samchain/econo-pairs-v1 huggingface dataset:
The spending rule is especially important in the case of those government entities that have already achieved budget balance. 6/8  Under the rule, neither the budgeted nor the actual spending of the government entity can exceed the Spanish economy’s nominal potential growth rate. Since government revenues have an elasticity with respect to nominal GDP of approximately one, the spending rule involves linking its growth to that government revenues. Spending growth may only exceed this reference rate if there is an increase in revenues that is recurrent in nature; likewise, legal changes involving permanent losses of revenue should automatically lead to a downward revision in the spending threshold. One of the advantages of this rule is that increases in government revenues above their normal trend must be saved, such as during the upswing prior to the last crisis, when very significant extraordinary revenue increases associated with the real estate boom were recorded. Also, by linking spending to the economy’s potential rather than its actual growth, and by excluding from its definition nondiscretionary spending on unemployment benefits, public spending should grow more slowly than GDP and revenues during economic upswings (when actual GDP and, therefore, revenues are growing at above their potential rate), while in recessions the opposite should occur. Thus, the spending rule requires general government to accumulate budgetary savings during economic upswings that may be used during downswings, allowing the behaviour of public finances to be disciplined and automatic stabilisers to function at the same time.

Here I am using the term in a broader sense, to describe the view that monetary policy is the only tool necessary to stabilise the economy. Friedman advocated the control of money as superior to fiscal measures for stabilising the economy. In Friedman (1948) he argued that financing variations in the government deficit or surplus with monetary expansions or contractions would be stabilising. Later, in Friedman (1960), he advocated a constant growth rate of the money stock as a means to stabilise the economy effectively. Following the experiences of the 1980s, there is today great scepticism that the velocity of money circulation exhibits the kind of stability necessary to make the quantity equation operative as a means of inflation control, although money may still have useful information content as an indicator. As Gerry Bouey said, “We didn’t abandon the monetary aggregates, they abandoned us.” See Friedman, M. 1948. A monetary and fiscal framework for economic stability. American Economic Review 38, 256–64; and Friedman, M. 1960. A Program for Monetary Stability. New York: Fordham University Press. ii Growth in India and China in particular has contributed to a marked fall in the global Gini coefficient, from 0.74 in 1975 to 0.63 in 2010. Niño-Zarazúa, M., Roope, L. and Tarp, F. (2016), “Global Inequality: Relatively Lower, Absolutely Higher,” Review of Income and Wealth, July. iii Reinhart, C. and Rogoff, K. (2009), This Time is Different, Princeton University Press.
This would create a strong incentive for individuals to monitor the actions of their colleagues, and to call attention to any issues. This could be expected to help to keep small problems from growing into larger ones. Importantly, individuals would not be able to “opt out” of the firm as a way of escaping the problem. If a person knew that something is amiss and decided to leave the firm, their deferred debt compensation would still be at risk. This would reinforce the incentive for the individual to stay at the firm and to try to get the problem fixed. This might work for senior managers, but what about those material risk-takers who are early in their careers at a firm and do not have much wealth tied up through deferred compensation to serve as an effective performance bond? How do we provide strong incentives for these traders not to put the firm at risk by their potential illegal behavior? In these cases, we can create the performance bond in a slightly different manner. Individuals who enter finance have generally invested heavily to develop the specialized skills required in the field. These skills typically have a higher return in finance than they do in any other occupation. That is, workers in finance earn a premium relative to their next best alternative job outside of the industry. Over the course of a career, this premium can be expected to add up to a significant sum of money. This cumulative premium can act like a performance bond.

