samchain/econo-pairs-v1 huggingface dataset:
If its debt was so onerous that the government could not or would not finance it by conventional non-inflationary means, and if the independence of the central bank were sufficiently fragile, inflation could come to be viewed as just another tax, rather than something to be stabilised in its own right. In extremis, when the credibility of the macroeconomic framework is entirely lost, inflation expectations – indeed inflation itself – would be determined solely by the fiscal position. Even a notionally independent central bank could do nothing to affect it. Purchases of government debt by the central bank, for example, would do nothing to depress their yields. (Indeed, if they served only to reinforce the central bank’s subservience, thereby pushing up expectations of future inflation, QE could actually raise bond yields. Put another way, the policy can only work as intended to the extent the framework is credible – if it’s generally accepted that deficits are controlled by conventional fiscal measures and monetary policy is devoted to a fixed nominal objective.) There is also the potential, in this extreme situation, of a positive feedback between inflation expectations and inflation itself, and an associated risk of hyperinflationary spirals. When inflation expectations rise, the expected cost of holding zero-interest money goes up as well. Reluctant to hold on for very long to the paper the government is using to fund itself, people spend it straightaway, feeding the inflation and confirming those prior expectations.

I would also like to welcome Mr. Emil Stavrev, Deputy Division Chief, and Mr. Mariusz Jarmuzek, Senior Economist, both of them from the IMF European Department, who have contributed extensively to the report under debate today. Now, returning to the main topic: The National Bank of Romania has always valued the Regional Economic Outlook Report as it gave us a full and unbiased image of where we stand as compared to our peer countries. It has helped us to better understand the macroeconomic developments in our region and the interconnectedness/connections between our economies. The current report marks a turning point in our post-crisis economic history: We should take advantage of the improved economic context to focus on structural reforms needed to accelerate the real convergence and to raise Romania’s economic capacity in the long run. We need to preserve competitiveness and enhance the quality of public expenditure. We are all glad to see the global economy back on track and the European recovery strengthening. These results are even more encouraging, if we think back to 2010, in the aftermath of the crisis, when economists and policymakers started to really doubt our economies ever returning to business as usual. At that time it was believed that the new normal would come with secular stagnation, low interest rates and low inflation. Romania has secured a record growth of 8.6% in 2017/Q3. Nevertheless, we need to moderate our enthusiasm.
The criterion of security covers primarily the reduction of risks such as market, credit and concentration risks. In addition, it is important for us to maintain the real value of the foreign exchange reserves in the long term. Consequently, the long-term return on investment must match the average rate of inflation. If the criteria of security and liquidity are fulfilled, our investment policy aims to achieve an additional return over and above the real maintenance of value. The return on foreign exchange reserves is made up of current income plus changes in the value of the investments. The income takes the form of interest and dividend payments on the bonds and shareholdings. In view of the current low interest rate environment, these amount to only around 2% of foreign exchange reserves per year. Just like investments that fall due, income is generally reinvested. Therefore, foreign exchange reserves tend to rise even when we do not need to purchase additional foreign exchange. The other component of returns is changes in the value of foreign exchange reserves. We value all investments at market prices and in Swiss francs. Consequently, changes in the prices of interest-bearing paper and shares as well as exchange rate movements have a direct impact on the net result for investment. If the Swiss franc strengthens against the investment currencies, this results in a valuation loss on the foreign exchange reserves.

