samchain/econo-pairs-v1 huggingface dataset:
17  See the reasoning on this in Williams (2009) and Bayoumi et al. (2014). 18  See for example Krugman (2014) and Pettersson (2014). 19  Bordo and Filardo (2005) note that episodes of deflation have been common throughout history and often been unproblematic. But they also note that these unproblematic episodes often occurred under the gold standard regime and that long-term inflation expectations were then firmly anchored. Mechanisms that are based on expectations of lower prices in the future then do not arise so easily. 8  BIS central bankers’ speeches  phones. The price level for these goods has fallen fairly quickly, as a result of the rapid productivity growth, even during periods when the general inflation rate has been clearly positive (see Figure 5). But despite the falling prices, demand for these goods has not collapsed, but rather increased over time. To summarise, I am thus worried about the low inflation in Sweden in recent years. I see it as particularly problematic that the low rate of inflation risks impairing wage formation and contributing to unnecessarily high unemployment. There is also a risk that the credibility and efficiency of monetary policy will deteriorate and that there will be arbitrary reallocations between lenders and borrowers. But, at the same time, I believe that some concerns and problems have been exaggerated in the debate. I see it as a small risk that Sweden would suffer a prolonged period with falling prices.

And if this were nevertheless to happen, the consequences would probably only be a gradual strengthening of the problems I already see with the current low inflation. The risk that we would face a prolonged period of deflation is partly linked to the view of what monetary policy can achieve. I sometimes see an overly pessimistic attitude to the Riksbank’s ability to influence Swedish inflation rate. Let me discuss this question in conclusion. Monetary policy determines the inflation rate Central banks often talk about the so-called transmission mechanism, that is, how a change in the policy rate affects different aspects of the economy and ultimately the rate of inflation. But how well does this transmission actually work? Does a small open economy like Sweden need to adapt to monetary policy and price trends abroad? Has the transmission mechanism been damaged or weakened by the financial crisis? BIS central bankers’ speeches  9  My perspective on these questions is perhaps rather split. It is clear – and has been so for a long time – that we do not completely understand how the transmission mechanism works. The description we give is simplified and partly based on theories and hypotheses that have not been completely verified by data. But at the same time, empirical studies and practical experience show that the policy rate is a useful tool for influencing economic activity and the inflation rate. It is of course true that a small open economy like Sweden is dependent on developments abroad.
The role of regulators and their policies are thus important, at least regarding two aspects: the promotion of the use and development of technology, including the incorporation of technological improvements into financial services provision; and the need to ensure that headway in financial inclusion does not impair consumer safeguards or financial stability. I would like to offer some brief thoughts on each of these two points. Promoting the use and development of new technologies. Logically, developing technological solutions requires suitable telecommunications infrastructures. They must provide widespread access to the Internet, including in rural areas, while seeking to improve digital education and offer safeguards against vulnerabilities such as cyber threats. We should not forget that approximately two-thirds of the adult population without access to 1  See Cull et al (2014). 2/3  banks do have a mobile phone. And, as the World Bank points out, these devices are proving essential for improving accessibility to financial services. Moreover, the development of a stable institutional framework – paving the way for competition, providing legal security to the new financial proposals and ensuring an appropriate level of interoperability – is vital for generating the necessary confidence in financial services. Also, aspects such as legal recognition of digital identification, the use of biometrics in identification and ease of access to public data in “Know your costumer” (KYC) procedures, are matters the different tiers of government can push and which catalyse significantly the progress in financial inclusion. Monitoring the risks inherent in financial innovation.

