samchain/econo-pairs-v1 huggingface dataset:
That is why in the case of essentially technical judgments it is sensible to rely upon collective wisdom, and there are other areas in which we do precisely that. The Law Lords, for example, reach their decisions by aggregating individual judgments, and the same is true in the United States Supreme Court. The MPC is based on the same principle. For such a system to work it is crucial that the individual members of the MPC give their best judgment and do not try to reach an artificial consensus. When policy is clearly off-track, as in the spring of last year, it is not difficult to reach unanimous decisions, as the Committee did through 1997. But when policy is finely balanced, disagreements about the precise level of interest rate are not only likely but an indication that policy is broadly on-track. That is why the motto of the MPC should perhaps be “divided we stand, united we fall”. Some commentators have been unable to resist labelling members of the Committee as either “hawks” or “doves”. There is a fundamental problem with this labelling. It makes no sense in the new system to describe individuals as hawks or doves. Each member of the Committee has the same inflation target. Unlike some other central banks, MPC members cannot entertain closet views about the attractions or dangers of slightly higher or lower inflation. Their task - to which they will be held personally accountable - is to hit the Government’s inflation target.

And, over a five year period, since each member of the MPC is trying to hit the same inflation target, I predict that it will be impossible to distinguish between “doves” and “hawks”. What will the commentators call us then? If Britain either has or is about to join Monetary Union, then the birds may have flown the nest. But if the MPC is still setting interest rates in Britain, then I hope that we shall be seen as a group that is tediously predictable, sometimes raising interest rates, sometimes cutting them, but always moving in response to the economic data in order to hit the inflation target. BIS Review 53/1998
In devising and implementing macro supervision, authorities are facing delicate trade-offs between efficiency and stability in the financial system. Deep social choices are involved, which, arguably, can differ across countries and periods of time. Also, as recent experience has shown, financial stability may ultimately involve fiscal commitments. Finally, and most importantly in my view, we lack the analytical framework upon which both a financial stability mandate and operational independence could be validly and legitimately anchored. Central Bank independence has closely followed theoretical breakthroughs, in the 1970s, in our understanding of inflation dynamics. It was made possible because societies reached a common – and easily communicable – agreement on the lack of trade-offs involved, on the long run, between inflation and growth. That robust, and commonly shared analytical background on what monetary policy could – and could not – achieve was essential in establishing the primacy of price stability and the legitimacy of independence in monetary policy making. We are very far away from such a theoretical agreement on the causes of financial instability, on the real trade-offs between efficiency and stability in finance, on the role of innovation and, finally, on the origins and detection of asset and credit bubbles. It would therefore be illusory, and dangerous, to expect that a precise mandate for financial stability could be defined, let alone quantified, in a foreseeable future. The situation is therefore somehow confusing and this raises important challenges for the future.

How do you view them as an alternative? A: I would prefer not to make any comments on the political situation in Greece. I do believe, however, that the appearance of protests in countries subject to financial assistance programmes [implemented by the Troika] is the reflection of the huge demands that have been placed on the population. Being in a democracy means that people have the right to voice their complaints. Yet it is also a warning to leaders that when an economy is undergoing reform, sharing responsibility and effort is key. It is key to both the economic efficiency and political sustainability of the reforms. Social protests are there to remind us that we cannot reform an economy by placing all the demands on workers and the most fragile parts of society. Q: Can the euro survive without debt mutualisation? A: The debate on the future of the euro should not be centred on instruments such as mutualisation. This is in my view the tail that wags the dog. The question to consider is to what extent we should share risk and sovereignty in order to make monetary union sustainable. Since the beginning of the crisis we have made a lot of progress in creating various instruments to establish effective solidarity within the euro area, as well as governance that establishes responsibility at a national level. The process is not yet completed.
The liquidity created by low official interest rates around the world has helped to push down long-term real interest rates and compress credit spreads to unusually low levels. That monetary stimulus is now being withdrawn. Since January, long-term interest rates have moved up, and now other asset prices are responding. So far we have seen little more than a modest correction to the prices of a wide range of assets that had risen sharply over the previous two years. The realisation that such levels of asset prices were unlikely to be sustainable, coupled with a tightening of monetary policy in many countries, has injected uncertainty into financial markets. And it is hardly surprising that, as investors searching for yield realised that they might have underestimated the uncertainties, the price of risk moved up. Even though the monetary stimulus around the world is now being withdrawn, its effects are still being felt. There are some signs of inflationary pressures in the main industrial countries. Even in China, with its growing manufacturing base and large pool of labour, some indicators are showing upward pressures on export prices. And in turn that is raising our import prices, over and above the increases resulting from higher energy costs. At home, we can take some comfort from the fact that, despite sharp increases in energy prices, both consumer price inflation and inflation expectations have remained close to the target.

