samchain/econo-pairs-v1 huggingface dataset:
The MPC has used that flexibility to the full in recent years: it has been at the forefront of providing support to our economy in the aftermath of the financial crisis and it will continue to be so. But we must remember our mistakes of the past. Without credibility there can be no flexibility. And ultimately, the best contribution that monetary policy can make to sustainable growth and long-run prosperity is to deliver enduring price stability. That is important to remember in the face of suggestions that inflation is somehow yesterday’s battle and that the focus of monetary policy should be turned even more firmly towards growth. It should also be remembered when making difficult judgements about the likely trade-off between growth and inflation and about how far to push the MPC’s flexibility. 9  This consensus is a reflection of the belief that the long-run Phillips curve is vertical. Taken literally, the suggestion that it is possible for monetary policy to stimulate increased output with little or no increase in inflation points to a near horizontal long-run Phillips curve, at least over some range of output expansion.

And ultimately delivering low and stable inflation is the best contribution monetary policy can make to achieving a robust and sustainable recovery. The trade off between growth and inflation Let me turn now to the second issue I wanted to discuss today which concerns the operation of monetary policy and, in particular, the likely trade-off between growth and inflation in the current environment. As I said, in February the MPC made clear that we thought it appropriate to bring inflation back to target more slowly than usual in order to support the nascent recovery. But is there a case for monetary policy going even further? What if, as some commentators have claimed, it were possible for the MPC to inject additional monetary stimulus, thereby providing even greater support to growth, with relatively little consequence for inflation. Stronger growth with little or no higher inflation: surely that would be a good use of the MPC’s flexibility? There are two strands of argument put forward as to why the current trade-off between growth and inflation may be unusually favourable. The first is that cost and price pressures in the current environment may be relatively insensitive to the degree of slack in our economy. If that were the case, the economy could grow relatively rapidly, absorbing spare resources and capacity, without putting much upward pressure on wages and prices. In economists’ speak, the so-called Phillips curve – which sketches out the relationship between spare capacity and cost and price pressures – may be relatively flat at the moment.
People experiencing such issues can go to the local branch network of Banque de France all over the country. Along with other stakeholders, we help them finding solutions to their financial difficulties. In 2018, more than 180.000 such situations were examined. Also, through our financial institutions supervisory arm, the ACPR, and in relation with the financial markets authority AMF, we make sure that banks and insurers have effective procedures in place to detect fragile clients and provide adequate solutions to them. This means for them proposing the specific banking offer I mentioned earlier to all those who might need it. But also ensuring that financial products are not sold to people who do not understand or cannot afford them – it can be a new consumer loan that would lead to overindebtedness, or an insurance policy that clearly does not fit the clients’ needs. In an ageing world, we need to make sure that older customers are not taken advantage of by abusive or deceptive practices. This part of our market conduct role is increasingly important for us and other authorities internationally – the 2019 Japan G20 Presidency has put it forward. Finally, to help improving financial literacy, Banque de France is the national coordinator of the involved stakeholders in that area. This is of course especially important for those at risk of financial exclusion. In that role, we notably provide specific tools, resources and training for social workers who are in touch with these people.

