samchain/econo-pairs-v1 huggingface dataset:
Explaining this increasingly fragile trust in central banks is, in part, a story of the crisis. Pre-crisis, central banks were seen as stewards of the financial system. A failure of that system inevitably then caused some questioning of central banks’ stewardship role. The financial crisis was the catalyst for some loss of faith in the stewards in much the same way the expenses scandal was for British political stewards a few years ago. But there are also deeper-seated changes underway in the nature of the public’s trust, not specific to central banks, what Rachel Botsman calls the “Trust Shift”. 12  Once upon a time, public trust was endowed on public  institutions rather than needing to be earned. Trust was anonymous and centralised. The public did not ask 8  Stock and Watson (2003). King (2003). 10 “VILE” was coined by my MPC colleague Michael Saunders (see, for example, Giles and Atkins (2008)). 11 Haldane (2017a). 12 Botsman (2017). 9  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  difficult questions and public institutions, by and large, did not feel the need to provide answers. For public institutions, this was the Age of Innocence. As centralised and largely anonymous institutions, central banks surfed on this wave of blind trust during their early years. During the Age of Innocence, there was no public expectation of openness or accountability or need to build bridges with the public or parliaments.

Efforts by the Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI), Islamic  2  “The New Silk Road: Asia and the Middle East rediscover trade and investment opportunities”, Research Department, Kuwait China Investment Company (KCIC), January 2011. 3  Ibid. 4  “Economic growth moderates across Middle East”, IMF Survey, May 21, 2013. 5  “World Economic Outlook”, IMF, April 2013. 2  BIS central bankers’ speeches  Development Bank and Malaysia’s International Shariah Research Academy (ISRA) in research and fostering dialogue between Shariah Scholars from various jurisdictions are also narrowing the differences in views on Shariah issues in finance. As work on all these fronts progress, this will encourage greater interest internationally to participate in cross border financing and investment activities. The prospects for cross-border Islamic finance are already very bright. We are beginning to see cross border sukuk issuance within Asia, as well as between Middle East and Asia. As early as 2010, Malaysia’s Khazanah issued a $ sukuk in Singapore, while Japan-based Nomura issued 2-year $ sukuk in Malaysia. Last year, taking advantage of favorable currency swap rates, Singapore listed companies Natural Resources and Golden Agri tapped the Malaysian Ringgit (MR) sukuk market. In the last two years, two GCC firms, Abu Dhabi National Energy Company and Kuwait-based Gulf Investment Corp issued MR sukuk in Malaysia. There is considerable scope to issue more such cross-border sukuk, especially to finance the large infrastructure needs in both Middle East and Asia.
Having been instrumental in laying the foundations for the euro, the principles of the Maastricht Treaty will remain vital for the successful functioning of EMU. The medium-term macroeconomic policy framework laid down in the Maastricht Treaty has contributed to a stable macroeconomic environment, and will continue to do so. In addition, the Treaty provides for a clear allocation of responsibilities between EU institutions and Member States, as well as clear mandates for all involved. The maintenance of price stability (the ECB’s primary objective), the independence of the Eurosystem and the provisions safeguarding fiscal discipline, in particular as enshrined in the Stability and Growth Pact, are among the hallmarks of this framework. Furthermore, the path towards participation in the euro area mapped out in the Maastricht Treaty, focusing on sustainable economic convergence as a prerequisite for adoption of the euro, will also serve to guide prospective Member States. The name “Maastricht” will therefore always be connected with the euro and will forever have a prominent place in the history of Europe. When the Maastricht Treaty was ratified ten years ago, many doubted whether EMU would ever amount to more than the solemn words of a Treaty or a laudable objective to be reached at some point in the distant future. However, during the 1990s, policy-makers, governments, central bankers and other political and economic agents showed great resolve and determination to ensure that the single currency would become a reality.

