samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  Chart 1: GDP projection in August 2010 Percentage increases in output on a year earlier 7 6 5 4 3 2 1 0  Latest vintage of data  -1 -2 -3 -4 -5 -6 -7  06  07  08  09  10  11  12  13  Chart 2: Cumulative change in GDP since 2010Q2(a) Percentage points 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 (b)  Net trade  Change in inventories  Investment  Government consumption  Consumption  GDP  -1.0  (a) Chained-volume measures. Components may not sum to total due to chain-linking, the statistical discrepancy and the alignment adjustment. (b) Excludes the alignment adjustment. BIS central bankers’ speeches  7  Chart 3: CPI inflation projection in August 2010 Percentage increase in prices on a year earlier 6 Outturn 5 4 3 2 1 0 -1 -2 06  07  08  09  10  11  12  13  Chart 4: Indicators of bank funding spreads Percentage points Initial FLS announcement  Secondary market bond spreads(a)  4.0 3.5 3.0  Fixed rate retail bond (average of 2 & 3yr spreads)(b)  2.5 2.0 1.5 1.0  Covered bond spread (d)  Five-year CDS premia(c)  0.5 0.0  Jan  Jul 10  Jan  Jul 11  Jan  Jul 12  Jan  Jul 13  Sources: Bloomberg, Markit Group Limited, Bank of England and Bank calculations.

In any case, as a breach of the threshold becomes imminent, it seems likely that the Committee will wish to provide further guidance on the future determinants of policy in order to reduce any uncertainty surrounding our reaction function. Can we say anything yet about the effectiveness of the introduction of forward guidance? As already noted, the primary objective is to give confidence to business and households that policy will not be tightened until there is a material reduction in economic slack (assuming that neither price nor financial stability are threatened) and to prevent an excessive snapback in market interest rates taking place simply because a recovery is under way. As far as the broad message to businesses and households goes, contacts of the Bank’s Agents suggest that businesses have got the message that the MPC will only begin to tighten policy once the recovery is entrenched and slack has been materially reduced. And in the period after the MPC’s announcement, the Markit Household Finance Index suggested that households expected Bank Rate to rise later than before, although the date has since come back in again, perhaps reflecting the continued flow of positive data. At first sight, the evidence from market interest rates is more equivocal. Chart 5 shows the instantaneous forward yield curve in May, August and today. Yields have risen substantially since May. On the face of it, that appears to suggest that the guidance has not been very effective at influencing the expectations of market participants.
Business can and will flow quickly away from Hong Kong if we somehow fail to upgrade the standards of our financial services. In conclusion, let me say that to become “an international risk management hub” is synonymous to becoming “an international financial centre”. No IFC can exist or compete if it is not also a risk management hub in delivering the various forms of financial intermediation, including the money, banking, capital, asset management and insurance markets. I don’t really think there is such creature as a “pure” risk management hub as opposed to an IFC. In other words, it is hard to contemplate how a place can turn into a risk management hub if money and capital do not flow through it. 15. Finally, let me share with you a couple of takeaways on what I have said today on how Hong Kong can enhance its competitive position and leadership in risk management: Financial institutions must not put their own interests above those of their clients. The (a) professionalism and integrity of the financial institutions and the practitioners are crucial in earning the confidence and trust of their customers. Without such trust, the prospects of Hong Kong as an IFC are doomed. Financial firms should avoid getting carried away in boom times. Motivated by big and growing profits and bonuses, many financial firms are minded to undertake very rapid (b) expansion without building the necessary risk management capability.

