samchain/econo-pairs-v1 huggingface dataset:
I argued then that it made no sense to use these descriptions because each member of the Committee had the same objective. Members of the MPC cannot entertain closet views about their desired inflation rate because they will be held personally accountable for their judgments about the level of interest rates necessary to meet the inflation target. No matter. A good argument will never beat a good headline. Hawks and doves it was, though there were also references to ostriches, foxes and hedgehogs, and headless chickens. No doubt there were even less flattering comparisons made in private. Still, unlike England football managers, we have not – yet – been compared with root vegetables. And we have made progress. As Chart 4 shows, press references to “hawks and doves” reached a peak in mid-1998 and have declined markedly since. As I predicted in a speech in May last year, “as circumstances change, it is easy to imagine that the ‘hawks’ shall be ‘doves’ and the ‘doves’ shall be ‘hawks’”. But we were also criticised for not being open enough about differences of view. The early minutes were thought to be too bland and to conceal expressions of individual points of view. Much of that criticism was indeed fair. And we have tried to respond by making the minutes a more accurate expression of the range of points of view that are expressed at the meeting.

By addressing these issues, the stress tests implemented by the Federal Reserve in the United States, and by the European Banking Authority in Europe, could play a key role in re-establishing confidence in the banking system. Reputational risks in tail events The second category of contracts we want to examine can be put into more of a game theoretic framework, where the perceived pay-off in the tail event is offset by “unforeseen” costs. In this section, we are focusing on behaviour that, at first glance, may seem irrational, but is best understood as being driven by classic time inconsistency. In particular a market participant may voluntarily choose not to enforce a contract that is “in the money”, if the reputational repercussions are perceived to cause more damage than whatever could be gained financially by enforcement. During the crisis, banks moved a significant amount of their mortgage-based assets offbalance sheet into Structured Investment Vehicles (“SIVs”). Most of the funding for these SIVs came from publicly sold asset-backed commercial paper (“ABCP”) and other mediumterm notes (“MTN”). There was a small amount of equity in the form of a junior “capital note,” which split the excess return with the asset manager. From their invention by Citigroup in 1988 and until the crisis, there was sufficient spread between the assets and the funding to generate a reasonable return to attract investors to buy the capital notes. In addition, there was typically a partial liquidity back-stop facility provided by the originating bank.
The Executive Board discusses the forecast at the second large meeting The Monetary Policy Department then presents its forecast for the main scenario to the Executive Board at the second large monetary policy group meeting. This takes place in week five, that is, approximately three weeks prior to the monetary policy meeting. The organisation of this meeting differs from the first one. The meeting is divided into two parts. The first part of the meeting is open to the majority of the employees of the Monetary Policy Department. The civil servants then report their outlook on the economy over the coming years. They present the results from any in-depth reports ordered by the Executive Board. There is now an opportunity for us Executive Board members to ask questions about and express opinions on the forecasts to the different sector experts. The second part of the meeting is held in a smaller circle consisting of the Executive Board, senior staff at the Monetary Policy Department, a couple of advisers and representatives of the Communications Secretariat. It is now that the Executive Board discusses and expresses opinions on the main scenario on the basis of its assessments. This may sometimes mean giving different weight to alternative macroeconomic scenarios, that is, the risks. The main scenario is then adjusted in accordance with the views of the Executive Board.

In total, around 20 persons are usually present at the meeting. What happens at a monetary policy meeting? There is an agenda which states the order in which we will discuss the different items. The meeting usually begins with a brief update on how the financial markets have developed, including market expectations of the repo rate with regard to our meeting, and other new, important information that has been received in the last few days. This is followed by a summary of the main elements in the Monetary Policy Report or the Monetary Policy Update. After these introductory words from the civil servants, I and my colleagues go on to discuss economic developments over the coming three years. First we deal with economic activity and inflation abroad and in Sweden. Each person puts forward his or her view of the current economic situation and how the interest rate needs to be adjusted to attain the inflation target. There is no predetermined order as to who will begin the discussion. The discussion is fairly free at this stage. During the course of the process each one of us has formed his or her own opinion, but of course the formal decision is not made until the actual meeting. The Chairman of the Executive Board usually concludes by summarising the discussions held  8  BIS Review 77/2008  and what proposals have been put forward regarding the current interest rate. After this we move on to the decision and vote.
Your own survival and prosperity - and that of the institutions that you manage - depend ultimately upon your abilities as risk managers. But to the extent that each of you individually succeeds in your own business, you also make a vital contribution to the safety and soundness of the banking system as a whole. As a central banker, I can only wish you well! BIS Review 66/2000  4

