samchain/econo-pairs-v1 huggingface dataset:
Although copper still accounts for a relevant portion of Chilean exports, an important number of new markets for a variety of products have been opened thanks to both the unilateral efforts of trade liberalization and the significant spread of bilateral trade agreements with the major economic countries and zones. Finally, a sound financial system, with globally integrated, well-capitalized, and adequately-regulated banks. Actually, the regulation of the domestic banking system prevented some of the most notorious credit excesses that happened in advanced economies, or in the past of many emerging markets, including Chile. 1  Banco Central de Chile (2007). 2  See Marcel et al. (2001) for a discussion of the budget rule. BIS central bankers’ speeches  1  I will continue my presentation speaking about how all the shocks we have seen the last few years have affected the Chilean economy and the policy responses we have put in place. Then I will describe the recovery process and I will finalize presenting some thoughts on the lessons that can be drawn from our recent experience and some challenges I see for the future. The run-up to the financial bust By March 2008, Bear Stearns had already gone bankrupt and the risk of a higher stress episode at the world financial markets had increased greatly. Due to the risks of a potential sudden stop if the financial crisis should worsen, and in a context of a severe appreciation of the Chilean peso, in April, the Central Bank decided to start accumulating reserves through sterilized intervention.

Financial inclusion is a perfect example. Technology is helping thousands of families and business all over the world to gain access to financial tools that improve their day-to-day living. Yet, despite these many positive developments, digital transformation of the financial industry is also known to harbour significant risks. Some of them might be new but others have been long associated with the provision of financial services, such as operational, financial, legal and reputational ones. A telling example of this is banks’ -and Fin Techs’increased reliance on third and fourth parties. One such essential external partner are cloud and data service providers. In this context some of the more fundamental concerns expressed by central banks and supervisors have to do with issues such as the degree of concentration among a small number of dominant players, the potential loss of control over and visibility of whether a service is being delivered in line with laws and regulations, and the possible difficulties authorities may encounter to effectively access critical data held by third parties, if and when  2  Just in the case of Spain, a Banco de España led survey showed that by end-2019 about 89% of banks had already reached a high to medium degree of digitalisation of their internal processes; a figure that is close to 95% in the case of customer-related ones. In fact, the same study claimed that prioritisation was given to the retail segment (e.g. biometry, digital wallets, etc.).
There are many other judgements in the forecast where the risks for me are more balanced but similarly uncertain given the sources of uncertainty present. I am not advocating ignoring the forecast in the framing and setting of policy and relying instead on current, spot economic data. But I do support the MPC continuing to be more explicit in recognising the uncertainties inherent in the future path of the economy and in the forecasting process. One consequence of this approach is that I am more sensitive to errors in the short-term forecast than I am to forecast changes further out. A cross-check on the MPC forecast is to compare with other forecasters, which we facilitate by including an annex on other forecasters expectations in every MPR (Chart 9). Because the period running up to the November MPC was marked by particular volatility in financial markets, other forecasts were more likely than usual to be based on different assumptions to the MPR forecasts. Even allowing for that, the differences are noteworthy though also reflective of the uncertainties forecasters have to contend with at present, both on the demand side and the supply side. Bank of England  Page 13  All other forecasts for GDP in each of the three years from 2023 to 2025 were above the MPC’s modal projection. There was a similarly marked difference after the first year of the forecast period for unemployment.

The Bank’s forecasts at the time were conditioned on the declining futures curves for energy prices for the first six months of the forecast but were assumed flat thereafter. On that basis the MPC concluded that “while the risks around energy prices are judged to be to the downside those towards wage growth are judged to be skewed to the upside”. Fast forward a year and the November 2022 MPR forecast shows just how much has changed for the worse (Table 2). Inflation is now expected to peak at 10.9% in 2022Q4, over three times higher than was forecast only a year ago, before falling sharply from the middle of 2023, to well below target by 2024Q4. With the economy already likely to be in a recession which is forecast to be prolonged, GDP growth is negative in the year to 2023Q4 and 2024Q4, to 7.5 per cent below what was forecast a year ago3. Despite much weaker growth, unemployment looks likely to be lower in 2022Q4 than was forecast a year ago and wage growth is forecast to be much higher, 5 ¾% compared with 1 ¼%. As the recession is forecast to deepen, unemployment rises sharply throughout the forecast period, a significant degree of spare capacity opens up and wage growth falls back. 2  This was the average outside forecast included in the November 2021 MPR.
Another way to respond is to supply liquidity with a longer maturity. Central banks in the euro area, the US and the UK opted for this response, as a number of banks were finding it difficult to obtain loans with somewhat longer maturity on the market. A third response is to lower the discount rate. Banks that have miscalculated their liquidity requirements can obtain a loan through the discount window facility. Normally, the discount rate has a fixed premium above the key policy rate. 3 On Friday 17 August, the Fed reduced this premium and lowered the discount rate by 0.5 percentage point. All central bank loans are backed by securities or some other form of collateral. A fourth response is to approve a wider range of collateral. The central banks in the UK and Australia expanded their range of approved collateral during the turbulent period. A final response is to provide liquidity support on special terms. Central banks can provide this support if a bank faces short-term liquidity problems. The Bank of England approved a liquidity support facility for Northern Rock. In situations where the need for extraordinary measures arises, central banks must weigh two important considerations against each other. The objective of financial stability in the short term must be weighed against moral hazard in the longer term. When central banks intervene and bail out operators that have taken on too much risk, this may be perceived as insurance against moral hazard, which may increase the risk of similar situations arising in the future.

