samchain/econo-pairs-v1 huggingface dataset:
The rise in oil prices in the early 1970s or German reunification are classic examples. So the risk of divergent monetary policy needs within the euro area is real. And if there were a material divergence of monetary policy needs, that could lead to serious tensions, because alternative adjustment mechanisms, such as labour migration or fiscal redistribution, that exist within individual countries, and which help to alleviate familiar regional disparities when they arise at the national level, are simply not well-developed at the pan-European level. The Maastricht Treaty, of course, recognised this risk. The famous convergence criteria were specifically designed as a means of reducing the risk to manageable proportions by requiring that, before joining the euro club, countries should have achieved at least a minimum degree of macro-economic convergence - thereby demonstrating their commitment to macro-economic discipline both through fiscal consolidation, and through monetary policy consistently directed at effective price, and exchange rate, stability. And all member countries of the European Union have certainly made great progress towards macro-economic stability over the past few years. This has, of course, been a matter of national economic self-interest. But there is no doubt that the goal of monetary union, and the Maastricht criteria, provided a very powerful external incentive for many countries - indeed it is barely conceivable that anything like so much progress would have been achieved across the Continent without this incentive.

If that view were to prevail the main effect would be to inhibit the development of the euro as an international trading and portfolio currency, reducing one of the single currency’s major benefits to both investors and borrowers within the euro area itself. In practice in today’s world of globally integrated markets and liberalised capital flows there is very little prospect of being able to impose artificial constraints on the international use of the euro. There will inevitably be active euro markets in all the major financial centres, including London. And it is in the interest of financial activity right across Europe that there should be. Like trade in goods, trade in financial services is a positive sum game, so that London’s success is not a threat to other European financial centres. As a major interface between Europe and the rest of the world I have little doubt that euro-activity in London will mean more rather than less euro activity in other European financial centres like Frankfurt, Paris, Milan, Amsterdam or Brussels. And conversely I have little doubt either that what is good for those centres will be good too for the City. I hope, Mr. Chairman, that I have said enough to persuade at least some of you that British hesitations about participating in the euro from the outset are not just plain obstinacy!
But there are reasons to think that we will see a pickup in 2016 and 2017 as set out in the forecast Productivity growth can be divided into two sorts of change: the change in productivity inside individual firms and the changes between firms. The first, the changes within firms, happens as firms increase their efficiency. The second happens as labour and capital are reallocated between firms, from the less productive ones to the more productive. This reallocation between firms in the economy happens through changes in market share as the more productive, higher return firms, grow and the less productive, lower return, firms shrink. And it happens through the deaths of the low return firms and the birth of new ones. After collapsing in the crisis, productivity began to increase again within firms two years ago. We expect that to continue. As the economy grows, spare capacity is used up. The real cost of labour increases relative to the cost of investment. Firms have a greater incentive to find efficiency gains and to switch away from more labour-intensive forms of production. This should boost productivity. In contrast, productivity growth due to the reallocation of resources in the economy remains weak. We can see this in the divergence of rates of returns across firms which remain remarkably and unusually high and the change in capital across sectors which has been particularly low.

In our forecast, consumption is initially supported by the growth in real incomes that result from the very low inflation we are now seeing – from the one-off windfall from lower international energy and food prices. But as the sharp, one-off, drop in oil and other prices washes out of the system, real incomes increase over the next three years mainly because both pay and productivity gradually recover. In terms of inflation, we are forecasting that this growth in demand from business investment and consumption against a background of tightening supply in the economy will push inflation back to its 2% target over the next two years. We expect interest rates to rise over the forecast period but gradually and to a level below the pre-crisis average. As with all forecasts, there are risks. There is of course geopolitical risk, including at present obvious risks around Greece. But that is not my focus tonight. Another risk that has attracted some attention is whether we see a change in people’s expectations about inflation due to the very low inflation over past months driven by the drop in oil prices. Clearly, if very low inflation expectations became entrenched this could weaken growth. Sustained deflation can also in more extreme cases lead to lower incomes and higher real debt burdens – so-called ‘debt deflation’. The MPC has made clear that it is alive to this risk and would act if necessary to counteract it.
Under the auspices of the Basel Committee on Banking Supervision of the BIS, a wide-ranging set of reforms has been introduced progressively, including the recent finalization of the Basel III reforms.11 Tighter regulation of international banks must be complemented by effective supervision, and much progress has been made in improving home/host supervisory cooperation. In a local context, cross-border supervisory coordination has taken on increased importance as Brazilian banks have expanded internationally in recent years. Still, greater clarity around how large global banks will be resolved is required if we are to successfully end “too big to fail.” Finally, it is increasingly clear to me that we also need to develop a better shared understanding of the proper role of exchange rate policies and reserve accumulation in a healthy and fair global trading system. To be sure, in a world of volatile capital flows, experience has shown that having adequate reserve cushions has helped many emerging market economies ward off costly instability. Indeed, Brazil’s large stock of foreign exchange reserves has been a key pillar of stability through turbulent periods. But, reserves are a relatively expensive form of insurance, and excessive reserve accumulation can undermine global adjustment, shift burdens onto trading partners, and erode political support for continued trade openness.

