samchain/econo-pairs-v1 huggingface dataset:
The latter will call for a careful assessment of the inflation risk and the recovery strength so that the calibration of monetary policy going forward will be well-timed and consistent with the objective of maintaining growth with price and financial stability. Also, developments on the growth outlook next year are not without risk. An overarching risk is that the global economic recovery could stall. This could occur given the many headwinds and uncertainties that remain in the global economy as I already noted. Next, the second area of risk is the possible effects on business sentiment and consumer confidence at home from our own domestic political situations which could stifle the recovery in private sector demand. If this was to happen, the benefits that we expected to have from fiscal policy stimulus to lead a rebound in private sector spending would be weakened, rendering a missed opportunity for public sector spending to ignite the needed rebound in private investment. And finally, a resurgence of strong capital flows to Asia and a return of asset price inflation could pose a risk to financial stability and complicates further the conduct of monetary policy. The Bank of Thailand is mindful of these risks and is alert to their possible impacts on the economy. I hope I have given you a clear enough picture of what can be expected next year in terms of the economic outlook and the challenge for policy.

At the same time, there is great uncertainty surrounding fiscal policy as there is a political deadlock between the Democrats and the Republicans in Congress that may remain after the presidential election in 2012. The uncertainty has caused analysts to talk about the US economy facing a fiscal cliff next year. The concern applies on the one had to whether earlier income tax cuts and reductions in payroll taxes will be extended beyond the end of the year, and on the other hand is linked to the automatic expenditure cuts that will come into force at the turn of the year unless Congress can agree on long-term sustainable budget consolidation. All in all, these automatic tax increases and cuts in public expenditure entail a tightening during 2013 of 3–4 per cent of GDP. A further element of uncertainty is the result of the presidential election in November. If the results of the election are inconclusive and no party gains a clear majority, there is a major risk that the political deadlock will persist. The lack of credible budget solutions at present, and the low confidence in the political system’s ability to deal with the fiscal policy challenge, could led to companies and households beginning to act with greater caution. This would subdue growth in the world economy. We have given consideration to these risks in our forecast, but it is of course possible that the situation will be more problematic than we have assumed. Realistic to believe in an orderly resolution of the euro crisis?
His 2017 NIESR paper with Bill Allen examined the shift from the “old normal” of pre-financial crisis monetary policy to the “new normal” of QE and forward guidance, as well as engaging seriously with what a “future normal” for monetary policy might look like.5 That is a framing I will use for this lecture in setting out my own views of QE as a monetary policy tool, and then focusing on two other policy debates highlighted by the IEO review, the links between QE and government financing, an issue Peter also considered6, and the links between QE and climate change. The Bank of England and its balance sheet I’ll come on to the details of what exactly QE is and what uses it has as a policy tool, including over the last 11 months in response to the Covid pandemic. But I want to start by considering a more general question, which is the question of what central banks are actually for. That’s because I don’t think you can answer the question of how to use a tool without first knowing what you want the tool to do.

