Sergey Shvetsov, who will enlarge on these and other initiatives I have presented.

The currently low interest rates still have the potential to encourage growth in lending — as a business growth strategy. Advancements in the stock market enable corporate customers to attract resources on more favourable terms, which is key to long-term projects. We look to low inflation to carry positive implications for such long-term investment strategies. The financial market should meet the needs of any companies, large and small. We are championing both crowdfunding and factoring for small-sized companies, as well as the Growth Sector of the Moscow Exchange. A lot of our efforts are now focused on so-called green finance — a business strategy of environmental responsibility and human capital development aiming to deliver on objectives far beyond profits. Companies embracing this strategy should enjoy financing on more favourable terms. We all understand that advancing financial innovations are encouraging competition, in this way giving impetus to a reduction in consumer and business costs. You are well aware of our recently launched and operating Faster Payments System and the marketplace. We are also exploring the potential launch of a digital ruble — we are indeed prepared for an open discussion on the issue and all its nuances. Hopefully, we will hold a dedicated digital ruble meeting with the senators before the end of this year so that we make the right assessment of prospects and risks a national digital currency would involve.
Any signs of expectations becoming dislodged would be a signal that policy might need to be tighter than otherwise, in order to provide insurance that expectations remain on track. I will revert to this theme later. Over recent years long term inflation expectations have remained anchored close to the target level. This is important in delivering price stability: the fact that people think the MPC will be successful in sticking to the target conditions their behaviour in a number of ways. Higher prices for oil products, and indirectly other goods and services, leaves less disposable income for other things. Whilst the MPC takes comfort from the observation that so far inflation expectations and earnings growth have not risen, it is nonetheless possible that this could lead to demands for higher wages. Such demand, if granted, could be inflationary and even result ultimately in increased unemployment. The likelihood of this happening may be slight and there is no real sign of expectations presently becoming dislodged in the UK. And it is striking that although the effects of oil may have some impact  in today’s modest slowdown of consumption, that we have nonetheless managed to weather a significant price increase with so little disruption to the economy. Quite different from the late 1970s. But I think it is still too early to relax in relation to inflation expectations, and I think that the subject of oil will feature as a significant issue for some time to come in the monetary policy arena.

This could at one level be influenced by the fact that significant increases in housing wealth in recent years may have postponed people’s consideration of these issues, though they may now feel more pressing looking ahead. It is pretty clear that the changes are likely to be spread over a period of years, and from that perspective policy implications are likely to be gradual and manageable. Over time though the degree of change in savings habits – and therefore the impact on consumption and demand – may be quite significant. And the question is whether these changes will be smooth trends, or whether there will be more sudden, and perhaps unpredictable shifts or discontinuities in behaviour. And if the latter, will they be of sufficient magnitude to be relevant to shorter-term monetary policy? The challenges here are considerable, both of measurement, timing, and of our ability to anticipate any relevant changes. But to my mind we certainly need to remain alert. Policy makers in Germany have for some time now wondered if the sluggish performance of domestic demand in recent years is in part the result of such precautionary saving, and here in the UK we have wondered if this could have been one factor in the recent consumption slowdown. While the data will not confirm this for a while at least, the greater public awareness of the issues, brought about by initiatives such as Lord Turner’s report, suggests it is plausible that this has been a contributory factor.
The challenges I have mentioned include shortfalls in capacity on the telecommunications network, accessibility and user problems for some vulnerable groups and possible fragmentation of some segments of the market. But there are other challenges, too. Common to these is that the Riksbank does not have any formal tools to manage the problems. Often the primary responsibility for these areas lies with another authority and often there are many different parties involved who need to cooperate to resolve the problems. For instance, the county administrative boards and the Swedish Post and Telecom Authority have the task of ensuring  BIS central bankers’ speeches  5  that everyone has access to basic payment services. Finansinspektionen (the Swedish financial supervisory authority) has responsibility for financial supervision. The Swedish Competition Authority is responsible for ensuring there is suitable competition on the payments market, and so on. The banks, other providers of payment services and the retail trade are on different sides of the market, but their participation is often a decisive factor for bringing about a change. The Riksbank is inviting to a new retail payments council I believe that the Riksbank is well-positioned to take part in managing the challenges arising from a changing payments market. But as I mentioned earlier, successful management depends on the various market participants talking to one another and working together. At present, there is no suitable forum for these discussions.

