samchain/econo-pairs-v1 huggingface dataset:
Arnór Sighvatsson: Capital controls, fiscal policy and economic recovery Address by Mr Arnór Sighvatsson, Deputy Governor of the Central Bank of Iceland, at a morning meeting of the Iceland Chamber of Commerce, Reykjavík, 24 March 2010. *  *  *  Ladies and gentlemen, At the eleventh hour, just prior to the collapse of the banking system, it did not remotely occur to me that signing exemptions from rules significantly restricting the rights of residents to trade in foreign currency could become one of my responsibilities. Admittedly, it had been mentioned on several occasions, in meetings with foreign bankers and investors during the weeks and months leading up to the collapse, that they were of the opinion that capital account restrictions were among the conceivable measures that Icelandic authorities could apply in the dire straits into which the Icelandic economy was clearly headed. When I was asked whether capital controls could be considered, in the difficult situation that had arisen, I naturally replied in the negative, with reference to the international agreements Iceland had signed – any other answer would have been risky. Even less did it occur to me that the IMF would endorse capital controls as a key factor in an economic strategy for the reconstruction of Iceland’s financial system and economy, as the Fund has often been criticised for encouraging premature removal of capital controls in many countries around the world. The capital controls are controversial. Other routes were considered but eventually rejected as too risky.

And there is some corroborative evidence in the rise in output price inflation relative to costs, and in anecdote of some firms being able to pass on cost increases (Chart 17). Given a tight labour market, how does that fit with earnings inflation having been relatively subdued? One possibility is that as aggregate demand has picked up, firms have in the first place increased output by making greater use of their existing workforce and capital. That would be consistent with anecdotal evidence of firms having held on to labour during the earlier slowdown in aggregate demand; and with the pick up in private sector productivity growth over the past year or so (Chart 18). Looking ahead, it would also suggest a degree of upwards pressure on earnings growth. As reflected in the Inflation Report published a couple of weeks ago, conditions of excess demand, combined with the likelihood of stronger import prices, point to inflation gradually rising back towards and through the 2% target over the next two years or so. There are many risks around that central outlook but, taken together, compared with November I judge them to be slightly less to the downside over the medium term. The recent rise in CPI inflation suggests, for example, that we were not stuck  9  Nickell, S. (2005), ‘Why Has Inflation Been So Low Since 1999?’, Bank of England . BIS Review 16/2005  5  materially below the inflation target.
But now that the fence is up, we need it to do its job. It is of course a twenty-first century, modern fence – not a medieval stone wall, and as part of this it was electrified by Parliament in order to discourage attempts to  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  climb over it: the legislation empowers the PRA to use a group restructuring tool to require a banking group to sell its ring-fenced bank or other parts of its group. Hopefully the prospect of electrocution will discourage any blatant attempts to climb over the fence. But there is still perhaps the possibility of wicked burrowing under the fence, passing things through it or even perhaps using a drone to create mischief. We are therefore setting up a border patrol of PRA staff who will police the fence. The patrol will ensure there is compliance with restrictions on activities performed by the ring-fenced entities and independence from the rest of the group. In particular, we will closely monitor governance arrangements, seeking evidence that ring-fenced banks can identify conflicts of interest and are able to make decisions on their own. We will set capital and liquidity for the ring-fenced banks, and more generally keep an eye on the risks they face. Let me move to my second example: accountability. As with the ring-fence, we and firms have gone to great lengths to bring in the Senior Managers Regime here in the UK.

