samchain/econo-pairs-v1 huggingface dataset:
8  Nonetheless, other economists suggest that skill-biased technological change - by favouring top earners relative to 7  See Piketty, T., E. Saez, and S. Stantcheva (2014): “Optimal taxation of top labor incomes: A tale of three elasticities,” American Economic Journal: Economic Policy, 6 (1), pp. 230-271. 8 See, Piketty T., E. Saez and S. Stancheva (2014), op. cit. p. 245. 4  average earners - is at the root of this income concentration pattern. This debate has by now reached the public arena. 9  Third, from a macro perspective, a growing segment of the literature advocates a move from the standard new Keynesian framework, based on representative agents, to models that account for household and firm heterogeneity, in order to better understand the transmission channels of monetary and fiscal policy. This literature speaks directly to central bankers, since it challenges some of the basic tenets of our traditional understanding of monetary and fiscal policy. For example, a heterogeneous household framework is crucial to assess the extent to which additional revenue can be raised by making income taxes more progressive. In this regard, a recent paper emphasizes that the revenue impact of a more progressive tax schedule in the US should be assessed in light of the reaction of agents along the income distribution, and the aggregate changes triggered as a result.

271-301 6 See, for example, the discussion in Feldstein M. (1995), “The effect of marginal tax rates on taxable income: A panel study of the 1986 Tax Reform Act.”, Journal of Political Economy 103 (3), pp. 551-572. 5  3  top earners, while the reaction of the labour supply is modest. 7  For policymaking, it is crucial to know the direction and extent of these behavioural reactions. On one hand, because they inform the need for policy evaluation frameworks that go beyond the simple estimation of morning-after effects. On the other, because behavioural responses are at the root of the optimal design of the tax and transfer system. As a consequence, accounting for them is central to addressing a host of current policy debates, such as the optimal level of progressivity. Second, one influential avenue of research has documented a consistent trend of income concentration at the top of the distribution in some OECD countries in the last few decades. One explanation behind this pattern points to the concurrent fall in top marginal rates, whereby some authors have established a causal link. For example, it has been documented that the top 1% income share in the US has increased from around 8% in the early 1960s to 18% in recent years, this trend having been accompanied by a dramatic fall in the top marginal tax rate from 85% to 35%.
This is why I have proposed, as have others, the creation of a euro area finance minister. This person would embody and bring to fruition the shared commitment of our Member States. Conversely, to my mind, the priority is not to create a “transfer union” and a common fiscal capacity. * * * Hans-Dietrich Genscher said during a previous European crisis in the the 1980s: “scepticism and pessimism are just as poor advisers as national egoism”.4 Yes, we all love our country, our Nation. But the Franco-German friendship can be the defence that we need today against the reigning scepticism and pessimism. Friendship is more than a polite end-of-meal platitude, it is a sometimes demanding requirement, but always concrete as it is embodied in the projects. It must continue to inspire the European project, this singular collective will of which we should be proud. As a central banker, it is naturally not my decision. My responsibility, together with the other euro area governors, is to conduct a monetary policy that is in line with the mandate assigned to us, and to make proposals to render other economic policies more efficient. This is what I have outlined before you with my commitment to Europe. Thank you for your attention. 1 After-dinner speech in honour of the President of the French Republic, Charles de Gaulle in Bonn – 4 July 1963. 2 Eurobarometer Survey, December 2016. 81% in Germany and 68% in France.