At the same time, it introduced an unweighted capital adequacy requirement – a leverage ratio, to serve as a nonrisk-based backstop to the risk-based capital requirement for banks. The FSB measures are aimed at improving the resolvability of systemically important banks. In particular, requirements have been defined for resolution planning and for the accumulation of gone-concern loss-absorbing capacity. These measures are intended to ensure that systemically important banks can exit the market in an ‘orderly’ fashion in the event of a crisis. 17 18  For example, cf. FINMA (2009), p. 19. Cf. FINMA (2009), p.30 et seq. 19  Cf. Branson (2011), p.5: ‘For several decades we believed that the greater sophistication of risk management techniques allowed us to tolerate thinner capital cushions. We were wrong.’  Page 8/14  b) Swiss TBTF regulations rest on two complementary pillars …  In Switzerland, parliament had already passed a package of legislation back in 2011 that recognises the special importance of the ‘too big to fail’ issue and is in line with the international approach. It is based on two complementary pillars with special requirements for systemically important banks. The first pillar defines measures to strengthen the resilience of these banks and thereby reduce the likelihood of a systemically important bank getting into financial distress. In particular, the revised regulations impose stricter capital and liquidity requirements on banks. They have to meet both risk-weighted capital requirements and a leverage ratio requirement. Equity capital allows banks to absorb losses, thus protecting them from insolvency.
While I firmly believe it is up to history to judge as to whether I have been successful or not in discharging my responsibilities as Governor, I also believe that even at this late stage, it may be useful for those critics to reflect on the profile  BIS central bankers’ speeches  13  that John Exter had in mind for the position of Governor when drafting the MLA, and then perhaps consider, whether or not, I fitted the envisaged profile! In that background, I am inclined to believe that the education, training, and professional skills imparted by the Institute of Chartered Accountants of Sri Lanka, had a major role in my being appointed to this pivotal position as the Governor of the Central Bank of Sri Lanka. Therefore, please permit me to officially and publicly thank the Institute of Chartered Accountants of Sri Lanka for the tremendous impact that the Institute has had on my academic and professional career, in addition to the singular honour you bestowed on me this evening, by inviting me to deliver this prestigious Oration. Conclusion – running between the wickets! Mr. Chairman, let me now conclude, with a little story. About 6 months ago, a journalist friend asked me to explain the official relationship between the Governor and the Secretary, Treasury. In response, I gave him a long lecture for about half an hour, like what I have done today! While listening to me, I could see that he was quite restless, and somewhat bored.

The problem is that that commitment means that the central bank is voluntarily breaching its future inflation objective, which may possibly not be credible in advance. 7  Andreeva and García-Posada (2019) estimate the impact of the TLTROs on bank lending policies in the euro area. For an analysis of the macroeconomic effectiveness of forward guidance on interest rates and on future developments in the central bank’s asset portfolio, see Arce et al. (2019). 9 See Eggertsson and Woodford (2003). 8  13  This is what we economists call “dynamic inconsistency”: a central bank could announce today that it will tolerate higher inflation in future in order to stimulate the economy, but once the economy and inflation recover, there would be an incentive for it to breach its initial announcement if it conflicted with its price stability objective. If agents doubt the central bank’s credibility, this type of forward guidance will not be effective in the first place. One way to avoid this problem is by modifying the monetary policy “strategy”, seeking to grant greater credibility and transparency to the central bank’s actions; in other words, to change the way in which the central bank’s objective is articulated and the way that the central bank pursues that objective with the tools available. To date, in their strategic frameworks most central banks have followed variations of inflation targeting, which entails targeting an inflation rate that is close to a specific number (for example, 2%) over a medium-term horizon.
Moreover, the financial sector in Sweden has some distinguishing characteristics which make stability and clear game rules particularly important. From an international perspective, the Swedish banks’ collected balance sheet totals are large in relation to our GDP, market funding comprises a larger share than in most other countries, and funding from abroad is relatively extensive and largely short-term. Our own Swedish regulatory framework also needs to be renewed. For one thing, we need to look into the division of responsibility and the powers of authority of the different government agencies. For instance, the Riksbank is responsible for the stability of the financial system in Sweden, but has no really effective tools to carry out this task. Finansinspektionen (the Swedish Financial Supervisory Authority), on the other hand, has tools that could be used to influence the banks’ behaviour. But it does not have the task of counteracting macroeconomic developments than entail risks for financial stability. Another important issue that needs to be addressed in a new regulatory framework is how the state should manage banks in distress. 3  See, for instance, Ben S. Bernanke, “Fiscal Sustainability and Fiscal Rules”, speech given at the Annual Meeting of the Rhode Island Public Expenditure Council, Providence, Rhode Island, 4 October 2010. BIS Review 149/2010  5  In February we presented a report to the Riksdag proposing that the regulatory framework in Sweden should be reviewed. We mentioned these two areas as examples of important objects for analysis.

