samchain/econo-pairs-v1 huggingface dataset:
But the role of the Bank was about to change – first with the Inflation Report in February 1993, which gave the Bank its own public voice, and then with independence for the Bank and the creation of the Monetary Policy Committee (MPC) in 1997. The inflation target was born out of the experience that high and variable inflation was very costly to reduce and that only a policy based on domestic considerations would be credible. The objective of monetary policy in the medium term would unambiguously be price stability. As the then Chancellor of the Exchequer, Norman Lamont, put it “we wish to reduce inflation to the point where expected changes in the average price level are small enough and gradual enough that they do not materially affect business and household financial plans”. The idea that there is a long-run trade-off between price stability and employment had long since been abandoned. That intellectual revolution, associated with the names of Friedman, Phelps and Lucas, had stood the test of time and formed the foundations of inflation targeting. The initial reception of the inflation target among economists and commentators alike was distinctly mixed. As the Financial Times put it in a leader published twenty years ago today, “the Chancellor’s speech was as economically thin as it was politically disappointing”. The critics argued that the new framework was inadequate to control inflation. They were to be proved wrong.

Second, crises typically reduce potential supply growth, for example by disrupting the supply of credit to productive firms. A failure to take financial instability into account creates an unduly optimistic view of where the Taylor frontier lies, especially when it is based on data drawn from a period of stability. Relative to a Taylor frontier that reflects only aggregate demand and cost shocks, the addition of financial instability shocks generates what I call the Minsky-Taylor frontier, shown in Chart 5. This reflects the influence of misperceptions, financial cycles and the search for yield. On the Minsky-Taylor curve, for a given degree of inflation variability, output is more volatile in the long run than on the simple Taylor curve. Ignoring financial instability might mean choosing a policy reaction function that is believed to imply a trade-off at point O in Chart 5. In fact, the true trade-off is given by point P. Once that is understood then the optimal policy reaction function might well change and correspond to a trade-off at point Q. 22 The examples I have given suggest the possibility that there is a trade-off between meeting the inflation target in the short run and reducing the risk of a financial crisis in the long run. To shed light on whether that possibility warrants a change to the way we implement inflation targeting, I want now to conduct a counter-factual thought experiment and ask whether monetary policy before 2007 might have moderated the crisis if it had not simply pursued a target for inflation.
And are the potential vulnerabilities of the networks they help to create properly understood and contained? Threats can emanate from many areas: and you can see we could keep armies of people active scanning the horizon in real-time. We have all heard about the butterfly’s wing-beat in Bali causing a hurricane in the Gulf of Mexico. And we all know that there are lots of butterflies! So we need to have some way of distinguishing between those threats which are of real significance and danger and those which are less pressing or more remote. What we do is to subject each of the potential threats that we can identify to regular scrutiny. So we prioritise the areas where we see real problems emerging, or weaknesses which make us think that the infrastructure could buckle under shocks. But it is not sufficient just to be aware of the threats; we need to take action to mitigate them. Our second objective is, therefore, to do what we can to strengthen the financial infrastructure. And we design deliverables - work programmes and projects - to address important emerging dangers. Each deliverable will imply a response of some type. Let me give you some recent examples of work we’ve been involved with. On the domestic front, we gave just completed a programme to dematerialise Money Market Instruments. These are now integrated into the main CREST settlement system, enhancing market infrastructure and thereby reducing potential settlement risks. The settlement of transactions in these instruments can now occur with Delivery-Versus-Payment.

