samchain/econo-pairs-v1 huggingface dataset:
In particular how best to assess the sometimes bewildering quantity and variety of data; yet to keep a sense of perspective in relation to the big issues. There is for example the need to understand the implications of the frequent data revisions and updates: how to think about them and what conclusions we need to draw ahead of the next policy decision. But it is the big picture issues, all of which have puzzling unknowns, which have fascinated me most. We spend considerable time reflecting on these in our quarterly forecast round, when we estimate the course of the economy and inflation three years ahead. The November Inflation Report was published a couple of weeks ago and provided an analysis of the UK economy, the factors influencing policy decisions and the MPC's latest forecasts for inflation and output growth. The models of the economy that we use to produce these projections provide a framework to organise thinking on how the economy works and how different economic developments might affect future inflation. The forecasts need to reflect the uncertainty in the economy. The technique we rely on is “fan charts”. [Chart 1] They show the Committee’s best collective judgement about the balance of risks and uncertainty around the central case. It means that members can agree on the overall outlook and balance of risks, even though they may come to that view for slightly different reasons.

Small wonder that there are many who feel that this development is in economic terms the most significant event since the industrialisation and entry  of the USA on the world economy in the late 19th Century. You can think in some ways of China as the centre of the offshoring of manufactured goods, whilst India has shown the potential for offshoring services – and these include operational services with high intellectual content as any visit to Bangalore, Mumbai or an increasing number of other places in India will quickly show. For me there are several key issues for monetary policy. Firstly we should recognise the reality of the effective globalisation of the supply of labour, even if it does not involve the physical movement of people. Secondly we need to understand the effect on wage dynamics from a large external supply of labour which this gives rise to in wage bargaining, where the strength of the position of employers is added to by the threat that if higher wages are demanded the goods or services will no longer be supplied by those with jobs in the UK but will be shifted offshore. Not only is this the case in unskilled jobs and in manufacturing, but also in services such as the medical profession and IT specialists. But thirdly, and crucially, how long will this process continue, and for how long will its effects be felt? Will there be sudden changes along the way as, for example, China’s own economy and social context changes?
Risk is less concentrated in the banking system, where moral hazard concerns and other classic market failures are more likely to be an issue, and spread more broadly across a greater diversity of institutions. And yet this overall judgment, that both financial efficiency and stability have improved, requires some qualification. Writing a decade ago about the history of the financial shocks of the 1980s and early 1990s, Jerry Corrigan wrote that these same changes in financial markets we see today, though less pronounced then than now, created the possibility that financial shocks would be less frequent, but in some contexts they could be more damaging. This judgment, that systemic financial crises are less probable, but, in the event they occur could be harder to manage, should be the principal preoccupation of market participants and policymakers today. What factors might contribute to this risk, a risk that could be described as the possibility of longer, fatter tails? One reason is a consequence of consolidation. The major banks are larger and stronger today, and it would take a much larger shock to make them vulnerable than was true in the past. But in that event, the consequence of their failure could be greater for markets. Another reason is the consequence of leverage.

And the characteristic reluctance of savers to invest outside their home market may be diminishing. Alongside these longer terms trends, financial markets today also show the effects of other forces. The extraordinary growth in earnings of energy and commodity exporters, the substantial rise in wealth that has come with rapid growth in China, India, and other emerging markets, together with efforts by many of those governments to stem the appreciation of their currencies, has led to a rise in capital flows, official and private, into the United States and other major economies. These flows seem large enough to have had a material effect on global interest rates and asset prices. These changes in economic conditions reinforce each other. The long period of relative economic and financial stability has reinforced expectations of future stability, reducing implied volatility and risk premia, increasing comfort with higher leverage, and encouraging flows of capital into riskier assets. BIS Review 49/2007  1  The low level of real interest rates that has prevailed in much of the world through this expansion has contributed to relatively accommodative financial conditions. The high levels of reserve accumulation by governments with heavily managed exchange rate regimes put downward pressure on forward interest rates, potentially distorting asset prices. The increase in size of sovereign wealth funds, the shift in assets to hedge fund and private equity managers, and the possible reduction in home bias among private savers have increased the amount of mobile capital in search of higher returns.
Mr Bergo looks at the impact of the euro on the economies of non-member states Speech by the Deputy Governor of the Central Bank of Norway, Mr Jarle Bergo, to the Scottish Norwegian Business Forum, in Edinburgh, Scotland on 3/2/99. At the beginning of this year we witnessed the implementation of the greatest monetary reform of the century: the launch of the euro and the final stage of EMU. Norway watches this great experiment from the outside, but we are not uninfluenced by it. On the contrary, it constitutes an important change in the environment of our policy-making, especially with respect to monetary policy. In addition, there are important questions concerning the use of the euro by Norwegian economic agents and possible implications for the Norwegian business sector, particularly the banking and financial industry. I shall try to address these issues. My basic proposition will be that in most respects the euro does not give rise to fundamentally new challenges, but almost certainly accentuates some that are already present. The euro and Norwegian monetary policy Monetary policy in Norway has been oriented towards maintaining exchange-rate stability for almost the entire post-war period. When the Bretton Woods system collapsed in the early 1970s, Norway joined the European “Snake”. However, when the European Monetary System was set up in 1979 Norway chose a link to a trade-weighted basket of currencies.

