samchain/econo-pairs-v1 huggingface dataset:
In this period, the financial sector has become very vulnerable and edged away from its main duty of financing production. Today, we are happy to see that enhanced competition and economic stability following the decline in inflation and ease of the impact of inflation-oriented uncertainties on financial markets, financial intermediation mechanism has started to operate more efficiently. Moreover, serious steps are being taken towards establishment of banking sector-real sector relationship. The ratio of total credits to total deposits, which has been on the rise since 2003, is a clear indicator of this process. However, let me draw your attention to one point. It is clear that, in order to maintain financial stability in the current environment of relative economic stability, the relationship between banking sector and the real sector needs to be developed not only towards credit utilization, but also with respect to risk evaluation. The progress of risk management in the banking sector will ensure that the companies have sounder financial structures, that they develop more transparent financial tables and adopt modern management style. To express it more openly, the progress of modern risk management in both the financial as well as the corporate sectors will prevent developments that may arise out of the imbalance between assets and liabilities, stemming from different perceptions in the process of transition to price stability, and jeopardize financial stability.

However, the models developed and long-term analysis made after 1980s revealed that the loose monetary policy under high inflation conditions could only end up raising the inflation rate and growth would slow down due to uncertainties arising from inflation. We very well know from our own high inflation experiences in the past three decades and other countries’ experiences that average growth slows down when inflation climbs and average growth accelerates when inflation falls. The high growth rates we achieved in the past three years, which were marked by the stability program, is a good evidence of this generalization. Attaining price stability is a prerequisite for achieving sustainable growth. For this very reason, today, the primary objective of the Central Bank is to achieve and maintain price stability, which makes the biggest contribution to sustainable growth and increase in employment. Distinguished participants, In this part of my speech, I would like to dwell on the three pillars of the change observed in inflation dynamics under falling inflation process. The first significant change observed in economies under falling inflation conditions is the decline in interest rates. If enough credibility has been established in the falling inflation process, significant decline is observed both in nominal and real interest rates and this process does not only lead to rise in expenditures but also in investments.
Our inflation forecast therefore always includes an assessment of credit developments and the housing market. As I mentioned earlier, it may be difficult to quantify the risks linked to a rapid increase in house prices and indebtedness over a long period of time using our usual forecasting methods. As the expansionary monetary policy is to a large extent a driving force in developments in house prices and indebtedness, we have considered it reasonable in our monetary policy considerations to  2  BIS Review 12/2006  view these risks as an argument in favour of beginning to increase the repo rate now, rather than postponing the increases for a few months. However, this does not mean that we have set up any target for house prices. I intend to discuss the objective of monetary policy in more detail later. Let me first say a few words on future interest rate developments. Future interest rate developments The inflation forecast contains an assumption of how the interest rate will be adjusted in future. This is a relatively new method of making forecasts for the Riksbank. Like many other central banks, we have previously worked on the assumption of the interest rate remaining at the same level throughout the forecast period. The new method of forecasting also alters the communication and motivation of interest rate decisions somewhat.

Dividing price trends into different categories shows that it was mainly some imported product groups that showed unexpectedly weak development. It is difficult to determine from the outcome of only one month whether or not this is a sign of a more lasting development. Naturally, it is something we will pay attention to in our future assessments of inflation. We can also observe that over the past few years inflation has been kept down by high productivity growth and low import prices. This is partly related to developments in economic activity. However, there are probably also lasting factors behind the low inflationary pressure. We can see similar patterns in some other countries. Amongst other things, it is probably a question of the effects of increased global competition. The durability of this type of structural change is difficult to determine. I intend to return to this in connection with my look back at inflation developments during 2005. A further complication is that house prices and household borrowing have increased rapidly (diagram 3). There are some risks with this type of development that can be difficult to quantify. One cannot entirely rule out the possibility that credit expansion and house prices are being driven up by over-optimistic expectations. This could lead to a situation in future with sudden downward adjustments in house prices and a large increase in household saving.
The interplay between the Riksbank and the market is of central significance for monetary policy. It is a question of mutual dependence. For example, the Riksbank is to supply an efficient payment system – a financial infrastructure. We also oversee the stability of the system. Moreover, we are responsible for providing Swedish banknotes and coins. However, at the same time we are dependent on the financial markets to implement monetary policy measures. The game rules for our interaction with the financial markets have changed quite a lot over the past 25 years. The most dramatic changes took place in connection with the deregulation of the credit and foreign exchange markets that begin in the 1980s. The deregulation has contributed to more efficient pricing which better reflects demand and supply conditions. The efficiency of the financial markets has considerable importance for the impact of monetary policy via the transmission mechanism. The impact of our policy also depends on how well we succeed in communicating our intentions to the market. The more open and clear we are, the better chance we have of influencing interest rate setting in the way we want, not just in the short term, but also over a part of the so-called yield curve. This makes some demands of our actions. BIS Review 40/2007  1  The other aspect – that we are a public authority with responsibility towards the general public and their elected representatives – also makes a number of demands of us.

