samchain/econo-pairs-v1 huggingface dataset:
Very recently we informally polled ten leading financial institutions in London. Their forecasts for the dollar/euro exchange rate by the end of this year ranged from $ down to 90c. This is a considerably wider spread than the trading range already experienced and suggests a huge measure of uncertainty, to a horizon of only ten months. Of course, one might argue that this represents uncertainty over the dollar as much as the euro. Yes indeed, and I apologise for analysing things very much from a dollar base. Over time, all currencies have experienced considerable volatility - the dollar, the yen, the euro and its ancestors, sterling and so on. Yet in all of these, investors have been able to enjoy significant positive real rates of return over the long term. That may not be good enough for everyone: some seek short-term gains; others may be worried by mark-to-market volatility in the short term even if they are there for the long haul. But long-term investors will give considerable weight to the overall economic and monetary management of the economy. As I mentioned earlier, there are a number of aspects of the management of the Euroland economy about which perceptions from Asia may be somewhat sceptical. As for monetary policy, I would suggest that it is perhaps natural for outsiders to be rather hesitant in their assessments, in view of the new infrastructure for monetary policy, but as the ECB beds down one would expect confidence to grow.

But the growth of financial firms active across different business lines and national boundaries does make designing policies to address systemic risks more challenging. Let me conclude by highlighting some actions we can take to guard against such risk. First, there is scope for more private and public sector cooperation on stress-testing. There is room to develop further our analysis of the combined effects of market and credit risk on the balance sheets of financial firms and at a system-wide level. And it is important that macroeconomic stress scenarios do not blindly extrapolate from the robust economic performance of recent years. The FSA is reviewing stress-testing practices of UK firms as part of a campaign to identify and encourage best practices. Of course each firm needs to tailor its tests to its own business, but I believe that there may also be merit in looking at a common set of plausible scenarios. This would help compare risk profiles and publishing these results could potentially strengthen market discipline. Second, efforts are underway to improve further liquidity risk management. The fundamental reforms to the sterling money market introduced in May should make for greater flexibility in the day-to-day management of sterling liquidity, and help ease potential liquidity bottlenecks in times of stress. 7 These changes build on the lessons of the Federal Reserve’s discount window in US dollars and the ECB’s marginal lending facility in euros. Handling potential liquidity pressures faced by LCFIs operating in multiple countries and currencies continues to be a focus of policy attention.
(iv)  Costs of changing price lists  The costs of changing price lists and catalogues - so-called menu costs - are generally agreed to be of little direct consequence. But they may produce a degree of nominal rigidity in wages and prices which takes on greater significance. Inflation now causes relative price variability as not all firms are able to change their prices at the same time. The cost of greater relative price variability was discussed above, and continues to be an active field of research. Recent work at the Institute of Fiscal Studies (2002) shows that when inflation is higher, there is a larger dispersion in the inflation rates faced by individual households. This finding points strongly to the role of nominal rigidities in contributing to relative price dispersion. Taken together, the verdict of economics, history and common sense is that inflation and deflation are costly. It is clear that very high inflation - in extreme cases hyperinflation - can lead to a breakdown of the economy. There is now a considerable body of empirical evidence that inflation and output growth are negatively correlated in high-inflation countries. For inflation rates in single figures, the impact of inflation on growth is less clear.

Alan Blinder, who was Alan Greenspan’s deputy at the Federal Reserve Board, put it even more clearly. Price stability, he said, was when ordinary people stop talking and worrying about inflation. And so successful has been the pursuit of low inflation that some commentators have talked about the “death of inflation” and others have become increasingly concerned about the prospect of deflation. Tonight I want to re-examine the case for price stability, and ask the following questions. Did the benefits of low inflation promised ten years ago materialise? Is the case for price stability the same as in 1992? What does price stability mean in practice? Finally, what are the challenges for monetary policy over the next decade? 2. Ten years of the inflation target: what has it achieved? Since Britain’s departure from the Exchange Rate Mechanism in September 1992, monetary policy has been based on an explicit numerical target for the rate of inflation - now 2.5% - and a high degree of transparency and accountability. Indeed, it was in his LSE lecture that Lord Kingsdown announced that the first Inflation Report would appear in February 1993. And last week’s Report completes exactly a decade of Inflation Reports - forty assessments of the outlook for growth and inflation in the British economy. Although inflation targeting in the United Kingdom is now ten years old, the most significant institutional changes occurred five years ago.
In spite of the fact that the interest rates of many central banks have been reduced to their historical lows in the recent years (they have been brought down to zero in Japan and were at the level of 1% in the USA for some time), and in spite of a high growth in prices of oil and other commodities, inflation in the largest world economies still remains low. The Federal Reserve Bank increased its interest rate from 1% to 4.5% over the past two years and the markets expect further rises, to the level of about 5.0%, whereas the interest rate on 10-year US Treasury bonds has been fluctuating at around 4.5% for a few years now. This phenomenon has even received an official name of “the Greenspan’s puzzle”. The yield curve in the US is inverted, which means that the interest rate on 2-year bonds is higher than that on 10-year bonds; in the light of the present knowledge, this should indicate an oncoming recession. Meanwhile, according to the present forecasts, the economic growth rate in the USA will slow down only slightly in 2006 and will remain close to the potential GDP. In 2005, the current account deficit in relation to the GDP in the USA exceeded 6%, and many forecasting institutions expect its further deterioration. Meanwhile, contrary to what the theory of economics says, the dollar exchange rate, instead of falling, appreciated against the euro by 13% in 2005.

