samchain/econo-pairs-v1 huggingface dataset:
The reaction to the crisis has however shown that central banks learn fast and can take decisive action to protect the economy. Their response is in stark contrast to how they reacted to the Great Depression. On that occasion, monetary policy-makers were largely responsible for causing the crisis, for deepening it and for preventing a quick recovery. We can be more optimistic this time around. 12  BIS Review 45/2010

Going forward, the strategic location of Thailand and regional trend towards more economic integration provides an opportunity for Thailand in terms of market reach. We are located in the centre of ASEAN, with a combined population of more than 600 million, a large proportion who are of middle income and have potential to spend on goods and services. We are also to enter the ASEAN economic community, a regional agreement to liberalize and integrate trade in 2015 which would further develop trade prospects. Economic integration with CLMV countries will open up the opportunity to tap into a rapidly-growing consumer market as well as the regional workforce. Thailand is well known as a high performance production base in the region, especially for automobiles, food and petrochemicals. Meanwhile, the CLMV countries have a young and abundant labor force. Thus Thailand can benefit from a production supply chain that makes use of the CLMV resources for more efficient production to support businesses at home. Seeing these chances, the government has given priority to infrastructure by endorsing investment plans, especially in railways and roads, to reduce transportation costs, and setting up Special Economic Zones at five locations along our border to reap the benefit from our strategic location as a gateway to other ASEAN countries. On the side of the Bank of Thailand, we facilitate the ease of doing business through the Capital Account Liberalization Master Plan so that businesses can benefit from this opportunity.
Without it, we cannot imagine to successfully cope with the challenges ahead of us, especially now, when the European integration is becoming more realistic, which means intensive preparations for the future monetary integration. All of this requires an unconditional consistency in the price stability and the exchange rate of the domestic currency, a supervisory setup that is close to the European one, as well as institutional capacity for a quality dialogue with the European monetary authority. In the end, on behalf of the central bank team and on my behalf, I would like to thank and pay a tribute to the previous governors and managements and to all those who have been part of the central bank in the years behind, the ones that selflessly dedicated themselves and managed to build an institution that is independent, transparent, highly professional and respected in the international community. I would also like to thank the professionals who are a part of our team today – they are the foundation of the values that we constantly build, following the only path to our European future. Even today, 28 years after the monetary independence, we stand firm ahead of new challenges and I assure you that we will succeed by guaranteeing the stability of the denar and price stability, which are the best contributions that a central bank can make for the prosperity of our society. Congratulations on the 28th anniversary of the monetary independence! 2/2  BIS central bankers' speeches

In a liberalised financial market environment, the central bank contributes to the reduction in lending rates by reducing inflation. The Government also contributes by implementing prudent fiscal policy, thus limiting the incidence of crowding out of the private sector by the Government. As a result, yield rates on Government securities fall. As inflation and yield rates on Government securities decline, lending rates are also expected to decline in the medium to long term as the two provide the relevant opportunity cost of lending to the private sector. Another factor that commercial banks take into consideration in determining lending rates is the default risk arising from the poor credit culture in the economy in general. In resolving the problem of poor credit culture, the Central Bank through the Financial Sector Development Plan, facilitated the establishment of a credit reference bureau which collects information on borrowers to be used by credit providers. Furthermore, in order to increase competition in the financial sector the Bank of Zambia has registered a number of commercial banks and other financial institutions to operate in Zambia. In 2009, the number of registered banks increased from 14 to 17. In addition, the Bank of Zambia is developing a framework to migrate from the use of monetary aggregates as the anchor of inflation expectations to the use of interest rates.
Following the deepening of the global financial crisis, we focused on policies to contain the adverse effects of the crisis on economic activity and financial stability, while also overseeing price stability. Accordingly, our Bank slashed policy rates and kept them at low levels for quite some time in addition to deploying supportive liquidity measures. 38. In view of the normalization in money and credit markets amid waning effects of the global crisis on financial markets, we announced our exit strategy on April 14, 2010, which encompasses the withdrawal of crisis measures and the normalization process of the monetary policy. Unlike other emerging economies, Turkey entered the global crisis with a strong and well-regulated banking system as well as a flexible and efficient liquidity management tailored to previous crisis experience. Hence, our balance sheet deteriorated only slightly due to anti-crisis measures and we were not forced to adopt radical measures during the crisis. Thus, our exit strategy was simple compared to those of many other central banks. 39. As part of the exit strategy and also considering the favorable developments in credit markets and the recovery in economic activity, the CBRT started to withdraw the temporary liquidity measures introduced during the crisis. Hence, the excess liquidity provided to the market was gradually drained in tandem with the normalization process. Moreover, as the first step of the technical rate adjustment process, the 1-week repo rate was adopted as the key policy rate in May. 40.