It’s important to keep in mind that the Taylor rule’s theoretical underpinnings are loose, especially compared with the seminal 1979 John Taylor article 10 on optimal monetary policy in a rational expectations model with sticky prices. Indeed, the Taylor rule parameters are not necessarily stable. In particular, consider the intercept term. The usual specification of the rule assumes that this intercept term is a constant 2 percent equilibrium level of the real interest rate. However, it is well known that equilibrium real rates of interest are not constant, and modern macroeconomic models of optimal monetary policy all take this into account. Assuming that the equilibrium real interest rate is constant is just as egregious an error as failing to account for the time-varying nature of the natural rate of unemployment. We all know that mis-specifying the natural rate of unemployment can lead to seriously inappropriate monetary policy outcomes like double-digit inflation in the 1970s. It certainly seems that the fallout from the financial crisis and persistent headwinds holding back economic activity are consistent with the equilibrium real interest rate being lower than usual today. Indeed, if you put any weight whatsoever on the secular stagnation hypothesis that Larry Summers and Paul Krugman have described, 11 an appropriate analysis would recognize lower expected real rates of interest.
As evidenced by the information available so far, we have not had any problems with external financing resources; however, the Central Bank has assured that, should such problems come up, it will provide any necessary liquidity in dollars and pesos for the financial system to continue providing credit adequately. The average cost of foreign financing has dropped, although for some companies it has risen, as a consequence of greater global uncertainty and of a less fluid operation of the international financial markets (Figure 7). This crisis has also had significant implications in the real sector. Even though the world demand reduction affects all countries, the most direct impact has been borne by the economies driven by exports of manufactured products – particularly machinery and equipment – to developed countries (Figure 8). Some countries, such as Germany and Japan, have witnessed a severe effect on their output, although they initially were in a much better position than was the United States. Therefore, although a decline in investment and in durable consumption in the world has a more direct impact on exporting industrial economies, it also results in declines in exports of countries which produce intermediate and basic goods, including Chile. However, our country should not be too affected thanks to a characteristic that has always been pointed out as a hindrance to our development – with which I agree – : the low value added, or the low human capital content, of our exports. Chilean exports are closer to being commodities, which face relatively abundant demands.

Stress tests show that the banking system’s capital levels are still sufficient to absorb the materialization of a severe stress scenario, although if such conditions occur it would affect profits somewhat more than was assessed in previous IEFs. The less favorable stage of the cycle could imply higher credit risks. On one hand, those households more exposed to the cycle would take a turn for the worse in their repayment behavior should the labor weaken significantly. On the other hand, the deterioration in the past year of some economic sectors in the commercial portfolios could intensify if the slowdown becomes sharper. Thus, the level of provisions set aside in each case is one important element that could cushion the impact of such risks. As I said, funding costs are low, with near record-low long-term real interest rates. However, one cannot rule out a reversal or new episodes of volatility. Thus, it is still important to diversify by sources and maturities of external and internal credit. A large segment of the banking industry has advanced in that direction, but some smaller banks continue to depend heavily on local wholesale suppliers. Some reflections to wrap up. Final remarks We have been seeing a rise in inflation for some months that has taken y-o-y figures up past 4 percent. The forecasts in this Monetary Policy Report indicate that this is a temporary development associated with the depreciation of our currency, and private expectations corroborate this, as a normalization of inflation over the coming months is foreseen.
For details on liquidity management in Sweden, see “The Riksbank’s operational framework for the implementation of monetary policy – a review”, Riksbank Studies, March 2014, Sveriges Riksbank. 6  In Denmark and Switzerland, the interest rate on banks’ marginal deposit facility at the central bank corresponds to our reserve rate. For details on the liquidity management system in Denmark, see Jørgensen, A. and Lars Risbjerg (2012): “Negative interest rates”, Monetary Review, 3rd Quarter 2012, Part 1, Danmarks Nationalbank. 7  The policy rate in the euro area is the refinancing rate, which is the minimum bid rate in the ECB’s weekly market operations. BIS central bankers’ speeches  3  Excess reserves have increased substantially since the ECB started to provide banks with long-term loans and implemented quantitative easing. This is illustrated by the grey area in the chart. As a result, the overnight interbank rate has remained below the policy rate and just above the reserve rate, as shown in the chart. Negative rates have their limitations In the euro area and Sweden, the aim of unconventional monetary policy has been to bring inflation up towards the inflation target. Negative rates – in combination with asset purchases – are intended to boost activity and prevent low inflation from becoming entrenched. The effects can be transmitted via both lower bank interest rates and a weaker exchange rate. In other words, negative money market rates operate through the usual channels.

