samchain/econo-pairs-v1 huggingface dataset:
At the same time, a number of new, more structural risks are also emerging, brought about by digitalisation and global warming Digitisation first gives a systemic dimension to cyber risk. The expansion of digital practices contributes to the propagation of cyber risk and amplifies it, through the interconnections between financial institutions, but also between them and their service providers. The fact that some of these providers are Fintechs and Bigtechs, which are unregulated and not easily substitutable, is an additional vulnerability factor. To cope with these risks, we must resist the temptation to set up a bunker-style security system, which is a dead end, but rather imagine a system which combines openness and innovation. This is why we, at the Banque de France and the ACPR, are working with the other supervisors of the Eurosystem to ensure that the entities we supervise take cyber risk into account and to set up a broad programme for protecting the infrastructures that we operate. Cyber security is one of the key priorities of the French Presidency of the G7 in 2019. The Banque de France also contributes to the work conducted in this wider framework by coordinating the preparation and implementation of a cyber resilience test for the global financial sector. As regards the risks associated with climate change, they can no longer be ignored. Physical risks – which correspond to the rise in the frequency and severity of extreme weather phenomena – are obviously the most visible and immediate for the financial sector.

Interestingly, I find evidence in the early (pre-1988) sample that suggests that inflation was, if anything, more sensitive to the unemployment gap when unemployment was high, rather than low. Although these estimates are imprecise, this pattern is the opposite of the claim by HMS, which relies on full-sample estimates to draw conclusions. This also runs counter to HMS’s historical narrative about the 1960s and the dangers of a red-hot labor market. I will not dwell on this further, but it is a reminder that findings of nonlinearities in Phillips curves are often not robust. The apparent breakdown in this simple price Phillips curve in the past 30 years reflects a number of structural changes in the U.S. economy. The Federal Reserve’s success in re-anchoring inflation expectations at a low level can explain the decline in inflation persistence seen in the data.1 However, the role of well-anchored expectations in flattening the Phillips curve is not obvious, and as HMS note, this flattening is not as clear in the wage inflation equations. This suggests other forces are at work. Several usual suspects come to mind, including the effects of supply shocks, increased globalization of goods markets and supply chains, and changes in the market structure for consumer goods.
High spending of public funds and the persistence of mediocrity will go hand-in-hand if no one is likely to be held accountable for failure to achieve outcomes. Therefore, good financial governance must be measured in the achievement of specific and measurable outcomes. If the outcomes fall short, then tax-payer money cannot be considered to have been well spent. When there is a lack of financial governance in the public sector, it means that government contracts are awarded based on who you know rather than who can give the best value for the money. As a result, government projects often become costly, poorly delivered and fail to provide the incentives for increased proficiency and productivity. Not only that, a pool of vested interest develops to feed on the lack of financial governance, and any threats to their privileged livelihood are met with great hostility. It is the privileged position of this vested  3  4  Source: IMF’s Fiscal Monitor Database. BIS central bankers’ speeches  interest that makes government reform so difficult. The end result is that the intention to have an economy that is driven by efficiency and increasing productivity remains unattainable. There are countries that have gotten it right when it comes to good public financial governance. For resource rich economies, Norway is one example, where since 1990, the government has put aside its oil income in a fund that at the end of 2014 was worth almost $ trillion 4.

It is certainly the case that the recent crisis has been a key factor behind the increase in government indebtedness. In the aftermath of the crisis, governments in the crisis affected economies had to use public funds to rescue troubled banks. For example, Ireland had a government debt to GDP ratio of just 24% in 2007, but due to its banking crisis and its impact on the Irish economy, that number jumped to 111% by 2011 3. In fact, even for countries that were not at the centre of the financial crisis, fiscal spending to stimulate domestic demand was increased to offset the negative real sector shock created by the crisis. The low growth environment also reduced the tax revenues of governments, further eroding public finances. So, the crisis certainly played a role in the worsening of public finances. But that is not the complete story. In many countries, public finances were already stretched even before the crisis. This surely says something about the state of financial governance in the public sector of these economies. In the advanced economies, ageing populations and over-generous health and pension benefits were a major source of strained fiscal positions. Although the threat of demographics to fiscal sustainability is at this juncture most imminent for countries such as Japan, Spain, Italy and Greece, where the old age populations are rising most sharply amid already high levels of debt, it is only a matter of time before many emerging market economies will also face similar issues. That includes countries in ASEAN.
Ladies and gentlemen, On the 8th of May this year, only 15 days ago, Macedonia had the honor to represent its first preaccession economic program at the ministerial dialog between the ministries of economy and finance of the EU and the candidate countries in Brussels. The adopted conclusions that refer to our country, amongst other things, state that "generally, the document suffers from a lack of reliable statistics, impeding the analyses of the position of the country regarding the growth cycle...", which, you would all agree, has to do with the reliability, in such situation, with inflation calculations, particularly of the expected one. Furthermore, page 4 says that "in the area of economic statistics, top priority for Macedonia is to establish a capacity for regular production and submission of annual and sub-annual statistics", but, also, not failing to notice that "a certain progress has been made in the annual national accounts, following the ESA 95 concepts", and that we should move on in that area.

