samchain/econo-pairs-v1 huggingface dataset:
Given that the prices that determine inflation are partly rigid, the central bank may influence the real interest rate by adjusting nominal rates. Before the onset of the financial crisis, the central bankers’ manual prescribed that if the economy is overheating and prices and wages are under growing pressure, the central bank should raise nominal interest rates above inflation expectations, thus tightening real rates and cooling down the economy. And vice versa, in a downturn, with falling prices and rising unemployment, the central bank should cut nominal interest rates, thus reducing real rates and stimulating aggregate demand. 10  Conceptually, central bankers sought to maintain real interest rates at a level – known as the natural rate of interest – that would hold GDP at its potential level and would keep inflation stable around its target level.2 This natural rate of interest is not directly observable  2  The concept, determinants and monetary policy implications of the natural rate of interest are discussed in depth in Galesi, Nuño and Thomas (2017). 11  and may only be estimated, with some degree of uncertainty, using econometric techniques.3 In recent decades this natural rate of interest has gradually fallen in the advanced economies. This is attributed both to demographic factors (such as population ageing) and to technological factors (such as low productivity growth), which have changed the balance between the supply of savings and the demand for investment.

Plosser, Charles (2018), “The risks of a Fed balance sheet unconstrained by monetary policy”, in M. Bordo, J. Cochrane, and A. Seru: The Structural Foundations of Monetary Policy, Hoover Institution  10 [16]  Rachel, Lukasz and Thomas Smith (2015), “Secular drivers of the global real interest rate”, Bank of England Working Paper No 571 Sims, Christopher (2016), “Fiscal policy, monetary policy and central bank independence”, Jackson Hole Symposium, Federal Reserve Bank of Kansas City Sveriges Riksbank (2009), “The monetary base – the Riksbank changes statistical definition”, memorandum, 16 April Sveriges Riksbank (2012), “Securities portfolio in Swedish kronor”, press release, 10 May Sveriges Riksbank (2014), “The Riksbank’s operational framework for the implementation of Monetary Policy – a review”, Riksbank Studies Sveriges Riksbank (2017a), “The long-term repo rate”, article in Monetary Policy Report, February Sveriges Riksbank (2017b), “The Riksbank’s experiences of publishing repo rate forecasts”, Riksbank studies, June Walsh, Carl (2017), Monetary Theory and Policy, fourth edition, MIT Press Woodford, Mark (2000), “Monetary policy in a world without money”, International Finance 3, 229-260. Yu, Edison (2016), “Did quantitative easing work?”, Economic Insights, First Quarter 2016, Federal Reserve Bank of Philadelphia  11 [16]  Figures Figure 1.
57 As I had explained on previous occasions, MAS’ overall profit position is strongly influenced by currency translation effects – these are the effects of converting value of our reserves in foreign currency to Singapore Dollars (SGD). •  A weaker SGD means a positive translation effect, i.e. investment gains on our foreign assets are amplified when reported in SGD. •  Conversely, a stronger SGD means a negative translation effect, i.e. investment gains are smaller or even negative when measured in SGD. But these translation effects have no bearing on the international purchasing power of MAS’ reserves. 58 Therefore, it is important to look at the underlying investment gains holding the SGD exchange rate constant to strip out currency translation effects. When we do this, for FY2013/14, MAS posted foreign investment gains of $ billion, comparable to investment gains of $ billion for FY 2012/13. 59 For this financial year, we recorded positive translation effects as SGD weakened against the USD, EURO and GBP. In the last financial year, we had negative translation effects because the SGD appreciated against these three currencies as well as the JPY. 60 To help make sense of MAS’ underlying investment performance, we have provided a write-up on page 27 of annual report, showing the overall profit position, currency translation effects, and investment gains. 61 As shown in the chart on page 27, MAS’ investment gains have been relatively stable.

