samchain/econo-pairs-v1 huggingface dataset:
Charting a path for monetary policy in this environment thus requires a nuanced understanding of how globalisation both affects inflation and influences the stance of monetary policy. It is to these I will now turn. Global Influences on Domestic Inflation In a closed economy, inflationary pressures depend on developments in domestic costs, which in turn depend on domestic spare capacity, or the balance of domestic supply and demand. Opening up the economy changes this relationship in three ways. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Most straightforwardly, external demand exerts pressure on domestic resource utilisation and therefore domestic inflation. The importance of this channel has steadily increased for most of the past half century (Chart 4). 7  Chart 4: External demand has steadily increased in importance  Sources: IMF and Bank calculations. Next, in an open economy, prices of imports affect domestic inflation both directly – through the final goods and services bought by households – and indirectly – through the prices of imported intermediates used in the production of final goods and services in the consumption basket. For years the direct effect has imparted a steady disinflationary bias. The integration of lower-cost producers into the global economy acts like an increase in potential supply for advanced economies, raising the level of 8  spending that is consistent with inflation at target.

This development, whether we like it or not and depending on who we are, is a reality that we have to relate to. In this structural development in the payment market, there will be several challenges for commercial players, as well as for those of us working on the public side. Evolvement is seldom a gradual and smooth process. This gives rise to a number of interesting issues that we have the chance to address here today. It also explains the conference agenda. Three topics for the conference The first topic concerns the current development. How do the different market players view the evolving ecosystem? Are the banks hurt or do they benefit from the entry of non-banks as a result of an increase of payment traffic through their systems and between their accounts? Are all market players a big happy family where everyone cooperates with everyone else or is it razor-sharp competition, a dog-eat-dog market? Who, if anyone, is gaining the upper hand? I’m looking forward to learning more about this type of issue in the first session. The second topic concerns the regulatory environment. The central role of the retail payments market for social welfare ensures that the authorities will want to promote an efficient outcome. How to balance cooperation and competition? How to ensure a level playing field and how to protect consumers? For example, is the current supervision 2  BIS central bankers’ speeches  sufficient or will we have to sharpen it in the future?
We are doing so with the firm conviction that this will be the new statutes of the BNB in the following, at least, 20 years. We have been actively working on other euro area-related legislative amendments as well. For example, yesterday the Governing Council adopted the required amendments to the Law on the payment systems concerning the euro area. This draft will be submitted to the Ministry of Finance today or on Monday at the latest because the BNB is not entitled to direct legislative initiative. 3/4  BIS - Central bankers' speeches  I do not have to dwell on this any further. What I would like to say is that on the part of the BNB, there is not a single day of delay with regard to the euro area-related legislative programme, nor is there any unsettled issue in this regard, with the ECB or with the European Commission. And yesterday, during our debates with Mr. Dombrovskis, we cleared up this topic. The same is true for the technical preparations. The BNB and commercial banks provided in their 2023 budgets the funds required for these preparations which are well underway. For example, yesterday we discussed with Mr. Dombrovskis and his team as to how we can move forward with the implementation of the memorandum on the minting of test Bulgarian euro coins, signed in December. A few words about the date. We do understand the considerations of the European Commission and the Government about changing the date.

There is a tendency to loosen the country's traditionally strong fiscal stance, fuelling inflation and impeding market-based measures to reduce it, as fiscal expansion, among other things, increasingly conflicts with the global and regional trend of monetary policy tightening. 1/4  BIS - Central bankers' speeches  It is, of course, worth noting the efforts of the Ministry of Finance and the current caretaker government in controlling the negative fiscal trend and achieving a budget deficit for 2022 within the nominal convergence criterion. Such a result, however, cannot be sustained without the adoption of a regular budget that is sufficiently disciplined, or in other words, guarantees the achievement of a budget deficit for this year and over the medium term firmly below 3% of GDP. Therefore, the solutions to the current problems in the process of joining the euro area can be sought along two lines: political consolidation and fiscal consolidation. By political consolidation I mean finding a sufficiently stable formula to form a regular government with clearly defined and broadly supported priorities, including, of course, the country's membership in the euro area. I hope the issue receives a sufficiently convincing response after the elections on April 2. Fiscal consolidation will be a logical consequence of political consolidation. It must provide strong enough guarantees, and not only within an annual but also within the medium-term horizon, for restoring the fiscal position of the country and fulfilment of the convergence criteria.
Chart 4 plots a measure of financial markets’ expectations of UK inflation since 1985. Also shown is the date of Bank of England independence and inflation targets since their inception in 1993. These measures of inflation expectations were consistently and materially above target in the period prior to independence – the myopia or inflation bias problem looked real. But from pretty much the point of announcement of independence, they began ratcheting down. Within 12 months, they were aligned with the inflation target. They have stayed there in the period since. The Bank of England has thus far passed the marshmallow test. Another lens is provided by looking at the stability of inflation and output either side of central bank independence (Chart 5). Since independence, UK inflation variability has fallen by a factor of five and output stability by a factor of almost two. As this period saw the largest macro-economic collapse in memory, it loads the dice against independence. This evidence may seem to suggest that central banks have tamed the inflationary tiger. That metaphor is apt. Friedrich Hayek likened the process of controlling the economy as akin to taking a tiger by the tail. 53 As far as inflation control is concerned, Hayek was right. As some countries are finding today, the tiger is capable of biting back. Chart 6 plots inflation expectations from financial markets in the UK, US, the euro-area and Japan over recent years. In Japan, inflation expectations have been anything but wellanchored, varying significantly around a trend close to zero.