Gent Sejko: Lending to and funding the Albanian agriculture sector Address by Mr Gent Sejko, Governor of the Bank of Albania, at an event, organized to discuss on lending issues of the agriculture sector in Albania and launch the initiative on Albania Agribusiness and Tourism Support Facility (AATSP), Tirana, 26 January 2022. * * * Your Excellency Prime Minister, Honourable Madame Ministers, Honourable Head of Albania for the EBRD, Dear friends and colleagues, Let me first to thank you for the invitation to participate in this event, organized to discuss on lending issues of the agriculture sector in Albania and launch the initiative on Albania Agribusiness and Tourism Support Facility (AATSP) mechanism. The Bank of Albania has continuously welcomed the transparent and constructive dialogue amid public authorities, private sector, banking industry and international partners, to address issues which serve to unclog the potential development and welfare growth of Albania. In particular, allow me to emphasize the fact that – despite the considerable progress in the last years – the Albanian agriculture sector, overall, and branches related with it- agritourism and agribusiness – are still far from the full utilisation of both resources and potentials they have. In figures, almost half of the Albanian population lives in rural areas and around 1/3 of labour force in the country are employed in agriculture sector.
Being a large economy, the degree of trade openness of the euro area is much smaller than that of its constituent countries, even though it is still higher than in the United States and Japan. Measured by the average of exports and imports as a share of euro area output, the degree of openness is 16% in the euro area. By contrast, prior to Monetary Union, the average export ratio of all Member States including intra-euro area trade stood at around 35% in 1997, ranging from 20 to 60%. At the same time, the euro area remains more open than the United States and Japan, with ratios of 12% and 11% respectively. Another factor highlighting the role of the euro area in world trade is its share in world exports. With almost 20%, the euro area is the world’s largest exporter, compared with 15% and 9% in the United States and Japan respectively. As regards the structure of the euro area economy, the patterns of production are broadly similar to those of the United States and Japan. While primary production is rather negligible (around 2% of total output), the bulk lies with the euro area’s services sector, accounting for almost 70% of total production, which is roughly equal to that of the United States (72%) and higher than that of Japan 1  BIS Review 72/2000  (60%). The industrial sector accounts for around 30%, which is higher than in the United States but somewhat lower than in Japan.

By reducing the number of key players, the introduction of the euro will simplify the international policy cooperation process between the major economies. In particular, it should make this process more efficient by facilitating the reciprocal exchange of information and views, as well as the formulation of common understandings on economic and financial issues at the global level. Each of 3  BIS Review 72/2000  the main partners - the United States, the euro area and Japan - is in a position to speak for a comparatively large economic area. A more balanced relationship between the major players might help to induce each of them to take on responsibility for contributing to a stable global environment. In many ways, the ECB - which as a rule represents the Eurosystem externally - is already involved in the work of international institutions and fora in the area of competencies of the Eurosystem. Formal and informal agreements have already been reached with the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), the Bank for International Settlements (BIS), the Financial Stability Forum (FSF), and the several groupings of ministers and central bank governors (G7, G10 and G20). The involvement of the ECB was relatively straightforward for groupings created after the introduction of the euro, such as the FSF or G20. In the case of pre-existing international fora and organisations, however, the arrangements to be made were more complicated.
That is because oversight is shared by several different entities, and the power to implement macroprudential tools is constrained. Another challenge is the diverse structure of the U.S. financial system, in which non-banks and capital markets play a substantial role in credit intermediation. Although the Financial Stability Oversight Council (FSOC) could conceivably play a greater role here, whether it will be able to do so effectively remains uncertain. Another issue that needs attention is the ability to resolve large, complex financial firms that operate on a global basis. The framework of requiring such firms to hold a large buffer of debt that could be converted into equity at the time of non-viability is an important step forward. But, the task of operationalizing this on a global basis in a way that is fully credible to these firms’ customers and counterparties has not been completed. Achieving clarity about the roles and responsibilities of home and host country authorities is still a work in progress. The Federal Reserve’s lack of authority to lend to a major securities dealer that gets into difficulty is another outstanding issue. The Dodd-Frank Act narrowed the Federal Reserve’s authority under Section 13(3) of the Federal Reserve Act. No longer can the Federal Reserve lend to an individual securities firm or non-bank financial intermediary. Such authority may not be as necessary now that the Federal Deposit Insurance Corporation (FDIC) has the power to lend under Title II of the Dodd-Frank Act and firms are required to have sufficient resources to support their resolution plans.

