samchain/econo-pairs-v1 huggingface dataset:
And UK GDP has now risen for 38 consecutive quarters (albeit in the case of 2001 Q4, only just! ), the longest continuous expansion since post-war records began. Achieving low and stable inflation is the best contribution that monetary policy can make to the wider economic goals of sustainable growth and employment. Having an inflation target certainly does not mean that we ignore  BIS Review 18/2002  1  real activity. We have discretion over how rapidly we try to bring inflation back to target when and if it diverges from 2½%. And we regularly publish our best estimate about the likely future path of growth up to a two year horizon. But the aim of policy is clear - we do what is necessary to keep inflation on target. As you know, there are nine of us on the Bank's Monetary Policy Committee, and we meet once a month to make our interest rate decision. This is a rigorous process, and rightly so. But, of course, agreement on process need not, and does not, imply universal agreement on the appropriate stance of policy, as our minutes show. Indeed, an industry has grown up geared to guessing MPC members' personal habits, psychoanalysing our personalities and classifying us into different species of the aviary. But it is important to recognise, I think, that disagreements are evidence of the strength of the system, not its weakness.

But not all of the sectoral differences that have emerged are necessarily unwelcome. Indeed, for those seeking to ensure stability in the economy as a whole, it is really just as well that consumption growth has remained robust at a time when the net trade position of the economy has worsened so markedly. And, as recent MPC minutes show, that has been our intention. So long as the world economy recovers quickly enough to pick up the slack as consumption slows, it may be that we in the UK will avoid the sharp recessions of previous cycles. Of course, this is a big 'if', and I do not want to imply that I am excessively confident that this will occur. Rapid consumption growth brings with it considerable risks, not least when it is financed by a large build up in consumer debt. But it is the MPC's central expectation that we will escape a serious slowdown at current interest rates. In the last few weeks, we have seen some tentative signs of an unwinding of some of the more severe sectoral gaps in the economy, with the slowdown in retail sales growth since the start of the year, and an encouraging pickup in a number of surveys of business confidence and investment intentions. 2  BIS Review 18/2002  Overall, it seems to me that the risks around the outlook for UK inflation are fairly evenly balanced.
The Riksbank has therefore been working on internal EMU preparations for several years now. What would the economic consequences of membership of the Eurosystem be for Sweden? Swedish participation in stage three of EMU is essentially a political issue on which the Executive Board of the Riksbank has not taken a stand. On the other hand, earlier General Councils of the Riksbank have declared themselves in favour of EMU membership on two occasions, in 1994 and 1997. So, what economic consequences would membership of the Eurosystem have for Sweden? One advantage, in my opinion, is the strength and stability entailed in belonging to a large currency area rather than a small one. Fluctuations in the value of the currency ought to decline, which would reduce uncertainty. The most evident economic effect of EMU membership would be the transaction gains as a result of the currency borders disappearing. These are the costs and the inconvenience of  6  BIS Review 37/2002  exchanging currency when one visits or trades with different countries in the euro area. Another concrete advantage is that the administration costs companies have been forced to bear to safeguard against undesirable fluctuations in exchange rates would disappear. It is probably of greater significance for the economy that a single currency would promote competition to the advantage of consumers, who would meet lower prices and thereby have more money left in their purses. When all parties use the same currency unit, it is possible to make price comparisons between countries.

