samchain/econo-pairs-v1 huggingface dataset:
But precisely because the world has moved on so much since the 1970s, it has not been straightforward to predict or understand the impact of higher energy prices on the inflationary process. (I will return to this subject later in my remarks). The MPC tackles challenges like these all the time: you will see these questions discussed in the minutes of our policy meetings, in our speeches, and in the quarterly Inflation Report. We also commission research into these questions, which we publish in academic papers. This is not research for its own sake; it is carried out to help Committee members, present and future, do a better job. We need to keep refreshing our intellectual capital. Half a century ago, Governor Cobbold famously said that the Bank of England is a bank, not a study group. Nowadays, the best central banks have something of the study group about them. Anniversaries are a good moment to take stock. So the TC enquiry and other events will prompt us to review what we have learnt, and to identify where there are gaps in our knowledge. Procedures and communications The 1997 institutional reforms did more than take political considerations out of interest rate decisions. They were intended to convince people that the inflation target regime was here to stay. The idea was to align expectations of future inflation more closely to the target, by putting monetary policy in the  4  BIS Review 20/2007  hands of technocrats whose behaviour would epitomise professionalism.

In our better moments, we reflect on all that we have learnt, through bad times as well as good. But there are days when we peer in the mirror and ask anxiously whether we have lost our freshness and drive. Have we become too set in our ideas and in our ways? Have others stolen a march on us? Have we become, to a degree, prisoners of our own past Maybe even victims of our own perceived success? The only way to deal with such fears is to confront them. That is a far larger task than I can do justice to tonight, and it needs to be part of a continuing effort to improve our performance. But let me try and give you an overview of some of the main issues in the remainder of my remarks. 5  “The Inflation Target five years on”, lecture delivered by Mervyn King at the London School of Economics, October 1997. BIS Review 20/2007  3  Intellectual development I want to start with the MPC’s intellectual development. As the world around us changes, it throws up new policy challenges which force us to examine old ideas and develop new ones. So the MPC has been on an intellectual voyage of discovery since it was established. The formation of the MPC unleashed a ferment of intellectual debate and activity inside the Bank. It was a thrilling time for those who were closely involved.
Total ESG assets in the region more than doubled, from about $ billion in 2019 to about $ billion in 2020. 12 Of the record $ billion global inflows into ESG funds last year, Asia attracted about $ billion. 13 But we need to do much more to allocate the capital that is necessary to support Asia’s transition to a sustainable future. As a centre for green finance in Asia, Singapore will play a purposeful role in this effort. We will do this in two ways: as the platform for developing green financing solutions customised for Asia; and 2/7  BIS central bankers' speeches  as the channel through which global capital is directed at meeting Asia’s transition needs. There are three areas where we need to intensify efforts: broaden the range of green financing solutions and markets; improve the consistency and transparency of ESG reporting and disclosure; and build knowledge and capabilities in sustainable finance. BROADEN GREEN FINANCING SOLUTIONS AND MARKETS Let me begin with broadening green financing solutions and markets. I will highlight three strategies that Singapore is focusing on. First, facilitate the issuance of more established green financing instruments, such as green bonds and green loans. Bonds and loans are a familiar and key source of financing for corporates of all sizes. Green, sustainability, and sustainability-linked bonds and loans enable corporates to raise financing as they take up green projects, invest in green assets, or move towards more sustainable business practices.

