samchain/econo-pairs-v1 huggingface dataset:
Our policy works much better and more efficiently when we are open and clear about our objectives and the reasons for our decisions. An important piece of the puzzle is that we now have a "direct” and clear inflation target. Although the fixed exchange rate was aimed "indirectly” at providing low and stable inflation, this was not really as clear. But with a fixed exchange rate monetary policy is also governed by external events, which has both advantages and disadvantages. Up to the beginning of the 1990s, the Riksbank was on the whole a closed and rather secretive institution, just like most other central banks at that time. Today the situation is the opposite. We are now considered one of the world’s most open central banks. The fact that an independent authority must provide opportunities for insight and evaluation is natural in our society. Another aspect that may be of importance is that the openness puts a little extra pressure on us to develop and do our job as well and as efficiently as possible. And I can note that our methods have changed substantially. Willingness to change and rapid development in our working methods The fact that a lot has happened since the mid-1970s when we sat and drew diagrams and forecasts by hand on graph paper is not surprising. But even during my period in office the last six years our methods of working have shown a rapid development.

I maintained that this inflationary impulse and the risk of contagion effects to other prices and wages were something that could become the first serious test for low-inflation targeting around the world. Seven months later, this prophecy does not seem so relevant any more. Commodity prices have fallen and inflation has begun to drop back from the high levels seen in the summer. The challenges now faced by central banks are of an entirely different nature than those of just a few months ago. Now the most important challenge is to safeguard the stability of the financial system and to try to limit the negative effects on production and employment. But I would nevertheless like to point out that what I said in May was important, although the financial crisis has come in between and made the problem of rising commodity prices less relevant for the time being. There were several explanations as to why commodity prices rose so sharply. But the one I considered – and still consider – to be most important was that emerging economies with large populations, such as China and India, have increasingly begun to take part in the competition for global resources – resources which in many cases are finite. This is probably a fairly lasting and long-term driving force. The emerging economies are undergoing a structural transformation that will probably take some time. Their demand for commodities will probably remain high in the future.
In August, inflation, measured in terms of CPI and UND1X, was forecast from this perspective to rise slowly to around our 2-per-cent target. There is currently no reason to alter this forecast markedly. Some factors that are difficult to access Of course there are factors that could thwart the main scenario I've just presented. One such factor is a delay in the European economic recovery. Several countries in the euro area are contending with growth problems. Germany's GDP, which comprises one-third of that of the euro area, declined during the second quarter. Investment in Germany has fallen since 2000 while consumption has been weaker than the euro area average. There was also a contraction in second-quarter growth in France, whose GDP comprises roughly one-fifth of that of the euro area. This came after the country had enjoyed relatively robust growth in consumption in recent years, which had compensated  2  BIS Review 42/2003  for weak investment growth. There are also more fundamental problems in the euro area which could have a negative impact on economic activity. For instance, Germany is still suffering from the aftereffects of reunification. Moreover, the euro has appreciated sharply. In light of this, there is no doubt that the world economy is strongly dependent on a US revival. The outcome of the forthcoming wage bargaining round will also be of great importance, both for economic activity and inflation prospects.

Eddie Yue: Opening keynote speech at HKIB Annual Banking Conference 2020 Keynote speech by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at HKIB Annual Banking Conference 2020, Hong Kong, 28 September 2020. * * * Mr Patrick Fung, distinguished guests, ladies and gentlemen, 1. I am delighted to be with you here this morning for the annual banking conference of the Hong Kong Institute of Bankers (HKIB). It is great to see everyone in person, and I am grateful to the organisers for the hard work they have put into making this possible. 2. The past year has been a testing time for Hong Kong as it faced challenges on three fronts. We experienced prolonged social unrest of a kind not seen for many decades. Geo-political tensions and trade wars have raised fundamental questions about globalisation. And, as in the rest of the world, the COVID-19 pandemic is causing severe disruptions to our economy and threatening people’s livelihoods. 3. All this turmoil has put our institutions, not least our banks, to the test; they have had to adapt rapidly to constantly changing conditions. Hong Kong’s banking sector has largely met these challenges and continues to be resilient. 4. This resilience stems from the fact that our banks entered the current crisis with some of the strongest fundamentals in the world. Through sheer hard work and by learning from past experience, banks have been able to respond to operational challenges posed by both the pandemic and the social unrest.
If, for instance, the perception is that monetary policy has been conducted in the wrong way and led to a poor economic outcome, this will in my view make it more difficult to deal effectively with the risks linked to household debt when looking ahead. The reason for this is that I believe that monetary policy must play at least some role in this context. A fairly good development since the crisis So, how has the Swedish economy actually developed since the financial crisis broke out just over five years ago? The current debate gives rather mixed impressions, ranging from things having gone quite well to things having gone rather badly. If we look at the data, however, there is no doubt that Sweden has had a relatively good real economic development. We compare favourably to the countries we usually use as benchmarks (see Figure 1). Sweden is one of the relatively few countries where GDP per capita is higher now than it was prior to the crisis. The employment rate – the percentage of the working-age population in employment – has also held up well. Only few countries have had a better development with regard to both GDP and employment (that is, lying above and to the right of Sweden in Figure 1). Some stress that the development of unemployment has been less favourable. But here we must take into account that the labour force in Sweden has increased relatively substantially during the period (see Figure 2).

