samchain/econo-pairs-v1 huggingface dataset:
A recent estimate of the number of unemployed is an appalling 30 million.” Except for the phrasing and style, that speech could be cut and pasted from that address in 1933 to describe the situation today. The queues of the unemployed that we used to see in 1930s-vintage black-and-white photographs we are now seeing on television in living colour. Youth unemployment in southern Europe is especially high. The Red Cross is setting up food banks in Spain. The middle class is being hit by higher taxes, lower pensions and unemployment. Political scientists tell us that this is a recipe for social and political unrest.3 In May 1945, the work began to rebuild our country after the Second World War. At that time, Friedrich Georg Nissen was the highest-ranking official in the Ministry of Finance. Nissen trained in the law, and the photograph of him in Einar Lie’s book on the history of the Ministry of Finance shows a man formally dressed in a three-piece suit. He believed that the central government budget should be balanced each year. Fiscal policy was conducted based on this principle, which leading politicians also agreed with.4 Tax revenue was to be spent, but not a penny more. Broadly speaking, the prevailing paradigm up until the Great Depression of the 1930s – both in economic policy and in economic theory – was that the authorities’ role should be limited to keeping domestic order and ensuring a stable and predictable regulatory and operating framework.

When some investors sought to sell their shares in exchange for gold early in 1720s to secure their gains, the party came to an end. The bank attempted to persuade investors to accept banknotes instead, but this led to a sharp increase in the money supply. Inflation surged and in January 1720 it had exceeded 20 percent per month. In late spring 1720, the bubble burst. People lost all confidence in banknotes. Coins resumed their status as means of payment, and to the extent that bank-like institutions were established in France in the next 150 years banks were designated using other names such as “caisse”, “credit”, “sociétè” or “comptoir”. John Law was sacked and allegedly fled the country disguised as a woman. At about the same time a similar project in England led to the South Sea Bubble. Under an agreement between England and Spain in 1713, the South Sea Company was awarded a contract for delivering slaves to the Spanish territories in America. The South Sea Bubble also burst in 1720. In contrast to the Mississippi bubble, however, the South Sea Bubble involved extensive insider trading and fraud, and a reaction new and stricter financial regulation was introduced in England through the Bubble Act and Sir John Barnard's Act. There is a large body of literature dealing with these speculative bubbles in France and England in the early years of paper money, see for example Larry Neal (1990, 2011), “The rise of Financial Capitalism.
- A fiscal accelerator, once we have increased trust between Member States and made headway towards greater economic convergence: the euro area budget could be used to finance, for the benefit of all countries, certain “European common goods” such as digital technology, energy transition, security, migration controls. - An institutional accelerator: i.e. first and foremost a euro area Finance Minister, President of the Eurogroup and member of the Commission,  Page 8 sur 8 backed by a European Treasury; but also a euro area Parliament group, in order to ensure the democratic legitimacy of the institutions and decisions. The latter two accelerators, fiscal and institutional, would require Treaty changes, unless they were to be very limited. But this must not stop us from making progress straightway on the first two, in order to breathe new life into Economic Union. **  I would like to conclude my speech today by quoting Stefan Zweig, one of the most famous Austrian authors. He wrote a beautiful text after his visit to the Banque de France in Paris in 1932.viii But he above all paid tribute to his home town in the following words: “For the genius of Vienna — a specifically musical one — was always that it harmonized all the national and lingual contrasts. Its culture was a synthesis of all Western cultures.

This naturally served to temper the degree of exuberant risk-taking. Partners or managers in a bank were in for the long haul, with their investments and family wealth tied into the firm until retirement. So it was not just their next year’s bonus that was at risk. This evident “alignment of interest” between the bank owners or managers and the bank’s customers and creditors clearly helped promote trust. 8. That said, although some US investment banks only moved from the partnership to public ownership model in the past 25 years, it is the case that other commercial banks have been structured as public joint stock banks with limited liability since the 19th century. So if limited liability has existed for two hundred years, in at least commercial banking, with the attendant potential “agency” risks (i.e. shareholders with limited skin in the game and managers with relatively little capital invested), what else has been at work to create the problems which so vividly surfaced in the Global Financial Crisis? What has changed: bank management 9. First, bank employees’ time horizons have shifted. By this I mean that in the past employees, for a variety of reasons, tended to be much more “stable” in the sense of their ties to a given employer. An employee might join a bank, work their way steadily up through its ranks and then, on retirement after 30 or 40 years of service, receive a pension from the bank.
Financial Stability Board “Progress since the St. Andrews meeting in Implementing the G20 Recommendations for Strengthening Financial Stability”, 19 April 2010. 18. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies. OJ, l 302, 17.11.2009, p. 1. 19. Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority. Brussels, 23.09.2009, COM(2009)503 Final. 4  BIS Review 67/2010