And they can also bring new risks: for instance, of leaving out those who are not at ease with digitalization, of creating unforeseen bias via automation of processes, or of leading to security issues for personal data that is not handled properly. So is the digital age a blessing or a curse for financial inclusion? To help us answer that question, there was a very interesting session this morning in the plenary on “a macro view on financial inclusion”. And this afternoon, you will have the opportunity to listen to a wide range of speakers, who will share their experience around many more topics: what is financial inclusion 2.0? Can blockchain play a role? what can regulators do? And where are we standing in developing economies where inclusion is the most needed, in particular in Africa? To contribute to these forthcoming discussions, let me share with you the perspective of a central banker and a supervisor, whose institution has been entrusted by law to support financial inclusion. I would like to highlight the different ways we currently support financial  inclusion and how we intend to adapt them to the digital age and to improve them building on digital tools. 1/ What BDF does to support inclusion by the financial sector In the last decades, Banque de France has been entrusted with different tasks to support financial inclusion. Our contributions in that area are today quite diverse and is a major part of our mission to provide services to the public.
Muhammad bin Ibrahim: The resurgence of payments in a digital world Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian E-Payments Excellence Awards (MEEA) 2018 "The resurgence of payments in a digital world", Kuala Lumpur, 11 April 2018. * * * Thank you for inviting me to speak today. Ten years ago, the word “payments” was only heard in small and exclusive circles. Those in banking understand the importance and criticality of the payment system. Huge resources are devoted to this function. Understandably so. Payment services are the bread and butter of banking and the lubricant for the economy. It is at the heart of all economic activities. Its services are indispensable. Yet, only a few took an interest in payments, except maybe those in the financial services community. Today, this situation has reversed. Payments is now at the top of everyone’s minds. Globalisation of the financial markets and the consequent flows of funds across borders necessitates modernisation and strengthening of the financial system. Huge investments are being put in place. Technological advancements accelerate this process. Out of the $ billion raised globally for fintech funding in 2017, 30% of the funds went to payment companies. In the third and fourth quarter of last year, 4 out of the top 10 global fintech deals were for payment services. A few factors have driven changes in the payments sphere; digitisation, competition and innovation.

Background slides  BIS Review 51/2010  9  10  BIS Review 51/2010
Central Bank of Sri Lanka – ROAD MAP 2017  At the same time, we will continue to actively engage in liquidity management operations in the money market to guide  14  the short-term interest rates within the  economic analyses for the purpose of  desired path. formulating effective policies, while  In order to ensure the effective implementation of monetary policy, we  improving the transparency of monetary policy and policy communication. expect to introduce certain measures  At the same time, in the process of  with regard to OMOs, such as  making more informed policy decisions,  introducing fixed rate and variable rate  we look forward to enhancing statistical  auctions, and fine tuning auctions after  inputs by introducing new indices on  examining their need and feasibility in  property prices as well as modifying  line with other country experiences and  wage indices, while improving the  market needs. We will evaluate  coverage of existing surveys to better  alternative instruments to strengthen  track developments in the private  OMOs. sector. Reflecting these measures, inflation is  The Central Bank will continue to  expected to remain at mid-single digit  communicate policy decisions among  levels in the medium-term.

During the more extreme periods of the Asian crisis, however, one of the main concerns of market participants was the high level of uncertainty in the market about whether and to what extent lender of last resort support would be forthcoming should it be required. In fact, the liquidity shortages experienced during the more volatile periods may have been in part attributable to this market uncertainty. Arguably, this uncertainty may also have aggravated the credit crunch during the crisis periods. The introduction of the Discount Window in September 1998 has helped to ease this problem. A greater knowledge and awareness of the availability of a lender of last resort facility will, we hope, further help to reduce uncertainty, and will, in turn help to improve overall market liquidity in the event of future crises, should they arise. A formalised policy framework will also help the HKMA itself to ensure speed and consistency in considering whether or not to extend lender of last resort support. A quick response in an uncertain environment could be of vital importance in helping to restore stability and confidence to the banking system. But it must be acknowledged that there are also good arguments for not saying too much on the subject. The HKAB, while expressing general support for clarification, has rightly observed that the HKMA must be able to maintain sufficient flexibility to be able to handle widely differing situations, to deal with abrupt changes, and to take action in a timely way.
In Sweden, the Riksbank has regularly highlighted many of the risks in the financial system. We did so most recently in our Financial Stability Report. There we pointed out, for instance, that the financial turbulence might worsen and that the banks' access to funding could deteriorate. At the same time, we have all along made the assessment that financial stability in Sweden has been satisfactory. We make the same assessment now, and the Swedish banks are financially strong. 2  BIS Review 115/2008  As we have seen, a lot has happened on the financial markets recently. We are following developments closely, constantly updating our analyses and we are prepared to take action if necessary. We have regular contacts with banks, market participants and other government agencies, as well as our central bank colleagues in other countries. There is a generally high level of uncertainty in the world economy at present and this will probably persist for a good while to come. I would therefore like to return now to what I mentioned at the beginning – the inflation target and the stability it offers to the economy, particularly when storms are raging all around us. Monetary policy – focus on the inflation target The objective of monetary policy is to maintain price stability and this has been established by law since 1999. To be more precise, inflation measured in terms of the consumer price index, CPI, is to be held at 2 per cent, with a tolerance interval of +/- 1 percentage point.

