samchain/econo-pairs-v1 huggingface dataset:
The gradual shift towards more flexible monetary policy led to a greater need to illustrate the fact that it is the entire expected sequence of events for inflation and the real economy a few years ahead that is important to monetary policy decisions, and not merely the levels we foresee two years ahead. And the focus should be on not only current interest rates, but also expectations of future interest rate changes 6 . Now we instead use an assumption that the policy rate will develop in line with financial market expectations. This means that the monetary policy discussion can now be based on a relatively realistic development of the interest rate throughout the forecast period. This makes it easier to assess our policy, to compare our forecasts with those of other forecasters and it enables clearer communication with regard to future policy. If inflation is expected to be close to target in a two-year perspective, this could indicate that market expectations of interest rate developments are reasonable. However, to determine this we must also take into consideration the expected sequence of events for inflation and the real economy that would result from this interest rate path. In our communications we point out that the assumption that our policy rate will follow implied forward rates is not a commitment from the Riksbank that the repo rate will actually develop in this way.

The target is for the annual rate of change in the CPI to be 2 per cent, with a tolerance for deviations of plus/minus 1 percentage point. The decision to define the target for monetary policy in terms of a specific figure was of course partly due to the desire to create a nominal anchor that everyone could recognise and base their expectations on. However, another important reason was that a specific target would facilitate assessments of the Riksbank’s activities and make it easier to hold the Riksbank accountable, which was important when it had been granted so much independence. Inflation can be measured in many different ways. The Riksbank chose the CPI as target variable partly because it is a broad price index that represents typical purchases made by consumers and the index is familiar to the general public. But the development of the CPI cannot always indicate what monetary policy is needed at a particular time – no single inflation measure can do this. The Riksbank therefore uses various measures of underlying inflation to describe the trend rate of inflation and to justify the monetary policy conducted. Our most commonly used measure, with the not so pronunciation-friendly name UND1X, consists of the CPI adjusted for certain items that are very directly affected by fiscal and monetary policy. So, there are educational gains with using measures of underlying inflation.
The collapse of Banco Ambrosiano in 1982 and the difficulties at Johnson Matthey Bankers in 1984 brought the risks inherent in the system into sharp relief once more, and there was a renewed push to establish consolidated supervision across 26  borders . Through its participation in international fora, the Bank sought “to promote close supervisory co-operation, to influence supervisory developments and to enhance the effectiveness of its own supervisory effort through obtaining clearer pictures of the nature of the business operations engaged in by the institutions it supervises 27  and of the methods and operations of its international counterparts” . The idea of a level playing field began to emerge in the international setting as well as the importance of supervisory convergence in an increasingly globalised sector; this, alongside crises, motivated the evolution of regulation and supervision to a large extent during the latter decades of the twentieth century. In addition, the increasing size (including in the present day) of the financial sector and its contribution to UK GDP underscored the importance of maintaining stability in the financial system, and a more active type of supervision began to emerge.

The Act ushered in strict new rules, including a requirement for those looking to set up an insurance company to place a £ deposit with the Accountant General. Financial information across insurers was to become standardised and independently valued at least once every five years. The Act also introduced conditions around takeovers and mergers, requiring that consent be sought from both the courts and shareholders  33  – a process alive and well today in the form of Part VII transfers. Whilst the Accountant  General could hardly be characterised as an active supervisor, the Act did at least lay down some 31  Annual Report of the Building Societies Commission 1986-87 http://www.bankofengland.co.uk/publications/Pages/speeches/2017/967.aspx See also: http://www.bankofengland.co.uk/publications/Pages/speeches/2016/877.aspx 33 Tapp, Julian. ‘Regulation of the UK insurance sector’, in Finsinger, Jorg. and Pauly, Mark V. The Economics of Insurance Regulation: A Cross-National Study, London, Macmillan, 1986, p.29 32  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  requirements for life insurers for the first time. In 1909, these were extended to all other classes of business in existence with the exception of motor and marine insurance, and by 1930 motor insurance was also subject to this level of oversight. th  During the early part of the 20 century, British society underwent a stark change as the invention of the car transformed people’s everyday lives.
cit..  11  In 1992, Governor Leigh-Pemberton gave a lecture entitled: “The case for price stability”. As well as reviewing the costs of inflation, the lecture reprised the early-1980s debate on the rate of inflation the authorities should settle for (see Note 9), in a section entitled “Why not settle for 5%?”. These issues were also the centrepiece of the Bank’s tercentenary conference in 1994 on the future of central banking. See Fischer, S, “Modern Central Banking”, in Capie F., C. Goodhart, S. Fischer and N. Schnadt (eds. ), 1994, The Future of Central Banking: The Tercentenary Symposium of the Bank of England, Cambridge University Press. See also Briault, C., 1995, “The costs of inflation”, Bank of England Quarterly Bulletin, February. And Haldane, A. (ed. ), 1995, Targeting Inflation: a conference of central banks on the use of inflation targets organised by the Bank of England, March. 2  BIS Review 66/2007  just an end in itself but a precondition for macroeconomic stability more generally: for sustainable growth in output and employment and, thus, for the “good things in life”. A precondition, but not a sufficient condition. The Bank took care to stress that, however effective, monetary policy could not deliver economic prosperity on its own. It was a necessary condition. And it could avoid the costs of inflation, including random and unacceptable redistributions of wealth between savers and borrowers resulting from unexpected surges in inflation caused by the authorities choosing to loosen monetary conditions.