13.12.2019  Session: “Central banks, financial inclusion and digitalization: harnessing technology for inclusive growth” Conference “Financial integration and inclusive development: A view from the Mediterranean Countries”/Banco de España e Instituto del Mediterráneo (IEMed) Pablo Hernández de Cos Governor  Good morning. It is a privilege for me to chair this panel on the importance of financial inclusion and how digitalisation can contribute to it. It’s all the more a privilege given that the panel includes governors from four countries with broad experience in promoting financial inclusion, where significant initiatives in this area have been launched with the central bank taking the lead. Access to financial services continues to be a primary problem globally. On the latest World Bank estimates, almost 1.7 billion adults do not have access to an account offering basic functionalities and, therefore, they are excluded from basic services such as payments, credit and saving. This has obvious repercussions for economic and social development, as there is a positive correlation both with growth and employment1, and it is thus essential to understand the causes behind it. In this respect, most studies have highlighted the fact that, although there may in specific cases be voluntary factors relating mainly to cultural or religious aspects, the explanation for this lack of access to financial services is usually to be found in involuntary factors.
Now while we have several explanations for this “productivity puzzle”, I think it is fair to say that none of them yet seems to provide a completely convincing explanation. And although different MPC members place different weights on the possible explanations, we all agree that there is considerable uncertainty as to how productivity will evolve as the recovery proceeds. Unemployment is certainly not a perfect guide to slack in the labour market. For instance, the recent increase in the number of workers wanting to work more hours suggests it understates the absolute level of slack1. But it is not unreasonable to expect this margin of “potential hours worked” to move in line with unemployment. And, unlike in the 1980s, we have not seen a substantial movement in the labour force participation rate, which suggests that the number of discouraged workers has not risen markedly. So overall, changes in the unemployment rate are, we think, likely to provide a reasonable guide to the evolution of labour market slack. Now consider what will happen if the weak productivity performance of recent years is simply a consequence of the weak state of demand and so reverses as the recovery proceeds. In that case, businesses will be able to supply the extra demand without greatly expanding their workforces and unemployment will be slow to fall. In these circumstances, it is indeed appropriate to keep monetary policy loose as potential output is well above actual output. Conversely, suppose that the financial crisis and subsequent recession has wrought lasting damage to productivity.

Chart 8 shows the correlation between UK forward interest rates and the UK and US data surprise series that I described earlier, split by time period. That the responsiveness of forward interest rates to data news was particularly low during the 2009–April 2013 period is not surprising as Bank Rate was constrained on the downside by the zero lower bound, so that the distribution of policy rates was truncated. That is still relevant today, but economic news has been more consistently to the upside recently, attenuating the impact of the constraint. Importantly, there is some evidence that the response of UK rates to US data surprises has declined since the introduction of the MPC’s forward guidance, although the small sample in the most recent period means that the coefficients are not that precisely estimated. A final piece of evidence, which is at least consistent with the central aim of the MPC’s guidance, is presented in my final chart. As I noted earlier, a prime concern was to convey the message that a return to growth did not imply an early withdrawal of stimulus. Rather, if slack was substantial, then it should be possible to maintain the highly stimulatory monetary stance for some while before price stability – as embodied in the inflation target – is threatened. Historically, and particularly in the pre-crisis period, there was a reasonably strong correlation between indicators of growth and the slope of the yield curve at the short end.
And yet it is not for lack of resources: the euro area has a savings surplus of more than EUR 350 billion, equivalent to more than 3% of GDP. That is huge. The FUII must make it possible to channel that abundance of savings more effectively towards investment. To achieve this, we naturally need to build on the initiatives already in place at European level: the Capital Markets Union, the Juncker Investment Plan and the Banking Union. But we also need to foster synergies between them and go even further. More reform at national level and a better collective economic strategy When each State acts without worrying about its neighbours, we end up in a situation that is suboptimal for everyone. There is no doubt that growth and employment would be stronger in the euro area if its members committed to implementing more structural reforms where they are needed, such as in France and in Italy, and to providing more fiscal or wage support where there is room to manoeuvre, such as in Germany. But for that to happen, we need to rebuild the trust between member countries. First by accelerating reforms at home – in France and in Italy – and let me be clear, it is in our national interest. And then, in order for this collective strategy to exist, the euro area needs an institution that inspires confidence, one that embodies and brings to fruition the shared commitment of our Member States.

