samchain/econo-pairs-v1 huggingface dataset:
Most of the growth, such as it was, was down to private and public consumption, though the former was nevertheless quite a bit weaker than we expected. Net trade was distinctly disappointing relative to our expectations. And fixed investment continued to drag on growth. Lurking behind this picture was: first, a much less pronounced improvement in credit conditions than expected, with the spreads over Bank Rate of borrowing and lending rates actually increasing for much of the period and only falling sharply after last summer; second, much weaker global growth, as the problems of excessive indebtedness in the euro-area periphery and the associated uncertainties concerning the resilience of European banks pulled the region into a second recession; and, third, the kick to net exports from the depreciation of sterling was apparently offset by a fall in foreign demand for business and financial services triggered by the financial crisis. BIS central bankers’ speeches  1  As far as inflation goes, at the time of our August 2010 Inflation Report, CPI inflation was a little over 3%, reflecting higher oil prices, the restoration of VAT to 17.5% and pass-through from the depreciation of sterling (Chart 3). Our central expectation was for inflation to remain elevated in the short term, as VAT was raised further to 20%, but then to fall back to well below the 2% target when that rise dropped out of the twelve-month comparison.

10  BIS central bankers’ speeches  Chart 9: Composite PMI and spread between 2-year swap and overnight rates Net balance 65  Percentage points 2.0 1.5  60  1.0 55  0.5  50  0.0 -0.5  45  Composite PMI (left-hand scale) 35 1998  -1.0  Spread between 2-year swap and (a) overnight rates (right-hand scale)  40  -1.5  (b)  -2.0 2000  2002  2004  2006  2008  2010  2012  Sources: Bloomberg, Markit Economics, ONS and Bank calculations. (a) Three-month moving average of the end-month spread between the 2-year swap rate and the SONIA rate. (b) Based on the Markit/CIPS manufacturing and services PMIs. BIS central bankers’ speeches  11
The leading economic institutions and private research institutes state that we will probably continue to see a rather dynamic growth rate at a global level. However, you seem to be very concerned with inflation, to the point that many people are betting on a further rate rise before the end of the year, to 3.5%. The primary mandate assigned to us is to guarantee price stability, and we have to be credible in order to be able to anchor inflation expectations. This is extremely important not only for our credibility, but also because it enables a favourable level of medium and long term market interest rates to be maintained. I am convinced that this is also the sentiment of the 313 million European citizens (315 if we include the Slovenians, who will be the next to join the euro area), who are asking us to safeguard their purchasing power by maintaining price stability. Therefore, this is not only what the Treaty commands us to do but also what our European fellow citizens are emphatically asking us to do. Could inflation trends lead you to adjust rates again? After our last meeting in Frankfurt, I said, on behalf of the Governing Council, that strong vigilance remains of the essence so as to ensure that upside risks to price stability are contained. Do you regard the 2% inflation limit as being absolutely inviolable or is there some degree of flexibility? What has to be kept in mind is that we take a medium-term perspective.

The public debt and fiscal consolidation are still an area that requires additional vigilance by the policymakers in emerging economies, especially in light of changing financial conditions in the upcoming period. Around a decade after the global crisis, we have seen that the banks, globally, are in a quite better shape. However, the reforms and Basel requirements should be fully implemented in order to build resilient banks. The digitalization is yet another interesting phenomenon of today’s life and unavoidable element of the current global environment. Fintech in banking industry provides new revolutionary approach to the supply of banking services, as a response of the banks to the changing habits of their clients. This creates new opportunities, but also risks that regulatory authorities must be aware of. Therefore, globalization and innovation in financial sector call for deepening the international cooperation between authorities in different fields of operation. This conference is just one of the possible forms of this international cooperation. Today, we will discuss the empirical findings from the research papers received upon our Call for papers, on different and very important central banking issues, while tomorrow we will have panel discussions on policy issues with high-level representatives from central banks and international institutions. I believe that all together, we will make contribution by answering the pending economic questions that I mentioned earlier and exchanging experiences that will enable us to better cope with the future challenges. I wish you interesting conference, fruitful discussion and pleasant stay in Ohrid! Thank you. 2/2  BIS central bankers' speeches
Jiří Rusnok: Currency, taxes and other institutes of financial law Welcome speech by Mr Jiří Rusnok, Governor of the Czech National Bank, at the Currency, taxes and other institutes of financial law conference, Faculty of Law, Charles University, Prague, 20 September 2018. * * * Good morning, everyone. It is an honour and a pleasure for me to welcome you to today’s conference on the currency, taxes and other institutes of financial law. The 100th anniversary of the foundation of the independent Czechoslovakia is a good opportunity to look back and identify the main features of our national economic history. As you know, we have been through four periods since 1918 – the period of political and economic emancipation from Austria-Hungary, the wartime economy, the era of central-planning-based totalitarian communism, and finally almost three decades of democracy and a market economy. So, more than enough has happened in our country over the last 100 years. Although these periods could not have been more different, two common features have appeared in various guises. I would characterise them on the one hand as economic moderation, prudence and discipline, and on the other as a struggle for economic independence and a willingness and ability to bear the consequences. Let me give some examples of both. Czechoslovakia’s founding fathers Tomáš Garrigue Masaryk, Karel Kramář and Alois Rašín were well aware that nurturing a sound financial environment was crucial to the prosperity of the young nation.