With the increasing share of gold on the balance sheet, a secondary effect would be that the profit distribution to the Confederation and the cantons would likely be lower. This is because, unlike foreign currency investments, gold does not generate income in the form of interest or dividends, and any valuation gains on gold could not be realised because of the ban on sales. If, as the initiative demands, a ban on selling gold were to be enshrined in the constitution, the question would arise as to whether an immovable asset of this kind could even still fulfil the function of a currency reserve. Yet, the very purpose of currency reserves is that they are available quickly and without restriction when needed. This availability in a crisis situation is important, even if – as is currently the case – we are not intending to sell gold. The availability of gold reserves also plays a role with regard to their storage. Let me therefore take a look at the third component of the initiative, i.e. the demand that all gold reserves be physically stored in Switzerland. Decentralised storage in Switzerland and abroad is in line with the basic principles of due diligence in the conduct of business and business continuity management. It ensures that the SNB can in fact access its gold reserves, especially in an emergency. The same standards are applied to storing gold abroad as to storing gold in Switzerland. Our partner central banks keep clearly identifiable gold bar holdings for the SNB.
However, the improvement in the unemployment rate has not yet reached the desired level. When unemployment rates and the labor market are analyzed in detail, it is observed that unemployment is a structural problem in Turkey. A continued decline in employment in the agricultural sector due to the structural transformation in the labor market and the participation of this unemployed population in the labor force in urban areas stand as factors that prevent a more significant fall in unemployment rates. Moreover, although it has lost pace, the rate of the population increase still remains high. In turn, the employable population is rising rapidly and unemployment rates remain at high levels despite the increase in the number of people employed. Additionally, high employment taxes affect employment figures unfavorably and encourage unregistered employment. The high level of unregistered employment increases the volatility of employment. Although the share of unregistered employment in total employment fell in the recent period, it is still high at 49.4 percent as of May 2006. Another structural problem in the labor market is that the employment rate of professionally trained people is low. This fact shows that there is a lack of qualified labor force for structural transformation to take place. The unemployment problem is a critical matter and must by all means be solved. Finding a lasting solution to this problem and sustaining the employment increases are possible only through long-term and supply-oriented policies. Turkey should follow active policies that would create employment opportunities.

Monetary policy was sometimes overly loose, also in regard to the regulatory and supervisory framework in place. 2. Regulation and supervision trail behind the markets at intervals. Markets always find a way to innovate because of the ongoing competition among economic agents to meet real needs. Innovations enhance the efficiency whereby such needs are met and that is why the innovation process will never cease. Even if confronted with administrative barriers, markets will still identify solutions to meet demand. A clear example in this respect was the NBR's attempt at slowing down the frantic pace of forex-denominated loans. We resorted to administrative barriers, yet their efficiency was subdued and we realised that side effects outweighed benefits. Hence we removed those barriers relatively quickly. The innovation process can be so dynamic and sophisticated that market regulators or supervisors may lag behind. A statement in the G20 London Summit Communiqué of 2 April is particularly relevant in this respect: "Regulators and supervisors must (...) support competition and dynamism, and keep pace with innovation in the marketplace". One of my advisors said this is a recognition of the fact that the current financial crisis is not due to market failure, but rather to regulatory and supervisory institutions' inability to adapt to market realities. I would like to add that it is, at the same time, a guideline on how to keep the pace with market innovations.
Many objectives have been hinted at in the more than 18 months since it was created, but nothing specific has been implemented so far. Yet each of the objectives is highly important, be it the issuing of protection certificates or the establishment of the special purpose vehicle or the purchasing of peripheral countries’ bonds in the secondary market. 2. The ambiguity in the definition of the Facility’s mission is indicated by the changes made both to its guarantee structure, even though the structure remains based on the “per partes” principle, and to its rules of operation during its short lifetime. The fact that the term EFSF 2 has caught on for the new structure reveals just how fundamental these changes are seen to be. 3. Uncertainty also exists on the issue of increasing the effective capital strength of the Facility using concepts such as leverage (via an SPV), protection/insurance, loss tranches and short-term funds. From the reputational perspective, these are exceptionally controversial issues, because many market participants interpret them as a mere attempt to disguise the fact that the euro area countries do not currently have enough resources for a credible rescue plan for Italy and Spain. If they did want to create such resources, they would be putting their own debt arithmetic at risk, because under Eurostat methodology the guarantees for the EFSF’s bonds are included in the guarantors’ gross government debt. If the Facility is to provide effective assistance in stabilising the larger European economies, it will need more funding.

