samchain/econo-pairs-v1 huggingface dataset:
There was reason to believe that the electricity prices would fall back and that this would then also have a marked impact on inflation. We thus followed the strategy that we had established in our clarification from 1999, and explained that policy should disregard the temporary effects of the fluctuations in electricity prices. On this particular occasion it was appropriate to calculate an alternative measure of inflation, UND1X excluding energy, and this measure was therefore used as a basis for policy. Figure 4 gives a fairly good idea of the nature of the decision facing us. Inflation was driven up at the start of 2003, when electricity prices rose, and then fell again during the latter half of 2003 and 2004 when the rise in electricity prices dropped out of the inflation data. If we instead look at UND1X excluding energy the picture is considerably less dramatic. When we looked ahead to forecast developments the picture also proved very different depending on whether we focused on UND1X or on the same measure excluding energy prices. That the outcome for UND1X excluding energy didn’t turn out exactly as we expected is a different matter, attributable to imported inflation turning out lower and productivity proving higher than anticipated. However, that doesn’t take away from the fact that we essentially made the right assessment about electricity price developments. This problem could also have been described with a forecast of inflation in a longer time frame. Let me illustrate this line of thought with a stylized example (see Figure 5).

In the long term, according to Paul Krugman, the concept of the competitiveness of an economy merges with that of its productivity: the increase in the standard of living in the United States, Japan or Europe, which, in keeping with Professor Laura d’Andrea Tyson’s  BIS Review 80/2005  1  definition, is the ultimate indicator of a country’s competitiveness, has in fact, excluding all external factors, tracked developments in national productivity over several decades. In addition, the flexibility that enables an economy to specialise in promising sectors determines both developments in its productivity and its competitive position: several recent studies show that labour or product market rigidities may thwart the emergence of an ICT-producing sector and limit the use of these technologies in the other sectors, which holds back productivity growth and the development of exports of products that are in high demand. Second change: the advent of new players in international trade of goods and services and international division of labour. Of course, this is not an unprecedented development – it has occurred several times since the Second World War, with Japan and also with the newly industrialised Asian countries. It has nevertheless taken on a new dimension due to the newcomers’ size and competitive edge, the liberalisation of capital flows and the decrease in transport and communication costs.
’9 ’9 7 1  1  0  0 -1  -1 94  95  96  97  98  99  00  01  S ource s: S ta tistics S we de n a n d P rospe ra R e se a rch Diagram 3  Com p on en ts of th e CPI percen tage 12-m on th ch an ge 9  9  I m p o r t ( 24 % )  6  6  D o m e s t i c ( 67 67% %)  3  3  0  0  -3  -3  -6  -6  Ho u s e m o r tg ag e i n t e r e s t c o s t ( 9%)  -9  -9  -12  -12  -15  -15 92  93  94  95  96  97  S o u r c es : S tati s ti c s S w ede n a n d th e R i k s ba n k  BIS Review 56/1997  -5-  Different indicators of underlying inflation also show a declining rate of increase, though the picture measured in this way is not quite as dramatic (Diagram 3). Excluding house mortgage interest costs, the current rate of inflation is about 1 percentage point higher than indicated by the CPI.

Memoranda of Understanding regulating these interactions will be prepared in the coming months. Conclusion To conclude, it is unavoidable that the existence of the SSM will alter the functioning of the ESFS. This is, after all, the most significant development in financial supervision in the history of the European Union. However, I am confident that the changes brought by the SSM will strengthen the ESFS, and will overall enhance the quality and consistency of supervisory and regulatory practices across Europe. The more Member States that are involved in Banking Union, the greater these positive effects will be. Thank you for your attention. BIS central bankers’ speeches  3
We aim to build an open system in which other banks in Hong Kong are welcome to join if they are interested. It is obvious that the new platform will create the highest value if the majority of banks engaging in trade finance businesses are making use of it. 5. However, this is only half of the story. As we all know, trade is by definition cross border and invariably involves parties and financial institutions in two or more jurisdictions. So it is not good enough for a jurisdiction to do it alone in digitalising trade finance. In this connection, I am pleased to say that the first item of collaboration between Hong Kong and Singapore would be the building of a DLT interface linking the domestic trade finance platforms being developed separately in the two centres. Later this morning, colleagues from the HKMA and MAS will talk more about this exciting collaborative project. What I want to say here is that this interface would likely to be the first of its kind in the world in the application of DLT in solving the century-old problem arising from the inefficiency of the paper-based trade finance system. This new trade platform interface, once developed and implemented, would allow our other trading partners around the world to plug into it.