Within minutes, the exchange rate exceeded the CHF 1.20 mark. Seen from the outside, this may have created the impression that a minimum exchange rate can simply be generated by pressing a button and that such an exchange rate is a normal monetary policy measure which is straightforward to implement. That is far from being the case. A minimum exchange rate is an extreme measure, only to be introduced in a situation of massive overvaluation, with the aim of averting the worst developments. It is neither a panacea capable of solving all the problems facing the Swiss economy, nor can it simply be implemented for any desired level, free of any risk. On the contrary. A minimum exchange rate can only be successfully implemented if there is a clear economic justification for its introduction, such as a massive overvaluation resulting from adverse developments on the foreign exchange market. Within the framework of a system of flexible exchange rates, it is also important that it be internationally accepted, and that it is not seen as a competitive depreciation. Finally, a vital element in the successful implementation of such an exchange rate is the central bank’s credibility, in other words, the belief that the central bank will indeed defend the minimum exchange rate, if need be. Financial markets are constantly changing their assessment of risks. A situation may also occur in which the market decides to test the defence of the minimum exchange rate.
In addition, imbalances risk being aggravated in economic upswings, which means that some measures need to be implemented in situations where there is probably a general resistance to them – what is usually compared to “taking away the punchbowl just as the party gets going”.16 Thus, the measures may also be politically difficult to implement in some cases. The extent to which this affects macroprudential policy in practice will of course depend on the institutional set-up chosen. Difficult target to define and assess The inherent difficulty in defining concrete targets for macroprudential policy may affect the ability to implement various measures. A common formulation for the objective of macroprudential policy is “to counteract risks to the financial system as a whole”, or something similar. Regardless of the exact formulation, it is difficult to specify what the target actually entails in practice. When has it been attained? Let us say that macroprudential measures are implemented over a couple of years and that no problems arise in the financial system. Have the measures then been justified or unnecessary? The only thing the general public can observe is a lack of problems, and there could thus be a risk that the need for macroprudential measures is questioned.17 Measures could be circumvented It could also prove difficult to design a system for macroprudential policy that functions efficiently enough, and which inventive market participants are not able to circumvent. In this situation, monetary policy may need to support macroprudential policy.