Jerome Powell, the chairman of the Federal Reserve, referring to the assessment of risks in emerging economies, said that three elements are important:2 first, the vulnerabilities in the EMEs themselves; second, the evolution of advanced-economies monetary policies; and, third, how markets might respond to that evolution. Emerging economies are takers in the global markets; we cannot do much about the last two elements mentioned above, which are exogenous. Our job, our duty, is to prevent the accumulation of domestic vulnerabilities, because deterioration in a country’s economic conditions makes it more vulnerable to adverse external shocks. 1/5  BIS central bankers' speeches  High growth in emerging economies is good as long as it is sustainable. I would recall here a famous answer from Henry Ford, the father of the car industry, when he was asked about his preferred color for the new T-model: “Any color, as long as it’s black”. Any growth is good, as long as it is sustainable and, I would add, fairly distributed. True, emerging economies need higher growth rates to catch-up with the more advanced economies. True, potential GDP is a non-observable variable, like many others such as inflation expectations, non-accelerating inflation rate of unemployment, or the one to which it is directly linked – the structural deficit. New Member States have probably higher potential growth rates than the ones we are now estimating, and this estimation is subject to constant change, based on new information in the data series, but also on improved endowment with and efficiency of labor and capital.
We in the Bank consider research as very important because it forms the basis upon which we formulate our policies and execute our operations. To underscore this point, the Bank of Zambia launched the BOZ Reader series a few years ago as a means of having articles of economic interest being published for the benefit of the Zambian public. The three publications of the BOZ Reader that have been published so far have largely contained articles prepared by BOZ members of staff. However, our intention has always been to have a wider network of contributors. With the signing of this agreement, we hope to see more economics related research being undertaken by faculty members in the Department of Economics on behalf of the Bank. We further urge the University of Zambia to be a key and keen contributor to the publications. The University of Zambia Economics Department should coordinate with our Economics Department on this matter. In addition to the research fund, the monthly salary supplementation for faculty members in the Economics Department has been adjusted up by 64%. Meanwhile, the Bank has continued to recognize academic excellence among economics students at UNZA. For this reason, the bank has been providing fully funded scholarships to five outstanding economics students at third and fourth year levels. This support is also expected to shift to postgraduate economics programmes as soon as the modalities are agreed between the two institutions.

Caleb M Fundanga: The Bank of Zambia – placing a high premium on education Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the University of Zambia, Lusaka, 23 November 2007. * * * The Vice Chancellor The Deputy Vice Chancellor The Registrar The Deans of various schools Heads of Departments present Faculty Members Invited Guests Ladies and Gentlemen I feel greatly honoured to once again participate in the signing of the Memorandum of Understanding (MoU) between the Bank of Zambia (BOZ) and the University of Zambia (UNZA). The Bank of Zambia and UNZA have a long standing relationship which is intertwined in more ways than one. I am sure that the majority of employees in the Bank that possess a first degree have this University to thank for that achievement. It therefore gives me pleasure to stand here and undertake this function of signing the MOU between our two institutions. Vice Chancellor, the Bank places a very high premium on education. It is for this very reason that it has this day decided to renew its financial support to the University of Zambia’s Department of Economics. Under the new agreement, the Bank has increased the level of support to UNZA to include setting aside a special fund specifically for research purposes and procurement of personal computers (PCs) and software for the same purpose.
We will really try hard to explain that what we are doing is in the interest of the euro area, Germany included. 2  BIS central bankers’ speeches  In your book, you talk about the isolation of the central banks. Do you feel that strongly at the moment? Central banks are independent, but they are not isolated. In Europe, however, we need a coherent approach across monetary policy, fiscal policy and structural reform policy, as emphasised by President Draghi at the Jackson Hole conference (at the end of August [ed.]). The understandable instinct of the governments is to respond to their voters. This is never easy and it becomes even more difficult in an environment of low growth and high unemployment. But our plea to the governments is to always remember Europe’s common interest, because the actions of one affect all the others. That is why they must be coordinated. Do you feel more mature, at the ECB, after last Thursday? This is not about being mature, but about providing the right answers to a new situation, as the ECB has always done throughout the crisis. Now, with asset purchases, we are like the other central banks, but with an instrument that is adapted to our specific environment, i.e. an environment which does not foresee a common fiscal policy. We are conducting QE in our own way. BIS central bankers’ speeches  3

