samchain/econo-pairs-v1 huggingface dataset:
The sum of the economies of all the new member states does not presently amount to more than the GDP of the Netherlands. Furthermore, historically high inflation rates in the acceding countries have been reduced through reinforced macroeconomic discipline (which in turn owes much to the enlargement process). A simple calculation shows that even if growth in the acceding countries averages some 4 per cent more than the euro area, and this catch-up, according to most estimates, generates Balassa-Samuelson price convergence with 2-3 percentage points higher inflation than euro economies, their inclusion in the euro area would still only add some 0.2 percentage points to area-wide inflation. Instead, it is the perspective of the acceding countries themselves that is crucial. Risks with ERM II The one risk with ERM II that has been discussed at length in recent years is the potential conflict between a pegged exchange rate and an inflation target. Both exchange rate stability and low inflation are necessary to fulfil the conversion criteria, but in some cases it may be difficult for monetary policy alone to meet two targets at the same time. One possible situation is that the central parity has been set too low and that real appreciation pressures, due to catching up, are so strong that the upper band comes into question. This can result  BIS Review 53/2003  1  in large-scale speculative currency flows and unnecessary turbulence, as demonstrated by the attack on the forint at the beginning of this year.

Andrew G Haldane: Unfair shares Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Bristol Festival of Ideas event, Bristol, 21 May 2014. *  *  *  These are not necessarily the views of the Bank of England, Financial Policy Committee or Monetary Policy Committee. I am grateful to Edd Denbee, Priya Kothari, Varun Paul and Fiona Robinson for comments and contributions  Inequality has become the issue du jour – especially, it seems, when it is expressed in French. Yet until recently, inequality was a deeply unfashionable topic among academics and policymakers. Until the crisis, it is difficult to identify a period in the past 50 years when inequality was close to the top of the public policy or academic agenda (Stiglitz (2012)). The past few years have changed all that. Key milestones include:   The emerging facts. As ever, dispute rages about the precise statistics. But the longterm patterns are clear enough – and remarkable. Almost half of the growth in US national income between 1975 and 2007 accrued to the top 1% (OECD (2014)). In the UK and US, the top 1%’s share of the income pie has more than doubled since 1980 to around 15% and their share of the wealth pie has been estimated at up to a third – more than the whole bottom half of the population put together (ONS (2014), Wolff (2012)).
The problems are not a consequence of shortcomings in the borrowing instruments. I do not see any immediate need for new types of lending instruments, such as non-borrowing programs or a reintroduction of Contingency Credit Lines. There are already surveillance methods in place to deal with such situations, and today's borrowing instruments are sufficiently flexible to meet the existing requirements (and demand). Nor do I believe that the problems to any great extent are due to incorrect analysis or erroneous assessments, even though the situations faced by the Fund are often difficult and the advice given has been open to question from time to time. Nonetheless, there are a number of things that can be done in this area. Shortcomings still exist, as I mentioned earlier, as regards the Fund's participation in crisis resolution. There is scope for further development of those instruments that exist today. The reason why this has not happened is because some countries oppose it for political reasons. This brings me into the role that “political considerations” play for the IMF to work well. In my view, the central problems of the IMF are often political in nature. These problems exist at several different levels: •  Individual countries are sometimes for political reasons not willing to take the sometimes bitter medicine prescribed by the IMF’s staff and Executive Board and engage in serious dialogue.