If a non-European country wanted to help Europe, there is the question of whether it should send the money to the IMF or use it to purchase EFSF bonds, a senior tranche of the SPV, or the peripheral countries’ debt, i.e. with no intermediation. The many uncertainties associated with the specific operation of the EFSF are giving rise to general doubts about the appropriateness of the current approaches to overcoming the ongoing debt crisis in the euro area. I cannot help feeling that many solutions to the problems have been wrongly chosen in part because the main causes of the financial and debt crisis have not been correctly identified. Greece gets too much attention from decision- and policy-makers. It represents a mere 1/50 of the European economy. I believe that without the political will to provide Greece with massive support from European funds to restore its competitiveness – and I see little such will at the moment – its exit from the euro area will be inevitable, since depreciation of the Greek currency will become part of the measures to restore competitiveness. The provision of loans to Greece has so far primarily bought time. This has enabled wealthier Greeks to transfer their savings out of the country. The costs of such action have been a reduction in Europe’s credibility and harm to the reputation of the International Monetary Fund and its ability to raise funds outside Europe.
Here, too, Nicholas Bloom, together with Scott Baker of Stanford University and Steven Davis of the University of Chicago, made an important contribution in developing an economic policy uncertainty index for the US, Europe and other major economies. The measure has been used not only in academic papers but also by investors and financial professionals.5 It has also been subject to intense discussions in the blogosphere in view of some of its political uses. The difficulties in finding good indicators controlled to avoid reverse causation and the use of political events provided fodder for the debates. Professor Bloom’s work on measuring uncertainty stimulated more systematic analysis of uncertainty indices also at the ECB. We developed our own composite uncertainty indicator which combines four components: systemic stress, uncertainty of private households and firms, political uncertainty and financial risk aversion. Measurement difficulties were also an issue Professor Bloom had to tackle in the second strand of his research, namely in his research on the role of management practices in driving productivity and growth differentials across companies and across countries. Due to an absence of good quality data on management practices, little prior research was conducted on this important topic. To address this gap in the literature, Nicholas Bloom, together with John Van Reenen of the London School of Economics, developed a methodology for quantifying management practices.

Monetary policy should not, and in the end cannot, prevent such changes in relative prices. They will show up either in higher consumer prices or in a lower level of other prices and pay. Either way, the result is the same – a loss of real purchasing power. This year our real take-home pay will rise at a slower pace than national productivity. Rising fuel, gas, electricity and food prices, mean that average real take-home pay will stagnate this year. It will not be an easy time, and I know that some families will find it particularly difficult. But it is only a temporary slowing in the growth of our real take-home pay and remember that this is the opposite side of the coin to the falls in prices of manufactured goods from countries such as China and India, which in the nice decade allowed our standard of living to rise at a rate faster than productivity. The squeeze on real take-home pay will arguably be an even more significant restraint on consumer spending this year than the credit crunch. And it will affect the housing market too – lower demand in the high street will go hand in hand with lower demand in the property market. I have said in the past that there is no causal link between house prices and consumer spending. That remains the case. How closely they move together depends on the underlying forces that are driving them both.
What they should be trying to avoid is a repeat of the problems with credit cards, where many borrowers chose bankruptcy as a way out of their problems. The dynamics of the two products are different, but the warning signs are there. As might have been expected, credit card charge-offs did increase during the SARS crisis as rising unemployment prompted a renewed increase in bankruptcy petitions. But the latest news on this front is somewhat more encouraging. The number of petitions continued to rise going into the first week of June, but has since fallen back and the daily average for June as a whole was back to around the levels that we saw before the SARS outbreak. If this improvement can be sustained, it would have a positive impact on profitability in 2003. Asset quality is an important factor in explaining changes in profitability across banks and over time. But it is certainly not the only factor and not necessarily the most important in the long term. To generalise, changes in bank profitability depend on both macroeconomic influences and a variety of bank-specific determinants. The Research Department of the HKMA has recently been doing some work in this area based on published data of 14 banks that account for about half the market in Hong Kong. I would like to share with you some of the preliminary findings of the research since it casts an interesting light on how the performance of the industry might evolve over the next few years.