Because inflation remains to be one of the most exciting, most important macro-economic phenomena, tackling the life of the communities and of the separate entities and individuals in the most concrete way. We all find it important to know what are the real values that are at our disposal. What are the real values that we produce. What is the real progress of the economy, what is the real growth or decline in our income, what is the real growth or decline in our living standard and well-being. Inflation is one of the obstacles on the way to those real values, important from several viewpoints of our life and our behavior. Therefore, macroeconomic analyses are commonly based on values in real terms, i.e. values adjusted by the increase in the prices with the single objective – to obtain realistic picture of the macro-economic developments. Therefore good investment and business plans of companies, inter alia, do not miss the opportunity to grasp and incorporate the expectations about the future movement of the inflation, as they are aware that it will have an effect on their profit in the future. Therefore, labor unions are interested in inflation when they negotiate wages, therefore each of us is interested in the information about the current and future inflation, i.e. increase in the prices, when we consider what to do with our savings. Why is the Central Bank preoccupied with the inflation and its accurate measurement, perception of inflation and expectations about its movement in the future?
In view of what has already been said, it is clear that industry and business in Iceland has to prepare itself for a higher exchange rate than would have been the case without this major development. It naturally demands careful management and cost-cutting in operations where required. As mentioned previously, the Central Bank of Iceland now practices inflation targeting intended to keep inflation as close as possible to 2½% per year. The Bank’s latest forecast predicts that inflation will be slightly below this mark during the next two years, or just over 2%. Following this forecast, the Bank cut its policy rate by 0.5 percentage points.. All other things being equal, this will mean that inflation will be slightly higher than that assumed in the forecast. Were interest rates to be lowered significantly from the current level, it would very likely set off a new wave of inflation and instability, which would be to the advantage of neither wage earners nor industry. As mentioned, there seems to be some overestimation of the possibility of the Central Bank to control the market rate of exchange. But, as was also pointed out, the Bank’s intervention on the foreign exchange market, expending large sums in 2000 and 2001, had only a short-lived effect. In this connection, it should also be noted that since last autumn the Central Bank has regularly purchased foreign currency in the domestic interbank market.

As is well known, the exchange rate for the króna plummeted in 2000 and 2001, and for quite some time was substantially below a level reconcilable with long-term equilibrium. This occurred at a time when the price of key exports was very high, making the years 2000 and 2001 especially favourable for the export sector and in fact also for import competing sectors. Enterprises in these sectors now understandably feel the effects of the rise in the exchange rate. It is not to be expected, however, that the same conditions will again arise in these sectors as prevailed, for example, during 2001 and in the early part of 2002. In this connection it could be mentioned that, based on the predictions on performance made by financial enterprises, the contribution margin in fisheries companies will be fairly good this year, although not as good as in 2001 and 2002, which were quite exceptional. In the February issue of its Monetary Bulletin, the Central Bank published an analysis of the proposed 1 major construction projects in East Iceland and possible responses for economic management. The article concludes that unless economic counter-measures are taken, the projects will create overheating in the economy, inflation and instability. Although their scope will be considerable, the projects are not so large that economic stability cannot be preserved and inflation contained by means of appropriate responses in economic management.
But rules can be too simple.19 They must be used only as points of reference, not as excuses for doing nothing. Economic policy rules should be common knowledge. An independent body should be established to tell us when we are “speeding”, and procedures must be in place to implement measures to solve the problem.20 The new "Fiscal Compact" in the euro  17  See Berg, Qvigstad and Vonen (2011) Two essays on the magic number 4 , Staff Memo 2/2011, Norges Bank, and Llewellyn and Qvigstad (2012) The “Rule of Four”, The Business Economist, Vol 43, No. 1. 18  The financial sector faces risk involving probabilities of various outcomes that we can forecast fairly accurately. But it also faces genuine uncertainty, where probabilities are also unknown. We do not know all the possible outcomes of bank behavior or the real probabilities. Such uncertainty is more effectively managed using simple and robust rules, rather than rules that are as complex as the systems they are meant to regulate. 19  The psychologist and Economics Nobel laureate Daniel Kahneman touches on this theme in his book, Thinking, Fast and Slow (Allen Lane, 2011) (see e.g. page 98). Kahneman points out that the application of heuristics – simple decision-making rules often used to find answers to difficult questions – may produce answers that are imprecise or wrong. The use of heuristics may be regarded as a way of substituting complex questions with simple ones.