In May and June we saw what could happen if expectations of a less expansionary monetary policy course become widespread in the market. At that time, the announcement by the US Federal Reserve of a possible reduction in its bond purchase programme caused share markets to plunge temporarily. The wave of selling did not recede until the beginning of July, when the Federal Reserve, the European Central Bank and the Bank of England reassured markets that key rates would remain at very low levels until the recovery of the individual economies was on a firm foundation. On bond markets, interest rates continued rising in June and July. Since then, they have largely moved sideways. This applies to US, UK, German and Swiss government bonds, in particular. Until the beginning of September, yields on ten-year Confederation bonds rose to almost 1.2%. They are currently at around 1%, which means that they have increased by about half a percent year-on-year. Government bonds in the emerging economies were particularly strongly affected by the rise in interest rates, since the expectation of an impending monetary policy normalisation in the US led to significant capital outflows from these countries. By contrast, risk premia on government bonds for the peripheral euro area economies did not increase very much. Moreover, these risk premia have fallen again in the meantime so that returns on government bonds in the peripheral economies are now in fact lower than at the beginning of the year.
David Miles: Monetary policy and financial stability Speech by Mr David Miles, Member of the Monetary Policy Committee of the Bank of England, at the Bristol Business Forum, Bristol, 14 July 2010. *  *  *  I would like to thank Conall MacCoille and Gilberto Marcheggiano for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. Monetary Policy in the UK has never been as expansionary as it is today. Just over 15 months ago the level of Bank Rate was reduced to what is – to all intents and purposes – its floor. As Chart 1 rather starkly shows, this is the lowest level to which Bank Rate has fallen since the Bank of England was established at the end of the seventeenth century. Bank Rate has not been changed for 16 consecutive meetings of the MPC. That is not so unusual. In fact, as the Chart reveals, between 1720 and 1820 Bank Rate did not move from 5%. Had a Monetary Policy Committee then met each month, as it does now, it would have decided at 1200 consecutive meetings not to change the level of interest rates. So it is far from unusual for the interest rate set by the Bank to remain constant for over a year.

Now we have in place a framework for the recovery and resolution of banks, something that we did not have two years ago. Serious steps forward have been made on all technical issues that are of key importance for the integration into the European financial infrastructure. I wish to point out something in the BNB’s work, something that may be difficult to see – it is the huge amount of experts’ work and the intensive technical consultations that we are having about our joining the Exchange Rate Mechanism II and the euro area. I’ve already had a suitable occasion to thank my colleagues in the central bank. Now it is a pleasure to thank you, too, for the very good results achieved in this sector. All the items on our agenda are not yet completed and we still have a lot to do. I will not go into details or numbers, but let me mention some of our today’s priorities. I will begin with the amendments to the Law on Credit Institutions which take effect from today. They create an appropriate legal framework for further consolidation of the BNB’s supervision model. You probably know that from today onwards all the most important decisions and administrative acts will have to be approved and issued by the Governing Council. The second group of most important issues relates to lending to so-called ‘related parties’. A legal framework has been created for better definition of this subject and for managing the relevant supervisory practices.
ERM II membership also offers a meaningful, flexible but credible framework for :  •  -  increasing convergence with the euro area,  -  tackling the challenges faced by accession countries on the road towards the adoption of the euro,  -  contributing to macroeconomic and exchange rate stability,  -  helping determine the appropriate level for the eventual irrevocable fixation of parities. This is to be accomplished in the best interest of the candidate countries themselves. Thirdly, a sound and efficient banking and financial system is key. Significant progress has been made over the past few years in rehabilitating the banking sector and encouraging structural reforms and foreign ownership. Progress in corporate governance, the enhancement of the legal and supervisory frameworks that support the banking sector are also crucial. They are conducive to achieving the macroeconomic objectives of the accession countries. ***  To conclude, let me stress two words: rapidity and stability. Rapidity is a key word. We have not much time to meditate, decide, implement. The structural reforms, that we are badly in need of, must be implemented as rapidly as possible if Europe is to be up to its historical challenges. The Chinese say “It is later than you think” has never been so true. In any case, history itself does not wait for us.

Clearly, the demand for labor is very strong—we hear that from employers who are finding it hard to fill all their openings—and a lot of people are getting hired. At the same time, the numerous people leaving their current jobs contribute to the recordhigh level of postings as employers look to fill newly vacant positions. We won’t see all the vacancies filled overnight—it takes time for employers to fill open positions. With the strong, sustained demand for workers and progress on hiring, I am confident that we will see continued strong job gains going forward. The last aspect of the outlook that I’ll speak about is inflation. Recent inflation data have moved up sharply, which has garnered a great deal of attention. My view is that the spike in inflation mostly reflects the temporary effects of the surprisingly rapid opening of the economy. Given the importance of this issue, I will explain my thinking in more detail. With the economy reopening, people are once again enjoying activities, such as travel, that they postponed during the worst days of the pandemic. With the return of these activities, prices for things like airfares and hotel rooms have rebounded. But we must keep in mind that many of these increases are simply reversals of the large declines we saw last year when the pandemic first took hold. Once these prices have fully adjusted to the reopened economy, they shouldn’t continue to increase at recent elevated rates, and their effect on overall inflation should subside.
In many ways, the build-up of vulnerabilities that led to the crisis arose from a series of bad financial decisions made by borrowers, bankers, investors and regulators. This brings forth the importance of sound financial governance as a fundamental element of robust economies and financial systems, one that ensures that the possibility of the existence of weak links within the system is minimised. 1  Kremer, M. (1993). The O-Ring Theory of Economic Development. The Quarterly Journal of Economics (Oxford University Press) 108 (3): 551–575. 2  Hartford, T. (2015). Teamwork gives us added personbyte. Financial Times 19 June 2015. BIS central bankers’ speeches  1  Today, I would like to discuss three inter-related issues relevant to the theme of this conference. First and briefly, the issue of global financial governance. Then I will focus at greater length on the relationship between financial governance and economic growth at the national level. The third and final part of my remarks will cover the governance of finance. Global financial governance: a lack of urgency Let me start with global financial governance. I will be brief on this as much of the discussion has been had elsewhere at various other platforms. Since the demise of the Bretton Woods system in the 1970s, while the global monetary and financial system has become more integrated and sophisticated, global financial governance has changed little.

