samchain/econo-pairs-v1 huggingface dataset:
The inflation surge could nevertheless be transient, and then hopefully stabilise in a new regime of “controlled reflation”. The jump in euro area headline inflation in early 2021 did come as a surprise (it rose from -0.3% to +1.3%); Nonetheless, the causes of this increase are temporary in nature, like the recent rebound in oil prices, the reversal of the VAT rate cut in Germany and from modified weights in the HICP basket. Over the medium term, the persistence of substantial economic slack over the projection horizon, despite a significant  Page 5 sur 9 recovery from the second half of this year, will weigh on inflation. All in all, the March 2021 ECB projections show that headline inflation would remain weak, at 1.4% in 2023. Inflation is therefore not yet where we would like it to be, back towards 2% over the medium term. Our inflation objective must be understood as simple, symmetric and medium-term oriented. iii “Simple” means that we could reexamine oversophisticated qualifiers still associated with the 2 % figure. “Symmetric” refers to the fact that our objective is a target and not a ceiling: we might be ready to accept inflation higher than 2% for some time. Finally “medium term” means that we assess inflation performance over a long enough period, looking forward, but also not ignoring the past.

At the Banque de France and the ECB we have been conducting extensive listening exercises and the issue has been frequently raised by the general public. Moreover, to what extent financial stability concerns should figure in monetary policy decisions is a perennial debate. Most central banks have a separation principle in which monetary policy and financial stability, to be dealt with by macroprudential policy, are kept entirely distinct. This clear division of responsibilities has worked well but I think recent developments have tipped the balance in favour of more integrated approach. First, we are no longer in a linear world. When r* is very low, there is a fundamental asymmetry created by the effective lower bound on interest rates. We have created substitute instruments to compensate for the impotence of conventional monetary policy at the effective lower bound but these instruments, although still effective, have some adverse side effects on excessive risk taking. Second, the macroprudential instruments we actually have, while remaining the first and main line of defense, are insufficient to address the whole range of financial stability concerns. We should not be Panglossian, in the phrase of Charlie Bean vii. Consequently we must accept that financial stability concerns have to be a factor in the setting of other instruments, and in particular monetary policy. This is the more integrated approach that I want to plead for. This does not imply a systematic (mechanical) reaction to financial stability indicators, and it is very different from the leaning against the wind strategy.
But, let me be clear what it does not mean: it does not mean that the ring fenced bank can set its own strategy and thereby ignore the group to which it belongs; it does not mean that it can set its risk appetite in isolation of the group to which is belongs; it does not mean that it can refuse to pay a dividend to its parent if it is adequately capitalised both now and looking forwards using stress tests (in other words, it does not have a reason to trap excess capital); and it does not mean that its CEO can ignore the Group CEO. But, and this is crucial, the group cannot require the ring fenced bank to break the rules of ring fencing. I hope this is clear. If you think we have watered down the regime, please let me know. Competition I want to finish on an equally important subject, namely competition in the banking industry, which is of course topical today in view of the CMA’s report. The PRA has been given by Parliament a so-called secondary objective which I think is best described as requiring us to act in respect of the competitive implications of our own actions and inactions but only to the extent that we are not undermining our primary objective for banks of safety and soundness. We have been working to embed the secondary objective in the PRA, and to date our most publicised actions have been in the area of new bank authorisations.