My view is that the risks linked to developments in the credit and housing markets have been given an increasing amount of attention in the media and in the general economic debate recently, which appears to be confirmed in Figure 4. Despite the relatively good developments in Sweden in recent years, and the fact that the repo rate is still low, the policy conducted by the Riksbank has given rise to considerable debate. Some arguments in this debate have been understandable and natural. The size of the risks linked to household debt and developments in the housing market is, for instance, one question that certainly can and should be discussed. This is something that is inherently  1  This was something that also affected policy to some extent before the crisis, see for instance Nyberg (2005), Ingves (2007) and Heikensten (2008). 2  BIS central bankers’ speeches  difficult to quantify and the analysis and discussion of this topic needs to continue. Here I can fully understand that the assessments may differ – which has also been the case in the Riksbank’s Executive Board. A crisis rate for four years is no realistic comparison However, there have been elements in the debate that I, at least, have found more difficult to understand. One such argument has been that one can basically disregard these risks altogether and that the repo rate therefore did not need to be raised at all after the crisis.
The Stability and Growth Pact and all the efforts of the Eurogroup over the years to maintain a coordinated and disciplined fiscal policy have been vital and should be continued in the future. But in addition to continuing along these lines in the coming decade, efforts should focus on designing and adopting the necessary structural policies. If we observe how these divergences are perceived in the different countries, we can gain insight into the importance of efforts to push through structural reforms. Many in Spain believe that the divergence problems witnessed in the Spanish economy in recent years are to do with the fact that certain euro area countries are lacking in dynamism and therefore have much lower growth potential than we do. And it's true. Spain has a higher degree of privatisation that makes its economy much more dynamic. Also, the weight of public spending in the economy is much lower. Advances in competition in many industries affords higher growth potential for Spain than for other euro area countries. The problem of being in an area with countries with lower growth potential is that when the ECB set its interest rates in the 2000-2004 period, it did so at a level which, though arguably high for these other countries, was very low for Spain. And that entailed higher debt, higher inflation and, therefore, a loss in competitiveness for our country. But look now how such divergences are seen from the other countries.

This was due in part to excessively lax supervisory standards, which led to insufficient monitoring of institutions under inspection and to the underutilisation of the information available to supervisors, and which allowed the excessive growth of the “shadow banking system”. Work is now in progress to define and standardise ways in which material information on transnational institutions can be exchanged through so-called colleges of supervisors, which group together the supervisors of the countries where these institutions have a significant volume of activity. Substantial headway has been made in a short time and improved supervisory cooperation at international level and at European level (with the creation of new European supervisory authorities) will unquestionably enable more effective action. BIS Review 51/2010  3  I would like to emphasise here another dimension which the Banco de España considers crucial, namely the improvement of national supervision. The first step in achieving effective international supervision is to ensure high quality national supervision, not only of large institutions, but of the whole system, since systemic risk may flare up due to a mere contagion effect. The second step is to foster the convergence of a majority of countries towards uniform and higher-quality supervisory standards. In this respect, work is commencing on a review of the various national supervisory models with a view to developing principles based on sound supervisory practices.
Mervyn King: Monetary policy – many targets, many instruments. Where do we stand? Remarks by Mr Mervyn King, Governor of the Bank of England, at the IMF Conference on “Rethinking macro policy II: first steps and early lessons”, Washington DC, 16 April 2013. *  *  *  I would like to thank Charlie Bean, Alex Brazier, Spencer Dale, Andy Haldane and Iain de Weymarn for helpful comments and suggestions in preparing these remarks; and in particular Tim Taylor who I regard as a co-author, although he is absolved of any errors in the current draft. Introduction The past five years has been an extraordinary period for central banks. The breadth and scale of our operations has expanded in ways that were previously unimaginable as we responded to a crisis in the banking sector and the wider economy. In monetary policy, we have moved into uncharted territory. But has our notion of what central banks should do, and how, changed? Now is a good time to reflect on where we stand. I want to focus my remarks on two areas. First, I want to draw out what have we learned about the objectives of monetary policy. Second, I want to reflect on the implications of the proliferation of instruments that have been used to meet those objectives. Objectives For over thirty years the objective of central banks was clear. It was to set monetary policy to achieve long-run price stability.

