samchain/econo-pairs-v1 huggingface dataset:
Employing again the simple AD/AS framework, their initial impact may have resembled a leftward shift in supply (Chart 8a) – but in time these hits to real income also take their toll on demand, shifting the AD line to the left as well (Chart 8b). Charts 8a and 8b: The shocks hitting the UK have pushed up inflation and started to weigh on demand  That hasn’t happened to any appreciable extent so far. Households emerged from the pandemic with extremely high rates of saving: having been so suppressed during the lockdowns, consumer spending had ample room to bounce back when they were lifted (even without any subsequent growth in income). Those high saving rates had resulted in the accumulation of significant “excess deposits”: measured relative to household incomes, they were around 15% higher than before the pandemic (Chart 9). Wider measures of households’ financial wealth had also recovered strongly, along with global equity markets, and those too were comfortably above average. All this provided the support for a very steep decline in the rate of saving (i.e. for consumption to grow much faster than income) once the economy came out of the lockdowns.

This is most pertinent for regulators and for central banks’ work in economy-wide forecasting, policy analysis and scenario simulation. I would also encourage further research in this area, including developing empiricallyvalidated feedback relationships that can be embedded into models for stress testing purposes. Evaluating the impact of FinTech 25 Turning now to a recent pet topic of interest – FinTech. Much has been written and reported on technology innovations that have and will continue to disrupt business models. There are also many views around disruptions to jobs and on socio-economic relationships. 3/5  BIS central bankers' speeches  26 Let me make some brief comments on MAS’ regulatory stance towards innovation in financial services. For any innovation or a new technology-based business model to take off, it must be purposeful and value creating. 27 For example, there are FinTech entities that have entered the financial inclusion space, especially in the rural areas, and boosted economic growth. 28 There are other examples. Robo-advisory services can allow investors greater access to customised, low-cost financial advice. Other initiatives like open banking can provide potential benefits to a broad range of consumers by allowing for the easy portability of data and payment instructions. The use of distributed ledger technology, or blockchain, may replace traditional central party systems or intermediaries by creating alternative trusted platforms. Such blockchain-based immutable transaction and account records may help to facilitate cross-border transactions, by cutting costs and settlement time without compromising on security and certainty.
So in the event of increased funding pressures, a number of banks had planned to use securitisation techniques more intensively to liquefy assets such as mortgages. Such a counter-measure may well succeed if a single firm faces a liquidity problem on its own. But of course this approach fails completely when the source of the change in market conditions is a lowering of global demand for securitised products and a widespread closure of term lending markets. Another approach is to bid for higher retail deposits. That is likely to take time as many individual retail savers react only slowly to changes in relative interest rates and as banks offer higher rates on term deposits to limit their movement. More importantly, this approach can only succeed by offering rates above those of competitors, thereby eroding margins. And in an environment of general liquidity strain, competitors are likely to follow suit to protect their market share. So the impact on each bank in the medium term is likely to be limited to a share in any rise in aggregate retail savings. Faced with restrictions on raising liquidity, a bank must respond to a funding shortfall by acting on the asset side of its balance sheet to lower its financing need: in other words, by slowing or even reducing its lending to households and corporate customers. This policy will ease funding pressures and boost liquidity, but it has two major drawbacks. The first is that it takes time to take effect.

It is calibrated to ensure that a bank has enough highly liquid assets to meet its outflows for the first week of a liquidity crisis without recourse to the market for renewed wholesale funding, in order to allow the authorities time to explore options for an orderly resolution. It was designed as one component of a wider crisis management regime, and not as a means for a bank to manage its precautionary buffer for addressing liquidity strain on a going concern basis 3 . Chart 4 shows how actual liquid reserves fell in line with minimum requirement levels until 1981, and continued to decline afterwards, albeit more slowly. Clearly, over this same period, banks also diversified their liquid asset holdings to include other currencies, and started using repo markets extensively. So the chart may exaggerate the decline somewhat. Nonetheless, the overall historical pattern has clearly been one of a marked secular decline in cushions of high quality liquid assets. Similar trends also prevailed in countries other than the UK, such as the US, Canada and Sweden. 4 And focusing on the past decade, whilst holdings of very high quality liquid assets have remained relatively stable, they have not increased to match banks’ rising vulnerability to liquidity risk described above. 3  See Financial Services Authority: “Review of the liquidity requirements for banks and building societies” Discussion Paper 07/7. December 2007. The UK regime is under review. 4  See Goodhart, C.A.E. (2008), “Liquidity and Money Market Operations: A Proposal”, London School of Economics, mimeo.
This would have three advantages: the numerical target would be clarified; the current target (which is below 2%) would be raised, thus providing more space for our interest rate policy; and the possible perception of asymmetry in the current formulation would be completely eliminated. Another key aspect will be which tools are to be included in the ECB’s monetary policy toolkit and how they are to interact within the new strategic framework. In this regard, it seems clear that, against the backdrop of low natural interest rates and greater constraints on the use of nominal interest rates as a stabiliser, asset purchase programmes and liquidity-providing operations have become part of central bankers’ normal “toolkit”. Moreover, the pandemic crisis has dramatically illustrated how the economic and financial impact of exogenous crises affecting the euro area as a whole can be asymmetric across jurisdictions. This suggests that we ought to have sufficiently flexible instruments available, so as to avoid the re-emergence of fragmentation dynamics that jeopardise the smooth transmission of monetary policy throughout the euro area. The current crisis has also highlighted that monetary policy cannot be the euro area’s sole stabilisation mechanism. Indeed, it is crucial that the euro area should have a permanent fiscal stabilisation mechanism to enable future crises to be addressed without the need for ad hoc political agreement. The European funds approved during this crisis may prove to be a sound embryo for this mechanism.