•  First, the Eurosystem takes the uncertainty related to transmission uncertainty into account with the medium-term horizon of the definition of price stability. It introduces flexibility in the decision-making process and avoids focusing on short-term developments. The medium-  BIS Review 63/2006  3  term horizon is also a way to reconcile monetary policy and financial stability-related considerations, enabling the central bank to “look through the bubble”. •  Second, the Eurosystem does not rely on a single model. The two-pillar approach based on economic and monetary analyses contains complementary information on the short to medium-term horizon (economic analysis) and the long-term horizon (monetary analysis). The economic analysis relies on indicators on the one hand (hard data related to the real economy and soft data) and forecasts on the other hand (Eurosystem’s staff macroeconomic projection exercises evaluated together with the forecasts of other institutions). The monetary analysis is based on a comprehensive assessment of liquidity and credit conditions. These two analyses can be cross-checked to give an overall assessment of the risks for price stability. Alternative models of the inflationary process justify the fullinformation approach adopted by the Eurosystem in order to overcome uncertainty. In a way, the two-pillar approach rests on the same principles as the Bayesian model averaging, although it is less formal. •  Third, the higher the uncertainty, the greater the need for transparency and more important the credibility.
According to ECB studies, this development is partly because the banks need to allocate  BIS Review 85/2001  1  less capital to meet the capital adequacy requirement for derivatives than for other money market instruments. Both the repo market and the market for securities with a short duration, such as treasury bills and commercial papers, have developed relatively well, but there still remains a clear national segmentation. In the repo market this segmentation seems to primarily reflect difficulties in assessing the underlying securities, while integration on the market for short-term securities is mainly hampered by the lack of a harmonised trade environment and separate systems for settlement. The fact that the euro countries also have different tax systems is evidently another important barrier to continued market integration. Evident success for euro corporate bonds The bond market takes over where the money market stops. It is on this market that interest-bearing securities with a maturity of at least one year are issued and traded. Recent developments have clearly illustrated that the euro has established itself on the international bond market. Although the total stock is still significantly lower than the corresponding stock of international dollar bonds, the euro has passed the dollar in terms of new issues. This boom is due to several factors. One of these is that the euro has eliminated the exchange rate risk between the Euro countries and thereby given rise to a broad and deep source of financing.