Lastly, I will comment on certain aspects relating to the architecture of the euro area that are still outstanding and should be addressed promptly, also with the aim of adequately tackling the consequences of this crisis. Monetary policy Since March the ECB has deployed a broad package of measures to mitigate the impact of the pandemic on the economy of the euro area. From the start, the ECB faced three important challenges deriving from the pandemic: first, stabilising the financial markets throughout the euro area to avoid financial fragmentation between countries; second, protecting the supply of bank lending, which is especially important to provide financing for households and small and medium-sized enterprises; and third, neutralising the downward pressures on the medium-term inflation outlook generated by the COVID-19 crisis, in accordance with our price stability mandate.1 In light of the situation, a series of decisions, which can be grouped into two large blocks, were adopted. As regards the first block, the ECB approved a broad battery of measures to provide liquidity to banks so that they, in turn, would continue to grant credit to households and firms. The measures included substantially improving the conditions of our targeted longer term refinancing operations (TLTRO) and easing the collateral eligibility criteria for banks in the ECB’s refinancing operations, thus increasing the volume of funds they may obtain on such operations. These measures have been highly successful. In the June TLTRO operation, participating banks received liquidity for an amount of € trillion, an all-time high in the Eurosystem’s refinancing operations.
As the name suggests the safety net is there to catch banks that are in trouble or, if not the banks, then at least their depositors. This is part of the other aspect of our reform measures that are aimed at promoting the safety and soundness of the banking system. One aspect of this is already in place in the form of a policy statement issued by the HKMA in June of last year on its role as Lender of Last Resort to authorised institutions. The major safety and soundness issues however lie ahead. The first is whether we should introduce a commercial credit reference agency in Hong Kong which would gather and collate information from participating institutions about the indebtedness and credit record of their corporate borrowers. This would enable lenders to obtain a more complete picture of the financial position of their customers, and thus improve their credit assessment and perhaps make them willing to lend. That is the theory, BIS Review 69/2000  4  which seems to be supported by both academic research and the experience of overseas countries. We are currently nearing the end of a consultation period and will consider the way forward in the light of the comments received. As this consultation ends, we are about to embark on another that may be more contentious. I am referring to the possible enhancement of the deposit protection arrangements in Hong Kong.

A number of the measures in the programme are directly relevant to foreign banks and you may therefore be interested to hear about what we have done so far, and what more we have in mind. The current state of the banking sector The Consultancy Study was conceived just before the outbreak of the Asian Crisis and took place during it. The Hong Kong banking sector has now come through the crisis, and can be said to have clearly demonstrated its resilience and underlying strength. It is true that the number of foreign banks in Hong Kong has fallen sharply over the last two years. This reflects the fallout from the crisis that has led to the demise of some banks and has required others to cut back on their overseas operations and return to their home base. Hong Kong has certainly not been the only financial centre to witness this retreat. However, the important point is that the core of the Hong Kong banking system - represented by the local banks and the large foreign players - has remained intact. Although bad debts rose sharply during the crisis and a few banks lost money, the banks generally remained profitable and financially sound. The capital ratios of the local banks actually rose during the crisis period. No banks failed and no depositors lost money. The Government was not called upon to provide financial support. The results of the banks for the first half of this year show that their recovery from the crisis is well underway.
For 30 countries that have defaulted on sovereign debt in recent decades, the interest rate on government bonds was 4 percentage points higher than normal one year after default and 2.5 percentage points higher the second year. 4 Thereafter, interest rates fell rapidly to more normal levels. Third, a creditor can impose sanctions, such as trade blockades, seizure of foreign assets or choose even more severe measures. At the end of the 19th century, England took control of Egypt’s government finances because of the country’s payment problems. Egypt had raised a number of loans to finance the construction of the Suez Canal. The administration established by the British government restored order to Egypt’s government finances and remained in the country for 40 years. It is likely that economic incentives also play a part in today’s armed conflicts, but such instruments are not used to recover sovereign debt. The most effective weapon available to a creditor today is probably to take legal action to seize the debtor’s foreign assets. In the past 30 years, creditors have won several such cases. Several studies of sovereign debt crises over the past century have shown that creditors’ actions have not resulted in particularly high costs for the debtor state. A state soon regains access to capital markets after default and borrowing costs fall back fairly rapidly. If the costs of default are transient, defaulting could be a profitable proposition.

This assessment is also broadly reflected in the March 2019 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021. Compared with the December 2018 Eurosystem staff macroeconomic projections, the outlook for HICP inflation has been revised down across the projection horizon, reflecting in particular the more subdued near-term growth outlook. Turning to the monetary analysis, broad money (M3) growth decreased to 3.8% in January 2019, from 4.1% in December 2018. M3 growth continues to be backed by bank credit creation, notwithstanding a recent moderation in credit dynamics. The narrow monetary aggregate M1 remained the main contributor to broad money growth. The annual growth rate of loans to non-financial corporations declined to 3.3% in January 2019, from 3.9% in December 2018, reflecting a base effect but also, in some countries, the typical lagged reaction to the slowdown in economic activity, while the annual growth rate of loans to households remained at 3.2%. Borrowing conditions for firms and households are still favourable, as the monetary policy measures put in place since June 2014 continue to support access to financing, in particular for small and medium-sized enterprises. The policy measures decided today, and in particular the new series of TLTROs, will help to ensure that bank lending conditions remain favourable going forward.