samchain/econo-pairs-v1 huggingface dataset:
This is what a responsible government ought to do:  2  BIS central bankers’ speeches  •  to state that the adjustment is for the country’s own good, and not just to please international lenders;  •  to tell the hard truth;  •  to explain what needs to be done;  •  to be clear what the consequences of non-action or of alternative policy choices would be. All this is conducive to public acceptance of the programme and, therefore, its success. And this is also in the enlightened self-interest of the government, as the electoral reward of the Latvian Prime Minister demonstrates. Beyond economic considerations, the adjustment programme has to be put into a broader context. Political factors can also be key justifications for undertaking difficult economic measures. In the case of the Baltics, the ultimate objective of adopting the euro also has a geostrategic dimension, namely completing their firm anchoring in a Union based on freedom, democracy and human rights. In fact, sharing a currency is more than just drawing economic benefits; it means being part of a community with a shared destiny. This project of political integration justifies making short-term sacrifices to join – or stay within – the euro area. To sum up, a speedy fiscal adjustment, a critical mass of structural reforms and a strong national ownership: these were, in my view, the key ingredients of the Baltic recipe for a quick economic rebound.

However, the meagre progress in structural reforms and the unorthodox direction taken by some countries’ economic policies may curtail future growth possibilities. In the short run the world economy can be expected to continue posting high growth, unless the US slowdown becomes more acute and the rest of the world is unable to continue growing under its own steam. Further ahead, the continuity of the high rate of expansion of the world economy is more uncertain. The increased efficiency and productivity gains brought about by globalisation, through greater trade integration and a far-reaching reallocation of resources and factors, might begin to weaken. In this setting, the emergence of protectionist tendencies – such as those manifest in the difficulties of moving the Doha round forward – is an added risk to continuing high growth. Inflation has remained contained worldwide. The growing integration of the emerging economies into the global economy, providing abundant low-cost labour, coupled with heightened competition on world markets and technological innovation have allowed price increases to moderate significantly. The anchoring of inflation expectations, to which the credibility acquired by central banks in their efforts to preserve price stability has contributed, and the headway in the programmes for structural reform and increased flexibility in economies have likewise eased inflationary pressures. All these developments have helped contain the upward pressures stemming from the impulse of domestic demand and have made the task of monetary policies easier.
Stefan Ingves: Flexible inflation targeting in theory and practice Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Swedish Economics, at the Swedish Economics Association, Stockholm, 12 May. *  *  *  Mikael Apel, Carl Andreas Claussen and Niklas Frykström have contributed to this speech. It is enjoyable, inspiring and a privilege to come here and speak at the Swedish Economics Association. It is one of the few occasions when I can take a break from current practical monetary policy and discuss issues of a more academic nature. I intend to take up some issues that I have been considering “on the side” for some time now. If I were to try to coin a title that summaries what I am going to talk about, it would probably be “the link between theory and practice in monetary policy”, and more specifically where I believe the boundaries are as to how close the links can be. I would like to point out that these are my personal reflections and not official Riksbank views. Monetary policy’s tasks in general terms… According to the Sveriges Riksbank Act, the objective of monetary policy is to maintain price stability. The Riksbank has specified this as a target for inflation – where the annual change in the consumer price index (CPI) is to be 2 per cent.

The mean squared gap analysis makes it easier for the central bank to explain why it chooses a particular monetary policy – what it means more specifically by a “well-balanced” policy. It can also provide support when assessing monetary policy. But however good the tool is, the step from theory to practice is not without complications. I intend to discuss some circumstances that in various ways complicate things when taking this step. Arguments in loss function less clear in practice than in theory One such circumstance is that although the variables included in the loss function – inflation and resource utilisation – are in theory unambiguous and well-specified, in practice it is far from evident how they should be measured. Resource utilisation can be regarded as a summary of developments in the real economy and shows to what extent labour and real capital are being used at a particular time. It normally states use in relation to the level sustainable in the long run, which is often regarded as a “normal” level. One complication is that it is not possible to directly observe how high the level of resource utilisation in the economy is, and nor is there any generally-accepted view of this should be calculated. Different measures can give fairly different results and it is therefore difficult to determine to any great degree of precision the level of resource utilisation at any given time.
How the international downturn has influenced the Norwegian economy Turning to the Norwegian economy, our export industry is being severely affected by the sharp global downturn, and this is having repercussions on other Norwegian business sectors. Mainland GDP is expected to fall by 1 per cent this year. BIS Review 42/2009  1  As in other countries, a wide range of instruments is being used to counteract the effects of the financial crisis. In order to curb the fall in activity, government expenditure will be increased by over 10 per cent this year. Norges Bank’s bank lending survey shows that banks have been tightening credit standards substantially, particularly for corporate loans. To boost the credit market, a separate government fund 1 will buy private bonds. The government has also provided loans and guarantees for exports and expanded lending limits for the Norwegian State Housing Bank and other special vehicles for government financing. 2 At present, our banks are financially sound, but they need to strengthen their core capital in order to be able to supply credit as normal. The authorities are offering risk capital to banks, including core Tier 1 capital without voting rights, through a newly established State Finance Fund. To facilitate the funding of banks operating in Norway, a swap arrangement was established allowing banks to exchange covered bonds for up to NOK 350 billion in government securities. A number of banks have made use of this facility, so far in an amount totalling NOK 90 billion.