Pay pressures in the labour market are muted, reflecting in part the need of employers to adopt a tough stance in wage bargaining when faced by such large increases in other input costs. Companies facing higher costs for energy, raw materials and other inputs, have been willing to offer only moderate wage increases in  BIS Review 52/2006  3  order to minimise the squeeze on their profit margins. The rapid rise in input prices and the muted degree of pay pressures are not independent of each other. Inflation expectations – whether measured by household surveys or implicit in government bond yields – have moved up during the course of this year. Although not of serious concern as yet, the MPC will monitor inflation expectations carefully. Inflation itself remains volatile as increases in oil and natural gas prices pass through to household bills. Those increases will dampen the growth of real household disposable incomes and moderate consumer spending. So the economic outlook is far from certain. In these circumstances the Monetary Policy Committee must examine carefully all information, learn and, if necessary, revise its judgements, and question all received wisdom. In other words, it must be enlightened. The Scottish Enlightenment, it is generally agreed, began and ended in the 18th century. Our present framework for monetary policy is of more recent vintage.
Therefore we, the policymakers, have to ask ourselves whether we have consistently checked our progress against what must be the ultimate goal of the transition process. My message here is not only that transition policies should ultimately benefit the people, but that the people have to understand why reforms are necessary and what kind of reforms we should pursue. In short they have to understand what the policymakers are doing. Let me stress that because of the legacy of socialism this goal is even more challenging in transition. Usually people are both averse to risk and have a high discount rate about the future. In socialism those two behavioral patterns seem to be even stronger. People who have spent part of their lives in a socialist system and came out of it only ten years ago, on average tend to be even: a) more risk averse and b) have stronger preferences for the present. a)  In socialism the notion of risk and its consequences were almost unknown. One can think of socialism as a big insurance company. No bankruptcies, no unemployment, no financial markets, no volatility whatsoever, very little choice (both for households and companies) as almost everything was laid down by the central plan. Most risks (which always exist) were taken by society as a whole (socialized) and were not individualized. Or, vice versa, individual decisions rarely affected individual wellbeing.

Moreover, we can fall into the trap of measuring our success in piecemeal reforms without asking whether the whole spectrum of economic relations have moved forward together. Therefore, we must bring the people forward with the reforms and ensure that they are politically accepted. If this is not the case, it may become a big obstacle to rapid transition (as I will explain further in due course). Which reminds me of an old joke that we used to tell during socialism, and it goes something like this. During a preparatory seminar for future members of the then almighty Communist Party the local Party Secretary explained to the group of candidates that the future belongs to socialism and that socialism is the most advanced system in the world. A young candidate asks a question referring to permanent meat shortages under socialism: Mr Secretary, if we are so advanced how come there is no meat in our shops? The swift answer was: “My dear comrade, we are advancing so quickly into the future that the cattle can’t keep up with us”. I am not I arguing for slower reforms in transition, on the contrary, but let us not forget in our rush to market economies that transition is done for the benefit of the people. 2. What “ingredients” do we need to achieve sustained, rapid growth? Economists agree that for transition to be successful we need sustained growth. Therefore, the question of what needs to be done in transition ultimately leads to the question of what causes growth?
The sources of systemic risk that may originate from the interplay between the financial sector and real economy imply that safeguarding financial stability is essential for ensuring fiscal sustainability and co-ordinating economic policies, and also in the context of any potential financial assistance by the ESM. Accordingly, it is essential in my view to also enhance the supervisory framework within the euro area. This could be achieved through several institutional steps. One possibility would be to grant the EBA specific powers for the euro area, including wider possibilities to take mandatory decisions in certain fields addressed to national supervisors and financial institutions. Nevertheless, it is worth remembering that in 12 out of the 17 members of the euro area, the respective Central Banks have full responsibilities in banking supervision. After the crisis, the trend in several countries has been to change the system of banking supervision by giving that responsibility to the respective Central Banks. Regarding macro-prudential policies the Eurosystem (the ECB plus the National Central Banks) was already given a special role in supporting the mission of the European Systemic Risk Board. All this opens the opportunity to an alternative future development in the direction of giving a more significant role to the Eurosystem in the supervision of banks, in particular of large cross-border banking groups An enhancement of the role of the Eurosystem would not need to represent a major overhaul of the institutional setting.

