samchain/econo-pairs-v1 huggingface dataset:
Protectionism is the polar opposite of free trade, the negative impact of the former mirroring the positive effects of the latter. Tariffs make imports more expensive, thereby increasing domestic production costs and reducing consumers’ purchasing power. Tariffs imposed by trading partners restrict exports. Trade barriers impact on the division of labour worldwide, productivity declines, growth and progress are curbed. Although it is difficult to estimate the negative impact of a worldwide trade dispute on global GDP, there can be no question that a full-scale trade war would weigh heavily on the world economy. Not least because it would be likely to entail a slump in confidence among economic actors and upheaval on the financial markets. 5 All countries would feel the detrimental effect of a global trade war, but small open economies such as Switzerland would be among those hardest hit. 5  A range of authors have recently published estimates of the effects of a global trade war on the real economy. In their study, Berthou et al. (2018) simulate a 10 percentage point increase in tariffs worldwide, and found that this could reduce global GDP by around 1% after two years, taking only the direct trading effects into account. Other studies, such as that published by the OECD (2016), show similar results. If the indirect effects on confidence and the financial markets are considered in addition to the direct impact, the decrease in global GDP could be three times greater (Berthou et al., 2018).

The foundations for a fiscal compact have been laid – a suggestion presented before the plenary of the European Parliament at the ECB hearing on our annual report at the beginning of this month. It has been agreed that the annual structural deficit should not exceed 0.5% of nominal GDP. Euro area Member States will implement such a rule in their national legal frameworks at a constitutional level. The objective is to avoid excessive deficits before they arise, rather than  2  BIS central bankers’ speeches  trying to control them after they have emerged. An automatic correction mechanism is also foreseen in case of deviation. Moreover, the leaders agreed on a numerical benchmark for annual debt reduction to bring down debt levels. Sanctions will also apply automatically to euro area Member States in breach of the 3% reference value for deficits. The European Court of Justice may be asked to verify the implementation of these rules at national level. The new fiscal compact is an essential signal, showing a clear trajectory for the future evolution of the euro area. It frames expectations of both citizens and financial markets. Enshrining strict rules in primary legislation, making them enforceable by the European Court of Justice: all of this should contribute to making public finances in the euro area credibly robust. The ECB welcomes this outcome.
Unbeknownst to the other participants, one member in each group had been instructed to argue for the wrong answer within one of the question sets. They did their job well. The groups did very poorly on the set of questions where the conference organiser’s confederates argued for the wrong answer. 26 There is thus a danger that members of a group can be swayed by other members to make the wrong choice. But falling into the opposite trap – paying insufficient heed to others’ advice – is not unusual either. This is a pitfall that many people, who have been in management for a while, will be acquainted with. Psychologists have known that such  22  See more about this in Erling S. Andersen, Ingeborg Baustad and Åge Sørsveen (1994): Ledelse på norsk [Norwegian management], Ad Notam Gyldendal, Oslo, pp. 117–126. 23  Three in Switzerland and 22 in the European Central Bank. 24  See more about this in for example Alan S. Blinder (2008) and Anne Sibert (2006): “Central Banking by Committee”, International Finance 9:2, pp. 145–168. In September 2007 Norges Bank hosted a conference on monetary policy committees. The opening address was given by Alan S. Blinder, former vice chairman of the Federal Reserve Board, and is one of the economists who has focused most on group decision making. Anne Sibert also attended this conference.