Fostering Employment, Productivity and Innovation”, Meeting of the OECD Council at Ministerial Level, 2005, pp. 7. 25  N. G. Mankiw, P. Swagel, “The Politics and Economics of Offshore Outsourcing”, American Enterprise Institute for Public Policy Research Working Paper, November 2005. 26  A. T. Kearney’s 2004, „Offshore Location Attractiveness Index, Making Offshore Decisions”, Three categories of indicators were assessed: the financial structure with the weight of 40% (labour costs, infrastructure costs, tax and regulatory costs), employee skills and access to labour force — weight of 30% (accumulate business experience, easiness of employing workers, knowledge of foreign languages and education, social indicators, e.g. unemployment rate), business environment — weight of 30% (business conditions in the country, infrastructure, cultural adaptability, intellectual property protection). 27  “The Future of Outsourcing, How it’s transforming whole industries and changing the way we work,” BusinessWeek, January 30, 2006. 6  BIS Review 19/2006  Alan Blinder 28 goes even further and openly speaks about the third industrial revolution. He presents a vision of medical services which may performed on a remote basis (an example of radiological examinations in India) as well as rendering many educational services via electronic ways of communication. Formerly, the natural resources of an economy were of prior importance; nowadays, the perspectives of an economy depend to a greater degree on the human factor. This factor is decisive, especially in new branches of the economy, related to the services sector.
PLATFORM FOR DISCUSSION  EVENT: BIS Meeting of the Working Party on Monetary Policy in Central and Eastern Europe 2њљњљ DATE:  NATIONAL BANK OF THE REPUBLIC OF NORTH MACEDONIA  20-21 February 2020  info@nbrm.mk  LOCATION: Becici, Montenegro  www.nbrm.mk  MONETARY POLICY CONUNDRUM IN DEVELOPED ECONOMIES – IS THE REGION DIFFERENT? Ana Mitreska, NBRNM Ljupka Georgievska FSBRR1, NBRNM Gani Ramadani MPRD2, NBRNM  1 Financial Stability, Banking Regulations and Resolution Department. 2 Monetary Policy and Research Department. 1  Monetary Policy Conundrum in Developed Economies – is the Region Different? Ten years after the global crisis, it is more than certain that the context for monetary policy making has not returned to the pre – crisis “normal”. Central banks, in advanced economies in particular, have deployed unprecedented measures to ensure proper functioning of financial markets, and to provide impetus to the economy. Despite the recent global recovery, uncertainties remain elevated and possible vulnerabilities come to the fore. At the same time, certain macro-economic linkages on which conventional monetary policy making was based on have been challenged. To streamline the matter, we will tackle few important issues, which as monetary policy makers we have been faced with. First, though the monetary accommodation helped the recovery, easy financing conditions might have encouraged excessive risk-taking and building of debt vulnerabilities. Second, inflation rate has been low for long, despite the wage growth in many countries, giving ground to the so called “wage – price puzzle”, and questioning the traditional Phillips curve concept.