Chart: Long-term yields and term premiums In addition, the central banks’ purchases have pushed up prices for government bonds and pushed down yields. Term premiums on government bonds have fallen. While 10-year government bond yields in the US and UK are now at around 2 percent, German yields are as low as less than 1 percent. BIS central bankers’ speeches  5  Chart: Credit premiums and equity prices Another important transmission channel into the economy is the portfolio rebalancing channel. Investors selling government bonds are left with a more liquid portfolio, which they then seek to invest in other financial assets. Prices for a number of securities have risen, and yields on bonds issued by banks and other enterprises have fallen. Premiums on covered bonds, for example, have fallen back to the very low levels prevailing in the pre-crisis period. A fourth transmission channel operates via global financial markets. Cross-border capital movements as a result of portfolio rebalancing have generated exchange rate fluctuations. Unconventional monetary policy can contribute to a depreciation of the domestic currency, providing a positive extra effect of the policy in the short term. However, the effect diminishes when a number of countries implement quantitative easing and policy rate cuts in parallel. Exchange rate movements may then quickly reverse. Increased volatility creates an environment of uncertainty. Capital inflows and a stronger exchange rate have at the same time created challenges in other countries, not least in some emerging economies.
Along with the flatter rank structure, we have introduced a more discretionary and merit-based pay system, removing some of the barriers to rapid advancement of the very best people. At the same time, we reformed our benefits arrangements, removing a system that geared benefits in part to length of service and replacing it with one geared to contribution to the organisation. In particular we removed subsidised mortgages, arguing that the Central Bank, now responsible for interest rates, should not insulate its staff against the effects, for example, of rising interest rates which might affect the rest of the country. The approach to the new flexible benefits is modern, offering staff a menu of benefits up to a percentage of their salary; if none of the choices appeal, they can take cash instead. Many of these management issues are dealt with in our Annual Report - and I hope this gives comfort that the Bank of England is not hiding behind its unique role to limit disclosure. Rather we recognise that we should play our part in being open and accountable. In aiming to achieve a high degree of efficiency we must recognise that we will never reach any absolute goal - but we do want to stand up well in comparison to other organisations in the public sector. We have set ourselves the goal of seeking excellence as one of the leading central banks in the world; and at home to stand out as one of the leading UK public sector institutions.

Government influence also directed bank lending into uneconomic projects and non-viable companies. This government involvement lent credence to the view that regional banks were effectively government guaranteed, which made it easier for these banks to borrow in the global interbank market. This provided the fuel for the irresponsible lending which took place. Hong Kong did not suffer from these structural and systemic weaknesses. But it is the case that imbalances had emerged in the economy, and this became particularly evident during 1997 as confidence grew that the Handover would proceed smoothly - as indeed it did. This was reflected in soaring residential property prices - up by an average of 48% during the year to October 1997 and a record level for the Hang Seng Index of 16,820 in August 1997. The boom in asset values was to a large extent financed by the banks. The sharp escalation in asset prices and in bank lending was clearly unsustainable. A downward adjustment would have been necessary and would have happened sooner or later. All that was required was an external shock to bring it about. This of course is precisely what happened in BIS Review 48/1998  -2-  the third week of October when the Hong Kong dollar came under speculative attack. The operation of our currency board system meant that the sales of the Hong Kong dollar depleted the clearing balances which the banks maintain with the HKMA for settlement purposes and the resultant shortage of liquidity caused interest rates to rise sharply.
In banking, we have increased competition by introducing Qualifying Full Bank privileges, issuing more restricted banking licences and providing greater flexibility for offshore banks. Local banks have greater strategic autonomy and operational flexibility now that the limit on foreign shareholdings has been removed and several regulations revised. We have also opened up the stock market. The Singapore Exchange was the first in the Asia-Pacific to both demutualise and merge the cash and derivatives activities. SGX has made its listing requirements more flexible to cater to growth enterprises. We have loosened up rules on foreign listings in Singapore dollars, reduced capital requirements for securities firms, and eased other onerous restrictions. By 1 January 2001, commissions will be completely freed up. Access to trade on SGX, which is already being opened, will be fully liberalised a year later. In the debt market, we relaxed restrictions on borrowing $ to enable foreign players to issue $ bonds. We set up the Approved Bond Intermediary scheme to encourage the origination, placement and management of debt issues in Singapore. We also increased the issuance of Singapore Government Securities and extended the maturity profile to ten years so as to create a more liquid government bond market. The fund management industry now has access to a larger pool of CPF funds as well as government funds farmed out by MAS and GIC. New tax incentives and more flexible licensing requirements should also attract more fund managers here.