However, these values are far below the objective of price stability, which is defined as inflation of below, but close to, 2% in the medium term. The latest data, referring to the February estimate, for the euro area’s Harmonised Index of Consumer Prices show a year-on-year increase of 0.9%, the same figure as in January. The smaller drop in energy prices appears to have been offset, in the context of rising oil prices, by moderation in the core component (which excludes energy and food). The latter fell by 0.3 pp with respect to January to 1.1%. This outcome was determined in particular by temporary factors, such as the updated HICP weights, which since January are based on 2020 consumption patterns and which, although they will have a very marginal downward moderating effect on the year as a whole, will have a considerable impact on short-term inflation dynamics, making them difficult to interpret. Also, the pandemic containment measures appear to be changing the seasonal sales calendar in various countries. The situation I have just described is, therefore, one of a fragile, uneven and uncertain recovery in the euro area, where some of the downside risks for our short-term baseline scenario, which were identified just a few months ago, appear to be materialising. Against the current backdrop of uncertainty surrounding both the course of the pandemic and the speed of the vaccination campaigns, the best contribution that economic policy can make is to instil confidence and certainty.
At a minimum, the exchange of views and a better understanding of country positions may help to avoid even worse outcomes. For example, in 2009, there was real concern that countries might respond by resorting to protectionist measures. That has, by and large, been avoided. And some aspects of the international policy process have worked well. A good example is, in my view, provided by the redrawing of the scope of financial regulation. Here the G20 has set the overall political direction and tone, delegating the task of developing a detailed template for new international rules and regulations to the technocrats on the Financial Stability Board and the Basel Committee on Banking Supervision. This division of labour has enabled a substantial amount of new regulation relating to matters such as bank capital and liquidity requirements, financial sector compensation, and the principles for handling failing financial institutions to be developed in a relatively short period of time. So, despite the modest progress in restoring our economies to Strong, Sustainable and Balanced Growth in the global economy, policy makers can claim some successes. And on that more upbeat note, let me conclude. Thank you! BIS central bankers’ speeches  5  References Bean, C R (2002) “The MPC and the UK economy: should we fear the D-words?”, Speech given to The Emmanuel Society. Borio, C and Disyatat, P (2011) “Global imbalances and the financial crisis: Link or no link?”, Bank for International Settlements Working Paper No 346.