Not that I want to defend the past economic regime in any way, of course, but let’s not forget that it had elements which can be traced back at least implicitly to the pre-war period. An explicit return to the three traditions I mentioned is the central feature of our post-1989 economic history. Many of us clearly remember that the liberalisation of prices and foreign trade in 1991 was accompanied by effective stabilisation measures. These included an appropriate devaluation of the koruna against a basket of currencies and the maintenance of balanced budgets or even slight surpluses. It is therefore no accident that in 1991 inflation was “only” 56% here, as compared to triple figures in Poland and often quadruple figures in other transforming 1/2  BIS central bankers' speeches  economies. The Czech National Bank embraced the legacy of price stability right from its establishment in 1993. The maintenance of a fixed exchange rate until 1997 was a condition for attaining singledigit inflation and provided a fixed point in the unstable transformation environment. The switch to inflation targeting in 1998 marked the start of a roughly ten-year transition to price stability according to the definition long applied in advanced market economies. Maintaining price stability is not just our constitutional duty, but a long-standing legacy that we proudly embrace. The second feature of our economic history that I mentioned at the start is an ability to cope with the consequences of the struggle for economic independence.
As regards the Swiss franc, we have noted that the euro/franc exchange rate has for the first time reached its pre-9/11 level. The price losses on equities of the past few years - the SPI today is approximately 40% below its peak - have had a significant effect in Switzerland. They put pressure on both corporations and individuals, with foreseeable higher old-age provisions and nascent insecurity in this area being one of the concerns. The Swiss financial sector, which makes an above-average contribution to gross national product, has been particularly hard hit by the stock market correction. The cut-backs which are now necessary in the financial sector will put a strain on the Swiss economy for an extended period to come. Economic activity Economic activity in Switzerland weakened in the first quarter of 2003. According to preliminary estimates of seco, real gross domestic product contracted compared with the previous period and was again slightly below the previous year’s level. The renewed deterioration in the economic situation did not come unexpectedly. It was primarily the result of the recurring downturn of the global economy, which is partly a reflection of the uncertainties in connection with the Iraq war. Swiss exports were  BIS Review 27/2003  1  down again in the first quarter, and the foreign trade contribution became distinctly negative. Consumer spending had a slightly stabilising effect while investments continued to decline overall. Even though geopolitical uncertainties have meanwhile largely given way, the economic situation in Switzerland remains difficult.

That said, there are some nascent signs that the economy may be doing better. For example, based on the first estimate, which is subject to revision, real GDP increased at a 2.8 percent annual rate in the third quarter of 2013, above the trend of the past four years. And the most recent payroll employment report showed a pickup in the monthly pace of job gains. The 3-month moving average rose back above a 200,000 pace after slowing to about 150,000 as of July of this year. I hope that this marks a turning point for the economy. But before we rush to this conclusion, a few more cautionary comments are appropriate. With respect to GDP growth, it turns out that inventory investment contributed ¾ of a percentage point to that overall growth rate. Thus, because this impetus from inventories will  BIS central bankers’ speeches  1  likely reverse this quarter, the real GDP growth rate is likely to slow to around a 2 percent annual rate or a bit less in the fourth quarter. With respect to payroll employment, we have seen such bursts in payroll growth before over the past few years and have been disappointed when the pickups proved temporary and did not lead to a rise in the overall growth rate. But, I have to admit that I am getting more hopeful.
10  Guild et al (2014). 4  BIS central bankers’ speeches  •  The private value of volunteering activities, in particular the benefits felt by volunteers themselves; and  •  The social value of volunteering activities, as societal gains may be a multiple of economic and private benefits. I want to build up a quantitative picture of these various layers. They take us from a conventional, GDP-centric measure of economic value through to a more fashionable, wellbeing-centric measure of social welfare. In other words, this approach combines elements of both the old and the new when determining the value of volunteering. Before diving into methodology, let me just highlight a few general caveats: •  First, these value layers – economic, private and social – may not be entirely distinct. For example, the private benefits from volunteering may be the very reason people volunteer in the first place and create economic value. So we should hesitate before simply adding these benefits together. I will try to resist doing so, but will probably fail. •  Second, value measurement becomes harder the further out you go from the centre of the onion. We can make reasonably informed guesses about the economic value of volunteering, by adapting national income accounting techniques. And we can construct some reasonable proxies for private benefits from various surveys. But we have only piecemeal evidence on measuring the social value of volunteering. This, in short, is a fledgling science.

