samchain/econo-pairs-v1 huggingface dataset:
Being in a currency union can amplify fiscal stress, and increase both the risks and consequences of financial instability. In the situation just described, fiscal policy would ideally help smooth adjustment to the external shock. But its ability to do so could be limited by the budgetary impact of the falls in output, prices and wages. To maintain credibility, fiscal policy  1  Mundell (1961). 2  Commission of the European Communities (1990). 3  The elimination of currency risk within the area reduces uncertainty over future prices for firms and consumers, helping them to make better decisions about how much to produce, invest and consume. These benefits are hard to quantify, but probably important. It also avoids inefficiencies that can arise when the exchange rate fluctuates for non-fundamental reasons (Mundell 1973, Buiter 2000). 4  A substantial literature has sought to measure the impact of currency unions on trade flows, starting with Rose’s (2000) surprising estimate that they are associated with a tripling in trade flows. Subsequent work suggests smaller impacts. In relation to the Eurozone, a survey by Rose (2009) concludes that “EMU has raised trade inside the Eurozone by at least 8% and perhaps 23%”. De Grauwe and Mongelli (2005) survey the broader ways in which currency unions promote integration. 5  If wages and prices can adjust instantaneously then the adjustment to shocks can happen costlessly via movements in prices and wages, so there is no cost to losing exchange rate flexibility.

10  BIS central bankers’ speeches  (i)  TABLE AND CHART ANNEX  Table 1: Similarity of industrial structures  EA (Core vs VEAPs)(a)  EA (17 countries)(b)  rUK and Scotland(c)  rUK and Scotland (oil on geographic basis)(d)  Energy  0.1  1.0  1.8  10.0  11.5  3.1  Construction  0.6  1.3  0.1  0.7  1.3  0.6  Manufacturing  1.3  6.1  0.7  0.5  4.8  4.5  Finance and insurance  0.3  2.5  0.8  1.4  2.2  3.2  Other  0.3  5.6  1.5  7.4  8.5  5.2  Sum  2.6  16.4  4.7  20.1  28.3  16.6  Canada (13 provinces and territories)  US (50 states + DC)  Sources: Bank calculations; Statistics Canada; US Bureau of Economic Analysis; Eurostat; ONS Regional Gross Value Added. rUK and Scotland data are for 2011; Euro Area (EA), US and Canada data are for 2012. Industrial classifications in the US and Canada are NAICS, in the UK SIC, and in the Euro Area they are NACE Rev2. These were consolidated into the five broader industrial classifications to ensure consistency. Notes: The table shows absolute differences between output industry shares in each region and the monetary union as a whole, which are then averaged for each industry in each monetary union.
I would like to note that like other central banks, we also have considerations regarding the temporary nature of price movements resulting from supply shocks. While maintaining the tight monetary policy focusing on demand factors and their consistency with our medium-term inflation target, we will be giving more weight to decomposing the effects of supply shocks in the upcoming period. Before I finish my evaluations on inflation, I would like to make a few notes on the pricing behavior. Recently, price increases in certain products have exceeded their historical averages. When we look into the products that made the highest contribution to inflation, we observe that in August, annual price increases in those products exceeded the average price increases of the last 10 years by more than three to four times. Although one reason for this situation, as I mentioned before, is developments such as the pandemic-led increases in commodity prices and supply constraints, these factors alone may not fully explain the price increases in some products. However, we consider that such pricing behavior will converge to its pre-pandemic level as the economic and social normalization gains pace in the upcoming period. Lastly, when we look into exchange rate developments, we see that the improvement in our reserves is consistent with our forecasts. Reserves increased by USD 30 billion from USD 85-90 billion to USD 115-120 billion. Swap agreements, rediscount credits, gold ore purchases and reserve requirement steps have been the primary factors contributing to reserves.