Alternatively, the rise in competition, either domestically or  15  from abroad, may have limited the ability of firms to pass cost increases to consumers for fear of losing market share. Another important consideration of a more cyclical nature is firms’ profitability, which determines how much and how fast wage growth feeds into prices. To the extent that firms have buffers - comfortable profit margins - they may be able to absorb higher wage costs without increasing prices” (IMF, REO - Europe, November 2019). 7.0  2014  2012  2013  2010  2011  2008  2009  2006  2007  2004  2005  2002  2003  2018  2016  2017  2014  -3.0  2015  -6.0  2012  -2.0  2013  -1.0  -4.0  2010  -2.0  2011  0.0  2008  1.0  0.0  2009  2.0  2006  2.0  2007  3.0  4.0  2004  6.0  2005  4.0  2002  8.0  2003  Euro area  5.0  2018  Euro area  10.0  CESEE  6.0  2016  CESEE  12.0  2017  14.0  Chart 19: CESEE and Euro area labor productivity per person employed (change in percent)  2015  Chart 18: CESEE and Euro area unit labor cost (change in percent)  Source: Eurostat, SEE Jobs Gateway Database, National Statistics  Source: Eurostat and The Conference Board Total Economy  and Authors’ calculation.
The rise in home prices helped support more borrowing as households used lines of credit and second mortgages to tap into their rising home equity. This also fueled a strong boom in home construction. But house price increases could not be sustained without limit. When home prices peaked and started to turn down, the dynamic linking house prices, credit and consumption went into reverse. Let’s consider first what this means for consumption. Consumption of goods and services rose at a slow 2 percent annual rate over the first half of 2010 and with no sign of a rebound. Several factors are inhibiting families from spending, including: job or income losses, low confidence and declines in wealth as real estate and stock prices dipped. Households have been saving more and paying down their debts. Of course, lenders have also reinforced this tendency with tightened underwriting for credit relative to prerecession standards. Have households completed their deleveraging, so they will soon spend more? Although we believe that substantial progress has been made, it is hard to tell how much further this process has to run. Now, let’s consider why housing market activity – both new construction and sales – remains depressed. One reason for this is that many existing homes stand vacant. We estimate that there are roughly 3 million vacant housing units more than usual. This stock of vacant homes will shrink when foreclosures fall and more empty homes are sold or rented out.

With this auspicious start, I trust this conference may become a regular forum of dialogue between researchers and policy-makers: central banks and financial supervisory authorities have many things to learn from the research carried out in academia, away from the frequent policy-making urgencies that drive the daily workload in our institutions. Financial stability and macroprudential policy The last crisis generated a good deal of issues to be dealt with by authorities with a role in financial stability. The experience gained over recent years has shown the importance of safeguarding the stability of the financial system as a whole. We now understand that this ambitious task requires the use of sophisticated analytical tools to identify vulnerabilities at an early stage and anticipate how potential shocks can propagate across the financial system. To this end, both micro and macroeconomic methodologies can offer valid insights, and this is why the conference programme intends to offer a mix of both approaches. One of the most relevant and obvious legacies from the crisis is the introduction of a fullyfledged macroprudential policy framework. As we all know, macroprudential policy has, essentially, a twofold objective. On the one hand, it seeks to prevent or mitigate the emergence of systemic risks over the expansionary phase of the credit cycle, as well as to strengthen the resilience of financial institutions against these risks.
shocks which are not common to other members, and which would therefore require a monetary policy stance that differs from that which is appropriate to the currency union. The Treaty’s provision for a flexible time-table is grounded in this fundamental economic principle. Now, while most of us are probably familiar with the fact that Malta has an obligation to adopt the euro at some point in the future, the rationale for doing so might be less obvious. Perhaps an appropriate way to put it is that EMU has come to play a central part of what the EU is today and of what it is expected to become in the future. This is because by significantly reducing transaction costs and intra-area exchange rate risk, the euro facilitates progress towards the completion of the Single Market and gives access to a large pool of financial resources. By increasing price transparency, moreover, the euro fosters a more competitive environment, which, in turn, is conducive to higher levels of efficiency. In this sense, the euro also contributes to the achievement of the Lisbon Strategy’s goal of making the EU the most competitive and dynamic knowledge-based economy in the world. Indeed, the Strategy states explicitly that it is essential to exploit the potential of the euro to promote the integration of EU financial markets and also, therefore, SME growth and job creation.