Direct tests of Ricardian equivalence have produced conflicting results and do not allow us to draw any clear conclusions regarding its existence or its potential magnitude either for the United States or for the euro area. In the euro area the equivalence seems to have been disproved by a sample test conducted in a select group  26  Debrun, X., J. Pisani-Ferry and A. Sapir (2008), Government Size and Output Volatility: Should We Forsake Automatic Stabilization?, International Monetary Fund Working Paper, No 08/122. 27  Debrun, X., J. Pisani-Ferry and A. Sapir (2008), Government Size and Output Volatility: Should We Forsake Automatic Stabilization?, International Monetary Fund Working Paper, No 08/122. 28  Échevin, D. (2008), Social Polarization vs Income Polarization: An International Comparison, Cahier de recherché/Working Paper del Gruppo di ricerca in economia e sviluppo internazionale dell’Università di Sherbrooke, No 08-02. 10  BIS Review 135/2008  of 15 EU member countries between 1970 and 2000. 29 Yet private consumption would appear to respond better to increasing wealth in “less indebted” countries compared with those countries suffering from higher debt. In this connection, a higher public debt level could entail a more Ricardian form of conduct by European consumers and that, in turn, should discourage fiscal activism. 4.
Case Study 4: The creation of our present day “virtuous cycle” Mr. Chairman, I would like to now place before you, yet another significant example of harmonization between the Monetary and Fiscal policies, which led to the creation of a new “virtuous cycle” in relation to inflation, interest rates, investor confidence and sustained growth, in our country. As we are all aware, Sri Lanka had been long trapped in a “vicious cycle” of high fiscal deficits leading to high inflation; high inflation leading to high interest rates; high interest rates leading to low investor confidence; low investor confidence leading to sluggish investment; sluggish investment leading to low growth; low growth leading to high debt; and high debt once again leading to high fiscal deficits. This was the vicious cycle that we had been trapped, for more than 5 decades since independence. It is true that we have had one-off spurts of high growth or short periods of low inflation at various times in our history. However, we have to acknowledge that, other than in 2010 and 2011, we have never had over 8% growth in consecutive years, or, for that matter, been even able to record an average growth of over 5% over a 5 year period, prior to 2006! At the same time, other than the period February 2009, till now, Sri Lanka had never enjoyed a period of even two continuous years of single digit inflation, and, believe it or not, our level of average inflation was over 12% prior to that!

To do so, let us initially examine a snap shot of our economy in 2005. Growth in 2005 was 6.2%, with the average growth for the 7 years, 1999 to 2005, being 4.3%; Foreign reserves were around $ 2.7 billion, or about the equivalent of 2 ½ months imports; The country was at the mercy of a ruthless terrorist group and on the brink of war; Unemployment was at 7.2%; Poverty was at a level over 15%; Inflation was on a sharp rising trend; The banking system was vulnerable and displaying several worrisome cracks; Public debt to GDP level exceeded 90%; Per capita income was under $ GDP was around $ billion; The Western Province share of GDP was an overwhelming 51%; Infrastructure development was almost non-existent; The fiscal deficit was over 7% although very little infrastructure development work had been carried out. All in all, a rather bleak picture, and worse still, a bleak outlook.
However, this increase was exceeded by far by the wage hikes, which explains the sizeable widening of the external deficit, as well as the increasing inflationary pressures over the past year and a half. So, we embark upon this path, carrying a serious burden on our shoulders. I wonder what will happen the moment the increase in labour productivity slows down. Such a trend is closely connected to economic rigidities, the infrastructure-related issues, the slowdown in economic restructuring. In view of all these issues, the NBR does not embrace the idea of slowing down wage increases, but rather it advocates the creation of conditions likely to render this hike sustainable and maintain its actual nature. After all, from a nominal point of view, there is no limit to increasing wages. However, the market will admit only pay rises matched by labour productivity gains. The rest fuels inflation and the depreciation of domestic currency, taking the real level of wage rises to where it is matched by output and labour productivity. Next, I would like to make reference to the factors that establish the direct connection between the NBR’s legal tasks concerning wage increases, on the one hand, and the rise in labour productivity, on the other.