The Fund must enhance its surveillance activities and its advice must be acted upon to a greater extent. However, this probably requires changes in the IMF’s governance structure. Countries that are now gaining in economic strength are seeking greater influence, and the IMF must also improve its reputation in these countries. We have to ensure that the Fund has sufficient resources to grant loans to member countries that are particularly hard hit by the financial crisis. The financial resources of the IMF are being discussed at the G20 summit in London. The IMF aims to double its lending capacity and has called on member countries to provide the necessary funding. Several countries have responded positively, among them Norway. The Government has offered to make available a contribution of up to NOK 30 billion to the IMF, subject to approval by the Storting. The US has asked for the NAB 3 to be increased substantially. Even a special one-time allocation of SDRs 4 to strengthen global liquidity may be considered. The Government Pension Fund – Global Let me now turn to the Government Pension Fund – Global. International capital markets have been a boon to Norway. We drew on borrowing opportunities abroad when the petroleum industry was being built up. We did the same in order to expand welfare schemes and to finance the countercyclical policy of the mid-1970s and the early 1990s. National oil and gas resources are now converted into equities and bonds abroad in the Government Pension Fund – Global.
Available at: https://www.bankofengland.co.uk/paper/2017/a-blueprint-for-a-new-rtgs-service-for-the-uk 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  Resilience Resilience in its many forms is vital to meeting the Mission of the Bank of England – to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. Resilience permeates the work of the Bank’s policy committees and how they go about meeting the remits they have been given. It’s the resilience of the financial system, and major banks and insurers who operate in the UK, where post-trade is most relevant. Most recently, a major focus of the Bank’s Financial Policy Committee has been resilience to the risks associated with a disorderly no deal Brexit8. This has also been a consistent focus of the recent work of AFME under Simon’s leadership. We have a responsibility to ensure the consistent supply of the vital services that the real economy demands from the financial system – things like paying for goods, services and assets; intermediating between savers and borrowers, and channelling savings into investment; and insuring against and dispersing risk. We have evaluated what effect of a worst case disorderly scenario would be on the core of the banking system, and concluded that it would be resilient to such an event9.

This means that no shock that the economy will face in the future is incorporated into both the forecast and the decision. In other words, there is no way of avoiding the last-mentioned uncertainty connected with future shocks and neither the central bank nor the markets have any superior information about them. The uncertainty surrounding the first two mentioned points – the current state of the economy and future monetary policy – will be the heart of my remarks tonight. Being forecasters we all face uncertainty surrounding the knowledge about the current state of the economy. This current state should be thought of as a shortcut to all the inflationary determinants brought from the past, but due to the transmission lags having an impact on future developments. Every forecaster, and of course also the central bank, has his own opinion about the economy’s current state. One question arises immediately: Should the central bank look at market forecasts and use them as a source of information about the economy’s current state and for its decision-making? My answer is: Market forecasts should not be neglected. On the other hand they cannot be the core for decision-making and the central bank must rely primarily on its own structural modelling. This implies that despite all the transparency and communication, the central bank will – from time to time – have to surprise other forecasters and the market. BIS Review 10/2005  1  Let me now briefly explain why this is the case.
5 The reason for this is partly that the hedge funds have not to any great extent been exposed to the subprime sector and partly that they were flexible and could rapidly close positions where they lost money. In addition, the hedge funds generally seem to have had a stabilising role in the financial markets. In some cases hedge funds have had considerable liquidity, seen the large fall in prices as an opportunity, and taken advantage of this to go in as a buyer. In this way they have contributed to, rather than consumed liquidity. It does not appear as though the hedge funds have played a specifically negative role during the turmoil we have seen to date. Nor have the hedge funds triggered it. 4  For instance, see Khandani and Lo (November 2007) “What happened to the Quants in August 2007?”, http://ssrn.com/abstract=1015987. 5  The two indices of hedge funds’ return, the HFRX Global Index and the HFRI Composite, showed an upswing of 4.2 per cent and 10.4 per cent respectively in 2007. For example, this can be compared with the S&P 500 index which rose by 3.5 per cent. BIS Review 11/2008  3  Some reflections on events There are always experiences to reflect upon when unrest arises in the financial markets. It is already possible in this crisis to point at certain weaknesses that have come into focus. Firstly, we have had a clear reminder as to how events can turn suddenly and unpredictably.