One could also say that long-term credibility and sustainability are necessary conditions for monetary policy and fiscal policy to be able to provide short-term stimulation. A rather worn but appropriate expression used with regard to fiscal policy is to “save for a rainy day” during good times. We appear to have succeeded in doing so this time. So the second of the three global challenges I listed does not actually apply to Sweden. Better regulatory framework also important for us One cannot rule out the possibility that our previous crisis contributed to some extent to our bank system managing better this time than banks in many other countries. But the Swedish banks’ memories still do not appear to have been terribly long. A couple of them were carried away by the over-optimism in the Baltic countries, and most of them would have faced much larger problems if the Swedish authorities had not intervened so resolutely. On the positive side, they largely avoided securities containing high-risk US mortgages. New share issues and good earnings capacity mean that the Swedish banks now appear well-capitalised from an international perspective. The first challenge – the design of a better regulatory framework and more effective supervision – is of course something to which Sweden is contributing in various ways. Our own financial markets and banks coped relatively well on this occasion, but it is nevertheless clear that we are also hit hard when there is international turmoil.
On the one hand, the current legal and organisational structures of the two global big banks do not yet ensure an orderly wind-down in the event of a crisis, although the measures they have already announced are all steps in the right direction. On the other hand, international provisions need to be drawn up to ensure that sufficient resources are available for a wind-down of systemically important banks in the event of a crisis10 and that rules on participation by creditors, referred to as “bail-in”, have  10  This topic is currently being discussed under the heading of “gone-concern loss absorption capacity”, GLAC. BIS central bankers’ speeches  5  been established. Switzerland has every interest in ensuring that the relevant work in the international bodies advances further. A second basic factor needed to ensure a successful international Swiss banking centre is stable political and economic conditions. As I have already mentioned, the wide-reaching stability in Switzerland, not least as regards consumer prices and the currency, was a key historical prerequisite for the international reach of the banking centre. The latest financial crisis has clearly shown that the stability associated with Switzerland continues to represent an important argument in favour of placing money with our banks. Preserving Switzerland’s good reputation as a stable country based on liberal values and legal certainty has a positive impact on the reputation of the Swiss banks. This stability bonus is not simply accorded for its own sake – it is something which has to be continuously earned.

10  Capgemini Survey entitled Online Availability of Public Services: How Is Europe Progressing? Web Based Survey on Electronic Public Services. Report of the 6th Measurement, June 2006. 11  www.iN2015.sg  BIS Review 97/2006  3  countries. Many people who left Poland will achieve success, and set up prosperous companies. Some of these companies may become global challengers. Simultaneously, Poland has gained a million ambassadors abroad. For the time being, we are only lamenting. Have we yet done anything to use this huge Polish intellectual potential located in other countries in order to pursue joint efforts aimed at improving the standard of living for Poles, both at home and abroad. Have we got a vision that would for example indicate mechanisms for creating a diaspora with millions of Poles in the EU or across the globe, a diaspora that could effectively care for Poles’ and Poland’s interest? Actual examples of these include the Chinese and Mexican diaspora in the US, the Jewish diaspora across countries, the Portuguese diaspora in France or Global Scott Network, and many other. In the global economy, greater progress is made thanks to increasing use of information and communication technologies (ICT), also in public services. Firstly, it allows to leave unilateral communication channels for interactive two-way communication, which in turn enables citizens and entrepreneurs to be more active, and allows to offer public services better tailored to the needs of individuals and businesses.
Revival of investments, at least partially, in 2016 that were delayed in 2015 due to domestic uncertainties and the effect of the strong post-crisis employment performance coupled with the recent wage developments on the income channel are likely to support domestic demand. Moreover, the projected fall in the current account deficit and the strong public finances also provide room for policy responses against possible shocks. The rebound in the EU economy continues to support our exports, while the uncertainties related to the Middle East and Russia constitute downside risks (Chart 17). Moreover, volatility in global financial markets and concerns over global growth may deteriorate financial conditions and foreign demand. In sum, we expect that in 2016, domestic demand will prove slightly stronger than 2015, while foreign demand will, despite the existence of geopolitical risks, recover owing to the recovery in the EU. Accordingly, we project that maintained macroprudential measures coupled with favorable developments in the terms of trade will support the ongoing improvement in the current account deficit (Chart 18). Chart 17. Chart 18. (Real, Seasonally Adjusted, 3-Month Average 2010=100)  (12-Month Cumulative, Billion USD)  Imports by EU  Source: Eurostat. Current Account Balance (CAB)  Source: CBRT. As you all know, food, energy and import prices also play a great role in inflation forecasts. Therefore, before moving on to forecasts, I will briefly talk about our assumptions regarding these variables. The downtrend in commodity prices in international markets, chiefly oil prices, continued in the last quarter of 2015 as well.