A bank may have an ownership share in and/or provide credit lines to both the lender and several other types of special purpose vehicles. If problems arise in one of more of the intermediaries, the responsibility easily falls on the bank. US and European banks have also invested in securities issued by special purpose vehicles. An important part of the process is the packaging of mortgages by special purpose vehicles. The senior tranches have a high rating. The subprime mortgage market has thus gained access to funding from insurance companies and other financial institutions that would not otherwise have invested in this market, and credit risk associated with these mortgages has been spread to international financial markets. 2  BIS Review 115/2007  Rising defaults on subprime mortgages resulted in a sharp rise in the yield spread between securities backed by this type of loan and US government bonds. The turmoil quickly spread to other financial market segments. Uncertainty arose in banks that were directly or indirectly exposed to losses on loans to subprime borrowers. Banks’ oversight of their own potential losses was poor. It was also unclear to what extent special purpose vehicles would draw on credit lines. A number of takeover companies, known as private equity companies, had difficulty obtaining financing in bond markets for their leveraged buy-outs. As a result, banks that had guaranteed temporary funding for these companies were left holding these loans for longer than originally planned.
Moreover, it is possible, albeit with the benefit of hindsight, to explain why inflation in recent years has been higher than we expected. But that is all in the past. What matters for monetary policy are the prospects for inflation over the next 2 to 3 years. My broad view of the inflation outlook is similar to that described in the February Inflation Report. Inflation will probably rise further in the near-term as recent commodity price increases pass through the supply chain. But further out, inflation is likely to fall back as the temporary impacts of the price level shocks wane and the slack in the economy associated with the deep recession from which we are only gradually recovering continues to pull down on inflation. But the risks and uncertainties associated with the inflation outlook means it is impossible to know with any certainty by how much and over what period inflation will moderate. Indeed, it is quite possible that inflation may be considerably higher or lower than the central view taken in the February Report. This leads to the third item on our charge sheet: could inflation remain high? The simple answer to this question is – I’m afraid – yes. I would highlight two risks in particular. The first is that global price pressures continue to add to domestic inflation. There are a number of potential channels through which this could operate.

3  The relevant clause of the remit states “The framework is based on the recognition that the actual inflation rate will on occasions depart from its target as a result of shocks and disturbances. Attempts to keep inflation at the inflation target in these circumstances may cause undesirable volatility in output.” See http://www.hmtreasury.gov.uk/d/open_letter_from_chx_to_boe_22032011.pdf  2  BIS central bankers’ speeches  MPC’s initial judgement was that over the next few years less than half of the increase in import prices would feed into higher UK consumer prices, with the remainder being absorbed in margins or lower nominal wages. This judgement was based in part on a number of influential studies made in the years prior to sterling’s depreciation which suggested that the degree of exchange rate pass-through in many countries, including the UK, had fallen significantly during the period of Great Moderation. Indeed, a general view had emerged amongst many academics and commentators that pass-through in many major economies had fallen close to zero.4 The MPC’s initial judgement that around 40% or so of the increase in import prices would pass through into consumer prices was at the top end of this emerging view. However, that judgement now looks woefully optimistic compared to the degree of pass-through we think has occurred, which is closer to 100%.5 This error of judgement can more than account for the surprising strength of inflation through 2009 (Chart 2).
But while risk-free rates have been falling globally in recent decades, measures of the rate of return on productive capital across high-income economies have not. [16] As the return on capital has remained stable, as shown in Chart 4, while the safe rate and cost of funding has declined, a wedge has opened up between the return on firms’ investment and the cost of financing it. [17]  Chart 4: Realised real return on capital has been relatively stable  Note: High-income countries include Finland, France, Italy, Japan, Netherlands, Spain, the United Kingdom and the United States. See Appendix A.2 to Bailey et al. (2022) for data definitions. Source: Authors' calculations using EU KLEMS, the Penn World Table 10.0 and the Jordà et al. (2017) Macrohistory Database. See Appendix A.1 to Bailey et al. (2022) for more details. Chart 5 plots the wedge between the return on capital and risk-free rates for a broad group of high-income economies since 1990. [18] If the return on capital had comoved with the risk-free rate, the wedge would have been stable over time. However, the wedge has increased in most countries, as shown by the blue swathe. The median increase of around 5 percentage points is broadly similar to the rise in the wedge in the United Kingdom (shown in orange). Page 10  Chart 5: Wedge between the return on capital and risk-free rates has risen  Note: High-income countries include Finland, France, Italy, Japan, Netherlands, Spain, the United Kingdom and the United States.