Neither is it unusual, if they do swallow the medicine, that the countries blame any side-effects on the IMF whether they were a result of the medicine or not; that the ownership – to use IMF vocabulary – is weak. At the same time, there may also be scope for the IMF itself to become better at operating in an environment where strong political considerations are present. •  Nor are groups of countries always willing at IMF meetings to raise questions of crucial importance to the world economy as a whole. Larger countries do not want to run the risk of coming under the spotlight. As a result, the big industrial countries normally prefer to discuss imbalances and exchange rates in a narrower circle, if at all. •  Also when dealing with financial crises, political considerations are constantly present. Everyone that follows IMF’s work in this area the last 10-15 years, has been able to see that geopolitical considerations sometimes play an important role when defining the conditionality – with mixed results. What can be done to strengthen the IMF? There is every reason to approach this question with humility. Many people have reflected on it and plenty of suggestions have been put forward in the debate. Since the crucial problems are political, they are also likely to require political solutions. In recent years, the discussion has focused on matters to do with quota, voice and representation (QVR). Many countries consider themselves to be underrepresented under the current structure.
The empirical evidence on this subject is mixed, but generally it has been found that inflation targeting does lower inflation and reduce its volatility. 5 There is some evidence for emerging economies that inflation targeting also reduces growth volatility (Gonçalves and Salles, 2008). Bad luck is back: the risks of inflation Recently, the world has faced one of the worst inflationary shocks in the last 60 years. First, it happened with oil prices, which started rising sharply at the beginning of the decade, and has climbed to record-high levels (figure 4). However, even with this shock, inflation and output have been much less volatile than in previous oil price cycles. Lower oil-dependence and countercyclical fiscal policy explain part of the milder effects. Better monetary policy has also contributed to substantially reduce the impact of oil shocks on output and activity. 6 However, the price of oil has kept increasing, and although its effects are smaller than in the past, the shock is becoming so large and persistent that it may have noticeable effects on inflation and output over the coming quarters. On the bright side, however, the better monetary policy frameworks that are used today limit these effects. On the other hand, more recently, we have seen an impressive increase in food prices (figure 5), with serious inflationary effects in many countries. Food prices have reached in some cases their highest levels in history.

Tackling the urgent issues To tackle the urgent issues stemming from the crisis, it was first essential for the three countries that were experiencing major difficulties to be able to continue funding themselves:  BIS central bankers’ speeches  3  the EU and the IFM stepped in to assist them. They did this via bilateral loans in the beginning, and then in the framework of a structure that borrowed on the markets backed by a guarantee from the euro area Member States: the European Financial Stability Facility (EFSF). This support was subject to strict conditionality to ensure that the sustainability of public finances was restored and the country in question regained its competitiveness. These countries therefore undertook to meet deficit reduction targets in order, ultimately, to be able to tap the markets directly for their funding needs. This support was always designed to be temporary and encourage sound fiscal policies. Central banks also played a decisive role throughout the crisis. First, they cut their key interest rates sharply after the crisis of 2008 in order to guarantee price stability and boost lending and activity. Furthermore, they provided financial institutions with liquidity to limit credit crunches. Since 2008, the Eurosystem, for example, has conducted fixed-rate tenders with full allotment against an extended range of eligible collateral.
We had to manoeuvre through uncharted waters and we may not yet have arrived in the Promised Land”. I take these words as a prophecy, made in those heydays, when things seemed to move into the right direction all by themselves. The outbreak of the global crisis had not yet exposed the fracture lines of the European construct, which originated in the incomplete institutional architecture of the Economic and Monetary Union, as reflected by the weakness of fiscal rules and the absence of transnational instruments to monitor cross-border private capital flows. Many a times I heard Professor Issing talk about the need to address the vulnerabilities of the monetary union project, particularly in the area of public finance, where monetary policy more than often overlaps politics. To what extent the Eurozone is now closer to the Promised Land than in 2006 is debatable. On the one hand, euro area enlargement continued at a sustained pace, so that it now encompasses 19 countries from 12 originally. On the other hand, for the non-euro area EU Member States, recent experience has made the benefits of euro adoption become less visible than its costs. Thus, in the pre-crisis period, euro area membership was seen as automatically delivering lower risk premiums, thereby helping achieve faster growth rates. In retrospect, the then benefit should not be viewed otherwise than as a consequence of improper risk assessment – financing costs for several euro area member countries have been exceeding those of some non-euro area Member States, Romania included.

