samchain/econo-pairs-v1 huggingface dataset:
The contribution of the core inflation and food and energy prices to the overall inflation rate in the countries of the CESEE region in the last six years on average is generally balanced, with core inflation weighing slightly more. In the euro area, 76% of the average inflation dynamics was driven by the core inflation, and the rest by the more volatile prices. Compared to the 2002-2012 period, on average, in the last couple of years, the importance of core inflation for the dynamics of the headline inflation is much more pronounced, both in the region and the euro area. It either indicates that demand pressures and cost-push factors are becoming more prevalent, or that the pressures from the global commodities prices are becoming lesser. 13  Chart 15: CESEE and euro area headline inflation and core inflation developments 8.0  Chart 16: Contribution of core inflation and food and energy component to headline inflation in CESEE and Euro area (in p.p.) 6.0  CESEE inflation, %  7.0  5.0  CESEE core inflation, %  6.0  Euro area inflation, %  4.0  5.0  Euro area core inflation, %  3.0  4.0  2.0  3.0  1.0  2.0  0.0 2002-2008  1.0  2015-2019  2002-2008  Euro Area  2009-2014  2015-2019  CESEE  Core inflation, average (contribution to inflation, in p.p.) 2018  Source: IMF WEO Database, Eurostat and National Statistics.

Moreover, the signs of a stronger global recovery and increasing global trade suggest that foreign demand should increasingly add to the overall resilience of the economic expansion in the euro area. However, economic growth continues to be dampened by a sluggish pace of implementation of structural reforms, in particular in product markets, and by remaining balance sheet adjustment needs in a number of sectors. The risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors. Headline inflation has been recovering from the very low levels seen in 2016, largely owing to higher energy price increases. After reaching 2.0% in February 2017, euro area annual HICP inflation stood at 1.5% in March. This reflected mainly lower energy and unprocessed food price 1/2  BIS central bankers' speeches  inflation, but also a decline in services price inflation. Looking ahead, on the basis of current futures prices for oil, headline inflation is likely to increase in April and thereafter to hover around current levels until the end of this year. However, as unutilised resources are still weighing on domestic wage and price formation, measures of underlying inflation remain low and are expected to rise only gradually over the medium term, supported by our monetary policy measures, the expected continuing economic recovery and the corresponding gradual absorption of slack.
“Potential Benefits of Poland’s EMU Accession”, Focus on Transition No. 1. 2. Brzoza-Brzezina, M. 2005. “Lending Booms in the New EU Member States: Will Euro Adoption Matter?”, ECB Working Paper No 543, European Central Bank, Frankfurt. 3. Brzoza-Brzezina, M. 2006. “The Information Content of the Neutral Rate of Interest: The Case of Poland”, Economics of Transition 14(2), s. 391-412. 4. Buiter, W.H., Nielsen, E. (2007), “Mundell on His Head: Asymmetric shocks are good for you, thanks to Economic and Monetary Union in Europe”, paper presented at The Brussels Economic Forum 2007, Global Adjustments and EMU, 31 May 2007-1 June 2007 5. Csajbók, A., Csermely, A. (ed.) 2002. “Adopting the euro in Hungary: expected benefits, costs and timing”, MNB Occasional Paper 24, National Bank of Hungary 6. DeGrauwe, P. 2003. “The Enlarged Eurozone: Can it Survive?”, Jelle Zijlstra Lecture, NIAS. 7. Demirgüç-Kunt, A., Detragiache, E. 1998. “The Determinants of Banking Crises in Developing and Developed Countries”, IMF Staff Papers, Vol. 45, No. 1, Washington, D.C. 8. ECB (2006), “Indicators of Financial Integration in the Euro Area”, ECB, September 2006 9. Eickmeier, S., Breitung, J. 2005. “How synchronized are central and east European economies with the euro area? Evidence from a structural factor model”, Discussion Paper 20/2005, Deutsche Bundesbank 10. Estrada, A., López-Salido, D. 2001. “Understanding Spanish Dual Inflation”, Documento de Trabajo n.º 0205 Banco de España  4  BIS Review 67/2007  11.