BIS central bankers’ speeches  Monetary policy The task of evolving our liquidity insurance framework will not end, but given the substantial reforms made to it over recent years, it is likely that the focus will shift to monetary policy implementation, as and when the MPC decides to move policy away from its current settings. As the head of the Markets Directorate it is not my role to speculate when the policy setting might change, but it is my job to ensure that decisions of the MPC are implemented effectively. That involves, in particular, ensuring that we have the tools needed for effective monetary control; that is, keeping overnight market interest rates in line with Bank Rate. The Bank’s current approach is to pay Bank Rate on the full balances held in reserves accounts. This is known as the “floor” system. As set out in the SMF Annual Report, this approach remained successful at keeping sterling overnight market rates close to Bank Rate during 2014–15, with the “wedge” between policy rates and market rates relatively small over the past year. But over the year, activity in the sterling money markets remained low as the floor system, alongside a large-scale injection of reserves through QE, reduced the need for banks to transact in money markets. In the near-term, I expect that this system will remain effective at moving market rates in line with any change made to policy rates by the MPC.
Our aim is to convince 400 schools across the country to download and teach the econoME materials in the first year rising to about 1500 schools over three years. Already during the trial period over the past four months, almost 300 schools have downloaded the resources, 250 of which were state schools. We have also started discussing with examination bodies about how to develop resources similar to econoME to support the GCSE and A-level economics syllabus by 2020. And we intend to develop resources, including games, activity sheets and videos for primary school children over the next two years. The second motivation of the Bank’s efforts is to help young people understand the Bank’s role in managing the economy and hold us to account. The Bank’s decisions affect every UK citizen whatever their age and wherever they live. We know that for our policies to be effective, the Bank needs to be understood, credible and trusted. The challenge is that the Bank’s work often requires deep technical skills and arcane knowledge, but not surprisingly, not everyone wants to be steeped in fan charts, capital modelling and stress testing. So recognising that we need to make our communications more accessible to the people we serve and in order to connect with both the City and the country, the salon and the suburb; we are creating content that engages different audiences through different channels. Of course, these efforts will be more effective if people understand the basics of the Bank’s responsibilities.

But, we have still not been able to truly cooperate in this field of reserve management, and it is perhaps time for us to take the preliminary steps to move towards such practices in the foreseeable future. It may be controversial. It may pose some new challenges. But, explore, we must. So, I hope you would also start thinking about this new philosophy as well. 2. My dear friends, achieving higher returns, given the current financial turmoil and other factors associated with it, is a challenge faced by many central banks today. The manner in which central banks respond to this challenging task of reserve management has also, had to change rapidly to meet with these new conditions. In fact, it is seen now that central banks have started to gently move away from traditional asset classes like the government Treasury Bills to more sophisticated asset classes. With this development, we now witness changes in the asset portfolios of central banks in the current context, since Central Banks have moved into more dynamic instruments to achieve its return objective within certain acceptable risk parameters. Consequently, gold and Treasury bill holdings traditionally held by central banks are now being challenged by investments like derivative products, securities lending and securitised products, and this trend opens out a new canvas for the reserve managers of central banks. 3. The experience of the financial market turmoil has led to fresh new challenges as well, which are quite formidable.
14  Examples include Norges Bank (2013), p. 8: “Weight was also given to the fact that house prices and debt have risen faster than income for a long period. A lower key policy rate may increase the risk of a renewed acceleration in house prices and debt accumulation and of build-up of financial imbalances.”; Bank of Canada (2013): “[T]he Bank must also take into consideration the risk of exacerbating already-elevated household imbalances.”; and the Reserve Bank of New Zealand (2012): “In addition, the PTA’s stronger focus on financial stability makes it clearer that it may be appropriate to use monetary policy to lean against the build-up of financial imbalances, if the Reserve Bank believes this could prevent a sharper economic cycle in the future.”  BIS central bankers’ speeches  7  intend to go into these here, but merely point out that if the supply had adapted better to demand, the price increases in the housing market would have been more limited and thus household debt would have given less cause for concern.15 Merely slowing down the demand side, without trying to make the supply side function better, is probably not sustainable – at any rate it does not appear to be a particularly wise long-run strategy. Housing policy probably also needs to be included in the equation for a lasting solution to be achieved.