It has become clearer than ever that early euro adoption is undesirable, at least from this standpoint. Furthermore, direct costs have emerged in relation to euro area membership, arising from the sovereign debt crisis and the establishment of resolution mechanisms. Bearing such costs entails not only additional financial efforts. It is politically difficult to justify to the general public the need for financial contributions to mechanisms that richer countries currently benefit from (the collapse of the Radičová Cabinet in Slovakia in 2011 is illustrative in this respect). Another argument for the reluctance to set a target date for euro adoption is also linked to the fact that the euro area, unlike the European Union, appears not to have been a convergence club for its members. Hence, the standard deviation of GDP/capita at PPS relative to the group average indicates higher disparities among countries part of the initial euro area setup, while homogeneity in terms of income has been increasing across the EU. In my opinion, this state of affairs does not rule out the success within the euro area, but merely highlights that it can be achieved only under certain circumstances (the prior achievement of a sufficiently high economic development level and coherent macroeconomic policies). The thorough preparation of euro adoption is therefore essential, so as to ensure the sustainable compliance with nominal convergence criteria, because a single currency area is no place for economies with competitiveness issues or rigid markets.
For instance, the Bank of England has introduced regular auctions of liquidity in which loans can be secured against either the safest collateral or, at a cost, a wider collateral set, including high-quality private securities. An increase in bids offering the wider collateral as security then provides an early warning of financial stress. And here, the Reserve Bank of Australia has also permanently widened the range of collateral it accepts. More recently, the movements in the size and composition of our respective balance sheets reflect transactions carried out for monetary policy purposes, especially our large-scale purchases of government debt (and, in the US case, also government-backed GSE debt and mortgage-backed securities) financed by the issuance of reserves. Commonly called “quantitative easing”, I shall say more about the efficacy of these operations later. Before the crisis, central banks saw these two objectives of monetary and financial stability as largely complementary in nature. According to the conventional wisdom, the maintenance of price stability would help foster stable macroeconomic conditions more generally by anchoring expectations. And the consequent reduction in macroeconomic volatility should help reduce the likelihood of episodes of financial instability. All that was necessary, then, was to ensure that banking regulators and supervisors ensured individual financial institutions followed appropriately responsible policies with regard to their lending decisions and were sufficiently well capitalised and all would be well. We know now that this confidence was misplaced.

Banks with CDO exposure have already made full provisioning and recognized losses in line with IAS 39, and presently all sub-prime related CDOs have been unwound. Thai banks also have very low exposure to investment banks like Lehman Brothers and have no investment in US GSE securities. In all, total exposure of Thai banks to foreign investment is about 1.2 percent of total assets, about half of which are sovereign assets. Having said this, we are very mindful of the risk from second round effect of slowdown in global growth and domestic growth, which can affect credit, market, as well as liquidity risk. To handle this, the Bank of Thailand has been holding dialogue with top managements of banks to discuss financial stability outlook, and have conducted stress-test to ensure that banks are alert to these risks and are able to manage them to ensure adequate capital and liquidity. We will continue to hold candid and two-ways dialogues with all the banks operating here to ensure that we can manage these challenges and dynamics of the global turmoil. Ladies and gentlemen, I would like to conclude with some lessons learned so far to increase our immune system going forward. First, growth must be based on strong macroeconomic foundation, with prudent fiscal and monetary policy, flexible policy options, and strong external positions.
Appreciating the distinct qualities of FSVC’s assistance and taking into account the enhanced capacities of Albanian institutions to take in this assistance effectively, I deem that this cooperation should be supported and forego the concrete realization of future development objectives. In this context, the assistance may be tailored to support the design of a holistic project; not channeled in certain segments of its development, but focused, especially, on its implementation phase. This would require the FSVC and the Bank of Albania or the ADIA to define respective programs and other necessary requisites so that foreign experts may provide longer term assistance to ensure consistency of the training content and quality. This process would be carried out also by a thorough ex-post assessment of these projects. Finally, I avail myself of this opportunity to thank the US Government and other donors, USAID Mission in Albania, FSVC’s Board of Directors and its staff in Tirana for raising the necessary financial resources to support this cooperation program. I would like to reiterate the commitment of the Bank of Albania for a fruitful and effective cooperation. Thank You! 2  BIS central bankers’ speeches