In particular, governments need to foster innovation by providing the right framework to encourage experimentation and risk-taking in new and growing sectors, and to support the transition to new jobs for people working in “sunset” sectors. In parallel, they need to ensure that the conditions are in place to direct investment towards the technologies and sectors of the future. 2/4  BIS central bankers' speeches  This requires sufficient financing. The European Commission estimates that the investment needs for delivering the digital transformation as well as the green transition will be at least € trillion over the next two years.2 But in a number of countries – Italy among them – mobilising investment requires above all a business-friendly economic environment, with efficient and agile public and private services, adequate physical and digital infrastructures, a well-functioning judicial system and a strong financial sector. If such actions are taken, this crisis can engender a period of positive transformation. It offers an opportunity to policymakers to take a decisive step forward towards more inclusive, greener and more digital growth.
The amplification of spillovers by the IMFS matters less when the global expansions are relatively synchronised or when the US economy is relatively weak. But when US conditions warrant tighter policy there than elsewhere, the strains in the system become evident. These conditions emerged last year. US fiscal policy had boosted growth at a time when the US economy was near full employment. US monetary policy had to tighten consistent with the Fed’s dual mandate. The resulting dollar strength and financial spillovers tightened financial conditions in most other economies by more than was warranted by their domestic conditions (two thirds of the global economy was growing at below potential rates at the start of 2019, and that proportion has since risen to five sixths). More recently, the dramatic increase in trade tensions (Chart 1) has reinforced their effects by increasing risk premia. Today, the combination of heightened economic policy uncertainty (Chart 2), outright protectionism and concerns that further, negative shocks could not be adequately offset because of limited policy space is exacerbating the disinflationary bias in the global economy. What then must be done? In the short term, central bankers must play the cards they have been dealt as best they can. That means using the full flexibility in flexible inflation targeting. To retain the essential credibility of their frameworks, this is best done transparently with central bankers explaining their reasons for targeting specific trade-offs between price stability and output volatility.

The purple bars build on the contribution of pull factors to the conditional 5th percentile of capital flows in the current quarter and two quarters ahead. Pull factors are proxied by domestic financial condition indices (DFCIs), which are mean-orthogonalised by a global financial conditions index (GFCI). The coefficient on the DFCIs is estimated by panel quantile regressions. Push factors are proxied by the Bank of England’s global financial conditions index. The chart shows PPP-weighted averages across the 13 EMEs in our panel. Chart 7: For EMEs, market-based finance accounted for all the increase in foreign lending since the crisis Structure of external liabilities for emerging market economies  Sources: IMF, EPFR and Bank of England calculations  20  All speeches are available online at www.bankofengland.co.uk/news/speeches  20  Chart 8: Market-based finance flows are particularly sensitive to push shocks The sensitivity of Capital Flow-at-Risk to push factors, by source of capital flow FDI  Banking  Market-based finance  of which: investment funds 0 -1 -2 -3 -4  Median  5th percentile  -5 Capital Flows-at-Risk as a % of GDP  Sources: IMF, EPFR, Bank calculations. Notes: Chart shows the sensitivity of different capital flows to a negative "push" shock. Coefficients are standardised by each component’s share of total flows e.g. the red MBF bar shows how total Capital Flows-at-Risk would respond to a one standard deviation tightening in global financial conditions if all capital flows were accounted for by MBF.
In my speech in 2016 I also didn’t address how monetary policy and communication of monetary policy should be formulated more explicitly in a situation where inflation is not expected to reach the target during the forecast period, and there is a risk that the long-term inflation expectations will fall and become entrenched at a low level. We had not come that far then, but as many countries now find themselves in a situation where this risk is a reality, it is a problem that the world's central banks and governments need to deal with. Continued expansionary policy with possible modifications So, if I return to the Riksbank, how do I think we should act more specifically – what should be the plan from now onwards? With regard to communication of  6 [15]  the principal plan, we should, as I mentioned earlier, both be completely clear that monetary policy is still aimed at the inflation target, and also continue emphasising why it is important that the inflation target is some way above zero – with the aid, for instance, of the three questions I mentioned earlier. Explaining why a respectful distance to zero inflation and deflation is so important is not a new element in our communication, but as it is more important than ever before that there is a broad understanding of it in society, we need to increase our efforts. Of course the actual policy should in accordance with this remain expansionary, with the tools that are at our disposal.