It affects the way financial decisions 2  BIS central bankers’ speeches  are made, including decisions relating to savings and spending, borrowing and lending, investment and profit distribution, and it is relevant to all economic agents, be they households, businesses or governments. Soundness of financial governance is a critical prerequisite for the sustainable growth of any economy. Having said that, we also have to recognise that the process of economic growth itself is an outcome of a system that is highly complex and adaptive, and that a country’s economy, polity and society – and the institutions that underpin each of these – are embedded within a complex network of interdependencies. Therefore, there cannot be a one-size-fits-all prescription of what constitutes good financial governance for all economies. Nevertheless, I do believe that we can recognise the presence or absence of good financial governance based on broad characteristics. In this regard, three key inter-related features are typically present when there is good financial governance. Firstly, effective financial governance ensures that financial decisions take into account all externalities arising from the decisions. Financial decisions often have consequences that are not fully borne by the decision maker. Financial decisions that may appear rational at the individual level, may in fact be collectively unsustainable. For instance, corrupt practices may be optimal for the individual perspective, but they are clearly detrimental to the welfare of society and the economy.
It will have potential profit and loss, tax and accounting implications on market participants. Migration of legacy contracts and adoption of new documentation involving hundreds of thousands of clients would be another complex exercise. All these 1/4  BIS central bankers' speeches  issues will cut across different segments of the financial market, from derivatives, to bonds, to loans and many others. The implications may also vary greatly across different jurisdictions given the different market structure and legal environment. Therefore, industry associations such as ISDA have an important role to play, in helping to address these wideranging issues with a global and industry-wide perspective. Global banks should take the lead 8. Likewise, international banks, which have operations across many jurisdictions, will be better placed to help shape the path for transition for the banking sector. As we all know, IBORs are used in nearly every aspect of their business – from trading, to risk management, to pricing and valuation. Preparing for the transition means they need to develop the necessary operational and system capability for their global operations, probably dealing with multiple alternative reference rates at the same time. I can see this is a very onerous and resource-intensive process. But then, given the quantity and diversity of financial contracts on their book, and their presence and market knowledge in various jurisdictions, these global banks should be best equipped to take the lead in devising a comprehensive transition plan.

Here is Chancellor Denis Healey, writing in his memoirs3 about a spat with the Prime Minster of the day:  3  2  Healey, D (1989), The time of my life, Michael Joseph London. BIS Review 11/2004  ‘At this time my own relations with Jim were shaken by an incident just after the Party Conference. On October 6 I had asked him to let me raise interest rates by another 2 per cent to the then unprecedented level of 15 per cent…He refused. I said I wanted to take the matter to Cabinet that morning. ‘All right’ he replied ‘but I will not support you.’ Nevertheless I insisted…’ In the event this did not prove necessary: Callaghan backed down, leading Healey to comment wryly that ‘This was the only time I have ever used the threat of resignation to get my way.’ The new framework has taken the politics out of interest rate decisions without sacrificing democratic accountability or oversimplifying the policy process. It is an elegant institutional solution to the lengthy debate between those who favoured untrammelled discretion and those who advocated rules (such as monetary targets); one, moreover, which manages to respect the constitutional priorities of a parliamentary system. Achievements Performance over the six years since the Bank became independent has been impressive. Against the target of 2.5% for RPIX which ran from 1997 until December 2003, average inflation was 2.4%.
In summary, the political economy case for one person/one vote does not entail the equivalent of postal voting, which I believe would impair the quality of our discussions and so, probably, of our decisions. Communication of the Committee’s reaction function: whether to publish an expected path of Bank Rate Central bankers know that expectations matter. So they know that delivering their goals requires more than being able to set the overnight money market rate from one policy meeting to the next. It matters where agents – businesses, households, financial markets – expect the policy rate to be set in the future. More than that, it matters that agents have a broad understanding of how the monetary authority will react to unforeseen developments in the economy; their “reaction function”. That being so, some central banks have started publishing their expected future path of rates, or a range for the future path. This could have advantages. For example, absent a clear agreement and statement of the strategy being pursued by the Committee, differences amongst members about the monthly decision can occasionally stem from judgments about how the precise timing of Bank Rate changes would affect perceptions of the Committee’s future course and so monetary conditions. But in my book, there are two reasons for not publishing a planned policy path – both related to the political economy context in which the MPC operates.