There is need of better transparency rather than further regulation The debate about regulation of hedge funds’ activities has gained fresh impetus in the wake of the crisis – somewhat surprisingly, since the blame can hardly be placed on the hedge funds. My view in this matter is that there is no reason to introduce specific regulations for hedge funds, apart from greater insight where it is lacking. Such measures threaten the positive contribution hedge funds make, not least under the conditions which we have now experienced. For those of us who reflect on stability in the financial system, it is however extremely important that the major banks’ and the hedge funds’ other counterparties can manage their risk. If they manage their counterparty exposures in a correct manner, that is they take sufficient collateral and can manage any liquidity problems, there is no reason to specifically regulate the hedge funds. However, periods of market turmoil tend to entail certain unpleasantness. I consider that the ensuing debate should focus on market discipline in a broad sense. Transparency is a key word in this context. By means of clear and open information about strategies and risk taking conditions are created for good market discipline. Good insight is also of the utmost importance to those of us who oversee financial stability. This gives us a chance to decide where the risks are. Now that I speak of the need for market discipline, I would like to mention the global association, the Financial Stability Forum (FSF).
As regards the collection of data, the ESCB’s Statistics Committee (STC) and Banking Supervision Committee (BSC) will, in cooperation with the Committee of European Banking Supervisors, look at means of better aligning supervisory and statistical concepts, definitions and reporting formats, with the aim of reducing the reporting burden for financial institutions in the case of overlapping data requirements. The STC will also investigate the feasibility of reusing and sharing available micro-data for Eurosystem statistical purposes – particularly data contained in central credit registers, central balance sheet offices and business registers – while maintaining strict confidentiality standards. Furthermore, it is considered best practice for a central bank to integrate the overlapping parts of the various statistics it produces and to concentrate the production of all of its statistics within a single statistical organisational unit. As far as data processing is concerned, the feasibility of a move towards the consolidated or pooled collection and production of some types of Eurosystem statistics will be explored. In addition, NCBs are invited to exploit comparative advantages in their cooperation with other national statistical authorities, 11 for instance by setting up joint business registers. In this context, it is generally agreed that an enhanced exchange of confidential information between NCBs, the ECB, NSIs and Eurostat, strictly for statistical purposes, is indispensable in order to keep the response burden to a minimum and ensure the quality of both European and national statistics.

For instance, the harmonised national average interest rates on the deposits and loans of households and  BIS Review 50/2008  1  corporations that are published every month by the ECB and the NCBs provide citizens and firms with very useful preliminary insights. 1 Concerning the key developments in ECB statistics over the last two years, I would like to highlight the following 2 : 1. Since June of last year the ECB and Eurostat have jointly compiled and published quarterly euro area accounts. 3 These accounts can be considered the “national accounts” for the euro area and provide a complete and consistent overview of its economic, financial and monetary developments. A fairly unique feature of the euro area accounts is their almost entirely consistent representation of “real” and financial developments, which greatly facilitates integrated analyses and permits further enhanced cross-checking of the economic and monetary analyses that feed into the overall assessment of the ECB’s monetary policy stance. 2. The euro area accounts record not only the economic and financial transactions, but also the financial balance sheets of all institutional sectors (i.e. households, nonfinancial corporations, financial corporations and general government). They integrate and complement more timely and frequent statistics, for instance by providing a sectoral breakdown of the broad monetary aggregate M3 and by providing hitherto unavailable quarterly data on household and corporate income, expenditure, savings and wealth. 3.
Thus, despite our vulnerability to setbacks, these factors prepared the ground for Asia to be positioned for a rebound to a more sustainable growth. Allow me to take this opportunity to also say something about China, the host country for our meetings. Let me first of all thank the PBC and in particular, Governor Zhou for the very warm hospitality that has been extended to us. China has always recognised its important role in the region. With its ascension to the WTO in 2001, the increase in intra-regional trade has been an important catalyst in driving growth in the Asian region. For many of us, China has become our largest trading partner. This trend is reinforced by the two-way foreign direct investment flows in the region. The use of the Renminbi to settle these trade and investment flows is a further factor that facilitates and strengthens these trade and investment flows. In the area of Central Bank cooperation, the PBC has actively participated in all our regional groupings including that for the ASEAN economies. For Malaysia, this cooperation has manifested itself in many ways. The one event that I will always vividly remember is the one on 21st July 2005 at 7 o’clock in the evening when both China and Malaysia transitioned to a flexible exchange rate regime. For Malaysia, we had seven years earlier fixed our exchange rate during the height of the Asian financial crisis.