The yield on Icelandic Treasury debt is now a bit lower than in the euro area countries that are facing severe sovereign debt crises, and real yields are considerably lower. It is not a given that this would be so without the capital controls. If the controls were lifted today, interest rates would probably rise sharply, even though a large proportion of the investors that own these bonds are relatively at ease within the capital controls regime. Without the controls, the authorities would have to take further action in order to achieve the objectives set for the coming year. It is therefore of pivotal importance to lengthen the maturity profile of Treasury financing before the controls are lifted. Marked progress has already been made in this area. The average duration of domestic Treasury bonds has increased from 3 to 7 years. Last spring, domestic pension funds and other investors purchased a sizeable supply of indexed longterm Treasury bonds by participating in the first auctions under the liberalisation strategy, which were dedicated solely to investment in long Treasury bonds. The aim was to lengthen the maturity profile of Treasury financing and thereby reduce risk. Although there has been a hiatus in the auctions and the pension funds lost interest in them after foreign stock markets fell this past summer, non-residents are growing interested in this investment option, which will continue to be available alongside the Investment Programme.
On our part, it is undoubtedly the case that the inflation target is necessary as a lodestar in order for monetary policy to be able to contribute to creating good conditions for long-term growth. BIS Review 98/2000  6

Yves Mersch: Challenges for completing Europe’s economic and monetary union Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the MNI Connect event, Singapore, 13 October 2015. *  *  *  Over the past few months, Europe has faced two exceptional challenges. First, there was the new adjustment programme for Greece. And second, there has been the large influx of refugees, a challenge that is very far from the competences of the European Central Bank (ECB). Though very different in nature, these two events offer a common lesson for future challenges that we will collectively face: that Europe is strong only when it acts on the basis of solidarity and cooperation. I would like to talk about two further topics of importance today: first, the ECB’s assessment of recent economic developments and their implications for our monetary policy stance; and second, the necessity for completing Europe’s economic and monetary union. Over the summer, industrial production and other indicators of economic activity in the euro area have shown signs of resilience. Yet at the same time, the macroeconomic environment has become more challenging. The ECB’s latest macroeconomic projections indicate a weaker economic recovery and a slower increase in inflation rates than was expected earlier in the year. Inflation will remain close to zero in the very near term, before rising again towards the end of the year.
It is also important that the banks and the households make realistic assessments of housing costs in the period ahead and that they ensure that in all new borrowing there is a margin for higher interest rates than those we have today. However, even though regulation and supervision are sharper tools in the work to promote stability than the repo rate, it is of course not the case that monetary policy has no impact in this context. An important challenge in the period ahead, as I see it, will be to try to find an  appropriate mix between regulation and supervision on the one hand and monetary policy on the other. So, how should the authorities act if, for example, they suspect that a property bubble is developing and that this may lead to a serious increase in systemic risk? Dialogues with and warnings to the banks will continue to be important tools. However, our experience shows that warnings are not always heeded to the extent they should be. The authorities therefore need to be able to use more concrete and more costly measures, partly to achieve more effective communication and partly – if warnings do not help – to affect the behaviour of the participants more directly. A recurring issue in international discussions is what types of measure are most effective in influencing risk behaviour. Can we influence behaviour best by controlling prices, that is by applying regulations that make lending more expensive, or by using quantitative regulations?