This deprived the inexperienced investors of the necessary help and support. A look at, for example, the advice that was provided before stock markets began to fall tells the same tale: recommendations to sell made up less than one per cent of all advice. The media latched onto the stock market boom with reports of rapidly rising share prices. Instead of taking a critical look at what was happening, the notion that the new economy offered chances of earning a quick profit became the conventional wisdom. The part played by human psychology for herd behaviour in financial markets has in fact given rise to a new school of financial knowledge, known as Behavioural Finance. Two key concepts in this analysis are just conventional wisdom and wishful thinking. There’s nothing odd about that. When people make investment decisions they function in much as the way as in other contexts. A familiar example is our reluctance to enter a restaurant that is empty - we generally prefer one that already has many guests, particularly if there is a long queue outside. We simply rely on the good judgement of others and assume that all those inside have made the right choice. By arriving at a better understanding of how people behave, we can certainly do a good deal to prevent unduly large mistakes in market pricing and perhaps ultimately reduce the occurrence of financial bubbles.
The Federal Reserve purchased mortgage-backed securities owned by banks, for example, which improved banks’ funding conditions and facilitated their credit provision to the broad economy. In Norway, the swap arrangement had a similar effect. In the years following the financial crisis, a number of central banks have adopted new measures. The margin for further reductions in the key policy rate has gradually diminished. Any further attempts to stimulate the economy have had to involve lower long-term interest rates. Central banks have sought to achieve this in two ways: first via communication. Central banks have clearly stated that policy rates will be kept low for a long time. In some cases, signals have been linked to specific targets that must be reached before a rise in the policy rate will be considered. The purpose is to provide forward guidance to the market concerning future interest rate developments. For Norges Bank, publishing an interest rate path is a form of forward guidance. Second, central banks have implemented purchases of government bonds and other securities on a massive scale. This has further driven down long-term interest rates. This measure is known as quantitative easing, or balance sheet policy, which the Bank of Japan attempted to use as long as 15 years ago. Following the financial crisis, it was quickly adopted by the central banks in the UK and the US. The ECB and Sveriges Riksbank have subsequently followed suit. Chart: Central bank reserves The use of unconventional instruments has vastly inflated central bank balance sheets.

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A good way to start making sense of Web 3.0 is through refreshing our understanding of Web 1.0 and 2.0. • Web 1.0 is the “readable” Internet, centred on access to information and where most users were consumers of content. It is about web pages, emails, and chatrooms. • Web 2.0 is the “interactive” Internet, with rich exchanges of information and usergenerated content and collaboration. Key features are blogging, tagging, and social media. • Web 3.0 is the “personal” Internet, empowering end-users through applications that allow the decentralised sharing of information. The key enablers of this new paradigm are smart contracts and tokenised assets. Smart Contracts and Tokenisation Smart contracts are computer programmes that automatically execute actions according to the terms of the contract. Tokenised assets, implemented as smart contracts, are digital representations of real-world assets. They could be physical assets such as commodities and real estate; or intangible property such as financial assets, patents, or digital music and art. Once tokenised, rights and ownership of these assets could be transferred seamlessly, improving liquidity and efficiency. This has the potential to substantially enhance economic opportunity and inclusion. Smart contracts and tokenisation are already being used to enhance the market infrastructure for financial assets in Singapore. • Olam International issued last year a digital bond on SGX’s digital issuance, depository and servicing platform. • SembCorp through UOB Bank issued a digital bond this year on the ADDX digital securities platform, eliminating manual processes in custody and post-trade administration through smart contracts on a blockchain.

But we can likely manage these risks by designing the retail CBDC with sensible safeguards, such as stock and flow caps on the amount of digital Singapore dollars that anyone is allowed to place with MAS. On balance, the case for a retail CBDC in Singapore is not urgent. • For a subject that has attracted much attention, there are neither strong reasons for or against a retail CBDC in Singapore. Why do I say that? • Physical cash is likely to be with us for quite some time more and so the need for a digital version of cash is moot at this point. • The financial inclusion benefits of a digital Singapore dollar are not compelling. A high proportion of Singaporeans have bank accounts and electronic payments in Singapore are pervasive, highly efficient, and competitive. • Possible currency substitution by foreign digital currencies is a remote tail risk at this point. The issuance of a retail CBDC is ultimately a socio-economic rather than a monetary consideration. Moving to a fully cashless society with all money in the form of bank deposits will not make a significant difference to the conduct of monetary policy. The question is whether the public is comfortable with holding only bank deposits and whether there is public demand for a state-issued currency that is as safe as cash but in digital form. So for now, there is no strong case for a retail CBDC.