samchain/econo-pairs-v1 huggingface dataset:
3/7  In 2008, scarcely a year after the onset of the first tensions in August 2007, the initial turmoil resulted in a deep-seated global crisis, interrupting the global economy’s longest growth phase since the 1960s and making way for the most serious economic recession since the Great Depression. In the euro area, vulnerabilities that had not been perceptible against the background of the relative good times that followed the launch of Monetary Union began to emerge. On one hand, the crisis uncovered a series of imbalances in the economies of certain member countries: losses in competitiveness, high debt levels and weak banking systems. These imbalances showed that the national economic authorities have not sufficiently assumed that, in a monetary union, domestic economic policies must be equipped with the necessary flexibility to compensate for the lack of some of the traditional instruments used in national economic policies, such as the interest rate, the exchange rate and, indeed, fiscal discretionality. On the other, it became evident that the euro area’s institutional design and governance arrangements lacked the appropriate mechanisms for the early identification and correction of macroeconomic imbalances, and ultimately for crisis management and resolution. The sovereign debt, banking and balance of payments crisis episodes in 2011 and 2012, and the emergence of the risk of the common currency falling apart further highlighted the inadequacies of the financial integration model. The cost of the crisis across the euro area as a whole was greater than that incurred by the United States; and exit proved slower.

7  But, when this architecture is put in place and preserved over time, the floating ER regime may be just the expression of a broader arrangement of institutions and policies. Perhaps it is such arrangement, rather than the ER policy itself, the factor that may really protect EMEs from major global shocks, but this is not material to the end result: substantial smoothing of external volatility over the local economy. Finally, a greater convergence to the international standards on banking capital requirements defined by Basel III, especially for global banks, is among the macroprudential policies currently promoted to reduce the impacts of greater external volatility. Thank you. ***  8
The Governing Council at its meeting yesterday reaffirmed its intention to reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. This will reinforce the stock effect channel and, as a result, is likely to also help to mitigate abrupt changes in the direction of capital flows. The second factor that may help explain the persistence of cross-border capital flows relates to our forward guidance. By clearly spelling out the Governing Council’s reaction function, and the sequence by which we would adjust our various policy instruments, markets were able to better anticipate our actions based on the progress made towards a sustained adjustment in the path of inflation consistent with our inflation aim. They understood that, even as we were gradually reducing the monthly pace of purchases in response to growing confidence in the convergence of inflation towards our aim, our key policy rates would remain at current levels “well past” the horizon of our net asset purchases. This transparency has contributed to reducing policy-induced uncertainty on the rate outlook, thereby extending the planning horizon of investors and, ultimately, moderating volatility. More recently, the enhancement of our forward guidance in June has provided a similar sense of the direction of the rate outlook in the euro area beyond the expected end of net asset purchases in December.

Prices for Norwegian exports, such as oil, gas, metals, minerals and fish, rose markedly, while prices for imported goods fell. In the seven years leading up to the financial crisis, the volume of mainland GDP expanded at an average annual rate of 3.4 per cent. Exactly ten years ago today, Norges Bank was charged with the task of setting the interest rate with a view to keeping inflation low and stable. At the same time, new fiscal policy guidelines, also known as the fiscal rule, were implemented, charting a course for petroleum revenue spending. Norway’s sovereign wealth fund, which is now called the Government Pension Fund Global, was designed to prevent fluctuations in oil prices from feeding through to the mainland economy. 2  BIS central bankers’ speeches  A decade of inflation targeting The inflation target for monetary policy provides a sound anchor for inflation expectations. Over the past decade, CPI inflation has varied to some extent. Underlying inflation has naturally been more stable, but has been both higher and lower than the target. If we look at the ten-year period as a whole, inflation has been 2 per cent, that is to say close to the target. BIS central bankers’ speeches  3  Still, over the past ten years, the conduct of monetary policy has been tested. During this period, we have gained insight into the functioning of the Norwegian economy under an inflation-targeting regime. Let me touch upon some of these insights.
Prices for this metal impact prices for cars, household appliances, construction materials, garden tools, and other goods. These trends are also typical of a range of other products and services. However, I would like to repeat once again: it is the rapid recovery of aggregate demand that makes it possible to pass through costs to price growth. Taking into account elevated inflation expectations and the nature of inflation processes in general, we have raised our short-term estimate of the inflation path. Previously, we believed 1/3  BIS central bankers' speeches  that annual inflation would peak in March, gradually decreasing further on, while now we expect annual inflation to plateau until the middle of the year close to its readings observed in the first quarter. The annual rates of price growth will begin to slow down steadily in the second half of the year as the effect of one-off factors tapers off. However, given the period of substantially accommodative monetary policy and the time-lagged influence of our decisions on inflation, we believe that elevated inflationary pressure may persist until the end of the year due to the impact of the steady factors. In this regard, we have revised our inflation forecast for the end of 2021. The inflation rate will equal 4.7–5.2%. This is significantly higher — by one percentage point — than was expected in February. Our decision to accelerate the return to the neutral key rate will make it possible to bring annual inflation back to 4% by the middle of 2022.

