samchain/econo-pairs-v1 huggingface dataset:
In other words, the big issue is whether medium-term inflation expectations will remain anchored; or more graphically, whether the central bank will ‘lose control’. I think we can see that in the statements of central banks from a whole host of countries over the past year or so. The statements amounted to saying: “if it looks as though second-round effects are occurring, and creeping into rising medium-term inflation expectations, then I shall have to – and believe me, I shall – tighten policy.” If the central banker’s commitment to do so is believed – ie if it is credible – then it does not have to tighten policy for that reason. It is a state-contingent policy stance. And the central bank behaves time consistently. Unless we are passing each other in the night, a possible explanation for the difference between my practitioner’s view and the time-consistency problem in the model economy is that the latter assumes model-consistent expectations. In the model economy, the monetary authority’s ability to deliver, and its will to stick to, its inflation target over the medium run is never in any doubt. Whereas what it feels like, at least to me, is that that kind of credibility needs to be earned and re-earned, over and over again. That does not make us ‘inflation nutters’: the target is symmetric. But maintaining well-anchored medium-term inflation expectations is not guaranteed.

), 2001, ‘Reforming Britain’s Economic and Financial Policy: Towards Greater Stability’, HM Treasury, page 10: ‘Although there are many reasons for the UK’s poor inflation record in recent decades, one key factor was poor institutional arrangements. Monetary policy, if set correctly, should be a stabilising force for the economy. However, serious mistakes were made, which often meant that inflation was higher and more volatile than it would otherwise have been. This, in turn, created substantial economic instability that harmed the long-term performance of the UK economy. Many of these policy mistakes were made because the aims and procedures of monetary policy were not properly defined’. 14  For example, Lomax, R., 2004, ‘Stability and statistics’, speech to the North Wales Business Club dinner November 2004, Bank of England Quarterly Bulletin Winter 2004, vol 44, number 4. 4  BIS Review 46/2006  maintaining stable inflation. But that does not mean that we can always smooth out quarter-to-quarter, or even year-to-year, fluctuations in demand and output to the extent some commentary implies. In terms of the political economy of monetary policy making, it is important for the central banking community to get that across and accepted. If we fail in doing so, and the public believes that central banks can deliver more than is realistic, there will at some point down the road be disappointment, conceivably putting in jeopardy the real achievements of monetary policy in delivering price stability. Of course, these strictures apply most of all to ourselves.
Mergers – or, I should rather say, their absence in light of the recent past – are always prominent in press headlines. In this respect, let me reiterate that mergers may be a means for securing gains in efficiency and profitability, but they are very complex operations and the attendant business plans must be appropriately assessed. 10/15  We have seen a 30% reduction in the number of institutions there were in 2009. More recently we have seen how, in the absence of a context of acute crisis, many of the corporate operations announced do not reach fruition. Meantime, in some of the operations that are finalised, integration problems continue to be seen for years. Our task in a setting such as the present one is to ensure that any merger process should lead to the creation of a new, more solvent institution, with a sound business model, enabling structural costs to be cut and, in short, value to be generated. We must of course assess these same aspects with a view to potential cross-border mergers in Europe. The absence of such mergers may be seen as a sign that the Banking Union is not working as it should. True, several elements of the Banking Union are still not in place, including most notably the European Deposit Insurance Scheme (EDIS). It is likewise true that the regulations affecting the sector are still too heterogeneous across the different Member States.

