samchain/econo-pairs-v1 huggingface dataset:
Chart 4: MPC over-predicted demand coming out of the pandemic  Sources: ONS, Bank of England and Bank calculations.The money-based forecast is based on an error correction model of consumption estimated over 1992-2019 that includes separate terms for liquid assets and illiquid assets in both the longterm relationship and short-term dynamics. It is based on a consumption function set out in Aron et al (2011)  . Nor does the pattern of price rises, over the past couple of years, fit the story. A pure, moneydriven inflation affects all prices equally. What we've actually seen are huge shifts in relative prices – first the jumps in those of non-energy traded goods in 2021 and then, in 2022, the enormous  Page 7  rises in the costs of imported food and energy. The important point here is that, however you measure it – whether in terms of prices (interest rates) or quantities (monetary aggregates) – monetary policy operates with a lag. During that interval, and at least until policy can react to them, there are lots of things – “shocks and disturbances” (as the MPC’s remit puts it) that can affect inflation. In this case it’s clear what those have been: the hits to the supply of non-energy goods during the pandemic, to those of energy and food during the war, and the resulting rise in their global prices. Thanks to the significant hit to real incomes they involved, these shocks have also had sizeable second-round effects on domestic wages and prices.

To add something else would be to double-count the effect. Macro models and the determination of demand As an undergraduate one of the books I had to read was a collection of essays about monetary economics by one of my lecturers, Frank Hahn. It begins with this rather provocative sentence: “The most serious challenge that the existence of money poses to the theorist is this: the best developed model of the economy cannot find room for it”. As a newcomer to the subject I found this a bit concerning (not to say alarming). If economics can’t even say why money exists how can it hope to explain what it does? Reading on, one’s concern subsided a bit. Hahn was, by training and inclination, a general equilibrium theorist. For him, as he explained in the very next sentence, “the best developed  Page 8  model of the economy” was the highly stylised description developed by the great economic theorists Ken Arrow and Gerard Debreu. For all its sophistication, the Arrow-Debreu model is one in which, by assumption, trade is entirely costless. In this perfect economy there’s a market and a price for the exchange of any two goods or services – including those for future delivery – without the need for a medium of exchange or any sort of costly financial architecture. So it’s not a huge surprise that, having ruled out at the start the conditions that might require it, this model should “have no place” for money.
Concerning the intensive debate about the Riksbank’s policy, my conclusion was that it can be useful to have a system where the monetary policy remit and policy objective are reviewed at regular intervals, as is currently the case in for example Canada. This would create better understanding and legitimacy for the monetary policy conducted and clarify that the central bank actually only performs the remit it has been given. I also believe it can be a way to counteract the forces that seem to exist in many parts of the world to make central banks less independent. As regards the decline in cash use, there are not so many conclusions to draw as yet. What we can say for certain is that an e-krona would affect the conditions for monetary policy quite substantially, more or less regardless of how it is designed. It is wise that many countries are examining the scope for introducing e-money, as one of the lessons that after all can be learnt from developments in Sweden is that cash use in society can decline very rapidly. These were the experiences and reflections I wanted to share with you. Perhaps the conclusions I draw are not that spectacular. But I would like to believe that the observations and experiences that we practitioners and economic policy decisionmakers make in our day jobs, so to speak, slowly but surely help to enhance the level of our collective knowledge. My hope is that this could at least be a small contribution to this development.