However, this is not a convincing argument. Swedish conditions also affect the prices of the goods we import. The world market price of a product is not the price that Swedish households see in the shops. The value of the krona in relation to other currencies for example plays a part. Demand and factors such as transport, mark-ups in the wholesale and retail channels are also significant. What the Riksbank can do is to conduct well-balanced monetary policy so that consumer prices on average rise by 2 per cent a year. When the Riksbank raises the repo rate, demand is dampened, which reduces the scope for price increases in all areas, including energy and food. It is important that monetary policy is aimed at keeping down the general price increases and that the inflation target is not redefined merely because some prices are rising more than others. Households’ total purchasing power is affected when prices of imported goods change, and this would be the case even if we had an inflation target that excluded these prices. When, for instance, the price of oil rises over a longer period of time there is a risk that price increases will spread to other areas of the economy. This risk would hardly decline if the inflation target was formulated differently. Of course one must be open to change that could improve the current monetary policy regime. But it is important to think things over very carefully. And we shouldn't fix something that isn't broken.
Across the banking book, a large bank might need to estimate several thousand default probability and loss-given-default parameters (Table 1). To turn these into regulatory capital requirements, the number of parameters increases by another order of magnitude. It is close to impossible to determine with complete precision the size of the parameter space for a large international bank’s banking book. That, by itself, is revealing. But a rough guess would put it at thousands, perhaps tens of thousands, of estimated and calibrated parameters. That is three, perhaps four, orders of magnitude greater than Basel I. If that sounds large, the parameter set for the trading book is almost certainly larger still. To give some sense of scale, consider model-based estimates of portfolio Value at Risk (VaR), a commonly-used technique for measuring risk and regulatory capital in the trading book. A large firm would typically have several thousand risk factors in its VaR model. Estimating the covariance matrix for all of the risk factors means estimating several million individual risk parameters. Multiple pricing models are then typically used to map from these risk factors to the valuation of individual instruments, each with several estimated pricing parameters. Taking all of this together, the parameter space of a large bank’s banking and trading books could easily run to several millions. These parameters are typically estimated from limited  10  Basel Committee on Banking Supervision (2004). 11  Basel Committee on Banking Supervision (2010).

Yet the regulatory response to the crisis has largely been based on the level of thinking that created it. The Tower of Basel, like its near-namesake the Tower of Babel, continues to rise. An alternative point of reference when regulating a complex system would be to simplify and streamline the control framework. Based on the evidence here, this might be achieved through a combination of five, mutually-supporting policy measures: de-layering the Basel structure; placing leverage on a stronger regulatory footing; strengthening supervisory discretion and market discipline; regulating complexity explicitly; and structurally re-configuring the financial system. (a)  Reconstructing the Tower of Basel  The quest for risk-sensitivity in the Basel framework, while sensible in principle, has generated problems in practice. It has spawned startling degrees of complexity and an  14  BIS central bankers’ speeches  over-reliance on probably unreliable models. The Tower of Basel is at risk of over-fitting – and over-balancing. It may be time to rethink its architecture. A useful starting point might be to take a more sceptical view of the role and robustness of internal risk models in the regulatory framework. These are the main source of opacity and complexity. With thousands of parameters calibrated from short samples, these models are unlikely to be robust for many decades, perhaps centuries, to come. It is close to impossible to tell whether results from them are prudent. One simple response to that concern may be to impose strict limits, or floors, on model outputs. These would provide a binding regulatory backstop.
Two obvious examples: we need to make it much more difficult for institutions with little capital and little supervision to underwrite mortgages, and we need to look more comprehensively how to improve the incentives for institutions that structure and sell assetbacked securities and CDOs of ABS. And supervision will have to focus more attention on the extent of maturity transformation taking place outside the banking system. Second, risk-management practices and supervisory oversight has to focus much more attention on strengthening shock absorbers within institutions and across the infrastructure against very bad macroeconomic and financial outcomes, however implausible they may seem in good times. After we get through this crisis and the process of stabilization and financial repair is complete, we will put in place more exacting expectations on capital, liquidity and risk management for the largest institutions that play a central role in intermediation and market functioning. This is important for reasons that go beyond the implications of excess leverage for the fate of any particular financial institution. As we have seen, the process of de-leveraging by large but relatively strong institutions can cause significant collateral damage for market functioning and for other financial institutions. Inducing institutions to hold stronger cushions of capital and liquidity in periods of calm may be the best way to reduce the amplitude of financial shocks on the way up, and to contain the damage on the way down.