This is what the Riksbank began doing with effect from the first Monetary Policy Report published this year. I will talk about this a little more in a moment. Let me take up a final argument in favour of transparency that I believe should not be underestimated. It is that by being open and clear towards the outside world we also become better in our analysis within the walls of the Riksbank. As transparency makes it easier to evaluate how well monetary policy functions, it quite simply increases the incentives for us to do a good job. The objections are not convincing However, not everyone is agreed that transparency is a general blessing. Academic research shows both advantages and disadvantages with transparency. A theoretical result from this research that has received much attention is that more public information from central banks and other authorities can in some cases be a negative element 2 . However, this result is based on the public information being of low quality. If the economic agents attach greater importance to poor public information than to their own better private information, the economy as a whole may suffer losses. However, this assumes that the public information is much poorer than the agents’ own information – an assumption that is hardly true in practice 3 . A more reasonable assumption, in any case with regard to central banks and monetary policy, is that public information is not poorer than the assessments made by private agents.
Mervyn King: Jackson Hole Conference - remarks to the Central Bank Governors’ Panel Remarks by Mr Mervyn King, Governor of the Bank of England, at a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 27 August 2005. *  *  *  Jackson Hole speakers normally draw out the lessons of economic theory for one specific area of policy. But this year we are trying to distil lessons from the practice of monetary policy in the United States - over an extraordinarily successful quarter century under the leadership of Alan Greenspan – for the theory of monetary policy. At most celebrations of a long and successful career, invited speakers talk at length and the great man himself is allowed a few minutes at the end. It is a remarkable tribute to Alan that on this occasion the tradition has been turned on its head. We all remain intrigued by what he has to say. In the few minutes I am allowed, I want to describe the three important lessons that I have learnt from Alan during my time at the Bank of England. First, to be a successful central banker requires an extraordinary degree of objectivity. The key is to recognise that economics tells you how to think, not what to think. It is not a set of settled conclusions about issues. Above all, it is vital never to confuse the world with a model.

Small wonder that I delighted when President Clinton asked me to become deputy U.S. trade representative and help implement NAFTA – even if it meant matching wits with formidable negotiators like Luis de la Calle and Herminio Blanco! Small wonder that as president of the Federal Reserve Bank of Dallas, I have delighted in working closely with Guillermo Ortiz and Agustín Carstens. Small wonder that at meetings of the Federal Open Market Committee or in U.S. banking circles, I have often argued Mexico’s case. Or taken sheer pleasure in pointing out to U.S. congressmen and senators, and in speeches and media interviews, that the Mexican government – unlike my own government – actually can agree on a budget, keep deficits under control, bring about structural change and resist interfering with the workings of an independent central bank. BIS central bankers’ speeches  1  I am full of pride for Mexico. I am full of pride that this country, the country of my happiest childhood years, would now choose to honor me with the Order of the Aztec Eagle. The citation for this honor speaks of my being a fierce defender of price stability. In the parlance of central banking, I am referred to as a “hawk.” Well, it may not surprise you to learn that taxonomists place the eagle and the hawk in the same bird family.
The UK houses some of the world’s largest CCPs. For example, LCH in London clears swaps in 18 currencies for firms in 55 jurisdictions, handling over 90% of cleared interest rate swaps globally and 98% of all cleared swaps in euros. All currencies, products and counterparties benefit from the resulting economies of scale and scope. Fragmentation of such global markets by jurisdiction or currency would reduce the benefits of central clearing. EU27 firms account for only a quarter of global activity in cleared euro interest rate swaps, and about 14% of total interest rate swaps in all currencies cleared by LCH. Any development which prevented EU27 firms from continuing to clear trades in the UK would split liquidity between a less liquid onshore market for EU firms and a more liquid offshore market for everyone else. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  The potential for higher costs is not theoretical. In Japan, for example, where the clearing of yendenominated swaps by certain Japanese firms must take place onshore, the difference in price between the onshore and offshore markets has generally been in the range of 1-3 basis points. Such seemingly small price differences translate into significant costs for users given the scale of activity in these markets. Industry estimates suggest that a single basis point increase in the cost resulting from splitting clearing of interest rate swaps could cost EU firms € per year across all of their business.