2007 UK data use the same methodology. (d) US data is based on US GAAP accounting principles. 2007 US data is break-adjusted by Bank of England staff to include assets of several large bank holding companies (BHCs) that became BHCs in 2009, and so were previously excluded from the data. BIS central bankers’ speeches  17  Table 5: General and central government expenditure as % GDP  Australia Austria Belgium Canada  General government expenditure, % of GDP(a)(b) 36 53 53 44  Central government expenditure, % of GDP(a)(b) 26 27 30 17  Czech Republic Denmark Estonia Finland  44 58 40 56  30 42 30 28  France Germany Greece Hungary  57 48 51 50  24 16 40 33  Iceland Ireland Israel Italy  52 65 45 50  40 58 39 29  Japan Korea Luxembourg Mexico  41 30 44 23  18 20 31 19  Netherlands Norway Poland Portugal  51 45 45 51  31 36 27 39  Slovak Republic Slovenia Spain Sweden  40 49 46 52  23 31 19 30  Switzerland Turkey United Kingdom United States  34 40 50 43  11 29 46 26  Source: OECD Notes: Table shows ratios of nominal government expenditure to nominal GDP for 2010. 18  BIS central bankers’ speeches
That would only be a problem if the world recovery faltered seriously. While Asia and emerging markets continue to power ahead, and the US and the European Union are also recovering steadily, we should not expect to see a significant interruption to growth across the world economy. 3  See Sentance, A., “Sustaining the Recovery” Speech hosted by British American Business Council and RSM Tenon in London, 13 October 2010. Available on the Bank of England website. BIS Review 158/2010  3  Business resilience through the recession The turnaround that we have seen in the UK economy over the last year mainly reflects a change in demand conditions. But economic growth cannot be generated simply by stimulating demand if the supply side of the economy is not in good shape and able to respond. In the UK, we saw this most clearly in the 1970s and early 1980s, when British business was encumbered by problems of poor industrial relations, low productivity and inflexible labour markets – the symptoms of what became known as “The British Disease”. Since that time, we have seen quite a bit of evidence that the supply side of the UK economy has indeed become more flexible and supportive of growth. Surveys of the business climate in the UK, which aim to take into account the impact of regulation and other factors as barriers to doing business, show that we are well placed internationally, as the latest “Doing Business” survey from the World Bank shows (see Chart 2).

Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. Cross-checking the outcome of the economic analysis with that of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as money and credit growth continues to slow down. Against this background, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. As the transmission of monetary policy works with lags, we expect that our policy action will progressively feed through to the economy. Hence, with all the measures we have taken, monetary policy has been supporting the availability of liquidity and the recovery of the euro  2  BIS Review 136/2009  area economy. Looking ahead, and taking into account the improved conditions in financial markets, not all our liquidity measures will be needed to the same extent as in the past. Accordingly, the Governing Council will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. By so doing, the Governing Council will continue to ensure a firm anchoring of mediumterm inflation expectations. Such anchoring is indispensable to supporting sustainable growth and employment and contributing to financial stability.
Relative prices, or price differences between goods and services, should ideally reflect demand and production cost. Correct prices contribute to the economically efficient production and distribution of goods. When it becomes difficult to observe relative prices, resource use may become less efficient. High inflation not only makes it more difficult to observe relative prices but may also impair the ability of relative prices to reflect supply and demand at a given time. The reason is that most prices are not changed continually. In a high-inflation environment, the relative price of a good gradually falls until the firm adjusts the price. Right before the price change, the relative price will therefore often be “too low”. Right after the price change, it will often be “too high”, because the firm will factor in expected inflation when adjusting the price. These inflation costs figure prominently in the New Keynesian literature but are probably not very large in practice. [2] A final point relates to distributional effects. High and variable inflation also leads to unexpected changes in purchasing power. Wage income and social security benefits are normally not protected against changes in the general price level – at least not in the short term. An unexpected increase  in inflation will therefore reduce most households’ purchasing power. This especially affects households that cannot draw on savings. In this group we are likely to find a large share of lowincome households.