The NGFS aims to share best practices and make recommendations to central banks and supervisors on how to better integrate climate6/7  BIS central bankers' speeches  related risks into their financial stability monitoring and microprudential supervision. Within the framework of the NGFS, the ACPR and Banque de France have begun looking at ways to conduct climate-related stress-tests. In parallel, and in line with the energy transition law, the ACPR has published two reports on the climate risks facing the French banking and insurance industries, and has set up a Climate and Sustainable Finance Commission tasked with monitoring financial institutions’ commitments and publishing its findings in an annual report prepared jointly with the AMF. **** My conclusion, therefore, is that we should not just assume that the significant strengthening of the financial system over the past decade is enough. Now more than ever, it is vital that we remain vigilant, to face up to the risks threatening to undermine our financial stability. This means rigorous supervision, and the adoption of a multilateral and coordinated approach in order to implement and complete the reforms to our financial regulation. Safeguarding financial stability, to make the financial system more secure over the long term, is a global challenge and one that requires a global response. 7/7  BIS central bankers' speeches
This is not a widespread issue: the average NPL ratio is 5.4% in the European Union as of September 2016, and in many countries, including France and Germany, it is below 4%. But it is a challenge which seriously affects specific banks in certain countries, mainly Italy and Portugal. So this challenge is manageable, but it needs to be actually managed: the quicker the better. Recent initiatives by Italian authorities are a step in the right direction, with the active involvement of European supervisory authorities. Third factor: the digital transformation. It is true that digitalisation is disrupting traditional customer relationship models. But it also creates opportunities: for instance, more diverse and accessible financial services, more complete customer satisfaction, greater valorisation of data. Yet, in order to succeed in the digital transition, financial companies need first to place innovation at the heart of their strategic management; and second to examine ways of transforming their business models, mainly in Retail. Obviously these are difficult choices that need to be made by the companies themselves. The strategic way forward is not up to regulators, and will not be uniform. That said, let me share some thoughts with you. On the income side, the response could be twofold: diversifying the range of services – both proprietary and via partnerships – that are offered to customers; and adjusting existing pricing policies, with fewer flat-rate prices and more pricing by use.

For if risk is spread more broadly, shocks should be absorbed with less trauma. Moreover, the system as a whole may be less vulnerable to distortions introduced by the moral hazard associated with the access that banks have to the safety net. A second issue we need to consider stems from the complexity of the new credit instruments, the challenges they present in terms of valuation and risk measurement and their short history of experience in times of stress. Even the most sophisticated participants in the markets for these instruments find the risk management challenges associated with these instruments daunting. This raises the prospect of unanticipated losses. Default rates are harder to predict where there has been a substantial change in the financial attributes of borrowers. The prices of instruments may not respond as expected to a given change in losses or in the value of the assets underlying these instruments. Hedging strategies may prove to be less effective than expected. Similarly rated instruments can behave very differently in stress events. The response of prices and volatility to the downgrades in the automobile sector in the spring of 2005 and the recent experience in subprime mortgages and related asset-backed securities and credit derivatives illustrate different types of surprises faced by the participants in these markets. They are a reminder of the dimensions of uncertainty that exist about the shape of the distribution of potential returns. This is particularly true of what we might call the adverse tail, or the negative extreme.
First, the availability of collateral in secured markets will remain decisive for market functioning, particularly against the backdrop of ongoing central bank asset purchases, even if collateral scarcity is mitigated by the broad fiscal policy response to the COVID-19 pandemic. Second, a high level of excess liquidity may further reduce cash-driven activity in some market segments, potentially raising challenges for setting money market benchmark rates. And third, non-bank financial institutions play an increasingly important role in money markets. Their market activity has a bearing on the formation of some money market rates, including the € Unlike banks, these market participants often do not have access to central bank operations. Were the transmission across money market rates to weaken, or rates to decouple from policy intentions, this could have implications for monetary policy implementation in the future. Understanding the changing forces that affect money market activity is essential for policy makers. To foster an improved understanding of recent trends in money markets, this conference brings together some of the best academics, central bankers and practitioners. I look forward to many insightful discussions over the next two days. Thank you very much for your attention. https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp201123~8d9573b1b1.en.html  5/7  24/11/2020  Shifting tides in euro area money markets: from the global financial crisis to the COVID-19 pandemic  [1] I would like to thank Marie Hoerova for her contributions to this speech.

Internet compared with railways Simplifying somewhat, the advent of the Internet can be compared with the era of railroad construction in Sweden in the second half of the nineteenth century. In the initial phase there was a boom for those who constructed the railways and manufactured rolling stock. In the closing decade of the century Swedish firms began to produce locomotives; previously BIS Review 118/1999  2  that had been the preserve of British manufacturers. The Swedish firms took over the domestic market and were even able to export their products. Much the same happened with the manufacture of passenger carriages and goods wagons. Today we can see similar developments in the IT industry. Besides the giant, Ericsson, Sweden has many different IT enterprises. But growth is still being driven not so much by users of the new communication facilities as by the production of new possibilities. To continue with the comparison, in the next phase people started to travel by rail. A journey from Stockholm to Gothenburg admittedly took 11 hours and 45 minutes in 1865, but that was nothing compared with a horse-drawn carriage. Travelling became quicker and more efficient; people gained new impressions and learned new things. Sweden became smaller. Today we travel on the Internet by gathering information simply and efficiently from all over the world, largely for the price of a local telephone call. Millions of people in all parts of the world are indeed using this facility and in that sense the world has now become smaller.