samchain/econo-pairs-v1 huggingface dataset:
Core inflation will hover around 3 percent throughout the same horizon (figure 7). 4  BIS central bankers’ speeches  The current account deficit of the balance of payments is forecast to stand at 3.6 percent of GDP in 2014, up a little from 2013, but below the December estimate. Behind it is the expected decline in the copper price this year, which more than offsets the lower growth foreseen in domestic demand and imports. This implies that, measured at trend prices, the deficit will narrow further, approaching 3 percent of GDP. As for GDP, the rate of total investment will go slightly above 23 percent in nominal terms (somewhat more than 25 percent in real terms), while national savings should amount to 19.5 percent (table 2). Aside from the already discussed trajectories foreseen for domestic growth and the world economy, this forecast uses as a working assumption that nominal wages will be adjusted in line with productivity and the inflation target. It also uses as a methodological assumption that the real exchange rate will remain stable, considering that it is now inside the range believed to be consistent with its long-term fundamentals. Finally, the baseline scenario uses as a working methodological assumption that the MPR will follow a trend comparable with the one that can be derived by the prices of financial assets prevailing at the statistical closing of this Report (figure 8).

Both processes throw up a peculiar, and quite perplexing challenge: how to present our work and achievements in terms that are comprehensible and acceptable to the many non-specialists on our boards, and to the multitude of non-specialists among the general public. Because of the business background of many board members, and because of the natural human desire for clarity and simplicity, this increasingly boils down to a quest for setting down specific, quantifiable targets by which our performance can be measured. This presents enormous difficulties, even in policy areas that might seem easily amenable to quantification. And the challenges become still more complex when performance is linked to pay. The same problems of clarity and simplicity arise in the operation of transparency, an issue closely linked to accountability, and something which has, I believe, suffused all of the discussions these last few days. There has been a shift in the approach to this subject in recent years, from a broad assumption of confidentiality, except where exceptions can be justified, to something approaching the opposite: transparency and openness in all things except where market or commercial sensitivity, personal privacy or the public interest require otherwise. This is a healthy development. But it is also something that has been forced on many of us by financial or political crisis - through the sudden and often painful realisation that our actions have been inadequately explained, misrepresented and misunderstood. Central banks have been quick to learn from these episodes.
And the latest bank lending survey saw banks report a further easing of overall credit standards. Second, the Comprehensive Assessment, which we concluded just a few weeks ago, has encouraged banks to frontload their balance sheet repair and recapitalisation efforts. The  1  The figures are adjusted for sales and securitisation. BIS central bankers’ speeches  1  exercise has also identified € in capital shortfalls and imposed important prudential requirements on banks. Taken together, these actions increase transparency and confidence in the banking sector, which is a pre-condition for stronger recovery in credit. Third, against that background, we expect the monetary policy initiatives we adopted in June and September to gain pace in the coming months, thus incentivising lending to the real economy and ultimately bringing inflation closer to 2%. As evident from the latest bank lending survey, participation in the Targeted Long-Term Refinancing Operations (TLTROs) is likely to pick up in December and beyond; the covered bond purchase programme has begun; and the operational preconditions to start asset-backed securities (ABS) purchases are now met. Indeed, reflecting this progress in implementing the June and September packages, we have already observed a considerable easing of the effective monetary policy stance – although the liquidity injections via the TLTROs and purchase programmes are only starting to accumulate. These measures will have a sizeable impact on the Eurosystem’s balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012.

In my view there are two main areas today where this applies: first, ensuring that banks retain the incentives to lend in markets where to all intents and purposes they are irreplaceable, namely for SMEs; and second, ensuring that they have capacity to do so. Ensuring that banks’ retain incentives to lend Ensuring that banks retain the incentives to provide an elastic supply of credit to SMEs involves a variety of issues, but the priority in the current environment is addressing the factors that could drive unwanted adjustment in the sector: in particular, the cyclical, legacy and regulatory factors I described above. Cyclical factors matter for banks’ incentives because the longer weak demand conditions persist, the greater the risk that banks will shrink their balance sheets more than is necessary. Thus, a stronger recovery with stronger credit demand is a key part of repairing the bank lending channel. Achieving this means economic policies must do their utmost to bring the economy back to potential as quickly as possible, by strengthening both supply capacity and aggregate demand in the economy. As this is now high on the EU policy agenda, I will not dwell on it today. In terms of legacy factors, the main issue today is dealing with non-performing loans (NPLs).
Governance to prevent systemic risks – the road ahead I would now like to say a few words about the road ahead for the authorities’ efforts to prevent systemic risks. Today, the Riksbank has an overall responsibility for the financial system. Finansinspektionen is responsible for the stability of individual institutions, but also has a responsibility for the system as a whole. Together, our task is to try to steer the financial system away from instability and towards stability. The main responsibility for this of course lies with the banks themselves. The institutional frameworks give Finansinspektionen the effective tools that directly affect behaviour – the possibility to change the capital requirements, impose sanctions, prohibit or stipulate measures and, ultimately, to withdraw permits and licenses. The role of the Riksbank, on the other hand, is to exert influence by conducting a dialogue with the participants and issuing warnings about the risks that arise. The “Financial Stability Report”, which we publish twice a year, is a central tool in this work. The idea is that our warnings should influence the banks in the following way: if the Riksbank points out that a risk has arisen at a bank, the bank itself should take action to retain the confidence of the market in its operations. If the bank itself does not take action, the bank’s counterparties and customers should at least react and take account of the risk in their pricing.