The northbound Stock Connect has presented a huge opportunity for Hong Kong to develop risk management capability for understanding of the risks and the pricing of such risks for offshore investors interested in the A share markets. Apart from helping to channel foreign investments into the Mainland market, the Stock Connect has also contributed to the inclusion of bigger weights of A shares in the global stock market indices such as the MSCI. Asian Equity Derivatives Hub 8. Another recent trend that is relevant is that several international financial firms have decided or are planning to relocate their Asian equities derivatives booking hubs from Europe to Asia. This is very logical as the underlying securities and clients are based in Asia. The HKMA welcomes these moves and stands ready to facilitate such moves, on the condition that the booking business must be accompanied by the necessary risk management functions. Again, this will enhance Hong Kong’s position as the risk management hub for Asian equities and derivatives, particularly Mainland related stocks. Bond Connect 9. By the same token, the launch of the northbound Bond Connect in 2017 has opened another window of opportunity for Hong Kong to enhance its risk management functions for offshore investors wishing to invest in the Mainland bond market. It is still early days yet, but I am confident that Bond Connect offers attraction to those investors who prefer using a nominee holding structure through the Central Moneymarkets Unit of the HKMA.
It is clear that, at the same time as the long tail of companies have been stagnating, they have been sky-rocketing. Or put differently, the distribution of UK firm-level performance has itself been widening or bifurcating over time. This pattern of productivities goes some way towards explaining, at least in an arithmetic sense, the large and widening divergence between regional levels of productivity. High-productivity regions have more of the frontier firms, and fewer of the long tail, than low-productivity regions. Or, put differently, high-productivity regions have greater numbers of companies from sectors with high productivity – for example, high-valued added chemicals companies, like those in Teesside. Charts 18 and 19 plot the estimated distributions of labour productivity, measured as output per employee, at the firm level across different regions and different sectors using the ONS ARDx dataset. What is striking is that differences in productivity within-region and within-sector are far larger than the differences across-region and across-sector. Every region and every sector has a range of both high and low productivity firms, with huge overlaps across regions and across sectors. There are, of course, some regions, such as London, and some industries, such as Information & Communication and Professional & Scientific services, which have a larger number of frontier firms in the far right-hand side of the distribution. But the North-East clearly also has its own set of productivity pioneers. This underscores the value of the Mayfield Commission’s benchmarking work.

Mojmír Hampl: Central bank independence in practice - the case of the Czech Republic Speaking points by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the Annual Research Conference of the Central Bank of Ukraine, Kiev, 1 June 2018. * * * Ladies and Gentlemen, Before I begin my talk in earnest, I would like to thank the organizers for inviting me to this inspiring event. It is an honor to participate in such a distinguished panel. And it is a particular pleasure for me to visit Kiev, one of the great historical pivots of Europe and also a city with immense economic potential. The latter, I believe, can be said about Ukraine in general. The topic of this panel and the entire conference is monetary-fiscal interactions. This is an important issue, and I am convinced that a good working relationship between the central bank and the government is imperative for the proper counter-cyclicality of economic policy. My intention today, however, is to offer a related but cautionary tale. I will talk about central bank independence, with an emphasis on the experience of my own country. Few economists nowadays doubt the importance of central bank independence for achieving price stability. For example, the latest meta-analysis of this research question summarizes 300 empirical estimates from dozens of studies and finds strong evidence that independence is crucial for delivering low inflation (Iwasaki and Uegaki, 2017). This finding holds for both developed and emerging economies, as the authors clearly show.
One – perhaps extreme – characterisation of such robust control thinking starts from the adoption of a so-called MINIMAX strategy to monetary policy decisions.16 Even if it is too abstract to offer a practical guide to monetary policy, it can act as a device to help clarify some ideas underlying the policy debate. The MINIMAX approach involves choosing the policy setting which works best in the worst circumstances that you might face across the possibilities of how the economy behaves. More precisely, if we characterise uncertainty as being reflected in a set of different possible models of the economy, policymakers seek to minimise the welfare cost in that model where those welfare costs are highest, given the observed developments in macroeconomic data. The intuition here can be understood using a recent practical example. Most new Keynesian macroeconomic models have more than one steady state. But the inflation targeting literature originally focused on developments around one of those states, namely – and of course unsurprisingly – that defined by the inflation target itself. But in the face of deflationary risks and the aftermath of the global financial crisis, another steady state – one characterised by the zero lower bound on nominal interest rates, the liquidity trap and the threat of persistent deflation spiral – could no longer be ignored. Since this other steady state entailed lasting deviations from the inflation target, the threat of falling into it weighed heavily on central bank thinking.

Difference rules thereby avoid introducing the policy mis-calibration and resulting noise that stems from using poorly estimated or mis-specified R- and Y-star measures.23  10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  I will explore briefly this idea in a narrower setting using a version of a model built by my colleagues Rich Harrison, Martin Seneca and Matt Waldron (a sketch of which is provided in the Annex). Essentially, this is a canonical three equation new Keynesian macroeconomic model estimated for the UK, with a few additional features to ensure more realistic persistence in inflation and output. Although estimated, I would emphasise that this is a stylised representation of the UK economy – I am using it for illustrative purposes, rather than to foreshadow any specific policy decision. In the background of the model are ‘cost-push’ shocks that introduce a difficult trade-off between inflation volatility around target and output gap volatility, which monetary policymakers seek to manage by varying the policy rate. My focus here is on the treatment by monetary policy of shocks to the R- and Y-star concepts embodied in this model. One can think of these as risk premium and productivity shocks. The crucial feature is that shocks to these starred variables have two components: one temporary, the other persistent. Neither policymakers nor households and firms can observe these shocks in real time. Rather, they have to learn about the persistence of the driving shocks over time on the basis of how the observed data evolve.
Interest rate differentials across regional deposit markets have vanished and the “law of one price” applies to all transactions within a deep and highly liquid pan-European market. Cross-border transactions - for unsecured interbank deposits and repos - now account for over 50% of all money-market cash transactions. EONIA and EURIBOR have within a very short time become the undisputed benchmarks for short-term interest rates. This is reflected for instance in the impressive development of the euro interest-rate swap market, where all but a few transactions are indexed on these benchmarks. This deep integration of the money market has prompted new organisational patterns in the banking sector, with a concentration of euro cash management activities making it possible to take advantage of higher liquidity levels on the secondary market. For instance, according to a survey by the International Securities Market Association in June 2002, the top ten banks in a panel of 77 accounted for 55% of the total reported business on the European repo market. As a result the price discovery mechanism on the money market is smoothened because trade decisions are based on information systems that capture the relevant parameters at euro-area level. The integration of euro-area financial markets has also deepened on the bond market: –  Rapid internationalisation has taken place.