In order to have sustainably higher interest rates tomorrow, we must have them low today. That being said, not all unconventional instruments are legitimate. There are limits on how negative interest rates can go, as Mario Draghi stressed it. So this type of unconventional measure, although useful, should be used with care. And I think that socalled “helicopter money” would bring more harm than good: we do not need it and it is not on the table. The real issue is that monetary policy cannot do everything. We have done our bit but cannot create the lasting economic growth which underpins prosperity, including for savers. For this we need other policy makers to act. At a time when the euro area is experiencing both a negative output gap and a large external surplus – i.e. an excess of savings over investment, we must reflect on how abundant European savings could be put to the most productive use for investment in Europe.
Fifteen to twenty years ago, central banks moved wholesale payment systems on to a Real-Time Gross Settlement basis. Cutting through the details, this meant that settlement banks are no longer exposed to each other during the day for the payments they send each other; and, in the UK and most other countries, the central bank delivers this without taking unsecured intra-day credit exposures itself. Without those unheralded reforms, I have little doubt that last autumn’s crisis would have been calamitous on a scale massively exceeding the dreadful near-seizure we did experience in the money markets. That example was a public sector initiative; the banks were more or less herded into it. But there is an equally important private sector initiative. Without the collateralisation of OTC-derivative counterparty credit exposures, the credit spillovers from firm and fund failures around the world would surely have been much greater. What those two examples demonstrate is that the authorities and practitioners can get things right – when we focus on what will matter in bad states of the world. Summary The Turner Report makes a big contribution to developing the agenda for reforming the global financial system, including on macroprudential oversight. If anything, I may have added to that agenda this morning. We need to undertake serious research and analysis on whether we can develop a macro instrument for taming the credit cycle. But, in making the system more resilient, we cannot rely solely on bank capital or loan market requirements.

This includes the implementation of mandatory climate-related disclosures by various governments, regulators and independent bodies to hold companies accountable for their impact on the environment. The world is clearly moving more aggressively on building climate resilience in what is being described as the “decisive decade for climate action". Individual countries and firms cannot stand still. Not just because climate change has severe implications at a domestic level – more so for developing countries – but because global climate actions affect us directly through economic and financial linkages. How we respond is crucial. With the growing traction to sustainability, the 1/5  BIS central bankers' speeches  risk of stranded assets is real and significant. The risk of getting left behind and shut out of key markets will affect our economic competitiveness, lead to a drop in growth and worsen existing inequalities. Ultimately, it is at the local level that the effects of climate-change will be mostly felt – through its transmission to food supply, energy and transport, disease and livelihoods. It is therefore in our collective interests and responsibility to act now, and to act together. As the lifeblood of the economy, the response of the financial sector is crucial on several levels – (i) to safeguard the resilience of the financial system through the identification and management of climate-related risks; (ii) to direct financial flows to low-carbon activities; and (iii) to support the transition by economic agents through appropriate financial and risk solutions.
In this respect, the empirical evidence available on 9/14  the effects of increases in the minimum wage offers a wide variety of results, although in general, it tends to suggest that an increase in the minimum wage has a negative – although limited – effect on aggregate employment in the economy. Nonetheless, according to this same evidence, the impact on the probability of job loss is significant in the case of certain groups, such as lesser-skilled youths and elderly workers, whose unemployment rate is still very high and whose level of productivity is below the average. The level of the national minimum wage and its annual increases should therefore be designed bearing in mind the productivity of the workers affected and their level of employability if it is wished to avoid undesirable effects, in the form of job loss and increased inequality. To address the challenges of our labour market, economic policy should firstly move on evaluating active policies, especially among the lesser-skilled, in order to focus resources on those measures most effective with a view to increasing employability. Secondly, future changes in the labour market should serve to make progress in reducing temporary employment and excessive job turnover, without hindering job creation and, in particular, permanent job hires. Thirdly, mechanisms should be set in place to provide for a greater alignment of each firm’s wage conditions with their level of productivity.