Beyond ensuring that the financial system is resilient to climate risk, we need to make the financial sector a force for good – namely, to facilitate the transition towards a lower carbon economy. If the world is to reach net zero, the financial sector needs to be at the vanguard. Many financial institutions pledged net zero goals in the lead-up to COP26 last year. This is remarkable against the backdrop of a world that was still struggling to emerge from a global pandemic that had disrupted millions of lives and livelihoods. It shows seriousness of commitment. The GFANZ is a powerful expression of that collective will to do the right thing for the planet. While net zero is a 2050 goal, the critical decade for climate action is this – 2020 to 2030. To achieve net zero by 2050, the world must decisively bend the emissions curve and achieve substantial reductions by 2030. This is not a far away problem. The time for action is now. The setting up of the GFANZ Asia-Pacific Network is timely. Asia is where the battle against climate change will be won or lost. Energy demand in Asia is expected to double by 2030 on the back of economic growth, urbanisation, and rising affluence. Some 45 million people in Southeast Asia still do not have access to electricity. Fossil fuels will continue to play an important role in meeting the energy demands of Asia, at least for the next few years.
The fallout has been particularly pronounced in the US, but European interest rates have also risen sharply. The flow of dollars among banks has seized up at times. Other than central bank measures to supply liquidity to banking systems, the authorities in the US and Europe first approached the financial crisis as a succession of problems at individual institutions. In the US, a general package was adopted by Congress on Friday 3 October. USD 700 billion was allocated for purchasing illiquid assets from financial institutions. On 8 October, the UK government announced a number of measures to stabilise financial markets, but with emphasis on providing risk capital. Euro area countries followed suit and on 12 October agreed to take similar action. On 12 November, the strategy for the  BIS Review 143/2008  1  US crisis package of USD 700 billion was changed to provide the authorities with the scope to inject capital into banks and other financial institutions. There is unusually high uncertainty surrounding economic developments ahead. This is reflected in equity markets among other things. Since spring, stock indices have plummeted both abroad and on the Oslo Stock Exchange. The Oslo Stock Exchange has declined by more than 50 per cent since the peak in May. On 8 October, the central banks in the US, the UK, Canada, the euro area, Switzerland and Sweden implemented coordinated interest rate cuts. The central bank of China also reduced its key rate.

Svein Gjedrem: The economic outlook for Norway Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), for Norges Bank’s regional network, Region East, 19 November 2008. Please note that the text below may differ slightly from the actual presentation. The speech is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 29 October and Monetary Policy Report 3/08. *  *  *  Financial market imbalances The first signs of an emerging crisis in financial markets came into evidence in early 2007. The crisis intensified in August last year and entered a new phase in March this year when the US authorities had to bail out the investment bank Bear Stearns. What began as isolated losses in a small segment of the US housing market gradually had substantial spillover effects on the global financial system. The crisis took a new and dramatic turn when Lehman Brothers, the fourth largest US bank, filed for bankruptcy on 15 September this year. The failure contributed to a weakening of confidence between financial market participants, and many financial markets abroad, but also in Norway, almost stopped functioning. Confidence was further eroded when the crisis spread to US commercial and savings banks. Among other things, bondholders suffered losses after the largest US savings bank – Washington Mutual – was split up and partially acquired by JPMorgan Chase in the wake of heavy mortgage losses.
The new budget process — with a moving budget ceiling and a budget surplus of 2 per cent of GDP as a medium-term target — means that the Government and the Riksdag have set up a clear set of rules to show that Sweden has no intention of relapsing into earlier habits. There is nothing fortuitous about these rules. But the purpose of the budget ceiling and the budget target as confidence-enhancing instruments does presuppose that they are observed consistently and continuously over the business cycle. Changes in fiscal policy also affect monetary policy through their direct impact on demand. The debate in recent weeks has focused not least on these effects. An adjustment of income tax or of transfers to households alters disposable income and thereby private consumption. Similarly, a change in corporate tax or transfers to firms affects company profits and thereby investment and other economic decisions. Activity in the economy may also be affected if the government decides to spend more on public sector consumption or investment. This makes fiscal policy a factor of importance when assessing economic activity and future inflationary pressure. At the same time, the changes that are generated do not lend themselves to mechanical calculations. Part of the reason is that the path of inflation is determined by other factors besides fiscal policy. A third important aspect of fiscal policy’s interaction with inflation has to do with fiscal effects on potential output.

Under the new rules and our strict supervisory practices, we are optimistic that the banking system will play a more meaningful role in the economy in the near future. Ladies and gentlemen, Much has transpired since 1997. Our economy has been under intense pressure to perform, and I am confident enough to say that we are in a better position today to manage future challenges. Although, the outlook for 2002 is brighter than that of last year, we do remain somewhat cautious. The reform process must continue so that the global pick-up does not pass us by and that our economy can secure the potential gains imbedded in our talented entrepreneurs and workforce. It has been an honor and thank you for your attention tonight. 4  BIS Review 16/2002