As a closing example of the mindset underlying this philosophy I am going to quote Warren Buffett quoting Meg McConnell: 18 The years ahead will occasionally deliver major market declines—even panics—that will affect virtually all stocks. No one can tell you when these traumas will occur—not me, not Charlie [Munger], not economists, not the media. Meg McConnell of the New York Fed aptly described the reality of panics: "We spend a lot of time looking for systemic risk; in truth, however, it tends to find us." 1 I would like to thank Deborah Leonard for her assistance in the preparation of these remarks and colleagues at  the Federal Reserve Bank of New York for insightful comments and suggestions. 2 Tetlock, Philip E. and Dan Gardner, 2015, Superforecasting: The Art and Science of Prediction, New York, Crown 5/6  BIS central bankers' speeches  Publishers. Philip Tetlock was the lead on the book so throughout my remarks, I will refer to only him. 3 IARPA’s Aggregated Contingent Estimation Program is described here. 4 The work of Scott Page on similar issues is an essential complement to the discussion in Superforecasting. 5 Footnote 12 of chapter 12 of the book discusses the highly quantitative approach taken at the Federal Reserve.
Mario Draghi: Introductory remarks Representatives of the Netherlands  at  the  House  of  Introductory remarks by Mr Mario Draghi, President of the European Central Bank, at the Tweede Kamer der Staten-Generaal (House of Representatives of the Netherlands), The Hague, 10 May 2017. * * * Mr Chairman, Honourable Members of Parliament, This year, we celebrate the 60th and 25th anniversaries of the Treaties of Rome and Maastricht. Despite the many challenges that we face as Europeans, we should never forget the significant achievements of European integration in providing peace, security and prosperity. The fact that the Treaty that gave birth to the euro was signed in this country symbolises the enduring role of the Netherlands at the forefront of this European project. I am therefore honoured to be invited to speak here at the Dutch Parliament. Today’s event offers an opportunity to provide insight into the ECB’s decisions and to listen to your views. It is indeed important for the ECB to reach out to euro area citizens and their representatives to explain how we fulfil our mandate. The EU Treaties democratically conferred upon the ECB the primary objective of maintaining price stability in the euro area as a whole. This objective binds my colleagues and me on the ECB’s Governing Council, where our decisions are the result of collegial debate. And we are held accountable for our decisions by all EU citizens through their representatives in the European Parliament.

These measures aim to influence short and longerterm interest rates, asset prices and loan volumes, thereby fostering economic growth and supporting price stability. The ECB’s actions were not unique. Central banks in the United States, Japan and the United Kingdom also used asset purchases, while central banks in for example Sweden and Switzerland reduced key interest rates to below zero. Our measures have been very effective: they have led to very favourable financing conditions. Since mid-2014, bank lending rates for both firms and households have dropped by more than 100 basis points. And we have witnessed a pronounced convergence in borrowing conditions across both euro area countries and types of borrowers. These favourable financing conditions have in turn supported the economic recovery. For 15 consecutive quarters, euro area quarterly GDP growth has been consistently between 0.3% and 0.8%. In 2016, GDP per capita grew faster in the euro area than in any other major advanced economy. Four and a half million jobs were created in the last three years. And unemployment in the euro area is at its lowest point since May 2009. Our monetary policy has successfully stabilised inflation expectations. In our March ECB staff macroeconomic projections for the euro area, the outlook for headline HICP inflation has been revised upwards significantly for 2017 and slightly for 2018, while remaining unchanged for 2019. These projections foresee annual HICP inflation at 1.7% in 2017, 1.6% in 2018 and 1.7% in 2019. The staff projections are conditional on the full implementation of all our monetary policy measures.
More widely, the future Prudential Regulation Authority will work to transform the climate of prudential regulation. The Bank’s prudential supervision will avoid ticking boxes, instead being centred on making judgments about big risks to safety and soundness. We want this to be as collaborative, open and honest as possible – a different relationship between banks and their supervisors. One that revolves around penetrating and forensic analysis of the business and, where necessary, frank discussions with senior management and the board. Not a negotiation. And a regime where the Bank’s Prudential Regulation Authority has the powers to underpin pursuit of material concerns about safety and soundness, based largely on whether firms meet the broad statutory criteria – the Threshold Conditions – for being authorised. Macroprudential policy: keeping the regime up to speed, and taking away the punchbowl No set of static rules, regulations and structures will keep the system safe for ever. As time passes, and the financial system evolves we cannot put an ever increasing burden on microsupervisors of individual firms to compensate for outdated regulatory regimes. The market will eventually take the system to the edges of the box the authorities have tried to put it in. Policymakers therefore need to be able to move the box when circumstances warrant. 6  BIS central bankers’ speeches  This is where macroprudential comes in – keeping the rules of the game up to date, and leaning against exuberance. In the UK, the Financial Policy Committee is charged precisely with those tasks.