On the other hand, having tightened its monetary policy sooner and more strongly than its peers, Turkey has become one of the few economies that have offered a substantial real interest rate since the beginning of 2021. Along with a better current account balance, risk premiums affecting borrowing costs will also continue to improve as we make progress in our efforts on inflation and reserve accumulation. In addition, as of May 2021, short-term external debt is down USD 25.7 billion from USD 144.9 billion to USD 119.2 billion thanks to our recent work on compiling debt statistics. This will have positive implications for our external debt indicators. Some developed countries have large external debts and many have high budget deficits, but their risk premiums and policy rates remain low. Due to fiscal, monetary and financial policy responses to the pandemic and its negative effects on households and the corporate sector, indebtedness rates have surged in many countries. Amounting to USD 289 trillion globally, debt exceeded 360% of the world’s income (GDP). In the coming months, both public and private sector indebtedness will become a growing issue worldwide. In this context, among sectors of the economy, the public sector and households have a very high debt burden across advanced economies. In terms of indebtedness, Turkey diverges quite positively from advanced economies in all categories. Compared to other developing countries, I can say that Turkey is in a relatively good position in terms of public and household indebtedness.
The situation is reminiscent of that in the mid-1990s, when the Riksbank, despite widespread scepticism, managed to establish confidence in the inflation target, even though the aim that time was to bring down inflation. There are, of course, no guarantees that inflation will stay at around 2 per cent going forward. Nevertheless, things look good so far, even though a lot of support from monetary policy will still be necessary and further monetary policy easing cannot be ruled out. Links to the international debate How, then, can Sweden's experiences be linked to the international debate – the implicit ideological debate between the Yellen camp and the Borio camp? To more easily understand this, it is useful to start by reviewing the debate in a little more detail. There are, above all, two differences, which are closely related, between the two camps: the view of the so-called Phillips curve and the view of the possibilities central banks have to steer inflation. The Phillips curve exists in different variations but, in one way or another, all of these deal with the relationship between resource utilisation and the development of prices or wages. The starting point is that, by adjusting its policy rate, the central bank can influence resource utilisation in the economy. When resource utilisation increases, prices and wages rise faster, and vice versa, via the Phillips curve.

The effect on inflation of a given level of resource utilisation can certainly vary over time, which is to say that the slope of the Phillips curve is not necessarily always the same. The time dynamics may also vary, that is the time lag of the impact of resource utilisation on inflation is not always the same. In addition, inflation is, of course, affected all the time by a series of other factors – various shocks, in the vocabulary of economics. 14  See Borio (2017). 15 See, for example, Blanchard (2016) and The Economist (2017). 10 [20]  These can be highly temporary, but also relatively persistent. However, I find it very hard to swallow, not to say completely unlikely, that, other things being equal, there should be no relationship between resource utilisation and inflation. My conclusion that it is important not to lose sight of inflation and inflation expectations is also quite well in line with the Yellen camp’s view, in the sense that the inflation target and confidence in the target are seen as vital. It is worth noting that there is a debate, not least in the United States, which has come the furthest with its policy rate rises, about how rapidly monetary policy should be made less expansionary. 16 The concern is precisely that excessively rapid changes will make inflation and inflation expectations fall below target again – something that there thus is reason to avoid.
It contains a commitment, for example, to reduce the burden of public sector expenditure on the productive areas of the economy, and targets a 6 percent reduction this year. It also provides new incentives for investment in R&D by the private sector and more generous allocations for the development of industrial areas. As far as the labour market is concerned, new training and placement programmes are envisaged for persons who lack skills and for the long-term unemployed, especially those interested in setting up their own business. There are also plans to establish a register for those seeking part-time employment, along with incentives that should encourage a greater take up of temporary employment as well as labour market participation after pension age. In the education sector, a wide range of measures are envisaged aimed at improving the quality of education. There are also plans to offer land to international educational institutions interested in developing campuses in Malta. This year will also see a record amount of funds allocated for higher education, including for the creation of an ICT faculty, the modernisation of science and engineering laboratories and additional investment in e-learning facilities. In this same area, a new ICT strategy has been launched which aims to establish Malta among the top ten Smart Islands by 2010. The strategy aims at improving further the ICT infrastructure, the diffusion of next generation applications and at creating the right environment for large projects that are in the pipeline, including the Smart City by Tecom Investments of Dubai.