As stated by the President of the National Bank of Poland, Mr Sławomir Skrzypek, an in-depth assessment of the costs and benefits of the euro adoption in Poland needs to be periodically repeated in order to make sure that we take into account all important factors of the fast changing global economy. The National Bank of Poland is willing to play a key role in stimulating the public debate about the costs and benefits of the euro adoption. Today’s conference is a good moment to contribute to this debate, and I would like to thank the organizers for offering this opportunity. Let me begin with the benefit side. Economists typically concentrate on the following sources of economic benefits related to monetary union. These are: •  lower transaction costs,  •  lower interest rates,  •  financial integration,  BIS Review 67/2007  1  •  trade creation. Elimination of transaction costs incurred by companies and households in relation to the zloty/euro exchange rate is among the most obvious benefits of the single currency. These costs include, inter alia, the bid-ask spreads, fees accompanying exchange rate operations and costs of hedging against exchange rate risk. Any company could possibly calculate how much it would save on transaction costs if there were no exchange rates. This is also relatively unsophisticated for the whole economy, and has been estimated to be approximately 0.2% of GDP in Poland (NBP 2004). Not much, but worth saving.
Robust growth now would also potentially have the benefit of reducing the likely erosion of the economy’s supply capacity – the more quickly growth is resumed, the less skills will be eroded and the capital stock effectively run down. The longer-term outlook for growth is therefore improved. This is indeed a powerful reason for continuing to focus on the two-year horizon, and one which seems to trump the considerations around the lags in the policy process and worries about inflation expectations. But it is not the only relevant longer-term consideration. I argued earlier that in the period running up to the financial crisis, it might have been beneficial if policy had taken more explicit account of how it was contributing to imbalances in the economy. And there may be risks in the present circumstances in driving growth up quickly in the UK, if the global economy, and particularly our major trading partner, the EU, experiences a somewhat sluggish recovery. Slow growth elsewhere would make it more difficult for the UK to achieve an improvement in the external balance. The UK’s external sector has so far perhaps had a rather disappointing response to the depreciation of sterling. Manufacturing output in the UK has not, so far, performed any better in the early stages of recovery than has the US, Germany or France. Recent surveys do suggest that export orders are improving (for example, the February 2010 CIPS/Markit survey of manufacturing suggested that export orders grew at their fastest pace since the survey began in 1996).

All these initiatives, coordinated with other policies, have proven effective. Inflation remains subdued and in check, inflationary expectations are anchored, macroeconomic environment is steady and financial stability is consolidated. Looking ahead, the Bank of Albania holds that the Albanian economy will continue to face the above-cited concerns over 2013 and beyond. Although improving, economic activity is expected to remain below its potential, followed by low inflationary pressures, creating premises for maintaining stimulating monetary conditions in the future. Likewise, our  BIS central bankers’ speeches  1  projections suggest that external balances of the economy are expected to improve. On the other hand, slow economic growth rates may generate pressures on debt stability indicators, unless they are identified and taken into consideration in fiscal policy decisions. In Bank of Albania’s view, growth rate recovery will require combining the cyclical stimulus of the economy with structural measures that expand the growth potential. Regarding the cyclical aspect, the Bank of Albania holds that macroeconomic policies are rightfully stimulating. In the absence of space, fiscal policy should continue to be oriented towards long-term stability of debt indicators. The monetary stimulus is expected to be transmitted more completely in the upcoming period. We continue to underline our message that businesses and consumers should have a more realistic approach on sound perspectives for the country’s development as well as revise up their consumption and investment plans.
But it will also be seen that in certain periods the return has deviated rather markedly from the trend. That raises the question of how long the horizon needs to be for a diversified 13 portfolio to actually yield a good return. The third diagram plots the highest and lowest real returns for rolling investment horizons of different duration between 1918 and 1996 (Diagram 3). It will be seen that with a five-year horizon in this period, the best average annual return has been 26 per cent; with an unfavourable initial year, however, the average annual return could be as poor as –9 per cent; moreover, even such a long horizon as twenty or thirty years did not guarantee a return on a par with the trend. The return is admittedly positive for all the rolling periods but even for such a long horizon as twenty years the return on equity was worse than for bonds and bank deposits in 5 per cent of the cases. This raises the issue of timing, that is, when to start saving in shares. Doing so at a time when stock market prices are high may entail a long – in some cases very long – wait for a return that is even in the vicinity of the trend. One way, used by many people, of coping with the problem of timing is to spread the investments over time.