This attractiveness may no longer be objectively related to low unit labour cost or disproportionate tax facilities which would not comply with EU norms. Therefore, an investor-friendly environment should be the result of a different set of characteristics such as increased flexibility in the fiscal regime and in the labour market. Thus, the NBR’s primary objective to ensure and maintain price stability is closely linked to the policy mix pursued by the Romanian authorities. Another nominal objective which is essential for joining the euro area is exchange rate stability. In recent years, the improved performance of the Romanian economy enabled the significant alleviation of exchange rate fluctuation as compared with the situation in the last decade. In fact, the foreign exchange regime adopted by the Romanian authorities, namely a flexible exchange rate requiring far lesser interventions in the forex market by the central bank, bolstered the national economy. Even the over-appreciation episode in early 2007, generated by massive capital inflows following Romania’s accession to the EU, was corrected via autonomous forex market movements. We may state that, at present, there are no significant pressure-inducing factors in relation to the exchange rate in terms of  2  BIS Review 162/2008  appreciation or depreciation, despite the temporary two way movements caused by global financial market turmoil.
In my few months so far as General Counsel at the New York Fed, I am increasingly mindful of the value of cognitive diversity and inclusiveness within the Bank’s Legal Group. Former prosecutors may view an enforcement matter differently than former defense lawyers. A regulatory lawyer who studied economics might not have the same insight as a lawyer whose background is in political science. A compliance officer may spot a problem in our policy that a regulatory lawyer would not have considered. Managers—myself included—whose tenure at the Bank spans decades, may not see shortcomings in communication or organization that are glaring to newer arrivals. When different views are brought to the table, risks are better understood and better decisions get made. As you progress in your careers, I encourage you to seek out other views. One way to do this is to expand your professional network to lawyers in other countries. We are likely to face similar problems and it can be enlightening, as my meetings this week in Beijing have been, to learn from each other about possible solutions. Conclusion The circumstances of modern corporate practice demand increased attention to risk and professionals mindful of managing risk with a view to promoting broader organizational and public purposes. Whether or not you practice law, the virtues of issue spotting, listening to your clients, and speaking up will serve you well in your professional careers. They are invaluable tools for the task of risk management—a shared task of corporate officers, and one that extends beyond professional bailiwicks.

In other cases, the laws in the United States will treat a bank as the perpetrator. That is because, as an employer, the bank may be legally responsible for the actions of its employees. So a bank could risk losing money in two ways: theft or fines. And, more important, a bank may risk losing its good name or reputation for trustworthiness. Now consider, hypothetically, a bank that employs 100,000 people. That bank may have a 99.9 percent record of good conduct—almost perfect. Even then, there will still be 100 employees whose misconduct could, under the right circumstances, damage the bank’s reputation or balance sheet or harm its customers. Banks face risks from third parties too. Vendors or other service providers may expose a bank to additional risk. For example, if a bank gives a software vendor access to its network, the bank may take on risks in the vendor’s cyber security. Cyber risk is not limited to software vendors. It actually could be any vendor. The vendor that opened the gate for a cyber attack on a chain of retail stores in the United States was an air conditioning contractor using an electronic vendor invoicing system. Here is another example of risk from third parties. A newer, faster means of executing or settling transactions may draw such a significant share of a market that it creates a concentration risk that previously did not exist. If that connection fails, an entire market could shut down. Banks can also face risks from their customers.
U.S. growth may weaken more than foreseen, with effects on financial markets – in particular stock index reversals – and new  4  BIS Review 126/2010  postponements of the monetary stimulus withdrawal. The fiscal accounts in developed economies – especially in some countries in Europe – is still cause for concern, mainly because of their effects on perceived risks and in the final recovery of the world economy. Furthermore, measures adopted in China to limit credit growth and prevent an overheating may result in a weaker world economy and lower commodity prices. As usual, the persistence of global imbalances entails risks both on capital flows across economic areas and on the behavior of parities between different currencies. In the recent past, the trajectory of international food prices has reopened the concern on its future performance and its impact on inflation, given the high degree of pass-through we observed in Chile from world price hikes in 2007 and the first half of 2008. Overall, it is not that clear that, if wheat prices continue to rise internationally, the local economy will replicate them, because domestic margins have remained fairly large. If any of these scenarios materializes, there will be direct consequences for the growth and inflation scenario foreseen by the Board. After considering all the elements described, the Board believes that the balance of risks for inflation and output is unbiased, and we reiterate that we will continue to use our policies with flexibility so that projected inflation stands at 3% in the policy horizon.