The extent of these deficiencies was such that in its first opinion on Malta, the European Commission called for ‘a root-and-branch overhaul of the entire regulatory and operational framework of the Maltese economy’ 1 . Although the situation had improved somewhat by the time Malta’s EU application was reactivated in1998, the economy was still not fully equipped to withstand the competitive pressures unleashed by globalization. While reforms were underway, they were not sufficiently ambitious. For example, while the re-introduction of VAT in 1999 was meant to broaden the tax base and reduce the extent of unrecorded activity, the list of exempt or zerorated items was far longer than that of the other Member States. The role of different authorities having competence in the field of competition remained ambiguously defined, and in many sectors an insufficient distinction was made between the regulator and the service provider. The public sector was not only overmanned, but outdated practices and manual procedures were still pervasive. These weaknesses became fully exposed around the turn of the century when the removal of trade restrictions and other protective measures gained momentum in anticipation of EU membership. This process, moreover, coincided with two external shocks that adversely affected two vitally important industries, electronic components and tourism. The former was hit by the sharp decline in demand as result of the global downturn in the high-tech sector, the latter by the increased travel aversion in response to the 9/11 terrorist attacks.
It was concerns about confidence in the banking system as a whole that explain why the major central banks acted together in December, which in our case meant extending the range of collateral accepted in our regular auctions of 3-month lending. Auctions like this can play a useful role but, as we saw with Bear Stearns, a more continuously available facility may sometimes be needed to avoid an immediate loss of confidence. That is why, in April, when confidence was particularly fragile, we introduced a backstop that is available every day – the Special Liquidity Scheme. As I said in September, in providing such a backstop, we face a balancing act, between avoiding a major shock to the system and encouraging future reliance on the same cheap but risky funding sources. The Special Liquidity Scheme aims to do this by exchanging liquid for illiquid assets that existed only before the end of last year. We intend to learn from the experience of the Scheme to put in place a liquidity facility that works in all seasons – both ‘normal’ and ‘stressed’. It will be part of a set of reforms to our Red Book, to be announced later this year. Any such facility will need to meet two challenges: it will need the right pricing structure and it will need to overcome the ‘stigma’ problem that has affected access to all central banks during the current crisis. BIS Review 75/2008  3  The pricing structure will be key to striking the right balance.

Thus, the Supervision Department of the National Bank of Romania was set up with technical assistance from the Nederlandsche Bank. Also, forex and market operations developed from the co-operation with our colleagues from the Belgian central bank. Another form of cooperation between the member states of the Constituency was the fact that since 1993, a second constituency meeting at the level of ministers and governors was held annually in one of the member countries, on a rotating basis. The IMF management and senior staff were invited to speak on issues of interest. I have participated to almost all constituency meetings since 1990. I could testify that each of them was interesting and  BIS central bankers’ speeches  1  fruitful. As a veteran I cannot help but remember the first meeting after the fall of communism, in September 1990. At that time I met three not only impressive tall men, but also, outstanding personalities: Governor Wim Duisenberg, Minister Wim Kok and Executive Director Goddard Posthumus. I have to say I had the honour to collaborate with all the executive directors of our constituency. Thus, it is a pleasure to remember the extraordinary relationships developed with Onno Wijnholds, Age Bakker, Jeroen Kremers, Governor Nout Wellink and Minister Gerrit Zahn. Dear colleagues and friends, I am proud to say that the constituency meeting held in June this year, in Romania, where both Belgium and Luxembourg representatives were invited, was a step forward towards this formal outcome.
4  BIS central bankers’ speeches  latency where execution times converge on the speed of light.19 For social scientists, this is a financial arms race, a sub-second game of leapfrog. In their quest for speed, a number of firms are also engaged in a positional race. The shorter the cable to the trading exchange, the faster a trade can be executed. This has encouraged some firms to begin relocating their servers as close as physically possible to the trading exchange – so-called “co-location”. This is the financial equivalent of seeking the apartment closest to the sea. It, too, fuels arms-race behaviour: “however fast they went, they never seemed to pass anything”. Accompanying this shift in speed has been a dramatic change in the composition of trading and market-making. During this decade, so-called High Frequency Trading (HFT) has come to dominate. It now accounts for anywhere between a half and three-quarters of trading volume on the world’s major equity markets and a rising share of futures and other derivative markets.20 In some markets, HFT firms have become the de-facto liquidity providers or market-makers.21 Historically, designated market-makers were often granted privileges in return for agreeing to ensure trade and price continuity. No longer: the sleek have inherited the earth. This emerging topology of trading has had some clear benefits. This is manifest in narrower, sometimes dramatically narrower, bid-ask spreads for trading.22 For equity markets, these have fallen by an order of magnitude since 2004. This is typically taken as evidence of improved market liquidity and price efficiency.

