samchain/econo-pairs-v1 huggingface dataset:
The interdependencies between countries can be illustrated by a simple three by three table which I call “Sudoku for economists”, showing the composition of demand in, and the trade flows between, the high- and low-saving groups of countries. “Sudoku for Economists”: 2008 data Domestic Net trade Demand  GDP  High-saving countries  18,000  1,000  19,000  Low-saving countries  28,500  -1,000  27,500  Total  46,500  0  46,500  Source: IMF. Data for G20 countries, rounded to the nearest $ billion. The key point is that the entries in the table – corresponding to economic policy choices – are interdependent reflecting economic constraints. Total demand or GDP is the sum of domestic demand and net trade. And, assuming for simplicity that the world can be divided  2  BIS Review 4/2010  into high- and low-saving countries, the trade surplus of one group is the deficit of the other. Just as in a sudoku puzzle, the nine numbers in the table cannot be chosen independently. Sudoku for economists is simpler than ordinary sudoku because the economic adding-up constraints mean that of the nine numbers in the table, only three can be chosen independently. So, for example, if both groups of countries want to achieve full employment levels of GDP, and the high-saving group targets a trade surplus, the low-saving group cannot target a reduction in its trade deficit. Either trade deficits must remain high, which is not likely to prove sustainable, or something else must give.

And although at this stage it is difficult to define the magnitude and scope of these changes, it is essential they be identified promptly, since economic policy cannot provide indefinite support for firms that are headed for a structural reduction in their activity. Rather, it should aim to encourage and support the adaptation of the productive system to the new reality and the efficient cross-sectoral and cross-firm reallocation of resources. Moreover, the outlook for the Spanish economy and, therefore, for the business sector remains very dependent on the still highly uncertain course of the pandemic. Since the beginning of July, the strength of the recovery has been adversely affected by the fresh outbreaks of the virus in our country and, more recently, by the worsening of the epidemiological situation both in Spain and in most of Europe. This has prompted the relatively widespread introduction of new restrictions on mobility and activity in certain sectors. Accordingly, economic activity in this final stretch of the year and in early 2021 will foreseeably be less dynamic than was anticipated in the baseline scenarios published a few months ago by the Banco de España and the ECB for Spain and the euro area, respectively.2 By contrast, the latest news on the availability of a vaccine for early 2021 is clearly positive and, if confirmed, should help raise confidence and rule out the most adverse economic scenarios, even though the effects on activity will not be immediate.
The list is long and includes the need to avoid policy conflicts in small, open, and financially integrated economies, to better regulate FX risk in domestic banking systems, to give up the dream of financial centres in small countries if they do not have access to credible and comprehensive international or regional safety nets, and to improve policy frameworks and tools in light of the experience that we have been through. In Iceland, this process has gone past the talking stage: frameworks for monetary and financial stability policies have been improved, new prudential rules have been introduced, financial sector legislation has been amended, and supervision has been improved and strengthened. And there is more to come. Thank you very much. BIS central bankers’ speeches  5  6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches  BIS central bankers’ speeches  15  16  BIS central bankers’ speeches  BIS central bankers’ speeches  17

12  4  Kung, 2015, discusses the equilibrium implications of such “shared appreciation mortgages”: http://www.newyorkfed.org/research/conference/2015/mortgage_design/Kung_Edward_housingstructural_052 015.pdf. BIS central bankers’ speeches  BIS central bankers’ speeches  5
From the statistical point of view, the financial crisis which turned into a global recession has provided a good opportunity to carry out a stock-taking exercise in the areas of data availability and timeliness. In the case of the Czech National Bank, it was quite a comprehensive exercise since the central bank acts as a monetary authority, integrated supervisor and statistical institution, which brings a lot of synergies. During the period of turbulence banks were required to provide us with additional information regarding, for example, their liquidity positions, exposures vis-à-vis the group of their foreign parent bank and information indicating how active the banks were in their lending activities. This information was even provided on a daily basis for some time. Some data, both standard and those provided as a result of the global financial crisis, are collected mainly for supervisory reasons and other data for monetary purposes, but put together they provide the policy makers with a comprehensive set of information. In addition, the statistical and regulatory  BIS Review 107/2009  1  concepts have interacted more closely since data collection for both purposes started to be carried out in a coordinated way. Integration of supervision in the central bank, which took place more than three years ago, thus also proved successful during this turbulent period. The Czech National Bank is both a user and producer of statistics. Macroeconomic statistics produced by the Czech Statistical Office are very important for the central bank.