But the idea that monetary policy may need to be used in support of macroprudential policy and contribute to preventing new imbalances arising on financial markets is nevertheless a question that is climbing higher up the agenda in these countries, too, as the economy and the housing market recover.26 A clear example is the United Kingdom, where the most recent remit for the Bank of England’s Monetary Policy Committee (MPC) states that circumstances may arise in which the MPC  24  One recent example is Lagarde (2014): “But where macroprudential policies fall short, monetary policy will have a larger role than in the past to maintain financial stability.” Other examples include White (2009), OECD (2010), Caruana (2010), Borio (2011b), IMF (2013), BIS (2013), Bayoumi and Habermeier (2014). See also Mishkin (2011) and the Committee on International Economic Policy Reform (2011). 25  It should be noted that the central banks in these countries have not necessarily made the assessment that there was motivation for leaning monetary policy against the wind in practice. The point is that they consider such deliberations as important to include in monetary policy as a question of principle. 26  Examples in the US Federal Reserve are Hoenig (2010), Bernanke (2011), Kocherlakota (2013) and Stein (2014). Within the ECB it has been noted that the strategy of a so-called “second pillar” that focuses on developments in monetary aggregates implicitly contains an element of leaning against the wind. See ECB (2010) and Stark (2010).
For example, in higher-interest-rate environments, the opportunity cost of holding a CBDC with these design features could be high, resulting in it being used only for modest transactional purposes. Conversely, in lower-interest-rate environments, a zero-interest CBDC without holding limits could compete more strongly with existing money market instruments, and demand for a zerointerest CBDC in lower-interest-rate environments could be hard to predict. A zero-interest CBDC could also interact with policy rate setting. For central banks that seek to maintain a zero lower bound on interest rates, a zero-interest CBDC could benefit monetary policy implementation, as a widely available zero-interest instrument could help reinforce the lower bound. For other central banks, a zero-interest CBDC could constrain their ability to achieve negative rates. The alternative that central banks might consider is an interest-bearing CBDC, for which the natural question is: what rate of interest should be paid? If a central bank decided to remunerate a CBDC, the incentives created within the monetary policy implementation framework would need to be considered. As a broad principle, research suggests that a CBDC should be structured with rates of remuneration at or below rates on central bank reserve balances, as a higher rate could create direct competition for deposits, risking disintermediation of the banking system.9 How much lower would need to be considered in the context of a specific central bank’s policy implementation framework, its policy rate target, and the incentives that an interestbearing CBDC could create in money markets.

In the assessment of the Executive Board, the sight deposit rate should lie in the interval 2-3 per cent in the period to the publication of the next Inflation Report in March 2006, conditional on economic developments that are broadly in line with the projections. In the press release following the Executive Board’s meeting on 2 November, the following factors of uncertainty were highlighted: •  Stronger trade shifts and increased labour market competition may result in lower price and wage inflation and weaker pressures in the economy. In isolation, this would imply less frequent interest rate changes. •  We have little experience of such low interest rates over a long period. There is a risk that an interest rate that is kept low for a longer period may lead to expectations of a persistently low interest rate. This might result in a higher-than-projected rise in output and inflation and would in isolation suggest a faster interest rate increase. •  Developments in the global economy are uncertain. Our projections are based on favourable growth prospects in other countries and continued high oil prices. Different developments in global growth and in oil prices would result in a different path for the Norwegian economy. Interest rate setting must also be assessed in the light of developments in property prices and credit. Wide fluctuations in these variables may constitute a source of instability in demand and output in the somewhat longer run.
I note with interest that the workshop will discuss potential solutions to this dilemma. It is important that as the credit reporting landscape continues to evolve and assume more prominent roles in influencing borrowing and lending behaviours, appropriate attention is paid to consumer education to mitigate consumer anxiety and ensure that consumers understand and can exercise their legitimate rights. As uncertainties continue to cloud the global economic outlook at a time when borrowers have become more financially literate, lenders have become more innovative, and financial products have evolved to become more sophisticated and intricate, the need for an effective and efficient financial infrastructure becomes increasingly more critical to ensure the prudent expansion of credit and risk taking. This workshop addresses a key part of that infrastructure that can contribute towards avoiding damaging effects of a financial crisis induced by credit excesses. 2  BIS central bankers’ speeches  Before I end my remarks, allow me to say a few words about this magnificent building, Sasana Kijang. Designed to be a nexus for thought leadership and collaboration in central banking, “Sasana” is a Sanskrit word that describes a site, centre, building or arena where communities gather for meetings, while the Kijang is a small yet very intelligent animal that is depicted in Bank Negara Malaysia’s logo.