See the notes to Chart 2 for how excess current account balances are calculated. And since all countries cannot become more competitive at the same time – it is a relative concept – there is no avoiding it: higher global growth will require comprehensive measures to boost productivity and with it, real wages and demand. This means domestic policies to spur innovation, technology adoption, and the reallocation of resources. Particularly important will be measures to re-start the stalled ‘diffusion machine’. 18  While the most productive  companies have continued to innovate, others have become slower at adopting those innovations. Speeding up the rate of take-up of new inventions and processes – for example through greater product market competition or challenges to management to benchmark against best practice  19  – would provide a  significant boost to overall productivity growth. And higher growth requires a new approach to trade policy. Consider that Bank of England research estimates that up to one half of the post-crisis productivity slowdown could be related to the deceleration in global trade growth. 20  It will not be enough for the G20 to “resist protectionism.” The G20 now needs to make “trade work for all.” That includes using e-commerce platforms to promote free trade for SMEs across the G20,  21  and it requires  an urgent and critical examination of trade in services. 18  See https://www.oecd.org/eco/growth/OECD-2015-The-future-of-productivity-book.pdf.
Rerunning our Phillips curve models using this broader measure of slack, or equivalently, a measure of “core” employment only, leads to the prediction errors for inflation becoming measurably smaller. Look at how the gap between actual and predicted inflation largely disappears on slide 5, in particular for the recent history. All this essentially means that it may take longer for inflation to gain steam and wage pressure might only start to rise meaningfully once adjustments in the “intensive margin” take hold – that is, once those who want to work more hours also succeed in doing so and once those who are still willing to work, but not currently counted as unemployed, are reabsorbed. Indeed, hours worked per employee have not recovered since the double-dip recession. So what is the link between these developments and hysteresis? To be sure, the increasing prevalence of part-time and temporary work reflects several factors – including, in part, important structural reforms in many euro area economies that have helped strengthen the resilience of the euro area. 4/9  BIS central bankers' speeches  Yet, the compositional effects we are seeing in the labour market may also reflect more crisisrelated factors, in particular uncertainty about the strength and durability of the recovery and pessimism about the long-term impact of the downturn on growth.

BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11
Companies have acted to repair balance sheets following the excesses of the late 1990s, and may conceivably have built a cushion of financial assets to support them through a period of uncertainty as they adjust to the new competitive forces associated with globalisation. But the UK corporate sector stands out as having employed its surplus in ‘cash’ to a far greater extent than its G7 peers (Chart 6). The IMF hypothesise 1 that this may have been motivated by a desire to accumulate a precautionary pot of liquid savings for managing pension fund deficits. I do not know whether or not that is so. For example, the build up of deposits has been concentrated in a few sectors: real estate, and business services, and it is not obvious that these sectors have big pension fund deficits (Chart 7). But that pensions have been a material component in firms’ cash management is not in doubt. That is apparent in the share of gross corporate savings accounted for by employers’ contributions to pension funds (Chart 8). Contributions have tripled – or in real terms doubled – since the late 1990s (Chart 9) 2 . Part of this reflects ‘special’ or ‘one-off’ contributions to reduce deficits. But, judging by selfadministered schemes 3 , regular contributions have doubled (Chart 10). What is going on here? Well, it might have something to do with your management of risk, bearing in mind avoidable and unavoidable sources of uncertainty.