As indicated, the lower use of IRB models by our banks means they will not be affected by this concept. However, other changes, such as the new operational risk and Credit Valuation Adjustment (CVA) frameworks, or the introduction of changes in the standardised approach, will indeed affect our banks, which should prepare themselves to absorb the new requirements. 8/15  MREL  Another challenge banks face stems from the introduction of the new eligible liabilities requirements, known as MREL. As you will be aware, the introduction of MREL is the consequence of the change in paradigm in crisis resolution. We have now moved from the bail-out to the bail-in. The aim is to ensure that banks have sufficient unsecured liabilities on their balance sheet, whether own funds or “bailinable” debt, if you will allow me to use this expression, so as to avoid the use of public funds in the event of failure. The Single Resolution Board (SRB) has set MREL objectives for each significant institution at the European level. It has also informed them of the maximum time available to cover these requirements, which must be met through organic growth of specific liabilities and new issues. It is essential that each institution should plan the issues to be made appropriately. It is worth recalling here that the characteristics of these liabilities make them rather unsuitable for distribution among retail customers.
Alongside all of this news, we have seen some big strains in parts of the global banking system emerge. Assessing this would be another speech, which I am not going to make this evening – you will be relieved to hear. Suffice to say that we believe the UK banking system is resilient, with robust capital and liquidity positions, and well placed to support the economy. We have a strong macroprudential policy regime in this country. With the Financial Policy Committee on the case of securing financial stability, the Monetary Policy Committee can focus on its own important job of returning inflation to target. We have to be very alert to any signs of persistent inflationary pressures. If they become evident, further monetary tightening would be required. With this in mind, the MPC’s response will be firmly anchored in the emerging evidence. Thank you. I am grateful to Ben Broadbent, Fabrizio Cadamagnani, Kieran Dent, Izzy Doughty, Marco Garofalo, Michael Goldby, Richard Harrison, Karen Jude, Tomas Key, Catherine L Mann, Huw Pill, Dave Ramsden, Andrea Rosen, Martin Seneca, Bradley Speigner, Danny Walker and Laura Wallis for helpful comments and assistance in helping me to prepare for these remarks, and to ChatGPT for its views on R*.

This present economic recovery is taking place in a sound economic environment. Inflation level remains under control even though the balance of risks to price stability has recently gone up: some pressures have resulted from recent oil price rises or may result from some capacity constraints that could be encountered in the course of next years. Needless to say that the Governing Council of the Eurosystem has been and will remain vigilant in order to secure our primary objective of price stability. Besides, the current account is slightly in surplus and fiscal deficits are, in the euro zone as a whole, on a downward trend. It is worth stressing that European economies have never been creating so many new jobs so fast. The past two years (1998 and 1999) have seen very rapid job growth (about +1.5% a year) and a very big decrease in unemployment. In France, the rise has been sharper since almost 900,000 new jobs were created by enterprises (excluding Government administration) from December 1996 to December 1999 i.e. +6.6% over three years. With the economic growth speeding up, we can expect a further drop in the unemployment rate which is presently below 10%. Due to this economic recovery, the growth differential between the US and the euro zone is progressively to disappear. This gap between the two economic zones in terms of economic growth has resulted in the past years from the lag between their economic cycles.
It demolished any argument that disparities in credit processes and banking regulations across countries reflected differences in cultural and social norms, and that therefore harmonising regulations was misguided and futile. Everybody now acknowledges that the core principles of sound banking practices and banking regulation are universal. There should be due diligence in credit decisions. A banker should not lend unless he is highly confident that the loan will be repaid. The factors that affect the probability of default will differ across countries. But regardless of the country in which the bank operates, lending based on relationships or names without proper due diligence is simply unsound banking. More needs to be done to improve regulatory cooperation and harmonisation, to achieve the vision of "One Financial World". There are two elements of improvement. The first is a clearer distribution of responsibilities among regulators for prudential oversight of international financial institutions. The Basle Concordat lays out the allocation of responsibilities between parent and host supervisory authorities for banking institutions. But with the advent of the internet, and more generally globalised banking, it has become harder to pinpoint exactly where financial transactions are being carried out, and which supervisor has responsibility over them. In this environment, supervisors need to cooperate more closely with each other to ensure effective consolidated supervision of the institutions under their charge. The second element of improvement is the harmonisation of practices and standards across jurisdictions.

We seek to clarify in advance what we might or might not regulate, in order to help entities to roll out their services. Our regulations are reactive; necessarily so because we have to respond to market and industry developments. However, we must respond to market changes promptly, and complement prompt reaction with a forward-looking perspective, seeding innovation and attracting players in electronic financial services (EFS). The MAS intends to set up a venture capital fund and a grant assistance scheme, to incentivise electronic financial services in Singapore. Our purpose is to position Singapore as a test-bed for innovative electronic financial services, and a centre for incubators of electronic financial services start-ups. The fund is not intended to replace the venture capital industry, but will instead act as a catalyst to develop Singapore into a leading EFS hub. The objectives of these two schemes are twofold: •  To raise efficiency of financial sector players through the employment of EFS technology. •  To attract players to base their regional or global capabilities in Singapore. We aim to build a strong industry base of major EFS players, develop in the requisite skills and expertise, build supporting e-frastructure, and "electronicise" existing brick-and-mortar financial services. Conclusion Barring mishaps, the global industry trend towards greater integration and openness will continue. This will confront both regulators and industry practitioners with complex challenges.
Indeed, young people were the first to regain their confidence in the European Union after the Global Financial Crisis. More recently, their greater trust in the EU can be tracked to their attitudes towards globalisation. Recent research shows Europeans are more positive about the Union if they grew up when their country was already a member and, in particular, if their feelings towards immigration and globalisation were also positive. In a globalised and polarised world, the European model embodies a certain vision of the future of relations between nations. It is one based on strong and supportive institutions that protect citizens’ economic and social well-being. Crucially, the European project was forged around its members’ consensus and a tradition of understanding; a cooperative vision that transcends the continent’s frontiers and fosters a multilateral approach to global challenges. This multilateral approach is now more important than ever since most of the structural challenges facing our economies are global and, therefore, require a global response. And Europeans can and should play a key role in promoting this multilateral approach. Trade, global barriers and the COVID crisis One crucial area where multilateralism should be promoted globally is trade. In the current context, global barriers can only be obstacles to the economic recovery that should follow the dramatic economic crisis caused by the pandemic. Take the production of the Pfizer and Moderna vaccines as examples.