Rather, any statement has to be crafted to reflect the view of the majority that emerged at that particular meeting, not an easy task at speed. We are, in fact, very conscious of the distinction between collective and individual statements. We try to be clear about which communications are collective, on behalf of a majority or the Committee as a whole, and which are made by an individual member speaking for themselves. The Inflation Report projections, for example, represent a “best collective view” or centre of gravity in the Committee, admittedly not a well defined term. Individual views, when departing from that best collective view, have occasionally been published. At the Inflation Report press conference, the Governor, Charlie Bean and I are speaking for the Committee, not for ourselves. By contrast, we speak as individuals when we give testimony to Parliament or set out our views in speeches. That this should be understood is, of course, terribly important given that the effectiveness of the regime depends on the Committee decisions and “policy reaction function” that emerge from our individual deliberations. Conscious of the need to maintain a delicate balance between centripetal and centrifugal forces, most past and current members – including me – have opposed incorporating individually labelled paragraphs into the minutes. To do so would put beyond doubt each month where each of us stands, but it would also affect the dynamic interactions amongst Committee members.
There is a relatively high degree of correlation in the cyclical developments of euro area countries over a longer time period, and recent differences in growth rates have not been particularly unusual. Nevertheless, different cyclical positions may lead to variations in price pressures. Longer-term factors leading to national differences Turning to the longer-term factors, the trend rate of growth may be higher in some countries due to the process of “catching-up” in terms of productivity and living standards with other euro area countries. It is likely that this has been happening in some euro area countries over the past few decades. In others, the trend rate of growth may be higher due to the fact that the economy is at a more advanced state of liberalisation and deregulation. In terms of the current differences in inflation rates across euro area Member States, longer-term factors are important. It may first be noted that even if inflation rates for all individual goods were identical across countries, the overall rate of increase in consumer prices would differ because there are differences in tastes and preferences across countries and therefore the bundle of goods consumed, and thus the weights of the various goods in the overall price index, differs from country to country. This can also, of course, have consequences for short-term divergences in inflation rates across euro area countries. The “catching-up” effect for countries whose living standards are rising towards the average euro area level also has consequences for inflation differentials.

The time lag in product markets can, however, delay this effect somewhat, as was the case when the krone appreciated in 2001 and 2002. In addition, a weaker krone increases activity, profitability and the capacity to pay in the Norwegian business sector. Higher demand and wage growth may lead to higher inflation through enterprises’ price-setting. In the long run, wages must be commensurate with the value added that is generated by workers. Real wage growth is thus determined over time by developments in labour productivity in all sectors of the economy. With productivity growth at the historical level of about 2 per cent, wage growth of about  BIS Review 50/2003  3  4½ per cent over time will be consistent with Norway’s inflation target of 2½ per cent. Wage growth that is lower than 4½ per cent will boost employment and wage growth that is higher will reduce employment. Through 2003, the differential between Norwegian and foreign interest rates has narrowed considerably. This has also contributed to a substantial depreciation of the krone. The depreciation of the krone will make imported consumer goods more expensive, but will also improve competitiveness for Norwegian enterprises. Interest rate differentials are also affected by cyclical developments abroad. Subdued economic growth internationally, high levels of activity and a sharp rise in labour costs in Norway resulted in a wide interest rate differential between Norway and its trading partners in 2001 and 2002. This made it profitable to invest in NOK, and the krone appreciated.
NEMO can help us provide economic interpretations of observed developments. Changes in key variables such as GDP and inflation can be explained by factors such as productivity, competitiveness in labour and product markets and the propensity to save. In that respect, NEMO is quite different from the “weather forecasting models” I cited earlier, which provide little scope for interpretations based on economic theory. Chart: Effect of monetary policy shocks in the VAR models and in NEMO As indicated by the red line in the chart, NEMO provides a description of monetary policy that is broadly consistent with that derived from the VAR models9. In NEMO, an unexpected interest rate increase of 1 percentage point implies, in isolation, a decline in GDP of around 0.4 per cent around one year later. Inflation is reduced by about ¼ percentage point with a lag of around two years. Compared with the VAR models, NEMO is in the upper part of the area for GDP and in the lower part for inflation. NEMO is estimated from the mid-1990s and the results are also close to those derived from the VAR models that are estimated over the same time period. A model will never be able to provide an exact indication of how the interest rate should be set.