Monetary policy has a limited capacity to affect the real economy When the Riksbank decides on the repo rate, we assume that it will take one to two years before the decision has its full impact. Our monetary policy is therefore based on forecasts of inflation and economic developments over the coming three years. However, as I have said, it is particularly difficult to make forecasts right now as a result of the prevailing uncertainty. When we make our decisions we take into account both the inflation outlook and the prospects for the real economy. Depending on what type of shock the economy is exposed to, we can allow it to take time for inflation to return to the target and in this way avoid overly large fluctuations in employment and production. However, it is now generally accepted that monetary policy cannot be used to attain a permanently lower level of unemployment. Many people believed this was possible a while ago when A. W. Phillips found a negative correlation between unemployment and inflation at the end of the 1950s, 5 a relationship usually called the Phillips curve. This shows that higher  5  Phillips actually studied the relationship between wages and unemployment, but later studies indicated a similar relationship between inflation and unemployment, Phillips, A. W, (1958) “The relationship between unemployment and the rate of change of money wages in the United Kingdom, 1861–1957”, Economica, 25, pp. 283–299. BIS Review 58/2010  3  employment can be achieved at the cost of higher inflation.
Implications to BNM as a regulator These scenarios I have painted are drawn to show the distinct characteristics of a financial sector across four possible scenarios. It could be one of them, a combination or none of the above. Regardless of which scenario might eventually emerge, perhaps the most important realisation for stakeholders today is to be aware, ready and prepared for all the scenarios. In reality, what is even more likely though, is that the dynamic interplay between these scenarios will end up shaping the future of finance in ways that we cannot even fathom today. Interestingly, we are already seeing some elements of all four scenarios in our financial system today. To my mind, scenarios one and four are remotely possible, while scenarios two and three are considerably probable. For regulators, as the four scenarios highlighted, it is not beyond the realm of possibility that banks, in its current form, might no longer exist. This phenomenon not only negates the main intermediation channel of central banks’ monetary policy, it will also challenge central banks in terms of rethinking the means to regulate, supervise and safeguard overall financial stability and the manner in which scarce economic resources are allocated and intermediated. As data becomes the driving force of financial services, the central bank must keep abreast with 4/5  BIS central bankers' speeches  the latest thinking to harness the power of big data.

Today, we will also focus on what this evolution means for low- and moderate-income households. One session will explore on-the-ground community development and labor models, with a focus on the implications for low- and moderate-income earners. This will be an important discussion on how to help workers build the skills necessary to adapt to change—a conversation that should ultimately include workers, their employers, their communities and the public sector, working together. We all need to share in the responsibility of helping people increase and maintain the skills relevant to contributing valued work. Again, I wish you a fruitful dialogue, and I commend you for coming together to discuss such important issues and the trends affecting the U.S. workforce. 1  BIS central bankers' speeches
We are well aware that crises that incorporate a significant financial downturn are usually deeper and longerlasting. The health crisis will directly affect the profitability of the European banking sector. Such profitability was already low before the crisis broke, and events have highlighted the need to tackle even more urgently certain challenges, such as those associated with digitalisation, the management of cybersecurity risks, reputational risks and those relating to climate change. This underscores the importance of making further headway in improving banking efficiency. Given the extraordinarily prevalent role played by this sector in the Spanish and European economy, how successfully these challenges are resolved will notably influence the intensity and sustainability of economic growth in the coming years. The importance of an extension and selective adaptation of national stimulus measures In the national economic policy arena, achieving the dual aim of supporting the recovery and smoothing the adjustment of the economy to the post-pandemic scenario calls for two actions. First, the authorities must extend and regularly recalibrate some of the 6  measures already applied, which will have to be more closely focused now on the groups of firms, sectors and individuals most affected. And further, their design should enable the structural adjustments needed ahead of the new post-pandemic environment to be brought about. Allow me to illustrate this idea in relation to two measures that have been particularly important in recent months: the policies on guarantees and on ERTEs.

According to the draft agreement, the legal spending commitments attached to the projects included in Next Generation EU shall be made, at the latest, by 31 December 2023, and the related payments will have to be made effective, at the latest, by end-2026. More specifically, 70% of the transfers should be committed during the 2021-2022 two-year period, with a country-based distribution factor that depends on the unemployment rate in 2015-2019, population and the country’s per capita income. The remaining 30% must be committed before end-2023, and the distribution factor will be adapted to incorporate more directly the heterogeneous impact of the health crisis. Thus, the unemployment rate will be replaced by a variable that will weight, in equal portions, the decline in GDP in 2020 and the cumulative decline in GDP in 2020-2021. In sum, the fund will enable, at least in part, a balance to be struck between the potential and real financial divergences among the European partners. This is because it will benefit from the positive externalities arising from joint action and it will serve to engineer a coordinated exit from the crisis, based on common budgetary instruments. The financing of the fund through Community debt will benefit from the favourable low-interest-rate environment and will prevent this new debt being assumed by Member States individually, under conditions which, in some cases, would be foreseeably more unfavourable than those 4  which are expected to be applied to this pooled instrument.