This was remarkable in that according to the efficient-market hypothesis, it is only changes in fundamental factors, for instance profits or dividends, that ought to affect share prices. Further studies later in the 1980s indicated that future developments can be explained by historical price movements. A look at the share prices of two groups of firms – extreme losers and extreme winners – reveals that the group with the worst share performance in the first period gives a better return in the coming five years than the group that did best and vice versa. In the second period the undervalued shares recovered their fundamental value and the overvalued fell correspondingly. Studies with a shorter horizon confirm that shares which have begun to rise continue to do so and conversely, shares which have started to fall often continue to do so in the short run. The intuitive  1  Markowitz, H.M. (1952), Portfolio selection, J. of Finance, VII:1 (March), pp. 77–91. 2  Fama, E. (1970), Efficient capital markets: a review of theory and empirical work, J. of Finance 25, pp. 383–417. 3  This point has been made by, for instance, Milton Friedman and Eugene Fama; see Friedman, M. (1953), The case for flexible exchange rates, in Essays in Positive Economics, University of Chicago Press, and Fama, E. (1965), The behavior of stock market prices, J. of Business 38, pp. 34–106.
In the case of electronic banking, this will require us to recruit more bank examiners with specialist knowledge in information technology. As already indicated, our existing regulatory framework is split into two parts, e-money in the form of stored value cards and electronic delivery channels. As regards the first of these, Hong Kong is one of the jurisdictions around the world that has chosen to put in place a specific legal framework to deal with the issue of stored value cards. This is contained in the Banking Ordinance. The thinking behind the legislation was that the issue of multi-purpose stored value cards such as Mondex and Visa Cash is an activity akin to the taking of deposits or the issue of banknotes, and should be confined to licensed banks. On the other hand, we wanted to allow flexibility for non-banks to issue limited purpose cards which would have a distinct core use, such as payment for transport services, but could also be used for a restricted range of ancillary or incidental purposes. There is provision for the issuers of such cards to be licensed as a special type of deposit-taking company under the Banking Ordinance. If the range of non-core uses is very limited, it can be exempted altogether. The Octopus card presently falls into this latter category, although the issuer has stated publicly its intention to broaden the range of permitted usages and to apply for DTC status.

This will in turn ultimately bring benefits to the consumers and the economy at large. Implementation challenges and considerations Ladies and Gentlemen, Given the complexity of Basel II, the ability to comply appears to be the main concern within the banking community. This is truly a major undertaking with respect to the IRB approaches or the internal rating based systems. The resources involved and data constraints are often cited as the two main challenges in implementing the IRB approach, particularly for banks in the emerging markets. At this stage, data on default and credit migration for certain market segments is too limited to facilitate any meaningful analysis. It is therefore recognized that some lead time would be needed for banking institutions to produce a robust and meaningful validation of internal estimates of probabilities of default and loss given default. However, this does not mean that banks should wait until all the requisite data is in place. Banks can initiate work to establish the framework for analytical functions. While the industry survey conducted by Bank Negara Malaysia revealed a strong preference among Malaysian banking institutions to adopt the IRB approach, many had indicated the need to further strengthen their business case and undertake more comprehensive gap and impact analysis. This is indeed a critical process. Of importance is to be able to extract the benefits out of the new accord. This would however, take time even for large and internationally active banking institutions that have made substantial enhancements over the years.
Meanwhile, on the global front, the collapse of the Bretton Woods system, with the United States declaring in 1971 that it would cease to redeem US dollars for gold 6  from its reserves, challenged the system of fixed exchange rates that the global economy was used to operate in. In addition, the 1973 oil crisis caused inflation to escalate in all countries, including Sri Lanka, often resulting in a destructive wageprice spiral. In Sri Lanka, inflation increased to 14.4 per cent by December 1973, the highest level of inflation the country experienced until then during its postindependent history. Elsewhere in the world, following the collapse of the Bretton Woods system of exchange rates, the international community was getting used to floating exchange rates, where each currency’s value was determined by the international demand for the currency. This was a new normal, prior to which money has historically been based on a valuable commodity such as gold. Post-liberalisation Monetary Policy Framework In November 1977, Sri Lanka embarked on a major economic liberalisation move, marking paradigm shift from inward looking restrictive policies towards a liberal regime under which trade and payments were liberalised to a great extent. To be consistent with the new liberal regime, the Central Bank abandoned the fixed exchange rate regime and moved to a more market based system of exchange rate management. On 15th November 1977, the prevailing dual exchange rates were unified at an initial rate of Rs. 16 against the US dollar.