Today, I will first elaborate on two challenges that will continue uniting us: the need for good national economic policies, pro-business and long-term oriented; and the need for active multilateralism to face our global challenges. Then, I will dwell on a challenge that we will have to address together: our future relationship and Brexit. ** I. The need for pro-business and long-term national economic policies  Let me start with the challenge of national economic policies. In the euro area, the economic recovery is now robust and broadly-based across countries and sectors. GDP growth should stand at at least 2.2% in 2017 according to our ECB forecast. The ECB’s accommodative monetary policy has contributed to this acceleration of growth in the euro area. Yet monetary policy cannot be the only game in town. Structural reforms in each country, along with stronger European coordination, are of the essence to boost potential growth in the medium term and to treat the fatal disease of mass unemployment. In recent years, several European countries, including in Southern Europe, have successfully carried out in-depth reforms that are yielding positive results in terms of growth and employment. Germany, the Netherlands and Nordic countries, as well as Spain and Portugal, are proof that economic success, a solid single currency, and the European social model are compatible. We should run pro-business, long-term oriented, fiscally sound economic policies, while keeping the core elements of a common social model, which can be the DNA and pride of Europe in this highly divided world.
The number of additional people wanting to work overwhelmed the longer-term effects of population ageing, which, all else equal, would have been expected to have removed around half a million people from the labour force (Chart 10). This expansion of the workforce is being driven mainly by women and older workers. Before the Great Recession, between 46% and 83% of those in the 50- to 64-year-old age cohort were active. Now it is between 60% and 89% (Table 1). In part this reflects a continuation of past trends within age cohorts, but it goes much further. 8 The greater risks and financial burdens that many are now facing are likely to be important drivers of the recent increase in the labour force. Changes to pension arrangements have encouraged people to work longer. 9 State pension ages are rising, and the default retirement age has been abolished. 10  6  The average of European Commission, OECD and IMF estimates of structural unemployment have increased from 8.8% in 2008 to 10.3% in 2013, reported in Draghi, M (2014), “Unemployment in the euro area”, Speech at the annual central bank symposium in Jackson Hole, August. 7  There is evidence of there having been an increase in skills mismatch both in the rightward shift of the euroarea Beveridge curve and as indicated by skills mismatch indices. See Draghi (ibid.).

(a) Uses Workforce Jobs by industry data seasonally adjusted by ONS. Industries are grouped by Standard Industrial Classification (SIC) 2007. Chart 7: Employment growth has been strong among the most highly skilled since the crisis, but low-skilled employment has recently rebounded. Chart 8: The UK Beveridge curve has been returning towards its past position. Sources: Labour Force Survey and Bank calculations. (a) Uses the Standard Occupational Classification (SOC) 2000. Seasonally adjusted by Bank staff. (b) Includes managers, professional and associal professional and technical occupations. (c) Change in total employment less changes in high and low-skilled occupations. (d) Includes elementary occupations, plant machine operatives, sales and customer services. Sources: Labour Force Survey and ONS Vacancy Survey (a) Total vacancies divided by number of people aged 16+ in employment. (b) Number of unemployed aged 16+ as a share of the active population aged 16+. 12  BIS central bankers’ speeches  Chart 9: UK wage growth is substantially weaker than would have been predicted by its past relationship with unemployment. Chart 10: Aggregate participation rate would have been around 1ppt lower had participation rates across age cohorts remained constant at 2007 levels from the start of the crisis. Source: Broadbent (2014). Source: Labour Force Survey and Bank calculations. (a) Economically active as a share of the 16+ population. (b) Counter-factual estimate fixing age- and gender- specific participation rates at their 2007 levels, and using actual population shares.
All of these factors may permanently lower the path of potential output. As I said in the fall of 2010 and I repeat the message again today: I think state-contingent policies such as those I just described are a productive way to provide such necessary monetary accommodation. There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape. It is imperative to undertake action now. References Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans, 2005, “Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy”, Journal of Political Economy, February, Vol. 113, No. 1, February, pp. 1–45. Chung, Hess, Jean-Philippe Laforte, David Reifschneider and John C. Williams, 2010, “Have We Underestimated the Probability of Hitting the Zero Lower Bound?”, at the conference, Revisiting Monetary Policy in a Low Inflation Environment, Federal Reserve Bank of Boston, October 13. Eggertsson, Gauti, and Michael Woodford, 2003, “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, Vol. 34, No. 1, pp. 139–211. Federal Open Market Committee, 2011, Minutes of the Federal Open Market Committee, January 25–26, Board of Governors of the Federal Reserve System, February 16. Krugman, Paul R., 1998, “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap”, Brookings Papers on Economic Activity, Vol. 29, No. 2, pp. 137–206. Reinhart, Carmen M., and Kenneth S. Rogoff, 2009, This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press.