Second, when trying to enforce new supervisory guidelines and rules on our local banks, one of the first questions they will ask is what is being done elsewhere. It is thus very helpful to be able to point to the relevant international standard in order to confer legitimacy on what we are trying to achieve. Of course, this presupposes that international standards are relevant to individual countries and territories. The Basle Committee on Banking Supervision has played a major role in setting standards which do have such relevance. In particular, the Basle capital adequacy ratio, which is still called the “Cooke ratio” in parts of Asia in deference to our chairman here today, has become the de facto capital standard in most supervisory systems around the world despite the fact that it was originally intended to apply only to internationally active banks. Despite this enormous achievement, however, it can be argued that the subsequent work of the Committee did become somewhat too narrowly focused on issues which are of principal interest to supervisors from G-10 countries. This is only natural since these are the people who comprise the Basle Committee but it perhaps left something of a vacuum in the setting and promulgation of standards with more global relevance. In particular, much of the work of the Basle Committee has been dominated in recent years by the formulation of its recommendations to extend the capital adequacy regime to cover the market risk arising from trading in derivatives and other financial instruments.
2  1  See Tucker, PMWT, 2008 “Making monetary policy by Committee” Bank of England Quarterly Bulletin 2008 Q3 (forthcoming) for some thoughts on the relatively collective nature of the MPC’s forecasts given its one person, one vote decisions on Bank Rate. 2  I have to say that the textbook stress on the mean (or expected value) might be somewhat overdone in some circumstances, in particular where the mean is materially influenced by certain types of low probability/high impact risks. I hope the following will illustrate that. Imagine, not in the current context, that there is a risk of a dollar collapse against the euro, the currency of the UK’s largest trading partner, but without a similar risk of sterling collapsing. Say the probability is judged to be low, but the impact large; so that, in the probability-weighted way, it is enough to shift the mean outlook for future inflation. If (if) the risk crystallised,  BIS Review 112/2008  1  Now, putting this together, the following inference can be drawn; and I hope that I shall be excused if I plod through this in slow motion. Focusing on a roughly two-year horizon, if inflation was most likely to be below target in the context of the August modal forecast for output, then it would be even further below target if the MPC’s view in August of the downside risks to growth were to materialise (ie consistent with the mean path for output but no further adverse shock to costs).

In my view, however, the technical innovations are not the only explanation. The deregulations that began in the 1980s, as well as the consolidation of the federal budget during the 1990s, should also be mentioned as major factors. The deregulations have helped to strengthen America’s corporate sector and the improvement in the federal finances led to increased confidence among households and firms as well as somewhat lower long bond rates. Low interest rates and higher productivity growth then paved the way for the massive wave of investment. The U.S. economy’s growth rate shot up and unemployment dropped to levels that hardly anyone believed could be combined with low, stable inflation. As outcomes proved earlier forecasts wrong, assessments of how strong demand’s long-term growth could be without generating rising inflation were adjusted gradually upwards. Turning then to share prices in the United States, in the first place the Nasdaq exchange with its predominance of high-tech companies, we can see that expectations of corporate profits rose rapidly  BIS Review 20/2001  1  to levels that had not been seen since the 1930s. The trend peaked last year with share prices at record levels and a GDP growth rate above five per cent, in some quarters even higher. The reverse side of the medal lies in the imbalances that have built up during this period. The United States has been living on borrowed money; even though the federal budget was first consolidated and then generated a growing surplus, investment exceeded aggregate saving.
To illustrate what we are doing today we can use a simple equation that describes the banks' lending rate – that is the rate charged to households and companies – as the repo rate plus a premium. Image 4: Monetary policy and financial stability are interlinked  itlending = it + m(ct ,...)  The size of this premium depends on the bank's demand for compensation for, for example, credit risks, any differences in periods to maturity and the need to retain sufficient capital to cover the loans. What we are doing now is partly to control the first term, that is the policy rate, and partly to attempt to influence the second term, that is the risk premiums that are today reflected in large credit spreads as a result of the financial turmoil. To do this we must use tools from both of the toolboxes. It is against this background that we can view the monetary policy measures of a more or less unconventional nature that are now being taken in various parts of the world. I will now try to discuss this in a little more detail. Unconventional monetary policy As I mentioned earlier, the central banks have reduced policy rates quickly and dramatically in order to mitigate the effects of the financial crisis. At the end of last year, the US central bank cut its policy rate target to an interval of 0-0.25 per cent.