Earlier this year, in February, the ESRB released a report on macroprudential policy for cyberresilience.12 The document encourages authorities across the EU to make progress on three elements: (i) cyber-resilience scenario testing; (ii) systemic impact tolerance objectives and (iii) financial crisis management tools to deal with system-wide cyber incidents. This area is still work in progress – it is still in its infancy, if I may put it that way – and for this reason the ESRB continues to work on an EU-wide strategy to help mitigate systemic cyber risk. The ESRB aims to act as a hub to share good practices and insights gained from members’ experience. Likewise, climate change is another overarching concern as it can contribute to the build-up of systemic risks. Climate risk is typically broken down into: (i) transition risk (the risk of an abrupt transition towards a greener economy) and (ii) physical risk (the risk of a rise in the frequency and intensity of natural catastrophes) – both affect financial institutions. Due to unique features, in particular its long-term horizon and uncertainty, climate risk may be inadequately priced by financial markets. Besides, it can be amplified by classic systemic risk externalities, such as system-wide common exposures and portfolio correlations, as well as spillovers across the financial system and the real economy. The ESRB, together with the ECB, published two reports, in 2020 and 2021, which have contributed to the assessment of the systemic impact of climate risk, including via stress tests and scenario analyses.
Mainstream thinking supports the use of this unconventional monetary easing on the grounds that weak growth post-crisis is mainly the result of a lack of aggregate demand and thus the solution is to boost demand generally by reducing the cost of borrowing and inducing investors to shift from low-yielding government bonds to riskier assets in search of yields. 12. While there was general agreement on the need and efficacy of action taken by central banks during the crisis period to stabilise the markets, the same cannot be said for using the extremely accommodative monetary easing by the advanced economies to support economic growth and job creation. Looking beyond mainstream thinking, there are some sound analyses by renowned economists, such as Bill White of the OECD and Dr Rajan, the former IMF Chief Economist and newly appointed Governor of the Reserve Bank of India, that suggest these unconventional monetary policies are now in “uncharted waters” and may create unintended consequences and risks to the global financial system. At this point, I will mention three key costs or risks of these unconventional monetary policies. (a) First, these policies punish the savers and pensioners: The suppression of interest rates at close to zero is helpful to debtors, but I should hasten to add that only those debtors who can refinance themselves at the lower rates can benefit.

And rapid growth of non-bank payment providers could have profound implications for the business models of banks, challenging their revenue streams, altering the economics of credit provision and changing the risks to financial stability. 5  The Faster Payments Scheme launched in May 2008 and allows payments to be made 24 hours a day, seven days a week. 6  Further information on the One Bank Research initiative can be found here: http://www.bankofengland.co.uk/ research/Pages/onebank/agenda.aspx  BIS central bankers’ speeches  3  New payments technologies also pose practical challenges, such as ensuring they interface effectively with legacy IT systems in banks and payments infrastructure. What does all of this mean for the future of RTGS? Because of the changing context I have described, the Bank of England has decided the scope of the blueprint should be broad. We need to understand these trends, whilst recognising that there is considerable room for debate about the impact of the current wave of technological innovation. We need to think about to whom we give access to the advantages of central bank money with its unique qualities of finality of settlement. Trying to predict the future is a risky business, but when we make decisions about investment in systems that will last for a decade or more, they need to enable the kinds of changes that users will demand. So we need to make sure that we have “optionality” built in so that we can cope with different states of the world.
Conclusion The Scottish government has stated that in the event of independence it would seek to retain sterling as part of a formal currency union. All aspects of any such arrangement would be a matter for the Scottish and UK Parliaments. If such deliberations ever were to happen, they would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place. Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance. The euro area is now beginning to rectify its institutional shortcomings, but further, very significant steps must be taken to expand the sharing of risks and pooling of fiscal resources. In short, a durable, successful currency union requires some ceding of national sovereignty. It is likely that similar institutional arrangements would be necessary to support a monetary union between an independent Scotland and the rest of the UK. I suspect you have reached your limits of endurance of the dismal science, so you’ll be relieved to know that economics can take us no further. Decisions that cede sovereignty and limit autonomy are rightly choices for elected governments and involve considerations beyond mere economics. For those considerations, others are better placed to comment. 8  BIS central bankers’ speeches  References Adrian, T., and D. Gros (2004), “The degree of openness and the cost of fixing exchange rate”, Economics Letters, Vol.

But being in a currency union can amplify fiscal stress for individual nations, limiting their ability to perform this valuable role just when it is most needed. So it makes sense to share fiscal risks across the whole currency area. A localised shock is less likely to stretch the fiscal position in a larger more diversified currency area, especially if it shifts demand between different parts of the area. That makes a given shock to Nova Scotia less severe than the equivalent to Portugal. The second justification for shared fiscal arrangements is that problems in one country are very likely to spill over to others. For example, the threat of default by one country may trigger a generalised crisis, particularly if the liabilities of the crisis country are held by the banking system of the broader currency area. It will be in the interests of other countries in the union to bail out a country in crisis, and that reduces the incentives for countries to run their finances prudently in the first place. At a minimum, this “moral hazard” problem suggests the need for tight fiscal rules, to enforce prudent behaviour for all in the union, although credible sanctions for breaking those rules are hard to develop.26 There is an obvious tension between using robust fiscal rules to solve this problem, and allowing national fiscal policy to act as a shock absorber. This reinforces the need for fiscal risk sharing between nations.