The wider use of credit information can make an important contribution to prudent financial management, not just among borrowers by minimising incidences of excessive borrowings, but also among lenders by encouraging greater discipline during periods of exuberance when lenders may be tempted by rapid rises in asset prices and perverse incentives, to throw caution to the wind. It also has an important role in promoting access to financing for various segments of the society. Borrowers who maintain a good credit history and demonstrate strong financial discipline are able to leverage on such “reputational collateral” to secure borrowings at more favourable terms and rates. Credit registries have also been used extensively to support enhanced banking and financial market supervision. There can be little doubt, particularly after the events of the sub-prime mortgage crisis, that the accumulation of credit that is premised on informed credit decisions, whether taken at an individual, institutional or system-wide level, will contribute to the stability of the overall financial system. While the collection of credit information on borrowers in Malaysia started many years ago, it was not until the aftermath of the Asian Financial Crisis that a centralised credit information registry was realised. The crisis proved to be a defining moment for Malaysia on several fronts and was instrumental in advancing critical reforms in the development of our financial infrastructure.
BIS Review 23/2009  5  To summarise – with the most recent interest rate cut and the forecast for the future interest rate we are expecting to be able to counteract the restraining effects of the financial crisis on the Swedish economy. The economy will gradually return to a more normal situation and the Swedish economy will begin to recover next year. Resource utilisation will be lower than normal for the entire forecast period but will rise in 2011. We are assuming that CPI inflation adjusted for the effects of changes in mortgage rates will be close to the target of 2 per cent at the end of the forecast period. Uncertainty but also preparedness for unexpected developments It is important to bear in mind that economic prospects are unusually uncertain at the moment. For example, it may take longer than expected before the financial markets function normally once again. It is also possible that the effects of the economic policy will come sooner and with greater force than anticipated in our main scenario. The future direction for monetary policy will depend, as always, on how new information on economic developments abroad and in Sweden will affect the prospects for inflation and economic activity in Sweden. The Riksbank’s decisions are based on forecasts for a more or less uncertain future. Unforeseen events in principle occur all the time. This is something we have to live with, no matter how good are forecasts are.

Three-month moving average, goods exports in fixed prices calculated by the Riksbank. Sources: Statistics Sweden and the Riksbank  14  BIS Review 23/2009  Higher unemployment Per cent of labour force, seasonally-adjusted data 14  14 Unemployment 16-64 year Unemployment 15-74 year  12  12  February December  10  10  8  8  6  6  4  4  2  2  0  0 80  82  84  86  88  90  92  94  96  98  Note. Broken lines represent the Riksbank’s forecasts. 00  02  04  06  08  10  12  Sources: Statistics Sweden and the Riksbank  Forecast for GDP growth in Sweden and abroad Quarterly change in per cent calculated as an annual rate, seasonallyadjusted data 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  Sweden USA Euro area TCW  -3 -4  -3 -4 -5  -5 07  08  09  Note. Broken lines represent the Riksbank’s forecasts.
Rapid growth of leveraged lending – typically loans to non-investment grade firms that are highly indebted or are owned by a private equity sponsor – meant the share of debt owed by companies with debt more than 4 times their regular cash flow had increased from less than a quarter to more than a third. These companies won’t have much cash and will find it harder to raise new debt finance. In effect, the economy entered this crisis with a weakness that may make it more prone to scarring. The UK is by no means an outlier in this regard. In the United States, growth of leveraged lending was almost twice of that in the UK in recent years. The Federal Reserve has noted how this weakness in corporate balance sheets is likely to amplify the adverse effects of the virus disruption.9  There will be lessons to learn. We had warned about this since 2017 and ensured banks doing the lending could withstand the losses. When this is over and we can step back, we – and other central banks – will need to return to the question of whether unconstrained growth of corporate leverage in the good times puts the wider economy at greater risk of harm in the bad and, if so, whether measures are called for to limit the growth of corporate leverage.

That is not a requirement on funds but is a material hurdle to one fund breaking from the pack to make longer-term investments that cannot be priced daily. That hurdle has been highlighted by multiple industry bodies. 19 We will need to consider how this convention could be overturned. Conclusion  These details of the financial system may seem academic when many businesses and families are struggling to cope, grappling with uncertainty and worrying about the future. But finance is needed now to help you – the muscle of the economy – to finance cash-flow deficits to preserve employment and productive capacity. While the financial system has been given every assistance to meet the needs of the wider economy and has made a good start, it needs to do even more if scarring of the economy is to be minimised. And more equity will be needed: to help some companies through the disruption; to build new economic muscle to grow to replace that which is lost, and to help others restructure once the disruption is over and avoid the burden of debt hanging over investment and employment. The pools of capital managed by our insurance companies, pension and investment funds are huge. When combined their assets amount to £ trillion20. If just 1% more of that pool was allocated to unlisted equity, demand for £ of new issuance could be created.