Natasha Ahmetaj: Launching of the new Albanian banknote serie Address by Ms Natasha Ahmetaj, Second Deputy Governor of the Bank of Albania, at the launching of the new Albanian banknote serie, Pristina, 12 September 2019. * * * Distinguished guests, Ladies and Gentlemen, Today, we have invited you all to the premises of the Bank of Albania – also known as the “homeplace of money”, both figuratively and in the physical sense (as we are standing above the old treasury room) - to celebrate the two dimensions of the currency: a means of exchange and an authentic work of art. At the very beginning, our process of banknote production started with a design contest. This process is still in place today. Designs had to meet three criteria: be a genuine and unpublished work; have a national character; employ a set of techniques that serves security needs, namely, the use of fine and complicated lines which are extremely difficult to replicate. These three criteria are applicable to our banknotes. From the very beginning, banknotes have been designed not only as a means of exchange, but also as a part of national identity. That is why, in examining banknotes, numismatists are able to discern different eras, the extent of a nation’s freedom, or even aspects of social interdependence. Often, especially in dictatorial systems, banknote design manifests a government’s influence on markets. A lack of these influences is a dimension of social freedom. Time has proven that nothing has changed the educational and national mission of the banknote.
Next February we are hosting a select meeting of econometricians in inflation targeting model-making, and we will see if after that we could make our model into a linear zone-quadratic model, which would be more consistent with a target band than the present model which is really better fitted to a point target. The link back between inflation targeting and forex stability is, however, more nebulous and we have therefore fortified it with technical changes in the trading system designed to keep exchange rates more stable again basically through transparency. In my statement two years ago, I said we had set up a money market committee to oversee our operations in the money markets as well as forex, including swaps, forwards, options, and such likes. This we have now developed into a very good domestic monitoring vehicle, and the control of offshore baht will be fortified next week with our reissuing of forex declaration forms, which reflect the reality of the market condition today. The old forex forms allowed us to know the purpose of forex transactions only of 40% of total transactions, since it was issued some 20 years ago, when 60% of today’s transactions were unknown or insignificant in the system. Although this in itself is not designed to limit or restrict forex flows, we believe the increased transparency will make the system less prone to speculation especially as we are one of the few central banks that have decided to keep supervisory powers within the central bank.

In the area of transparency, commercial banks since August this year have had to announce at the end of each month their NPL level, penalties and fines imposed by the authorities and the related lending. Public and stakeholders’ opinions are thereby used to augment the new supervision and examination process we are installing with the help of the OCC and the FDIC. In terms of bad banks, I expect that by the time I get back, or soon after I get back, the disposal of all intervened banks will be complete. In terms of bad clients, since on the afternoon I left for the Annual Meetings of the World Bank and IMF, the contract for the transfer into the government-run Asset Management Company of some 12 billion dollars of assets was signed and the Cabinet had also approved the covered asset pool arrangement for another intervened bank for a further 5 billion dollars. I expect that the NPL at the end of this year will be in the teens - a quite manageable level compared to the high of 48% at the beginning of the year. On the average, banks are now back into the positive spread, actually of 1.28% last month, which is low by traditional standards and still not profitable but still over half of the spread that we expect banks to be operating in under the new competitive and transparent conditions that we will see in the future.
Partly as a result, after adjusting for one-off factors, core inflation is firmer in the US than the UK.   Fourth, the stance of fiscal policy differs markedly. The UK is undergoing the largest fiscal consolidation in the OECD, with the structural deficit projected to decline by around 1 percentage point a year on average over the next four years, having fallen only 1/3 percentage point on average over the past three. In contrast, US fiscal policy is expected to loosen notably over next three years.   Finally, the Bank of England’s control over macroprudential policy reduces the need to use monetary policy to address financial stability considerations. Recall that, despite an expansion that started two years before our own, the Fed has only raised rates to our lofty level of ½ %. This last point is not facetious. As my MPC colleague Jan Vlieghe argued in a speech yesterday, a variety of structural factors have likely depressed the so called equilibrium interest rate, or the rate consistent with the economy operating at full employment and inflation at target.6 Bank staff have estimated many of these drivers. In my long-held view, rate rises, when they come, are likely to proceed at a gradual pace and to a limited degree for some time. Most economics is at the margin, and the tightening of monetary policy – once warranted – is likely to be marginal for some time. Given all of that, what are the prospects for a rate rise in the UK?

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