Much of this “banking glut” 4 can be traced to the advanced economies: for example, around half of the gross inflows into the United States just before the crisis came from European institutions, rather than emerging economies. 5  3  See Borio and Disyatat (2011), Cecchetti (2011) and Tucker (2012) for more on this issue. 4  See Shin (2012). 5  See Borio and Disyatat (2011). BIS central bankers’ speeches  3  Now global capital flows of this nature can be valuable. They help to oil the wheels of the international financial system, allowing saving to flow to where it can be most effectively used. They allow banks to diversify across national boundaries, reducing their susceptibility to idiosyncratic domestic shocks. And they increase the degree of competition within the domestic banking market. But by increasing the linkages between financial systems, they can also increase systemic vulnerabilities. In this case, banks became dependent on shortterm funding from overseas, rather than their traditional domestic deposit base. When investors re-trenched, that funding dried up and banks struggled to find viable alternative sources of funding. Ensuring gross capital flows are not excessive is just as important as avoiding excessive net capital flows. Moving to a sustainable equilibrium requires a narrowing in the international payments imbalances. And we have indeed seen such a narrowing since the start of the crisis.
16  40  60 80 Unchanged  100  Figure 9  Labor income and social benefits (1) (2) (variación anual, porcentaje)  20  20  10  10  0  0  -3  -10  -10  -20  -20 -27  -30 -40  Second quarter Labor income  -30 Third quarter Social benefits  -40 Net  (1) The labor income is calculated using the wage bill, where (a) the employment projection is that implicit in the baseline scenario of the September 2020 MP Report, (b) those employed covered by the Employment Protection Law are excluded from the calculation, and (c) the labor income of self-employed workers would fall by 55% in Q2 and 35% in Q3. (2) The calculation of benefits considers: Employment Protection Law, Emergency Family Income (IFE), Severance Insurance, Covid-19 Emergency Bonus, and Middle-Class Bonus. Official information regarding payments already made is updated to 27/Aug/2020 and interpolated for the remaining months. For the IFE, four payments are considered. It does not consider the reforms to these benefits that had not been approved at the statistical closing. Source: Central Bank of Chile using INE, Ministry of Finance and Superintendence of Pensions data. Figure 10  Sales by electronic billing (*)  (moving two-week average, billion pesos)  7  Supermarkets  6  30/Jul,: Law for 10% pension fund withdrawal published in Official Gazette  5  +33% 6 +15%  4  2  20 01  4  2  26/Mar.

THE ANNUAL STATEMENT OF THE CENTRAL BANK OF CHILE PRESENTATION BEFORE THE HONORABLE SENATE OF THE REPUBLIC ∗  Mario Marcel Governor Central Bank of Chile September 2, 2020  ∗ The September 2020 Monetary Policy Report can be found at http://www.bcentral.cl. I. Introduction  Madame President of the Senate Senator Adriana Muñoz, honorable Senators, ladies, and gentlemen: On behalf of the Board of the Central Bank of Chile I thank you for the invitation to present the report that, according to the Constitutional Organic Law (LOC) of the Central Bank, we must deliver annually to the Senate. In compliance with this obligation, the following presentation includes our vision on recent macroeconomic and financial developments in the Chilean and international economy, as well as their perspectives and implications for the conduct of monetary policy, as contained in our Monetary Policy Report (MP Report) of September 2020. In addition, there are other matters of institutional relevance, related to the Bank’s performance in achieving the objectives assigned by law, the evolution of its balance sheet and technological development. In the September MP Report, along with a more detailed explanation of the Bank’s balance sheet, you can find a summary of the main decisions adopted by the Board this year to date as well as information on the management of international reserves. II.
It also covers a large proportion of household consumption. These were central arguments when the CPI was chosen as the target variable in the beginning of 1993. A disadvantage with the CPI, however, is that it combines information about inflation’s underlying trend with transitory price movements. In the period in which the inflation target has been in force, transitory factors have had a marked effect on the CPI on a number of occasions. Examples of such factors are tax changes (most recently the increases to and subsequent cuts in property and tobacco taxes) and fluctuations in interest rates (which affect the CPI in the form of house mortgage expenditure). During 1996 and 1997 in particular the CPI has been relatively markedly below not just the targeted rate but even the tolerance interval. This has faced the Riksbank with educational problems. Transitory effects on inflation ought to be a secondary consideration in monetary policy and be absorbed inside the tolerance interval of 1–3 per cent. That is one of the interval’s functions. And BIS Review 47/1998  -6provided it is a question of temporary price movements around a stable rate of inflation, there is no reason to counter such movements with repo rate adjustments. On the contrary, that might have a destabilising effect in the real economy. Instead, monetary policy’s central concern is the direction of inflation’s long-term trend. It is this trend which can be affected more directly by total demand and hence by monetary policy.