An additional important step that it´s still missing is related to the need to conclude the process of financial integration that was key to resolving the sovereign debt crisis. This is, namely, the Banking Union, through the agreement on a fully mutualised European Deposit Insurance Scheme. It would contribute decisively to guaranteeing financial stability in the euro area and avoiding problems of financial fragmentation, both in the short and medium-term. In parallel, capital markets in Europe remain relatively under-developed and under-integrated. Hence the need to move resolutely 3/4  BIS central bankers' speeches  towards implementing all the measures that are necessary to create a true capital markets union. It was Jean Monnet who said that “Europe will be forged in crises, and will be the sum of the solutions adopted for those crises". Let´s do not waste the opportunity that this new crisis has offered to us. Forging requires sufficient temperature to mould, but not so much as to melt. There has been much work on how to avoid reaching melting temperature in the last few years. Now is the time to mould both the European project and the multilateral institutions. Our aim is that, when the temperature drops, we find ourselves with a new, stronger global economic architecture. I´m convinced that, among the students graduating today at Barcelona GSE, there is a good number of molders who will contribute crucially to this endeavor in the following decades. Thanks you in advance for this contribution, congratulations to all and good luck.
I say this as a central banker not only because one of the ECB’s statutory tasks is to ensure the smooth operation of payment systems. I say it because, ultimately, trust in payments means trust in money as a reliable medium of exchange. For a sound currency, consumers must have 100% confidence that their money can be exchanged safely. 2. The markets challenge Non-banks are not only increasingly entering the retail payments market in the euro area, however; they are also entering the lending business. This brings me to the second challenge for euro area banks: the markets challenge. For some years now, we have been witnessing a trend towards more capital market-based financing in the euro area, driven by both deleveraging among banks and the very low cost of market finance. Looking forward, the Capital Markets Union (CMU) project promises to  1  Deloitte (2015), “Payments disrupted: the emerging challenge for European retail banks”. 2  Ibid. 2  BIS central bankers’ speeches  further deepen market finance in Europe by, among other things, making it easier for young firms to access risk capital and smaller firms to issue bonds, as well as deepening markets for high quality securitisation. So what will this mean for European banks? In the long run, deeper capital markets may lead to more competition in the provision of financial services and hence weaken banks’ market power.

4  ECB (2015), Financial Stability Review, May 2015. BIS central bankers’ speeches  3  3. The regulatory challenge As I said, however, CMU is for the longer-term. For the medium-term, SME financing in the euro area will still mainly come from banks. So we need to make sure that there are no unnecessary obstacles to that process. And this brings me to the third challenge facing banks – the regulatory challenge. The regulatory agenda since the crisis has no doubt been essential. Banks had too little capital, too much short-term funding, too high leverage, and created too great a cost for society when they failed. The reforms that have been introduced so far have increased resilience and, in extremis, made banks less costly to resolve. And there is no reason why this should, in principle, diminish the ability of banks to serve the real economy – research suggests, for example, that higher bank capital has no negative impact on lending. 5 But as new regulation accumulates, we know that it can also come with costs as well. In the economics jargon, policymakers always have to be watchful that, in attempting to internalise externalities, they do not inadvertently create new externalities. The possible risks can be summarised under the headings of complexity, clarity and consistency. As regulations have built up since 2009, they have tended to introduce more complexity, and with that comes an inevitable cost in terms of compliance.
In the Festschrift for former Norges Bank governor Hermod Skånland, Professor Preben Munthe writes the following: “There is a tradition that expects central bank governors to be parsimonious with words. This built up the aura that should surround a man in that position. He possessed knowledge about the secret black box – monetary policy with a capital M – and how it functioned. Without asking others, he changed the discount rate and thereby intervened in the economy with authority and deep insight. On seldom occasions did he step down from his cloud of wisdom to impart life’s economic truths to a gaping public.” 4 A change in views and practices relating to transparency first occurred in recent years, both in Norway and other countries. 5 It can safely be said that the change has been swift and radical. Today, most central banks are open about (i) the objective of monetary policy, (ii) its strategy for reaching the objective and (iii) the background for and the process behind interest rate decisions. Norges Bank is no exception in this respect. In some areas, Norges Bank has gone further than others. For example, Norges Bank is one of the few central banks in the world that publishes forecasts of its own interest rate decisions. 6 What then can explain this tendency towards greater transparency? I would highlight two main reasons. First, there has been a general trend in society towards greater transparency. Second, economic thinking has changed considerably.