But it has got harder. 4  BIS central bankers’ speeches  Chart 1: UK inflation and output gap variances 3  Inflation variance  1958-1992  2  1  1993-2007 0 0  1  2  3  Output gap variance  Chart 2: The UK’s pre-crisis trade-off? 3  Inflation variance  Stylised ‘Taylor frontier’  1958-1992  2  1  1993-2007 0 0  1  2  3  Output gap variance  BIS central bankers’ speeches  5  Chart 3: The ‘Great Stability’ and crisis periods 3  Inflation variance  1958-1992  2  1 2008-2012  1993-2007 0 0  1  2  3  Output gap variance  Chart 4: The true trade-off for the UK over 20 years? 3  Inflation variance  1958-1992  2  1 1993-2012  2008-2012  1993-2007 0 0  1  2  3  Output gap variance  6  BIS central bankers’ speeches  Chart 5: A preferable outcome? 3  Inflation variance  1958-1992  2  1  P  1993-2012  2008-2012  1993-2007 0 0  1  2  3  Output gap variance  Table 1: Monetary base  Data are month averages for UK, US, Japan and end month for the euro area. Sources: Bank of England, Federal Reserve, Bank of Japan, ECB.
Bloomberg, Chicago Board Options Exchange, Debt Management Office, London Stock Exchange, Merrill Lynch, Thomson Datastream and Bank calculations  Chart 3: Bank lending to households and nonfinancial companies in the UK  Chart 4: Major UK banks’ leverage ratio  Percentage of GDP 100 90 80 Households  70 60 50 40 30 20 10  Non-financial companies  0 70  74  78  82  86  90  94  98  02  06  Sources: Bank of England, Thomson Datastream and Bank calculations. 6  Sources: Published accounts and Bank calculations  BIS Review 132/2008  Chart 5: Major UK banks’ customer funding gap, household saving ratio and foreign interbank deposits  Chart 6: Major UK banks’ and LCFIs’ credit default swap premia  Major UK banks US commercial banks  (c)  US securities houses European LCFIs  Jul. Sep. Nov. Jan. Mar. May. Jul. 2007  Basis points 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Sep.  08  Sources: Bank of England, Dealogic, ONS, published accounts and Bank calculations. Sources: Markit Group Limited , Thomson Datastream, published accounts and Bank calculations.

It is unclear what fraction of these savings will be spent. As elsewhere, these savings are highly unevenly distributed across UK households. In its latest projections, the MPC assumed around 5% of savings in aggregate would be spent. This is a conservative estimate. Milton Friedman famously described money as 17  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  17  a temporary abode of purchasing power. 16 If that definition holds true, by the middle of this year as much as £ billion of savings by households and companies (around a third of annual GDP) will be seeking a new home, whether physical or financial assets or goods and services. This would provide a very significant degree of additional demand stimulus to an already rapidly-recovering economy. (c) The Shifting Supply-Side To what extent any rise in demand translates into higher inflation depends, ultimately, on the performance of the supply side of the economy. Over recent decades supply-side improvements, including increased trade, automation and population, have tended to relax supply-side constraints, dampening inflationary pressures. But some of these global forces now seem set to slow, perhaps even to reverse. In their recent book, Charles Goodhart and Manoj Pradhan discuss how, following a long period when global demographic trends supported growth in the workforce, these trends are likely to reverse. 17  As the  population ages and workers retire, labour supply growth will weaken and the bargaining power of workers will strengthen.
Bartsch, E., J. Boivin, S. Fisher and P. Hildebrand (2019), “Dealing with the next downturn”, SUERF policy note Issue No. 105. Bernanke, B. (2020), “The new tools of monetary policy”, American Economic Association Presidential Address”, Brookings Institution. Billi, R. and A. Vredin (2014), “Monetary policy and financial stability – a simple story,” Economic Review 2018:2, Sveriges Riksbank. Blanchard, O., and J. Simon (2001). “The Long and Large Decline in U.S. Output Volatility”, Brookings Papers on Economic Activity, 1, pp. 135-64. Blanchard, O. (2019), “Public debt and low interest rates”, American Economic Review 109(4): 1197-1229. Clarida, R. (2019), “The Federal Reserve’s Review of Its Monetary Policy Strategy, Tools, and Communication Practices”, speech, 26th September. Coenen, G., C. Erceg, C. Freedman, D. Furceri, M. Kumhof, R. Lalonde, D. Laxton, J, Lindé, A. Mourougane, D. Muir, S. Mursula, C. de Resende, J. Roberts, W. Roeger, S. Snudden, M. Trabandt, and J. Veld. (2012), “Effects of fiscal stimulus in structural models”, American Economic Journal: Macroeconomics 4(1) pp. 22-68. 23 [25]  De Rezende, R. and A. Ristiniemi (2018), “A shadow rate without a lower bound constraint”, Working Paper Series No. 355, Sveriges Riksbank. Del Negro, M., M. Giannoni and C. Patterson (2015), “The Forward Guidance Puzzle”, Federal Reserve Bank of New York Staff Reports 2012:574. Frohm, E. and S. Ingves (2020) “The future isn’t what it used to be – perspectives on changes in the Swedish economy”, Sveriges Riksbank Economic Review 2020:1, Sveriges Riksbank.