Figure 2 Output gap for a number of forecasters Per cent 6  6  4  4  2  2  0  0  -2  -2  -4  -4 The Riksbank, Feb -10 NIER, Dec -09 European Commission, Nov -09 OECD, Nov -09 IMF, Oct -09 Ministry of Finance, Jan -10  -6 -8 -10 00  01  02  03  04  05  -6 -8 -10 06  07  08  09  10  11  12  The gaps for output and hours worked are calculated as the difference between actual and “potential” levels. The Riksbank’s estimates and forecasts for potential output and hours worked are inadequate and in great need of improvement and development.4 Such development work is currently underway. These measurements of resource utilisation are thus not particularly reliable. However, according to all available measurements, there is no doubt that resource utilisation is and will remain very low during the forecast period. Other forecasters’ output gap forecasts are shown in Figure 2. Several of the forecasts from other forecasters indicate an even lower level of resource utilisation than the Riksbank’s estimate. 3  See Sveriges Riksbank (2009) and Svensson (2009a) for details.
These prevented it from efficiently and safely channelling savings between those parts of the country with a financial surplus to the booming industrial areas of the north and the midlands that needed finance for investment. These constraints included the Bank of England’s monopoly position as the only limited liability bank in the country allowed to issue bank notes and its lack of any presence outside London. 11  See Inflation Report, February 2017, Bank of England, available at: http://www.bankofengland.co.uk/publications/Pages/inflationreport/2017/feb.aspx. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  The Government of the day therefore offered the Bank the choice between losing its monopoly or establishing branches. Parliament’s response, however, was to legislate for both in order to improve financial liquidity throughout the country and provide for a more efficient intermediation of savings for investment. This enabled both the establishment of the Bank’s Birmingham branch and the Midland Bank that Charles Geach helped to start in 1836 – one of the first new joint stock banks, in competition with the Bank of England. The Bank of England has long since given up its private banking role in the financing of the economy. But the efficiency and soundness of the mechanisms for channeling savings to investment remain a key element in the delivery of our now, exclusively public, responsibility to safeguard monetary and financial stability. Today, monetary and financial stability is the most important contribution the Bank can make to stable, productive investment.

And US wage growth has  5  This result is also found when wages are adjusted for inflation expectations as discussed in Broadbent (2014). 6  BIS central bankers’ speeches  also been puzzlingly weak over the past few years.6 Despite unemployment falling around 2 percentage points, wage growth has remained around 2%. Chart 13: The US wage Phillips curve  Chart 12: The UK wage Phillips curve 1971-1997 2013-2014 Fitted 1998-2014  1971-1982 2012-2014 Fitted 1983-2011  1998-2012 Wage Fitted 1971-1997 inflation 40 35 30 25 20 15 10 5 0  0  5 10 Unemployment rate  Sources: ONS and Bank calculations  These Phillips curve surprises can be clearly seen in the Bank’s own forecast errors for wage growth and unemployment over the past few years (Chart 14). Since 2011, unemployment has come in consistently below the Bank’s expectations. Yet despite this unexpected strength in the labour market, wage growth has come in consistently and significantly lower than the Bank’s forecasts. In part, that reflects weak productivity, which has also been significantly lower than the Bank’s forecasts. But wage growth has been surprisingly weak even allowing for that. In response to this wage weakness, the MPC has dynamically adjusted its estimates of slack. For example, last year the MPC revised upwards its estimate of the so-called “participation gap” – the wedge between actual and equilibrium levels of participation in the labour force. By increasing the assumed drag from slack, that revision explained away part of the wage puzzle.
They have greater resources to monitor and analyse information, and typically greater leverage on companies to encourage them to improve on standards of corporate governance and disclosure. The move towards market-based regulation will be given a significant push by the recommendations of two private sector-led committees that were appointed by the Government last year - the Corporate Governance Committee and the Disclosure and Accounting Standards Committee. The committees have recently completed an exercise of public consultation on their preliminary recommendations, and aim to publish their final reports by April. The development of a market-driven, disclosure-based regime is in progress. It will be naïve to expect an effective system of market discipline to have arrived in a day, or in three years. The transition will cause some uncertainties initially, and even the occasional revanchist call for a return to the regime of the past. Market participants will take time to develop high standards of corporate conduct and disclosure, and to discover the new boundaries. We can expect some of them to test the boundaries in the process, either wittingly or otherwise. But the boundaries of what is permissible to preserve fair and transparent markets should become quite apparent through a few salutary cases, which will help define the new dispensation. The MAS and SGX themselves have reviewed their respective roles in the new regulatory environment.