In my view, however, the technical innovations are not the only explanation. The deregulations that began in the 1980s, as well as the consolidation of the federal budget during the 1990s, should also be mentioned as major factors. The deregulations have helped to strengthen America’s corporate sector and the improvement in the federal finances led to increased confidence among households and firms as well as somewhat lower long bond rates. Low interest rates and higher productivity growth then paved the way for the massive wave of investment. The U.S. economy’s growth rate shot up and unemployment dropped to levels that hardly anyone believed could be combined with low, stable inflation. As outcomes proved earlier forecasts wrong, assessments of how strong demand’s long-term growth could be without generating rising inflation were adjusted gradually upwards. Turning then to share prices in the United States, in the first place the Nasdaq exchange with its predominance of high-tech companies, we can see that expectations of corporate profits rose rapidly  BIS Review 20/2001  1  to levels that had not been seen since the 1930s. The trend peaked last year with share prices at record levels and a GDP growth rate above five per cent, in some quarters even higher. The reverse side of the medal lies in the imbalances that have built up during this period. The United States has been living on borrowed money; even though the federal budget was first consolidated and then generated a growing surplus, investment exceeded aggregate saving.
All of them had in common that they were important to be able to analyse and understand productivity. They included better price indices in the private services sector to be able to better calculate volume growth and thereby productivity growth. Also better capital stock calculations, better input-output statistics and better IT statistics. Statistics Sweden has now received money to make these improvements. This can provide us with better conditions for understanding productivity and the driving forces behind it. Productivity growth over the coming years I will now move on to the second of my questions, the question of productivity growth over the coming years. My conclusion is that productivity will slow down in the near future. This is indicated by changes in both the economic cycle and structure. Economic cycle indicates a slowdown I shall begin with the cyclical factors. In February we estimated that the rate of increase for productivity in the business sector would decline from approximately 4 per cent a year over the past five years to an average of 2.4 per cent a year during 2007-2009. Productivity growth has been unusually strong in recent years. This can be partly explained by the normal course of events in an economic cycle. As I said earlier, productivity usually increases quickly in the initial phase of an economic upturn. When the cycle then enters a more mature phase, employment begins to rise. We have been in this phase for the past two years. Employment is now increasing rapidly.

Safe and efficient clearing and settlement have been in demand as banks’ trust in each other has weakened. In Norway, our systems have had to handle major problems in two Icelandic banks operating in our country. These problems have been handled smoothly. Times of crisis can also be a turning point, providing the opportunity for change. During the Norwegian banking crisis in the late 1980s and early 1990s, Norges Bank and other public authorities put pressure on banks to increase their income from bank charges, including payment services. I believe that as banks have to focus even more on running a costefficient business, the incentives for developing the payment system further will be strong in times to come. For this conference we have received a large number of high-quality papers. I know that the selected conference speakers represent some of the best researchers in this field. We are especially pleased to have as keynote speakers two of the leading scholars in the economics of payments systems: David Humphrey from Florida State University and Jean-Charles Rochet from Toulouse School of Economics. Let me also extend my thanks to the three other members of the programme committee: Gabriela Guibourg from Sveriges Riksbank, Eirik Gaard Kristiansen from the Norwegian School of Economics and Business Administration, and Bent Vale from Norges Bank. As I mentioned earlier, I visit Nice in the South of France quite often. And from my direct observations, I notice that France has developed very fancy methods of processing cheques.
Broadly speaking, climate change can affect monetary policy in two ways. On the one hand, it can lead to structural changes in the economy. This rather slow and steady process must be taken into account in our forecasting models over the course of time. On the other hand, regulatory climate protection measures can lead to sudden changes in the prices of important goods. The SNB analyses the impact that both these types of change have on growth and inflation, and the resultant consequences for monetary policy. The dialogue we have within the framework of the Central Banks’ and Supervisors’ Network for Greening the Financial System also helps us in this respect. The SNB is actively involved in NGFS working groups that address monetary policy, financial stability and investment policy aspects. We also regularly exchange information on climate-related issues with other institutions. My two colleagues will talk about climate change from the perspective of financial stability and investment policy afterwards. Study on the methods used in the SNB’s company talks  I would now like to talk about an additional document that you will find in your press kits, namely a study looking at the methods the SNB’s delegates use in carrying out their discussions with companies. As you know, our delegates for regional economic relations regularly conduct talks with managers of companies throughout Switzerland. These provide us with a timely, first-hand account of the latest cyclical and structural developments in the Swiss economy.