In particular, a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation. Moreover, in examining the implications of the current increase in energy prices, it is necessary to take into account the full macroeconomic implications of adverse external shocks and supply shocks in the energy sector, including the associated headwinds for the economic outlook and the negative wealth effect associated with a deterioration in the terms of trade. Through these mechanisms, an energy price shock can simultaneously raise headline inflation but exert downward pressure on the path of underlying inflation. In addition to rate forward guidance, calibrating the volume of asset purchases also plays an important role in ensuring that the monetary stance is sufficiently accommodative to deliver the timely attainment of our medium-term two per cent target. In particular, the compression of term premia through the duration extraction channel plays a quantitatively-significant role in determining longer-term yields and ensuring that financing conditions are sufficiently supportive to be consistent with the delivery of our medium-term inflation objective.2 In conclusion, in addition to learning from the research presented and discussed at this year’s event, I look forward to seeing how this year’s strategy review (and our ongoing implementation of the strategy) shapes the research that will be presented in future editions of this annual conference series. With that, let me offer my best wishes to all conference participants for an exciting two days.
In particular, the potential amplification of the shock within the financial system through channels such as an endogenous fall in market liquidity as firms simultaneously seek to lower risk exposures; dynamic hedging behaviour (particularly of “unbalanced” options positions) 3 ; and restrictions on lending (a  3  Bank of England Financial Stability Report July 2006 Box 5, Page 33. BIS Review 81/2007  3  “credit crunch” or “financial accelerator” effect), are not yet built in empirically. And the framework does not yet incorporate the potential contagion and spillover effects which would result from severe strain at, or the default of, a major bank or financial institution. 4  BIS Review 81/2007  9 At present, the results from the top-down stress tests consequently tend to be relatively “linear”; that is an “extreme” scenario is a “scaled-up” version of a more “moderate” scenario. As financial instability is by nature inherently non-linear, given the central focus on default, contagion and spillover, this is an important failing. Moreover, the stress-tests typically concentrate on the impact of particular adverse scenarios, which individually have a nearzero probability of occurring in practice. There is generally no attempt to derive a distribution of possible outcomes. 10 Addressing these limitations is an important priority for financial stability authorities, so that “practical” stress-testing meets the “ideal” objectives set out above.

When operational, such distributions should help guide judgements on how overall financial system vulnerability is changing. But the approach should also provide considerable additional information on pressure points within the system and on the channels of transmission and potential contagion. 14 I believe that this broad approach offers an important step forwards in the development of an analytically and empirically robust framework for financial stability work. Of course it is analytically hugely challenging – modelling non-linear tail events with endogenous strategic interactions is always going to be tough! The results will inevitably be subject to major uncertainty. But the approach does start to provide a consistent and coherent framework which should substantially improve the value of top-down stress tests and of risk assessment work. 15 A particular “operational” aim is to use the results to help improve the focus of risk reduction work and crisis management planning, for example through the identification of  BIS Review 81/2007  7  “weak points” in the financial system and through improved assessment of the impact of policy interventions. An important element of risk reduction work is to influence the behaviour of financial firms. “Bottom-up” or firm-level stress-testing practices have developed rapidly in recent years. But one challenge is that, as for the authorities, it is hard for individual firms to gauge the likely “systemic impact” of particular shocks, which takes into account macro and financial system interactions and feedback effects.