As with road traffic congestion, one way to tackle that would be to place direct restrictions on excessive message traffic – for example, by setting maximum order cancellation ratios. The US Securities and Exchange Commission (SEC) are considering this option. So too are the authorities in Europe under the draft proposals contained in MiFID II. These are welcome moves. New trading topologies also run the risk of turning the miracle of higher liquidity into a mirage in situations of stress. One potential response would be to strengthen market-making commitments. The past few years have seen a dilution of some of those commitments. For example, in 2008 the New York Stock Exchange relaxed its market-making commitments on maximum bid-ask spreads. One upshot was that, during the Flash Crash, the prices of some stocks hit zero and others $ – so-called “stub quotes”. Following the Flash Crash, the SEC moved swiftly to ban stub quotes. This effectively re-introduced a requirement for market-makers to ensure price continuity. It has also been considering enhanced market-making obligations or incentives to improve the resilience of market liquidity in situations of stress. In Europe, MiFID II is looking at the scope for strengthening market-maker commitments for similar reasons. This would be a welcome turning-back of the trading clock – a clock otherwise at risk of running too fast. Strengthening circuit-breakers across exchanges can also help to restore market order in situations of stress.
If risks of a new financial crisis were to mount up in some distant future, a central bank could not stand idly by. The type of monetary policy regime with an explicit inflation target that applies in Sweden and other countries does, however, provide ways of coming to terms with problems from fluctuating asset prices. For one thing, the regime means that in the event of asset market instability, the monetary stance is adjusted automatically in a stabilising direction. As asset prices affect aggregate demand and this is an important mechanism for inflation, interest rates will be raised when asset prices move up and vice versa. This can be expected to exert some stabilising effect on asset markets. For another thing, macroeconomic stability as such should have a stabilising influence on financial markets. Focus on the provision of credit While a credible macroeconomic policy is needed to prevent financial crises, it is probably not sufficient by itself. It is also necessary to oversee and supervise the financial system, which includes having appropriate rules for the operations of banks and other credit institutions. In the final analysis, it was the provision of credit that lay at the heart of the events in the 1990s to which I have referred. Extensive credit risks constituted the problem and it seems that banks made similar mistakes time and again.

We cannot accept this assault on democratic systems and values and on the security of the European continent. Economic prosperity is, and will continue to be, built on the foundations of democracy and security. These values are the bedrock of open economies and financial systems, and Russia has betrayed them. The Russian shock is now the largest contributor to UK inflation by some way. There is an economic cost to the war, and we all have to recognise that, but at the Bank it will not deflect us from setting monetary policy to bring inflation back to the 2% target. The last disturbance is a domestic one. The UK labour force has shrunk over the last two years, and this is contributing to inflationary pressure due to the difficulty of recruiting. It is important to understand exactly why the labour force has shrunk, why inactivity – those not working and not seeking to – has risen, and of course what we might expect to see in the future. Have more people retired than was expected, has long-term illness risen permanently, and how many people may return to the labour force and over what time? A one percentage point reduction in the labour force may not sound much, but with a working-age population of around 40 million it is a lot of people. With such numbers, the shrinkage in the labour market adds an inflationary impulse on top of energy and international goods prices.
Christian Noyer: “The Brussels agreement is sound” – interview with Le Télégramme Interview with Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, in Le Télégramme, published on 15 December 2011. *  *  *  Does the Brussels agreement protect the euro area over the long term? I believe it is a sound agreement. It includes rules of governance that had been missing up until now. Of course, we had the Stability and Growth Pact, but it was of an inadequate legal standard, and it was not complied with as it should have been. Setting up clear rules of governance that are sound in substance and that will be integrated into the constitutions and organic laws of Member States is a good solution that should provide us with lasting protection. What would be the consequences of France losing its triple-A rating? I do not know what rating agencies will do. What I see is that these agencies have managed, through their criticisms, to weaken the positive sentiment that prevailed on markets after the Brussels summit. In addition, downgrading France’s credit rating does not seem justified when considering economic fundamentals. Otherwise agencies should start by downgrading the United Kingdom which has larger deficits, the same level of debt, more inflation and a lower growth rate than us as well as slumping credit. What is the legitimacy of these rating agencies? Agencies have become totally incomprehensible and irrational.

They make threats, even though Member States have taken strong and positive decisions. Rating agencies behave as if nothing had happened. It may seem that agencies are no longer a useful guide for investors. Would you say that their judgments are based on political criteria? Indeed, in the arguments they develop, there are more political arguments than economic ones. Credit agencies have downgraded the ratings of three large French banks. Are our banks undercapitalised? No, they are very well capitalised, in particular compared to their European and US counterparts. The importance of this downgrade should not be overstated especially since rating agencies have recently downgraded most large banks in developed countries. There is no doubt that the capital buffers of our banks are largely adequate in relation to levels in the global banking system. It is true that we are asking them to enhance their soundness in order to meet the new regulatory requirements that have been agreed at the European and global level. Banks are doing this through their own resources and needless to say without State aid. That is why I have no concerns about the French banking system. Should banks’ customers, companies and individuals, fear a credit crunch? No, and the figures bear it out. French banks’ lending activities remain very robust: up 8% for mortgage lending, up 5.6% for corporate lending and up 5.1% for lending to SMEs. It is precisely their retail banking business that makes them sound and profitable.