Philipp Hildebrand: Swiss monetary policy Summary of a speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Annual Meeting of the IFZ (Institute for Financial Services Zug), Zug, 1 June 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Having successfully pursued a strategy of money supply targets for around 25 years, the Swiss National Bank (SNB) decided to adopt a fundamentally new monetary policy approach in 1999. Although it integrated some of the important elements of inflation targeting, it did so less strictly, thus allowing greater flexibility. Money stocks and credits continued to play a vital role in the new concept. Unlike the European Central Bank, the SNB chose not to make the monetary analysis a separate pillar in its concept. An important distinction to inflation targeting is that monetary policy focuses on maintaining price stability in the medium to long term, while inflation targeting is generally oriented towards short-term and, in some cases, variable inflation targets. The SNB's monetary policy uses an inflation forecast as a central indicator and sets its operational goal in the form of a target range for the three-month Libor. A monetary policy that is geared to the medium and long term affords leeway for a certain degree of stabilisation of the real economy.
I should perhaps mention here for the sake of completeness that, put simply, real interest rates are nominal interest rates less inflation. 1 Chart 2 shows longterm real interest rates in Switzerland, Germany and the US, calculated as the difference between the nominal yield on 10-year government bonds and the observed inflation rate. I should emphasise two points: First, while real interest rates in Switzerland are currently negative, a historical comparison shows that this is by no means a new phenomenon. For example, real interest rates in Switzerland were also negative in the 1990s. Second, real interest rates have fallen on a global basis over the last 20 years. I shall now turn to an economic concept that plays a key role in the current monetary policy debate, namely the equilibrium real interest rate. The equilibrium real interest rate is not directly observable and is determined by fundamentals such as time preferences and the age structure of a society, which define the supply of savings and the demand for investment. The SNB controls a short-term nominal interest rate. By contrast, it has only an indirect and temporary influence on long-term real interest rates, which drive investment decisions. Longterm real interest rates are primarily determined by saving and investment decisions and hence by market forces. If the central bank wishes to stimulate the economy and increase inflation, it cuts the policy rate. Since inflation does not react immediately, real interest rates temporarily fall below the equilibrium rate.

The dual objective of PEPP  5/7  BIS central bankers' speeches  To enhance the effectiveness of our asset purchases, the PEPP has to be operationalised in a way that it meets the described dual objective. The PEPP is not an interventionist programme where we stand on the sidelines when conditions are calm and enter the market only in times of market disturbances. It rather resembles a two-staged pyramid. At the basis, there is a constant flow of purchases that reaches out to all eligible market segments. In the sovereign space, these purchases are guided by the ECB’s capital key. This is the “stance” element of PEPP. It seeks to create financial conditions that are consistent with our inflation aim. The upper part of the pyramid is its flexibility. This element responds to the challenges posed by the pandemic to market functioning and the smooth transmission of our policy to all parts of the euro area. The first granular breakdown of our PEPP purchases, published last week, highlights this particular aspect of our reaction function. It stresses the three dimensions of flexibility in the PEPP. First, in the sovereign space, monthly purchases in all jurisdictions will exceed the “basis” flow if we observe a general tightening of financial conditions across countries, unusually high volatility or poor liquidity. In this case, we frontload purchases, following the ECB’s capital key. Second, we raise the share of purchases above the capital key in countries facing severe risks of fragmentation.
Our assessment now is that hourly wages will increase on average by 3.7 per cent per year during the three-year period 20072009 measured using the National Mediation Office's method for presenting statistics, and by three tenths more using the method for presenting wage developments in the National Accounts. This is around half a percentage point per year more than during the previous three-year agreement period. … and a weaker development of productivity will lead to higher cost increases Labour costs per produced unit have, however, increased considerably more than we expected in the spring of 2007 as the development of productivity has been much weaker than we predicted at that time. In February 2007, we predicted that unit labour costs would increase by 2.3 per cent per year during the period 2007-2009. We now calculate that unit labour costs will increase by an average of 3.8 per cent per year in 2007-2009 compared to the figure of practically zero per cent per year in 2004-2006 (see Figure 5). This means that many companies are now faced with the choice of either increasing their prices to counteract the decline in profitability, which may be difficult in the present situation with a steady decline in demand, or of making staff cuts. Our assessment is that the companies will probably choose the latter. Price increases will be moderate while employment will decrease significantly. In the three preceding agreement periods, the high rate of increase in productivity helped to keep unit labour costs down.

Svante Öberg: Wage formation and monetary policy Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at Folkets hus, Stockholm, 5 December 2008. *  *  *  My speech today is supposed to be about wage formation and monetary policy, and I will devote most of my time here to this subject. However, given that we brought the monetary policy meeting forward to Wednesday and that we then reduced the repo rate to 2 per cent. I would like to begin by saying a few words about this decision. As you may know, the members of the Executive Board do not usually discuss their own position on the latest interest rate decision until the minutes of the meeting have been published. It is only then that the views of the individual members are presented officially. The minutes of the meeting on Wednesday will be published on 17 December. My comments on the interest rate decision and the current situation thus reflect the collective view of the Executive Board. We chose to move the monetary policy meeting forward by two weeks because it became clear to us at an early stage that there was a need for a significant reduction in the repo rate. In the prevailing situation, our assessment was that it was important to make a quick decision. We thus reduced the repo rate by 1.75 percentage points.