At least in official GDP statistics, they are not captured at all. This failure to recognise fully the value it creates means that volunteering suffers from a market failure problem. At the end, I will suggest a few avenues for correcting that failure. The economics of well-being Volunteering, and the work of PBE, fits under the broader umbrella of the economics of wellbeing. This has become a growth area of late. And, some might say, not before time. In his excellent recent report on  BIS central bankers’ speeches  1  well-being, former Cabinet Secretary and PBE patron Gus O’Donnell quotes Robert F. Kennedy in 1968: 1 “[GDP] measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.” Economists, from Simon Kuznets in the 1930s onwards, have long been aware that GDP does not measure social welfare (Coyle (2014)). But, then and now, it remains the best available proxy of the volume of the goods and services an economy produces. 2 For this reason, it remains an essential ingredient when assessing and managing the economy – for example, when doing my day job of setting monetary policy. But there are indisputably a much broader range of indicators that are relevant when assessing the welfare of society more generally.
In October 2011, the number of persons registered as unemployed in the groups regarded as vulnerable amounted to 220,000 (of a total of 372,000 persons registered as unemployed), which is almost double the amount in 2008 (an increase of 100,000). A large number of the persons registered as unemployed also have long periods without work behind them. One in four people has been without work for more than three years of the past ten years. As the matching for vulnerable groups appears to function poorly and there has been a rapid inflow in recent years to the labour force of people from groups that have difficulty getting jobs quickly, this is having a more long-term impact on unemployment and is thus also impacting various measures of equilibrium unemployment. It means that a change in the composition of the labour supply could lead to substantial changes in equilibrium unemployment and resource utilisation. When we try to assess resource utilisation, we therefore need to take into account the heterogeneity of the labour supply and expected changes in the composition of the labour supply. Concluding thoughts What I have discussed today points, as I see it, to a general truth; namely that many apparently simple and straightforward concepts are suddenly revealed, in a confrontation with reality, to be much more complicated. We have an official measure of unemployment, but even here there is reason to reflect on what this measure says about the amount of spare  10  BIS central bankers’ speeches  capacity in the labour market.

BIS central bankers’ speeches  5  Figure 2 Unemployment and model estimates of equilibrium unemployment10 Per cent of labour force 14  14  Unemployment SVAR  12  12  UC gap UC trend cycle  10  10  8  8  6  6  4  4  2  2  0  0 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  Note: The diagram only shows the so-called point estimate for the SVAR and UC trend cycle models. The uncertainty/error margin associated with these two calculation methods is thus not shown. Source: The Riksbank  So, even though the calculations shown in the figure are based on historical data, the level of equilibrium unemployment cannot afterwards be determined with any degree of certainty. This is because equilibrium unemployment is not observable. Given this uncertainty, it could be asked whether equilibrium unemployment is a stable enough measure to use in the assessment of actual resource utilisation. The fact that estimates of equilibrium unemployment vary heavily over time and depending on the calculation model used provides a good illustration of the risk in having blind faith in the exactness of the estimated unemployment gap. This uncertainty means that deciding which view to take of long-term unemployment is always, ultimately, a matter of judgement.
However, the evidence shows that the economic impact of supply shocks on inflation has changed over time – actually quite dramatically. Figure 4 shows the inflation rate (total inflation and core, which again excludes food and energy) since 1970. What is striking is the way the behavior of the two series differed in the 1970 to 1985 period versus the period from 1986 to the present. The interplay of core and total inflation is very, very different in the more recent period than it was in the former. 3  Even future purchases can be affected, if saving for them is squeezed. BIS central bankers’ speeches  3  I realize that delving into topics like total and core inflation can seem a bit abstract. So let me bring in something a bit straightforward – energy prices and inflation. Figure 5 shows the profound effect that energy prices had in the 1970s on core inflation. In the 1970s the lines move up and down together as core inflation increased with energy prices. That is why my earlier chart shows core and total inflation moving so closely in that era. But since 1986, dramatic movements in energy prices have not affected core prices. My next two figures look at each period separately. Figure 6 shows that for much of that earlier period, inflation rates were much higher than they are currently.