The successful operations of both Macedonian Interbank Payment System (MIPS), the RTGS system of which the central bank is both the owner and operator and Klirinski Interbankarski Sistemi Skopje (KIBS), of which the central bank is the settlement agent, have contributed to a high level of confidence throughout the years and have a positive effect on the stability of the banking and financial system and the economy as a whole. To conclude, commercial banks transferring among them funds held in accounts with central banks have facilitated the proper functioning of the banking and financial systems and mitigated disruptions and instability globally. This historical development has been accompanied with a slow, but steady movement towards a higher velocity of money circulation. Settling payments in accounts at the central bank still provides the link with the two main tasks of monetary policy and financial stability. While steering monetary conditions the central bank cooperates with commercial banks and thereby reduces transaction costs. This reality is a layered architecture in which central bank money is the ultimate settlement asset in the economy. The positive network externality is best described by referring to the risk reduction, service assurance and competitive neutrality the central bank provides. Using money held in accounts at the central bank to effect payment is generally regarded as risk free, service is assured even in extraordinary times of global and domestic crises, while using the central bank as a hub ensures that payment systems’ participants are not forced to rely on actual or potential competitors for payment.
To be sure, it has increased their fragility, especially with respect to their public finances. It is no surprise that most of the countries with the largest deficits and the largest increase in debt after the crisis have been those in which the financial sector played an increasing role, also as a source of fiscal revenue. As the financial industry becomes less profitable, and provides less tax revenue, the gap has to be filled by other sources of taxation, or lower public expenditures, which may be politically difficult to accept. These aspects may not have been fully incorporated in the projections for the adjustment of public finances in many advanced economies, unless it is expected that the financial sector will return to its pre-crisis peak, which is a risky assumption. More generally, this crisis has shown the vulnerability of public finances to volatile structures in the economy. In good times, volatile sources of income, such as those from the financial sector or the housing market, may overestimate the soundness of public finances, while the adjustment costs in the downturn may be enormous. A case in point is that of Ireland, which during the pre-crisis years was able to reduce taxes and increase expenditures for an amount of about 12% of GDP (in the period 2003–2008), thanks to the rise in revenues from the financial sector and from housing.

For instance, if the long-term trend growth of the economy is overestimated, the output gap (in absolute terms) would as a consequence be overestimated too and so would the deflationary risks. Monetary and fiscal policies would then be considered, ceteris paribus, as excessively tight and there would be a bias towards excessive expansion, with a view to achieving an optimistic rate of growth. The borrowing capacity of countries, households and companies would also be overestimated if their potential growth were overestimated. Ex post, the miscalculation of growth potential would result in an excessive accumulation of debt, both public and private, a misalignment between the interest rate and its long-term “neutral” level, and insufficient savings. As shown by Kydland and Prescott in their work on time inconsistency of optimal policy, which was later applied to monetary policy by Barro and Gordon, policy-makers who aim at excessively “optimistic” growth will conduct an inconsistent policy which will generate instability. The solution to this problem, at least for monetary policy, is to set a rule or establish an independent central bank which is aware of such an inconsistency and has a sufficiently long horizon to avoid it. This assumes however that the independent policy-maker knows what the right, “not over-optimistic” long-term growth of the economy is. He or she also has to know what the right model of the world economy is. This brings me back to the question I raised at the start, i.e. the impact of globalisation on the long-term growth of advanced economies.
I want to conclude by repeating my warm welcome to you all. I hope that you enjoy both the conference and your stay in Istanbul. Thank you very much. BIS Review 19/2006  5

Ethical guidelines for the exclusion of companies from the GPFG were established by the Norwegian authorities as early as in 2004. Under the guidelines, the GPFG must not be invested in companies producing tobacco or certain types of weapons, or with significant coal-related operations. Companies may also be excluded if there is an unacceptable risk that the company contributes to or is responsible for certain types of behaviour. The GPFG’s guidelines for excluding companies show that there is some money Norway says no to. There are some products and some types of behaviour the GPFG’s owners do not want to be involved in, whether or not they contribute to financial return. In 2015, the Ministry of Finance decided that the responsibility for excluding companies, based on criteria laid down by the political authorities, should be transferred to Norges Bank. The Executive Board’s decisions are based on recommendations and assessments provided by the Council on Ethics, which is independent of both the Ministry and Norges Bank. Chart 10: Exclusions are not insignificant At the beginning of 2018, 133 companies, corresponding to a market value of around NOK 200 billion, had been excluded from the GPFG.8 This is a substantial amount, but only a small share of the fund. There is an inherent paradox in using exclusion as a responsible investment instrument as it transfers ownership shares to investors who do not regard the company as problematic in the same way.
There is thus good reason to assume that demographical developments have contributed to an increased propensity to save in the world and thus to a lower real interest rate. 5  See Rogoff (2015). BIS central bankers’ speeches  3  The demographic effect on saving in China is worth mentioning in particular. The single-child policy contributed to a severe decline in the birth-rate. At the same time, life expectancy increased. The combination of weak social safety net and fewer children to provide for the elderly was probably an important explanation for the increase in saving in the Chinese economy. As China has become increasingly integrated into the global economy, saving in China has also been increasingly channelled to other parts of the world for investment. Increased propensity to save in many emerging markets Many other emerging markets have also increased their savings, but partly for other reasons than a change in demographics. Experiences from the Asian crisis in 1998 contributed to many emerging market countries’ central banks building up their currency reserves to be able to withstand future currency outflows. The increased demand from these countries for low-risk assets, such as government bonds, led to yields being pushed down at the end of the 1990s and until the years prior to the financial crisis. The rising demand for safe assets also contributed to an increase in the differential between the risk-free rate and the rate on higher risk investments.