For example, in Germany, the institution that became the highly independent Bundesbank was established as part of the country’s reconstruction after WWII and so before its new democracy was embedded. It had “goal independence”. And in the US, while there is hesitation over giving the Federal Reserve an inflation target, as great weight is placed by Congress on the “dual mandate”, there is not concern about the scope or mechanics of the FOMC’s accountability to Congress. Every member of the executive arm of the government is unelected except the President. The central bank is no outlier. 18 But in the UK it really was a novelty – in a way, a constitutional departure, foreshadowed perhaps only by the judiciary 19 – to give such a politically sensitive lever to a body of unelected technicians. The institutional obstacles to Bank of England “independence” therefore needed institutional solutions. Responsibility for bank regulation was transferred from the Bank in 1997. The pathway to resolution of the “democratic deficit” problem had potentially been opened up in the 1980s by the St John Stevas reforms of Parliamentary Committees which led, over time, to a Treasury Committee with a high reputation and standing, supported by access to expert advice. In the 1997 reforms, the sphere of politics was carefully delineated. The goal of price stability is set by Parliament in legislation; and, within that framework, the Chancellor of the day sets the Bank its target for inflation.
Lars Nyberg: In the wake of the financial crisis Speech by Mr Lars Nyberg, Deputy Governor of Sveriges Riksbank, at the HQ Bank, Stockholm, 18 November 2009. *  *  *  I would like to start by expressing my gratitude for having been invited to discuss a few of my thoughts about what may follow in the wake of the financial crisis. Make no mistake, the crisis is not behind us yet. Many balance sheets in many countries must be adjusted before the world’s banking system can be given a clean bill of health. But the acute phase is hopefully over, giving us reason to reflect not just over why developments took the turn that they did – many others have already written volumes about this – but also over what should be done to prevent these mistakes from being repeated. Much of this discussion deals with regulation and supervision and, just like after every crisis, many political initiatives are being proposed, some better than others. This is what I intend to talk about today. But there is also reason to reflect over the interplay between financial stability and monetary policy. The current crisis has indisputably demonstrated that monetary policy and financial stability overlap in many important ways that we in the central banks previously may not have entirely considered. I intend to devote the main part of my speech to this issue.

The difficulties monetary policy is faced with when markets cease functioning normally has also been underestimated, despite previous experiences from, for instance, Japan. Monetary policy and financial stability overlap in several areas. Following the past year’s dramatic economic developments, it should be evident that insufficient financial stability leading to a major financial crisis seriously impairs the preconditions for monetary policy. Strategically important markets must be made to function in order to avoid a total collapse. Central banks have thus been compelled to undertake a series of unconventional measures, partly aimed at maintaining a functioning payments system and partly aimed at improving the functioning of the financial markets, thereby contributing towards the desired effect of the expansionary monetary policy. At the same time, there exists greater awareness of the fact that a monetary policy that does not adequately consider financial factors can lead to the accumulation of serious financial imbalances. Financial stability has been demonstrated to form an important restriction to the manner in which monetary policy can be applied in crisis situations. 3 Monetary policy models must become better at capturing the functioning of financial markets. In my opinion, the present monetary policy framework, in which monetary policy is aimed at stabilising both inflation and real development, still works well. However, monetary policy analysis needs to be developed, in certain respects, to enable us to make better forecasts within this framework.