In the case of the pension system, the 2011 and 2013 reforms included a progressive raising of the retirement age, the application of the sustainability factor, which links the initial pension to the increase in life expectancy, and an annual revaluation index for pensions, with their increase conditional upon the system’s revenue and expenditure being in balance. These reforms were geared to gradually correcting the system’s current shortfall, significantly countering the effect of the expected increase in the dependency rate in the long term. However, the latest legislative developments appear to be moving towards relaxing the application of the current re-balancing mechanisms, the sustainability factor and, above all, the annual revaluation index for pensions. A return to inflation-indexed pensions would, on Banco de España calculations, give rise to an increase in public spending of over 3 pp of GDP in 2050 compared with the scenario based on the strict application of the revaluation 8/14  index. Ensuring the system’s financial sustainability would therefore require including additional measures on the revenue or on the expenditure sides of the system. In any event, it is desirable that any reform strategy chosen should increase the system’s transparency, strengthen its contributiveness (i.e. the relationship between contributions and benefits) and, in particular, maintain an automatic adjustment mechanism that ensures the sustainability of the population’s future pensions.
2006. “The Relationship between Expected Inflation, Disagreement, and Uncertainty: Evidence from Matched Point and Density Forecasts.“ Federal Reserve Bank of New York Staff Reports, no. 253, July. Vayanos, Dimitri and Jean-Luc Vila. 2009. “A Preferred-Habitat Model of the Term Structure of Interest Rates.“ NBER Working Paper Series 15487. Cambridge, Mass. : National Bureau of Economic Research, November. Vickery, James and Joshua Wright. 2013. “TBA Trading and Liquidity in the Agency MBS Market.“ Federal Reserve Bank of New York Economic Policy Review, Forthcoming. Wallis, Kenneth. 2004. “Forecast Uncertainty, Its Representation and Evaluation.“ Tutorial Lectures, IMS Singapore, May 3–6. Wallis, Kenneth. 2005. “Combining Density and Interval Forecasts: A Modest Proposal.“ Oxford Bulletin of Economics and Statistics 67 (2005 Supplement): 983–994. BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11

Mario Draghi: Global and domestic inflation Speech by Mr Mario Draghi, President of the European Central Bank, to the Economic Club of New York, New York City, 4 December 2015. *  *  *  Over the past years, central banks across advanced economies have provided unprecedented support to our economies, and the results are being felt. Output has been put back on an upward path. Growth is strengthening. The output gap is gradually closing, as is the case in the euro area, or in some cases it is closed already. Insofar as monetary policy is intended as a macroeconomic stabilisation policy, it is succeeding. But our mandate is not phrased in terms of real growth. It is phrased in terms of price stability. And there, success is not achieved yet. Inflation remains low everywhere, lower than our objectives require. And medium- to long-term inflation expectations have been less steady for some time, and also generally lower than our objectives. To some extent this apparent disconnect between real and nominal developments is an expression of lags in the transmission process. But it has also triggered suggestions that perhaps central banks are unable to fully control the trend in inflation – either because they lack the appropriate tools, or because inflation in any one economy is driven to a large extent by global factors outside their control. I would dispute entirely the notion that we are powerless to reach our objective.
Inflation targeting is softer around the edges than the exchange rate regimes Norway and many other countries operated earlier. The system has proved fairly robust to disturbances. Nevertheless, the soft landing of the Norwegian economy after several years of high domestic cost inflation and a low level of activity abroad must not lead us to believe that output and employment cannot show pronounced fluctuations in the future. We cannot expect the interest rate to have the same impact from one period to the next. The economy is exposed to unexpected disturbances. As a result, we cannot fine-tune economic developments, but we can avoid the largest effects when the economy is exposed to disturbances. Monetary policy’s most important contribution is to anchor inflation expectations. Experience indicates that inflation expectations remain stable even if inflation varies somewhat as long as the interest rate is used actively to moderate the variations in inflation. Given our highly open economy, we may have to accept somewhat wider variations in inflation than some other countries. Exchange rate expectations are influenced by growth in public expenditure and developments in terms of trade, although stable inflation expectations can also have a stabilising effect on exchange rate expectations. Just over a year ago, the interest rate was reduced by 0.25 percentage point to 1.75 per cent. Since then, the key rate has remained at this historically low level. Real interest rates are also low. Between December 2002 and March 2004, the key rate was reduced by a total of 5.25 percentage points.