One possible explanation could instead be that the global population increase has fallen over a long period of time, and is expected to continue falling in the coming period. This could contribute to lower potential growth in that the labour force will increase at a slower pace. At the same time, this effect will be counteracted if labour productivity rises. Slower population growth and the fact that the working age population is shrinking indicate that growth will remain lower than in the pre-crisis decades. The prospects for labour productivity are much more difficult to assess. The rate of increase in labour productivity declined in connection with the economic downturn following the financial crisis and it is uncertain how lasting the effects will be. Demography affects propensity to save and thus the real interest rate Demographic developments also affect the propensity to save. Life expectancy has increased and the birth-rate has fallen in recent decades. This has meant that the population has aged in most parts of the world. It applies especially in developed countries but also in countries such as China and several other emerging markets. Merely the fact that people are on average living longer means that they need to save more money for their old age, unless the retirement age is raised at the same pace as the increase in life expectancy. Developments have also entailed a percentage increase in the older working age population (40–65 years old) – which normally has a high level of saving – in recent decades.
Thus, first-quarter numbers showed a contrast between the fall in construction sectors and business and real estate services on one side, and growth in trade and the recovery of manufacturing lines that produce consumer goods on the other (figure 4). The improvement in investment in machinery and equipment—excluding uncommon transport equipment—is also worth noting, which, like durable consumer goods, has benefited from the need to replenish stocks after several years of low growth and exchange rate elements (figure 5). Finally, the greater execution of public spending contributed to increase government consumption, which also had a positive impact on activity. The increased stability in consumption occurs in a context where consumer expectations, although still in pessimistic territory, have improved somewhat. The labor market continues to adjust as expected, with the unemployment rate low by historic standards, but with salaried employment still weak and still decelerating wages. The downturn of salaried employment has been echoed by a rise in self-employment. As we show in a box in the MP Report, considering workers of equal experience and skills, a person that is self-employed or works in the informal sector, earns around 20% less per hour than a salaried employee. If we consider that the informal and self-employed work fewer hours per week, their income ends up being 30% to 40% less. Although the share of non-salaried employment in total employment has risen in the past few months, it has not diverted far from its historic indicators.

Also, at the statistical closure of this FS Report we did not observe any significant changes between the funds managed by the AFPs, in contrast to the significant transfer of affiliates to the E fund documented in the previous Report. 7  It is also worth noting that the financial position of local companies presents no big diversion from previous Reports, despite the fact that local economic activity has performed worse than expected. Total debt to GDP declined slightly, largely explained by external financing sources (figure 12). Meanwhile, the greater dynamism of bond issues has focused mainly on the refinancing of liabilities, while the growth rate of commercial loans remains low. The group of companies that report to the SVS increased their profitability at the end of 2016. However, about 70% of this increase has its origin in non-operational sources. Finally, those firms in productive sectors that do not report to the SVS and have no external debt, posted a decrease in their bank debt recently. This, combined with information from the Bank Credit Survey, reflect lower financing needs of these firms, which is consistent with the evolution of local economic activity. The less dynamic economy has marginally affected the repayment behavior of firms, increasing the credit risk of the commercial portfolio. Although delinquency levels are fairly low, since the last FS Report some NPL indicators showed increases. This, coupled with the fact that the fraction of loans rated sub-standard remained relatively high, has worsened the quality of the commercial portfolio (figure 13).
In short, a reshaping of global financial landscape. Moreover, the extraordinary macroeconomic and prudential measures deployed to stabilise the market, while having been vital and successful, have left a legacy. There has been a shift in global financial landscape, as rescue and intervention operations led to the redistribution of asset ownership, between state and private sector, and between nations, further complicating the intricate linkages within the global economic and financial system. These forces will, no doubt, have important bearing for systemic risk, cross-border supervisory coordination, and financial stability going forward. These are the dynamics of structural change that unleash a new paradigm for financial market and regulation. At the core of this force is the public demand for greater assurance of stability, through stronger mandate for governance and accountability of financial institutions and regulators. The response to this has been a sweeping reform package championed by the leader of G20 that will reshape the global supervisory standards. Ladies and gentlemen, The key challenge for regulators in emerging markets such as the Bank of Thailand is to deploy strategies that help to ensure that emerging global standards remain aligned with riskbased principle, consistent with emerging markets’ national contexts, and that our adoption of new reforms are based on those measures and reform agendas which are relevant and practical in our context. Equally important, banks in emerging markets such as in Thailand also need to further strengthen risk management to handle changes in global landscape, uncertainty, and strengthened regulatory framework that emerges as a result of this crisis.