The new Basel package is an attempt to use simple measures to put bounds on the consequences of flaws in more complex measures, which were themselves designed to avoid the perverse incentives to hold only very risky assets created by the previous generation of simple measures. More will need to be done in the years ahead to simplify and underpin the Basel regime. Market discipline can help, but only if there is much more transparency around the drivers of risk weights – both why they change over time and why they differ, for similar exposures, across institutions. The market needs to be able to understand what is published. Microprudential supervision under the new UK Twin Peaks system But the new UK regime will not rely on getting the regulations exactly right. That would be a fool’s paradise. Effective supervision is absolutely vital. Whether we like it or not, firms will be able to find their way around any set of rules – complex or simple – if they are determined to do so. This is not good. But the UK’s new Twin Peaks structure will help. In the first place, the reforms will finally give London a dedicated securities regulator a quarter century after the Big Bang that made it so necessary. The Financial Conduct Authority’s approach to enforcement will need to preserve – and, where necessary, restore – honesty in a market community for which side-stepping rules and principles has become too close to being part and parcel of commercial life.
This flexibility has been accompanied by fundamental changes in the approach to supervision that has shifted from a predominantly compliance-based approach, to one that focuses on an assessment of the risk-taking activities of an institution and the effectiveness of the control functions that are in place within the institution to manage the risks. The supervisory tools have also been expanded to include more forward-looking assessments of the risks to financial stability, supported by more dynamic stress testing approaches and enhanced surveillance systems. To a large extent, the preconditions for the shift to principle-based approach to regulation have been strengthened through capacity building measures that have been pursued in the period immediately following the Asian financial crisis. The development of the Financial Sector Masterplan which was released in 2001 is a blueprint not only for comprehensive financial sector reforms, but also provided the framework and strategies for the modernisation of our financial system. The financial safety net was also strengthened with the introduction of a comprehensive deposit insurance system and the establishment of institutions to assist consumers in managing their debt and resolving disputes with financial institutions. These measures have contributed towards maintaining confidence in the financial system. The crisis: a defining moment for the bank In the 1990s, it became evident for emerging economies that new challenges to stability arising from the international dimensions of financial activity had emerged. In particular, highly volatile and potentially destabilising capital flows had become a dominant feature of the international financial environment.

In the event, the Agents’ survey may, if anything, have understated the slowdown. Annual growth in average weekly earnings peaked at 2.8% in November 2016. It currently stands at 2.1%. Excluding bonuses, it stands at 1.7%. Data on pay settlements suggest that weak profile may persist. Private sector wage settlements are currently running at around 2.0%, down from 3% a year ago. These recent trends in wages, alongside further falls in unemployment, reinforce the impression of an exceptionally weak relationship between wages and employment, a pancake-like Phillips curve. Indeed, it is testimony to the flatness of the Phillips curve that wage growth is at similar levels today to when unemployment was at its recent peak back in 2011. The Bank’s May Inflation Report projections assume wage growth picks up to around 3 ¾% over the next three years. Given that unemployment is projected to be broadly flat over that period, the tight labour market will have to exert increasing upward pressure on pay growth if this wage profile is to be realised. Alternatively, whatever other factors have been dragging on pay growth will have to dissipate. Of course, wages are not the only determinant of underlying inflation pressures. That is why the Bank monitors a range of around 13 other indicators of domestically-generated inflation. Each of these has their own imperfections, but they share the aim of filtering out temporary influences on underlying inflation.
Andrew Bailey: Recovery and resolution plans Remarks by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at the Santander International Banking Conference, Madrid, 17 November 2009. I am grateful to Victoria Cleland, Chris Daniels, Iain De Weymarn, Andrew Hauser, Andrew Hewitt, Tony Lomas, Orla May, Maggie Mills, Sally Reid, Paul Tucker and Andrew Wardlow for their comments and advice. *  *  *  It is a pleasure to be in Madrid today, not least because finding time to reflect on the future of the banking system means that we are at some distance from the urgent fire-fighting that has characterised the past two autumns. But I would not wish thereby to downplay the importance and urgency of the rebuilding task. The past two autumns were in many ways taken up with doing what had to be done in crisis conditions. And what had to be done involved the use of public money on a scale that has been unprecedented and was previously unimaginable. There was nothing easy about that task, and from the perspective of resolving the problems of the system too often we have had to grit our teeth, accept that “we are where we are” and get on with the job in hand. Fire-fighters don’t get to choose the fires they fight, or even sometimes how they fight them. But fire prevention is better than fire-fighting.