The reason is that it has proved difficult in practice to lower nominal wages. If inflation is low and nominal wages cannot be lowered, it becomes difficult to adjust real wages among different professions, companies and sectors. This can ultimately bring about both higher unemployment and poorer productivity growth in the economy. These problems can be mitigated if there is some inflation. Another advantage of a target of 2 per cent, which has been particularly apparent in recent years, is that a very low average rate of inflation would make it more difficult for monetary policy to counteract recessions. If inflation on average is very low in a world of low real interest rates, like today, the average nominal interest 8 [21]  rate will also be very low. The lower the interest rate is in normal conditions, the less scope there is to lower it before it reaches its lower bound. It will thus become more difficult to counteract future economic downturns with interest rate cuts. Thus, if you do not like negative interest rates, you should not advocate a lower inflation target, as that would involve the repo rate needing to be negative more often and for longer periods. There is a widespread international discussion on whether a target of 2 per cent, which most developed countries have now, really provides sufficient scope to conduct a monetary policy that is as expansionary as it sometimes needs to be.
Contrary to what we saw during the debt crisis of the 1980s, the problems in Asia were not almost exclusively macroeconomic in nature; even if these countries suffered, all of them, from some deficiencies in this respect, by and large they had long track records of successful economic management. Rather, in a context dramatically changed by a major realignment between the dollar and the yen, and important differences in short-term yields, three other factors helped trigger the crisis: • •  the weakness of their public and private banking and financial structures; an unsustainable accumulation of short-term financing - particularly of interbank lending, which Alan Greenspan refers to as the Achilles’ heel of the BIS Review 43/1998  -2-  •  international financial system - which made countries particularly vulnerable to a sudden shift in market sentiment. and, last but not least, deep-seated problems of governance, corruption, and what US commentators call “crony capitalism”. Together with the macroeconomic problems, these three major factors had to be addressed for our response to the crisis to be pertinent. If you examine our programs with Thailand, Korea, and Indonesia, you will see that we have tried to deal with these factors, and they will have to be taken into consideration in the future in whatever efforts are undertaken to avoid the recurrence of crises. But even that will not suffice.

Obeying this same imperative of serving together peace and development, I would also suggest that the G-7/G-8 warmly endorse Mr. Koffi Annan’s recommendation to the African governments to reduce purchases of arms and munitions to 1½ percent of GDP and maintain zero growth on defense budgets for the next decade. Industrial countries must play their full part in these efforts, and, here, I must share with you my anxiety. Today’s silence on the crisis in official development assistance is profound and distressing. It means that Africa, in particular, must rely chiefly for its economic progress on humanitarian compassion or the benefits of trade. This cannot suffice if human development is to be intensified and accelerated. Yet, at the present juncture, the macroeconomic and structural successes of recent years, precisely in the context of IMF-World Bank supported programs, are creating an opportunity that is too good to miss. Africa has found a way to advance from two decades of negative per capita growth to positive growth in more than forty of its countries. In 3  I hope I am not revealing a state secret in telling you that she inscribed this on her Christmas card! BIS Review 43/1998  -7-  many African countries, a new generation of leaders is seriously concerned about the need for democratization, protection of human rights, promotion of “good governance”, and human development.
New generations are used to surrendering their privacy, to renounce their data sovereignty in favour of digital payment and social network providers. Some social networks even work that way - to make your own digital identification or to verify it is exactly You or Me out there on the web. Public concern over digital privacy has been identified in the 2021 document "Public consultation on a digital euro" and the idea of a unique digital identity for citizens in the EU is being developed by the European Commission. [5] This tendency is also at the heart of the digital euro project, and the digital euro will offer the highest levels of privacy for the citizens. Let me assure you that the central bank has no interest in peoples' payment behaviour, nor will we store or even see any of people's personal data. So, considering that our role is to act in the best public interest and at the same time, we see a proliferation of digital payment channels offered by various private entities or even networks without recognizable issuers, isn't it right to think that we also need to offer our citizens digital version of public money? To offer our citizens a way to access public money in the digital sphere? Or, to paraphrase ECB President Christine Lagarde, "Don't we all need to have access to public money in the digital age?".