They enhance the public’s understanding of what central banks do and why they do it. Sovereign wealth fund The SNB’s balance sheet has expanded sharply since 2008. It is this growth that inspired the idea to set up a sovereign wealth fund to manage the SNB’s foreign exchange reserves. A number of different options are being proposed for the structure of the sovereign wealth fund. Although proponents’ goals differ quite considerably, they all draw parallels with the sovereign wealth funds of countries such as Norway. However, comparisons with Norway are misleading, since this country supplies its sovereign wealth fund with tax revenues, licence fees and dividends from the oil sector. When companies in a country discover new natural resources, the country becomes richer as a result of the revenue generated and its wealth increases. By contrast, the exceptional growth in the SNB’s balance sheet since 2008 is primarily attributable to foreign currency purchases based on monetary policy considerations. We bought foreign currency in order to limit the appreciation of our own currency, thereby putting more Swiss francs into circulation. Such an expansion of the money supply, however, does not create any real value. This difference between oil revenues and foreign exchange reserves is important when contemplating setting up a sovereign wealth fund. Norway is able to transfer oil-sector tax revenue and other receipts into its sovereign wealth fund, because they constitute profit for the country as a whole. The SNB’s foreign exchange reserves, however, do not represent profit.
The problem is that that commitment means that the central bank is voluntarily breaching its future inflation objective, which may possibly not be credible in advance. 7  Andreeva and García-Posada (2019) estimate the impact of the TLTROs on bank lending policies in the euro area. For an analysis of the macroeconomic effectiveness of forward guidance on interest rates and on future developments in the central bank’s asset portfolio, see Arce et al. (2019). 9 See Eggertsson and Woodford (2003). 8  13  This is what we economists call “dynamic inconsistency”: a central bank could announce today that it will tolerate higher inflation in future in order to stimulate the economy, but once the economy and inflation recover, there would be an incentive for it to breach its initial announcement if it conflicted with its price stability objective. If agents doubt the central bank’s credibility, this type of forward guidance will not be effective in the first place. One way to avoid this problem is by modifying the monetary policy “strategy”, seeking to grant greater credibility and transparency to the central bank’s actions; in other words, to change the way in which the central bank’s objective is articulated and the way that the central bank pursues that objective with the tools available. To date, in their strategic frameworks most central banks have followed variations of inflation targeting, which entails targeting an inflation rate that is close to a specific number (for example, 2%) over a medium-term horizon.

For instance if, in the event of resolution, and after absorption of possible losses, it is expected that the institution in question would continue to perform its critical functions, the recapitalisation component would be equivalent to the new capital requirements estimated for the institution following the resolution process. In any event, the European regulations are currently under review, and will continue to be at least into next year, so it is still too early to know the precise details of the final requirements and, therefore, to accurately estimate the issuance volumes that institutions would need in order to comply with those requirements. Also, in order to allow the markets to absorb the foreseeably high issuance volume that would be needed to meet those requirements, there is a common understanding that an appropriate transition period is essential for implementation of the MREL requirements. That said, it is clear that although their introduction will be greatly beneficial for financial stability, they may pose a significant challenge for the banks themselves, especially for small and medium-sized banks that, owing to their business model, have less experience than 5/8  their larger peers in raising funds on the debt markets. It is to be hoped that the MREL requirements will not act as a further drag on these banks’ profitability, nor place excess constraints on their business models.
But, subject to that, we have done everything in our power to support the UK economy through the aftermath of the financial crisis, using the flexibility afforded to us by the inflation targeting framework and by our own credibility to the full. But the nature of our inflation targeting framework – with the primacy it attaches to the control of inflation – means it is not well suited to explaining our role in supporting growth and jobs. Policy actions have typically been explained solely in terms of inflation: for example, reducing the risk that inflation will undershoot the target in the medium term or extending the horizon over which we intend to return inflation to target. Although, technically accurate, such explanations don’t speak to the distress of businessmen and women worrying about the future of their companies or to the anxiety faced by families unsure as to whether they will still be in a job next week. Make no mistake: inflation targeting provides the flexibility for policy to respond to such anxieties. And we have fully exploited that flexibility over recent years. But it doesn’t provide a natural framework – a ready vocabulary – in which this flexibility can be clearly communicated. This almost exclusive focus on inflation in our communications didn’t matter for much of the first 20 years of inflation targeting in the UK. Indeed, arguably it was one of its attractions.

If productivity picks up strongly as the recovery gathers pace - as the more optimistic reading of the evidence would imply – this means that we are likely to have a relatively prolonged  policy is not being set with particular reference to the unemployment rate; rather the threshold simply provides a convenient point at which to reassess the stance of policy. Monetary policy continues to be set on the basis of a wide range of variables affecting the outlook for growth and inflation. 3  See, for example, Miles (2012 and 2013) and McCafferty (2103). 4  See, for example, Broadbent (2011, 2012, 2013). 5  My fellow MPC member Paul Tucker recently referred to this as a “probing strategy” (Tucker 2013). BIS central bankers’ speeches  5  period of strong growth, and a relatively prolonged period of low interest rates, before unemployment reaches the 7% threshold. But if, even as the recovery gathers pace, productivity growth remains relatively muted, unemployment will likely fall more quickly and the Committee will need to raise rates sooner. A threshold defined in terms of the unemployment rate is particularly well suited to dealing with this uncertainty. As demand picks up, those companies that can use their existing workforces more intensely or can shift employees to more productive activities are likely to do so before hiring additional staff. This suggests that to the extent that productivity picks up in response to increasing demand it should largely do so before unemployment falls materially.