The knowledge gained from this certainly benefitted the series of organisational transformation we undertook at Bank Negara Malaysia to enhance our organisational effectiveness. As this BIS meeting is taking place in Asia, allow me to take the opportunity to say something about our region. While Asia has not been immune to the turbulence and the upheavals taking place in the different parts of the world, the region has been able to rise to the challenge and each time has demonstrated the ability to experience a swift rebound. Factors that have contributed to this resilience is not so much what we have done in response to the developments but it is what we have done previously that prepared us to weather these developments. These factors in varying degrees have included undertaking rebalancing and structural adjustments of our economies, economic and financial reforms, the development of our financial systems, pursuing greater fiscal discipline, building a more extensive policy tool kits, building buffers during the good times and advancing regional integration and cooperation. BIS central bankers’ speeches  1  For most of the region, following these efforts, our more diversified economies have become less vulnerable to economic shocks, our more diversified and developed financial systems have been better able to absorb and intermediate the financial turmoil and turbulence, while the financial reforms have also increased our flexibility and produced better price and exchange rate adjustments. Those with sound macroeconomic fundamentals including more sustainable fiscal positions also had the policy space to manage the implications of these challenging developments.
Chart 12:Risky assets have under-performed  Chart 13: Easier monetary policy supports prices of risky as well as risk-free assets  Note: * Equity yields have been adjusted for leverage. Source: Thomson Reuters Datastream  Source: Thomson Reuters Datastream  Concluding remarks  This talk has been all about rational responses to higher uncertainty: how it raises the bar for decisions that are costly to reverse and – particularly when skewed towards downside risks – how it widens the gap between yields on risky and risk-free securities, contributing to the decline in the neutral real rate of interest and worsening the accounting deficits of pension funds. 10  As Charlie explained, QE probably has acted to raise the absolute deficit of schemes that were under-funded to begin with. But the more important problem has been the under-performance of risky assets (see also footnote 9). 11  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  11  But human instinct in this area isn’t always so rational. We’re prone to over-interpret noisy events, seeing 11  structure and determination when, very often, there isn’t any . If this is a general weakness, it’s no less evident in the wake of the referendum. Every bit of economic data is scrutinised for the impact of the vote to leave the EU. If it’s more positive than expected immediately beforehand, this is said to confirm the wisdom of the decision; a negative surprise and we’re meant to conclude it was a bad idea.

But early on, it’s as important to look at investment surveys as it is the official estimates. These too bear out the broad shape of the MPC’s August forecast (Chart 14). And as I’ve explained today, that shape has nothing to do with the longer-term consequences of EU exit, depending much more on the uncertainty about those consequences. All that said, there’s little doubt that the economy has performed better than surveys suggested immediately after the referendum and, although we aimed off those significantly, somewhat more strongly than our nearterm forecasts as well. The central projection in the August Inflation Report didn’t involve a recession, simply a slowing in the economy’s rate of growth. But that slowing looks so far to have been more moderate than we feared. Why might that be? Well, again, one shouldn’t rush to judgement here. Even within the quarter, the average forecast error on near-term GDP growth is around ¼% point. And even after the event, it may not be clear why a particular out-turn has differed from the central prediction, in one direction or the other. 11  I gave a talk about this in 2013, highlighting the pioneering work of Daniel Kahnemann (Broadbent (2013)).