Are we going to see the decline in the dominance of one global currency and its replacement by a new one or the formation of an alliance between currencies? Will it be the dominance of technology companies in providing payment services to the general public? TRUST Whatever the case may be, there is one thing we are certain of: Nothing has changed in our central banking task of maintaining the trust of the public in money and the financial system. Or to quote my colleague banker from the Bank for International Settlements, Mr Augustin Carstens, "The soul of money is trust.". We are still here to pursue monetary policy goals, to preserve the value of money by providing trust in the value of money and to offer money as a payment instrument that is widely accepted, secure, cheap and convenient. Our institutional task is to maintain confidence in the financial system and to serve as an anchor – a digital exchange for all other sorts of money that private issuers offer. To mention at this point – please, don't forget, everything you have today in your digital wallet, mobile banking app or similar is some sort of a payment instrument issued by a private entity. Some of them we supervise, some of them we don't. Whether it's a bank, a payment service provider, a stablecoin issuer or a globally interconnected anonymous network of nodes like Bitcoin, it isn't us you are banking with. But ... this may change.
In fact nominal interest rates have been as low they’ve been for 40 years; the overall economy has grown without interruption quarter by quarter - at an average annual rate of 2¾%, which is comfortably above its long-term trend; the number of people in employment has risen fairly steadily - and is still close to its all-time high, while the rate of claimant count unemployment has fallen from 9.6% to 3.1% - the lowest its been for more than 25 years. And what’s true for the UK economy as a whole is broadly true for every region of the UK, including the North West region. Total output in the North West increased year by year from 1992 to 1999 - the latest number I have - though at a somewhat slower annual average rate than in the UK as a whole, at around 1¾%. The number of people in employment in the region rose by about ¼ million from the end of 1992 to over 3.1 mn in the past two years. And the rate of claimant count unemployment fell from over 10% to 3.5% - still somewhat above the rate for the UK as a whole, but again the lowest rate for over 25 years. But I’m well aware that you don’t have to look far beneath the surface to see that at the sectoral or individual business level things are a lot more uncomfortable than these aggregate figures might suggest. To a degree that’s always going to be true.

That of course is cold comfort to the manufacturing businesses that were most affected, and to the regions - including the North West, where there is a relatively high concentration of manufacturing business. And you were severely affected last year too by the impact of Foot and Mouth Disease on agriculture and tourism. The frustrating thing for us has been that there was very little that we at the Bank could do through monetary policy - or indeed that the Government could do - to address the problems at source. That’s fairly obvious when we’re talking about the weakening of demand in the other major economies. Some people have suggested that we might have done more to weaken the exchange rate particularly against the generally weak euro - by cutting our interest rates more aggressively, but it really isn’t as simple as that: exchange rates don’t respond predictably to relative interest rates certainly in the short term; if anything in recent conditions cutting them further could even have had a perverse effect. What we were able to do, given that inflation was under control, by cutting interest rates as we did last year, was to try to compensate for the external weakness by stimulating domestic demand growth here in the UK. Given the weakness of business confidence, and therefore investment, reflecting the external pressures, that meant essentially stimulating consumer demand.
At present the most likely time for a referendum seems to be the autumn of 2003. If the outcome turns out to be a majority for Sweden's participation in the monetary union, one can expect the Riksdag to formally decide to request an end to Sweden's derogation, which would amount in practice to opening the door for participation. Meanwhile, the legal and practical adjustments that our full participation presupposes will have to be prepared and approved before the Ecofin Council makes the final decision on Sweden's participation. While the Riksbank is not involved in the political course of events, if a referendum results in a majority in favour of participation, it is up to the Riksbank to act so that this occurs in a stable and smooth manner. That is why for a number of years the Riksbank has had a readiness to act in the event of full participation in the monetary union. A matter that will be important is the stability of the SEK/EUR exchange rate and entry into ERM2. In this respect there may be cause to say something about what has happened earlier. The question of ERM participation and the possibility of combining it with the policy of inflation targeting that we have followed for some years has engaged the Riksbank earlier, above all in the period 1995-97.

I would briefly like to develop these two points. The past two decades have been characterised, on the one hand, by an increasing integration at the global level of goods, services and capital markets and, on the other, by a reduction in inflation that has stabilised at low levels. Given the coexistence of these two phenomena, a number of observers have concluded that there appears to be a causal link. Where exactly do we stand today? BIS Review 28/2008  1  For over ten years, with the growing integration of our economies in the past few decades, powerful forces, throughout the world, have been acting to enhance price stability. Each year, the arrival of tens of millions of people on the world market increases global production capacity, in particular for tradable goods. For monetary policy in developed countries, this process is equivalent to a sequence of positive supply shocks that take the form of a spontaneous decline in the import prices of manufactured goods. All other things being equal, this terms-of-trade gain allows for a lower inflation rate for a given capacity utilisation rate. More fundamentally, and although things seem to be less straightforward in this area, it is possible that the increasing openness of our economies may have structurally changed the wage and cost formation process in a manner that favours price stability. Heightened competition triggered by imports reduces the market power of firms at the national level. However, other more indirect effects are also detectable.
This is  2  BIS Review 156/2009  done every September, when the Board of the Central Bank presents its Monetary Policy Report (IPoM) before the full Senate. Nonetheless, the Bank has substantially enlarged its information disclosure function, taking important steps forward during this year. First, since March, the background minutes prepared by the Research Department are published on our website the day before the monetary policy meeting. This way, the public has the same background information as the Board does when making its monthly monetary policy decisions. Also, the Board announced that, as of next December, it will increase the frequency of the IPoM from three to four issues per year. Additionally, the Bank publishes the Financial Stability Report twice a year, in December and June, and publishes its yearly account on the administration of international reserves once a year as part of its Annual Report. But this is not enough. Legitimacy is strengthened through direct, open, and non-exclusive communication with the general public and, for that reason, the aforementioned documents are uploaded onto our website at the same time as they are being presented. In addition, the Bank issues other reports, communiqués, minutes, specialized studies and statistical publications, all of which are available to the public. These are complemented by presentations by Board members or staff, which are also uploaded to the website. The times when central banks’ operations were complex and indecipherable are being left behind.