Even if we had had perfect foresight at the time, the MPC would have still been faced with the same choice – the adjustment in real wages was unavoidable. Of course if nominal wages start to rise in an attempt to offset that inevitable fall in standards of living, risking a wage-price spiral as the UK had in the seventies, then the MPC would be duty-bound to raise Bank Rate sooner to bring inflation back to target, regardless of any short-run pressures on output. Given the nature and timing of the shocks, I would argue that the best we can do with monetary policy is accept the initial impact and then to gently steer inflation back to target in the medium term. In the remainder of this speech, I want to consider how we come to make our judgments about that, month-by-month, and in particular, discuss the relative role of economic forecasts and human judgment. Monetary policy in practice The Bank has come in for a lot of criticism recently about its forecasting record. For a period now, CPI inflation has been significantly higher than the Bank had been previously expecting. And in 2010 Q4 and 2011 Q1, output growth disappointed relative to our central expectations. In this section, I want to dig a little deeper into the issues around models and forecasts. Step back for a second and consider what an economic model actually is and why it might be useful.
The scale of the upside risk (G) has no bearing on the value of waiting and none, therefore, on the optimal timing of the firm’s decision. That’s because we assume it doesn’t take any significant time to implement the investment. The firm can therefore profit from the upside outcome (with a certain probability) whether it’s already invested by the time the event is realised, or instead chooses to wait until the good news actually comes through. The real value of delaying the decision is that you avoid locking yourself in to what could be a bad outcome – and the greater the danger and scale of those downside risks (λ and L respectively) the greater the incentive to wait. Thus, although we talk in general terms about the impact of “uncertainty” on investment this is really a euphemism for downside risks specifically. 7 In the case of Brexit you could spin this “Bad News” principle both ways. It’s worth recognising, for example, that weak investment doesn’t mean there aren’t potential upside outcomes. In principle businesses could well see positive opportunities from all this – it may just be that they have no reason to make the resulting investments until they actually know the final outcome. On the other hand, what you can conclude from weak investment is that, whatever the scale of those upside risks, firms definitely see potential downside risks from Brexit (L > 0). We know that directly, of course, from the various business surveys (Charts 2 and 3 again).

The blue line is a measure of the cost of finance for risky investments: it’s the profits of UK-quoted companies relative to their market value (debt as well as equity). The graph shows that, despite a protracted and significant decline in risk-free interest rates, firms have had to generate significantly more profits than in the past to raise a given amount of finance. The spread between the two lines is a measure of the risk premium on new investments, and it’s gone up significantly in the past few years, including since the EU referendum in 2016. Chart 11 carries a similar message. Here the orange line is a similar measure of that spread, between the rate of profit for private-sector firms11 and the yield on gilts. The blue line is the rate of growth of their investment spending. 10  In the simplified way that macro-economists sometimes use to describe the supply side of the economy, using a so-called “production function”, the elasticity of productivity with respect to the cost of capital – the proportionate response of the first to the second – is the product of two numbers: the share of national income going to capital (as opposed to labour), and something called the “elasticity of substitution” between the two inputs. In the data, the first is around one third; empirical estimates for UK put the second at around one half. Multiply the two and you get a figure of around one sixth. 11 The two charts use slightly different measures of profitability.
Nominal wages do not readily fall. With some inflation, relative wages can change without a fall in nominal wages. There may also be rigidities in the pricing of goods and services. Some degree of inflation will thus oil the economic machinery. •  In periods, inflation and economic growth will be low. It is then appropriate for real interest rates to be low, or even negative. Nominal interest rates cannot be set below zero. If inflation becomes entrenched at a low level or near zero, the interest rate will be less effective as an instrument. •  There are different ways of measuring inflation. The consumer price index tends to overestimate actual inflation. The most important source of measurement errors is probably the difficulty of distinguishing between changes in the quality and price of goods. In other countries, findings show that the consumer price index overestimates actual inflation to the order of ½-1 per cent. The inflation target is a vehicle for, not an obstacle to, monetary policy’s contribution to stabilising output and employment. This objective is also expressed in the Regulation on Monetary Policy. If demand for goods and services is high and there is a shortage of labour, there will normally be prospects of higher inflation. When interest rates are increased, demand falls and inflation is kept at bay. If demand is low and unemployment rises, there will be prospects of lower inflation. The interest rate will then be lowered.