23  Various observers have pointed out a number of factors that help to explain the financial crisis: Low key rates in all major countries over several years in the early 2000s, conflicts of interest in important financial institutions such as credit rating agencies and considerable economic differences are just a few of them. 8  BIS central bankers’ speeches  In many ways, central banks are the response the authorities could apply when crises arose. Central banks were established to exercise control over the monetary system, enabling states to issue banknotes people could trust and providing banks with a bank for their own deposits and from which they could, in the last resort, borrow from in times of crisis. Confidence in the monetary unit is the mainstay of our financial system. The following may serve as an illustration: It costs 50 øre to produce a banknote. For every 100-krone banknote Norges Bank issues, we apparently create wealth of NOK 99.50 – out of thin air. But people still sleep soundly in their beds – including those with money under their mattresses – because we are confident that the money can be exchanged for real goods. It is, of course, tempting to take advantage of this confidence. History is full of kings and governments who have attempted to do just that. In 1716, the Scottish economist John Law established a bank that soon assumed the role as the first central bank of France.
In fact, this was precisely one of the key drivers of Thailand’s growth in the 20 years prior to the 1997 crisis. During this time, the share of employment in agriculture fell by a third, releasing workers to the more productive manufacturing and service sectors. Thailand’s experience is quite typical of many others in Asia. Emerging market countries have not only grown rapidly over the last few decades, they have also changed dramatically. Sustaining growth going forward hinges on the continuation of this process of change and upgrading. For Asia, industrializing the agriculture sector through the adoption of modern methods and the development of agribusinesses will be a key source of productivity growth. Similarly, the composition of the service sector, which is also quite large, has to shift from low-productivity activities to modern, high value-added services. Countries that have achieved sustained growth are those that are better at removing the bottlenecks that impede such transformation. This typically requires a number of key fundamental capabilities, such as macroeconomic stability, rule of law, good education, strict enforcement of contracts, a competent bureaucracy, good governance, and low tolerance of corruption. These are often encapsulated under the rubric of strong institutions. One can think of institutions as the set of rules and norms that both governs the incentives of economic agents as well as constrains their behavior. Good institutions encourage growth, bad institutions stifle it. Entrepreneurship, a critical driver of structural change, relies heavily on the institutional environment.