Chile) External prices (in $  -4.2 3.3 3.4 3.0 2.6 6.9 2.0 -0.4 -9.8  1.9 2.8 3.0 2.3 1.6 6.7 1.7 -1.8 -2.7  LME copper price $ WTI oil price $ Brent oil price $ Gasoline parity price $ Libor $ (nominal, 90 days)  249 49 52 467 0.3  221 43 44 389 0.7  2017 (f) 2018 (f) Jun'17 Mar'17 Jun'17 Mar'17 Jun'17 Report Report Report Report Report (annual change, percent) 1.9 4.6 4.7 -0.5 -0.5 2.9 3.3 3.3 3.5 3.4 3.1 3.4 3.4 3.5 3.5 2.5 2.8 2.8 2.9 2.9 1.6 2.3 2.2 2.3 2.3 6.7 6.4 6.5 6.2 6.3 1.7 1.7 1.7 1.7 1.7 -1.5 1.3 1.1 2.5 2.2 -2.7 2.1 2.4 1.3 1.4 (levels) 221 255 255 250 250 43 50 50 50 51 44 52 53 52 53 389 457 453 444 447 0.7 1.5 1.5 2.4 2.5  (f) Forecast. Source: Central Bank of Chile. Figure 10  MPR and expectations (percent)  6  6  4  Financial asset prices in March Report (*)  MPR  FBS Financial asset prices in June Report (*)  2  4  EES 2  -  0 14  15  16  17  18  19  (*) Built using interest rates of swap contracts up to 10 years. Source: Central Bank of Chile.
If we do this what will we call it? We thought perhaps we could go for: “strong and simple”. I rather like this, but perhaps others will say it is clear why we are not in the advertising industry. Simple design  In designing a strong and simple regime we will have to decide on two things:   first, which firms are in it; and    second, how to simplify requirements. On the first of these, size measured by total assets is likely to be one good proxy – not least because it is simple. But other factors could also perhaps be brought in. For instance, purely as an illustration we could consider making eligible all firms with total assets of less than £ and who are also:   not systemically important;  6 In fact, the Financial Services and Markets Act 2000 (as amended) is explicit that it is not our role to ensure that no firm fails. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6    not internationally active;    not involved in trading activities;    not approved to run an internal model for capital requirements; and    capable of exiting the market in an orderly way, for example through solvent wind-down or an insolvency procedure. Now I’m quite sure that our disgruntled bank chair will be spluttering over their coffee at one or other of the items I just listed.

Indeed, the Lord Mayor’s Green Horizon Summit in London this week is a great example of this sort of activity. Our commitment to those mechanisms of international coordination, including working closely and cooperatively with our European colleagues, will not waver with Brexit – indeed we will double down on them. Still, it is reasonable to ask: what will be different? I have a strong interest in this but ultimately it’s for the government and parliament to decide, and the Treasury already has this question firmly in its sights in the 2  form of its Future Regulatory Framework consultation, which was published last month. But as one very small contribution to that debate, I would like to suggest three lodestars to guide us:   first, high regulatory standards – no surprise to find that on my list! More seriously, for the reasons I just gave I do think that is a vital ingredient of our future success;    second, responsible openness. By international standards the UK is very open to financial services, and we will continue to put a huge effort into making this work safely for us and the rest of the world, including those in the EU who want to do business with the UK; and    third, dynamism.