Convergence Programs of the new Member States should include ambitious Medium Term Objectives to ensure that not only the Maastricht criteria are met, but most importantly, the emergence of excessive deficit situations is avoided and the risks of taking recourse to exchange rate adjustments after joining the ERM2 (and, eventually, the euro area) are minimized. The well functioning single market for all goods and services, including infrastructure networks, as well as pursuing the National Reform Programmes in the context of the reinforced Lisbon agenda is the other pillar for the success of the euro area and for the new Member States in particular. Estonia has been a de facto member of the euro area since the inception of its independent currency in 1992. Fixing the local currency to D-mark, and later to the euro meant that the monetary policy decisions were not made in Estonia. Estonia's currency board regime implies prudent fiscal stance that has been largely adhered to since 1992, resulting in our general government having accumulated a relatively large net asset position of around 10 percent of GDP. A solid budgetary position and early deregulation of product and capital markets implies that Estonia has been well placed to absorb both positive and negative shocks during the last 15 years. Deregulation and reform in preparation of the EU membership has allowed us to fully integrate our economic and financial systems with the Single Market. However, that kind of approach requires, in today's conjuncture, forward-looking structural reforms in almost all EU member states, e.g.
In fact price stability, in the sense of an inflation rate overall of around 2½% a year, is likely to mean that the prices of manufactured goods will, on average, not rise at all. Faster productivity growth in manufacturing than in services, averaging around 2% over the last twenty years, means that the prices of services will rise faster than those of manufactured goods. And the rise in sterling over the past five years increased the difference between inflation rates in the two sectors. Table 5 shows the inflation rates for goods and services in the major economies. Positive rates of inflation for services, which account for around half of consumer spending, show deflation in most of the world economy is still some way off. In all countries over the past decade the gap between goods and services price inflation reflects productivity differences. That gap has widened somewhat in recent years as increasing competition from new producers has driven down prices of tradable goods. But the striking feature of the table is the extent to which the difference has increased to no less than 5.7 percentage points in the UK, much more than in the US where in turn the gap is larger than elsewhere. Exchange rate movements are largely responsible for these differences. The extent to which services inflation has risen relative to goods inflation is another manifestation of the imbalance within the UK economy.

Let me be elaborate on these key risks and vulnerabilities: The main risks identified outside the euro area financial system include the possibility of: •  vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions;  •  greater-than-expected household sector credit losses if unemployment rises by more than expected;  •  the surge of government indebtedness raising concerns about the sustainability of the public finances, as well as the crowding out of private investment; and  •  an adverse feed-back between the financial sector and public finances as a result of government financial system support measures, fiscal stimuli and weak economic activity. Within the euro area financial system, important risks include the possibility of: •  renewed financial strains and that the recent recovery of bank profitability will not prove durable;  •  vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries being unearthed; and  •  a setback for the recent recovery of financial markets, if macroeconomic outcomes fail to live up to optimistic expectations. All in all, the challenges facing the euro area banking sector in the period ahead call for caution in avoiding timing errors in disengaging from public support. In particular, exit decisions by governments will need to carefully balance the risks of exiting too early against those of exiting too late.
François Villeroy de Galhau: Financing of Very Small Enterprises (VSEs) Introductory speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Symposium on the Financing of Very Small Enterprises (VSEs), organised by the Bank of France in conjunction with the Federation of Approved Management Centres, Paris, 15 January 2016. *  *  *  Ladies and gentlemen, Welcome to the Banque de France for this symposium on the financing of very small enterprises or VSEs. It was conceived and organised in conjunction with the Federation of Approved Management Centres, and I would like to extend my warmest thanks to them, and in particular to their President Yves Marmont. I am very pleased to have developed such a close and lasting relationship with your organisation, which plays a vital role in supporting SMEs and VSEs. This event would also have been impossible without the help of the individuals and organisations who have agreed to take part in our three round tables today, and I would like to thank them sincerely for their contribution. It is a particular pleasure for me to be able to open this symposium today. As you know, just a few months ago, I had the honour of submitting a report to the prime minister on the financing of business investment, the first proposed recommendation of which was to “Improve access to credit for very small businesses, especially cash loans”. This is our focus today.