The theoretical foundations he developed have since been applied to solve puzzles such as why the leaflets on a pinecone follow the Fibonacci sequence and to explain the pattern of animals’ coats from cats to zebras. This work of a lifetime helped lay a cornerstone in theoretical biology. It was, however, the workings of the human mind that inspired Turing’s greatest contributions to human knowledge and our lived experience. Turing answered a fundamental question: whether there is a definitive method that could be applied by machine to solve all mathematical problems. Once again, Turing’s genius lay in his ability to think across boundaries, applying mathematical logic to a problem others had viewed as one of physics. The answer he supplied – captured in his 1936 paper On Computable Numbers5 – provides the very foundations of computer science. Turing envisaged a machine that could be turned to any well-defined task by supplying it with the appropriate program. The eponymous Universal Turing Machine, fed instructions through symbols on an infinite piece of tape, was an abstract concept in his time, but it’s something that recognisably embodies the core principles of a modern computer and the logic of binary code. Moreover, his insight that only computable functions can be calculated is vital to software design. In recognition of the importance of this work, Turing was elected a Fellow of the Royal Society in 1951. Enough for two lifetimes. Cryptographic History of Work on the German Naval Enigma, by C H O'D Alexander, a colleague of Turing’s at Bletchley.
This type of experiences is precisely the one that makes us be very cautious when confronted with massive capital inflows, because a reversal could trigger drastic output adjustments. Later on, in the late 1980s and early 1990s, Latin America was again the recipient of substantial capital inflows, which has been thoroughly analyzed in Calvo et al. (1993, 1994). At that time there was also an increase in the current account deficit. Today, considering the forecasts for 2010–2011 contained in the WEO of April 2010, no net inflows are expected for regions as a whole, but what is expected is a reduction in the current account surpluses of emerging economies. Although this scenario has not evidently materialized, it presents risks that have to be considered. Finally, while in the current setting inflows have been offset by similar outflows, we cannot disregard the possibility of sudden gross outflows or sudden stops of gross inflows, generating severe adjustments in the current account with high costs in terms of output. Traditional policy options The first line of defense against massive capital inflows is exchange rate flexibility. Frequently exchange rate rigidities and unsustainable defenses of parities that are away from their fundamental value give way to speculation against the foreign exchange regime. The literature on speculative attacks shows how an exchange rate that is inconsistent with the rest of the policy actions can trigger massive capital outflows that end up forcing its abandonment. The same rationale applies to inflows.

The forecasts were made under each participant’s unspecified views of appropriate policy, which is defined in true Fedspeak as: “the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her interpretation of the Federal Reserve’s dual objectives of maximum sustainable employment and stable prices.”  BIS central bankers’ speeches  5  Being more explicit about appropriate policy can clear up a lot of uncertainty. For example, suppose inflation were running higher than we would like, and the economic projections in the SEP showed it coming down over the next couple of years. In the absence of information on participants’ policy projections, the public would not know whether the FOMC thought inflation would simply come down on its own or whether it thought that a monetary tightening would be required to reduce inflationary pressures. Including policy projections will help clarify such judgments. In my opinion, this is a substantial, first-order improvement in policy communications, and this greater clarity may have significant additional value for improving how the economy operates. Expectations of the future path for policy and the degree of uncertainty surrounding those expectations are key determinants of private borrowing rates and other asset prices. These play an important role in the spending and saving decisions of households and businesses.