As the economy is from time to time subject to unforeseen shocks, there will be deviations from the forecasts, even if the forecasts are well-founded. If, for instance, fruit-growers’ harvests are affected by insects, the price of fruit will rise, if the water reservoirs are not filled, electricity prices could rise and if cattle in Europe suffer various diseases, the price of meat and some other foodstuffs will rise. If the Riksbank tried to make adjustments for this type of temporary price disturbance, it would probably lead to large swings in monetary policy and unnecessary fluctuations in demand and production. It would therefore be wrong to give the impression that inflation will always be above two per cent. On the other hand, it is important that the Riksbank adapts the instrumental rate so that the inflation forecast one to two years ahead is in line with the target. This means that companies and households can rely on temporary deviations upwards or downwards being only temporary. In retrospect and looking outwards The attacks on the World Trade Center and the Pentagon on 11 September last year increased the uncertainty as to how the already weak global economic activity would develop. Even before then, signals of a more evident slowdown in industry and a poor development on the stock markets had caused the Riksbank to make a downward revision of its growth forecasts. The risk was that the terrorist attacks would undermine confidence in future prospects among households and companies, which usually has a negative effect on demand.
So, in short, in Sweden a situation has prevailed where subdued inflationary pressures have called for an expansionary monetary policy, while, at the same time, property prices have been surging in a fashion that in no way can be deemed as sustainable. How can, and should, a central bank in a small open economy with an inflation target deal with such a situation? The first thing a central bank can do is to engage in “open-mouth operations” and constantly remind everyone of the existence of the risks through speeches and documents. One publication that can prove particularly useful in this regard is the Financial Stability Reports, which are now published by an increasing number of central banks. By taking a systemic view of the financial system, the Financial Stability Reports investigate the collective impact stemming from the actions of individual financial institutions. By communicating these findings to market participants and the general public, the central bank can raise awareness of risks to financial stability, which might otherwise go unnoticed. BIS Review 101/2007  3  But, at times, all this may not be enough, and then the inevitable question begs to be answered – How, if at all, should a central bank let changes in asset prices influence its monetary policy? The Riksbank runs a flexible inflation target, which means that we also take the real economy into account when we set interest rates.

1 Given the problems in defining and measuring financial stability, why should we pay any attention to it? One answer is that we simply cannot afford not to do so, as financial crises carry with them huge costs to society. This was shown by events in Japan and the Nordic countries during the early 1990s, and in much of South East Asia in 1997. In fact, one could even claim, that financial stability takes precedence over price stability, in the sense that the latter is quite irrelevant if the financial system is on the brink of collapse. An important difference between price stability and financial stability is that while responsibility for price stability rests squarely on the central bank, financial stability necessitates the cooperation of the central bank, supervisors and the government. However, the exact roles played by different authorities differ from country to country. Another difference is the number of instruments available to policy makers. In the case of price stability, there basically exist one instrument (either the short-term interest rate or the nominal exchange rate). Maintaining financial stability, on the other hand, requires a wide spectrum of policy measures, such as professional supervision, a legal framework that does not encourage “moral hazard”-type behaviour and crisis management plans. A recent complication is the surge in cross border banking activities, which means that the national authorities engaged in financial stability work, increasingly must work with their foreign colleagues.
But given that inflation is still below the objective, as are marketbased long-term inflation expectations, upside shocks would be more welcome than equivalent downside shocks at present. Let me at this point add some words on negative rates following my remarks Lisbon last February, and state the obvious: we are in March 2019, and no longer in March 2016 when we cut the DFR to –0.40%. This gap in time has two consequences: First, there were, at that time, significant deflationary risks, and we decided accordingly a strong calibration of our monetary answers. As these deflationary risks have now receded, there is obviously no reason to go more negative on interest rates. Second, we have three years more evidence on the combined effects of our various unconventional monetary tools, including negative rates, on financial intermediation and their impact on the transmission of our monetary policy – the combined effects of which might 2/3  BIS central bankers' speeches  have evolved over time. So Mario Draghi rightly stressed that we need to further monitor the bank lending channel and to reflect on possible measures that we can take to preserve the favourable implications of negative rates for the economy, while mitigating their possible side effects. Knightian uncertainty is different situation, for which assigning probabilities is not feasible, and is a concept that anyone trying to forecast the recent outcomes in the House of Commons would instantly recognise.