Third, traditional financial institutions in Asia have embarked on a digitalisation journey, enabled by core technologies such as cloud computing. Almost every major financial institution has an active innovation agenda to strengthen its business by harnessing technology. In just the last three years, more than 30 global financial institutions have set up innovation labs in Singapore, testing new technologies and collaborating with FinTech start-ups to develop solutions. Let me give some examples of collaboration from the Singapore FinTech ecosystem: 2/4  BIS central bankers' speeches  Hedge fund managers are using a solution deployed by SQREEM to provide them behavioural insights related to equities, foreign exchange markets or political events like Brexit. Relationship managers are using a solution by AIDA, to predict whether their clients are likely to increase their assets under management or make a withdrawal. FINQUEST is using big data analytics to connect small to mid-sized companies globally to growth capital and potential acquirers. APVERA is helping enterprises detect anomalies in the behaviour of their employees and flag data leakage risks. These three driving forces – FinTech start-ups, e-commerce platforms, and financial institutions harnessing technology in a big way – are creating the synergies that power Asia’s digital transformation. Initiatives to Foster the FinTech Ecosystem MAS has an active and wide-ranging FinTech agenda. In the interest of time, let me highlight three key initiatives we have taken in recent years to nurture the FinTech ecosystem in Singapore and integrate it across ASEAN. First, the ASEAN Financial Innovation Network, or AFIN for short.
As monetary authorities in these countries, we have greater challenges before us in rebuilding our nations. I hope we could effectively face these challenges with active cooperation of all central banks in the region. We live in an era of rapid globalisation. Enriched by vast advances in information and communication technology, the process has facilitated the free flow of trade and investments across the borders. This has also posed burgeoning management challenges to central banks in the form of how to plan for the future in a scenario of multiples of objectives and targets entrusted to them. In order to overcome these challenges, the central banks world over, are called upon to review their objectives and restructure their activities. Such review processes encompass re-examining legal frameworks, accounting practices and policies, organisational structures including the change in the composition of Boards, supervisory and human resources standards, to mention but a few of the new tasks. Having realised this need, the Central Bank of Sri Lanka recast its objectives in December 2002 into two core objectives, namely, economic and price stability and financial system stability with a view to encouraging and promoting the development of the productive resources of Sri Lanka. The change has enabled the Central Bank to free itself from multiple objectives for pursuing its core objectives. The theme of this seminar is Central Bank Governance and how such governance is related to strategic planning in central banks. These issues are not a novelty in a private sector organisation.

This is because the risk to financial stability can come from many sources other than domestic inflation. In the current crisis, it was the housing bubble and excessive risk-taking by financial institutions that precipitated the crisis in the environment of stable prices. Therefore, to maintain financial stability, attention must be paid to all the key sources of risk and imbalance, other than price stability, that can have systemic implications for the economy’s growth and stability. This is the second lesson. The third lesson relates to the importance of having a robust and resilient financial sector at all times. For emerging markets, this means a strong banking sector. In the current crisis, it is the strength of the banking sector that has enabled the Asian economies to cope more successfully with the impact of the global crisis. These strengths are underpinned by the sector’s strong capital base, its limited exposure to subprime-related and other toxic assets, and its low reliance on external funding. Such strength and qualities are no accident. They are the results of deliberate policies to reform the financial system, strengthen supervision of financial institutions, and revamp financial regulation, risk management, and governance after the Asian financial crisis. The point I want to stress here is that these are the qualities that helped us through the current global financial crisis and they are the qualities that we need to keep.
Yes, a big step forward has been made thanks to Next Generation EU, financed by a shared debt instrument. Before thinking of possibly increasing its size, we should accelerate its implementation: speed, even more than weight, is what is currently lacking in Europe. But our real leap forward will come when the existence of a permanent common fiscal capacity, – although less limited in amount, although different from a standing budget because not systematically activated, – allows genuine countercyclical action to be taken. Conversely – and not contradictorily –, adequate fiscal discipline is key to cope with economic reversals. Look at Germany, which fixed the roof while the sun was shining, and made appropriate use of its financial leeway during the crisis. There will be a debate, to be concluded most likely next year after the German and French elections, on the Stability and Growth Pact, following three years of warranted suspension between 2020 and 2022. We should avoid a fruitless confrontation between “illusionists” – who plead for debt cancellation, which is completely out of the question – and “traditionalists” – who want to keep the same old rules as if nothing had changed, including on the level of interest rates. We do still need rules, but revised and simplified ones. Indeed, the current low interest rate environment (with r<g) does not mean that public debt sustainability issues have become irrelevant: it only implies that governments have more time to ensure debt sustainability.