However, the reactivation of credit activity remains a challenging goal, which would require encouragement of the final demand and generation of business plans valid for bank financing, reduction of real and perceived risk in the economy, review of development strategies and commercial banks’ lending policies, as well as reduction of cost and non-cost elements in lending. All these factors are envisaged to gradually improve throughout the year; however, they will remain far from the pre-crisis levels. Bank of Albania’s monetary policy will continue to be prudent, chiefly oriented towards achievement of inflation target. The recent upward inflation trend might have been motivated by temporary-action and limited-intensity supply factors. The Bank of Albania has envisaged  BIS Review 28/2010  1  that the exceeding of 4 percent inflation rate will be for a short period of time and will not be followed by steady inflationary pressures. Our projections show that consumer price inflation will fall gradually towards the 3 percent targeted rate during 2010. However, we remain committed to taking all appropriate steps to ensure this performance and meet our legal mandate for price stability in the economy. 2  BIS Review 28/2010
I work in New York and live in New Jersey, where we know a thing or two about fiscal problems. Puerto Rico’s large public debt has the potential to reduce its growth prospects as the world economy recovers. Puerto Rico’s fiscal situation has deteriorated sharply over the last five years as the Commonwealth’s recession has deepened. Throughout this period, public debt has risen quickly as revenues that are sensitive to economic activity – such as income taxes – have declined. But the fiscal problem in Puerto Rico pre-dates the current crisis. Even when the economy was growing, public debt was growing even faster. This structural imbalance is difficult to sustain in the long run, and requires attention if Puerto Rico is to prosper. A critical factor here is ensuring that the Commonwealth’s tax system is designed to generate the revenue required to sustain government operations. Furthermore, any good tax system should satisfy three important criteria: simplicity, fairness and neutrality. The current system suffers from some problems that make it difficult to meet these tests and generate adequate revenue. In particular, high rates are levied on a narrow tax base. One of the key public services funded by these taxes is education. Workers need skills to produce the complicated technological products of the future. There is clear evidence that workers with the sort of flexible thinking skills not easily duplicated by computers have seen their productivity and earnings rise, a trend that is likely to persist in the future.

This requires all actors – both at national and European level – to play their parts in line with their respective mandates as laid down in the EU Treaties. BIS central bankers’ speeches  1  No monetary stimulus, indeed no fiscal stimulus, can be successful unless accompanied by the right structural policies – policies that foster potential growth and instil confidence. I would like to illustrate this argument by focusing on investment, which will also be discussed at the informal ECOFIN this weekend. Investment has been one of the great casualties of this crisis. The downturn in business investment in the euro area since 2008 has been much more severe than in earlier business cycles. From peak to trough, business investment decreased by around 20%, against 15% in the 1992 recession. The level of business investment in the euro area has only slightly improved since 2008, whereas in the US it is above its pre-crisis level. We will not see a sustainable recovery unless this changes. A decisive rise in investment is essential to bring inflation closer to where we would want to see it, to stimulate the economy, and to bring down unemployment. So what can we policy-makers do to revive investment? My main message today is that only if structural, fiscal and monetary policies go hand in hand will the euro area see investment return. Let me focus in particular on the decisive contribution which structural policies can make.
The economies were affected by factors such as swings in commodity prices, significant oil price adjustments, and the slowdown in the major economies. While the impact of these trade - related shocks on the domestic economies of the East Asian countries involved costs, in terms of slower growth and dampened domestic economic activity, these economies were able to adjust to the sudden changes. In such an environment, there was also greater predictability in the direction of the economic trends, providing the basis on which appropriate policy responses were implemented to manage the economic adjustment process. Emerging economies in particular, in the East Asian region participated in this globalisation process and benefited from the enhanced trade activities. In the recent decade however, there has been a distinct change in the nature of the globalisation process. Globalisation is no longer confined to trade and direct investment, but increasingly involves large cross- border financial flows. Over the recent decade, these financial flows have dominated the global market place. An emerging concern is that this trend would result in a widening of the divide between the developed and emerging and developing economies. In a world in which the magnitude of the financial flows are significant, in which the financial transactions have instantaneous implications, in which the flows are unconstrained by any regulatory framework, then size, the degree of development and the degree of resilience of economies will matter.

5  Typically, policymakers think about that in terms of the “output gap”, reflecting firms’ capacity utilisation and slack/pressure in the labour market. By contrast, in the academic literature – notably Michael Woodford’s Interest and Prices – the benchmark is to set monetary policy in order to offset the frictions in the economy, so as to obtain the conditions that would prevail if prices, wages etc were fully flexible. Policymakers and academics need to resolve how big the gap is between those two approaches. BIS Review 112/2008  3  that the textbook policymaker knows how the degree of slack in the real economy acts on future inflation (or the slope of the Phillips curve). The two forces sweeping through the world economy test the way policymakers typically apply various elements of this set up in more routine circumstances. For example, how do the commodity price rises and, separately, the credit crunch affect the “equilibrium” short-term real rate? Is the actual short real rate still an adequate proxy measure of monetary conditions? Is the “normal” relationship between economic slack and future inflation intact? The cost shocks, and monetary conditions Although they have fallen by nearly $ since the peak reached in July, oil prices are still up more than 200% since the middle of 2003; and, indeed, around 3% since the beginning of this year.