The weakening of the US currency resulted in a further decrease in the dollar’s share of foreign currency reserves. Recently, in an effort to prevent the dollar’s share from dropping too low and with a view to rebalancing, we bought dollars again on a number of occasions. Furthermore, as part of the 2004 strategy, the proportion of government bonds was also reduced in favour of other borrowers’ bonds. The required minimum rating for bond investments was lowered from A2 to BBB, thus covering the entire “investment grade” range. Corporate bonds have now also been added to the National Bank’s investment universe, albeit only those of foreign companies. Currently, roughly 4% of both foreign currency reserves and free assets are invested in corporate bonds. The credit quality of all our investments is still very high. Borrowers with the top rating AAA account for over 70% of the investments. Close to 20% bear the AA rating. The remaining investments have an A or a BBB. The average residual maturity (duration) of all bonds held by the National Bank was kept at 4-5 years. The first investments in equities issued exclusively by foreign companies will be made at the beginning of 2005. The addition of equities and corporate bonds is likely to improve the degree of diversification of the investments and will contribute to the achievement of slightly higher returns in the medium term. The main difference between the investment structures of foreign currency reserves and free assets is their currency profile.
First, it results in the decline in the use of cash in transactions, which calls into question the availability of central bank money for the public. Increased reliance on digital payment solutions also shows how our European ecosystem has become critically dependant on non-European players (eg international card schemes and Bigtechs). Meanwhile, the emergence of crypto-assets and so-called stablecoins may compete against both commercial and central bank money, even though they do not offer the same guarantees in terms of credit risk and safety: the recent collapse of the Terra-Luna ecosystems or the sudden liquidity shortage of Celsius Network are necessary wake-up calls. I strongly welcome here, on the last days of a fruitful French Presidency of the EU, the successful trilogues on Transfer Fund Regulation (Travel Rule) and Markets in CryptoAssets (MiCA). 2. Even if the precise use cases are not yet definitively fixed, there are several material reasons to consider the issuance of a digital euro The main rationale for a digital euro is therefore to preserve the role of public money in a digital economy.

Accordingly, I strongly encourage all financial intermediaries to actively participate in the dialogue the Eurosystem has established, both at the European level through the Euro Retail Payments Board and at the national level. We just decided to set up a CBDC working group within our French payments committee (the CNPS). Concerns have emerged that the issuance of a CBDC would threaten the role of banking intermediaries in client relationships, while draining banks’ deposits through a massive conversion into risk-free CBDC accounts, especially in times of stress. These outcomes are not foregone conclusions, to say the least. The Eurosystem is currently looking at the possible scope and design of a digital euro. Let me just share my personal thoughts about the general framework that  Page 4 sur 7 should see light: in my opinion, similarly to the current intermediation model, as many functions as possible should be delegated to intermediaries.   Obviously, some functions should remain the exclusive privilege of the  Eurosystem because they are at the core of its mandate and cannot, by definition, be outsourced. This is the case specifically for the issuance of a potential digital euro.   The Eurosystem should entrust banks with the distribution of digital  euros to final users, while setting technical, functional and commercial rules like for example the branding, logo, and fee structure. We would thus build on their experience as intermediaries to offer means of payment to end users and develop value-added services.
The withdrawal of pension savings will have a significant effect on consumption and trade-related activities next year. The fiscal stimulus will continue to be positive, in accordance with the approved budget. The Chilean economy will receive a slightly greater external boost than previously considered, with our trading partners growing by an average of 4.9% in the years 2021 and 2022, with an average copper price of USD 3.15 per pound in the same years. With this, we project that after falling between 6.25% and 5.75% this year, the Chilean economy will grow between 5.5% and 6.5% in 2021 and between 3% and 4% in 2022 (Table 1). With respect to monetary policy, our assessment of the macroeconomic scenario and its outlook leads us to anticipate that the monetary stimulus will remain high for an extended period of time, so as to ensure the consolidation of the economic recovery and the achievement of the Bank’s objectives. In particular, we foresee the Monetary Policy Rate (MPR) remaining at its minimum level for much of the 24-month monetary policy horizon. As for the unconventional measures, they will remain in place. This considers that the total stock of bank bonds acquired by the CBC under different programs—around USD 8 billion—will be maintained for the next six months, reinvesting the coupons as they mature. This excludes the purchases made under the Cash Purchase and Term Sale (CC-VP) program, which have a different objective. With respect to the FCIC, the Board has made no changes to the total amount of resources available.