My purpose this morning has been to cast those questions in the context of the political economy conditions in which individual central banks are constituted and operate, using the UK’s MPC as an example. Central bank independence is a solution to a political economy problem – time inconsistency. Precisely how that problem is resolved may legitimately vary from country to country. In the UK, it was achieved only after democratically elected politicians had done some of the politically contentious heavy lifting in bringing inflation down, and after a period in which the case for price stability had been made. The monetary regime introduced in 1997 was necessary to embed credibility. Its detailed design properly reflected UK circumstances. Circumstances elsewhere differ, and so details in central banking practices vary. But not every central bank practice everywhere may be optimal, and what is feasible for each country’s monetary system alters over time. We therefore need to learn from each other, without imagining that all design features travel safely: learning without proselytising. Academic research plays a huge role in keeping us intellectually honest, and so in progressing those debates. 34  See Tucker, P. M. W., “Reflections on operating inflation targeting”, speech at the Graduate School of Business, University of Chicago, July 2006. BIS Review 66/2007  9
8  BIS Review 130/2010  Figure 1 GDP gaps in September 2010 and in real time Per cent  Source: The Riksbank. Figure 2 Historical GDP trends Index 2000 = 100  Source: Statistics Sweden and the Riksbank. BIS Review 130/2010  9  Figure 3 GDP, hours worked and productivity Index 2007 Q4 = 100  Note: Broken lines denote the Riksbank’s forecasts in MPU September 2008. Sources: Statistics Sweden and the Riksbank. Figure 4 The GDP gap according to the Riksbank, the National Institute of Economic Research and the Ministry of Finance Per cent  10  BIS Review 130/2010  Figure 5 The GDP gap according to the Riksbank, the OECD, the IMF and the European Commission Per cent  Figure 6 Labour market gaps Percentage deviation from the HP-trend and from the average 2000–2007, seasonally-adjusted data  Note. Broken lines denote the Riksbank’s forecast in MPU September 2010. Sources: Statistics Sweden and the Riksbank. BIS Review 130/2010  11  Figure 7 Indicators for the business sector Deviation from the average, percentage points  Note. Companies’ inflation expectations 12 months ahead are denoted in tenths of a percentage point. Source: National Institute of Economic Research. Figure 8 Shortage of labour in the business sector and capacity utilisation in the manufacturing industry Deviation from average 1996–2007  Source: National Institute of Economic Research.

The negative gap at the recession’s lowest point in 2009 has been estimated at – 4 per cent by the European Commission and at – 7 per cent by the OECD. The GDP gaps of 2010 and 2011 according to both of these institutions can be disregarded, as their reports were compiled before the summer and, since then, GDP outcomes have been surprisingly high. In its latest report, the IMF reckons with a GDP gap of approximately 2.5 per cent for 2007, followed by a decrease to almost – 5 per cent in 2009 before reaching – 1.5 per cent in 2011. 8 (Figure 5. The GDP gap according to the Riksbank, the OECD, the IMF and the European Commission). All three organisations reckon that potential GDP has fallen in conjunction with the crisis. For example, the OECD estimates that potential GDP has decreased by an average of approximately 3 per cent for the countries in the OECD area, as a consequence of the crisis. Approximately two-thirds of this decrease is due to higher capital costs caused by the return to normal risk and interest rate levels after the abnormally low levels prevailing prior to the crisis, which is having a dampening effect on capital intensity. The remaining third is due to an increase in structural unemployment and a decrease in labour supply. As regards Sweden, the dampening effects of structural unemployment and falling labour supply are deemed to be below average, however.