I would like to outline these shifts in the global economic landscape, and then elaborate on the implications for the IMS and monetary policy coordination. Three structural shifts in the global economy Globalisation, home bias and regionalisation Clearly, the defining feature of the last three decades has been the dramatic strengthening of globalisation in both trade and finance. Cross-border trade in goods and services as well as investment has soared, driven by trade-liberalising policies, the lifting of capital controls as well as innovations in transport and information technologies. The global financial crisis has led to a halt in this trend, perhaps only temporarily. But there is also the possibility of a step backwards, i.e. a re-emergence of financial home bias and a stronger drive towards regionalisation. Early evidence of this is the resurgence of the so-called “Feldstein-Horioka puzzle”, that is, a sharp rise in the correlation between savings and investments.1 European banks have retreated from dollar-denominated lending.2 Banks from emerging economies also have a stronger regional orientation, in particular in SouthEast Asia, Central America and the Commonwealth of Independent States.3 Regulators have been tempted to ring-fence their domestic financial systems. Restrictions on intra-European  1  For euro area countries the cross-country correlation between the savings and investment-to-GDP ratios fell continuously from 0.6 in the early 1990s to essentially zero in 2005; similarly, for non-euro area OECD countries it even fell from almost one to zero over the same time span.
I am not in this speech going to summarise all our reform measures, which are due to be implemented over the period to the end of 2001. Instead, I will describe what we have done so far, and the main tasks that remain to be done. The progress on competitive reforms So far we have introduced three main changes that are intended to promote competition: •  In September 1999, the one-building condition that applied to foreign banks licensed after 1978 was relaxed to allow such banks to open branches in a maximum of three separate  BIS Review 69/2000  2  buildings. At the same time we eliminated any restriction on the number of regional and back offices that foreign banks can maintain. •  In December 1999, we announced that agreement had been reached with the various parties involved for restricted licence banks to join the RTGS interbank payment system. The detailed legal arrangements were finalised in May of this year and a formal invitation to join the system was issued to those RLBs with a clear business need to do so. •  Finally, at the beginning of July of this year, we embarked on the first phase of deregulation of the remaining interest rate rules. This involved removal of the interest rate cap on time deposits with a maturity of less than 7 days. Following this, all time deposits are now completely deregulated. What has been the reaction to these changes? The answer is that not much has happened so far.

To simplify, I believe that the logic underlying the current regulatory system consists in ensuring the financial stability of market segments, but without adopting an overall approach. However, the crisis has forced us to acknowledge that this fragmented approach to regulation does not necessarily ensure the stability of the entire financial system. During this crisis, the fact that financial institutions had considerably increased their use of leverage and that risk was concentrated among a relatively small number of banks was neither well assessed, nor well captured, nor prevented by regulation. In view of this failure and in order to mitigate the impact in terms of financial instability, government interventions were designed, not to stabilize the situation of any particular institution, but to prevent systemic risk from materialising. As a result, we now require macro-prudential regulation. This naturally leads us to address the issue of the scope of financial regulation. Who should be regulated? The problem is not new; it is also complex. Like me, you will have noticed that, at their last summit meeting, the G20 Heads of State and Government laid down a clear principle on the matter. They have indeed committed themselves to ensuring that “all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances”. The crisis shows quite clearly that the markets and institutions that have a systemic role must be regulated. This criterion implies re-examining the functioning of certain OTC markets, such as the interbank money market or the credit derivatives market.
In terms of the composition of the macroeconomic figures, the view of the Banco de España does not differ greatly from that of the Government; the adjustment of national demand is projected to continue further, while net demand will remain the linchpin of the Spanish economy, although its considerable contribution to growth will not suffice to prevent a contraction in activity and employment. As earlier stated, it is vital here that companies should harness the flexibility afforded by the new labour legislation to respond to the changes in demand without having to shed staff. If  2  BIS central bankers’ speeches  used appropriately, not only will this prevent the demise of certain companies, but production will also be much more competitive and Spanish products more attractive, both domestically and abroad. Evidently, in a situation like the present, the recovery in Spain should be export-led. Accordingly, all measures and reforms that enhance competitiveness should be considered a priority. In this connection, the State Budget for 2012 is part of a broader, medium-term consolidation strategy that requires the participation of the different levels of government. The Stability and Growth Programme unveiled in late April to the European authorities details these objectives up to 2015, with a breakdown of the efforts required by each level of government. From my standpoint, the fiscal consolidation process is one of the cornerstones of the recovery of the Spanish economy, although the adjustments needed to meet the fiscal targets may in the short term exert adverse effects on demand and activity.