The fact that interest rates have fallen, and are now at historically low levels, means that the level where the central banks’ policy rates are “neutral”— that is, neither expansionary nor contractionary – has also developed in a similar manner. The relationship between the neutral interest rate and monetary policy can be illustrated with the aid of Figure 4. The neutral interest rate is represented by the broken line. When central banks conduct monetary policy via the policy rate, they change it in the way described in the solid line. An interest rate that is lower than the neutral one stimulates demand and inflation, while an interest rate that is higher than the neutral one has the opposite effect. Central banks cannot set interest rates independently of the neutral interest rate, but must take it into account. As the neutral interest rate is currently at a historically low level, the central bank's policy rate needs to be very low to have an expansionary effect. This has meant that policy rates in many countries today are at or close to the lower bound, and would have been even lower if this had been considered possible. In other words, monetary policy is currently being squeezed from two sides — the pandemic and fall in demand that is subduing inflation on the one hand, and the conditions that make it difficult to cut the rate to counteract this on the other. 2 Skingsley (2016).
BIS central bankers’ speeches  11  But if inflation expectations are anchored to the target at the same time as average inflation is deviating from the target, this means that the long-run Phillips curve is no longer vertical, but sloping downwards. This relationship is supported by data and shown in Figure 3. The red circles show the outcome for unemployment and the gap between CPI inflation and the target of 2 per cent from the first quarter of 1998 and up to the end of the fourth quarter of 2011. The black line is an estimated long-run Phillips curve. If the average inflation rate would deviate substantially from the target, it is hardly likely that inflation expectations would still remain anchored to the target. The estimated long-run Phillips curve is therefore reasonably only relevant in moderate deviations from the target. It is thus marked as a dashed line for average inflation that deviates more than 1 percentage point from the target. That the long-run Phillips curve is no longer vertical for inflation expectations anchored to the target has been noted for the United States in the period 2000–2011 by Jeffrey Fuhrer (2011) at the Federal Reserve Bank of Boston. 12  BIS central bankers’ speeches  Higher average unemployment when average inflation undershoots the target The right-hand square on the long-run Phillips curve in Figure 3 shows an average inflation rate that is 0.6 percentage points below the target, which thus corresponds to the deviation in Sweden during the period 1997–2011.

Given these factors, I entered a reservation against the decision, preferring a much lower repo-rate path than the one proposed by the majority. At the next monetary policy meeting in July, there will be a new assessment, with new four-panel figures. 5  So-called mean squared gaps are also shown, although they are not needed in this case to judge which of the alternative repo-rate paths leads to the best target attainment. 4  BIS central bankers’ speeches  Objections to monetary policy focusing on inflation and unemployment The Sveriges Riksbank Act, the government bill proposing it and economic analysis thus all provide strong support, in my opinion, for monetary policy aiming to stabilise inflation around the target and unemployment around a long-run sustainable rate. At the same time, it is clear that the majority of Executive Board members have conducted a monetary policy that aims to do something other than this. As I discuss in detail in Svensson (2011), the majority of the Executive Board began to raise the repo rate in July 2010, despite the forecast for CPIF inflation being below the target and the forecast for unemployment being above any reasonable long-run sustainable rate. In recent years, according to the forecasts made at the time of each monetary policy meeting, a lower repo-rate path than the one chosen by the majority would have led to better target fulfilment for both inflation and unemployment.
A decade ago, we relied heavily on markets outside Asia for our products, sending over three-quarters of exports to those markets. That reliance has been reduced sharply. In 1996, around 35% of trade in East Asia was conducted within the region, compared with the share of 28% with NAFTA countries and 20% with the European Union. 38. On investment and capital flows, the story is similar. As recently as in 1989, equity flows within the Asian region amounted to only $ billion. In 1995, the flows had increased three-fold to almost $ billion. According to the Asian Development Bank (ADB), the share of foreign direct investment from North America and the European Union in East Asia had fallen from 40% of the total fifteen years ago to 25% by 1993. Now over 50% of foreign direct investment comes from within the region. This trend can only grow, as the population giants of China and India increasingly become more engaged in trade and investment (see Table 5). 39. Much greater interdependence of course means that policies in one economy can have important implications for others. A more liberalized financial environment also means that policy mistakes can be punished almost instantaneously by the market and that monetary problems in one economy can easily spread to others.