As well as building collaborative ties across the world, we are also creating partnership closer to home. There is a huge upside in tapping the considerable potential in fintech development in the Guangdong-Hong Kong-Macao Bay Area. The Bay Area has a population of over 66 million and a GDP of over $ trillion. With the deepening of the financial sector and the expanding cluster of technology talents and industrial base, the Bay Area is going to become one of the main engines of growth for China and a very fertile ground for innovation in financial services and fintech. 9. Recognising the importance of cross-border collaboration in the Bay Area, the HKMA, as a start, has signed a Fintech MOU with the Office of Financial Development Service (“OFDS”) 2/4  BIS central bankers' speeches  of the Shenzhen Municipal Government. Now, I am pleased to announce that, in pursuing our commitment to collaboration, Hong Kong and Shenzhen will jointly launch three fintech initiatives: (i) A fintech competition; (ii) A soft-landing scheme; and (iii) A talent development programme. Fintech Competition 10. Together with the Shenzhen OFDS, we will organize a fintech competition that is open to participation by Shenzhen and Hong Kong financial institutions. It offers total prizes of more than $ million for the winning fintech products or solutions. I am sure the awards will provide a strong incentive for financial institutions to innovate, either by themselves or in partnership with fintech firms.
The U.S. economy became substantially more open, with trade increasing substantially as a share of GDP. Deregulation in the 1980s (telecom, transportation, finance) and since then have helped make the U.S. economy more dynamic and flexible. The U.S. financial system became stronger, more resilient, better at matching capital to ideas, and better at spreading and managing risk. And finally, U.S. macroeconomic policy was very supportive. Good fiscal policy choices in the 1990s helped produce significant surpluses, freeing private savings for private investment. The gains in price stability delivered by the Fed under two chairmen provided a critical foundation for the sustained increase in private investment that helped translate a shift in the technological frontier into accelerating productivity. These forces reinforced each other. None would have been as powerful without the impact of the others. Globalization, deregulation and changes in the financial structure all worked together to produce a more competitive business environment, motivating major improvements in investment and in efficiency. Good monetary policy and fiscal policy provided a supportive environment, with higher public savings and low inflation. BIS Review 25/2005  1  Luck seems to have played some role, too. The strategic environment seemed in some ways more stable and secure. The size and frequency of external shocks that hit the United States and the world economy during this period were in some ways less acute and easier to manage. Are these improvements in underlying or structural productivity growth sustainable? This is a hard question to answer.

This decline in home bias - as Alan Greenspan has spoken about extensively - seems to have made it easier for countries to sustain larger current account deficits than might have been possible in the past. However, we don’t know much about how much further room there is to run in this phenomenon. We don’t know much about the present degree of concentration in the exposure of private savers to the United States relative to their longer term preferences, or how stable those preference are likely to be. And, therefore, we don’t know how likely it is that those outside the United States are going to be willing to continue to acquire claims on the United States at the recent pace. Finally, a number of observers have suggested that the present imbalances reflect what could be called a balance of interests, and that this balance is likely to endure for sometime. On one side of the balance is the substantial part of the world economy that has an interest in shadowing the dollar closely, as they absorb excess capacity, and that these governments are likely to continue to want to acquire dollars to make that exchange rate objective possible. On the other side of the balance is the United States, which is able to sustain higher rates of private spending and larger government deficits than it could if others were not willing to lend us their savings.
In the UK, the inflation-targeting regime requires the MPC to specify the horizon over which it expects inflation to return to target if it deviates by more than one percentage point. In its Open Letter earlier this year, the MPC stated that it judged it appropriate to set policy so that inflation would likely return to target within two years. That was intended to provide a clear horizon for the MPC’s actions and as an anchor for inflation expectations.16 A third potential source of policy insurance comes from making clear that, were it necessary on inflationary grounds at the two-year horizon, monetary policy could be eased further. If monetary policy were perceived to be constrained to the downside – for example, because of the zero lower bound on interest rates – that could affect agents’ perceptions of the distribution of inflation risk, which would be skewed to the downside. At the time of its Open Letter, the MPC stated that it had a variety of tools available to ease policy, should that prove necessary. That included re-starting asset purchases (Quantitative Easing or QE) and cutting interest rates from their current level of 0.5% towards zero. The latter reflected a re-assessment by the MPC of the relative costs and benefits of a rate cut. Back in 2009, the MPC’s judgement was that the benefits of cutting rates below 0.5% were probably outweighed by their costs, in terms of the negative impact on financial sector resilience and lending.