Tharman Shanmugaratnam: Regulating the capital markets: making market discipline work Speech by Tharman Shanmugaratnam, Deputy Managing Director of the Monetary Authority of Singapore at the StanChart-Reuters-Business Times Investment Awards ceremony, Singapore, 16 Feb 2001 * * * The capital markets are undergoing a sea change. Technology and the Internet have opened new channels for investors to access a wide range of investment information and to transact in securities, often without advice or assistance from market intermediaries. Market intermediaries themselves are consolidating, and exploring new business models to capture clients and add value to their decisions. It is a more competitive environment all round, and the margins from traditional financial intermediation have thinned. Regulators are having to rethink their approaches towards the oversight of the markets in this new and rapidly changing environment. The objectives have not changed to preserve confidence by maintaining fair, transparent and efficient markets, and to minimise the risk of disruptions that threaten the stability of the system. But the methods of achieving these objectives are being refashioned. It is no longer possible for the regulator to root out all that is evil, dangerous or vaguely suspicious before they get to the market. Greater emphasis is therefore being placed on discipline being exercised within the market, and by the market.
It has been slow to take off here, but it is going to come, sooner rather than later, as competition gathers pace. Events such as the sale of the Chase retail banking business, the restructuring of the Bank of China Group and the renewed interest of some foreign banks in acquiring an increased presence in Hong Kong will help to alter the competitive balance and could act as catalysts for change. Banks also need to respond by properly harnessing the power of new technology, including the internet, to bring down costs and increase their ability to cross-sell a wider range of products. They may find it easier to finance the necessary investment, and obtain the skills and human resources they need, as part of larger units - which is a further argument in favour of consolidation. Finally, I strongly believe that banks in Hong Kong and elsewhere must become more aware of, and responsive to, consumer needs. This not only means supplying the products that customers want but also providing them with easy to understand information about the terms and conditions of these products, including the fees and charges that attach to them. Hong Kong banks have not been sufficiently transparent in this respect, as a recent Consumer Council report on credit card charges has demonstrated. This is something that we will be aiming to put right in the current review of the Code of Banking Practice. What does this mean for the Hong Kong Monetary Authority?

This is being displayed most obviously in the decline in lending margins already mentioned, particularly on residential mortgage lending which is a major part of the loan portfolio of most of the local banks. The margin has recently reached a new low of 2.25% below prime compared with the pre-crisis level of 1.25% above prime. To some extent this reflects the temporary conditions of a depressed property sector, sluggish loan demand and plentiful liquidity. As loan demand picks up, as inevitably it will, the decline in margins will stabilise and may even reverse somewhat. But lending margins are unlikely to get back to where they were before the crisis. Competitive pressures will be further intensified on the funding side when we deregulate current and savings accounts next year. This is due to take place at the end of June 2001, and will only be postponed if the prevailing economic and financial conditions are clearly unfavourable, which we do not expect to be the case. The banks therefore need to prepare for the pressure on margins that this will cause and to be able to quickly introduce new deposit products like interest bearing current accounts. If they do not do so, their competitors will. How do the local banks need to respond to these challenges? Most obviously, the challenges raise the issue of consolidation of the banking sector, through either merger or take-over. This is the trend we have seen happen in other financial centres, including in Japan.
Differences among cohorts may lead to variations over time in the optimal shape of institutions, rather as Jefferson advocated. For example, Robert Shiller (1996) reports that 90% of those born before 1940 in Germany agreed with the statement that ‘The control of inflation is one of the most important missions of German economic policy’, compared with 51% of those born from 1950 onwards. Memories of hyperinflation can be vivid: Niall Ferguson cites the diary of one Frankfurt resident in 1923: “it was more than disorder that smashed over people, it was something like daily explosions… the smallest, the most private, the most personal events always had one and the same cause; the raging plunge of money” (p154). So it is not surprising that the generation of Germans which created the Bundesbank saw it as a crucial component of their new constitution. Countries, or indeed cohorts, which have not experienced hyper-inflation may be more willing to adopt monetary arrangements that are less entrenched in constitutional form than the postwar generation in Germany. The second aspect of the technology of collective decisions that creates a role for institutions is our ignorance of all possible future states of the world. That means that even if we were able to commit to a policy rule, we would choose not to do so. The exercise of some discretion is desirable in order that we may learn. The most cogent argument against the adoption of a fixed monetary policy rule is that no rule is likely to remain optimal for long.