Reinhart and Rogoff document the substantially detrimental effects that financial crises typically impose on the subsequent economic recovery. As we all know, the recent recession was accompanied by a large financial crisis. When I look at the U.S. economy today, I see it tracking Reinhart and Rogoff’s observation that such recoveries are usually painfully slow – and are so for reasons that have little to do with structural impediments in the labor market and the like. Liquidity traps are rare and difficult events to manage. They present a clear and present danger that we risk repeating the experience of the U.S. in the 1930s or that of Japan over  1  See Christiano, Eichenmbaum and Evans (2005), Smets and Wouters (2007) and Chung et al. (2010). 2  Federal Open Market Committee (2011). 3  Reinhart and Rogoff (2009). BIS central bankers’ speeches  3  the past 20 years. However, liquidity traps have been studied over the years in rigorous analytical models by a number of prominent economists, including Paul Krugman, Gauti Eggertsson, Michael Woodford and Ivan Werning.4 Variants of these models have successfully explained business cycle developments in the United States. The lesson drawn from this literature is that the performance of economies stuck in a liquidity trap can be vastly improved by lowering real interest rates and lifting economic activity using an appropriately prolonged and forward-looking period of accommodative monetary policy. Of course, such monetary accommodation is the antithesis of the policy prescription for the structural impediments scenario.
In the domestic foreign exchange market, average annual depreciation of ALL against the EUR and the USD was 7.6 and 13.2 percent, respectively. 1.5  Inflation and monetary policy  1.5.1  CPI inflation  Consumer prices rose 2.2 percent on average in 2009, which is in line with the Bank of Albania’s target for inflation. As a result of the reduced inflationary pressures worldwide, annual inflation marked low rates – 1.8 percent on average – during the first quarter of 2009. In the following two quarters, inflation rates stabilized close to the lower limit of the Bank of Albania’s target, 2.0 percent. Annual inflation displayed an upward tendency in the last quarter, when it marked 2.9 per cent in average terms and converging to the inflation target. The highest inflation rate of 3.5 percent was marked in December. The increase of inflation in the last part of the year was mainly triggered by the more complete exchange rate devaluation pass-through to consumer prices, in the presence of upward primary commodity prices in the global markets. The slowdown of economic activity at home and the low inflationary pressures from the global economy created an environment of relatively low inflationary pressures. Core and non-traded inflation marked average rates of 1.3 and 1.6 percent, respectively, in 2009 attesting to the low inflationary pressures of the domestic economy. These factors offset the devaluation effect of the national currency, which led to higher prices of imported goods and a part of products that are still indexed to the exchange rate.