Lorenzo Bini Smaghi: One size fits all? Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the 16th Annual Conference of the German-British Forum “The European Central Bank in a global perspective – central banking and the challenge of rising inflation”, London, 26 May 2011. *  *  *  I wish to thank Huw Pill and Oreste Tristani for their contributions to the speech. I remain solely responsible for the opinions contained herein. Ladies and gentlemen, It is a great pleasure to speak at this German British Forum on the important issue of “The European Central Bank in a global perspective – The challenge of rising inflation”. I would like to address an issue which is raised time and again, namely, can the monetary policy implemented by the ECB fit different underlying economic performances in the Member States of the euro area? And in the current situation, the question is often asked whether the ECB’s monetary policy doesn’t risk hampering the recovery in the euro area periphery and jeopardising the implementation of the adjustment programmes. As I said, the issue is not new, but it is certainly topical. I am sometimes tempted to answer that this is not the right question, or at least that the question comes too late, given that we now have had a monetary union for more than 11 years and there are no alternatives in sight.
Their business model is fascinating, Quaker-even, in its orientation. They offer only basic banking services, mortgages and small business loans, to people in a tight, locally-defined catchment area. All credit decisions are taken locally by people, not centrally by a computer. No bonuses are paid and no one has a sales-target. When the whole firm out-performs, a contribution is made to a pooled fund which is invested on employees’ behalf. The fruits of success are distributed equally and gratification is deferred. 6  BIS central bankers’ speeches  For banking, this is back to the future. If that sounds attractive, then it is down to us – not regulators, not politicians, you and I – to deliver it. If as bank customers we want to change the culture of banking, then we should start by supporting those banks who are delivering that change. Putting your money where your mouth is would deliver far greater and more durable change than any amount of banker-bashing. Already there are some encouraging signs of the winds of change blowing through the system, not just from the new entrants but among the UK’s oldest banks too. The new heads of the UK’s biggest banks have committed to restoring trust in their institutions and improving their social usefulness. And those words are beginning to turn into actions. Barclays and today Lloyds are seeking to change their sales-oriented culture, returning to their Quaker roots. There is the quiet, but unmistakable, sound of a leaf being turned.

The capitalist system depends on owners of capital to promote sustainable value creation through market discipline. Is it simply short-term profits that matter? Are there other social or environmental purposes that must be safeguarded? To this end, the Securities Commission’s Malaysian Code for Institutional Investors articulates the stewardship 3/5  BIS central bankers' speeches  role that shareholders ought to play. Ultimately, shareholders need to clarify that – we need more than just the bottom line – immediate profit is not everything. (b) Situation Let us move on to the second element – the “situation”. The system of values creates and maintains various situations. The situation represents the environment or immediate setting in which financial industry professionals operate. This is a broad subject. Today, I wish to focus on two types of situational incentives. Firstly, remuneration structures. And secondly, the attitudes toward speaking up. Remuneration plays a significant role in influencing behaviour, including ethical choices. Admittedly, the task of designing and implementing a remuneration system to encourage professionalism and integrity is not straightforward. However, the intuition is simple and attainable: financial institutions should avoid the folly of rewarding A, while hoping for B. In other words, we cannot hope for or expect ethical behaviour so long as we continue rewarding people for acting otherwise. In this regard, the Bank is currently phasing in requirements consistent with international standards to align remuneration with prudent risk-taking – with a focus on material risk takers.
The threshold policy I discussed earlier advocates keeping the federal funds rate near zero until either the unemployment rate falls below 7 percent (at least) or until medium-term inflation breaches 3 percent. The FOMC’s adoption of an explicit policy framework can underscore the distinction between these policy thresholds vs. our longer-run objectives. In particular, we would convey that the longer-run sustainable rate of unemployment is substantially lower than the threshold of 7 percent, while the inflation threshold of 3 percent is higher than the longer-run inflation objective. Consequently, even if inflation runs somewhat above its goal for a while, the public would understand that we intend to bring inflation down to the goal over time, and hence longer-run inflation expectations would remain firmly anchored. The communication of policy projections also works well in conjunction with the thresholds. By publishing projections for future short-term interest rates along with unemployment and inflation, the public can evaluate the Committee’s thinking about which combinations of unemployment and inflation will likely lead to a lift-off of policy rates. In comparing these projections against my thresholds, the public can evaluate how much more policy accommodation could potentially be allowed under my proposal. Providing these additional forecasts enhances transparency and the public’s ability to evaluate current monetary policy with alternative approaches. And a framework that explicitly clarifies the Committee’s commitment to both price-stability and achievable real-side mandate responsibilities will, I believe, often allow monetary policy to respond more strongly in the medium-term when adverse economic shocks impede growth and employment.