So there is clearly still lots of work to do, and I hope to see more research dedicated to this subject in the future. Intangibles and Productivity I can now come full circle and consider the implications of the findings so far for another important equilibrium concept: potential output. As intangibles seem to be important for the puzzling weakness of investment, can they also help us rationalise recent developments in productivity and hence the implications for potential output? Page 14  Since the global financial crisis we have observed a substantial productivity puzzle. Average labour productivity growth in the United Kingdom has been around 1.3 percentage points lower since the crisis. While intangibles help to explain the missing investment puzzle, their effect on productivity is mixed as, if anything, there is evidence that they might be driving this productivity slowdown. Chart 9 shows that intangible-intensive industries have experienced the strongest slowdowns in labour productivity growth since the global financial crisis, consistent with a recent study by my colleague Jonathan Haskel. [23]  Chart 9: Productivity slowdown is stronger in intangible-intensive industries  Note: The y-axis shows the change in average labour productivity growth over 2008-2018 with respect to the 2000-2007 period. The x-axis covers the average share of intangible assets in total capital. Each ‘bubble’ represents an industry, with the area of the bubbles reflecting its share in total employment within each country, thereby measuring the industry’s contribution to aggregate labour productivity growth. EU4 consists of Germany, Spain, France and Italy. Source: Source.
Elvira Nabiullina: Review of Russia's economic and financial developments in 2018 Speech by Ms Elvira Nabiullina, Governor of the Bank of Russia, at the plenary session of the State Duma of the Russian Federation, Moscow, 30 May 2019. * * * Good afternoon, esteemed colleagues. Today, I draw to your attention the report on the Bank of Russia’s activity in 2018. The Report was sent to the State Duma three weeks ago, and we had a chance to discuss it in working groups, at parliamentary group meetings and at the joint meeting of relevant committees. Allow me to express my gratitude for your attentive consideration and deep interest in what we do. I would like to dwell on our key activities determined by the Constitution and the Central Bank Law. They are associated with the national development goals set forth in the Presidential May decree and strategic goals of the Bank of Russia. I will start with monetary policy issues. Our main goal is near 4% inflation. This is stipulated in the Presidential decree. Low inflation is paramount to long-term investments and a rise in public prosperity. We first reached the inflation target in 2017, as we had promised. Since that period, our policy has aimed to keep inflation close to this level. In 2017 and early 2018, both internal and external factors were favourable and we could cut the key rate, whereas in the second half of 2018 serious inflation risks emerged.