The effective implementation of the acquis communautaire is not only a  8  BIS Review 2/2003  legal prerequisite for accession to the EU. It also implies the effective transformation of accession countries’ economic framework, which should facilitate their integration into the EU and, later, the euro area. In this context, it should be ensured that there is no discrepancy between the central banks’ formal status in the legislation and the implementation of that legislation. It is of utmost importance that all present and future Member States respect this economic and institutional ground rule of the European framework. –  Sixthly, let us not forget the present and future contribution of Central and Eastern European countries to the economic prosperity of Europe at large. It seems that this contribution might be sometimes underestimated, while the relative influence of the US economy, for instance, might be sometimes overestimated. In fact, transition economies, as a whole, are as important as the US in terms of external demand addressed to the euro area: they both enjoy the same share, i.e. 13% of our exports. And, during the last two years, transition economies contributed for two-thirds to the overall growth of our total external demand, while the US contributed for less than 0.1%. More generally speaking, Central and Eastern Europe countries are already major contributors to the overall growth on the European continent. In 2001, despite the international context, they remained at quite high a level of growth, around 2.8%.
The impact of a financial crisis emanating from the largest economy in the world that also serves as the world’s economic locomotive and provides the global reserve currency is likely to be pervasive and longer-lasting. There are no easy precedents, and we have to remain alert to new surprises. Moreover, the key pillars of economic theories that underpin much of our policy thinking are now being vigorously questioned. We need much more thinking and empirical work on how economies and people behave to draw out the critical lessons from this crisis. But based on what we know, we need to undertake policy changes to build a more stable, sustainable and resilient global economic and financial system. Much of this has to be globally coordinated, given the extensive linkages among economies and the financial system. In Asia, we face many policy challenges, and I will touch on three of these: managing the recovery, economic restructuring, and the regulation and development of the financial services sector. My main theme is that we must be cognizant that many Asian economies enter this crisis with different starting conditions, and going forward, face different challenges from those in advanced economies. Understanding these differences, and avoiding a onesize-fits-all approach, will be critical to the design of policies appropriate to each country and region. Managing the economic recovery First, the economy. The financial crisis hit Asia with unexpected speed and force.

Coupled with extremely accommodative monetary conditions globally, we can expect increasing inflow of funds to many emerging economies, including those in Asia, in search of yields. Managing this inflow so that it supports growth, and not drive excessive asset inflation, will be challenging. Policymakers will need a variety of tools. Economic restructuring in Asia Beyond the immediate challenges, the second set of issues that Asian policymakers will have to grapple with relates to the re-structuring of their economies. Business-as-usual policy will not work. The world has enjoyed a positive supply-shock with the entry of emerging economies into the global economy. We have had a period of Great Moderation. But this supply shock also creates new competitive dynamics, which will drive changes in the patterns of trade, production and growth in the coming years. The adjustments to these changes will be neither easy nor smooth. As unemployment in some advanced economies mount, the risk of trade and financial protectionism rises. Rapid changes in the real economy will generate greater uncertainty, and potentially greater volatility in financial markets. Over the next few years, Asia is likely to grow more slowly compared to pre-crisis days, when external demand from advanced economies weakens. To sustain growth, Asian economies with big domestic markets will need to continue with structural reforms to boost domestic demand. Smaller Asian economies will have to re-orientate their economies to respond to new opportunities in these markets.
1 See Article 127 of The Treaty on the Functioning of the European Union. 2 Jean-Claude Trichet, 2014: “Central Banking in the Crisis: Conceptual Convergence and Open Questions on  Unconventional Monetary Policy” Business Economics, Palgrave Macmillan; National Association for Business Economics, Vol. 49(2), pp. 74–84, April. www.perjacobsson.org/lectures/101213.pdf 3 Kydland, F. and E. Prescott (1977) “Rules rather than discretion: The inconsistency of optimal plans”, Journal of  Political Economy, 85(3), pp. 473–92. 4 Alesina, A. and L. Summers (1993) “Central bank independence and macroeconomic performance: Some  comparative evidence”, Journal of Money, Credit and Banking 25(2), pp. 151–162. 5 December 2018 Eurosystem staff macroeconomic projections for the euro area. 6 OECD Economic Outlook, November 2018. 7 Bank for International Settlements: Credit to non-financial corporations from all sectors at market value –  Percentage of GDP. March 2006 – June 2018 (unconsolidated data). 8 “The cost of deficiencies in euro-area economic policy coordination” Quarterly Selection of Articles No. 46,  Banque de France, summer 2017. 9 Address given by Pierre Werner, Luxembourg Prime Minister and Foreign Minister, on 30 September 1965 to the  Belgian Chamber of Commerce in New York. 6/6  BIS central bankers' speeches