I shall follow your work and the results closely, and I hope you enjoy this excellent event. Thank you for your attention. 4  BIS central bankers’ speeches
It is therefore essential that, while staying abreast of innovations in the financial world and taking on the changes that are required to stay competitive and improve efficiency, the domestic banking sector must also continue to build upon the strengths of the traditional model. By contrast, the financial turmoil of recent years has had a negative effect across many countries, particularly on financial institutions that rely on wholesale funding sources. In response to the rapid drying up of the interbank markets and with liquidity abruptly disappearing in many key financial markets in the euro area, the Eurosystem has for the past three years been implementing a broad programme of enhanced credit support. In particular, the Eurosystem has been providing liquidity on a fixed rate and full allotment basis and has also extended the maturity of its re-financing operations. These non-standard measures have been instrumental in avoiding a credit crunch and supporting financial stability. These measures are designed to ensure an effective transmission of monetary policy – to maintain the flow of credit to the real economy, avoiding liquidity problems and supporting growth in productive activity. However, there may be instances where the availability of these funding sources may induce some credit institutions to embark on alternative business models where access to central bank funding becomes the primary source of funding. I would like to make it very clear that the Central Bank of Malta is not prepared to support such ventures. When the conditions are favourable a higher leverage ratio increases the return on capital.

Of course, determined efforts are required on the part of EU governments to reach a consensus on improvements in governance – particularly on the rules governing budgetary policy in the monetary union – and on the provision of bail-out funds. While the discussion and decision process surrounding these matters are often regarded as a weakness in the governance structure, it must also be recognised that the changes involved represent significant levels of assistance to programme countries and also touch directly on issues related to sovereignty. It is perhaps ironic that current problems are in part a side effect of the success of the monetary union, and the benefits it brought about. More precisely the crisis has also been triggered by the misuse of the benefits of monetary integration. The new currency reduced the cost of borrowing in several countries, as credit spreads narrowed and exchange rate risk on intra-euro area borrowing was eliminated.1 The reduced cost of financing public as well as private debt was reflected in higher government debt and private sector leverage. In the wake of risk repricing by the financial markets, there is now the strong tendency for market operators to unwind their holdings of public and private sector debt. This can be seen in Chart 1, which shows as an example the ensuing reduction in the leverage of monetary and financial institutions. The deleveraging process could set the stage for a deterioration in economic conditions. However it also serves to correct past excesses.
16  All speeches are available online at www.bankofengland.co.uk/speeches  16  Chart 13: May IR central inflation forecast Policy following market rates No change in Bank Rate  Per cent  3.5 3 2.5 2 1.5 1 0.5 0  2013  2015  2017  2019  2021  -0.5  This does not seem a desirable outcome. Inflation persistently above target and a sustained period of excess demand would represent a failure to meet our remit. This is one of the reasons why I signed up to the Committee’s collective judgement that “were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon”. Despite the backdrop of uncertainty, and despite the unusual things going on in the economy, I am actually reasonably confident about our understanding of what’s going on. Forecasts are never going to be perfectly accurate. But over the last year I think we have got the broad narrative, and our understanding of the key moving parts, about right, with the slowing in GDP growth, the rotation of demand and the overshoot in inflation. 16  Students of the UK labour market – and I have been one for over thirty years – should always  expect surprises. But I feel my knowledge of what’s going on has developed over the last year.

Monetary policy can reduce inflation, but only at the cost of reducing output and increasing unemployment. If inflation is above target and output is below potential (or vice versa), there is a fundamental trade-off between achieving the two objectives. Since 2013 the MPC’s remit has required us to manage significant trade-offs when exceptional circumstances cause them to arise. And that has been the basis for the Committee’s assessment of the UK situation since the referendum. 12  To explain how our position on this has evolved, let me turn to the second unusual aspect of the economy that I want to focus on this afternoon: the UK labour market. 11  For more details see Box 5, “How has the economy evolved relative to the February 2017 Report”, in the Prospects for Inflation section of the May 2018 Inflation Report. 12 For a detailed explanation see: Carney, M (2017), “Lambda”, speech at the London School of Economics, 16 January 2017. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  The labour market I said at the start of this speech that wage growth has been surprisingly weak. That wasn’t a figure of speech. This chart (Chart 8) shows the MPC’s wage growth forecasts from the past few years against the actual data. As you can see, the MPC have been consistently surprised by the continued weakness of wage growth.