The recent launch of the FAA Learning Standards and the Finance Qualification Structure will facilitate the harmonisation and wider recognition of accredited professional learning programmes which will also be important for this industry to promote consistent standards in the professional development and mobility of its workforce. We have started to engage FAA, the industry and education providers on this initiative and are working towards the accreditation of mandatory core financial advisory training and examination modules in 2015, and continuing professional development programs progressively thereafter. To improve the alignment between the interests of consumers and financial advisers, we will be requiring all life insurers and family takaful operators to implement a balanced scorecard  2  BIS central bankers’ speeches  framework for the remuneration of agents and advisers, beginning with investment-linked products in the initial phase. We believe it is also important that such a framework is cascaded through to how financial advisory firms are rewarding their representatives. Incentives for individual representatives should be structured to promote impartial product advice, and investments in building enduring relationships with clients by providing the highest standards of professional service. The AFA will be expected to play an important role in driving this initiative through its guidance to firms on the operationalisation of the framework in the context of financial advisers. In the medium term, the Bank will examine the issue of the balance between fee-based and commission-based compensation for financial advisers more closely.
Firms decide how much to produce and set prices to maximise their profits, given expected prices for the input factors labour and capital. These are key mechanisms in microeconomic theory. The long-term growth potential of the economy is determined by technological developments. There is no long-term trade off between inflation and unemployment. As prices and wages respond with some lag, monetary policy can, however, influence demand, output and employment in the short and medium term. In the light of these mechanisms, NEMO can be called a New Keynesian model, with Keynesian properties in the short and medium term and classical properties in the long term. You will learn more about this type of model in your macroeconomics courses and the method for estimating such models in econometrics, although perhaps not until you reach Master’s level. 9  10  Thereafter the interest rate falls slightly below the starting point for a period. BIS central bankers’ speeches  Before I show you how the interest rate works in NEMO and compare the results with the VAR model, I would like to show you how monetary policy is modelled in a model such as NEMO. In the model, the central bank’s objective is to steer inflation. The interest rate is set to stabilise inflation at 2.5 per cent somewhat further ahead and weight is also given to stabilising developments in output. In some cases, a change in the interest rate will enable both objectives to be met at the same time.

The inflation target is symmetrical – it is just as important to avoid an inflation rate that is too low as an inflation rate that is too high. The inflation target provides economic agents with an anchor for inflation expectations. Decisions concerning saving and investment can be based on the assumption that inflation in Norway will be around 2½ per cent over time. Norges Bank’s instrument to meet the inflation target is the key policy rate, which is the interest rate on banks’ deposits in Norges Bank. This interest rate forms the basis for banks’ lending and deposit rates. 2  BIS central bankers’ speeches  The Bank’ monetary policy assessments and decisions must be based on knowledge it can obtain on interactions within the Norwegian economy and how the interest rate interacts. But we need a methodical apparatus to structure this knowledge. Like other central banks, Norges Bank uses economic models as an aid in monetary policy analysis. Economic models can help us to interpret historical developments, make forecasts for the future and analyse the effect of the interest rate. For an economic model to be relevant, it must be fit for its intended purpose. A model that is to be used as an aid in making interest rate decisions requires different attributes and is based on different principles than models that for example seek to provide optimal near-term inflation and output forecasts. In this chart, the time axis has been divided into three: short term, medium term and long term.
I will not elaborate on Asia, but on Europe, and the European Monetary and Economic Union. **  I. The need for active multilateralism to face our global challenges. Let me start with my first point: the need for active multilateralism to face our global challenges. We have to strive to maintain the collective rules of the game, at international level and with all our partners. In the current context, international cooperation between countries is more important than ever: it is essential to preserving the improvement in the global economic environment. The global recovery has indeed been gathering pace since 2016: according to the latest IMF forecast, global growth should stand at 3.6% in 2017, after 3.2% in 2016, while in Japan real GDP growth should pick up to 1.5% in 2017 after 1.0% in 2016. Moreover, growth in the euro area should reach at least 2.2% this year, reflecting a strong economic recovery. However, there are two major risks threatening growth: financial instability and protectionism. Regarding financial instability, the continued rise in global public and private debt since the start of the 2000s – from 190% of global GDP in 2001 to 230% in 2016 [slide] – has become a subject of concern. The 2008 crisis stemmed from this, but this trend has unfortunately not slowed down since; the private debt in emerging countries (namely corporate debt) has risen particularly rapidly.