If such an instrument had been in place since 10/11  the inception of the Euro, most countries (and not only the usual suspects) would have benefited from the scheme at one point, without permanent redistribution across countries. Finally, the creation of a common safe asset for the euro area should be explored further. The normal operations of markets and financial intermediaries require a broad spectrum of assets with sufficient liquidity and minimum counterparty risk. This situation is amplified in turbulent times, as investors react to increases in uncertainty by accumulating assets with a low level of perceived risk. Within the EMU, the volume of such assets is insufficient, as only the debt of a small group of countries is perceived as riskless, thereby giving rise to scarcity and financial fragmentation. An improvement in the fiscal position of countries might help expand the number of available safe assets. But a common safe asset will have additional benefits, by contributing to reducing the link between national governments and banks; preventing destabilising cross-border flights to safety in the event of difficulties; and, more generally, promoting a more stable and equitable provision of safe assets for the EMU as a whole. In sum, there is a pressing need to improve the functioning of the EMU before the next crisis hits. Increasing financial integration and introducing fiscal instruments to improve macroeconomic stabilisation are of the utmost importance in achieving this goal. Thank you for your attention. 11/11
♦ The path ‘consistent with the target’ which is announced in 5 December 2005 ‘’General Framework of Inflation Targeting Regime and Monetary and Exchange Rate Policy’ and constitutes the base for the principle of “accountability”. • 2006 end-year point target. ♦ The path consistent with the 2007 end-year target, under contemporary data set. The inflation forecasts given in Graph 25 were made under the base scenario developed on the basis of the assumptions and short-term outlook mentioned above, and the stance under which the Central Bank will progressively cut its policy interest rates in the forthcoming period. Accordingly, it is forecasted, in the light of current information, that inflation will be realized between the 4.8-6.4 percent at the end of 2006 and between the 2.9-5.4 percent at the end of the first nine months of 2007. In other words, according to the forecasts that have been produced within the framework of today’s data set, inflation will regain a downward course starting from the second quarter of the year. This tendency will become more apparent as of the third quarter and year-end inflation will be realized close to the target (Graph 25). The Graph also displays forecasts on the output gap that constitute the basis for the inflation forecast. Accordingly, the output gap will continue to remain negative throughout 2006. In other words, the contribution of overall demand and capacity conditions to the falling inflation process will continue in 2006 as well, albeit with a decline compared to the previous years.

For instance, the impacts of differentiation in productivity ratios in the tradable and non-tradable sectors compared to the Euro zone on relative prices and real exchange rate behavior in the process of convergence with the European Union are analyzed in one of the boxes. Moreover, in addition to the box in which international gold prices and the impacts of these on the CPI are analyzed, the Report also contains a box in which the targets and realizations relating to inflation and Net International Reserves are evaluated within the context of IMF conditionality. Distinguished Guests, After this general overview, I would like to summarize the evaluations and the inflation forecasts of the Central Bank in the latest Report, which will be published on our web site today. Inflation developments In the first quarter of 2006, the fall in inflation displayed a slowdown tendency in line with our predictions in the previous Inflation Report and the annual rate of increase in consumer prices was realized as 8.16 percent as of the end of March 2006. This slowdown stems from the base effect created by the price increases that have realized at historically very low levels due to the reduction in the Value Added Tax (VAT) rates of food, health and education items made in early 2005 (Graph 1). Graph 1.
Consider the rare example of the shift from sterling to the dollar in the early 20th Century – a shift prompted by changes in trade and reinforced by developments in finance.37 The disruption wrought by the First World War allowed the US to expand its presence in markets previously dominated by European producers. Trade 33  The design of the GFSN is also important. Positive steps have been made in recent years by introducing precautionary liquidity facilities so countries can borrow to prevent crises, as well as mitigate their impact. This should also reduce stigma of drawing on the facilities. But so far, only a few countries have taken them up. It is important to do everything we can to normalise use of these precautionary facilities. 34 World Bank. 35 Taken from The International Role of the Euro June 2019, ECB. 36 Initiatives include trade settlement programs, RMB offshore clearing banks, off-shore RMB denominated bond market in Hong Kong, and a network of central bank RMB swap lines. 37 For more details, see Eichengreen, B J (2008), ‘Globalizing capital: A history of the international monetary system’, Princeton: Princeton University Press; and Eichengreen, B, Mehl, A, and Chiţu, L (2018), ‘How Global Currencies Work: Past, Present, and Future’, Princeton University Press. 13  All speeches are available online at www.bankofengland.co.uk/news/speeches  13  that was priced in sterling switched to being priced in dollars; and demand for dollar-denominated assets followed. In addition, the US became a net creditor, lending to other countries in dollar-denominated bonds.