During this stage, the Fed’s monetary policy implementation regime worked in such a way that control over the size of its balance sheet, and more specifically over the level of excess reserves, was essential to ensure that the Open Market Desk could control the fed funds rate in a manner consistent with the FOMC’s monetary policy objectives. Had the Fed’s special liquidity facilities grown sufficiently large during that period, raising the level of the excess reserves in the banking system, the fed funds rate would likely have fallen far below the FOMC’s target rate. To keep the fed funds rate around the target, the only sure-fire option was to avoid a significant expansion in the balance sheet by funding the expansion of nontraditional assets, such as TAF loans, FX swaps, and PDCF loans with similarly sized liquidations of the Federal Reserve’s portfolio of Treasury securities. Thus, over the period from August 2007 up through the time of the Lehman Brothers failure in September 2008, the total size of the Fed’s balance sheet and the level of excess reserves in the banking system changed very little. The second stage began in October 2008 when the Federal Reserve gained the authority to pay interest on reserves, including excess reserves. The addition of interest on reserves to the Fed’s toolkit effectively broke the link between the size of the Fed’s balance sheet and the stance of monetary policy.
That is why banking operations need to be safeguarded. One safety measure is the possibility, in exceptional circumstances, of the central bank intervening as the lender of last resort. This is a matter of providing liquidity—as long as the banks are fundamentally solvent—when the stability of the entire financial system is threatened. In that way it is BIS Review 81/1998  -4possible to avoid more serious economic consequences and, provided the problems underlying the crisis are managed, stabilise the situation in the banking system and the economy in general. However, a central bank’s unique possibility of providing liquidity is restricted to the national currency. If a country has an external deficit and revenue from exports does not cover imports, to make up the difference it has to borrow in foreign currency. The vulnerability this involves increases if the loans are short-term, sizeable and have been channelled via the banking system to long-term investment projects. If a country in this situation encounters problems with the renewal of foreign loans, the central bank will have limited opportunities of coming to the rescue with liquidity unless it happens to have sufficient foreign exchange reserves or borrowing facilities. That is more or less what has happened in the countries that have recently been hit by problems. Sudden shifts in confidence as to a country’s real economy, the value of its assets or its political system are examples of factors that have triggered crises in economies that have been highly vulnerable.

It is clear that if real wage growth in the coming years is in line with productivity growth, this will facilitate the Riksbank's efforts. The Riksbank's forecast during the summer rested on the assumption that a weaker labour market would restrain the rate of wage increases to just over 3.5 per cent. But there are examples of wage bargaining rounds in which wages increased excessively despite weak demand pressures, e.g. 1995. The conflict over the Municipal Workers' Union's agreement is also indicative of tensions in the labour market. However, the two most recent wage bargaining rounds have been characterised by greater cooperation between labour market organisations. In addition to current economic conditions, this suggests that the forthcoming wage negotiations should result in economically reasonable wage rises of around 3.5 per cent. It is worth underscoring, however, that no one factor is as important for inflation - and consequently for the repo rate - as wages. The Riksbank will therefore be monitoring the autumn wage bargaining round closely. One factor that has proved difficult to assess in recent years is energy prices, in particular those for electricity. Energy prices have not fallen back as much as we expected during the summer. In August, UND1X inflation excluding interest expenditure, among other things, rose by 2.2 per cent, of which 0.7 percentage points were due to the increase in energy prices. Current forward prices suggest that electricity prices will be approximately 10 per cent higher during the autumn and winter than was indicated before the summer.
In conclusion, allow me to say that the Bank of Albania is in the process of perfecting the supervision regulatory framework, in the context of its cooperation with the European System of Central Banks. However, full and timely respect of legal and regulatory framework requirements on operational capitalisation and liquidity, as well as bank’s overall operational risk management methodology will continue to be an ongoing supervision priority. This process is oriented by the common objective to maintain banking and financial systems stability. The Bank of Albania remains committed to cooperate with the banking sector to achieve successfully this objective. As in previous years, the Bank of Albania will make the appropriate decisions to ensure that its fundamental objectives to maintain price and banking sector stability are constantly accomplished for the country’s stable growth in the long run. Thanking you for your valuable work, I wish you a New Year full of successes in your work and happiness in your families! Thank you! BIS central bankers’ speeches  3

Exports continue to grow, deflation has moderated, and unemployment appears to have peaked. Less easy to quantify is the change in mood, although it is, as I have said, shown to some extent in the activities in the markets, as well as in consumer spending. What is, I think, clear to every observer, however cynical, is that there has been, among all sectors of the community, a marked and quite sudden turnaround, from pessimism bordering on despair to a cheerful if cautious optimism. This comes as a huge relief after the gloom and despondency of the second quarter. Important initiatives, such as CEPA and the relaxation of restrictions on individual travellers from the Mainland, have undoubtedly helped to stimulate confidence. So too have the general - though by no means conclusive - signals that the world economy is also in better shape. It is also very likely that the recent surge in markets and the gradual growth in economic activity are part of a longer-term trend, going on for at least a year now, in which there have been underlying improvements in the Hong Kong economy. Deflation, under the discipline of the Link, has made Hong Kong more competitive: it is now a less expensive city in which to do business or take a holiday. The real effective exchange rate for the Hong Kong dollar - which is a true measure of the competitiveness of an economy - has declined by 24% over the past five years.