As he wrote in his autobiography, “When I first went to Germany I seemed to breathe a new and exhilarating atmosphere of freedom … [which] did not exist in [American universities]” (Ely, 1938). Two journeys, separated by a hundred years, reveal much about what occurred in Europe and America between them. Upon his return, Ely “undertook to draw up a project for the formation of a society to be called ‘The American Economic Association’, which should be broad enough to appeal to all the younger economists who, irrespective of their personal views, felt the stirring of the new life in economics”. His actions helped the AEA to develop into the great institution it is today. I have the privilege to work for another great institution, the Bank of England. And, as we celebrate the 150th anniversary of Ely’s birth, I thought it would be appropriate to choose as the theme of my lecture today the role that institutions play in the conduct of monetary policy. In brief, I want to argue that the core of the monetary policy problem is uncertainty about future social decisions resulting from the impossibility and the undesirability of committing our successors to any given monetary policy strategy. The impossibility stems from the observation that collective decisions cannot be enforced so that it is impossible to commit to future collective decisions; the undesirability reflects the fact that we cannot articulate all possible future states of the world.
Starting from this material, the Board members endeavour to arrive at a joint view of economic developments and inflation. By and large, we follow the structure of Chapter 2 in the Report and start with international prospects. Our opinions naturally differ on some things, large as well as small, as can be seen, for example, from the published minutes of the meetings. But an effort has always been made to arrive at a joint view and in this we have generally succeeded. I want to underscore that this is a balancing act. It is important that different perspectives are compared and as many difficult questions as possible are discussed. But it is also desirable that we ultimately arrive at something of a consensus. In the longer run it would hardly be good for the Riksbank to publish six different inflation reports, which in a way would be the logical outcome of carrying the Board members’ individual responsibility to an extreme. This raises the issue of what the Inflation Report stands for. The Board’s decision that it represents a majority view enables us to compile a clear and consistent presentation. The Bank of England has a different procedure that aims to present different views in a single report. The material produced in the Monetary Policy Department is distributed simultaneously to all the Board members to make their conditions as similar as possible.

And as Alf Henriksson, if my memory does not fail me, said on some occasion, making forecasts is difficult, particularly about the future. It calls at least for knowledge of what has happened and is now happening in the economy, as well as of various economic relationships that can be used to interpret the available information. One approach involves assessing the factors that affect prices and trying to identify simple relationships between them and inflation. Such calculations are a part of the material that is presented to the Executive Board as a basis for decisions. If they add up to a uniform picture, the calculations presumably say something about the direction in which inflation is moving. Our main assessment, however, uses methods that are more complex. Like other economic observers, we endeavour to construct a picture of economic developments in the coming years that is coherent and consistent. We do this with the aid of what economists call a model: a computer spreadsheet for processing economic data. This largely guides the presentation of our assessments in the Inflation Report (Chart 1.The Inflation Puzzle).
An overview to the experience of several economies suggests that the culprit of the current crisis was related more closely with the functioning of financial systems than with monetary policy. One issue that will have to be carefully examined in the future is the cause of the real estate boom and the housing crisis, and why it occurred in the United States. At this point it is clear that lending standards were excessively lowered. Ellis (2008) shows that in the U.S., households had strong motivation to increase their leverage through tax, legal and regulatory incentives. One key element of financial innovation was the creation of structured instruments. With them, banks could reduce their individual risk levels and expand their operations into formerly unexplored market segments. Recent evidence proves that the risk of these instruments was wrongly evaluated by rating agencies and by credit originators. Credit structuring also debilitated the central role of banks in the selection of their clients. 2 Securitization did not maintain the incentives for banks to properly screen their customers or for them to meet payments. The compensation structure was based on the number of operations rather than on their quality.

Jean-Pierre Roth: Switzerland as an industrial location and National Bank policy Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Europa Forum Lucerne, Lucerne, 27 October 2003. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  In a high-wage country such as Switzerland enterprises can only maintain their position in the face of international competition by a process of ongoing innovation. The resulting structural change in the direction of highly technological and increasingly productive economic sectors is also a prerequisite for strong economic growth. In an international comparison, however, Switzerland’s growth is poor. This weak perfomance in terms of growth highlights the need for action in economic policy. Monetary policy cannot, however, fulfil this role. The primary task of monetary policy is to ensure price stability. Price stability is an important locational advantage that Switzerland has to offer. Moreover, monetary policy can also contribute to stabilising the economy and warding off undesirable exchange rate shocks. It is, however, not in a position to bring about a sustained improvement in economic growth. The result of such an attempt would merely be economic overheating with the threat of a subsequent slide of the economy into recession. Lasting effects on economic growth may, by contrast, emanate from education policy, research policy, policy on foreigners and fiscal policy.