Since 1997, however, inflation expectations having shifted back inwards, restoring the Phillips curve to something closer to its position prior to 1970.5 Chart 11: The wage Phillips curve under different policy regimes in the UK  Chart 10: A long run estimate of the wage Phillips curve in the UK  1856-2014  1856-1970 1970-1997 1997-2014  Wage inflation 30  Wage inflation 30  20  20  10  10  0 0 -10 -10 -20 0  5 10 15 20 Unemployment rate (lagged 1yr)  Sources: Crafts and Mills (1994), Feinstein (1972) and ONS. Notes: Unemployment is measured here by the claimant count, and is lagged by one year. For more information on the long-run data used to construct this index, see Hills et al (2010, 2015). -20 0  5 10 15 Unemployment rate (lagged 1yr)  20  Sources: See footnote to Chart 10. If we look more closely at the most recent period, a second feature stands out (Chart 12). UK wage growth has been puzzlingly weak over the past few years, lying below the Phillips curve estimated since 1997. While UK unemployment has fallen more than 2 percentage points since 2013, wage growth has remained in the range 1–2% per year. This is, to a degree, a global phenomenon. For example, the US Phillips curve also shifted inward after the Volcker disinflation of the early 1980s (Chart 13).
This evolutionary approach requires two things: first, a stable framework which provides certainty for the industry so that the accord is not a moving target; second, enough structured flexibility to be able to adapt to relevant changes in best practices. Schedule With the release of the three papers on unexpected losses, securitisation, and the recognition of operational risk capital across home and host jurisdictions, the Committee has come a long way toward resolving many of the most complicated issues raised in consultations. These revisions to the framework will, moreover, help to ensure that the New Accord is more sensitive to the actual degree of risk that banks face and even more supportive of future improvements in the measurement and management of risk. The Committee’s working groups are refining these and other technical matters in the New Accord and will report their solutions to the Committee by May 2004. That will allow the Committee to meet its goal of resolving outstanding issues by the middle of this year and agreeing on the text of the Accord that will provide a solid basis for national rule-making processes and for the industry’s preparations to continue. Concluding thoughts Over the next two days, you will have an opportunity to discuss and share ideas on the latest risk management practices in the areas of market, credit, operational, and insurance risk. A great deal of what you will discuss has direct relevance to developing and implementing advanced risk management techniques.

With regard to this last point, the Committee has decided that the amount of excess provisions that can be included in Tier 2 capital will be limited to a certain percentage of a bank’s risk-weighted assets, which is still to be determined. This change represents a major improvement that will go a long way toward ensuring that a bank’s capital will adequately protect it against unexpected losses and that it will provide incentives to sound provisioning. I am also pleased to note that the early reactions to these changes have been positive. Securitisation The second note published in January addressed changes to the treatment of securitisation exposures. We are particularly committed to developing an appropriate and balanced treatment for banks’ exposures to securitisations since the 1988 Accord does not address this important risk management tool. At the same time, a securitisation transaction can result in an extremely intricate structure, which makes it hard to specify a simple rule. Public comments on our proposals acknowledged this challenge, as many found the proposed capital rules in the third consultative paper for securitisations to be among the most complicated parts of the New Basel Accord. Many also thought the treatment to be perhaps too conservative. In response, members of the Committee pledged in Madrid to streamline the relevant proposals. Equally important, we wanted to adopt, where possible, requirements that are more compatible with the best practices in use today. The note released in January illustrates the progress we’ve made.
This is the first time in 60 years or so that a sovereign crisis has hit the developed world, the rich world, not the developing one, the hardest. To demonstrate that: almost 80% of all the IMF’s rescue loans have gone to Europe! Over 40% have gone to the Eurozone itself, and the share is going to rise. The developed world is not accustomed to this. 3. This time the problem of sovereign debt has appeared at a time of peace and prosperity. 4. Moreover, the Eurozone – a monetary union without a state – is a completely new, unprecedented arrangement. Typically, the solution to such a crisis used to be: inflation, default or monetary reform, very often accompanied by currency devaluation, or a combination of all these. Please note that typically when the IMF organizes a programme for a developing country, it requires a partial default or devaluation to disburse funds. Nothing like that is possible within the Eurozone – monetary solutions are unavailable for the weakest sovereign links. And only default remains. Or, of course, a bail-out, i.e. shifting the debt burden from some countries to others. But, history seems to suggest quite clearly that without some form of debt reduction (or default, if you wish) it will be really hard to get sovereigns functioning normally again. Are there any OTHER alternatives? Yes, either very fast growth or slow deleveraging. The first option is possible, but unlikely. The second option might mean not one, but two “Japanese” lost decades.