What it shows is that when there is a supply shock such that total inflation (including food and energy) exceeds core inflation, two years later total inflation tends to be lower – when supply shocks such as oil prices drive up total inflation relative to core, the total tends to come back down toward the core inflation rate. Figure 9 performs similar analysis but focuses on the future core inflation rate, instead of the total. It shows no strong relationship. When total and core inflation diverge, core inflation tends to stay put. In other words, in recent years, when something like an oil shock causes total inflation to diverge from core, there was no consistent implication for the future core inflation rate. The shock to total inflation did not become embedded in core inflation. Why is all this important? If supply shocks tend to have a transitory impact on headline inflation, and do not pass through to any meaningful extent into core inflation, then monetary policy need not respond to the price increases caused by the supply shock. Currently, we have experienced sharply higher food and energy prices. If the relationship we document over the last 13 years continues, we should expect the impact on inflation to be transitory – and that total inflation will converge back to core inflation, which remains well below 2 percent. To digress, it is likely the case that supply shocks have become transitory because of the way in which monetary policy has tended to respond.
This is also the case for measures of TLAC (see Chart 6 for a sample of UK banks). Liquidity metrics show a similar pattern of improvement. For example, liquid asset ratios - high-quality liquid assets as a fraction of the total balance sheet – have risen from around 6% in 2008 to more than 8% (Chart 7), though the increase is more muted for D-SIBs. Meanwhile, the ratio of loans to deposits (LTD) has also improved, with lending backed by a larger share of stable sources of funding than before the crisis (Chart 8). Market-Based Metrics  A second set of metrics of bank solvency and liquidity focus on financial market perceptions of bank risk. There are a wide variety of potential such metrics, each with their own imperfections, including measures of default such as CDS spreads, bond yields and ratings; measures of volatility, such as option-implied volatilities; and measures of profitability, such as price-earnings ratios. These are summarised and evaluated in Sarin and Summers (2016). 8  These banks have been identified based on publicly available lists of systemically-important firms: • The Financial Stability Board’s list of G-SIBs as of 21 November 2016. • O-SIIs notified to the European Banking Authority as of 25 April 2016. • US bank holding companies (BHCs) subject to the Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR) as of March 2014. • Banks designated as systemically-important financial groups by the Swiss National Bank. • The four major banks in Australia. • The five largest banks in Canada.

However, overall economic progress has been below the desired level for a sustainable reduction in unemployment and poverty in Sri Lanka. Sri Lanka’s inflation has averaged 11 per cent in the post liberalization era. This has the adverse consequence of eroding the living standards of people, particularly vulnerable groups such as pensioners, other fixed income earners and the poor. Supply side factors, including sharp increases in the price of oil imports, have contributed to cost-push inflation. Sri Lanka’s vulnerability to the vagaries of weather, and relatively low agricultural productivity have been causal factors. Monetary management has been able to contain demand-pull inflation to a degree. The increase in inflation in 2004 over 2003 was perhaps typical - caused by a prolonged drought in certain areas of the country, a rise in international prices of key commodities, especially fuel, a somewhat higher growth in money supply and an increased budget deficit. Investment and savings ratios have been moderate; not sufficient to raise economic growth to the level necessary to improve the standards of living to the desired degree. Investment improved in 2004 to 25 per cent of GDP. However, a level of about 30 – 35 per cent of GDP is required on a sustained basis over the next five to ten years to improve essential infrastructure, to promote a higher and regionally balanced growth. BIS Review 36/2005  1  The external sector has been developing rapidly since 1977 with a significant degree of export diversification.
Page 19 16. See Busetto et al. (2022). 17. See Box A in ‘Monetary Policy Report – August 2021,’ Bank of England. 18. Such an approach would be consistent with periodic reviews of the asset sales programme at a lower frequency, as was envisaged in the August 2021 Box on this topic. (That Box foresaw a review of the parameters governing any quantitative tightening within two years of its commencement.) The MPC and Bank will of course learn more about the impact of balance sheet unwind as it progresses, and those lessons will inform any such review. 19. The empirical exercises reported in Busetto et al. (2022) and Bailey et al. (2020) support this view. 20. Asset sales will also reduce the stock of central bank reserves held by the banking system. In order to avoid that the overall stock of reserves did not fall below the level required to sustain normal functioning of the sterling money market, the Bank of England would need to stand ready with its operational tools to ensure a sufficient level of reserves.

While the ECB will maintain its commitment to the maintenance of price stability, other policy-makers should assume responsibility for increasing the growth potential of the euro area. This, in turn, is the best allocation of responsibilities to contributing to sustainable non-inflationary growth in the euro area and, thereby, also at a global level. 2  BIS Review 50/2001