Friedman, Milton, and Anna Jacobson Schwartz, 1971, A Monetary History of the United States, 1867–1960, Princeton, NJ: Princeton University Press. BIS central bankers’ speeches  7
When GDP-at-risk is high and outside an acceptable range, however, the convexity of the 𝑓(·) function dominates 𝜙 and drives the macroprudential policymaker towards an absolute (lexicographic) preference for financial stability. 13 The Bank of England Act states that the FPC is not “required or authorised to exercise its functions in a way that  would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term”. 15  All speeches are available online at www.bankofengland.co.uk/news/speeches  15  Chart 7: The relationship between GDP-at-risk and the macroprudential loss function is convex* Social cost of financial instability: 𝑓 (GDP-at-risk)  A  B  A C Tail risks increasing (GDP-at-risk worsening) as move further right Once GDP-at-risk is within an acceptable range, the gains from taking further action to protect financial stability are modest. In this case, the secondary objective carries larger weight, and actions to boost resilience will be tempered to a greater extent by any negative impact they have on the central outlook. Tighter regulation tends to have some cost for the central GDP forecast in the near term while the system adjusts. However, by making the system more resilient, macroprudential policy avoids a much larger hit to growth tomorrow and increases expected productive capacity in the longer term.

In contrast, the US and the euro area have generally faced Divine Coincidence since the global financial crisis (Charts 9 and 10)  16  All speeches are available online at www.bankofengland.co.uk/news/speeches  16  Chart 8: Divine Coincidence in the UK pre-crisis, but rarely post-crisis  6  Inflation (%)  4  2 -5 -4 Output gap (%)  -3  -2  -1  0  1  2  0  Pre-financial crisis Financial crisis and after  -2  Charts 9 and 10: Divine Coincidence generally held in the US (left chart) and euro area (right chart) 5  Inflation (%)  4.5  4  4  3  3.5 3  2 -8  -6  -4  -2  1 0  Pre-financial crisis Financial crisis and after  Inflation (%)  0  2  2.5  4  Output gap  2 -4.00  -2.00  1.5  -1  1  -2  0.5  -3  0  -4  -0.5  -5  -1  0.00  2.00  4.00 Output gap  Pre-financial crisis Financial crisis and after  Source for Charts 8-10: Bureau of Economic Analysis, CBO, Eurostat, IMF and Bank calculations. 17  All speeches are available online at www.bankofengland.co.uk/news/speeches  17  3. Time horizon Although both committees must promote the government’s economic objectives subject to achievement of their primary objectives, the MPC has very limited ability to influence trend growth. Monetary policy transmission impacts fade after 3-5 years.
This is similar to what other central banks call minutes. We are convinced that this very prompt delivery of information serves the interests of the public in an optimal way. I do not think that many central banks publish their minutes only a few hours after the meeting of their governing body. I am also convinced that it is in the public interest for the view of the whole Governing Council to be presented, rather than the views of individual members. Moreover, the ECB has just published its first edition of the Monthly Bulletin, and will publish an Annual Report. We shall also explain our policies on a regular basis in speeches and interviews, also making a presentation to the European Parliament at least four times a year. II. Recent monetary policy decisions and operations Co-operation among European national central banks has always been close and, among participants in Stage Three, it has become increasingly so in recent years and months. The coordinated reduction of the key interest rates by all central banks of the euro area in December 1998 clearly demonstrated that Monetary Union had begun de facto before the start of Stage Three. This co-ordinated measure contributed to the stabilisation of market expectations. The Governing Council of the ECB announced that the new level of the euro area-wide key interest rate of 3% would prevail “for the foreseeable future”.

The Governing Council takes its decisions collectively and independently, free from outside influence, and its position is clear: no country’s national fiscal policy should influence our single monetary policy, either now or in the future. In keeping with the mandate entrusted to us democratically, we should maintain a single focus: price stability throughout the euro area, with inflation below but close to 2% over the medium term. This is how we can contribute to sustainable growth, by managing the economic cycle and guaranteeing low interest rates. 4/ All of this brings me to the fourth reason: in the euro area, fiscal and structural policies are the responsibility of individual governments. We have built a system based on the principle of subsidiarity, where a maximum number of decisions are taken at the national level. This is good news for democracy. The counterpart to this decentralisation, however, is that governments have to abide by a minimum number of rules, including the Stability and Growth Pact. But following these rules is also in the national interest. If public deficits and debt were the keys to growth, then our two countries would be the growth champions of Europe: unfortunately, that’s not the case. In the short term, a bigger deficit will not necessarily have a positive impact on growth if it’s also accompanied by a higher risk premium on interest rates.