42  15  All speeches are available online at www.bankofengland.co.uk/news/speeches  15  Of course, there would be many execution challenges, not least the risk of fragmentation across Digital Currency Areas.44 But by leveraging the medium of exchange role of a reserve currency, an SHC might smooth the transition that the IMFS needs. Conclusion 20 years ago, the theme of this symposium was “New Challenges for Monetary Policy”, and my predecessor, Mervyn King, was one of the speakers. His reflections were on the merits of inflation targeting and flexible exchange rates. The applications of his insights have contributed greatly to improved economic outcomes around in the world in the intervening years. But during that same period, the deficiencies of the IMFS have become increasingly potent. Even a passing acquaintance with monetary history suggests that this centre won’t hold. We need to recognise the short, medium and long term challenges this system creates for the institutional frameworks and conduct of monetary policy across the world. Given the experience of the past five years, I will close by adding urgency to Ben Bernanke’s challenge. Let’s end the malign neglect of the IMFS and build a system worthy of the diverse, multipolar global economy that is emerging. 44  For more discussion of this, see Brunnermeier, MK, James, H and Landau, JP (2019), ‘Digital currency areas’, VoxEU. 16  All speeches are available online at www.bankofengland.co.uk/news/speeches  16  Annex I.
The second part of my status report therefore concerns where we stand in the crisis cycle with regard to the financial system, how the socalled unconventional measures we have taken appear to have worked and how we look upon them in the future. But, before we go on to this – let me give you a brief summary of the “extraordinary” or “unconventional” measures taken as a result of the financial crisis and its effects. “Extraordinary” or “unconventional” measures… When the international financial turmoil escalated into a worldwide crisis in September last year, many countries found it necessary to dig much deeper than usual into the economic policy toolbox to find partly new methods and tools. Governments, central banks and other authorities around the world have taken extensive measures to recreate confidence in the financial markets, to maintain financial stability and to counteract the negative effects of the crisis on economic activity. The central banks’ measures, such as lending to the banks, are reflected in the fact that their balance sheets have increased substantially during the crisis, as can be seen in Figure 7. 6  BIS Review 138/2009  Figure 7.

But as markets attained a global dimension, encouraged by financial liberalisation and the advance of information technology, they became far less tolerant of weaknesses than before, and the markets responded to weaknesses with harsh punishments, which many considered grossly unfair. But this is the reality that we face. And if we are to continue to benefit from the greatly enhanced efficiency of global financial markets in international financial intermediation - a process that has contributed so much to development - we have to get on with the necessary reforms. These include the domestic structural reforms to the financial and corporate sectors, to make sure that we can manage the risks and cope with the volatility that are part of that efficiency. And, to the extent that consensus can be reached, they also include measures to strengthen the international financial architecture. Thus, with some encouragement from the Bank and from others, and more importantly, urged on by the brute forces of the market, significant progress has been made in the domestic structural reforms of individual economies in the region. I applaud the progress and the achievements; and I sympathise with the pain and suffering which they have entailed. With the economic recovery of the region now well under way and international funds flowing back into the region, I would also urge a continued commitment to structural reforms and caution against complacency.
In big picture terms, the Bank of England’s programme of auctions to purchase small amounts of a fairly wide range of sterling corporate bonds can be viewed as one manifestation of that broad approach to MMLR. The aim has been to aid improvements in the liquidity of the market, including by reducing the inventory risk to “market makers”. But our community is some distance from thinking through the extent to which this kind of thing should feature as a permanent part of our armoury. While not an urgent issue, it is an important one given the increasing role of capital markets in our financial system. Recovery plans, and contingent capital Whether provided to individual firms or to markets, routine liquidity insurance will not always suffice. Sometimes a liquidity problem is triggered by fundamental problems. Sometimes a liquidity crisis creates credit problems through the effects of a fire sale of assets. Firms must plan for distress. Not only is that in the interests of the financial system and, indeed, of the economy more widely, it is in the interests of firms themselves. At not a few distressed firms around the world, at times over the past three years the leadership “lost it” under the pressure of events. Contingency planning is essential. Regulators must make firms do it – properly. And that means for really disagreeable scenarios. As the UK’s FSA has recently explained, 3 the clear recommendation of the G20-sponsored Financial Stability Board is that these contingency plans need two, distinct components.