Let me return to the Triffin Dilemma discussion mentioned earlier. As the issuer of an international currency can take advantage of its special status to overly stimulating domestic demand, this leads to excess liquidity in global market and can undermine the stability of the international monetary system in the end. However, whether the current vulnerability in the international financial system lies in the Triffin Dilemma or policy blunder is an on-going debate. Regardless of the nature of the vulnerabilities, it is clear that there have not been enough high quality financial assets in relation to financial investors’ demand. This is a factor that no doubt has contributed to the underpricing of risk and more importantly, a high degree of concentration in US financial assets, which have the most liquidity. This point is especially important because when the global economy resumes its normal path and when emerging market economies further accelerate their growth and development, it is without doubt that wealth will once again accumulate. This will result in greater global resources searching for investment in global financial markets. Therefore, I believe that there is a need to have more financial and capital markets that are deep and broad enough to have the acceptance of investors to help absorb the increased wealth and provide alternatives for quality investment globally. Looking around, some emerging market economies are certainly in a good position to further develop their financial markets in that direction. This is consistent with the concept of risk diversification.
As for risks for inflation: it has been high for a prolonged time, which could hurt its convergence velocity, both through its effects via indexation and its possible impact on the formation of expectations. In the short term, its dynamics will be closely linked to the exchange rate. Thus, considering the scenarios just described, there are risks in either direction. After assessing these risks, the Board estimates that the risk balance is unbiased for both inflation and output. Please allow me to share some final thoughts. Final thoughts If our projections come true, the Chilean economy will complete four full years growing around 2 percent. Inflation, meanwhile, will have converged to the 3 percent target, but only after standing for more than two years on or above the upper bound of the tolerance band. Of course these numbers describe a complex economic scenario, which makes us wonder what caused it and how we have dealt with it. Let me use the last minutes of my intervention  4  BIS central bankers’ speeches  to visit these topics briefly, and go in more detail into how monetary policy has behaved in this adverse economic environment. Many factors lie behind our low growth, some of which have been more intense than previously thought. Lately, this has led not only us but also market analysts and international organizations to make significant downward corrections to the growth outlook for Chile.

The new information leads us to estimate that global growth will fall short of expectations, because of both downward corrections to projected activity in the developed world and a major adjustment in Latin America, which is headed to a contraction in 2016. At the same time, the external financial conditions relevant for Chile are estimated to be tighter, while the terms of trade will be lower (figure 2 and table 1). BIS central bankers’ speeches  1  The downscaling in output projections for 2016 is consistent with the lower base at the end of 2015, and with spot indicators suggesting that consumption and investment have remained weak this year to date. On the consumption side, in the last two years the real wage bill has been outgrowing private consumption, leading us to expect a somewhat stronger recovery of the latter during this year. This has not happened, however, which together with the sharper deterioration of the labor market in recent months, plus consumers’ expectations remaining pessimistic and low levels of imports of consumer goods in the first months of the year, mean that this component of growth has to be revised downward. However, by 2017 some recovery of this variable is expected, thanks to a gradual improvement in its fundamentals, particularly, moderate growth in the wage bill and a slight improvement in consumer expectations. Investment, on the other hand, has seen a significant adjustment in recent years, due primarily to the end of the mining investment cycle (figure 3).
Underlying this stable rate of price increases have been offsetting developments at the level of services and goods prices. In February, services price increases moderated further slightly, mainly owing to downward adjustments in prices 1  BIS Review 39/1999  in the telecommunication area. At the same time, goods prices contributed slightly more to overall HICP increases than before, due both to price developments for unprocessed food and a deceleration in the fall in energy prices. It may be worth noting that goods prices may continue to move upwards temporarily, in particular as oil prices increased strongly from mid-February onwards. Such movements reflect the higher volatility of price changes of some categories of goods, in particular imported oil and other commodities. The interest rate decision has been taken in a forward-looking perspective, focusing on the mediumterm trends in inflation and the compatibility of these trends with the Eurosystem’s definition of price stability. In the view of the Governing Council, monetary growth is - at the current juncture - not a risk for future price stability. The decision taken today keeps monetary policy on a longer-term stability-oriented course and, by doing so, contributes to creating an economic environment in which the considerable growth potential of the euro area could be exploited.

In this way, we ensure that SARON and the other secured short-term money market rates remain close to the now positive SNB policy rate. To absorb liquidity by way of open market operations, we will use two proven monetary policy instruments: SNB Bills and repo transactions. Participants in the Swiss franc money market are familiar with both instruments. We have used repo transactions regularly in previous years. SNB Bills are debt certificates issued by the SNB, typically with a term of up  1  Further information is available in the ‘Instruction sheet governing interest on sight deposits’. Page 1/2  Zurich, 22 September 2022 Andréa M. Maechler  News conference  to one year. We last used SNB Bills for the implementation of monetary policy in 2011 and have since conducted tests to ensure operational readiness. We expect the volume of SNB Bills issued to increase within a short period of time on the back of the weekly auctions. The new interest rates on sight deposits apply as of tomorrow. The open market operations to absorb liquidity are being conducted with immediate effect. To ensure that our monetary policy is being implemented effectively, we will subject the instruments used to regular review. Further adjustments may be made if necessary. Page 2/2
This must surely be considered an ambitious goal. Sizeable imbalances can be seen in the global economy. The massive US current account deficit is eating up a large share of total global saving at present. Managed exchange rates elsewhere, for example in China, delay markets in responding to this problem. Economists claim that a change is inevitable, and the later that it comes, the more upheaval it will cause when it eventually does. As far as Iceland is concerned, however, external conditions have been favourable so far. It enjoys high creditworthiness and wide open access to markets. Interest rates have been low and product prices high, making the strong position of the króna – which will not last forever – much easier than otherwise for many to weather. But we need to make  2  BIS Review 82/2005  sure that favourable external conditions in most areas do not become a fundamental precondition for our own success. In my opinion – after only a few weeks at the Central Bank of Iceland –one of the main reasons that its management is employed there is to pay particular attention to risks in the economy. I shall mention the following illustration. Of course it is perfectly normal for progressive and rapidly growing banks, which feel constrained by the small size of the Icelandic market, to be eager for foreign capital in their efforts to expand and reap profits. The financial system infrastructure and all the criteria assessed by supervisory authorities and ratings agencies are in excellent shape.