15  The selection of the President consists of two steps: Appointment of the Reserve Bank president by the Board of Directors, and approval of the appointment by the Board of Governors. For details see: http://www.federalreserve.gov/faqs/how-is-a-federal-reserve-bank-president-selected.htm. 16  There is one exception, but it has little actual significance. Boards of Directors do make recommendations concerning changes in the primary credit (discount) rate. However, these recommendations only go into effect by an affirmative vote by the Board of Governors. Also, if the Board of Governors wanted to change the primary credit rate and no recommendations were available to act upon, the Board legally could move unilaterally. In fact, what would likely happen in this unlikely circumstance would be a phone call to one or more Reserve Banks to ask for the desired recommendation and rapid compliance with the Board of Governors’ request. BIS central bankers’ speeches  5  president about economic, community and business developments in the District, and to ensure that the Bank is a well-governed and well-managed institution. 17 And, although member banks hold capital in the Federal Reserve and receive a dividend set by law against this capital, member banks do not influence the Fed’s monetary and regulatory policy decisions, how policy is implemented or the supervisory oversight of banks. The Dodd-Frank Act also addressed the need for enhanced transparency by establishing disclosure requirements for participation in Federal Reserve facilities.
The different responses of those central banks reflect their institutional framework as well as the economic circumstances of the respective countries. On one hand, the SNB has been more flexible than the ECB. The ECB is a new institution without historical record. Moreover, the ECB has a strict mandate of maintaining low inflation, and there have been upward inflationary pressures in certain European countries due to the convergence process. Those factors induced a less aggressive easing of monetary policy in an uncertain environment. In contrast, with traditionally low inflation, the credibility of the SNB is strong, which allows it to react quickly to economic shocks without creating turmoil in financial markets. In the past few years we have thus been able to act in a flexible way, with our own timing, in order to respond to the global economic slowdown and pressures on the Swiss franc. On the other hand, the SNB reacted less strongly than the Federal Reserve to the deterioration of the international economic environment. The United States is a relatively closed economy where the Federal Reserve mandate is broader than price stability. In contrast, our freedom to maneuver is limited by the openness of our economy. In a small and open economy, monetary activism cannot  4  BIS Review 32/2004  fine-tune economic activity. Institutional and economic characteristics of the different countries and central banks have thus implied differentiated monetary policy profiles. 5.

In the past, the Swiss franc was overreacting to the dollar’s fluctuations, so that the pain of an appreciation of our currency relative to the greenback was exacerbated by a simultaneous appreciation of the Swiss franc relative to the German mark. This double whammy effect, attributed to the narrowness of the Swiss franc market, was highly penalizing for our export sector. Since the introduction of the euro however, this pattern is no longer observed. Thus, the evolution of the Swiss franc sticks closer to our economic fundamentals. I will address this issue more extensively later on and argue that this trend can be generalized to apply to other currencies as well. (b)  The euro as a means of payment  Those who thought that the euro would make the Swiss franc obsolete as a means of payment were also mistaken. True, our ATM machines have been adapted to provide euro banknotes, so that it is now possible to pay in euro almost everywhere in Switzerland. Yet, despite these efforts, the demand for euro notes is still weak and those notes do not circulate any more extensively than French francs, Italian lira and German marks used to. In truth, it may well be that the expenses incurred to transform all those ATM machines ended up being a misallocation of resources. In stores and restaurants, prices denominated in euros are usually not very attractive. Obviously, small shop and cafe owners are not thrilled by the idea of accepting cash payments in euros.