With the build up of household debt in many countries, and releveraging of parts of the corporate sector, that would not have been a happy prospect. That, taking the industrialised world as a whole, monetary credibility has been sustained without aggressive policy action may owe something to the reasons for the increases in energy and other commodity prices – namely, the rise of China, India and other Asian economies which, as well as boosting global demand, has also been putting downward pressure on internationally traded goods prices. But, as the Bank has argued before, the way these relative price changes play out in terms of headline consumer price inflation depends on the overall path of aggregate nominal demand. And that in turn owes something to the behaviour of central banks. The textbook response to a cost shock is supposedly to allow the price level to rise, with the associated temporary pick up in inflation being just that – temporary. In the jargon of central banking, the “first round effects should be accommodated” in order to contain output volatility; but any second-round effects on inflation, through wage bargaining and medium-term inflation expectations, should of course be prevented. What of practice? Well, notwithstanding the rise in inflation in the UK over the past eighteen months, it is moot whether any of the major central banks did in fact fully accommodate the first-round effects of the oil price rise.
The Four President’s Report has suggested that Member States could enter into bilateral Reform Contracts with the Commission, whereby they would make legally binding commitments to implement structural and institutional reforms. In return, they would receive funding to facilitate the transition process and finance transition costs – perhaps, for worker reallocation programmes. This could be one function of a fiscal capacity. There is still a lot of thinking to be done in this area. And we have to get the balance right. The most efficient way to ensure adjustment is to let market forces operate in the many protected sectors that still exist in the euro area. But we also know from the first decade of EMU that markets do not always self-regulate and that interventions from the centre to ensure competitiveness may be needed. The key challenge is to articulate the appropriate role for the European level, the state and the market in the euro area. Political union The fourth pillar, political union, is needed to ensure that the other pillars have sufficient democratic legitimacy. I will not dwell long on this issue, as it is fundamentally a matter for the Member States and European citizens. Suffice is to say that the crisis has shown the limits of applying a national mind-set in a deeply integrated monetary union. Citizens are affected by what happens across borders and their political arrangements need to reflect this.

Hence, the country would likely turn the table on the ECB, and push for generous liquidity support or supervisory forbearance. From the ECB’s perspective, an effective financial union is a key complement to the single monetary policy. To the extent that it restores the flow of savings between euro area countries, it will support the normalisation of monetary policy transmission and allow us to exit our exceptional measures. But more fundamentally, without integrated capital markets and a well-functioning banking sector, there cannot be a single monetary policy – and this means we cannot fulfil our mandate. Fiscal union The second pillar, fiscal union, is necessary to ensure that fiscal policies are fully commensurate with the requirements of the common currency. The crisis provided prima facie evidence of the sizeable negative spillovers associated with fiscal crises within monetary union. Moreover, it showed the importance of sound fiscal policies for allowing governments to perform their essential functions: countries with weak budgets lose their ability to perform cyclical stabilisation during a crisis. Measures that guarantee solid fiscal policies are therefore a public good – both for individual Member States and for the whole euro area. For domestic citizens, they ensure that the automatic stabilisers will be able to play out in full during a downturn and smooth the  BIS central bankers’ speeches  7  economic cycle. For citizens elsewhere in the euro area, they provide protection against contagion emanating from budgetary decisions over which they have no democratic control.