Once the investors in these financing arrangements – many conservatively managed money funds – withdrew or threatened to withdraw their funds from these markets, the system became vulnerable to a self-reinforcing cycle of forced liquidation of assets, which further increased volatility and lowered prices across a variety of asset classes. In response, margin requirements were increased, or financing was withdrawn altogether from some customers, forcing more de-leveraging. Capital cushions eroded as assets were sold into distressed markets. The force of this dynamic was exacerbated by the poor quality of assets – particularly mortgage-related assets – that had been spread across the system. This helps explain how a relatively small quantity of risky assets was able to undermine the confidence of investors and other market participants across a much broader range of assets and markets. Banks could not fully absorb and offset the effects of the pullback in investor participation – or the "run" – on this non-bank system, in part because they themselves had sponsored many of these off-balance-sheet vehicles. They had written very large contingent commitments to provide liquidity support to many of the funding vehicles that were under pressure. They had retained substantial economic exposure to the risk of a deterioration in house prices and to a broader economic downturn, and as a result, many suffered a sharp increase in their cost of borrowing. The funding and balance sheet pressures on banks were intensified by the rapid breakdown of securitization and structured finance markets.
Graduates under the age of 35 were close to 6 times more likely to move region and employer than non-graduates in the 1990s but are now just 3 times more likely. And mobility has decreased for both groups. 20  Clarke (2017). 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  Charts 21 and 22 look at rates of worker transition between different industries and occupations. These moves are grouped into “rungs” on the ladder, where the rungs for the 9-rung occupation ladder are ordered by the standard ONS classification, which itself reflects differences in skills used within each occupational group. For the 21-rung industry ladder, the rungs are ordered by the mean hourly gross pay of workers within each industry, across the whole sample period. The blue zone defines zero rung movements. The red zone defines large upward rung movements and the grey zone large downwards movements. Chart 21: Industry job ladder 100% 11+ 90% 8-10 80% 4-7 70% 1-3  60%  0  50% 40%  -1 to -3  30%  -4 to -7  20%  -8 to -10  10% 0% 1990  -11+  1995  2000  2005  2010  2015  Sources: ONS and Bank of England calculations. Notes: Chart shows percentage of jobs moves based on extent of upward or downward movement along the industry job ladder.

Assume also, in that event, that monetary policy followed a simple Taylor Rule and that inflation was unaffected.29 These are clearly very stylised assumptions. Nonetheless, on those assumptions, a Taylor Rule would suggest interest rates would need to be cut sharply to their zero bound, to cushion the hit to growth. If we do the same thought-experiment under the “deal” scenario, again using a simple Taylor Rule, we get instead an upwards-sloped trajectory for expected interest rates, on average 25-50 basis points higher than the slightly upward-sloped market path for interest rates prevailing in May. Clearly, these are two very different interest rate trajectories, reflecting two quite different Brexit economic outcomes.30  In the event of a ‘deal’, upward pressure on demand would also likely be accompanied with a stronger exchange rate, so the ex-ante impact on inflation is ambiguous. 30 My MPC colleague, Jan Vlieghe, made a similar point in his recent speech (Vlieghe (2019)). 29  29  All speeches are available online at www.bankofengland.co.uk/speeches  29  The market-implied path for interest rates is a probability-weighted mix of these two paths. With a 30% probability of “no deal”, this expected path would have interest rates falling in the near term before rising gently thereafter. Despite our scenarios being highly stylised and simplified, this expected path broadly mirrors the current market yield curve.