The focus now has to be on making sure that we end up with an operable system which doesn’t introduce procyclicality. The negotiations on the long-term guarantees assessment and other outstanding areas of Solvency II, such as the third country equivalence regime, are expected to continue over the summer, with a conclusion expected in the autumn. At the same time, EIOPA will be finalising the preparatory guidelines. We are hopeful that there will be final agreement by the end of the year, but we cannot make any promises. It is then critical that we have a clear and credible timeline for implementation so that firms can ensure that they will be compliant when the new rules are introduced. The official implementation date for Solvency II of 1 January 2014 is clearly unrealistic, and late last year we set a new planning horizon of 31 December 2015 for US and for the UK industry. During that period, we are allowing firms to put to use the significant investment in Solvency II internal models to meet the current regulatory requirements under the Individual Capital Adequacy Standards (ICAS) – referred to as “ICAS plus”. We believe that the UK’s current prudential framework for insurers is a good basis for a smooth transition to the new regime under Solvency II. We are forward looking and judgement based and this will be the way that we approach Solvency II implementation.
This is essential in enabling it to react to new challenges, and to smooth the economy in the event of a crisis. Thus, budget soundness is not an end in itself, because it fosters employment and prosperity. Fiscal policy thus pursues a similar goal to monetary policy. By creating favourable conditions for lasting and balanced economic growth, they both foster a prosperous society. The economic policy goals of monetary and fiscal policy are closely intertwined – or even overlapping. In both of these economic policy areas, sustainability is key: Fiscal policy can only ensure the lasting achievement of its goals if public finances remain healthy over the long term. Monetary policy, for its part, should focus on the medium to long term, because any economic stimulus motivated by short-term considerations carries the risk of raising inflation expectations. To recap: The goals of fiscal and monetary policy overlap to a large extent, which means that in normal times there should be no tension between the two policies. Nevertheless, there is a strong complementarity between fiscal and monetary policy, as their operations have a reciprocal impact as regards both the financial markets and the real economy. Let’s look at the financial markets first (cf. chart 2). Monetary policy steers a reference interest rate on the money market, which is used as a basis for the valuation and trading of securities such as government bonds on the financial market. If monetary policy is credible and succeeds in ensuring price stability, inflation expectations are low and well anchored.

We were aware that discontinuing the minimum exchange rate would have significant effects on the outlook for the economy and inflation. However, as the Governing Board, we must be prepared to make decisions that may have negative effects in the short term. We are convinced that postponing a decision which was ultimately unavoidable would have caused far higher costs in the long term. Review and appraisal of the minimum exchange rate As mentioned before, the minimum exchange rate of CHF 1.20 per euro was the SNB’s key monetary policy instrument for almost three and a half years. I will therefore begin my brief appraisal of this instrument in the summer of 2011, shortly before it was introduced. That summer saw a renewed deterioration in the outlook for the global economy, which was only hesitantly recovering from the worst recession since the 1930s. In addition, at that time, the European debt crisis was escalating again. In the US Congress, a protracted battle about raising the debt ceiling was under way. Given these developments, uncertainty on the financial markets was increasing very rapidly, and demand for Swiss francs soared. The Swiss franc appreciated very sharply against all major currencies, including the US dollar. In August 2011, the Swiss franc was, by any measure, massively overvalued. The SNB began by expanding liquidity on the money market to an extent that was historically unprecedented. However, the effect of this liquidity expansion on the exchange rate was only temporary.