Looking beyond current fiscal turbulences, let us think, for instance, of how euro area member countries would have absorbed the crisis with fifteen different currencies, fluctuating internal exchange rates, and, consequently, much higher volatility, uncertainty, risk premia and interest rates. This experiment speaks for itself. Let me add, also, that despite the perception of slow motion from European authorities, we share a great sense of urgency and solidarity. There is no benign neglect nor resignation/despair. The last type of reaction is support. It shows up in comments from a majority of observers and investors, especially in emerging economies: they praise the euro; they want it to succeed; but they sometimes question our collective ability, in current circumstances, to do what is necessary, to make the right decisions or make them at the right time and to set in place the proper framework for the future. These are the concerns I would now like to address. Where and how did it start? Most euro area and EU countries entered the crisis with significantly deteriorated fiscal positions, very far from the “structural balance objective”, which is the core of our fiscal framework and also the commitment made by Member States that adopted the euro. With the crisis, fiscal imbalances increased, not so much because of a rise in expenditure, but essentially through a massive loss in revenue.
So, exporters to the euro area are now able to recoup part of the margins they compressed during the downturn. The extent to which they are able to do so also depends on the degree of competition, a point made by Rudi Dornbusch back in 1987. The more concentrated market power is, and the less substitutable products are, the more likely firms are to increase their margins following exchange rate appreciations. This also means that the pass-through may well differ across industries.9 These examples demonstrate that it is by and large the state of the economy that will determine the strength of the pass-through. Monetary policy, for its part, is likely to influence the passthrough predominantly through its impact on the economy itself. And at the moment this support from monetary policy may be even more powerful than in the past. The reason is that, in the class of models used here, positive demand shocks are normally identified by assuming that short-term interest rates rise in response to higher growth and inflation. At the current juncture, however, the policy-relevant horizon – the “medium term” concept in our monetary policy strategy – is likely to be longer given the persistence of subdued inflationary pressures. Our forward guidance on both policy rates and the APP, as reiterated by the 6 / 14  BIS central bankers' speeches  Governing Council last Thursday, reflects this assessment.

Anita Angelovska Bezhoska: How to make capitalism work for all Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the IMF/WB Constituency Meeting, Skopje, 22 June 2019. * * * Distinguished Prime Minister, ministers of finance and other respective representatives of government institutions, governors of central banks and other respective representatives of central banks, Executive Directors, Vice Presidents in World Bank Group Directors in International Monetary Fund, Professor Zingales, Delegates of the Constituency, excellences, fellow colleagues, representatives of the media, At the very beginning, let me say how honored we are to have the opportunity to host this important gathering of our Constituency. Sixteen years have passed since the last meeting of the Constituency in Skopje, and we are delighted to have all of you with us here during these three days. By a twist of fate, I recently came across a book that I have not seen since my early youth days; a book that starts with a very powerful notion – “Happy families are all alike; every unhappy family is unhappy in its own way” – you might recall Tolstoy’s “Anna Karenina”. Few days after, while searching for the most recent discussions on the matter of capitalism, inequality, wealth distribution, I read an analytical piece where the author cited the same quote, linking it with all the different modalities of inequality, as a symbol of the global unhappiness. Standard metrics on inequality point to a widespread and rising phenomenon.
It will be necessary to reassess ideas based on clear boundaries between monetary policy and financial stability policy, and consider more deeply the particular risks associated with a small, unstable currency. All of these points will be considered with an open mind, and the Bank intends to examine two options thoroughly: the first is participation in the European Monetary Union. The other focuses on the monetary policy options available to Iceland if it remains outside the EU and the EMU. The latter of these could also be useful during preparation for EU and EMU membership, if it comes to pass. The Bank aims to complete an interim report early this summer, and an in-depth report early in 2011. This re-examination of policy pertaining to financial and monetary stability could require a review of the Central Bank Act, which I think is needed in any case. Consequently, I welcome the Minister of Economic Affairs’ statement, earlier in this meeting, that he intends to push for a comprehensive review of the Central Bank Act. I consider it critical that attempts be made to achieve as much multipartisan consensus as possible about that review. *  *  *  Honoured guests: The affairs of the Central Bank of Iceland were administered by the Prime Minister’s Office until this past fall. I would like to take this opportunity to thank the Prime Minister and the Prime Minister’s Office for successful collaboration during that period.

There is a practical reason for such a review: we need to formulate the monetary policy that will take over from the IMF programme because the current arrangement will not suit once the capital controls have been lifted and Iceland has re-established its financial links with other countries. But there are also lessons to be learned from monetary policy implementation during the upswing and in the run-up to the financial crisis. The inflation target and the floating exchange rate did not cause the banks to collapse; after all, if they had, many more banking systems around the world would have fallen. But monetary policy was part of the chain of events here in Iceland, and a  8  BIS Review 39/2010  number of difficulties emerged in monetary policy implementation under the conditions then reigning. There will be opportunities to discuss this in greater depth later, but in my view, the inflation target as such was not the problem, as studies show that countries with inflation problems are likelier to be hit by banking crises, and fare worse in the event of such a crisis, than their counterparts without problem inflation. The problem was rather that the various elements of economic policy did not interact as they should have, and it has come to light that implementing a floating exchange rate regime is complex and difficult in very small, open economies with strong financial ties to other countries.