Mr. Heikensten examines economic policy and the fight against inflation in Sweden Speech by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikensten, at the Meeting of Almega-Affiliated Employers’ Associations on 27/5/98. Thank you for the invitation to attend your meeting and talk about economic policy and inflation. Today I shall begin with a brief review of the historical background to the fight against inflation in the Swedish economy. It is worth recalling that more than eight years have passed since it was decided in Sweden that combating inflation would have top priority. This policy has been pursued consistently ever since. After a couple of initial years that were troublesome in many ways, the results have been encouraging and Swedish stabilisation policy now looks good even in a European comparison. This will be followed by a discussion of three policy fields—fiscal policy, labour market and wage formation—that are closely linked to monetary policy, as well as some remarks about competitive conditions in Sweden’s economy. Successful results in these policy fields enlarge the room to manoeuvre in monetary policy. In conclusion I shall consider some topical monetary policy issues, including our current appraisal of inflation and monetary policy’s construction. 1. The fight against inflation and its results High inflation characterised Sweden’s economy for a number of years in the 1970s and 1980s, a period that clearly illustrates an inflation economy’s negative consequences. Repeated attempts were made to rectify the economic imbalances by means of devaluations and fiscal stimuli but development remained unstable.
This time, the banks, instead of asking for financial statements, obtained alternative data from various data providers through CDI. For instance, from integrated online shopping platforms, banks learnt the amount of chilled chicken Chu Kee supplied to different supermarkets, and their value. 11. With the data, the banks understood Chu Kee’s latest operating conditions better and made credit decisions speedily. Needless to say, before the data was used and shared, prior consent from Chu Kee was obtained. In the end, Mr Chu secured a substantial loan at a competitive interest rate, and was very pleased with the hassle-free experience. 12. Now, what if I tell you that the above is based on a true story?2 Yes, during the technical exploration stage, CDI has already, in real life, helped SMEs in Hong Kong take more control of their own digital footprint, and use their own data to improve their access to financial services. Importers of chilled food and sneakers, and manufacturers of phone accessories have already enjoyed the benefits of CDI firsthand. As more and more banks and data providers join CDI, we expect that an increasing number of SMEs will benefit from the platform. 13. For CDI to reach its full potential and successfully connect the digital islands, your active participation is crucial. CDI is definitely a team sport, and we all have a role to play as members of Team Hong Kong. 14. The HKMA, as a regulator, will facilitate a conducive environment, and we are doing that by building the infrastructure and offering guidance.

With CDI, each bank and data provider will only need a single connection to the CDI platform, allowing banks to quickly access the business data of corporates. Banks will also be able to conveniently and swiftly set up connections with new data providers because CDI uses standardised APIs and data models, and adopts existing mainstream industry standards such as the Legal Entity Identifier. 7. I mentioned that CDI is designed with improving interoperability in mind. Because the platform can link up scattered digital islands and smoothen data sharing, it has great potential to enhance trade financing process and improve SMEs’ access to financing. Let me show you how this could be achieved with the aid of a story. 8. Mr Chu runs a small business called Chu Kee with the help of his wife and parents. Chu Kee imports chilled chicken from Guangdong and sells them to supermarkets all around 1/3  BIS central bankers' speeches  Hong Kong. The delicious taste of the chilled chicken and the Chus’ impeccable service quickly earned Chu Kee a big group of loyal customers. 9. A few years ago, when Mr Chu was trying to apply for loans from banks to expand the business, he was unable to produce the financial statements required because he had never properly prepared one before. The loan approval process ended up taking almost six months, and the experience left Mr Chu rather upset, unfortunately. 10. Last year, Mr Chu was ready to further expand Chu Kee, and decided to give CDI a try.
It is therefore in the interests of the Riksbank to participate in a dialogue and the development of knowledge that will facilitate this dialogue. I have here today identified a number of areas for future study and research. They have to do with the adaptation of wages in Sweden to the rate of wage increase in the Euro area, increased variability in nominal wage costs in Sweden and increased geographical and professional mobility in the European labour market. Let me to this add the big issue of demographic change and its effects on labour supply. Another interesting question, which is of imminent importance to Sweden, has to do with what 7  See Björklund et al. (2000): Arbetsmarknaden (The Labour Market), SNS Förlag, Kristianstad. 8  Communication, New European Labour Markets, Open to All, with Access for All, COM (2001)116. 6  BIS Review 40/2002  effects wage increases in the public sector will have on inflation. I hope that the trade unions in Europe will take an active part in initiating and carrying out research projects in these fields. Thank you for listening! 1.

This means that the curve normally has a negative slope. An outward shift in the curve can be interpreted as deterioration in matching in the labour market, as the number of vacancies for each given level of unemployment is higher. Movements along the curve may depend on economic changes. When there is an improvement in the level of economic activity, the number of vacancies and recruitment rise, but at the same time the difficulties and time required to fill the vacancies increase. The large rise in the unemployment rate in Sweden at the beginning of the 1990s was followed by a reduction in the number of vacancies, which can be interpreted as a movement along the curve. During the mid-1990s, unemployment appeared to have stabilised at a high level, but in recent years unemployment has been held back, while the vacancy ratio has risen. The Beveridge Curve appears to lie further out than before, which could indicate that the matching process has deteriorated and that the labour market has become less flexible. One reason for a possible outward shift could be that the persons who became unemployed during the crisis years of the 1990s have had difficulty in returning to the labour market.