Once linked up, Herstatt risk of foreign exchange transactions involving the two currencies concerned will immediately be eliminated. Payment versus payment (PvP) and delivery versus payment (DvP) within Asian time will become a reality. 57. The fourth area for Asian monetary co-operation is banking supervision and financial regulation. As financial markets are further liberalized and integrated, the growth of cross-border banking activities and other financial transactions is accelerating, increasing the risk of contagion. As ultimately monetary problems surface in the banking system, it is important for regulators in different economies to co-operate to safeguard the integrity of the banking and financial systems in the region. Part of the work will involve the harmonization of supervisory practices, including the adoption of the Core Principles for effective supervision advocated by the Basle Committee. 58. Through working closer together, such as the collaboration of the EMEAP Study Group on Banking Supervision, supervisory authorities in the region would be able to improve their understanding of each others’ banking systems and supervision framework and approach. We will also review practices in the region against the existing Basle Committee benchmarks, identify reasons for any differences and thus help to raise the quality of supervision in the region. Over time, it may be possible to move on to the setting of standards. 59. Last, but not least, in Asia monetary co-operation concerns policy consultation. Clearly, there is scope to improve mutual understanding of each other’s policy framework and priorities.
They show that home equity withdrawal was driven primarily by households with low credit scores and high credit card utilisation rates, who are most likely to have been credit-constrained in the past (Mian and Sufi (2009)). As these constraints loosened, spending rose and saving fell. Liberalisation fed impatience. These patterns are also consistent with an inequality-based explanation for lower saving (Rajan (2010)). Rising inequality may generate an increased desire to “keep up with the Jones’s”. That, in turn, may have led to higher borrowing, and lower net saving, by the poor. And what applies within countries appears also to apply across them. Among advanced countries, there is a significant negative relationship between within-country measures of inequality and the current account position (Chart 15). Rising inequality, by lowering savings rates among the poor, appears to be deficit-inducing. Rising imbalances may have important social, as well as economic, roots. 6  BIS Review 174/2010  BIS Review 174/2010  7  8  BIS Review 174/2010  Global imbalances – future So what will be the key forces driving global imbalances in the period ahead? Judging from the recent past, two factors have been important:   Global financial integration;    Differential savings behaviour. Consider in turn their likely evolution. Global financial integration. In the period ahead, this will be shaped by a number of mediumterm structural factors. One key such factor is cross-country GDP convergence.

Since then the picture in the UK has been clouded by the impact of the Brexit vote. The global picture however does I think provide evidence of the slow healing story. Having grown at rates below pre-crisis norms for the post-crisis period, the world saw an increase in growth rates from around the middle of 2016. That return to stronger growth was broad-based both in that it was true for the whole of the G7 – excluding the UK – and emerging markets in aggregate and that it was driven by a pick-up in investment not just consumption. At the same time, in the US, partly in response to very low levels of unemployment, pay and inflation have risen from subdued 1-2% to rates closer to 2-3% over 2015 to 2018. So is there still a case for any ‘stodginess’ in the approach to monetary policy in the UK? Headline CPI inflation is running at 2.4% above its 2% target. The overshoot, however, is entirely due to imported inflationary pressure. This has come primarily from the post referendum depreciation in sterling plus some more recent pressure from the increase in oil prices. The inflationary pressure from sterling’s depreciation is already passed its peak. In May the MPC forecast that CPI would be at 2.2% by the year end. The MPC’s remit is to keep inflation at target ‘at all times’.