In the case of investments in individual companies, extensive  BIS central bankers’ speeches  1  transparency can come into conflict with confidentiality requirements. In order to ensure confidential communication with the governing bodies of the companies in which we have a stake, both parties must be certain that the dialogue is indeed confidential. In 2012, we expanded our collaboration with Norwegian academia. NBIM participated by giving lectures on investment management at several universities and other academic institutions. Our programme, the Norwegian Finance Initiative, has helped support research in financial economics at different levels. This initiative contributes to enhancing the quality of research in financial economics among Norwegian academic institutions and to stimulating public debate on the management of the GPFG. This framework for cooperation is also used within Norges Bank, both in investment management and the development of strategy. Thank you for your attention. I now give the floor to the Chief Executive Officer of NBIM, Yngve Slyngstad. 2  BIS central bankers’ speeches  BIS central bankers’ speeches  3  4  BIS central bankers’ speeches
But it also reduces the costs of pursuing such strategies. In other words, liquidity unlocks the impatience gene. Investors whose judgement is wrong, but whose timing is right, can lock in immediate gains. Liquidity, too, can pollute the gene pool by allowing the impatient to prosper. Like information, liquidity can be too much of a good thing. 24 So we have pitchfork equilibrium: along one prong virtue, along the other vice. As in other social systems, these two financial equilibria have neurological roots and sociological branches. They yield, however, very different economic fruit. This dual-self world is structurally schizophrenic: financial innovation is both good and bad; information is both solution and problem; liquidity is both cure and curse; investors are both abstemious and addicts. 22  Chen (1995). 23  Bernholz (1997). 24  For example, Laibson (1997). BIS Review 114/2010  7  So which evolutionary gene is dominating finance in practice? Is bad money driving out good or the reverse? Is history repeating itself as the Yuan or the Ming dynasties? Patience in finance There is ample evidence, theoretical and empirical, of self-improving financial cycles. From the Medici banks in Italy in the 13th century to the joint stock banks of he 19th century to the explosion of capital market finance in the latter part of the 20th century. Today, China provides no better example of that self-improving cycle in motion. But can financial systems overshoot onto the impatient path, where too much liquidity and information unlock the impatience gene and its ugly progeny.

December 1995=100  Oslo Stock Exchange Benchmark  300 275 250 225 200 175 150 125 100 75 50 25  S&P 500  03  n  n  n  n  n  n  n  Ja  Ja  Ja  Ja  Ja  Ja  Ja  02  01  00  n Ja  99  97  98  Oslo Stock Exchange IT  96  300 275 250 225 200 175 150 125 100 75 50 25  Source: EcoWin SG Gausdal 31.01.03  Many other countries also experienced a period of strong expansion in the 1990s. Economic growth in the US was particularly high. New technology generated optimism and laid the basis for strong investment growth. At the same time, wage growth and inflation remained low. Equity prices, however, rose sharply just before the turn of the millennium, particularly in the US, but also in many other countries. 1  The output gap, which is a reflection of capacity utilisation in the economy, is measured by different methods: the trend GDP method (the HP method) and the potential GDP method (the production function method). When using the HP method, adjustments are made for the increase in vacation days in 2001 and 2002. This is also taken into account when applying the production function method. The output gap is zero if aggregate output is equivalent to the level of activity that can be achieved over time without generating a rise in price and cost inflation.