Last year our Agents – Adrian and Ian – drove 30,000 miles to talk faceto-face with you. The rugged scenery is, I suspect, less appealing to them as they wind their way – slowly – through the valleys and mountains. When you talk to them, you are speaking to the Monetary Policy Committee at only one remove before it sets interest rates. On this occasion, I am not in Wales to enjoy the scenery. I am here to listen to your views at first hand. But tonight I want to explain. Over the past year Bank Rate has risen four times to reach 5½%. A year ago, few expected that to happen – markets thought that by now Bank Rate would be only 4¾%. Market expectations of where Bank Rate will be at the end of this year have risen from 5% in the middle of last year to 6% now. So what has happened over the past twelve months? The right place to start is with inflation – that is, after all, the Bank of England’s target. A year ago inflation was bang on the 2% target. The latest figure – for April – is 2.8%. In recent months inflation has been volatile, rising to above 3% in March, when I had to write an open letter to the Chancellor, and subsequently falling back. The number for May, to be published tomorrow, is awaited with interest. Many column inches have been devoted to these short-run movements.
17  Smith recognised this too: “though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in money, but in the money’s worth; not in the metal pieces, but in what can be got for them” Wealth of Nations, I,ii,p295. 4  BIS Review 102/2006  can’t force people to use paper money, although after the French Revolution the Jacobins had a try. They made it a capital offence to use commodities as money! This was a desperate and unsustainable action resulting from the Jacobin policy of debasing their paper money – the Assignat – to make up for a collapse in tax revenues and to finance a war against Prussia. A more sensible solution is to create institutions in which we can have trust. On the front of this Bank of England £ note is written “I promise to pay the bearer on demand the sum of Twenty Pounds”. In essence, the promise is that the “stuff” that you can buy with this note does not change much from one year to the next. In other words, the general purchasing power of the note is broadly stable – we have price stability. Our ability to maintain price stability depends upon an institutional framework which is expected to persist. That depends on all of us acting collectively – the value of a nation’s money is inherently a political choice. Inflation arises when the collective political commitment to maintain price stability weakens.

On the contrary, it’s based very much on emerging best practices in the risk management arena globally, and the objective is to try to encourage the wider spread of these best practices around the banking community worldwide. As regards Hong Kong, embracing the New Accord can only further strengthen our position as one of the world’s leading international financial centres. BIS Review 31/2003  3
And the other thing to note is this: so far, not a single draft decision made by the Supervisory Board has been challenged by the Governing Council. But I admit that the decision-making process is complex. This, however, does not limit our ability to take decisions. In 2017 alone, we took a total of 2,308 decisions. On average, that amounts to more than six decisions a day, weekends included. So if something needs doing, it gets done. Ladies and gentlemen, the banking union is the place to be. There is a lot to be gained from going there. And if those who come bring along a stable and resilient banking sector as well as a tradition of strong banking supervision, the gains will be mutual. But let’s be honest. As any economist will tell you, there’s no such thing as a free lunch. Surely all this must come at a price? Well, in my view, the price of being a part of the banking union is low compared with the benefits it offers. Is it a free lunch? If you are part of the banking union, you need to share. You need to share control over banking supervision and resolution. That is the price to be paid. Now, I understand that it is often seen as vital to have total control over sensitive policy areas. And I understand that there is a feeling that if 4/7  BIS central bankers' speeches  you want something done well, you must do it yourself.