In both dimensions, I believe this kind of long-term approach is the hallmark of a high-quality financial system. Concluding remarks 27. I hope these reflections have shed some light on Hong Kong’s distinctive qualities as an international financial centre. It is resilient – our institutions and markets remain safe and sound in good times and bad. And it offers huge opportunities to local and global participants, driven by the Mainland’s continued financial liberalisation, as well as developments in fintech and green finance. 28. My team and I are committed to upholding these qualities. We will continue to reinforce Hong Kong’s position as an international financial centre of the highest quality. This journey has no end – and we will rely as always on strong support from everyone that we work with, including many of you. I am confident that, by working together, we can continue to build on Hong Kong’s unique foundation – and enhance our position as one of the world’s pre3/4  BIS central bankers' speeches  eminent financial centres. 29. It only remains for me to thank the Hong Kong Management Association for having me here tonight; to thank you all for your attention; and to congratulate the winners of the Quality Award – your achievements are rightly honoured today. 4/4  BIS central bankers' speeches
Such gambles for resurrection can explain the ruin of bankers as well as gamblers, including most recently Lehman Brothers and Bear Stearns. These shifts in risk preferences are not peculiar to humans. They are also observed in birds, insects and mammals when faced with a losing streak. 14 Birds foraging in mid-winter have been found to take a calculated gamble by pursuing high-risk, high-return strategies, much like the down-at-heel gambler or world-weary CEO. Although Lehman CEO Dick Fuld was  11  For example, Ainslie and Haslam (1992), Ainslie (1974). 12  For example, Madden et al (1997), Bickel et al (1999), Petry (2001), Vuchinich and Simpson (1998). 13  For example Kahneman and Tversky (1979). 14  For example, Watson and Platt (2010), Schultz et al (2010). 4  BIS Review 114/2010  nick-named the gorilla, his behaviour during a losing streak was closer to that of a ravenous robin. Self-improving cycles If preferences evolve over time, this gives rise to the possibility of self-reinforcing patterns of behaviour. Such evolutionary trends have been extensively studied by sociologists, psychologists and even some economists. These studies confirm the old aphorism: virtue is its own reward. Specifically, patience is capable of setting in train a cycle of self-improving behaviour in individuals, economic and social systems. Take happiness. Studies have shown that happy people save more and spend less. 15 Happy people also take longer to make decisions and expect a longer life. In short, they are patient. These patterns of behaviour are connected and reinforcing.

These dual equilibria make choosing the right pace and path of financial reform crucial. Some countries, like China, appear to be proceeding along the patient path. The choice is how to pace reform to prevent overshooting onto the impatient path. For countries which have already liberalised, the choice is how to promote patience while harnessing impatience. These are real public policy choices. Patience and impatience Patience, we are told, is a virtue. That has been the verdict of theologians, philosophers and authors for well over 700 years. Interestingly, it was also the verdict of the earliest economists. In his Theory of Moral Sentiments (1759), Adam Smith declares: “The qualities most useful to ourselves are, first of all, superior reasons and understanding, by which we are capable of discerning the remote consequences of all our actions; and, secondly, self-command, by which we are enabled to abstain from present pleasure or to endure present pain in order to obtain a greater pleasure in some future time”. BIS Review 114/2010  1  So for Smith, patience was both a distinctive and valuable human commodity. Subsequent research has shown he was right. Patience is peculiarly human. Our nearest evolutionary relatives, discount almost entirely outcomes more than one minute into the future. 1 It is not that animals are incapable of far-sighted behaviour – for example, squirrels collecting nuts or birds flying south for the winter. But these are not acts of spontaneous self-control, like saving or dieting. Rather, they are genetically pre-programmed.
Mario Draghi: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, for the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 17 November 2014. *  *  *  Mr Chairman, Honourable Members of the Economic and Monetary Affairs Committee, Ladies and Gentlemen, It is a pleasure for me to be back again in this committee for the last hearing of 2014. This year has once again been a year of profound change for the euro area and for the Union as a whole. It was a year of legislative and institutional progress on many fronts, as 2014 saw the birth of banking union with the agreement of the Single Resolution Mechanism, the start of the Single Supervisory Mechanism and the successful conclusion of the comprehensive assessment of banks’ balance sheets. And it was indeed a challenging year for monetary policy, which saw the ECB take a wide range of measures to respond to the risks emanating from an increasingly sobering economic outlook. You have chosen two topics for today’s hearing, the relationship of financial fragmentation and monetary policy as well as the Eurosystem’s collateral framework. I will touch on both these issues, but let me first run you through our current assessment of the economic outlook. Economic and monetary developments The euro area growth momentum has weakened over the summer months and most recent forecasts have been revised downwards.

It is therefore important that the authorities do not sow doubt, but on the contrary pursue a longterm and predictable policy. The authorities must be credible and inspire confidence. There must be consistency between the stated objectives of economic policy and what is actually done to achieve these objectives. This is the most important reason why the conduct of monetary policy has been delegated to the central bank in Norway, as is the case in other comparable countries. The question of central bank independence is not new. When Norges Bank was established almost 200 years ago, there was much discussion about where to locate the head office. Trondheim was chosen and one of the arguments in the debate was that locating the central bank far from the seat of government would prevent the central bank from coming under political pressure. It was not until 1896 that the Storting decided that the central bank should be moved to Kristiania (now Oslo). The strongest objection to relocating the central bank from Trondheim to Kristiania was expressed by Director Karl Gether Bomhoff, who was in fact also a friend of Henrik Ibsen from his Dresden period. 11 Bomhoff was a member of the Bank’s board for 35 years, from 1885 to 1920. In 1893, he became the first permanently employed chairman of the board and the first director for the entire central bank.