An important change this autumn and so far this winter has been large-scale issues of króna-denominated bonds in international markets. In particular, these issues are driven by the wide interest-rate differential between Iceland and other developed countries. The current Monetary Bulletin attempts to analyse the impact of these issues, including a separate article dedicated to this topic. Their impact can be positive. For example, it can lead to more efficient foreign exchange and securities markets in Iceland, thereby benefiting domestic economic developments. However, the issues can also – at least temporarily – create uncertainty about the transmission of monetary policy and even intensify its impact effect through the exchange rate channel. Such a pass-through hits export sectors hard, while doing little to subdue private consumption growth. One standard assumption underlying the inflation forecast published in the current Monetary Bulletin is that the policy rate will remain unchanged from the day of forecast. On the basis of this scenario, the Board of Governors decided to raise the policy rate by 0.25 percentage points. The Central Bank’s monetary policy over the medium term will need to ensure that the exchange rate adjustment which appears inevitable in the long run does not result in a higher rate of inflation than is compatible with the target. A tight monetary stance will be required to do so, for as long as capacity and labour market pressures pose inflationary threats. Furthermore, a sufficiently wide interest-rate differential with abroad must be maintained to contribute to a smooth exchange rate adjustment.
But stability at the macroeconomic level does not mean stability for individual firms or industries. Indeed one of the virtues of macro stability is that it allows – indeed forces – firms to focus on the real long term business challenges and opportunities they face rather than how to survive or profit from the short-term cycle. It is not a paradox therefore that the Great Stability has also been a time of great change in industry in ownership, structure and technology. The Engineering Employers’ Federation has itself stated that ‘manufacturing prospers best in a stable macroeconomic environment with low inflation, low interest rates and stable exchange rates’. 3 That is not because they are a recipe for a quiet life but because they allow businesses to focus on what really matters – their products, their technology, their customers and their competition. In the last few years, macroeconomic stability has provided business with a platform for rapid changes in ownership, location and product mix, and for the transformation by IT of all business processes in the factory, the warehouse and the office. 1  Bean, C (1998), ‘The New U.K. Monetary Arrangements: a view from the literature’, Economic Journal, November. 2  ‘The Inflation Target Five Years On’, Quarterly Bulletin  3  ‘Manufacturing in the UK’, Engineering Employers Federation, May 2005.

M R Chatu Mongol Sonakul: National Central Bank and building world peace  Speech by Mr M R Chatu Mongol Sonakul, Governor of the Bank of Thailand, at the 27th International Conference on World Peace “Building a Culture of Peace in the New Millennium”, held in Bangkok on 1 December 2000. *  *  *  Members of the Professors World Peace Academy, Participants of the 27th International Conference on World Peace, Ladies and gentlemen. The history of central banking is normally agreed to have begun around four thousand years ago in the Greece, Roman and other empires up to the middle ages when banks were put up primarily for the purpose of getting finance for governments to wage war. So the first period of central banking cannot very well be said to have been in conformity with the topic I’ve been asked to talk about here today, which is entitled “National Central Bank and Building World Peace”. But in the sixteenth and seventeenth centuries and especially later on when industrialisation began in earnest, there were great needs for finance for the many various industries that sprang up around that time. Commercial banks and great finance houses became common but the limitations of the technology of that period of using precious metals as currency became quickly apparent. Commercial banks began issuing their own paper notes, for the amount of the valuable metals that they had in stock being much more transportable.