Banks were ailing, some governments were struggling to obtain the funding they needed, markets were in turmoil, and there were fears that the euro area might eventually break apart. Well, it didn’t break apart. In fact, the crisis triggered a chain of reforms, and these reforms have made the euro area more stable. One of the boldest steps was taken at the peak of the crisis. On 28 June 2012, EU leaders decided to move towards a European banking union. And move they did. Two years, four months and six days later, they had turned their political pledge into reality. On a rainy day in November 2014, banking supervision was taken to the European level. Another year later, the same was done for bank resolution. And there is an ongoing debate about whether and how all this should be supplemented with a European deposit insurance scheme. In my view, it should be, and I am certain that, at some point, it will be. From the start, the banking union has covered the entire euro area. But its boundaries are not set in stone. The banking union is not an exclusive club; it is not limited to those countries that share the euro as their common currency. In fact, any EU country can join the banking union through an arrangement known as “close cooperation”. I know that many in Denmark are very much aware of this. But, as I said, I’m not here to talk about Denmark. I am here to talk about the banking union.
To generate these, consider a simplified version of (9) which abstracts from discount rates, company-specific risk premia and dividends: (11)  Following Wickens (1982), the rational expectation t+N periods ahead are formed on the basis of information available at time t. For each company j, these expectations differ from the realised values by a forecast error ( ) unpredictable at time t: (12)  Adding and subtracting the average forecast error across all companies (  ) gives:  (13)  Actual prices cannot be used in the estimation of (13) as these are not known at time t and . But consistent estimation of are correlated with the error term ( but which are independent of (13) is possible using a set of instruments correlated with the company-specific excess forecasting errors. In the estimation, lagged share prices, lagged dividends per share and lagged earnings per share are used as instruments for future dividends and equity prices. These are known at time t but are uncorrelated with the error term. Five lags of each variable (price, dividends, earnings) are used as instruments. BIS central bankers’ speeches  9  (c)  Generating estimates of short-termism  Given estimates of company beta and gearing, risk-free rates and the instrumented variables, equation (9) can be estimated to generate estimates of the short-termism parameter, x. This was achieved using non-linear least squares on a set of cross-sectional regressions for each of the years 1985 to 2004.24 Chart 4 shows point estimates of x for each of these years.

Oil prices, which reached historical highs in nominal US dollar terms in the last week of October, are a key factor determining near-term prospects for economic activity and inflation, both globally and in the euro area. As I noted earlier, persistently high and rising oil prices have had a visible direct impact on consumer prices in the euro area, and inflation is likely to remain above the upper limit of our definition of price stability of 2% in the coming months. This is a worrisome development, although there is little indication that medium-term inflationary pressures are building up in the euro area. What would be the potential impact of a sustained rise in oil prices on key macroeconomic variables in quantitative terms? For purely illustrative purposes, and using a variety of macroeconomic models, ECB economists have estimated the potential impact of a hypothetical permanent oil price increase of 50% on both inflation and output. According to these calculations, such an increase would add 0.3 to 0.6 percentage points to overall inflation in the euro area in the first year and 0.1 to 0.4 percentage points in the second year, before petering out in the third year (0.0 to 0.1 percentage points).
5  CFTC UBS, 2012, page 12. 6  CFTC UBS, 2012, page 13. 7  CFTC Barclays, 2012, page 13. 4  BIS central bankers’ speeches  We have learned as well that compensation and hiring practices also helped to undermine the integrity of the reporting regime. For example, we have seen that compensation and promotion within a bank are often tied to a trader’s market share and profitability. In addition, traders often move between firms so having a network of external contacts and being viewed as a team player could help to support job mobility. Consequently, one can conclude that even the loss of a job is not necessarily a permanent setback, and that market participants with allegations of improper behavior could potentially move on to other firms with the expectation that they would generate revenue and profits for their new employer. These incentives were amplified by the structure of the markets that underlie the setting of LIBOR and those that use LIBOR. The interbank cash borrowing market that LIBOR references is very small relative to the enormous markets that use LIBOR, for example interest rate derivatives. The standardization of settlement dates further concentrated trading activity. In this type of environment, relatively small changes in LIBOR submissions – either because the actual borrowing costs fluctuate or a submitting bank intentionally misreports its submissions – can have substantive effects on a trader’s profitability because the trader can hold large derivatives or futures positions that reference the cash LIBOR rate at the time these contracts settle.

In addition, the severe supply-chain bottlenecks that initially affected this category began to improve last year, which likely contributed to the easing of prices for some durable goods in recent months. However, there are factors that may throw sand in this gear going forward. The economic resiliency of Europe and a rebound in growth in China following the end of COVID restrictions will likely increase global demand for goods. And further improvement in global supply-chain disruptions has stalled over the past few months. For example, the New York Fed's Global Supply Chain Pressure Index remains elevated relative to pre-pandemic levels. The slowest gear to turn is the one that represents non-energy services. It's influenced by the balance of overall supply and demand, and it will take the longest to rotate at the right pace for low and stable inflation. One area where we are seeing signs of this gear turning is in shelter costs. After a sharp rise, we have seen a steep decline in the rate of increase in new lease rents. Assuming this trend continues, we should see a slowing of overall rent inflation during this year. That said, we have yet to see the gears turn for inflation of non-energy services excluding housing, which is still quite elevated, averaging 3-3/4 percent over the most recent six months. Tightening Monetary Policy Taking into account the different speeds the gears are moving, it is clear that overall demand remains well in excess of supply, and inflation is running far above our 2 percent target.