Tarisa Watanagase: Combating the global financial crisis – role of international cooperation Remarks by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the HKMA Distinguished Lecture, Hong Kong, 16 December 2008. *  *  *  Governor Draghi, Governor Yam, Distinguished Guests, Ladies and Gentlemen, I am honored and delighted to be here among this gathering of distinguished policymakers, financial experts and academia, at this year’s HKMA Distinguished Lecture and would like to thank Governor Yam for the kind invitation. This lecture truly provides an excellent opportunity for us to share our views on the topical issues that are at the center of international financial community. Ten years ago, we had the Asian financial crisis. In Thailand, there were plenty of discussions about the causes and remedies of the crisis, some of which still continued until these days. To me, the Thai crisis had 4 main causes, namely, we had weaknesses in the macroeconomic management leading up to bubbles, lax supervision, excessive risk taking of both the financial sector and the private sector in general, and the inadequate legal and information infrastructure. The crisis we are facing now has many surprises as pointed out by Governor Draghi, but I also see plenty of similarities in the underlying root causes. Because of the crisis’s global scale and its severity, this time around we have seen unprecedented efforts taking at both the national, regional and international levels. Today, one decade after the Asian financial crisis, emerging markets look less vulnerable to financial disturbances.
It is an interesting theme. It is even more interesting if we look at the insurance industry from a broader perspective, from the angle of economic development. Beyond issues of safety and soundness, my experience suggests that we ought to have a keen interest in the development of an effective and efficient insurance market, that serves the advancement of broader goals, from the provision of healthcare, to building resilience against natural disasters, supporting trade, enhancing social security and providing the opportunity for people to improve their livelihood. Insurance is a great invention, one of those inventions that touches people’s lives. Long before “big data” became in vogue, insurers have effectively used data to turn unknowns into knowns, and perils and hazards into opportunities. The concept of pooling funds to assist the unfortunate and those faced with adverse situations is a very noble idea. From air travel to the launching of satellites, insurance innovations have enabled many of mankind’s greatest feats, propelling civilisation forward. Innovations in micro-insurance have helped protect our most vulnerable communities from devastation. Today, drones are being used to inspect property damage claims, and machine learning to detect fraud. Indeed, the industry has enabled trade to flourish, serving as the bedrock of modern economies. Despite these remarkable developments, the world continues to face immense economic, environmental and social challenges. The effects of climate change are real, leaving horrific damage and destruction. Economic losses in the aftermath of this year’s hurricane season in the Gulf of Mexico is estimated to reach up to $ billion.

And, as my colleague Sarah Breeden explained last July, the PRA attaches great importance to making sure that the way we regulate and supervise these firms isn’t an unnecessary barrier to them realising their ambitions.10 That is why the PRA consulted last year on how we should regulate new and growing banks and has this month published a Supervisory Statement outlining our approach.11 What we need to make sure of now is that growing banks don’t face unnecessary costs from having to move from a simpler regime to more complex requirements once they reach a certain size. If simpler requirements are very different from the requirements for larger banks and building societies, a growing firm would have to make a substantial investment to adjust to the more complex rules it was growing into. If this was prohibitively expensive, it would become difficult for small firms to grow. That would work against what the PRA is doing to support effective competition in the banking system. That is what we want to avoid. We don’t want to trap small firms within a walled garden. Now, to some extent this could be achieved by giving small firms the option to stick to the full set of requirements if they know they 9  See https://www.bis.org/publ/bcbs129.htm. ‘Climbing mountains safely’, speech by Sarah Breeden, Executive Director, UK Deposit Takers Supervisions, building on marks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020.
In this respect, I would like to commend the ambitiousness of the European Commission’s recent Digital Finance Package and its priorities, in particular those to fight against the fragmentation of the digital single market for financial services and to address the new challenges and risks associated with the digital transformation. With regard to these risks, I think it would be appropriate for the Commission to address the complex but currently unavoidable issue of the oversight framework to be applied to critical IT service providers, including cloud service providers, and the equally important matter of the supervision of issuers and distributors of stablecoins, whether they be single or multi-currency coins. I will not go into detail on the Commission’s proposed legislation, which still requires careful examination on our part and which will, of course, have to be improved by the negotiations that are about to get underway. I simply want to say here that the regulations’ proposals aimed at critical IT service providers and stablecoins include promising provisions: for the former, a dedicated framework that does not exempt financial intermediaries from their responsibilities and their obligation to use European service providers, and for the latter, a strict supervision that involves and associates national and European authorities.