The interest rate decline can be ascribed to a number of factors. In late autumn 2002, inflation started to fall. The inflation projections were also revised down. New information gradually emerged about the outlook for other countries and the Norwegian economy, indicating that inflation might be very low. Short-term real interest rates have fallen by close to 4 percentage points. It would seem that it is not only changes in the real interest rate that have an influence, but also its level. Between December 2002 and March 2004, the interest rate has moved from a high to a low level. The real interest rate is now lower than a neutral real interest rate. A real interest rate that is lower than the neutral rate will stimulate activity even after the effects of the interest rate fall itself have been exhausted. Calculations seem to indicate that the neutral real interest rate for Norway is between 2½ and 3½ per cent, and it has probably fallen somewhat in recent years. It takes time for an interest rate reduction to have an impact on inflation. We are now seeing the effects of previous monetary policy decisions, some of which were taken two years ago. The interest rate has affected inflation via the krone exchange rate and via demand for goods and services. In particular, the rise in prices for domestically produced goods and services has picked up.
For example, to fill a void in timely measures of regional economic output my staff produces monthly indexes of economic activity for New Jersey, as well as for New York State and New York City. These measures are similar in concept to measures of gross domestic product (GDP). We have also initiated a consumer credit panel so we can monitor local household credit conditions, including the amount of debt being carried per person and the composition and payment status of that debt. Furthermore, we have a new survey to track credit and financing issues for small businesses, which create a lot of jobs. The poll takes a fresh look at borrower demand by asking firms not only about credit applications but also about reasons for not seeking credit. In all, 876 small businesses from the tri-state area responded to our May 2011 poll, and 14 percent of these were from New Jersey. To share the information that we gather and produce about our diverse District, we have created a rich website with localized current data and maps on conditions in the region. I invite you to visit us at newyorkfed.org to explore the highly detailed information on small business, credit and housing conditions that we provide. Finally, and crucially, in the aftermath of the financial crisis, we are working with our colleagues in Washington and at other agencies in the United States and abroad to help put the nation’s financial system on a firmer footing.

As the scale of the Bank’s balance sheet persisted however, it became increasingly clear that we needed to do more to bring our risk framework up to best practice. That was for three main reasons, each linked to the drivers I listed a moment ago. First, the increasing complexity of the Bank’s operations meant that we needed more effective ways to measure the risks we were taking, add them up across the different specific operations, and evaluate them against an explicit statement of the Bank’s risk tolerance. Second, the increasingly contingent nature of our risks meant we needed much better forward-looking tools for evaluating how those risks might crystallise in different scenarios, and ensuring we had sufficient resources to respond. And, third, the need to hold ourselves accountable, identify potential blindspots and safeguard against groupthink in our internal work, required more effective internal challenge and reporting mechanisms. In the summer of 2015, we therefore set up a brand new second line financial risk challenge function, staffed using some of our risk experts who previously helped the PRA to challenge commercial banks: bringing the ‘Golden Rule’ to life. We developed a framework of risk tolerance, measurement, assessment, reporting and challenge tools across the full range of credit, market, counterparty and liquidity risks facing the Bank, basing 6  More details on these functions are available in the Bank’s annual report on the Sterling Monetary Framework, available at http://www.bankofengland.co.uk/markets/Documents/smf/annualreport16.pdf. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  them where possible on industry best practice.