Demand growth can then be brought into line with the growth of production capacity and result in a more stable path. By acting in good time in a manner that is predictable, it is hopefully possible to avoid interest rate adjustments that are more drastic. Meanwhile, economic agents can continue to count on stable, low inflation. An example of the good results that can be achieved with a forward-looking monetary policy is the US economy. With a judicious and timely tightening of the monetary stance, the Federal Reserve has contributed to a long period of sustainable growth. Since the gradual increase from 3% between 1993 and 1994, the fed funds rate has fluctuated between around 4.5 and 6%. This has accompanied a notably good economic development, with the longest postwar period of unbroken growth. The latent inflationary pressure has been held in check without arresting growth. Similar reasoning lay behind last week’s interest rate increase. The positive trend has been aided by the consolidation of federal finances. On the other hand, if inflation has already risen to a high level that is expected to last, the central bank may have to resort instead to larger interest rate increases to signal its determination to fulfil the inflation target. That weakens economic activity and risks a renewed increase in unemployment. Thus far the argument – and the question of which alternative is most advantageous – seems fairly simple. But that is where the difficulties begin.
These flows are particularly flighty (Chart 13), reflecting the fact that more than $ trillion of global assets are held in investment funds that promise daily liquidity to investors despite investing in potentially illiquid underlying assets, such as EME debt.17 We have recently seen analogous situations in the UK within some niche managers and smaller markets, such as open-ended property funds investing in commercial real estate.18 The complications would be much greater if a major asset class like EME debt were to freeze up. This structural mismatch means that these funds can behave particularly pro-cyclically. Bank of England work finds that redemptions by EME bond funds (those with larger structural mismatches) in response to price falls are five times those for EME equity funds (those with less structural mismatch). In turn, EME equity funds are twice as responsive as AE equity funds. While the shift to market-based finance has increased global capital flows to EMEs, it also amplifies spikes in Capital Flows-at-Risk. Moreover, market-based finance flows are particularly sensitive to push shocks, especially in extreme scenarios (Chart 13). The recent global growth in assets under management has not yet been fully tested in an extreme scenario, such as a global downturn. Chart 13: The sensitivity of Capital Flow-at-Risk to push factors, by source of capital flow  FDI  Banking  Market-based finance  of which: investment funds 0 -1 -2 -3 -4  Median  5th percentile  -5 Capital Flows-at-Risk as a % of GDP  Sources: IMF, EPFR, Bank calculations.

2/3  BIS central bankers' speeches  Lastly, I would like to underline that the Bank of Albania will make maximum efforts for the cooperation in the framework of this agreement to be concrete and have a direct impact. Concluding, on behalf of the Bank of Albania, allow me to thank once again the Central Bank of the Republic of Turkey for the continuous fruitful cooperation; I would also like to thank, in particular, Governor Çetinkaya, who has honoured us today with his presence at the ceremony of signing the Common Memorandum. Thank You! 3/3  BIS central bankers' speeches
While the $ billion aggregate cap on ON RRP usage employed during exercise operations to date has generally provided sufficient capacity to establish a floor on the level of money market rates, it is difficult to know ex ante whether the same amount will be adequate once we move away from the zero lower bound. Providing capacity that market participants will judge sufficient to meet demand with a high degree of certainty can therefore enhance the confidence of policymakers and market participants that the facility will support short-term interest rates at the time of liftoff. It is important to note that allowing for elevated capacity in an ON RRP facility is not the same as offering a fixed-rate, full-allotment facility. Through testing, we’ve learned that the fixed-rate and full-allotment features are not necessary for securing interest rate control. Moreover, by supplying a perfectly elastic quantity of a risk-free asset at a fixed-rate, a fixedrate, full-allotment ON RRP facility might have undesirable effects on financial stability and the Federal Reserve’s role in financial intermediation. 9 In periods of financial stress, the availability of a fixed-rate, full-allotment facility could enable a rapid or unexpected expansion that exacerbates disruptive flight-to-quality flows by facilitating a run away from funding financial institutions and nonfinancial corporations. This dynamic could undermine financial stability.

The perceived costs associated with new regulatory requirements on capital and liquidity ratios may further incentivize such behavior, particularly by foreign institutions. Borrowers’ responses appear to contribute to the period-end dynamics I described earlier, including declines in money market volumes, increased volatility in money market rates, and elevated participation in the RRP operations as cash investors face temporarily reduced investment options from private counterparties. Importantly, the increase in RRP take-up can be understood as a consequence, rather than a cause, of private market balance sheet reductions on quarterend dates. There have also been changes to the business models of many money market participants. Following the financial crisis, many financial institutions have sought to adjust their balance sheets to enhance their liquidity positions and reduce reliance on short-term wholesale funding. Cash lender business models have also adapted, with changes to some lenders’ willingness to take credit risk. For example, Fannie Mae and Freddie Mac have not been active lenders in the fed funds market since 2011. 21  Although the currently elevated level of reserves creates unique temporary dynamics, the introduction of IOER, (which would have been implemented regardless of monetary policy responses to the financial crisis) represents a permanent change in the Federal Reserve’s operating framework. 22  Drawing on public filings of market participants, we estimate that this figure captures approximately 80 percent of all overnight fed funds transactions. 23  For foreign banks—the predominant borrowers of fed funds—the Basel III leverage ratios are largely calculated on a period-end basis.