“The Great Leveraging,” NBER Working Papers, No. 18290. BIS central bankers’ speeches  1  this context, Turkey established the Financial Stability Committee in 2011. Along with the Central Bank, the Committee is composed of the Banking Regulation and Supervision Agency, the Capital Markets Board of Turkey, the Savings Deposit Insurance Fund and the Undersecretariat of Treasury. Distinguished Guests, Now I would like to briefly mention Turkey’s contributions to global financial stability. Turkey became a member of the Financial Stability Board (FSB) in 2009. In 2014, Turkey will participate in G20 Troika and assume Presidency of the G20 in 2015. During the period from 2014 to 2016, when Turkey will be taking part in G20 Troika, our representative from the Undersecretariat of Treasury will be assigned to the FSB Steering Committee. Turkey became a member of the Basel Committee on Banking Supervision (BCBS) and the Group of Governors and Heads of Supervision (GHOS) in 2009. The Central Bank of the Republic of Turkey will participate in the FSB Steering Committee during the period 2013–2015 when it will be chairing FSB Regional Consultative Group for the Middle East and North Africa (MENA). The New Constituency group, formed upon an agreement signed within the International Monetary Fund (IMF) governance reform framework, includes Austria, Hungary, the Czech Republic, Slovakia, Slovenia, Belarus and Kosovo along with Turkey. According to this agreement, during the periods of 2014–2016 and 2018–2020, Turkey will assume the Executive Director position on behalf of the group for two-year terms.
The main aim of the euro area today is therefore to bring consistency back: that is, to make governance of different policy areas mutually consistent and internally consistent. Let me briefly review how this is being addressed in the banking, fiscal and economic domains. Banking union Since 2012, the priority has been to restore consistency between the single monetary policy and other policies – that is, to guarantee the singleness of money irrespective of the fiscal health of sovereigns. Essentially, this had to involve removing the fault lines between national banking systems that called into question the fungibility of deposits, and that meant bringing those national systems together into a single system. This is where the banking union comes in. Banking union means three things: it means a single supervisory framework that minimises equally the risk that a euro area bank takes excessive risk and runs into failure. It means a single resolution framework, so that if a bank does still fail, it can be resolved in the same way, with limited use of taxpayer money, irrespective of where the bank is located or the fiscal strength of its government. And it means a system of deposit protection that provides depositors with equal confidence that their deposits are safe, regardless of jurisdiction. In terms of implementing these three elements, the euro area has made considerable progress. And importantly, the governance reforms that have been agreed are much more internally consistent.

Yves Mersch: Law, money and market – the legal dimension of monetary policy Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Information Club Meeting, Luxembourg, 31 May 2014. *  *  *  Ladies and gentlemen, Thank you very much for inviting me to speak at this event. What I would like to address in my remarks is what went wrong with the governance of the euro area and how to fix it. But as this has been much discussed in the past, I want to come at the question today from a slightly different perspective: that is, to go back to the first principles of what makes a market economy function, and then to look at the situation in the euro area from there. 1. Law, money and the market  A well-functioning free market is a socio-economic construct. It is created by a consistent accord of rules, instruments and institutions. As economies develop, what this accord entails changes. But at the most fundamental level there must be a harmony of law, money and freedom. This is because the rule of law guarantees the freedom of the individual by defining the scope and boundaries of his or her action. And in turn, it is the freedom of the individual that creates the agency and choice which is essential to produce a free market to the benefit of the whole society.