Governance to prevent systemic risks – the road ahead I would now like to say a few words about the road ahead for the authorities’ efforts to prevent systemic risks. Today, the Riksbank has an overall responsibility for the financial system. Finansinspektionen is responsible for the stability of individual institutions, but also has a responsibility for the system as a whole. Together, our task is to try to steer the financial system away from instability and towards stability. The main responsibility for this of course lies with the banks themselves. The institutional frameworks give Finansinspektionen the effective tools that directly affect behaviour – the possibility to change the capital requirements, impose sanctions, prohibit or stipulate measures and, ultimately, to withdraw permits and licenses. The role of the Riksbank, on the other hand, is to exert influence by conducting a dialogue with the participants and issuing warnings about the risks that arise. The “Financial Stability Report”, which we publish twice a year, is a central tool in this work. The idea is that our warnings should influence the banks in the following way: if the Riksbank points out that a risk has arisen at a bank, the bank itself should take action to retain the confidence of the market in its operations. If the bank itself does not take action, the bank’s counterparties and customers should at least react and take account of the risk in their pricing.
This report was published for the first time last year and it displays, among other things, our most important indicators to assess the degree of financial integration in different parts of the financial system. The second report will come out next month, and will again feature a number of interesting analyses and conclusions. I would like to mention yet another example in this group of activities, namely our contribution to the possible extension of the market transparency provisions in the Market in Financial Instruments Directive, in short MiFID, to financial instruments other than equities. The interest of the ECB in this issue follows in particular from the great importance of wellfunctioning markets for the transmission of monetary policy impulses. We explained our view at a public hearing held by the European Commission in September 2007. Focusing on post-  6  Schmiedel (2007), The economic impact of the Single Euro Payments Area, ECB occasional paper, no. 71, August. BIS Review 17/2008  3  trade transparency in retail and wholesale bond markets, we proposed a market-led controlled experiment about the trade-off between transparency and liquidity. In such an experiment, post-trade transparency could be gradually introduced, starting for example with the most liquid bond market segment, in order to assess its effects on market liquidity. The ECB stands ready to support such an experiment. In the present time, the importance of transparency in financial markets to allow for an efficient processing of information has of course become particularly evident.

Financial integration Financial integration is an important part of the Lisbon Agenda and the European Union’s Single Market Program. In particular, among industrial countries the free flow of capital across borders unleashes competitive pressures that reduce the cost of capital and allows for better sharing of risk for consumers and firms. It is therefore the long-standing view of the Eurosystem that financial integration is an important process for the general well-functioning of the European economy. Since its creation in 2002, the ECB-CFS network has featured important pieces of research that further substantiated our conviction in this regard. We have seen more of this since this morning in the present Symposium. One paper adds that the benefits of financial openness through the corporate sector arise particularly from improvements in total factor productivity, rather than through capital accumulation. 1 Another illustrates how cultural factors, such as mutual trust and confidence, matter for the degree of risk sharing even among European regions within the same country. 2 While we have certainly made a lot of important progress in European financial integration over the last decades, not the least through the introduction of the euro, available research also suggests that a lot of benefits in terms of cross-country risk sharing are still to be reaped and therefore further efforts are necessary. 1  Bonfiglioli (2006), International financial integration, productivity and capital accumulation, mimeo., Institut d’Analisi Economica CSIC, July.
However, the pressure of workers' efforts to regain lost purchasing power and the pick-up in profit margins could be stronger than anticipated. Wage negotiations are taking place in a tight labour market, with the unemployment rate at a historical low and labour shortages increasing in some countries, despite labour-market participation growing robustly since early last year.15 And some wage indicators show stronger wage pressures than those derived from aggregate wage statistics.16 This is already having an impact on core inflation, since the contribution of wage-sensitive items17 to core inflation has more than doubled in recent months. Indeed, services inflation (which accounts for two thirds of core inflation, with wages making up around 40% of the direct input costs of services) reached 5% in March this year, up from 2.7% a year ago. Moreover, although economic weakness should lead to a squeeze on profit margins, the indicators available up to the end of 2022 do not yet show clear signs of any such squeeze. There is considerable heterogeneity across sectors and the cyclical situation of the economy and demand conditions will play a key role in the degree to which higher wage costs are passed through to final prices, as well as in the behaviour of profit margins going forward.

Jean-Pierre Roth: The euro – a stabilising factor in the international currency system Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Fondation Jean Monnet pour l'Europe, Lausanne, 21 September 2007. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  The euro is undoubtedly a success story. It has contributed to stabilising the international currency system. In Europe, the former monetary disorder has been replaced by a new monetary order. The European payment system has become more transparent and price stability is guaranteed. Switzerland, too, is benefiting from European currency stability. The Swiss franc is taking advantage of a monetary environment that is considerably calmer than previously. The euro and the franc are coexisting very successfully. Nevertheless, it would be wrong to claim that all the effects of European currency integration have already worked their way through to the real economy. In spurring on competition and promoting transparency, the euro is having an integrating effect. However, there are still considerable obstacles standing in the way of this integration process. BIS Review 103/2007  1