The recent report by the Intergovernmental Panel on Climate Change (IPCC) is sobering. To limit global warming to 1.5 degrees Celsius, global greenhouse gas emissions must peak by 2025 and come down by about 45% by 2030 relative to 2019 levels. This is far from the emissions trajectory we are currently on. Climate change is a long-term risk but whether and how that risk materialises depends on what we do in this “critical decade”. The already tepid transition to net zero has been thrown into disarray by the war in Ukraine. In the short term, the imperative facing some major economies to cut dependence on Russian supplied gas could see them turn to readily available fossil fuel alternatives, including coal. It will take some time for reliable renewable alternatives to fossil fuels to scale up and be widely available at viable costs. At the same time, governments’ fiscal resources are being stretched by the need to provide support to cushion against macroeconomic stresses arising from the war as well as humanitarian relief. This means less fiscal space for public investments in green technologies and infrastructure. But there are also promising efforts to turn the tide. Many governments recognise that environmental sustainability and energy security are complementary goals. We have seen, in recent weeks, new policy proposals that may lead to a more decisive pivot towards renewable energy. The European Commission’s REPowerEU proposal includes targets to further boost renewables development and quadruple green hydrogen supplies by 2030.
In particular, concerns have been expressed about the potential distributional effects of monetary policy. In the simple two-car economy described earlier, monetary policy did have some potential short-run impact, potentially shrinking the distribution of income but raising the distribution of wealth. What does the real-world evidence suggest? Several of my colleagues on the MPC have recently presented evidence which speaks to this issue. For example, Ben Broadbent has looked at evidence on the Gini coefficient – a measure of the degree of inequality - for UK households’ income and wealth over recent years. He finds no evidence of these inequality measures having increased over the period since the UK’s monetary policy loosening. 18  Jan Vlieghe has recently looked at how monetary policy may have affected the fortunes of, among others, savers, pension funds and pensioners. The empirical evidence does not suggest these cohorts have been  18  Broadbent (2016). 10  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  10  disadvantaged to any significant degree by the monetary policy stance. For most members in each cohort, the boost to their asset portfolios and the improved wages and profits due to a stronger economy more than offset the direct loss of income from lower rates. 19  If we look at the regional dispersion of wages, unemployment and wealth over the period of the UK’s monetary policy easing, the picture is roughly as we might expect.

Admittedly, in all these areas progress is still possible and desirable, but what has been achieved so far now enables you to address a number of institutional issues for the solution of which Western experience is fast becoming increasingly and directly relevant. But before considering some of these issues, allow me to make some remarks about the macroeconomic situation of the Hungarian economy and about the new framework within which the National Bank of Hungary will be operating. Both these areas are of key importance for the management of your banks. At the same time, both have a bearing on Hungary’s declared intention to join the European Union (and within this, probably at a later stage, also EMU). Last but not least, both are important areas in themselves, irrespective of considerations relating to European integration. THE MACROECONOMIC SITUATION That there has been a significant improvement since mid-1995 in Hungary’s macroeconomic situation is beyond doubt. Here are a few facts and comments on some of the features of this improvement. 1. The current account deficit reached $ billion in 1993 and almost $ billion in 1994, i.e. more than 10% of GDP - an obviously unsustainable situation by any standards, but even more so for a country with a high debt ratio.
If it appears that inflation will be higher than 2.5 per cent, the interest rate will be increased. If it appears that inflation will be lower than 2.5 per cent, the interest rate will be lowered. This is a clear and simple interest rate setting principle to which the public and market participants can easily relate. This kind of simple principle also contributes to reducing uncertainty about the central bank’s trade-offs between price stability and stability in output and employment. We have no reason to believe that a variable horizon would generally result in substantially higher stability in inflation and output than a two-year horizon. In some cases, however, it may be appropriate to change the horizon. In situations where the central bank’s forecasts indicate that substantial imbalances in the real economy would arise if the interest rate was set so that the inflation forecast two years ahead was the same as the target, it might be appropriate to apply a somewhat longer time horizon. The same may be the case if financial stability is at risk. The entire path for inflation and the real economy, both before and after the two years, will be taken into account when setting interest rates. There are two reasons for this. First, there may be several paths that result in inflation of 2.5 per cent at the two-year horizon, and developments after the twoyear period may be important to the choice of path.

The Bank of England is responsible for operation of the SRR (with the exception of Temporary Public Ownership, where the Treasury is responsible). The Bank will consult the FSA and Treasury before selecting the SRR tool to be used, and we need to obtain the agreement of the Treasury to the implications of the chosen tool for the use of public funds. Also, the Bank can make recommendations to the FSA when it feels that the SRR should be triggered, though as I have said, the decision is for the FSA. Finally the Financial Services Compensation Scheme (FSCS) plays an important role in the resolution process. This would be very obvious if an actual payout of depositors was chosen and the FSCS would work very closely with the administrator. They also have a prior role in assessing whether payout is feasible in a reasonable time. But the FSCS can also be requested to contribute to the cost of other forms of resolution up to the net amount it would have failed to recover in insolvency if there was an actual payout. This approach can be used, for example, where there has been a transfer of deposits – and the FSCS can provide  BIS Review 157/2009  3  a suitable deposit to contribute to the immediate cost to the authorities. The FSCS does not however operate a pre-funded scheme in which money is available on call to provide such a substitute deposit.