In this way, experimentation allows us to send the right signals for the ecosystem to realise the potential of new technologies without fearing a delayed and unexpected “backlash” from the Supervisory Authority. The experiments underway at the Banque de France on a central bank digital currency (CBDC) are an illustration of the same experimental approach in the field of work specific to central banks. They present with issues directly related to the need for the Eurosystem, should circumstances require it, to be ready to issue a CBDC in order to ensure that central bank money is accessible to the general public and to preserve their freedom of choice of means of payment and their confidence in our currency. By testing the possible uses of a CBDC, we investigate not only the potential of blockchain technologies but we also question the players in the ecosystem on what tomorrow’s landscape could look like, on subjects as fundamental as the methods of exchanging financial instruments for CBDCs, the improvement of the conditions for executing cross-border payments or new ways of making CBDCs available to financial sector players. *  * 2/4  BIS central bankers' speeches  The second thrust of our work is to promote a regulatory framework and appropriate supervisory practices. In this respect, our immersion, as a player, in the innovative FinTech ecosystem is a valuable asset that we intend to build on in order to contribute to the impending and necessary changes in regulations and supervision.
We must continue to make progress towards economic union in order to achieve more and to further join forces in the new international context. To do so, Europe should seize the opportunity to move forward on three concrete steps towards Economic Union: The first step, as of today, is to build a “Financing and Investment Union” (FIU) to steer abundant savings into productive investment. Resources are not lacking: in the euro area, the current account surplus, which is a measure of the excess of savings over investment, stands at more than 3% of GDP. This trend is often described as a “saving glut” but I believe it is more fitting to talk of an “investment crunch” [slide 6], since we lack productive investment. The FIU would merge together the initiatives already in place: the Capital Markets Union of course, but also the Juncker Investment Plan – which aims, through the use of limited public guarantees, to foster private investments totalling EUR 630 billion in six years –, and the Banking Union. We need to put the pieces of the puzzle together in order to magnify their impact through synergies. There are two objectives: [slide 7] increased diversification of firms’ financing – with more equity financing –, and higher resilience of the euro area thanks to private risk-sharing across domestic borders. [slide 8] The second step, after the FIU, would be a collective economic strategy for the euro area.

It also finds that potential deviations from the globally agreed Basel III reforms – for example, with regard to the output floor – would significantly dilute the benefits to the real economy. 2/3  To sum up, there are clear and significant benefits to all from implementing the Basel III standards in a full, timely and consistent manner in Europe: -  For households and businesses, it would reduce the probability and impact of future banking crises, and provide banks with the capacity to maintain lending in both good times and bad. -  For European banks, such an implementation would shore up their resilience by fixing some of the outstanding frailties in the banking system. It would also avoid any stigma and negative signalling to financial markets about their noncompliance with global standards. The pandemic has further reminded us that the benefits of a resilient banking system should not be taken for granted. -  For policymakers, it would help safeguard global financial stability and avoid the risk of a harmful “race to the bottom” in bank prudential standards. And it would serve as an important input towards greater financial integration in Europe. Europe has a strong track record of playing a lead role when it comes to multilateralism and sticking to global agreements. Now, more than ever, it is crucial for Europe to continue to demonstrate these traits, including with regards to globally agreed prudential standards.
We must, of course, take advantage of the fact that everything is being digitalised in Russia and look for ways we can move to a qualitatively new level here. You mentioned outdated regulations. Yes, there are outdated regulations. But please let me remind you that we have a permanent working group that is working on these issues. It is something like the Government’s ‘regulatory guillotine’. We have already revoked some of the norms, and we are prepared to go further with greater intensity. We are waiting for your proposals. Perhaps the association should intensify its work in this regard. We are ready. Outdated norms are of no use to anyone. Let’s look at remote services. You mentioned this and many banks have raised the issue. We understand that being able to open an account and use other services remotely is an important area. In this regard, the development of the Unified Biometric System is one of our key projects. We recently had a meeting with banks. And our approach, the Central Bank’s approach is that this system should be developed independently, equidistantly from all players. Opportunities should be given to various players to participate in it and use it. As for banks with a basic license, Mr. Aksakov also spoke about this. Banks with a basic license will be the focus of our attention because there are questions banks with a basic license need to answer. In my opinion, the decision to create them was made in a timely fashion.

Furthermore, the seasonal effect of domestic agriculture production supply was stronger this year, leading to further reduction of food items annual inflation. During 2011, consumer prices in Albania were subject to supply shocks, materialised in high imported prices. This effect was more moderate during July–August and, in the absence of sudden shocks, it is expected to subdue even further in the months ahead. Moreover, second-round effects are contained, under the influence of controlled expectations of economic agents on inflation. The domestic economic setting produced controlled inflationary pressures. Aggregate demand slowdown led to spare capacities of production factors and controlled long-term inflationary pressures on the economy. Therefore, core inflation was 2.9% in July, showing a downward trend, and was close to our inflation target. New economic data obtained in September are scarce. Following our earlier analysis and based on new available information, the Bank of Albania deems that the Albanian economy continued to grow during 2011. Economic activity relied primarily on public spending and exports surge, while the private sector demand had a slow positive performance. Consumption and investments were supported by crediting, but their upsurge is conditioned by hesitation to spend. Following the revised budget, the fiscal behaviour during the last two months is characterised by lower spending pace and lower budget deficit increase. Fiscal stimulus was present in the first quarter, while in the following months the fiscal policy was more contained, which is reflected in lower annual deficit increase.