Stemming mostly from the lack of demand from China and other developing economies, this trend caused import prices in the Turkish economy to BIS central bankers’ speeches  7  recede in USD terms. Therefore, we made downward revisions to assumptions for crude oil prices and USD-denominated import prices With regard to annual averages, we reduced crude oil price assumptions from USD 54 to USD 37 for 2016. Also, we revised the assumptions for annual percentage changes in average import prices downwards by 4.9 points for 2016. We revised the assumed inflation for food prices upwards from 8 percent to 9 percent for 2016 due mostly to the effects of minimum wage adjustments on costs and demand (Chart 19). Chart 19. Revisions in Oil and Export Prices* Oil Prices* (USD/barrel)  * Shaded area indicates the forecast horizon. Source: Bloomberg, CBRT. Import Prices* (USD, 2010=100)  * Shaded area indicates the forecast horizon. Source: Bloomberg, CBRT. Effective as of January 2016, some items with administered prices saw price increases. We estimate that the additional effect on the year-end inflation of the portion of these increases that remain above 5 percent will be 0.4 points in 2016. In turn, we monitor meticulously how the rise in the minimum wage will affect the budget balance and tax adjustments.
Following this workshop, the results of these research works will feed into the decision making process and help the Bank of Albania to make more informed decisions and improve its models and the efficiency of policy-making. For this reason, I encourage and invite you all to ask questions, to comment and to assess our work with your opinions and academic proficiency, to challenge our findings and methodologies. The nature of our research is undoubtedly influenced by our main mission and prevailing concerns. It is for that reason that the majority of our research focuses on monetary policy, price and financial stability, models related to them and the economic events that affect them the most. Some of the trends that we will discuss today are global and fundamental in nature. They may not have reached our economies, yet, but they will definitely have a significant impact on our real economy and financial system in the future. For example, new technologies, such as crypto currencies, Artificial Intelligence and machine learning, which represent a major challenge, not only for central banks, will have various implications for monetary and financial stability. Research related to these new technologies will be beneficial for both advanced and developing countries. Unexpected, sometimes new, global or regional events can shock a domestic economy such that authorities need to intervene with what they already know and have experienced. It is important to understand the short and long-term implications of the adopted policies in these new environments.

To maintain sustained growth, sound economic management, with an appropriate mix of mix of policies, is essential. Sound monetary policy, together with the appropriate fiscal policy, contributes to macro-economic stability. However, it is structural policies that we must turn to, if we are to successfully meet the challenges brought about by demographic  BIS central bankers’ speeches  1  changes, technological advancements and globalisation. Macroeconomic or financial policies cannot work in isolation, and indeed, an over-reliance on any specific policy instrument can create unintended consequences. The robust recovery in the Singapore economy reflects in part the judicious mix of policies that the government has pursued. 7. This year, the Singapore economy is expected to expand at a more moderate pace of 4–6%, driven by the services sector which is expected to benefit from robust regional demand. The IMF projects that the global economy will expand by 4.4%. Nevertheless, the road ahead remains challenging. 8. First, the pace of recovery varies across economies. Many advanced economies are weighed down by the protracted process of restructuring of financial systems and fiscal consolidation. In comparison, Asian and most emerging economies, including Singapore, have bounced back decisively, and are now facing rising inflationary pressures because of tight factor markets and higher global commodity prices. The growth differential and the very accommodative monetary conditions in the advanced economies have also resulted in a strong surge in capital flows into Asia.